General public utility status preserved for urban development authority; incidental fees and land sales did not make it commercial.

A statutory urban development authority constituted under the Gujarat Town Planning and Urban Development Act, 1976 was treated as carrying out planning and development functions for general public utility, not trade, commerce or business. The Court held that preparation and execution of town planning schemes, collection of regulatory fees, and limited sale of land were integral to its statutory object and only funded those functions. Incidental receipts or surplus did not change the charitable character of the activity. The first proviso to section 2(15) of the Income-tax Act, 1961 was therefore inapplicable, and exemption under section 11 remained available.

---

---

Issues: Whether the respondent's activities as an urban development authority were in the nature of trade, commerce or business so as to attract the first proviso to section 2(15) of the Income-tax Act, 1961 and deny exemption under section 11.

Analysis: The respondent was constituted under the Gujarat Town Planning and Urban Development Act, 1976 to carry out planning and development functions for urban development areas. Its activities, including preparation and execution of town planning schemes, collection of regulatory fees and sale of a limited portion of land for development purposes, were found to be integral to the statutory object of providing infrastructure and general public utility. The Court applied the earlier binding decision on the same statutory framework and held that the sale of land and collection of charges were only means to fund the statutory functions and did not amount to carrying on trade, commerce or business. The presence of incidental receipts or surplus did not alter the charitable character of the activity.

Conclusion: The first proviso to section 2(15) was held inapplicable and the respondent remained entitled to exemption under section 11.

Final Conclusion: The appeal was rejected, and the assessee's charitable status for income-tax exemption purposes was affirmed.

Ratio Decidendi: A statutory urban development authority engaged in development, planning and allied public utility functions does not become a trading or commercial concern merely because it collects regulatory charges or realises limited sale proceeds to fund those functions; such receipts remain incidental where the dominant object is general public utility.

---