Ahmedabad Urban Development Authority, Ahmedabad V. The Jt.DIT(Exemption), Ahmedabad

ITA 647/AHD/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1745 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 06-01-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 05-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G C SRIVASTVA
• Keywords: Business income; Depreciation; Charitable institution; Cost of acquisition; Initiation of penalty proceedings; Capital receipt; Capital expenditure
• Section: 143(3); 142(1); 12A; 12AA; 12; 28; 154; 11

Judgement Text

, D IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA.NO.712 AND 711/AHD/2013 / ASSTT. YEAR: 2009-2010 AND ITA NO.647 AND 2335/AHD/2014 ASSTT.YEAR 2010-11 AND 2011-12 AHMEDABAD URBAN DEVELOPMENT AUTHORITY SARDAR VALLABHBHAI PATEL SANKUL, USMAPURA, ASHRAM ROAD AHMEDABAD 380 014. PAN : AAALA 0233 B VS ACIT (EXEMPTION) AHMEDABAD. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI S.N. SOPARKAR WITH MS.URVASHI SHODHAN REVENUE BY : SHRI G.C. SRIVASTVA, AND SHRI SANJAY AGRAWAL, CIT-DR / DATE OF HEARING : 11/01/2016 AND 29/01/2016 (FOR WRITTEN SUBMISSIONS) / DATE OF PRONOUNCEMENT: 19/04/2016 $%/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE LD.AO HAS PASSED ASSESSMENT ORDERS UNDER SECTIO N 143(3) ON 29.12.2011, 12.3.2013 AND 31.1.2014 IN THE ASSTT.YE ARS 2009-10 TO 2011-12 AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 2 RESPECTIVELY. THE ASSESSEE HAD CHALLENGED THESE OR DERS IN APPEALS BEFORE THE CIT(A) WHO DISMISSED THE APPEAL VIDE ORDER DATED 21 .2.2013, 20.1.2014 AND 29.5.2015 IN THE ASSTT.YEARS 2009-10 AND 2011-12 RE SPECTIVELY. THESE ORDERS OF THE LD.CIT(A) ARE BEING IMPUGNED BY THE ASSESSEE IN ITA NO.712/AHD/2013, ITA NO.647/AHD/2014 AND 2335/AHD/2 015. 2. IN THE ASSTT.YEAR 2009-10, THE ASSESSEE HAS MOVE D AN APPLICATION UNDER SECTION 154 OF THE INCOME TAX ACT FOR RECTIFICATION OF THE ASSESSMENT ORDER. THIS APPLICATION WAS FILED ON 27.1.2012 AND LD.AO H AS REJECTED THE APPLICATION VIDE ORDER DATED 12.3.2012. THIS ORDER WAS CHALLENGED BEFORE THE CIT(A) IN AN APPEAL, BUT THE APPEAL WAS DISMISSED V IDE ORDER DATED 21.2.2013. HENCE, THE ASSESSEE HAS IMPUGNED THIS O RDER OF THE CIT(A) IN ITA NO.711/AHD/2013. ALL THESE APPEALS HAVE COMMON ISS UES. THEREFORE, WE HEARD THEM TOGETHER, AND DEEM FIT TO DISPOSE OF THE M BY THIS COMMON ORDER. 3. THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE IN A LL THESE ASSESSMENT YEARS ARE IDENTICAL IN SUBSTANCE EXCEPT VARIATION I N QUANTUM. THE FACTS ON ALL VITAL POINTS ARE COMMON IN THESE ASSESSMENTS. THER EFORE, FOR THE FACILITY OF REFERENCE, WE TAKE UP THE FACTS MAINLY FROM THE ASS TT.YEAR 2009-10. THE GROUNDS IN THE ASSTT.YEAR 2009-10 IN ITA NO.712/AHD /2013 READ AS UNDER: 1. LD. CIT (A) ERRED IN LAW AND ON FACTS IN D ISMISSING APPEAL OF THE APPELLANT WITHOUT CONSIDERING AND ADJUDICATING EACH GROUND OF APPEAL RAISED BEFORE HIM BY CONCLUDING THAT ALL THE GROUNDS RELATE TO SECTION 11 & 12 OF THE ACT. THE ORDER PASSED BY ID. CIT (A) IGNORING DETAILED SUBMISSIONS ON VARIOUS GROUNDS IS WHOLLY U NJUST, ERRONEOUS AND AGAINST THE SANCTION OF LAW. 2. LD. CIT (A) ERRED IN LAW AND ON FACTS IN CO NFIRMING ACTION OF AO TREATING THE APPELLANT TRUST AS AN 'AOP' AND FRA MING THE AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 3 ASSESSMENT ON AN UNREALISTIC AND ERRONEOUS FIGURE O F RS. 3,59,95,83,000/- 3. LD. CIT (A) ERRED IN LAW AND ON FACTS IN CO NFIRMING ACTION OF AO REFUSING EXEMPTION U/S 11 AND ASSESSING INCOME O F THE APPELLANT U/S 28 TO 44 OF THE ACT. BOTH THE LOWER AUTHORITIES FAILED TO APPRECIATE THE FACT THAT THE PROVISO TO SECTION 2 ( 15) WAS NOT APPLICABLE TO THE APPELLANT AND EXEMPTION CLAIMED U /S.11 OF THE ACT OUGHT TO HAVE BEEN GRANTED. 4. LD. CIT (A) ERRED IN LAW AND ON FACTS IN NO T APPRECIATING THE FACT THAT THE APPELLANT WAS NOT ENGAGED IN ANY COMM ERCIAL / BUSINESS ACTIVITY BUT WAS CARRYING OUT CHARITABLE ACTIVITY I N ACCORDANCE WITH ITS OBJECTS FOR WHICH REGISTRATION U/S 12A OF THE A CT WAS EFFECTED AS PER DECISION OF THE HON'BLE INCOME TAX APPELLATE TR IBUNAL IN THE CASE OF APPELLANT. 5. LD. CIT (A) ERRED IN LAW AND ON FACTS IN CO NFIRMING ACTION OF AO IN DISALLOWING DEDUCTION CLAIMED OF RS. 42,21,17 ,250/- BEING 15% OF THE RECEIPTS AS PROVIDED IN SECTION 11(1 )(A ) OF THE ACT. LD. CIT (A) OUGHT TO HAVE GRANTED THE DEDUCTION BY DELE TING THE DISALLOWANCE MADE BY AO. 6. LD. CIT (A) ERRED IN LAW AND ON FACTS IN CO NFIRMING ORDER OF AO IN MAKING ADDITION BY DISALLOWING RS. 38,71,69,0 00/- CLAIMED IN ACCORDANCE WITH CLAUSE 2 OF EXPLANATION TO SECTION 11 (1) OF THE ACT. LD. CIT (A) OUGHT TO HAVE DELETED SUCH DISALLOWANCE MADE BY AO. 7. LD. CIT(A) ERRED IN LAW AND ON FACTS IN CON FIRMING ACTION OF AO IN MAKING ADDITION BY DISALLOWING RS.60,00,00,00 0/- CLAIMED U/S 11 (2) OF THE ACT THOUGH ALL THE CONDITIONS OF SECT ION 11 (2) WERE FULFILLED BY THE APPELLANT. 8. LD. CIT(A) ERRED IN LAW AND ON FACTS IN CON FIRMING ACTION OF AO IN MAKING ADDITION OF RS.179,29,58,000/- DISALLO WING VARIOUS CAPITAL EXPENDITURE INCURRED BY THE APPELLANT TOWAR DS OBJECTS OF THE TRUST IGNORING THE FACT THAT CAPITAL RECEIPTS OF RS . 237,41,70,000/- HAVE BEEN ALSO THEREBY WRONGLY CONSIDERED AS INCOME IGNORING THE SUBMISSION THAT ADDITION BY WAY OF DISALLOWANCE OF CAPITAL EXPENDITURE WAS AGAINST THE SANCTION OF LAW. AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 4 9. WITHOUT PREJUDICE TO THE ABOVE, ID CIT (A) ERRED IN LAW AND ON FACTS IN CONFIRMING ACTION OF AO IN FRAMING ERRONEO US ASSESSMENT OF INCOME, ALL CAPITAL RECEIPTS AMOUNTING TO RS. 144,1 7,69,000/- AND CAPITAL GRANTS AMOUNTING TO RS.93,24,01,000/- AGGRE GATING TO RS. 237,41,70,000/- HAVING NO REVENUE CHARACTER WERE CO NSIDERED AS INCOME. CAPITAL RECEIPTS ARE NEVER TREATED AS INCOM E EVEN WHILE COMPUTING INCOME UNDER NORMAL PROVISIONS OF SECTION 28 TO 44 OF THE ACT AS IT IS ONLY NET REVENUE SURPLUS WHICH COULD B E BROUGHT TO TAX UNDER THOSE PROVISIONS. 10. LD CIT (A) ERRED IN LAW AND ON FACTS IN CON FIRMING THE ACTION OF AO IN DISALLOWING DEPRECIATION AMOUNTING TO RS.3 8,59,02,000/- TREATING THE APPELLANT AS AOP. 11. LD CIT (A) ERRED IN LAW AND ON FACTS IN NOT ALLOWING THE CARRY FORWARD OF DEPRECIATION/ DEFICIT OF THE EARLIER YEA R AS CLAIMED BY THE APPELLANT. 12. LD CIT (A) ERRED IN NOT CONSIDERING THE SUB MISSIONS BASED ON THE JUDICIAL PRONOUNCEMENTS THOUGHT THE COPIES OF W HICH WERE FURNISHED BEFORE HIM, THAT EVEN IN CASE OF ABSENCE OF REGISTRATION U/S 12A OF THE ACT AND BENEFIT OF S. 11 OF THE ACT IS N OT AVAILABLE TO A CHARITABLE TRUST, CAPITAL RECEIPTS AND GRANT CANNOT BE BROUGHT TO TAX AND THAT ALL EXPENSES/ DISBURSEMENT FOR OBJECTS OF TRUST ARE REQUIRED TO BE DEDUCTED. LD CIT (A) ERRED IN LAW AND ON FACT S IN OMITTING TO REPRODUCE RELEVANT OBSERVATIONS OF THE CASE LAWS WH ICH WERE HIGHLIGHTED IN THE WRITTEN SUBMISSIONS. 13. LEVY OF INTEREST U/S 234A, 234B, 234C & 234D OF THE ACT IS UNJUSTIFIED. 14. INITIATION OF PENALTY PROCEEDINGS U/S 271(L)(C) OF THE ACT IS UNJUSTIFIED. 4. A PERUSAL OF THE GROUNDS WOULD INDICATE THAT THE SE ARE ARGUMENTATIVE AND DESCRIPTIVE IN NATURE. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, WE HAD A GLANCE OVER THE ISSUE RAISED IN THE GROUNDS A ND FIND THAT MULTIPLE FOLD OF GRIEVANCES RAISED BY THE ASSESSEE ARE REQUIRED TO B E SEGREGATED IN TWO AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 5 COMPARTMENTS. IN THE FIRST COMPARTMENT, THE FOCUS OF INQUIRY WOULD BE IN THE AREA, WHETHER THE REVENUE AUTHORITIES HAVE ERRED IN HOLDING THAT AS PER PROVISO TO SECTION 2(15) OF THE ACT, THE ASSESSEES ACTIVITIES DO NOT FALL WITHIN THE AMBIT OF EXPRESSION CHARITY EMPLOYED IN THIS SECTION, AND FURTHER ERRED IN ASSESSING THE INCOME OF THE ASSESSEE UNDER NORMA L PROVISION I.E. SECTIONS 28 TO 44 OF THE ACT BY TREATING IT AS AOP INSTEAD OF A SSESSING IT UNDER SECTION 11(2) OF THE INCOME TAX ACT CLAIMED BY THE ASSESSEE . IF THIS FOLD OF GRIEVANCE IS BEING REDRESSED BY THIS TRIBUNAL, THEN ALL THE I MPUGNED ORDERS ARE TO BE RESTORED, AND THE AO WOULD BE DIRECTED TO REFRAME T HE ASSESSMENT. IN CASE THE STAND OF THE REVENUE IS UPHELD, THEN THE QUANTIFICA TION OF TAXABLE INCOME IS TO BE EXAMINED. THESE ADDITIONS ARE IMPUGNED IN VARIO US GROUNDS OF THESE APPEALS. THEREFORE, FIRST LET US EXAMINE WHETHER T HE REVENUE AUTHORITIES HAVE ERRED IN HOLDING THAT THE ACTIVITIES ARE NOT CHARIT ABLE IN VIEW OF THE AMENDMENT CARRIED OUT IN THE PROVISO APPENDED TO SECTION 2(15 ) OF THE INCOME TAX ACT, W.E.F. 1.4.2009. 5. BRIEF FACTS OF THE CASE ARE THAT IN THE ASSTT.YE AR 2009-10, THE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 30.9.2009 DECLARI NG ITS INCOME AT RS.NIL. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE UNDER SECTION 143(2) OF THE INCOME TAX ACT WAS ISSU ED ON 6.9.2010 WHICH WAS DULY SERVED UPON THE ASSESSEE. THE LD.AO HAD ISSUED A QUESTIONNAIRE UNDER SECTION 142(1) OF THE ACT. HE CALLED FOR THE DETAILS OF PURCHASES, SALES AND PREMIUM CHARGED IN RESPECT OF LEASING OUT OF LA ND DURING THE ASSTT.YEAR 2007-08, 2008-09, 2009-10 AND 2010-11. IN RESPONSE TO THE NOTICE OF THE AO, THE ASSESSEE HAS FURNISHED RELEVANT DETAILS. THESE HAVE BEEN REPRODUCED BY THE AO IN THE ASSESSMENT ORDER STARTING FROM PAGE N OS.2 TO 13 OF THE ASSESSMENT ORDER. ON AN ANALYSIS OF THESE DETAILS, THE LD.AO HAS HARBOURED A BELIEF THAT THE ASSESSEE HAS BEEN CHARGING HIGH PRE MIUM WHICH INDICATED THE AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 6 PROFIT MOTIVE EVEN AT THE PLANNING LEVEL. THEREFO RE, HE INVITED THE EXPLANATION OF THE ASSESSEE AS TO WHY THE DEDUCTION UNDER SECTION 11 OF THE INCOME TAX ACT SHOULD NOT BE DENIED TO THE ASSESSEE . SHOW CAUSE NOTICE WAS ISSUED BY THE AO VIDE LETTER DATED 22.12.2011. THE RELEVANT EXTRACT OF THE SHOW CAUSE NOTICE ISSUED BY THE AO ON 22.12.2011 HA S BEEN EXTRACTED IN THE ASSESSMENT ORDER IN PARA 2.8. IT READS AS UNDER: 2.8 BASED ON THE ABOVE OBSERVATIONS AND LEGAL PROVISIONS OF THE ACT, A SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE ON 22.12.2011, THE RELEVANT EXTRACT OF WHICH IS REPRODUCED HERE UNDER: 'YOU WERE ASKED TO FURNISH THE DETAILS OF PURCHASE AND SALE OF LAND FOR A.Y. 2007-08, 2008-09, 2009-10 AND 2010-11 BY AUDA. UPON PERUSAL OF DETAILS FURNISHED BY YOU, IT CAN BE SEEN THAT YOU ARE CHARGING VERY HIGH PREMIUM ON SALE (LEASE) OF L AND, WHICH WAS PURCHASED AT A VERY NOMINAL/ MINISCULE PRICE. A PART FROM THAT AT, THE PROVISION OF THE SALE OF LAND PURCHASE D FOR THE TOWN PLANNING SCHEMES AT MARKET RATES IS EVEN MENTIONED IN THE ACT OF THE AUDA. IT SHOWS THAT THE CHARGING OF HIGH PREMIU M IS AN INBUILT CHARACTERISTIC OF AUDA, WHICH REVEALS PROFI T MOTIVE EVEN AT THE PLANNING LEVEL. UNDER SUCH CIRCUMSTANCES, YO U ARE REQUIRED TO SHOW CAUSE AS TO WHY THE ACTIVITIES OF AUDA PERTAINING TO SALE (LEASE) OF LAND AT VERY HIGH PRE MIUM BE NOT REGARDED AS COMMERCIAL ACTIVITY (AND NOT A CHARITAB LE ACTIVITY). YON ARE REQUIRED TO SHOW CAUSE AS TO WHY DEDUCTION U/S.11 OF THE ACT, CLAIMED BY AUDA BE NOT DENIED UNDER SUCH CIRCU MSTANCES AND INCOME OF THE TRUST BE BROUGHT WITHIN THE PURVI EW OF TAXATION AS PER NORMAL PROVISIONS OF THE ACT (SECTION 28-44) . CONSIDERING THE FACT THAT THE OBJECT OF AUDA IS 'ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY', AND THE BUSINESS RECEIPTS ARE MORE THAN RS.10,00,000/- FOR THE YEAR UNDER CONSIDE RATION, YOU ARE REQUIRED TO SHOW CAUSE AS TO WHY THE DEDUCTION U/S 11 OF THE ACT BE NOT DENIED WHEN READ WITH PROVISO 2 OF SECTI ON 2(15) OF THE ACT. YON ARE HEREIN/ GIVEN AN OPPORTUNITY TO FU RNISH PROFIT AND LOSS ACCOUNT AND BALANCE SHEET OF AUDA AS PER COMMERCIAL PARLANCE IN ACCORDANCE WITH THE PREVAILI NG ACCOUNTING STANDARDS.' AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 7 6. THE ASSESSEE HAS FILED DETAILED SUBMISSIONS, WHI CH HAS BEEN REPRODUCED BY THE LD.AO IN THE ASSESSMENT ORDER. THE LD.AO DI D NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND HELD THAT ITS ACTIVI TIES ARE NOT OF CHARITABLE NATURE. THE RELEVANT FINDINGS OF THE AO IS WORTH T O NOTE. IT READS AS UNDER: 2.11 ON THE BASIS OF FACTS OF THE CASE, SUBMISSI ONS FILED BY THE ASSESSEE, LEGAL PROVISIONS OF THE ACT AND DISCUSSIO N IN THE PRECEDING PARAGRAPHS, IT IS HELD THAT: THE ASSESSEE'S OBJECT IS 'ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY'. THE REASONS FOR ARRIVING AT THIS C ONCLUSION ARE: THE ASSESSEE'S MAIN OBJECT AS PER ITS SUBMISSION IS THAT THE ASSESSEE SHALL CONTRIBUTE TOWARDS PLANNED AND CONTR OLLED DEVELOPMENT FOR THE ENTIRE URBAN DEVELOPMENT AREAS. CHARITABLE OBJECTS DEFINED IN THE SECTION 2(15) OF THE ACT ARE: RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF, PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES O R OBJECTS OF ARTISTIC OR HISTORIC INTEREST, AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBL IC UTILITY UPON PERUSAL OF OBJECTS OF THE TRUST VIS-A-VIS THE OBJECTS DEFINED IN THE ACT, IT IS CONCLUDED THAT THE OBJECT OF THE TRUST IS 'ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY' THE ACTIVITY OF GIVING LAND ON LEASE AT PREMIUM IS A BUSINESS ACTIVITY. THE REASONS FOR ARRIVING AT THIS CONCLUSION ARE: THE PLOTS OF LAND HAVE BEEN ACQUIRED AT A VERY NOMI NAL PRICE IN THE NAME OF TOWN PLANNING SCHEME, BUT HAVE BEEN GIVEN O N LEASE AT A VERY HIGH PREMIUM BY MEANS OF AUCTION TO THE HIGHES T BIDDER. THE LAND IS GIVEN ON LEASE NOT EVEN AT ITS JANTRI RATE (STAMP VALUE), BUT AT AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 8 A COMMERCIAL/ MARKET RATE. THIS VIRTUE OF THE LAND TRANSACTION IS VERY CHARACTERISTIC OF COMMERCIAL ACTIVITY WITH A P ROFIT MOTIVE. AS IS EVIDENT FROM THE DATA IN PARA 2.3.1, THE MAJ ORITY OF THE LAND HAS BEEN ACQUIRED BY VARIOUS COMPANIES (MAINLY CONS TRUCTION COMPANIES), AS MENTIONED IN PARA 2.3.2. SO, IN THE NAME OF TOWN PLANNING THE LAND BELONGING TO ORDINARY PEOPLE/ CIT IZENS HAS BEEN SYSTEMATICALLY SHIFTED TO BIG CORPORATE BY CHARGING PREMIUM. THE LAND OF COMMON/ ORDINARY PEOPLE IS COMPULSORILY ACQ UIRED BY THE ASSESSEE (AUDA) IN THE NAME OF LAND DISPOSAL POLICY AND GUJARAT TOWN PLANNING AND URBAN DEVELOPMENT ACT, AND THE SA ME LAND IS HANDED OVER TO REAL ESTATE COMPANIES AT HUGE PROFIT S. BY NO STRETCH OF IMAGINATION CAN SUCH AN ACTIVITY BE CALLED AS CH ARITABLE ACTIVITY. THIS IS A PURELY COMMERCIAL ACTIVITY WITH NO ELEMEN T OF CHARITY AND THE ONLY MOTIVE BEING PROFIT MOTIVE. THE ASSESSEE HAS HEAVILY RELIED ON THE GUJARAT TOWN PLANNING AND URBAN DEVELOPMENT ACT IN ITS SUBMISSION. THE SAME A CT HAS REFERRED TO THE ASSESSEE AS A CORPORATE BODY (SECTI ON 22(3)) IN THE VERY CHAPTER WHICH TALKS ABOUT THE CONSTITUTION OF AUDA AND SIMILAR AUTHORITIES. SO, AUDA IS IN FACT A CORPORAT E BODY AS PER THE GUJARAT TOWN PLANNING AND URBAN DEVELOPMENT ACT, HE NCE THE ACTIVITIES BEING UNDERTAKEN BY AUDA ARE ALSO CONSID ERED AS COMMERCIAL/ BUSINESS ACTIVITIES SECTION 23A EVEN TA LKS ABOUT ENTRUSTING OF POWERS AND FU RATIONS OF AUDA AND SIM ILAR MINORITIES TO THE GOVERNMENT COMPANIES. SO, THE AUDA IS CONSID ERED AS HOMOLOGOUS TO A COMPANY IN THE GUJARAT TOWN PLANNIN G AND URBAN DEVELOPMENT ACT, WHICH IS BEING REFERRED BY THE ASS ESSEE IN THE ENTIRE LENGTH OF ITS SUBMISSION IN ITS SUPPORT. BY THE VERY LOGIC/ RATIONALE ALSO, THE CHARITABLE A CTIVITY REFERS TO PROVIDING SOME AMENITIES TO THE NEEDY PEOPLE AT A R EASONABLE PRICE. IN THE INSTANT CASE, THE AMENITIES (LAND) HAVE BEEN ACQUIRED FROM THE COMMON PEOPLE, AND IN TURN AUDA HAS ACTED AS A FACI LITATOR FOR THE BIG COMPANIES AND HAS PROVIDED THE SAID LAND TO THE SE COMPANIES AND HAS ITSELF EARNED HUGE PROFIT IN THIS TRANSACTI ON. SO, BASICALLY THIS ACTIVITY OF AUDA IS ANTAGONISTIC TO VERY PRINC IPLES OF CHARILY. IF THE SPARE LAND WOULD HAVE BEEN GIVEN BACK TO THE OR IGINAL OWNERS OF LAND OR, TO OTHER NEEDY PEOPLE AT A REASONABLE PRIC E, SUCH ACTIVITY COULD HAVE QUALIFIED IN THE DEFINITION OF CHARITABL E ACTIVITY. AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 9 THE TWO MAJOR CHARACTERISTICS OF ANY BUSINESS ACTIV ITY ARE PROFIT MOTIVE AND CONTINUITY. FROM THE PURCHASE AND SALE D ETAILS PERTAINING TO A.Y. 2007-08, 2008-09 AND 2009-10 (RE PRODUCED IN PARA 2.3.1), IT IS CLEAR THAT THE ASSESSEE IS IN TH E BUSINESS OF GIVING LAND ON LEASEHOLD AT A HIGH PREMIUM ON A CONTINUOUS BASIS. THE PROFIT MOTIVE OF THE ASSESSEE VIA THE REFERRED ACTI VITY HAS ALREADY BEEN ESTABLISHED IN THE PRECEDING PARAGRAPHS. THOUGH THE ASSESSEE HAS APPLIED ITS PREMIUM INCOME FROM LEASEHOLD OF LAND FOR TOWN PLANNING ACTIVITY ONLY, BUT SINCE THE INCOME EARNED IS BUSINESS INCOME; THE APPLICATION OF INCOME BECOMES IRRELEVANT. THE ASSESSEE'S ENTIRE CONTENTION IS BASED ON THE THEORY THAT SINCE THE INCOME EARNED OUT OF PREMIUM IS USED FOR TOWN PLANNING, HE NCE IT CANNOT BE CONSIDERED AS BUSINESS INCOME, OR PROFIT MOTIVE CAN NOT BE ESTABLISHED. THE TWO PROVISOS WERE INDUCTED IN THE DEFINITION OF CHARITABLE PURPOSE U/S 2(15) OF THE ACT W.E.F A.Y. 2009-10, WHICH ARE BEING REPRODUCED HERE UNDER: 'PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, I F IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OILIER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY:] PROVIDED FURTHER THAT THE FIRST PROVISO SHALL NOT A PPLY IF THE AGGREGATE VALUE OF THE RECEIPTS FROM THE ACTIVITIES REFERRED TO THEREIN IS TEN LAKH RUPEES OR LESS IN THE PREVIOUS YEAR;]' IT IS IMPORTANT TO NOTE FROM THE SAID PROVISIONS OF THE ACT THAT THE APPLICATION OF INCOME EARNED OUT OF BUSINE SS ACTIVITY PERTAINING TO ADVANCEMENT OF ANY OTHER OBJ ECT OF GENERAL PUBLIC UTILITY IS NOT RELEVANT THE ENTIRE S TRESS HAS BEER, LAID ON THE FACT THAT THE INCOME PERTAINING T O ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY SHOULD NOT BE BUSINESS INCOME. SO, DESPITE THE FACT THAT THE ASSESSEE HAS APPLIED THE ENTIRE INCOME EARNED OUT O F PREMIUM IN TOWN PLANNING SCHEME ONLY, BUT STILL AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 10 CONSIDERING THE FACT THAT GIVING OF LAND ON LEASE A ND CHARGING OF HUGE PREMIUM IS A COMMERCIAL/ BUSINESS ACTIVITY, THEREFORE THE ACTIVITY OF THE ASSESSEE DO ES NOT COME IN THE CATEGORY OF 'CHARITABLE PURPOSE' AS PER THE PROVISIONS OF SECTION 2(15) OF THE ACT. THE TOTAL RECEIPTS OUT OF THE ACTIVITY OF GIVING LA ND ON LEASEHOLD FOR THE YEAR UNDER CONSIDERATION IS MORE THAN RS.10 ,00,000/- (RS.13,45,32,000/- TO BE PRECISE). IN ADDITION TO THE ABOVE, THE ASSESSEE'S REGISTRATI ON U/S 12AA OF THE ACT HAS BEEN CANCELLED BY THE DIT (E), AHMEDAB AD VIDE ORDER DATED 05.02.2010. 2.12 IN THE LIGHT OF DISCUSSION IN THE PRECEDIN G PARAGRAPHS, IT IS HELD THAT THE ASSESSEE'S ACTIVITIES DOES NOT QUA LIFY THE DEFINITION OF CHARITABLE PURPOSE, AS LAID DOWN IN SECTION 2(15 ) READ WITH PROVISO-1 AND PROVISO-2 OF THE ACT. HENCE, DEDUCTIO N CLAIMED BY THE ASSESSEE U/S 11 OF THE ACT IS DISALLOWED AND AD DED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE IS HEREBY TREA TED AS AN AOP, AND ITS INCOME IS BROUGHT WITHIN THE PURVIEW O F TAXATION AS PER NORMAL PROVISIONS OF THE ACT (SECTION 28-44). P ENALTY PROCEEDINGS ARE INITIATED FOR FURNISHING INACCURATE PARTICULARS AND CONCEALMENT OF INCOME U/S 271(L)(C) OF THE ACT. ' 7. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD.CIT(A) WHO CONCURRED WITH THE LD.AO ON ALL ASPECTS. THE LD.FI RST APPELLATE AUTHORITY HAS SUMMARIZED THE ARGUMENTS GIVEN BY THE ASSESSEE BEFO RE THELD.AO ON PAGE NO.7 OF THE IMPUGNED ORDER. THEY READ AS UNDER: .IN RESPONSE TO THE SHOW-CAUSE NOTICE ISSUED BY T HE AO THAT AS TO WHY THE ACTIVITIES CARRIED OUT BY THE ASSESSEE SHOU LD NOT BE CONSIDERED AS ACTIVITIES OF THE NATURE OF GENERAL PUBLIC UTILI TY. THE ASSESSEE SUBMITTED BEFORE THE AO AS UNDER: (A) THAT ONLY SMALL PORTION OF PLOTS ACQUIRED WHICH DO NOT EXCEED 5% TO 7% WERE SOLD OFF, FOR THE PURPOSES OF PROVIDING INF RASTRUCTURAL FACILITIES. SUCH A CLAIM OF SELLING OF SMALL PORTIO NS OF PLOTS WAS INTRODUCED IN 1986 TO MEET WITH THE FINANCIAL CONST RAINTS. ACCORDING TO AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 11 THE ASSESSEE, THE ACTIVITY OF PURCHASE OF LAND AND SALE OF LAND IS SPECIFICALLY PROVIDED IN THE COST OF SCHEME (SECTIO N 77), CALCULATION OF INCREMENT (SECTION 78) AND CONTRIBUTION TOWARDS COS T OF SCHEME (SECTION 79). THE PURPOSE OF SELLING OF SMALL PORTI ON OF LAND WAS FOR IMPROVING INFRASTRUCTURAL FACILITIES LIKE ROADS, DR AINAGE FOR DEVELOPING GARDENS, SCHOOLS, OTHER PUBLIC SERVICES, ETC. (B) THAT THE MANNER IN WHICH THE PLOTS OF LAND ARE SOLD OUT IN TOWN PLANNING SCHEME DISPOSAL OF SUB PLOTS IN A DEFINED MANNER AND PURPOSE AND UTILIZATION OF PROCEEDS FOR INFRASTRUCT URAL DEVELOPMENT ONLY AND ALL THESE PROCESS ARE CARRIED OUT WITHOUT ANY INTEND OF MAKING ANY PROFIT OUT OF AND THEREFORE ACTIVITIES CARRIED OUT CANNOT BE TERMED AS BUSINESS OR COMMERCIAL ACTIVITY. (C) WITH RESPECT TO PROPOSED DISALLOWANCE OF DEDUCT ION CLAIMED U/S. 11, IT WAS SUBMITTED THAT THE ASSESSEE TRUST IS DULY RE GISTERED U/S. 12AA OF THE INCOME-TAX ACT. IT WAS FURTHER SUBMITTED THAT E VEN THE ORDER CANCELLING THE REGISTRATION HAS BEEN CANCELLED BY T HE HON'BLE ITAT, AHMEDABAD AND THUS THE ASSESSMENTS ARE TO BE FRAMED AS PER THE PROVISIONS OF SECTION 11, 12 & 13 OF THE INCOME-TAX ACT. (D) THAT THE ASSESSEE HAS ACTED AS A TRUSTEE IN CAR RYING ALL ACTIVITIES U/S. 23 OF GUJARAT TOWN PLANNING AND URBAN DEVELOPMENT A CT. THE VERY MOTIVE IS TO CARRY OUT DEVELOPMENTAL ACTIVITIES FOR THE PUBLIC AT LARGE AND NOT TO EARN INCOME. IT WAS ALSO SUBMITTED THAT THE ASSESSEE IS NOT THERE TO GENERATE INCOME AND DISTRIBUTES TO ANYBODY BUT IT IS ONLY FO R DEVELOPMENTAL ACTIVITIES WHICH NEEDS TO BE SPENT AS PER THE ABO VEMENTIONED ACT. THE ASSESSEE ALSO POINTED OUT THAT CHAPTER V OF THE ACT WHICH DEALS WITH TOWN PLANNING SCHEME. AS PER THIS CHAPTER, THE ASSESSEE IS EMPOWERED TO MAKE TOWN PLANNING SCHEMES FOR THE DEV ELOPMENT OF ANY AREA. IT WAS ALSO POINTED OUT THAT UNDER THE SUB-C LAUSE, IT IS CATEGORICALLY PROVIDES THAT THE PROCEEDS FROM SALE OF LAND SHALL BE USED FOR THE PURPOSE OF PROVIDING INFRASTRUCTURAL FACILI TY.. 8. ON DUE CONSIDERATION OF THE SUBMISSION OF THE AS SESSEE, THE LD.CIT(A) HAS REJECTED THE STAND OF THE ASSESSEE. WE DEEM IT APPROPRIATE TO TAKE NOTE OF THIS FINDING. IT READS AS UNDER: AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 12 4.5 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT OR DER AND SUBMISSIONS MADE IN THIS REGARD. I HAVE ALSO PERUSE D THE VARIOUS JUDGMENTS CITED BY THE APPELLANT IN SUPPORT OF THE GROUNDS RAISED BY IT. I FIND THAT APPELLANT HAS RAISED A FUNDAMENTAL QUES TION THAT BENEFIT OF SECTION 11 & 12 CANNOT BE DENIED IF THE ASSESSEE HA S A VALID CERTIFICATE OF REGISTRATION U/S 12AA OF THE INCOME TAX ACT. THE APPELLANT HEAVILY RELIED ON THE FACT THAT SINCE, IN HIS CASE, HON'BLE ITAT AHMEDABAD HAS RESTORED REGISTRATION U/S 12AA HE IS ELIGIBLE FOR E XEMPTION U/S 11 & 12 OF THE ACT. 4.5.2 I FIND THAT THAT APPELLANT HAS OVERWEIGHTING THE FACT OF RESTORATION OF CERTIFICATE U/S 12AA BY THE HON'BLE ITAT IN HIS CASE AS IN SUCH ORDER HON'BLE ITAT, AHMEDABAD HAS MERELY RESTO RED THE CERTIFICATE U/S 12AA. HON'BLE ITAT, AHMEDABAD AS ON LY MERELY SAID IN THIS ORDER THAT ACTIVITIES OF APPELLANT TRUST ARE A S PER ITS OBJECTS. NO WHERE IN ORDER HON'BLE ITAT, AHMEDABAD HAS CERTIFIE D THAT THE APPELLANT ACTIVITY ARE CHARITABLE IN NATURE. THE RE LEVANT PARA OF ORDER OF TRIBUNAL IS REPRODUCED AS UNDER; 'BEFORE WE PART WITH THE MATTER, WE MAY POINT OUT T HAT THE LEARNED COUNSEL FOR THE ASSESSEE HAD ARGUED AT LENG TH THAT THE ACTIVITIES OF THE ASSESSEE ARE CHARITABLE AND THERE FORE THE ASSESSEE IS ENTITLED FOR REGISTRATION UNDER SECTION 12AA. IN SUPPORT OF THIS CONTENTION, HE HAS RELIED UPON THE DECISION OF HON'BLE APEX COURT AS WELL AS THE HONBLE JURISDICTI ONAL HIGH COURT. THE LEARNED DR HAS ALSO ARGUED AT LENGTH TO SUPPORT REVENUE'S POINT THAT THE ASSESSEE IS NOT ENTITLED T O REGISTRATION UNDER SECTION 12AA. IN SUPPORT OF HIS CONTENTION, H E HAS ALSO RELIED UPON VARIOUS DECISIONS. HOWEVER, THE ISSUE B EFORE US IS NOT WHETHER THE ASSESSEE IS ENTITLED TO REGISTRATIO N OR NOT BECAUSE THE ASSESSEE-INSTITUTION IS ALREADY REGISTERED VIDE ORDER OF THE DIT(EXEMPTION) UNDER SECTION 12AA(1) DATED 23-10-20 03. THE LIMITED ISSUE IN THIS APPEAL BEFORE US WHETHER THE DIT(EXEMPTION)WAS JUSTIFIED IN CANCELING SUCH REGIS TRATION BY INVOKING THE POWER UNDER SECTION 12AA(3).' FURTHER, ACCORDING TO THE APPELLANT, THE POWER AND FUNCTIONS OF URBAN DEVELOPMENT AUTHORITY ARE AS UNDER: AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 13 '[THE POWERS AND FUNCTIONS OF] AN URBAN DEVELOPMENT AUTHORITY SHALL BE: (I) TO UNDERTAKE THE PREPARATION OF DEVELOPME NT PLANS UNDER THE PROVISIONS OF THIS ACT, FOR THE URBAN DEVELOPMENT A REA; (II) TO UNDERTAKE THE PREPARATION 3[AND EXEC UTION] OF TOWN PLANNING SCHEMES UNDER THE PROVISIONS OF THIS ACT, IF SO DIRECTED BY THE STATE GOVERNMENT; (III) TO CARRY OUT SURVEYS IN THE U RBAN DEVELOPMENT AREA FOR THE PREPARATION OF DEVELOPMENT PLANS OR TOWN P LANNING SCHEMES; (IV) TO GUIDE, DIRECT AND ASSIST THE LOCAL AUTH ORITY OR AUTHORITIES AND OTHER STATUTORY AUTHORITIES FUNCTIONING IN THE URBAN DEVELOPMENT AREA IN MATTERS PERTAINING TO THE PLANNIN G DEVELOPMENT AND USE OF URBAN LAND; (V) TO CONTROL THE DEVELOPMENT ACTIVIT IES IN ACCORDANCE WITH THE DEVELOPMENT PLAN IN THE URBAN DEVELOPMEN T AREA; 4[(V-A) TO LEVY AND COLLECT SUCH SECURITY FEES FOR SCRUTINY OF DOCUMENTS SUBMITTED TO THE APPROPRIATE AUTHORITY FOR PERMISSI ON FOR DEVELOPMENT AS MAY BE PRESCRIBED BY REGULATION;] (VI) TO EXECUTE WORKS IN CONNECTION WITH SUPPLY OF WATER, DISPOSAL OF SEWERAGE AND PROVISION OF OTHER SERVICES AND AMENIT IES: 1[(VI-A) TO LEVY AND COLLECT SUCH FEES FOR THE EXEC UTION OF WORKS REFERRED TO IN CLAUSE (VI) AND FOR PROVISION OF OTHER SERVIC ES AND AMENITIES AS MAY BE PRESCRIBED BY REGULATIONS;] (VII) TO ACQUIRE, HOLD, MANAGE AND DISPOSE OF P ROPERTY, MOVABLE OR IMMOVABLE, AS IT MAY DEEM NECESSARY: (VIII) TO ENTER INTO CONTRACTS, AGREEMENTS OR AR RANGEMENTS, WITH ANY LOCAL AUTHORITY, PERSON OR ORGANIZATION AS THE URBA N DEVELOPMENT AUTHORITY MAY CONSIDER NECESSARY FOR PERFORMING ITS FUNCTIONS; AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 14 (IX) TO CARRY ANY DEVELOPMENT WORKS IN THE URB AN DEVELOPMENT AREA AS MAY BE ASSIGNED TO IT BY THE STATE GOVERNMENT FR OM TIME TO TIME; (X) TO EXERCISE SUCH OTHER POWERS AND PERFORM SUCH OTHER JUNCTIONS AS ARE SUPPLEMENTAL, INCIDENTAL OR CONSEQUENTIAL TO ANY OF THE FOREGOING POWERS AND FUNCTIONS OR AS MAY BE DIRECTE D BY THE STATE GOVERNMENT.' 4.5.3 PLAIN READING OF THE OBJECTS OF APPELLANT ABOVE INDICATE THAT THE MAIN OBJECT OF THE ASSESSEE IS CONTRIBUTION TOWAR DS PLANNED AND CONTROLLED/ DEVELOPMENT FOR THE ENTIRE URBAN DEVELO PMENT AREAS AND CLEARLY SUCH ACTIVITY / FALLS UNDER THE CATEGORY 'A DVANCEMENT OF GENERAL PUBLIC UTILITY' (REFER SEC 2(15)) CHARITABLE OBJECTS, NOW, ARE DEFINED IN AN INCLUSIV E MANNER IN SECTION 2(15) OF THE ACT AS ARE: RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF, PRESERVATION OF ENVIRONMENT (INCLUDING WATERS HEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PL ACES OR OBJECTS OF ARTISTIC OR HISTORIC INTEREST, AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBL IC UTILITY 4.5.4 IN THE INSTANT CASE THE PLOTS OF LAND HAVE B EEN ACQUIRED BY THE ASSESSEE AT A VERY NOMINAL PRICE IN THE NAME OF TOW N PLANNING SCHEME, BUT NAVE BEEN GIVEN LEASE AT A VERY HIGH PREMIUM BY MEANS OF AUCTION TO THE HIGHEST BIDDER. THE LAND IS GIVEN ON LEASE N OT EVEN AT ITS JANTRI RATE (STAMP VALUE), BUT AT A COMMERCIAL/ MARKET RAT E. THIS VIRTUE OF THE LAND TRANSACTIONS IS VERY CHARACTERISTIC OF COMMERC IAL ACTIVITY WITH A PROFIT MOTIVE. THE SAID ACTIVITY OF THE ASSESSEE CA N BY NO STRETCH OF IMAGINATION BE TREATED AS CHARITABLE ACTIVITY WITHI N THE MEANING OF EDUCATION, MEDICAL RELIEF, RELIEF OF POOR, AND PRES ERVATION OF ENVIRONMENT OR RESERVATION OF MONUMENTS. THE NATURE OF THE TRANSACTIONS CARRIED OUT BY THE ASSESSEE CLEARLY SH OWS THAT THE ASSESSEE IS CARRYING ON AN ACTIVITY WHICH FALLS UNDER THE LA ST LIMB OF THE DEFINITION OF 'CHARITABLE ACTIVITY' U/S 2(15) OF TH E ACT I.E 'THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC-U TILITY'. FURTHER, THE FACT THAT THE PLOTS OF LAND WERE ACQUIRED FROM THE PUBLIC AT NOMINAL RATES AND SOLD TO VARIOUS COMMERCIAL ENTITIES AT MA RKET RATE INDICATES AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 15 THAT THE ASSESSEE IS INVOLVED IN CARRYING ON THE AC TIVITY WHICH IS IN THE NATURE OF TRADE, COMMERCE OR BUSINESS. SINCE THE AS SESSEE HAS SOLD PLOTS OF LAND AT A PREMIUM, TO VARIOUS COMMERCIAL E NTITIES, WITH A MOTIVE TO EARN PROFIT, IT HAS BEEN RIGHTLY TREATED AS A BUSINESS TRANSACTION BY THE AO. THEREFORE, IT IS CLEAR THAT THE PROVISOS TO SEC 2(15) OF THE ACT ARE SQUARELY APPLICABLE TO THE FAC TS OF THE CASE. THE TWO MAJOR CHARACTERISTICS OF ANY BUSINESS ACTIVITY ARE PROFIT MOTIVE AND CONTINUITY. FROM THE PURCHASE AND SALE DETAILS PERT AINING TO A.Y. 2007- 08, 2008-09 AND 2009-10 (REPRODUCED IN PARA 2.3.1 O F THE ASSESSMENT ORDER), IT IS CLEAR THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF GIVING LAND ON LEASEHOLD AT A HIGH PREMIUM ON A CONTINUOUS BASIS AND ON PROFIT BASIS. 4.5.5 THE CONTENTION OF THE ASSESSEE THAT THE SAID INCOME HAS BEEN APPLIED TO FOR TOWN PLANNING ACTIVITY ONLY AS PER I TS OBJECTS, IS NOT RELEVANT SINCE THE INCOME EARNED IS BUSINESS INCOME AND THE APPLICATION OF INCOME BECOMES IRRELEVANT, IN VIEW O F THE PROVISO TO SEC 2(15) OF THE ACT. THE TWO PROVISOS WHICH WERE INSER TED IN THE DEFINITION OF CHARITABLE PURPOSE U/S 2(15) OF THE ACT W.E.F A. Y. 2009-10, ARE REPRODUCED HERE UNDER: 'PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, I F IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION* OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY:] [PROVIDED FURTHER THAT THE FIRST PROVISO SHALL NOT APPLY IF THE AGGREGATE VALUE OF THE RECEIPTS FROM THE ACTIVITIES REFERRED TO THEREIN IS TEN LAKH RUPEES OR LESS IN THE PREVIOUS YEAR;]' THEREFORE, THE NATURE OF APPLICATION OF THE INCOME IS NOT RELEVANT IN THE CASE OF THE ASSESSEE WHOSE ACTIVITY FALLS UN DER THE CLASSIFICATION, 'ADVANCEMENT OF GENERAL PUBLIC UTIL ITY' AND WHERE THE PROVISIONS OF PROVISO TO SEC 2(15) IS APPLICABL E. 4.5.6 ATTENTION NOW IS DRAWN TO SEC.13(8) OF THE AC T, W.E.F 1/04/2009 (FINANCE ACT 2012). THIS PROVISION MAKES IT CLEAR THAT THE ASSESSEE WHOSE CASE IS SQUARELY COVERED BY THE PROVISOS TO AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 16 SEC 2(15) SHALL FORFEIT ALL THE EXEMPTIONS THAT ARE OTHERWISE AVAILABLE U/S 11 AND 12 OF THE ACT. THE RELEVANT PR OVISIONS IS AS UNDER: '(8) NOTHING CONTAINED IN SECTION 11 OR SECTION 12 SHALL OPERATE SO AS TO EXCLUDE ANY INCOME FROM THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT THERE OF IF THE PROVISIONS OF THE FIRST PROVISO TO CLAUSE (15) OF S ECTION 2 BECOME APPLICABLE IN THE CASE OF SUCH PERSON IN THE SAID PREVIOUS YEAR.' THE NEW SUB-SECTION (8) PROVIDES THAT THE EXEMPTION UNDER SECTION 11 85 12 WILL NOT BE AVAILABLE TO A TRUST, IN A PREVIOUS YEAR, IN WHICH THE PROVISO TO SECTION 2(15) BECOMES APPLICABLE, FOR THAT PREVIOUS YEAR. 4.5.7 THEREFORE, IN THE LIGHT OF THE PROVISIONS OF SEC 13(8) OF THE ACT, THE ASSESSEE LOSES ALL THE EXEMPTIONS CLAIMED U/S 11 & 12 OF THE ACT. IT IS CLEAR FROM THE PLAIN READING OF THE SAID PROVISION THAT ONCE PROVISO TO SEC 2(15) BECOMES APPLICABLE T O THE FACTS OF THE CASE, ALL THE EXEMPTIONS OTHERWISE ALLOWABLE U/ S 11 AND 12 ARE NOT AVAILABLE TO THE ASSESSEE IN THAT PREVIOUS YEAR. THEREFORE, THE ASSESSEE IS NOT ELIGIBLE TO ANY OF THE EXEMPTIO N CLAIMED U/S 11 AND 12 OF THE ACT. THUS, THE AO HAS RIGHTLY DISALLO WED THE VARIOUS EXEMPTIONS CLAIMED U/S 11 & 12 OF THE ACT B Y THE ASSESSEE MENTIONED IN PARA 6 OF THE ASSESSMENT ORDE R. 4.5.8 FURTHER FOLLOWING DECISIONS MAY ALSO BE NOTED WHERE IN SIMILAR FACTS AND CIRCUMSTANCES THE ASSESSEE WERE D ENIED EXEMPTION CLAIM U/S 11 & 12 OF THE ACT. THE DECISIO NS ARE: (A) JALANDHAR DEVELOPMENT AUTHORITY V. CIT ITAT AMRITSAR BENCH [2010],35 SOT 15 (ASR.)(URO) (B) JAMMU DEVELOPMENT AUTHORITY V. CIT, JAMMU* ITAT, AMRITSAR BENCH [2012] 23 TAXMANN.COM 343 (AS R.) (C) PUNJAB URBAN PLANNING & DEVELOPME NT AUTHORITY V; CIT-1, CHANDIGARH, ITAT CHANDIGARH BENCH B' [2006] 156 TAXMAN 37 AO (CHD.) (MAG.) AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 17 WHEREIN IT HAS BEEN HELD THAT 'THE ASSESSEE ACQUIRE D LAND AT NOMINAL RATE SAND AFTER DEVELOPING THE SAME, SOLD T HE SAME LAND ON HIGH PROFIT WHICH COULD NOT BE SAID TO BE A CHAR ITABLE ACTIVITY.' (156TAXMAN 37 ) IN THE CASE OF JALANDHAR DEVELOPMENT AUTHORITY V. C IT, THE ITAT AMRITSAR BENCH [2010] 35 SOT 15 (ASR.)(URO) HELD TH AT, 'THE MAJOR THRUST OF THE ASSESSEE WAS THAT ITS ACTI VITY WAS OF GENERAL PUBLIC UTILITY AS IT SATISFIED THE NEED FOR HOUSING ACCOMMODATION FOR THE SECTION OF THE PEOPLE OF THE STATE OF PUNJAB AND WAS ALSO DOING PLANNING AND DEVELOPMENT OF THE CITIES, TOWNS AND VILLAGES. THE SAID CONTENTION COU LD NOT BE ACCEPTED BECAUSE A CHARITABLE INSTITUTION PROVIDES SERVICES FOR CHARITABLE PURPOSES FREE OF COST AND NOT FOR A GAIN . IN THE PRESENT SCENARIO, THE SIMILAR ACTIVITIES WERE PERFORMED, BY BIG COLONIZERS/DEVELOPERS WHO WERE EARNING A HUGE PROFI T. IF THIS REGISTRATION WAS GRANTED, THEN A PANDORA BOX WOULD BE OPENED AND ANYBODY WOULD CLAIM THE EXEMPTION FROM TAX. WHE N THE OBJECTS OF THE ASSESSEE WERE ANALYSED, IT HAD TURNE D INTO A HUGE PROFIT MAKING AGENCY FOR WHICH IT WAS TAKING MONEY FROM THE GENERAL PUBLIC. IN SUCH A SITUATION, IT WAS OPINED THAT NO CHARITY WAS INVOLVED AND IF ANY INSTITUTION OF PUBLIC IMPOR TANCE LIKE SCHOOL, COMMUNITY CENTRE WAS CREATED/DEVELOPED, THE ASSESSEE WAS CHARGING THE COST OF IT FROM THE PUBLIC AT LARG E AND THE MONEY WAS COMING FROM THE COFFER OF THE GOVERNMENT. THUS, IT COULD BE SAID THAT OBJECTS/ACTIVITIES OF THE ASSESS EE WERE MORE OF COMMERCIALIZED NATURE AND THERE WAS NO CHARITY IN I T. AT THE SAME TIME, IF THOSE FACILITIES WERE NOT PROVIDED, T HEN NOBODY WOULD PURCHASE A PLOT. IT COULD BE SAID THAT IT WAS A MEANS OF ATTRACTING PEOPLE SO THAT MAXIMUM PEOPLE MAY APPLY FOR THE SAME AND THE HIDDEN COST WAS ALREADY ADDED, SO NO C HARITY WAS INVOLVED. AT BEST, THE ASSESSEE COULD BE SAID TO B E AN AUTHORITY CREATED TO ACHIEVE CERTAIN OBJECTS. 4.5.9 TO SUMMARIZE, IT MAY BE CONCLUDED THAT 'EVEN THOUGH THE ACTIVITY OF APPELLANT ARE CHARITABLE FALLING UNDER THE CATEG ORY ' ADVANCEMENT , OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY, PROV ISOS TO SECTION 2(15) ARE APPLICABLE AS THE APPELLANT IS CARRYING OUT ACT IVITIES IN THE NATURE OF TRADE, COMMERCE OR BUSINESS AND RECEIPTS FROM SU CH AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 18 TRADE/COMMERCE/BUSINESS EXCEEDS THE PRESCRIBED LIMI T OF 10 LAKHS. SINCE THE PROVISOS TO SECTION 2(15) IS 'APPLICABLE, SECTION 13(8) GETS INVOKED. AS A RESULT OF SECTION 13(8) THE APPELLANT LOSSES ALL THE BENEFITS U/S 11 8S 12 OF THE ACT AS WAS RIGHTLY CONCLUDED BY THE AO. 4.5.10 IN VIEW OF THE ABOVE DISCUSSIONS, I AM OF T HE VIEW THAT AO WAS RIGHT IN WITHDRAWING THE BENEFIT OF SEC 11 & 12 TO THE APPELLANT. SINCE ALL THE GROUNDS RELATE TO SECTION 11 & 12, SA ME ARE THEREFORE DISMISSED. THE CLAIM OF DEPRECIATION IS NOT ALLOWAB LE AS APPELLANT IS NOW TREATED AS AOP. OTHER GROUNDS RELATING TO CHARG EABILITY OF INTEREST U/S 234A, B & C ARE ALSO DISMISSED AS IT IS MANDATO RY TO CHARGE THE INTEREST. 5. IN THE RESULT, THE APPEAL IS DISMISSED. 9. BEFORE WE TAKE NOTE OF THE ARGUMENTS OF THE RESP ECTIVE PARTIES AND EMBARK UPON AN INQUIRY ON THE FACTS AND LAW BROUGHT TO OUR NOTICE, WE WOULD LIKE TO OBSERVE THAT THOUGH THE ASSESSEE IS ENJOYIN G REGISTRATION OF A CHARITABLE INSTITUTION, CONTEMPLATED UNDER SECTION 12AA OF THE INCOME TAX ACT, AND UNDER NORMAL CIRCUMSTANCES, ITS INCOME HAS TO BE AS SESSED BY GIVING BENEFIT OF SECTIONS 11, 12 AND 13 OF THE INCOME TAX ACT, BU T BY INVOKING PROVISO APPENDED TO SECTION 2(15) OF THE INCOME TAX ACT, TH E LD.AO DID NOT GRANT TO IT THE STATUS OF A CHARITABLE INSTITUTION AND HE ASS ESSED ITS INCOME UNDER REGULAR PROVISIONS I.E. UNDER SECTIONS 28 TO 44 BY TREATING THE ASSESSEE AS AN AOP. THUS, FIRSTLY, BOTH THE REPRESENTATIVE HAVE ADDRESSED THEIR ARGUMENTS ON THIS ASPECT I.E. WHETHER THE ASSESSEE IS TO BE D ENIED CHARITY STATUS AFTER INSERTION OF PROVISO TO SECTION 2(15) OF THE INCOME TAX ACT W.E.F. 1-4-2009 I.E. ASSTT.YEAR 2009-10. 10. SHRI S.N.SOPARKAR, LD. SENIOR COUNSEL FOR THE A SSESSEE, WHILE IMPUGNING THE ORDERS OF THE REVENUE AUTHORITIES HAD APPRAISED US THE HISTORICAL BACKGROUND OF THE ASSESSEE. HE SUBMITTED THAT IN ORDER TO ACHIEVE THE OBJECT AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 19 OF ORDERLY DEVELOPMENT OF VARIOUS AREAS WITHIN THE CITY AND VICINITY, THE STATE LEGISLATIVE ASSEMBLY HAD ENACTED GUJARAT TOWN PLANN ING AND URBAN DEVELOPMENT ACT, 1976 (HEREINAFTER REFERRED TO AS T HE TP ACT FOR SHORT). THE PREAMBLE TO THE SAID TP ACT CONTEMPLATES THAT T HIS ACT HAS ACTED TO CONSOLIDATE AND AMEND THE LAW RELATING TO MAKING AN D EXECUTION OF DEVELOPMENT PLAN AND TP SCHEMES IN THE STATE. 11. THE AHMEDABAD URBAN DEVELOPMENT AUTHORITY CAME TO INTO EXISTENCE IN THE YEAR 1978. IT WAS ESTABLISHED AS AN AUTHORI TY UNDER SECTION 22 OF THE TP ACT. UPTO ASSESSMENT YEAR 2003, ITS TOTAL INCOME W AS EXEMPT UNDER SECTION 10(20A) OF THE INCOME TAX ACT, BEING AN AUTHORITY C ONSTITUTED IN INDIA BY A LAW ENACTED FOR THE PURPOSE OF PLANNING, DEVELOPMEN T AND IMPROVEMENT OF STATES, TOWN, VILLAGES. THIS, CLAUSE WAS OMITTED F ROM THE ACT W.E.F. ASSTT.YEAR 2003-04. THE ASSESSEE CLAIMED THAT IT W AS CHARITABLE INSTITUTION. IT APPLIED FOR REGISTRATION UNDER SECTION 12A OF TH E ACT, WHICH WAS GRANTED TO IT. THE AO ACCEPTED THE CLAIM OF THE ASSESSEE TO B E A CHARITABLE INSTITUTION. THE LD.COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TOWARDS THE ASSESSMENT ORDER AVAILABLE ON PAGE NO.1 OF THE PAPER BOOK. SI MILARLY, IN THE ASSTT.YEAR 2004-05, THE STATUS OF THE ASSESSEE AS A CHARITABL E INSTITUTION WAS ACCEPTED BY THE AO IN AN ASSESSMENT ORDER PASSED UNDER SECTI ON 143(3) OF THE INCOME TAX ACT. UPTO ASSESSMENT YEAR 2006-07, THE STATUS OF THE ASSESSEE TO BE A CHARITABLE INSTITUTION WAS ACCEPTED BY THE AO. T HE LD.COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TOWARDS ASSESSMENT ORDE RS IN ORDER TO BUTTRESS HIS CONTENTION. IN THE ASSTT.YEAR 2007-08, THE AO DID NOT ACCEPT THE CONTENTIONS OF THE ASSESSEE, HOWEVER, WHEN THE DISPUTE TRAVELLE D UPTO THE TRIBUNAL, THEN, VIDE ORDER PASSED IN ITA NO.1835/AHD/2010, THE TRIB UNAL HAS ACCEPTED THE STATUS OF THE ASSESSEE AS A CHARITABLE INSTITUTION . IT SET ASIDE THE ASSESSMENT ORDER AND DIRECTED THE AO TO FRAME THE ASSESSMENT I N ACCORDANCE WITH THE AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 20 PROVISIONS OF SECTIONS 11, 12 AND 13 OF THE INCOME TAX ACT. SIMILARLY, IN THE ASSTT.YEAR 2008-09, THE DISPUTE TRAVELLED UPTO THE TRIBUNAL, AND THE TRIBUNAL IN ITA NO.1682/AHD/11 DIRECTED THE AO TO ACCEPT THE ASSESSEE AS A CHARITABLE INSTITUTION AND DIRECTED HIM TO GRANT BENEFIT UNDER SECTIONS 11, 12 AND 13 OF THE INCOME TAX ACT. THE ORDERS OF THE TR IBUNAL IN BOTH THESE ASSESSMENT YEARS HAVE BEEN PLACED AT PAGE NOS.19 TO 23, 35 TO 39 OF THE PAPER BOOK. THUS, ACCORDING TO THE LD.COUNSEL FOR THE AS SESSEE, RIGHT UPTO THE ASSESSMENT YEAR 2008-09, THE ASSESSEE WAS ALLOWED T HE BENEFIT OF CHARITABLE INSTITUTION AND ITS INCOME HAS BEEN ASSESSED UNDER SECTIONS 11, 12 AND 13 OF THE INCOME TAX ACT. HE FURTHER CONTENDED THAT RIGH T FROM INCEPTION UPTO THE ASSTT.YEAR 2008-09, THE ASSESSEES INCOME WAS EXEMP T EITHER UNDER SECTION 10(20A) OF THE ACT OR BY THE OPERATION OF REGISTRAT ION GRANTED UNDER SECTION 12AA IN FAVOUR OF THE ASSESSEE. 12. DURING THE ASSTT.YEAR 2009-10, THE STAND OF THE REVENUE IS THAT NOTWITHSTANDING OF THE FINDING IN ALL THE ORDERS OF THE EARLIER YEARS TO THE EFFECT THAT THE ASSESSEE IS A CHARITABLE INSTITUTION ON ACCOUNT OF AMENDMENT IN THE DEFINITION OF CHARITY INSERTED BY PROVISO TO SECT ION 2(15) FROM 1.4.2009 WOULD DISENTITLE THE ASSESSEE FOR A CHARITABLE STAT US. THE REVENUE ALSO REFERRED SECTION 13(8) OF THE INCOME TAX ACT. THE OPERATIVE FORCE OF REVENUES REASONING IS THAT THE ACTIVITY OF PURCHAS E AND SALE OF LAND IS A BUSINESS ACTIVITY, AND THEREFORE, PROVISO TO SECTIO N 2(15) DENUDE THE ASSESSEE TO CLAIM CHARITY STATUS. THE LD.COUNSEL FOR THE ASSESSEE HAD APPRISED US THE POWERS AND FUNCTIONS OF AN AUTHORITY ESTABLISHED UN DER SECTION 22 OF THE TP ACT. WITH THE HELP OF SECTIONS 23, 40, 48A, 91(1)( A) OF THE T.P.ACT, HE DEMONSTRATED AS TO HOW A URBAN DEVELOPMENT AUTHORIT Y CONCEIVE CONCEPT OF ORDERLY DEVELOPMENT OF AN URBAN AREA. SPECIFICALLY ON THE STRENGTH OF SECTION 40 OF THE T.P.ACT, HE CANVASSED THE MANNER OF GETTI NG THE LAND, AND HOW THAT AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 21 LAND IS TO BE USED BY THE ASSESSEE. HE TOOK US TH ROUGH VARIOUS SECTIONS OF T.P. ACT AND SPECIFICALLY THROUGH SECTIONS 23, 40, 48A, 91(1)(A). HE FURTHER CONTENDED THAT CLAUSE-JJ TO SECTION 40(3) OF THE T. P.ACT, AUTHORIZES THE AUTHORITY TO UTILIZE THE LAND OBTAINED UNDER T.P. S CHEME. ACCORDING TO THIS CLAUSE, THE ALLOTMENT OF LAND FROM TOTAL AREA COVER ED UNDER THIS SCHEME TO THE EXTENT OF 15% IS USED FOR ROADS, 5% FOR PARKS, PLAY GROUNDS, GARDEN, OPEN SPACE, ETC., 5% FOR SOCIAL INFRASTRUCTURE SUCH AS S CHOOLS, DISPENSARIES, FIRE BRIGADE, AND ANOTHER 15% IS EARMARKED FOR SALE BY APPROPRIATE AUTHORITY FOR RESIDENTIAL, COMMERCIAL OR INDUSTRIAL USE, DEPENDIN G UPON THE NATURE OF DEVELOPMENT. THE PERCENTAGE OF ALLOTMENT OF LAND S PECIFIED IN PARAGRAPH-(I) TO (III) OF 40JJ(A) OF T.P.ACT MAY BE ALTERED DEPEN DING UPON THE NATURE OF DEVELOPMENT, AND FOR THE REASONS TO BE RECORDED IN WRITING. SIMILARLY, THE PROCEEDS FROM THE SALE OF LAND REFERRED TO IN PARA (IV) OF SUB-CLAUSE (A) SHALL BE USED FOR THE PURPOSE OF PROVIDING INFRASTRUCTURE FACILITIES. THE LAND ALLOTTED FOR THE PURPOSE REFERRED TO PARA-(II) AND (III) OF SUB-CLAUSE SHALL NOT BE CHANGED BY VARIATION OF SCHEME FOR THE PURPOSE OTHE R THAN PUBLIC PURPOSE. THIS AMENDMENT WAS INSERTED IN T.P. ACT IN 1986. VIRES OF THESE WERE CHALLENGED BEFORE THE HONBLE GUJARAT HIGH COURT AN D THE HONBLE HIGH COURT HAS UPHELD THE AMENDMENT CARRIED OUT IN THE A CT IN THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF AHMEDABAD GREEN BELT KHEDUT MANDAL VS. STATE OF GUJARAT, IS REPORTED IN 2001(1) GLR 888. COPY OF THIS JUDGMENT HAS BEEN PLACED ON THE RECORD. THE LD.COU NSEL FOR THE ASSESSEE, IN THIS WAY, EMPHASIZED THAT THE ASSESSEE DOES NOT PUR CHASE LAND. THE LARGE PIECE OF LAND IS MADE AVAILABLE TO THE ASSESSEE UND ER THE T.P.ACT, WHICH IS EXPECTED TO BE SOLD TO RAISE FUND. IN GIVEN CASES, WHERE THE LAND IS NOT COVERED BY T.P.SCHEME, THE SAME IS ACQUIRED UNDER T HE LAND ACQUISITION ACT, BUT THEN, THE SAME IS NEVER SOLD. THE ACTIVITY OF THE SALE OF LAND TO THE EXTENT AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 22 OF 15% OF THE LAND, REFERRED FOR THE BENEFIT OF THE ASSESSEE IN ORDER TO ENABLE IT TO RAISE FUNDS TO CARRY OUT DEVELOPMENT ACTIVITY. IN FACT, THIS IS THE OBJECT FOR WHICH AMENDMENT WAS MADE TO THE T.P. ACT. THUS, TH E ASSESSEE DOES NOT INDULGE INTO PURCHASE AND SALE OF THE LAND. ACCORDI NG THE LD.COUNSEL FOR THE ASSESSEE, IT WOULD BE WRONG ON THE PART OF THE REVE NUE TO DENY THE STATUS OF CHARITY ON SUCH AN ERRONEOUSLY PREMISES. 13. ON THE STRENGTH OF SPEECH OF FINANCE MINISTER I N THE PARLIAMENT WHILE ADDRESSING THE AMENDMENT IN SECTION 2(15) AS WELL A S ON THE STRENGTH OF CBDT CIRCULAR NO.11 OF 2008, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT WAS VERY CLEAR THAT THE CHARITABLE TRUST/INSTITU TION GENUINELY ENGAGED IN PUBLIC WORK WOULD NOT BE AFFECTED BY THIS AMENDMENT . 14. IN HIS NEXT FOLD OF SUBMISSIONS, HE APPRISED TH E MEANING OF EXPRESSION TRADE, COMMERCE OR BUSINESS EMPLOYED IN THE PROVI SO TO SECTION 2(15) OF THE INCOME TAX ACT. IN ORDER TO BUTTRESS HIS CONTENTIO N, HE RELIED UPON THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF DCIT (EXEMPTION) VS. SABARMATI ASHRAM GAUSHALA TRUST, 362 ITR 539. HE ALSO RELIED UPON THE FOLLOWING DECISIONS: I) ALIGARH DEVELOPMENT AUTHORITY, IA NO.255/AGRA/2013; II) ANDHRA PRADESH URBAN INFRASTRUCTURE FUND, ITA NO.549/HYD/2013; III) BAGALKOT TOWN DEVELOPMENT AUTHORITY, ITA NO.1151/BANG/2012; IV) LUCKNOW DEVELOPMENT AUTHORITY, 38 TAXMANN.COM 246 ( ALL.) V) INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA, 13 TAX MANN.COM 175 (DEL.) AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 23 VI) GSI INDIA, 38 TAXMANN.COM 364 (DEL) VII) BUREAU OF INDIAN STANDARDS, 27 TAXMANN.COM 127 (DEL ) VIII) ITAT, AHMEDABAD DECISION IN ITA NO.2653 & 2654/AHD/ 2012; IX) AHMEDABAD SOUTH INDIAN ASSOCIATION CHARITABLE TRUST , TAX APPEAL NO.933 TO 936 OF 2010 (GUJ) 15. THE LD.COUNSEL FOR THE ASSESSEE FURTHER CONTEND ED THAT SECTION 91(1)(A) OF THE T.P.ACT PROVIDES THAT ALL MONEY RECEIVED BY THE AUTHORITIES WOULD HAVE TO BE CREDITED TO ITS FUND. UNDER SECTION 100(1)(A ) OF THE T.P.ACT, THE DEVELOPMENT CHARGES PAYABLE TO THE ASSESSEE CAN BE RECOVERED AS LAND REVENUE. SIMILARLY, UNDER SECTION 120 OF THE T.P. ACT, IN CASE THE ASSESSEE IS DISSOLVED, ALL ASSETS AND LIABILITIES SHALL VEST IN THE STATE GOVERNMENT. REFERRING TO THE JUDGMENT OF THE HONBLE SUPREME CO URT IN THE CASE OF SHRI RAMTANU CO-OPERATIVE HOUSING SOCIETY LTD. VS. STATE OF MAHARASHTRA, 1970 (3) SCC 323, HE CONTENDED THAT THE ASSESSEE CANNOT BE TREATED AS TRADING CORPORATION, BECAUSE, ACCORDING TO THE JUDGMENT OF THE HONBLE SUPREME COURT, TWO CONDITIONS I.E. SUM PAYABLE BY ANY PERSO N FOR THE CORPORATION ARE RECOVERABLE UNDER THE ACT, AS AN ARREARS OF LAND RE VENUE, AND ON DISSOLUTION OF THE CORPORATION, THE ASSETS WOULD VEST ALONG WITH L IABILITIES IN THE STATE GOVERNMENT WOULD TAKE AWAY THE STATUS OF THE ASSESS EE FROM A TRADING CORPORATION. 16. SHRI G.C. SRIVASTAVA, THE LD.COUNSEL FOR THE DE PARTMENT, WHILE GIVING REPLY TO THE CONTENTIONS OF THE LD.COUNSEL FOR THE ASSESSEE, WOULD SUBMIT THE BACKGROUND AND FRAME WORK OF THE LAW, GOVERNING THE TAXABILITY OF ALLEGED CHARITABLE INSTITUTIONS. HE CONTENDED THAT PARLI AMENT ALWAYS BELIEVE THAT THE BUSINESS AND CHARITY CANNOT BE MIXED AND GO TOG ETHER. HENCE, THE DEFINITION OF CHARITABLE PURPOSE CONTAINED IN SEC TION-2(15) ORIGINALLY ENACTED WAS CIRCUMSCRIBED BY THE EXPRESSION ANY OT HER OBJECT OF GENERAL AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 24 PUBLIC UTILITY NOT INVOLVING CARRYING ON ANY ACTIVI TY FOR PROFIT. THIS EXPRESSION HAD CREATED VARIOUS DIFFICULTIES TO CERT AIN INSTITUTIONS. THE RESTRICTIONS PROVIDED IN THE PHRASE NOT INVOLVING CARRYING ON ANY ACTIVITY FOR PROFIT WAS OMITTED BY THE FINANCE ACT, 1983 W.E.F. 01.04.1984, BUT ANOTHER RESTRICTIONS WAS IMPOSED ON THE BUSINESS ACTIVITIES CARRIED OUT BY ANY CHARITABLE INSTITUTION. THESE RESTRICTIONS WERE INTRODUCED BY WAY OF SUB- SECTION (4A) OF SECTION 11 OF THE ACT. THE ASSESSE E, WHO WAS IN BUSINESS ALSO HAS TO KEEP SEPARATE BOOKS OF ACCOUNTS FOR BUSINESS ACTIVITIES UNDER SUB- SECTION (4A) OF THE SECTION 11 OF THE ACT. CERTAIN INSTRUMENTALITIES OF THE STATE LIKE LOCAL AUTHORITIES, HOUSING BOARDS, URBAN DEVELOPMENT AUTHORITIES, VARIOUS BOARDS LIKE TEA BOARD, COFFEE BOARD, RUBBER BOARD ETC. WERE ENJOYING BLANKET EXEMPTION FROM TAX UNDER SECTION 10 OF THE ACT AND THEIR INCOMES DID NOT FORM PART OF THE TAXABLE INCOME. THESE ENTITIE S WERE NOT REGARDED AS CHARITABLE INSTITUTIONS SUBJECT TO REGIME OF SECTIO N 11 OF THE ACT, BUT WERE GIVEN COMPLETE EXEMPTION UNDER SECTION 10 ON THEIR OWN RIGHT. HE FURTHER CONTENDED THAT THE ASSESSEE WAS ENJOYING THIS EXEMP TION UNDER SECTION 10(20A). THIS SECTION ALLOWED THE EXEMPTION TO ANY AUTHORITY CONSTITUTED BY OR UNDER ANY LAW ENACTED FOR THE PURPOSE OF PLANNIN G AND DEVELOPMENT OR IMPROVEMENT OF CITIES, TOWN OR VILLAGES. IT WAS OM ITTED BY THE FINANCE ACT, 2002 W.E.F. 1.4.2003. THE EXEMPTION ENJOYED BY THE HOUSING BOARD WAS TAKEN AWAY. THE EXEMPTION ENJOYED BY SPORTS BODIES LIKE CRICKET, HOCKEY, FOOTBALL ETC. UNDER SECTION 10(23), THE AUTHORITY FOR MARKET ING COMMODITIES UNDER SECTION 10(29) WAS ALSO WITHDRAWN UNDER SECTION 10( 29) WAS ALSO WITHDRAWN BY FINANCE ACT, 2002. SIMILARLY, THE SCOPE OF LOCA L AUTHORITY ENJOYING EXEMPTION UNDER SECTION 10(20) WAS LIMITED TO ONLY PANCHAYAT, MUNICIPALITY, MUNICIPAL COMMITTEE AND CANTONMENT BOARD BY INTRODU CING AN EXHAUSTIVE DEFINITION OF LOCAL AUTHORITIES, WHICH WAS HITHERTO NOT THERE, THEREBY DENYING AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 25 ANY ROOM FOR BROADER INTERPRETATION OF THE TERM. HE EMPHASED THAT PRINCIPLE THAT SUCH AUTHORITIES SHOULD ENJOY EXEMPTION MERELY BECAUSE THESE WERE CREATED AS AN INSTRUMENT OF THE STATE OR THESE WERE ENGAGED IN PUBLIC GOOD WAS DERECOGNIZED BY THE PARLIAMENT. THE LEGISLATIV E INTENT WAS EXPLICIT THAT THESE WERE NOT TO GET INDIRECT SUPPORT OF THE GOVER NMENT THROUGH TAX EMPTION ROUTE. SUCH POLICY SHIFTS CAN BE DRIVEN BY ONE OR MORE CONSIDERATIONS LIKE THE NEED FOR HIGHER REVENUE OR PREFERENCE OF DIRECT SUB SIDIZATION OR BUDGETARY SUPPORT OVER THE INDIRECT SUPPORT LIKE TAX EMPTION ETC. HE CONTENDED THAT NEITHER IT HAS BEEN PROVIDED FOR NOR STATED IN ANY POLICY DOCUMENT THAT THESE AUTHORIZES WOULD ENJOY THE BENEFITS OF CHARITABLE I NSTITUTION. YET, THESE ENTITIES BEGAN TO CLAIM THE BENEFIT OF THE CHARITAB LE INSTITUTION. THEY HAD THE APPROVAL OF TRIBUNAL AND COURTS POST WITHDRAWN OF SPECIFIC EXEMPTION. FACED WITH THIS SITUATION, PARLIAMENT INTERVENED AG AIN AND INTRODUCED PROVISO TO SECTION 2(15) OF THE FINANCE ACT, 2008 W.E.F. 1. 4.2009. THIS PROVISO PROVIDES THAT ADVANCEMENT OF ANY OTHER OBJECT OF G ENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CAR RYING ON ANY ACTIVITY IN THE NATURE, TRADE, COMMERCE OR BUSINESS OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS, FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OR APPLIC ATION OF SUCH INCOME. IT WAS ALSO PROVIDED BY THE FINANCE ACT, 2010 WITH RETROSP ECTIVE EFFECT FROM 1.4.2009 THAT THE FIRST PROVISO SHALL NOT APPLY IF THE RECEIPTS FROM SUCH ACTIVITIES DID NOT EXCEED RS.25 LAKHS IN THE PREVIO US YEAR. SIMILARLY, IN 2012 ONE MORE AMENDMENT WAS CARRIED OUT W.E.F. 1.4.2009. THIS AMENDMENT PROVIDED THAT BENEFIT OF SECTION 11 OR 12 WOULD NOT BE AVAILABLE, IF THE RECEIPT FROM THE ACTIVITY IN THE NATURE OF TRADE OR BUSINES S EXCEEDS THE THRESHOLD PROVIDED FOR IN THE PROVISO TO SECTION 2(15) OF THE ACT. TAKING US THROUGH SECTION 13(8) OF THE INCOME TAX ACT, HE CONTENDED T HAT APPLICATION OF THIS AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 26 SECTION IS DEPENDED UPON THE RECEIPTS IN A GIVEN YE AR FROM ACTIVITY IN THE NATURE OF TRADE OR BUSINESS. THE BENEFIT WOULD BE DENIED IRRESPECTIVE OF THE CHARITABLE NATURE OF THE OBJECTS OF THE TRUST, AND IRRESPECTIVE OF WHETHER OR NOT THE TRUST OR INSTITUTION IS ENTITLED TO REGISTRATIO N. IF THE ACTIVITIES OF THE ASSESSEE ARE IN THE NATURE OF TRADE OR COMMERCE, AN D ITS RECEIPTS EXCEEDS RS.25.00 LAKHS IN THE PREVIOUS YEAR, THEN THE ASSES SEE WOULD NOT BE ENTITLED FOR CHARITABLE STATUS. IN ORDER TO APPRAISE US MEA NING OF EXPRESSION ACTIVITIES IN THE NATURE OF TRADE AND COMMERCE, THE LD.COUNSEL FOR THE REVENUE RELIED UPON THE ORDER OF THE ITAT, GOA BENCH IN THE CASE O F ENTERTAINMENT SOCIETY OF GOA, ITA NO.90 OF 2012. HE PLACED ON RECORD COP Y OF THE TRIBUNALS ORDER. HE POINTED OUT THAT IN VIEW OF SCHEME OF TH E ACT, FOCUS OF INQUIRY FOR DECIDING THE ISSUE IN THE PRESENT APPEAL SHOULD; (I ) WHETHER ANY OF THE ACTIVITIES OF THE ASSESSEE ARE IN THE NATURE OF TRA DE, COMMERCE OR BUSINESS; (II) WHETHER THE ASSESSEE IS RENDERING ANY SERVICE FOR A FEE, CESS OR OTHER CONSIDERATION, AND (III) WHETHER THE RECEIPTS FROM SUCH ACTIVITIES CROSS THE THRESHOLD OF RS.25 LAKHS DURING THE YEAR UNDER APPE AL. THE LD.COUNSEL FOR THE REVENUE SUBMITTED THAT IF THE AFORESAID ELEMENTS AR E FOUND TO BE EXISTED, THE ASSESSEE WOULD NOT BE ENTITLED TO THE BENEFIT OF EX EMPTION IRRESPECTIVE OF THE FACT THAT IT IS ENJOYING THE REGISTRATION UNDER SEC TION 12AA OF THE INCOME TAX ACT. HE FURTHER SUBMITTED THAT THE PARLIAMENT HAS REVISITED THE ISSUE, AND A COMPLETE EXEMPTION OF THEIR INCOME HAS AGAIN BEEN P ROVIDED TO THEM UNDER SECTION 10 BY INTRODUCTION OF CLAUSE (46) BY FINANC E ACT, 2011 W.E.F. 1.6.2016. THE SAID SECTION PROVIDES THAT THE SPECI FIED INCOME TO A BOARD, AUTHORITY, BODY OR TRUST, ESTABLISHED/CONSTITUTED B Y THE CENTRAL/STATE GOVERNMENT FOR THE BENEFIT OF GENERAL PUBLIC WILL B E EXEMPT FROM TAX SUBJECT TO ITS NON-ENGAGEMENT IN ANY COMMERCIAL ACTIVITY, A ND ALSO SUBJECT TO ITS BEING NOTIFIED BY THE CENTRAL GOVERNMENT FOR THE PU RPOSE. THE ASSESSEE AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 27 COULD APPLY FOR EXEMPTION UNDER SECTION 10 AFTER 1. 6.2006, AND IT IS NOT RETROSPECTIVE IN NATURE. FOR THE EARLIER YEARS, TH E PRE-AMENDED PROVISIONS WILL APPLY AND THE ASSESSEE WILL HAVE TO PASS THE TEST O F PROVISO TO SECTION 2(15). THE LD.COUNSEL FOR THE REVENUE FILED A WRITTEN NOTE DRAWING OUR ATTENTION TOWARDS SPECIFIC FACTS, WHICH WOULD GOAD THE ADJUDI CATING AUTHORITY TO HOLD THAT THE ASSESSEES ACTIVITY WERE IN THE NATURE OF TRADE, COMMERCE AND BUSINESS. WE DEEM IT APPROPRIATE TO TAKE NOTE OF THE WRITTEN SUBMISSIONS, WHICH READS AS UNDER: I. THE CONSTITUTION OF URBAN DEVELOPMENT AUTHORITI ES IN THE STATE OF GUJARAT IS GOVERNED BY CHAPTER III OF GUJARAT TO WN PLANNING AND URBAN DEVELOPMENT ACT OF 1976. THE POWERS AND FUNCT IONS OF URBAN DEVELOPMENT AUTHORITY ARE DEFINED IN SECTION 23 AND CLAUSE (VII) OF THE SAID SECTION GIVES THE ASSESSEE, AHMEDABAD URBAN DEVELOPMENTAUTHORITY, THE POWER TO 'ACQUIRE, HOLD, MANAGE AND DISPOSE OFF PROPERTY, MOVABLE OR IMMOVABLE, AS IT M AY DEEM NECESSARY'. SECTION 40(3) OF CHAPTER V PROVIDES THE EARMARKING OF THE LAND ACQUIRED AND IT PROVIDES THAT 15% BE PROVIDED FOR ROADS, 5% FOR PARKS, GARDENS, ETC, 5% FOR SOCIAL INFRASTRUCTURE S UCH AS SCHOOLS, DISPENSARIES AND ANOTHER 15% IS EARMARKED FOR SALE BY AUDA FOR RESIDENTIAL, COMMERCIAL, OR INDUSTRIAL USE. II. THUS, BY VIRTUE OF THE ABOVE PROVISIONS 15% OF THE TOTAL NOTIFIED AREA IS SOLD BY THE APPELLANT AND FROM SUCH SALE HU GE PROFITS ARE DERIVED. THE ACQUISITION AND SALE OF THIS LAND IS I N THE NATURE OF A TRADE OR BUSINESS AND THE ACTIVITY IS NOT DIFFERENT FROM A NORMAL PURCHASE OR SALE ACTIVITY BY A REAL ESTATE DEVELOPER. III. AS REGARDS THE ACQUISITION OF THE AFORESAI D LAND, IT IS SUBMITTED THAT THE LAND DOES NOT COME FREE OF COST TO THE APP ELLANT. THE SCHEME AS ENVISAGED UNDER THE GTP AND UD ACT IS JUST LIKE CON SOLIDATION PROCEEDINGS AS THE LAND BELONGING TO VARIOUS PERSON S COVERED BY THE SCHEME IS FIRST PUT INTO A COMMON POOL AND THEN THE PLOTS ARE REALLOCATED TO DIFFERENT PERSONS AND FOR DIFFERENT PURPOSES INCLUDING THE SALE BY THE AUTHORITY (THE APPELLANT). THE AMOUNT O F COMPENSATION PAYABLE TO EACH INDIVIDUAL OWNER IS DETERMINED IN T HE NOTIFIED SCHEME AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 28 ITSELF BY VIRTUE OF THE PROVISIONS OF SECTION 52(3) (III) WHICH READS AS UNDER: 'SECTION 52(3): IN THE FINAL SCHEME, THE TOWN PLANN ING OFFICER SHALL: I. XXX 11. X X X III. ESTIMATE THE PORTION OF THE SUMS PAYABLE AS COMPENSATION ON EACH PLOT USED, ALLOTTED OR RESERVED FOR A PUBLIC P URPOSE OR FOR THE PURPOSES OF APPROPRIATE AUTHORITY WHICH IS BENEFICIAL PARTLY TO THE OWNERS OR RESIDENTS WITHIN THE AREA OF THE S CHEME OR PARTLY TO THE OWNERS OR RESIDENTS WITHIN THE AREA OF THE S CHEME OR PARTLY TO THE GENERAL PUBLIC WHICH SHALL BE INCLUDED IN TH E COST OF THE SCHEME. ' THE COST OF THE SCHEME (DEVELOPMENT) IS DETERMINED AND THE CONTRIBUTION TO BE LEVIED ON EACH OWNER OF THE PLOT IS NOTIFIED, IV. THE FINAL AMOUNT OF COMPENSATION PAYABLE T O THE OWNERS OF EACH PLOT OR THE RECOVERIES TO BE MADE FROM THEM IS WORKED OUT BY THE AUTHORITY. RULE 22 OF THE RULES 1979 READS AS UNDER: '(I) THE COMPENSATION PAYABLE UNDER SECTION 45 SHAL L BE THE DIFFERENCE BETWEEN THE VALUE OF THE PROPERTY ON THE BASIS OF THE EXISTING USE AND THAT ON THE BASIS OF THE PERMITTED USE OF BOTH VALUES BEING DETERMINED AS ON THE DATE OF DECLARATI ON OF INTENTION TO PREPARE THE SCHEME. XXXXXXXXXXXXXX--XXXX V. FORM K ATTACHED TO THE RULES 1979 READS AS UNDER: A. COMPENSATION PAYABLE TO YOU B. AMOUNT PAYABLE BY YOU C. AMOUNT OF INCREMENTAL CONTRIBUTION D. COMPENSATION UNDER SECTION 82 E. NET AMOUNT OF CONTRIBUTION F. NET AMOUNT PAYABLE TO YOU AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 29 VI. THE AMOUNT OF COMPENSATION MAYBE ADJUSTED AGAINST THE RECOVERIES AND ONLY THE NET AMOUNT MAY BE PAID. VII. IT IS OBVIOUS FROM THE PROVISIONS THAT 15% LAND AVAILABLE TO THE AUTHORITY IS OUT OF THE TOTAL AREA COVERED UNDER TH E SCHEME. HENCE, THE AMOUNT OF COMPENSATION PAYABLE FOR SUCH LAND IS ONL Y A PART OF THE TOTAL AMOUNT PAYABLE BY THE AUTHORITY. VIII. IN THE FINAL SCHEME OF THINGS, THE AUTHORI TY DOES INCUR A COST FOR SUCH LAND WHICH MAY BE ADJUSTED AGAINST THE RECOVER IES DUE TO THE APPELLANT OR AGAINST THE AMOUNT PAYABLE FOR THE ARE A BY WAY OF COMPENSATION. IT MAY BE SUBMITTED THAT MODE OF PAYM ENT OF COST OF ACQUISITION WHETHER BY CASH OR BY WAY OF ADJUSTMENT AGAINST THE VALUE OF FINAL PLOT TO BE ALLOTTED TO THE ORIGINAL OWNERS WILL NOT ALTER THE FACT THAT THE LAND IS ACQUIRED FOR A COST. IX. AS A MATTER OF FACT AND FROM THE FINANCIAL S OF THE ASSESSEE IT IS SEEN THAT THE COST FOR THE LAND HAS BEEN INCURRED A ND HAS BEEN CAPITALIZED AS COST OF ACQUISITION. THE PRACTICE IS FOLLOWED FROM YEAR TO YEAR. 23.THE APPELLANT HAS, THUS, BECOME ENTITLED TO SELL 15% OF THE LAND BY VIRTUE OF THE PROVISIONS OF THE SCHEME. THIS ENTITL EMENT COMES FOR A COST AND HAS RESULTED IN HUGE PROFITS. 24.THE ACTIVITY IN RESPECT OF 15% OF THE LAND SOLD BY THE APPELLANT, THUS, IS IN THE NATURE OF TRADE OR BUSINESS. THE FIRST LI MB OF THE PROVISO TO SECTION 2(15) IS SATISFIED. 25.THE AUTHORITY IS ALSO REQUIRED TO MAKE A PLANNED DEVELOPMENT OF THE CITY UNDER A SCHEME APPROVED BY THE STATE GOVERNMEN T. IT IS CREATING A NUMBER OF INFRASTRUCTURE FACILITIES AND PUBLIC UTIL ITY SERVICES ARE BEING RENDERED. THESE SERVICES ARE ALSO BEING PROVIDED FO R A FEE OR CONSIDERATION. EVERY PART OF THE COST OF DEVELOPMEN T IS RECOVERED FROM THE OWNERS OF THE PLOTS OF LAND. THE AMOUNT OF FINA L COMPENSATION IS DETERMINED AFTER MAKING ADJUSTMENT OF THE DEVELOPME NT COST. ALL KINDS OF CIVIC AMENITIES/SERVICES THAT ARE BEING PROVIDED ARE NOT FREE BUT FOR A COST. HENCE, THE SECOND LIMB OF THE PROVISO TO SECTION 2( 15) IS ALSO SATISFIED. AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 30 26.SUPPOSING, AFTER NOTIFICATION OF THE SCHEME, THE LAW HAD STIPULATED AND THE GOVERNMENT HAD DECIDED TO OUTSOURCE THE DEV ELOPMENT WORK TO A THIRD PARTY (A INFRASTRUCTURE COMPANY) WITH SIMIL AR RIGHTS AND THE ENTITLEMENTS AS GIVEN TO AUDA, COULD IT BE URGED TH AT THE INFRASTRUCTURE DEVELOPMENT COMPANY DOING THE SAME WORK AS AUDA WAS NOT ENGAGED IN ACTIVITY IN THE NATURE OF TRADE OR BUSIN ESS. IT WOULD HAVE DEFINITELY CONSTITUTED ITS BUSINESS INCOME. IT IS, THEN, NOT POSSIBLE TO URGE OTHERWISE TO SUGGEST THAT THE ACTIVITY IS NOT IN THE NATURE OF TRADE OR BUSINESS. THE NATURE OF THE ACTIVITIES OF THE AP PELLANT ARE NO DIFFERENT FROM THAT OF A DEVELOPER OF A REAL ESTATE. THE DIFF ERENCE IN THE SCALE OF OPERATION OR THE MODE OF RECOVERY OR DEGREE OF PR OFITS OR HOW SUCH PROFITS ARE UTILISED WOULD NOT ALTER THE NATURE OF THE ACTIVITY. 27. THERE ARE MANY ACTIVITIES IN THE NATURE OF INFR ASTRUCTURE DEVELOPMENT LIKE ROADS, POWER, HOUSING, ETC WHERE T HE GOVERNMENT, INSTEAD OF CONSTITUTING AN AUTHORITY, ENTERS INTO A GREEMENT WITH INFRASTRUCTURE DEVELOPMENT COMPANIES. THESE PRIVATE COMPANIES ARE ALLOWED TO RECOVER THEIR COST AND EARN PROFITS AS A COCESSIONAIRES OR THE GOVT. MAY ALSO MAKE DIRECT PAYMENTS. THE INCOME IN ALL SUCH CASES WOULD UNDOUBTEDLY BE ASSESSED ON PROFITS FROM BUSIN ESS. 28.THE MERE FACT THAT THE SAME ACTIVITY IS DONE BY AN INSTRUMENTALITY OF THE STATE WILL NOT ALTER THE CHARACTER OF THE ACTIV ITY. THE ACTIVITY WILL STILL BE IN THE NATURE OF BUSINESS OR TRADE. 29.THE PROVISIONS CONTAINED IN SECTION 22(1) OF GUJ ARAT URBAN DEVELOPMENT ACT 1976 STATES: 'WHERE THE STATE GOVERNMENT IS OF THE OPINION THAT THE OBJECT OF THE PROPER DEVELOPMENT OR REDEVELOPMENT OF ANY URBAN AR EA OR GROUP OF URBAN AREAS IN THE STATE TOGETHER WITH SUCH ADJACEN T AREAS AS MAY BE CONSIDERED NECESSARY, -WHETHER COVERED UNDER A DEVE LOPMENT AREA ALREADY DECLARED AS SUCH UNDER SECTION 3 OR NOT, WI LL BE BEST SERVED BY ENTRUSTING THE WORK OF DEVELOPMENT OR REDEVELOPMENT THEREOF TO A SPECIAL AUTHORITY, INSTEAD OF TO AN AREA DEVELOPMENT AUTHOR ITY, THE STATE GOVERNMENT MAY, BY NOTIFICATION, DECLARE SUCH AREA TO BE AN URBAN DEVELOPMENT AREA AND CONSTITUTE AN AUTHORITY FOR SU CH AREA TO BE CALLED THE URBAN DEVELOPMENT AUTHORITY OF THAT AREA, AND T HEREUPON ALL THE POWERS AND FUNCTIONS OF AN AREA DEVELOPMENT AUTHORI TY RELATING TO THE DEVELOPMENT OR REDEVELOPMENT OF A DEVELOPMENT AREA UNDER THE ACT AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 31 SHALL, IN RELATION TO SUCH URBAN DEVELOPMENT AREA, BE EXCERCISED AND PERFORMED BY SUCH URBAN DEVELOPMENT AUTHORITY. ' 30.THE OBJECT OF THE PROPER DEVELOPMENT OR REDEVELO PMENT OF ANY URBAN AREA IS OF THE STATE GOVERNMENT AND THE CHOIC E OF EITHER CONSTITUTING AN AUTHORITY FOR THE DEVELOPMENT OR EN TRUSTING IT TO A THIRD PARTY IS OF THE GOVERNMENT. 31.THE OBJECT OF THE URBAN DEVELOPMENT IS OF THE ST ATE GOVERNMENT. THE AUTHORITY IS ONLY CARRYING OUT AND EXECUTING THE ST ATE'S OBJECT. IF SIMILAR ACTIVITY DONE BYA INFRASTRUCTURE COMPANY IS IN THE NATURE OF BUSINESS, IT CANNOT BE SAID THAT SINCE THE ACTIVITY IS CARRIED BY AN AUTHORITY, IT IS NOT IN THE NATURE OF BUSINESS. 32.IT MAY BE REEMPHASIZED AT THIS STAGE THAT THE RE QUIREMENT OF THE PROVISIONS IS NOT THAT THERE SHOULD BE A BUSINESS P ER SE BUT THE ONLY REQUIREMENT IS THAT THE ACTIVITY IS IN THE NATURE O F BUSINESS OR TRADE. 33.THE WORD 'BUSINESS' AS DEFINED IN SECTION 2(13) IS OF WIDE IMPORT AND WOULD COVER THE ACTIVITIES OF THE APPELLANT. BE SIDES, THE CONDITION STIPULATED IN THE PROVISO TO SECTION 2(15) IS NOT T HE CARRYING OF BUSINESS PER SE BUT ONLY THE ACTIVITY BEING IN THE NATURE OF TRADE OR BUSINESS WHICH FURTHER WIDENS THE WIDTH AND AMPLITUDE OF THE PROVISO. INSTITUTE OF CHARTED ACCOUNTANTS OF INDIA (347ITR 9 9 (DEL)) GSI INDIA (360 ITR 138(DEL)) (FOR THE LIMITED PURPOSE OF IMPORT OF THE WORDS 'TR ADE' OR 'BUSINESS') 34. IT MAY, THUS, BE APPRECIATED THAT THE APPELLANT IS CARRYING ON ACTIVITY IN THE NATURE OF TRADE OR BUSINESS AND COV ERED UNDER SECTION 13(8) OF THE ACT READ WITH PROVISO TO SECTION 2(15) OF THE ACT. 17. THE LD.COUNSEL FOR THE REVENUE, THEREAFTER, APP RISED US AS TO HOW THE DECISIONS RELIED UPON BY THE ASSESSEE ARE NOT APPLI CABLE ON THE GIVEN FACTS OF THE PRESENT CASE. THE REVENUE HAS RELIED UPON THE ORDER OF THE ITAT IN THE CASE OF ENTERTAINMENT SOCIETY OF GOAD (SUPRA). HE FURTHER RELIED UPON THE AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 32 ORDER OF THE ITAT, AMRISTAR BENCH IN THE CASE OF JA MMU DEVELOPMENT AUTHORITY. HE POINTED OUT THAT AGAINST THIS DECISI ON, APPEAL OF THE ASSESSEE WAS DISMISSED BY THE HONBLE JAMMU AND KASHMIR HIGH COURT IN ITA NO.164/2012 (J&K). THE SLP FILED BY THE ASSESSEE H AS ALSO BEEN DISMISSED BY THE HONBLE SUPREME COURT. HE PLACED ON RECORD COPIES OF THESE DECISIONS. HE FURTHER RELIED UPON THE ORDER OF BEL GAUN URBAN DEVELOPMENT AUTHORITY, ITA NO.214/PNG/2011, TAMIL NADU INDUSTRI AL GUIDANCE & EP BUREAU, ITA NO.201/2013, IMPROVEMENT TRUST, ITA NO. 366/12, DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF RAJA RAMES HWAR RAO, 42 ITR 179 (SC). 18. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND G ONE THROUGH THE RECORD CAREFULLY. SECTION 2(15) OF THE INCOME TAX ACT, 19 61 HAS DIRECT BEARING ON THE CONTROVERSY. THEREFORE, IT IS IMPERATIVE TO TA KE NOTE OF THIS SECTION, AS UNDER: 'SECTION 2(15) CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR, EDUCATION, [YOGA,] MEDICAL RELIEF, PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILDLIFE) AND PR ESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTO RIC INTEREST, AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT O F GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT IN VOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BU SINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO AN Y TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERAT ION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY: PROVIDED FURTHER THAT THE FIRST PROVISO SHALL NOT A PPLY IF THE AGGREGATE VALUE OF THE RECEIPTS FROM THE ACTIVITIES REFERRED TO THEREIN IS TWENTY-FIVE LAKH RUPEES OR LESS IN THE PREVIOUS YEAR; 19. IF THE ACTIVITY OF THE ASSESSEE ARE LOOKED INTO , IN THE LIGHT OF THE ABOVE PROVISION, THEN, IT WOULD REVEAL THAT THE ASSESSEE S CASE WOULD FALL IN THE AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 33 CATEGORY OF ADVANCEMENT OF ANY OTHER OBJECT OF GEN ERAL PUBLIC UTILITY PROVIDED IN THE LAST LIMB OF THE PROVISION. THE HO NBLE DELHI HIGH COURT WHILE EXPOUNDING THE MEANING OF EXPRESSION CHARITA BLE PURPOSE EMPLOYED IN MAIN SECTION HAS OBSERVED THAT THERE ARE FOUR MA IN FACTORS VIZ. (I) ACTIVITY SHOULD BE FOR ADVANCEMENT OF GENERAL PUBLIC UTILITY , (II) ACTIVITY SHOULD NOT HAVE ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE AND BUSINESS, (III) THE ACTIVITY SHOULD NOT INVOLVE RENDERING OF ANY SERVIC ES IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, AND (IV) ACTIVITY IN CLAUSE ( II) AND (III) SHOULD NOT BE FOR A CESS, FEE OR ANY OTHER CONSIDERATION, AGGREGA TE VALUE OF THE RECEIPTS FROM THE ACTIVITY UNDER CLAUSE (II) AND (III) SHOULD NOT BE EXCEEDED THE AMOUNT SPECIFIED IN THE SECOND PROVISO I.E. RS.25 LAKHS. ACCORDING TO THE HONBLE DELHI HIGH COURT, THE EARLIER TEST OF BUSINESS FEED ING OR APPLICATION OF INCOME EARNED TOWARDS CHARITY, ARE NO LONGER RELEVANT BECA USE OF THE AMENDMENT. 20. WE ARE CALLED UPON TO CONSTRUE THE MEANING OF E XPRESSION TRADE, COMMERCE OR BUSINESS EMPLOYED IN THE PROVISO AND F IND OUT WHETHER THE ACTIVITY OF THE ASSESSEE FALLS WITHIN THE AMBIT OF THIS EXPRESSION. WHILE APPRAISING US THE MEANING OF THIS EXPRESSION, EFFOR TS AT THE END OF THE ASSESSEE WAS THAT ANY ACTIVITY WILL BE DEEMED TO BE IN THE N ATURE OF TRADE, COMMERCE AND BUSINESS, ONLY IF THE SAME IS CARRIED OUT WITH INTENTION OF PROFIT. IN OTHER WORDS, PREDOMINANT OBJECT SHOULD BE PROFIT MOTIVE IN THE ABSENCE OF INTENTION OF EARNING THE PROFIT, THE ACTIVITY WOULD NOT BE TREATED AS TRADE, COMMERCE OR BUSINESS. FOR BUTTRESSING THIS PROPOSI TION, THE JUDGMENT OF THE HONBLE DELHI COURT IN THE CASE OF INSTITUTE OF CHA RTERED ACCOUNTANTS OF INDIA, 13 TAXMANN.COM 175, GSI INDIA, 38 TAXMANN.CO M 364, BUREAU OF INDIAN STANDARDS, 27 TAXMANN.COM 127 AND INDIAN CHA MBER OF COMMERCE WERE PRESSED INTO SERVICE. SIMILARLY, THE DECISION OF THE HONBLE GUJARAT AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 34 HIGH COURT IN THE CASE OF SABARMATI ASHRAM GAUSHALA TRUST, TAX APPEAL NO.1162 OF 2013 WAS ALSO RELIED UPON. 21. CONTRARY TO THIS PROPOSITION, IT WAS CONTENDED BY THE REVENUE THAT THE WORDS USED IN THE PROVISO ARE CARRYING ON OF ANY A CTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, NOT THE WORDS CARRYI NG ON OF TRADE, COMMERCE OR BUSINESS. THEREFORE, THE NATURE OF THE ACTIVIT IES IS TO BE IDENTIFIED. IT SHOULD BE AKIN TO TRADE, COMMERCE OR BUSINESS. IN O THER WORDS, PERFORMANCE OF AN ACT OR STEPS TAKEN TOWARDS OBJECT IN PHYSICAL FORM ARE TO BE IDENTIFIED AND WHEN SUCH STEPS OR ACTS ARE IN AN ORGANIZED MAN NER, AKIN TO ANY TRADE, COMMERCE, BUSINESS ETC., THEN THAT ACTIVITY SHOULD BE CONSIDERED. THE CONCEPT OF PROFIT MOTIVE IS REQUIRED WHEN THE INSTITUTION I S ENGAGED IN TRADE OR COMMERCE. IN THAT SITUATION, THERE WAS NO NEED TO USE EXPRESSION THE ACTIVITY IN THE NATURE . THE INTERPRETATION GIVEN BY TH E ASSESSEE TOTALLY MAKES THE WORD ACTIVITY OBSOLETE OR OTIOSE. THE LD.COU NSEL FOR THE REVENUE EMPHASISED THAT, IF THE TRADE, COMMERCE OR BUSINES S ONLY WAS REQUIRED TO BE CONSIDERED, THEN, WHAT IS THE NEED TO USE EXPRESSIO N ACTIVITY ?. IT WAS ALSO POINTED OUT THAT THE EXPRESSION ACTIVITY IN THE NA TURE OF SHOULD BE CONSIDERED KEEPING IN MIND HISTORICAL DEVELOPMENT O F INTRODUCTION OF THIS CLAUSE IN THE PROVISO COUPLED WITH THE CIRCUMSTANCE S THAT THE APPLICATIONS OF INCOME FOR CHARITABLE WORK IS IRRELEVANT. MEANING THEREBY THAT IF INTENTION TO EARN PROFIT IS TO BE CONSIDERED AS EMBEDDED IN THE ACTIVITY AND CONJOINTLY ATTACHED WITH EXPRESSION TRADE, COMMERCE OR BUSINE SS THEN USER ON NON- APPLICATIONS OF INCOME FOR CHARITABLE PURPOSES, AGA IN WOULD BE OF NO USE, INSTITUTION WOULD BE ABSOLVED FROM THE APPLICABILIT Y OF PROVISO AT THE THRESHOLD. AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 35 22. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND S TAND OF BOTH THE SIDES. WE HAVE GONE THROUGH THE DECISION OF THE HONBLE DE LHI HIGH COURT, WHERE THE HONBLE COURT HAD EXAMINED THE EXPRESSION TRAD E, COMMERCE OR BUSINESS ELABORATELY IN THE CASE OF THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA (SUPRA). THIS IS EVEN TAKEN NOTE IN THE CASE OF GSI INDIA (SUPRA). IT IS WORTH TO NOTE THE ANALYSIS NOTICED BY THE HONBLE D ELHI COURT IN THE CASE OF GSI INDIA (SUPRA) AS UNDER: SCOPE OF TRADE, COMMERCE OR BUSINESS 15. THE KEY WORDS, NAMELY; TRADE, COMMERCE AND BUSI NESS WERE ENUMERATE AND ELUCIDATE IN INSTITUTE OF CHARTERED A CCOUNTANTS OF INDIA & ANR. VS. DIRECTOR GENERAL OF INCOME TAX (EXEMPTIO NS) DELHI & ORS.(SUPRA) AS UNDER:- TRADE, AS PER THE WEBSTER'S NEW TWENTIETH CENTURY DICTIONARY (2ND EDITION), MEANS, AMONGST OTHERS, 'A MEANS OF E ARNING ONE'S LIVING, OCCUPATION OR WORK. IN BLACK'S LAW DICTIONA RY, 'TRADE' MEANS A BUSINESS WHICH A PERSON HAS LEARNT OR HE CA RRIES ON FOR PROCURING SUBSISTENCE OR PROFIT ; OCCUPATION OR EMP LOYMENT, ETC. THE MEANING OF 'COMMERCE' AS GIVEN BY THE CONCISE O XFORD DICTIONARY IS 'EXCHANGE OF MERCHANDISE, SPECIALLY O N LARGE SCALE'. IN ORDINARY PARLANCE, TRADE, AND COMMERCE C ARRY WITH THEM THE IDEA OF PURCHASE AND SALE WITH A VIEW TO M AKE PROFIT. IF A PERSON BUYS GOODS WITH A VIEW TO SELL THEM FOR PR OFIT, IT IS AN ORDINARY CASE OF TRADE. IF THE TRANSACTIONS ARE ON A LARGE SCALE IT IS CALLED COMMERCE. NOBODY CAN DEFINE THE VOLUME, W HICH WOULD CONVERT A TRADE INTO COMMERCE. FOR THE PURPOSE OF T HE FIRST PROVISO TO SECTION 2(15), TRADE IS SUFFICIENT, THER EFORE, THIS ASPECT IS NOT REQUIRED TO BE EXAMINED IN DETAIL. THE WORD 'BUSINESS' IS THE BROADEST TERM AND IS ENC OMPASSES TRADE, COMMERCE AND OTHER ACTIVITIES. SECTION 2(13) OF THE INCOME-TAX ACT DEFINES THE TERM 'BUSINESS' AS UNDER : AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 36 '2. DEFINITIONS.-. . .(13) 'BUSINESS' INCLUDES ANY TRADE, COMMERCE OR MANUFACTURE OR ANY ADVENTURE OR CONCERN IN THE N ATURE OF TRADE, COMMERCE OR MANUFACTURE.' THE WORD 'BUSINESS' IS A WORD OF LARGE AND INDEFINI TE IMPORT. SECTION 2(13) DEFINES BUSINESS TO INCLUDE ANY TRADE , COMMERCE OR MANUFACTURE OR ANY ADVENTURE OR CONCERN IN THE NATU RE OF TRADE, COMMERCE OR MANUFACTURE. THE INTENTION OF THE LEGIS LATURE IS TO MAKE THE DEFINITION EXTENSIVE AS THE TERM 'INCLUSIV E' HAS BEEN USED. THE LEGISLATURE HAS DELIBERATELY DEPARTED FRO M GIVING A DEFINITE IMPORT TO THE TERM 'BUSINESS' BUT MADE REF ERENCE TO SEVERAL OTHER GENERAL TERMS LIKE 'TRADE', 'COMMERCE ', 'MANUFACTURE' AND 'ADVENTURE OR CONCERN IN THE NATU RE OF TRADE, COMMERCE AND MANUFACTURE'. IN BLACK'S LAW DICTIONARY, SIXTH EDITION, THE WORD 'BUSINESS' HAS BEEN DEFINED AS UNDER : 'EMPLOYMENT, OCCUPATION, PROFESSION OR COMMERCIAL A CTIVITY ENGAGED IN FOR GAIN OR LIVELIHOOD. ACTIVITY OR ENTE RPRISE FOR GAIN, BENEFIT, ADVANTAGE OR LIVELIHOOD. UNION LEAGUE CLUB V. JOHNSON 18 CAL 2D 275. ENTERPRISE IN WHICH PERSON ENGAGED S HOWS WILLINGNESS TO INVEST TIME AND CAPITAL ON FUTURE OU TCOME. DOGGETT V. BURNET 62 APP DC 103 ; 65 F. 2D 191. THAT WHICH HABITUALLY BUSIES OR OCCUPIES OR ENGAGES THE TIME, ATTENTION, LABOUR AND EFFORT OF PERSONS AS A PRINCIPAL SERIOUS CONCERN OR INTEREST OR FOR LIVELIHOOD OR PROFIT.' ACCORDING TO SAMPATH IYENGAR'S LAW OF INCOME TAX (9 TH EDITION), A BUSINESS ACTIVITY HAS FOUR ESSENTIAL CH ARACTERISTICS. FIRSTLY, A BUSINESS MUST BE A CONTINUOUS AND SYSTEM ATIC EXERCISE OF ACTIVITY. BUSINESS IS DEFINED AS AN ACTIVE OCCUP ATION CONTINUOUSLY CARRIED ON. BUSINESS VOCATION CONNOTES SOME REAL, SUBSTANTIVE AND SYSTEMATIC COURSE OF ACTIVITY OR CO NDUCT WITH A SET PURPOSE. THE SECOND ESSENTIAL CHARACTERISTIC IS PROFIT MOTIVE OR CAPABLE OF PRODUCING PROFIT. TO REGARD AN ACTIVI TY AS BUSINESS, THERE MUST BE A COURSE OF DEALINGS CONTINUED, OR CO NTEMPLATED TO BE CONTINUED, NORMALLY WITH AN OBJECT OF MAKING PRO FIT AND NOT FOR SPORT OR PLEASURE (BHARAT DEVELOPMENT P. LTD. V . CIT [1982] 133 ITR 470 (DELHI)). THE THIRD ESSENTIAL CHARACTER ISTIC IS THAT A BUSINESS TRANSACTION MUST BE BETWEEN TWO PERSONS. B USINESS IS AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 37 NOT A UNILATERAL ACT. IT IS BROUGHT ABOUT BY A TRAN SACTION BETWEEN TWO OR MORE PERSONS. AND, LASTLY, THE BUSINESS ACTI VITY USUALLY INVOLVES A TWIN ACTIVITY. THERE IS USUALLY AN ELEME NT OF RECIPROCITY INVOLVED IN A BUSINESS TRANSACTION. IN THE SAID CASE RELIANCE AND REFERENCE WAS MADE TO STATE OF PUNJAB V. BAJAJ ELECTRICALS LTD. (1968) 2 SCR 536, KHODAY DIS TILLERIES LTD. V. STATE OF KARNATAKA (1995) 1 SCC 574, BHARAT DEVELOP MENT (P) LTD. V. CIT (1982) 133 ITR 470(DEL), BARENDRA PRASAD RAY V. INCOME TAX OFFICER (1981) 129 ITR 295 (SC), STATE OF ANDHRA PR ADESH V. H. ABDUL BAKHI AND BROS. (1964) 15 STC 664, STATE OF GUJARAT VS. RAIPUR MANUFACTURING COMPANY (1967) 19 STC 1(SC), DIRECTOR OF SUPPLIES AND DISPOSAL VS. MEMBER, BOARD OF REVENUE (1967) 20 STC 398(SC) AND SAROJINI RAJAH VS. CIT (1969) 71 ITR 504 (MAD) TO EXPLAIN THE TERMS TRADE, COMMERCE OR BUSINESS. 15.1 REFERRING TO THE CONCEPT AND PRINCIPLE OF ECONOMIC ACTIVITY THAT HAS GAINED SOME ACCEPTABILITY IN EUROPEAN UNION AND ENGLAND IT WAS EXPLAINED THAT THE SAID PRINCIPLE IS APPLICABLE TO SALES TAX, VALUE ADDED TAX, EXCISE DUTY ETC. BECAUSE THESE ARE NOT T AXES ON INCOME BUT THE TAXABLE EVENT OCCURS BECAUSE OF THE ECONOMIC ACTIVITY INVOLVED. EVEN IF A PERSON/ORGANIZATION IS CARRYING ON TRADING/BUSINESS ON NO LOSS NO PROFIT PRINCIPLE, IT MAY BE LIABLE TO P AY TAXES OR COMPLY WITH THE STATUTE WHEN THE CHARGE, OR INCIDEN T OF TAX, IS ON THE ECONOMIC ACTIVITY. THE WORDS TRADE, COMMERCE AND BUSINESS ARE ETYMOLOGICAL CHAMELEON AND SUIT THEIR MEANINGS TO T HE CONTEXT IN WHICH THEY ARE FOUND. FIVE TESTS PROPOUNDED IN CUSTOMS AN D EXCISE COMMISSIONER VS. LORD FISHER (1981) S.T.C. 238 AND DECISION IN COMMISSIONER OF SALES TAX VS. SAI PUBLICATION FUND, (2002) 4 SCC 57 WAS QUOTED. 16. THE FINAL AND DETERMINING FACTORS, IT WAS OBSER VED WAS CONSEQUENTIAL PROFIT MOTIVE OR PURPOSE BEHIND THE A CTIVITY AND WHEN AN ACTIVITY IS TRADE, COMMERCE OR BUSINESS WAS ELUCIDA TED IN INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA & ANR. VS. DIRECTOR GENERAL OF INCOME TAX (EXEMPTIONS) DELHI & ORS. (SUPRA) IN THE FOLLOW ING WORDS: 33. SECTION 2(15) DEFINES THE TERM CHARITABLE PURPO SE. THEREFORE, WHILE CONSTRUING THE TERM BUSINESS FOR THE SAID SEC TION, THE OBJECT AND PURPOSE OF THE SECTION HAS TO BE KEPT IN MIND. WE DO NOT THINK THAT A VERY BROAD AND EXTENDED DEFINITION OF THE TERM AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 38 BUSINESS IS INTENDED FOR THE PURPOSE OF INTERPRETIN G AND APPLYING THE FIRST PROVISO TO SECTION 2(15) OF THE ACT TO IN CLUDE ANY TRANSACTION FOR A FEE OR MONEY. AN ACTIVITY WOULD B E CONSIDERED 'BUSINESS' IF IT IS UNDERTAKEN WITH A PROFIT MOTIVE , BUT IN SOME CASES THIS MAY NOT BE DETERMINATIVE. NORMALLY THE P ROFIT MOTIVE TEST SHOULD BE SATISFIED BUT IN A GIVEN CASE ACTIVI TY MAY BE REGARDED AS BUSINESS EVEN WHEN PROFIT MOTIVE CANNOT BE ESTABLISHED/PROVED. IN SUCH CASES, THERE SHOULD BE EVIDENCE AND MATERIAL TO SHOW THAT THE ACTIVITY HAS CONTINUED ON SOUND AND RECOGNIZED BUSINESS PRINCIPLES, AND PURSUED WITH RE ASONABLE CONTINUITY. THERE SHOULD BE FACTS AND OTHER CIRCUMS TANCES WHICH JUSTIFY AND SHOW THAT THE ACTIVITY UNDERTAKEN IS IN FECT IN THE NATURE OF BUSINESS. THE TEST AS PRESCRIBE IN RAIPUR MANUFACTURING COMPANY (SUPRA) AND SAI PUBLICATIONS FUND (SUPRA) CAN BE APPLIED. THE SIX INDICIA STIPULATED IN LORD FISHER (SUPRA) ARE ALSO RELEVANT. EACH CASE, THEREFORE, HA S TO BE EXAMINED ON ITS OWN FACTS. THE HONBLE COURT, THEREAFTER, MADE LUCID ANALYSIS OF EXPRESSION BUSINESS ACTIVITY. THE DISCUSSION CONTAINED IN P ARA-22 OF THE JUDGMENT IS WORTH TO NOTE. IT READS AS UNDER: 22. BUSINESS ACTIVITY HAS AN IMPORTANT PERVADING EL EMENT OF SELFINTEREST, THOUGH FAIR DEALING SHOULD AND CAN BE PRESENT, WHILST CHARITY OR CHARITABLE ACTIVITY IS ANTI-THESIS OF AC TIVITY UNDERTAKEN WITH PROFIT MOTIVE OR ACTIVITY UNDERTAKEN ON SOUND OR RE COGNIZED BUSINESS PRINCIPLES. CHARITY IS DRIVEN BY ALTRUISM AND DESIR E TO SERVE OTHERS, THOUGH ELEMENT OF SELF-PRESERVATION MAY BE PRESENT. FOR CHARITY, BENEVOLENCE SHOULD BE OMNIPRESENT AND DEMONSTRABLE BUT IT IS NOT EQUIVALENT TO SELF-SACRIFICE AND ABNEGATION. THE AN TIQUATED DEFINITION OF CHARITY, WHICH ENTAILS GIVING AND RECEIVING NOTHING IN RETURN IS OUTDATED. A MANDATORY FEATURE WOULD BE; CHARITABLE ACTIVITY SHOULD BE DEVOID OF SELFISHNESS OR ILLIBERAL SPIRIT. ENRICHME NT OF ONESELF OR SELFGAIN SHOULD BE MISSING AND THE PREDOMINANT PURP OSE OF THE ACTIVITY SHOULD BE TO SERVE AND BENEFIT OTHERS. A SMALL CONT RIBUTION BY WAY OF FEE THAT THE BENEFICIARY PAYS WOULD NOT CONVERT CHA RITABLE ACTIVITY INTO BUSINESS, COMMERCE OR TRADE IN THE ABSENCE OF CONTR ARY EVIDENCE. QUANTUM OF FEE CHARGED, ECONOMIC STATUS OF THE BENE FICIARIES WHO PAY, COMMERCIAL VALUE OF BENEFITS IN COMPARISON TO THE F EE, PURPOSE AND AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 39 OBJECT BEHIND THE FEE ETC. ARE SEVERAL FACTORS WHIC H WILL DECIDE THE SEMINAL QUESTION, IS IT BUSINESS? 23. THUS, DECISIVE FACTOR OF ANY ACTIVITY, WHETHER IN THE NATURE OF TRADE, COMMERCE OR BUSINESS IS THAT THE CHARITABLE ACTIVIT Y SHOULD BE DEVOID OF SELFISHNESS OR ILLIBERAL SPIRIT. ENRICHMENT OF ONE SELF OR SELF-GAIN SHOULD BE MISSING, AND THE PREDOMINANT PURPOSE OF THE ACTIVIT Y SHOULD BE TO SERVE AND BENEFIT OTHERS. IT WAS ALSO EMPHASIZED THAT SMALL CONTRIBUTION BY WAY OF FEES THAT BENEFICIARY PAYS WOULD NOT CONVERT CHARITABLE ACTIVITY INTO BUSINESS, COMMERCE OR TRADE IN THE ABSENCE OF CONTRARY EVIDEN CE. QUANTUM OF FEE CHARGED, ECONOMIC STATUS OF THE BENEFICIARIES WHO P AY, COMMERCIAL VALUE OF BENEFITS IN COMPARISON TO THE FEE, PURPOSE OR OBJEC T BEHIND THE FEES ETC. ARE SEVERAL FACTORS, WHICH WILL DECIDE THE QUESTION, IS IT BUSINESS ? IN THE CASE OF SABARMATI ASHRAM GAUSHALA (SUPRA), THE ASSESSEE WAS ENGAGED IN IMPROVING BREEDING OF MILCH COWS, AND THEREFORE, IT WAS HELD AS NON-COMMERCIAL ACTIVITY. 24. ON AN ANALYSIS OF TOWN PLANNING ACT, ACTIVITIES AND OBJECTS OF THE ASSESSEE, WE FIND THAT WHENEVER A TOWN PLANNING SCH EME IS CONCEIVED, THEN THE LAND BELONGING TO VARIOUS PERSONS/ENTITIES ARE PUT INTO A COMMON POOL, AND THEREAFTER, THE SCHEME IN A PLANNED WAY IS DRAWN. THE ROLE OF THE ASSESSEE CAME TO EXECUTE SCHEME. FROM READING OF SECTION 40 (JJ)(A) OF THE TOWN PLANNING ACT WOULD SUGGEST THAT 40% OF THE LAND WOU LD BE TAKEN FROM THE LAND OWNERS. IT WILL BE USED AS PER THIS SECTION V IZ. (I) FIFTEEN PER CENT FOR ROADS, (II) FIVE PER CENT FOR PARKS, PLAY GROUNDS, GARDENS AND OPEN SPACE, (III) FIVE PER CENT FOR SOCIAL INFRASTRUCTURE SUCH AS SCH OOL, DISPENSARY, FIRE BRIGADE, PUBLIC UTILITY PLACE AS EARMARKED IN THE DRAFT TOWN PLANNING SCHEME, AND (IV) FIFTEEN PER CENT FOR SALE BY APPROPRIATE AUTHORITY FOR RESIDENTIAL, COMMERCIAL OR INDUSTRIAL USE DEPENDING UPON THE NATURE OF DEVELOP MENT. 15% LAND WOULD AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 40 VEST IN THE ASSESSEE. THIS WAS NOT FREE OF COST. THE COST IS INCURRENCE OF EXPENDITURE ON THE DEVELOPMENT OF REMAINING 85% OF THE LAND. THE LAND OWNERS HAVE SACRIFICED THEIR 40% LAND, THE POTENTIA LITY OF 60% WOULD INCREASE. IN OTHER WORDS, RELINQUISHMENT VALUE, RE PRESENTING 40% OF THE LAND BY THE LAND OWNERS, WOULD BE COMPENSATED BY ENHANCI NG THE VALUE OF BALANCE 60% LAND BEING DEVELOPED LAND IN A TOWNSHIP. IT I S ALSO IMPORTANT TO NOTE THAT THIS METHOD IS NOT STRICTLY APPLICABLE IN ALL CONDITIONS. 25. THE LD.COUNSEL FOR THE REVENUE DREW OUR ATTENTI ON TOWARDS SECTION 52(3) OF THE T.P. ACT. HE POINTED THAT THE TOWN PLA NNING OFFICER SHALL ESTIMATE THE COST OF THIS SCHEME (DEVELOPMENT) AND THE CONTRIBUTION TO BE LEVIED ON EACH OWNER OF THE PLAN IS TO BE NOTIFIED. THE FINAL AMOUNT OF COMPENSATION PAYABLE TO THE OWNERS OF EACH PLAN OR THE RECOVERY TO BE MADE FROM THEM IS WORKED OUT BY THE AUTHORITY. IN OTHER WORDS, FOR EXAMPLE, A SCHEME HAS 50 PLOTS OF 500 SQ.METERS IN A ROW. THE TOWN PLANNING OFFICER WOULD WORK OUT COST OF DEVELOPED PLOT. THEREAFTER, HE WILL SET OFF THE COST EQUIVALENT TO VALUE OF 40% OF THE LAND TAKEN FROM T HE OWNERS USED IN DEVELOPMENT OF 500 PLOTS. IN CASE THE COST OF DEVE LOPMENT IS HIGHER, THEN, THE RECOVERIES WOULD BE MADE FROM THE LAND OWNERS FOR T AKING 500 PLOTS IN THEIR NAMES. IN CASE, COST IS LOWER THAN THE VALUE OF 40 % OF THE LAND, THEN COMPENSATION WILL BE PAID TO THE OWNERS. THE LD.CO UNSEL FOR THE ASSESSEE HAS EMPHASIZED THAT IT GOT THE LAND FREE OF COST. IT I S WRONG TO SUGGEST THAT THE ASSESSEE GOT THE LAND FREE OF COST. THE COST OF LA ND IS EMBEDDED IN THE EXPENDITURE REQUIRED TO BE INCURRED ON DEVELOPMENT OF SCHEME. SHRI G.C. SRIVASTAVA, IN OUR UNDERSTANDING HAS RIGHTLY POINTE D OUT THAT, SUPPOSING, AFTER NOTIFICATION OF THE SCHEME, THE LAW HAD STIPULATED AND THE GOVERNMENT HAD DECIDED TO OUTSOURCE THE DEVELOPMENT WORK TO A THIR D PARTY (A INFRASTRUCTURE COMPANY WITH SIMILAR RIGHTS AND ENTITLEMENT AS GIVE N TO AUDA, COULD IT BE AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 41 URGE THAT INFRASTRUCTURE DEVELOPMENT COMPANY DOING SIMILAR WORK, AS AUDA WAS NOT ENGAGED IN THE ACTIVITY IN THE NATURE OF TR ADE ? THE MOST CRUCIAL FACTOR, WHICH WEIGHED WITH US THAT THE ASSESSEE HAS BEEN WORKING WITH PROFIT MOTIVE IS, THAT THE TOWN PLANNING OFFICER IS WELL A WARE ABOUT THE COST OF DEVELOPMENT. IN SPITE OF THAT THE ASSESSEE HAS NEV ER SOLD THE 15% OF THE LAND ON COST BASIS. FOR EXAMPLE, THE ASSESSEE HAS DEVEL OPED 1500 SQ.YARDS OF LAND IN A SCHEME, THE COST TO DEVELOP A SCHEME IS RS.600 00/-. THE ASSESSEE SHOULD HAVE ALLOTTED 15% 1500 SQ.YARDS OF LAND AT THE RATE OF 400 PER SQ.YARDS TO THE NEEDY PERSONS/INSTITUTIONS BY DRAW OF LOTS. INSTEA D OF THIS, THE ASSESSEE HAS FIXED A BASE PRICE, AND THEREAFTER, PUT THE LAND ON AUCTION. IT ALLOTTED THE LAND TO THE HIGHEST BIDDER. IT HAS SOLD THE LAND KEEPIN G IN VIEW THE PROFIT IN MIND. 26. THE LD.COUNSEL FOR THE REVENUE HAS POINTED THAT HUGE PROFITS HAVE BEEN MADE BY THE ASSESSEE IN THESE YEARS. IF THAT BE SO , WHERE IS THE ELEMENT OF CHARITY? THE ACTIVITY OF DEVELOPING ROADS, PARK OR LAYING OF SEWERAGE LAND ARE NOT TO BE SEEN REPRESENTING A CHARITABLE ACT. THES E ARE JUST TO DEMONSTRATE THAT THE ASSESSEE SHALL PERFORM THE ACTIVITY OF ADVANCEM ENT OF ANY OTHER OBJECTS OF GENERAL PUBLIC UTILITY. BUT AUCTION OF LAND TO THE HIGHEST BIDDER IS AN ACTIVITY, WHICH IS SPECIFICALLY, KEEPING IN VIEW, THE PROFIT IN MIND. AS FAR AS OTHER CIRCUMSTANCES ARE CONCERNED, WE ARE IN AGREEMENT WI TH THE CONTENTIONS OF SHRI G.C. SRIVASTAVA, WHICH HAVE BEEN NOTICED BY US BY TAKING COGNIZANCE OF THE WRITTEN SUBMISSIONS FILED BY THE REVENUE IN PAR A 16 OF THIS ORDER. THERE ARE SURPLUS AND RESERVES WHICH ARE CONTINUOUSLY SWE LLING. THESE ARE GENERATED BY THE ASSESSEE BY WAY OF THIS ACTIVITY S ALE/LEASE OF LAND AND CHARGING FEES. THE ASSESSEE HAS NOT BEEN CHARGING NOMINAL FEES OR SELLING THE LAND AT A NOMINAL RATE. IT HAS BEEN MAKING MONEY B Y PUTTING THE LAND ON AUCTION AFTER TAKING A RESERVE PRICE. THIS ACTIVIT Y CANNOT BE SAID TO BE A AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 42 CHARITABLE ACTIVITY. IN VIEW OF THE ABOVE DISCUSSI ON, WE DO NOT FIND MERIT IN THE CONTENTIONS OF THE ASSESSEE THAT THERE WAS NO P ROFIT INTENTION IN THE ACTIVITIES OF THE ASSESSEE. THEREFORE, IT IS NOT E NTITLED FOR CHARITABLE STATUS. THE INCOME HAS TO BE ASSESSED UNDER THE NORMAL PROV ISIONS I.E. UNDER SECTIONS 28 TO 44 OF THE INCOME TAX ACT. 27. NOW, WE TAKE THE GROUNDS OF APPEAL IN SERIATIM. 28. IN THE ASSTT.YEAR 2009-10, THE ASSESSEE HAS PLE ADED IN GROUND NOS.1, 2 AND 3 THAT THE LD.CIT(A) HAS ERRED IN DENYING THE B ENEFIT OF SECTIONS 11 AND 12 AND ASSESSING UNDER SECTIONS 28 TO 44 OF THE INCOME TAX ACT, AS AN AOP. WE HAVE ALREADY HELD THAT THE ASSESSEE IS NOT ENTIT LED FOR A CHARITY STATUS, AND THEREFORE, IT CANNOT CLAIM THE BENEFIT OF SECTI ONS 11 AND 12. ITS INCOME DESERVES TO BE ASSESSED UNDER SECTIONS 28 TO 44 OF THE INCOME TAX ACT, AS A BUSINESS ENTITY. THUS, THESE THREE GROUNDS ARE REJ ECTED. 29. IN GROUND NO.4 AGAIN, THE ASSESSEE HAS PLEADED THAT IT WAS NOT ENGAGED ANY COMMERCIAL ACTIVITY. IT GOT REGISTRATION UNDER SECTION 12A OF THE INCOME TAX ACT, AND THEREFORE, ITS INCOME SHOULD BE ASSESS ED UNDER SECTIONS 11, 12 AND 13 OF THE INCOME TAX ACT. IN THIS GROUND, THE ASSESSEE HAS RAISED A SUPPORTIVE ARGUMENT, WHICH IS SIMILAR TO ONE RAISED IN GROUND NOS.1, 2 AND 3. HENCE, THIS GROUND OF APPEAL IS ALSO REJECTED. 30. IN GROUND NO.5, THE ASSESSEE HAS PLEADED THAT T HE LD.CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN DISALLOWING THE DEDUCTION CLAIMED AT RS.42,21,17,250/- BEING 15% OF THE RECEIPTS AS PROV IDED IN SECTION 11(1)(A) OF THE INCOME TAX ACT. SINCE, WE HAVE HELD THAT THE A SSESSEE IS NOT A CHARITABLE INSTITUTION, THEREFORE, IT IS NOT ENTITLED FOR THE ALLEGED DEDUCTION AT 15% FROM THE RECEIPT PROVIDED IN SECTION 11(1)(A). IN OTHER WORDS, BENEFIT OF SECTION 11 AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 43 IS NOT AVAILABLE TO THE ASSESSEE. THEREFORE, THIS GROUND IS ALSO BECOME INFRUCTUOUS AND REJECTED. 31. IN GROUND NO.6 AGAIN THE ASSESSEE CLAIMED THE B ENEFIT AS PER CLAUSE (2) OF EXPLANATION TO SECTION 11(1) OF THE ACT. THE ASSESSEE IS NOT E NTITLED FOR ANY SUCH BENEFIT HENCE, THIS GROUND IS ALSO REJECTE D. 32. IN GROUND NO.7, THE ASSESSEE HAS PLEADED THAT T HE LD.CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE RS.60 CRORES CLAIMED BY THE ASSESSEE UNDER SECTION 11(2) OF THE ACT. SINCE, WE HAVE ALREADY H ELD THAT THE ASSESSEE IS NOT ENTITLED FOR BENEFIT OF SECTION 11, THEREFORE, IT I S PRECLUDED TO RAISE ANY SUCH ISSUE. THIS GROUND IS ALSO REJECTED. 33. GROUND NO.12 IS AGAIN GENERAL GROUND, WHICH IS JUST ARGUMENT. HENCE, IT IS REJECTED. 34. THE GROUND NO.13. IN THIS GROUND, THE ASSESSEE HAS CHALLENGED LEVY OF INTEREST UNDER SECTIONS 234(A), 234(B), 234(C) AND 234(D) OF THE ACT. THE LEVY OF INTEREST IS CONSEQUENTIAL IN NATURE. HENCE , IT IS REJECTED. 35. IN GROUND NO.14, THE ASSESSEE HAS CHALLENGED IN ITIATION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IT IS A PREMATURE GR OUND. THE ISSUE WITH REGARD TO LEVY OF PENALTY IS YET TO BE DECIDED. HENCE, TH IS GROUND DOES NOT EMERGE OUT FROM THE RECORD, ACCORDINGLY, REJECTED. 36. GROUND NOS.8, 9, 10 AND 11. THESE GROUNDS ARE IN RESPECT OF QUANTIFICATION OF INCOME OF THE ASSESSEE. ACCORDIN G TO THE LD.COUNSEL FOR THE AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 44 ASSESSEE, THE LD.AO HAS NOT PROPERLY COMPUTED THE I NCOME, EVEN BY TREATING THE ASSESSEE AS BUSINESS ENTITY. THE AO HAS DISALL OWED DEPRECIATION. HE HAS MADE ADDITION OF CAPITAL EXPENDITURE, AND THEREAFTE R ADDED THE CAPITAL RECEIPTS ALSO, WHICH RESULT DOUBLE ADDITION. THE ASSESSEE H AS FILED APPLICATION UNDER SECTION 154 OF THE ACT AND HIGHLIGHTED THESE ASPECT S. THIS APPLICATION WAS DISMISSED BY THE AO, AND APPEAL TO THE CIT(A) DID N OT BRING ANY RELIEF TO THE ASSESSEE. ACCORDING TO THE LD.COUNSEL FOR THE ASSE SSEE, SPECIFIC GROUNDS, WITH REGARD TO QUANTIFICATION OF INCOME, ARE BEING RAISE D IN ITA NO.711/AHD/2013 IN THE ASSTT.YEAR 2009-10. THIS ALSO HAS ARISEN OU T OF THE PROCEEDING UNDER SECTION 154 OF THE INCOME TAX ACT. WHEN WE CONFRON TED THESE ISSUES TO THE LD. COUNSEL FOR THE REVENUE, HE AGREED THAT ALL THE SE ISSUES ARE REQUIRED TO BE RE-ADJUDICATED AT THE LEVEL OF THE AO. THE LD.COUN SEL FOR THE ASSESSEE ALSO AGREED THAT THE COMPUTATION OF INCOME AS A BUSINESS ENTITY OUGHT TO BE DECIDED AFRESH AT THE LEVEL OF THE AO. KEEPING IN VIEW VARIOUS DISCREPANCIES IN DETERMINATION OF TOTAL INCOME BY TREATING THE AS SESSEE AS BUSINESS ENTITY AND THE STAND OF THE RESPECTIVE PARTIES, WE DEEM IT APPROPRIATE TO SET ASIDE ALL THE IMPUGNED ORDERS AND RESTORE THE ISSUES TO THE F ILE OF THE AO. THE LD.AO SHALL TREAT THE ASSESSEE AS AN AOP AND DETERMINE THE TAXABLE INCOME OF THE ASSESSEE UNDER SECTIONS 28 TO 44 OF THE INCOME TAX ACT. THE LD.AO SHALL COMPUTE THE INCOME UNDER THE NORMAL PROVISIONS OF T HE INCOME TAX ACT, AS IF APPLIED ON A REGULAR BUSINESS ENTITY. HE WILL RE-C OMPUTE ALL THE CLAIMS OF THE ASSESSEE WITH REGARD TO THE DEPRECIATION ETC., AFTE R PROVIDING AN OPPORTUNITY OF HEARING TO THE ASSESSEE. 37. THE OBSERVATIONS MADE BY US WILL NOT IMPAIR OR INJURE THE CASE OF THE AO AND WILL NOT CAUSE ANY PREJUDICE TO THE DEFENCE/EXPLANATION OF THE ASSESSEE. AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ADIT (EXE MPTION)-4 APPEALS 45 38. IN VIEW OF THE ABOVE DISCUSSION, THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 19 TH APRIL, 2016 AT AHMEDABAD. SD/- SD/- ( MANISH BORAD ) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER