TaxTMI 
TaxTMI 
2017 (1) TMI 945
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....oned appeals. 4. The appellant company was constituted pursuant to the State Legislature Act namely the Gujarat Industrial Development Act, 1962. The preamble of the Act reads as under:- "An Act to make special provision securing the orderly establishment and organization of industries in industrial areas and industrial estates in the State of Gujarat and for the purpose of establishing Commercial Centers in connection with the establishment and organization of such industries and for that purpose to establish an Industrial Development Corporation, and for purposes connected with the matters aforesaid". 5. For the Assessment Year 2009-10, the appellant company filed return of income showing total deficit at Rs. 607.87 crores. In the statement of income, the assessee has shown gross total income at Rs. 393.15 crores. Total application of funds was shown at Rs. 1045.86 crores and total loss was worked out at Rs. 607.87 crores. The A.O. denied the claims made by the assessee by making the following observations. 5. It is further observed that the main objects of the assessee Company is to establish and manage industrial estates at places selected by State Gover....
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....ssee is enjoying income from business of developing land for industrial purposes and allotting land to industrialists on lease and is also charging consideration for land transferred to them and is also claiming its income to be exempt u/s. 11 of the Act. Therefore, in my opinion its income is assessable u/s. 11(4) of the Act for A.Y. 2009-10. It is pertinent to note here that this view has been confirmed by ld. CIT(A) in the assessee's own case for the A.Y. 2006-07. 6. The assessee carried the matter before the ld. CIT(A) and reiterated its claim of exemption. Taking a leaf out of the observations of the A.O. discussed in Para 7 of the assessment order, the First Appellate Authority was of the strong belief that the proviso to Section 2(15) squarely apply on the facts of the case. The First Appellate Authority accordingly issued a specific show cause vide letter dated 28.09.2012 to show cause why consequent to the decision of the A.O. it should not be held that no income is even assessable u/s. 11(4), it was also required to show cause why GIDC should not be denied any benefit of Section 11 and, thereafter its income be not computed under the normal provisions of the Act. 7.....
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.... A careful reading of the proviso shows that it excludes from charitable purpose when the activities of the assessee concerned even though for 'the advancement of any other object of general public utility' 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. The definition is much broader than being engaged in trade or business. What it envisages and prohibits is even carrying out activities of that 'nature' for a cess or fee or any other consideration. Clearly, the legislation is excluding the carrying out of these activities (not only complete business or trade etc.) even though they may be for public utility, irrespective of the nature of use or application, or retention, of the income from such activity. The averment of the assessee that the profits though earned are for public use or may ultimately vest in the Government of Gujarat after the corporation is dissolved etc., therefore, does not make a difference, to the assessee's case Here, I would like to mention tha....
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....improvement of that part of the city where such areas are located. Finally it was held that such authorities being constituted by law for facilitating all kinds of development of cities, towns and villages for public purposes, therefore should .not be subjected to the liability to pay income tax, hence, entitled to exempt from tax u/s.l0(20A) of the I.T. Act. The purpose of careful reading of this judgment is to ascertain the objects of the trust and also to verify whether such objects had fallen under the definition of section 2(15) of the I.T. Act. According to us, there should not be any dispute or misunderstanding that the objects of this, appellant are very much covered, as held above, under the definition of section 2(15) of the I.T. Act. 11...........This is the main cause of grievance that though the activity of the assessee is to promote industry for the benefit of public at large and the income so generated on leasing out of the plots/land, the same has also been exclusively utilized for those listed objects of the Institution, therefore, there was no scope to invoke section 11(4) of the I.T.Act. There is no allegation of the Revenue Department that any part of t....
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....d there from was exclusively used for the laid down objects then to be covered by the main Sec.11. ......... Therefore, we are of the conscientious view that even if this undertaking may come within the purview of "business undertaking" but being no excess income was found utilised other than for the purposes of the object of the trust, hence, out of the ambits of the provision of section 11(4) of the l.T.Act. (emphasis supplied)" It is clear that the Hon'ble ITAT also considered the activities of the appellant to be 'business activity' but stated that the profits of business were utilized for the objects and in that year the charitable activity included business activities for the purpose of the general public utility also. The appellant has relied on the decision of the Hon'ble Supreme Court in the following cases: i) In the case of the Appellant itself i.e. GIDC & Ors v. CIT[227 ITR 414 (SC)] ii) Shri Ramtanu Co.Op. Housing Society Ltd. v. State of Maharashtra [(1970) AIR 1970 SC 1771] [(1970)-003)-SCC-0323-SC] Having gone through the judgments carefully, I find that these are of no help, to the assessee in the p....
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.... the second proviso to section 2(15) does not come to the rescue of the appellant. Therefore, it is held that the activities of the assessee, for the assessment year under appeal are not for charitable purpose as defined under section 2(15) of the Act. The provisions of section 13(8) of the I.T. Act, as amended with effect from 01/04/2009, read 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 thereof if the provisions of the first proviso to clause (15) of section 2 become applicable in the case of such person in the said previous year." Therefore, no income of the assessee for the previous year would be eligible to be excluded from the total income under the provisions of section 11 or section 12 of the IT Act. 9. Aggrieved by this, the assessee is before us. The ld. Senior Counsel vehemently submitted that the First Appellate Authority have grossly erred in not appreciating the facts of the case qua the decisions relied upon by the assessee before the First Appellate Authority. 10. It is the say of the ld. counsel that the Hon'b....
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....as placed on the decision of the Tribunal Ahmedabad Bench in the case of Ahmedabad Urban Development Authority in ITA No. 712 & 711/Ahd/2013 for A.Y. 2009-10 and ITA Nos. 647 & 2335/Ahd/2014 for A.Y. 2010-11 & 2011-12. The ld. D.R. relied upon the decision of the Co-ordinate Benches of Amritsar in the case of Jammu Development Authority in ITA No. 30/Asr/2011 which was later on decided by the Hon'ble High Court of Jammu & Kashmir in Tax Appeal No. 164 of 2012. The ld. D.R. further relied upon the decision in the case of GIVE Foundation in ITA No. 1465 /Ahd/2013, Entertainment Society of Goa in ITA No. 90/Panj/2012 and Belgaum Urban Development Authority in ITA No. 214/Panj/2011. 13. Having heard rival contentions, we have carefully perused the orders of the authorities below and with the assistance of the ld. representatives of both sides; we have gone through the related documentary evidences brought on record in the form paper books in the light of rule 18(6) of the ITAT Rules. We have given a thoughtful consideration to the decisions relied upon by the rival representatives. 14. The bone of contention is the applicability of the proviso to Section 2(15) of the Act. Section....
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....ly; (f) "engineering operations" include the formation of laying out of means of access to a road or the laying out of means of access to a road or the laying out of water supply; (g) "Industrial area" means any area declared to be an industrial area by the State Government by notification in the Official Gazette, which is to be developed and where industries are to be accommodated; (h) "Industrial Estate" means any site selected by the State Government, where the Corporation builds factories and other buildings and makes them available for industries or class of industries; (i) "means of access" includes a road for any means of access, whether private or public, for vehicles or for pedestrians; (j) "premises" means any land or building or part of a building and includes- (i) the garden, grounds and out-houses, if any, appertaining to such building or part of a building; and (ii) any fittings affixed to such building or part of a building for the more beneficial enjoyment thereof; (k) "Prescribed" means prescribed by rules, made under this Act; (1) "regulation" means regulation made under section 54 ....
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....es for providing industrial units and commercial establishments with such structures and facilities as may be necessary for their orderly establishment, growth and development;] (e) "[promote, organize, sponsor or undertake schemes] or works, either jointly with other corporate bodies or institutions, or with Government or local authorities, or on an agency basis, in furtherance of the purposes for which the Corporation is established and all matters connected therewith. 14. Subject to the provisions of this Act the Corporation shall have power- (a) to.acquire and hold such property, both movable and immovable as the Corporation may deem necessary for the performance of any of its activities, and to lease, sell, exchange or otherwise transfer any property held by it on such conditions as may be deemed proper by the Corporation; (b) to purchase by agreement or to take on lease or under any form of tenancy any land, to erect such buildings and to execute such other works as may be necessary' for the purpose of carrying out its duties and functions; (c) to provide or cause to be provided amenities and common facilities in 5[industrial e....
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....s authorised under this Act from out of the general fund of the Corporation referred to in section 19 or from the reverse and other funds referred to in section 23, as the case may be. (2) Without prejudice to the generality of the power conferred by sub-section (1), the Corporation may contribute such sums as it thinks fit towards expenditure incurred or to be incurred by any local authority or statutory public undertaking in the performance, in relation to any of its industrial estates or industrial areas, of any of the statutory functions of such authority or undertaking, including expenditure incurred in the acquisition of land. (3) No expenditure other than capital expenditure shall be incurred by the Corporation out of moneys borrowed or received by way of deposits. ACQUISITION AND DISPOSAL OF LAND 30,(1) Wherever any land is required by the Corporation for any purpose in furtherance of the objects of the Act, but the Corporation is unable to acquire it by agreement, the State Government may, upon an application of the Corporation in that behalf, order proceedings to be taken under the relevant land acquisition law for acquiring the same o ....
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....nd to carry out the purposes of this Act (2) In particular and without prejudice to the generality of the foregoing power such regulations may provide for all matters expressly required or allowed by this Act to be provided by regulations. (3) All regulations made under this section shall be published in the Official Gazette and shall be laid for not less than thirty days before the State Legislature, as soon as possible, after they are made, and shall be subject to rescission by the Legislature, or to such modification as the Legislature may make, during the session in which they are so laid, or the session immediately following. (4) Any rescission or modification so made by the State Legislature shall be published in the Official Gazette and shall thereupon take effect. 16. The Hon'ble Supreme Court in the case of the assessee in 227 ITR 414 had the occasion to consider the objects of the assessee qua the claim of exemption u/s. 10(20A) of the Act. The relevant observations of the Hon'ble Supreme Court reads as under:- 7. The Division Bench of the High Court while agreeing that 'industrial activity is one of the facets of general develop....
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....establishment, growth and development of industries in the State of Gujarat'. 10. We have no doubt that a proper planning is absolutely necessary for creation of an industrial area. Inside roads, sub-roads, buildings, sanitation, parks and other amenities have also to be provided in a planned industrial area as per the modern concept of any industrial complex. Even educational institutions may have to be provided in such complex. Therefore, development of industrial area would have its direct impact on the development or improvement of that part of the city or town or village where such area is located. Delinking industrial area from the scope of development of any area is thus, without any practical sense. 11. In this context, a reference to the Maharashtra Industrial Develop ment Act, 1 962, which is almost analogous to the Gujarat Act, is of some use. While examining issues relating to the validity of the Maharashtra Act, a Division Bench of this Court has said in Shri Ramtanu Co-operative Housing Society Ltd .v. State of Maharashtra [1 970] 3 SCC 323 : "The functions and powers of the Corporation indicate that the Corporation is acting as a wing o....
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.... 15. The position is, therefore, clear that the authorities constituted by law for facilitating all kinds of development of cities, towns and villages for public purposes shall not be subjected to the liability to pay income-tax. The Division Bench of the High Court seems to have interpreted the exemption clause too rigidly and narrowly which resulted in the anomaly of bringing authorities like the appellant-corporation within the tentacles of the income-tax liability while the authorities dealing with the housing schemes which provide houses to private individuals would stand outside the taxing sphere. 16. In the/ result, we allow these appeals, 'set aside the judgment under challenge. The answer to the question will, therefore, be in favour of the assessee and against the revenue. 17. As mentioned elsewhere, the Gujarat Industrial Development Act, 1962 is in pari materia to Maharashtra Industrial Development Act, 1962. The constitutional validity of the Maharashtra Act was challenged before the Hon'ble Supreme Court by a writ and the Hon'ble Apex Court dismissed the writ petition. The relevant observations of the Hon'ble Supreme Court reads as under:- ....
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....ngs on hire or sale to industrialists or persons intending to start industrial undertakings to construct buildings for the housing of the employees of such industries, to allot factory sheds or such buildings or parts of buildings, including residential tenements to suitable persons in the industrial estates established or developed by the Corporation and to do such other things and perform such acts as it may think necessary or expedient for the proper conduct of its functions, and the carrying into effect the purposes of this Act. 8. Broadly stated the functions and powers of the Corporation are to develop industrial areas and industrial estates by providing amenities of road., supply of water or electricity, street lighting, drainage, sewerage, conservancy and other conveniences, secondly to construct works and buildings, factory sheds and thirdly, to make available buildings on hire or sale to industrialists or persons intending to start industrial undertakings and to allot factory sheds, buildings, residential tenements to suitable persons in industrial estates established or developed by the Corporation and to lease, sell, exchange or otherwise transfer any pro....
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....vernment may deem fit to impose. We have already noticed that for the purpose of the Act, namely, the establishment and development of industries the State the Corporation will establish industrial estates and develop industrial areas. 12. Apart from establishing industrial estates and developing industrial areas the Corporation may dispose of any land acquired by the State Government and transfer to the Corporation without undertaking or carrying out any development thereof or transfer such land after undertaking or carrying out any development as it thinks fit. These powers of the Corporation with respect to the disposal of land are to be exercised so far as practicable, that where the Corporation proposes to dispose of by sale any such land without any development having been undertaken or carried out thereon, the Corporation shall offer the land in the first instance to the persons from whom it was acquired if they desire to purchase it subject to such requirements as to its development and use as the Corporation may think fit to impose. Again, the persons who are residing or carrying on business or other activities on any such land shall, if they desire to obtain acco....
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.... 18. The Corporation has to provide amenities and facilities in industrial estates and industrial areas. Amenities of road, electricity, sewerage and other facilities in industrial estates and industrial areas are within the programme of work of the Corporation. The fund of the Corporation consists of moneys received from the State Government, all fees, costs and charges received by the Corporation, all moneys received by the Corporation from the disposal of lands, buildings and other properties and all moneys received by the Corporation by way of rents and profits or in any other manner. The Corporation shall have the authority to spend such sums out of the general funds of the Corporation or from reserve and other funds. The Corporation is to make provision for reserve and other specially denominated funds as the State Government may direct. The Corporation accepts deposits from persons, authorities or institutions to whom allotment or sale of land, buildings, or sheds is made or is likely to be made in furtherance of the object of the Act. A budget is prepared showing the estimated receipts and expenditure. The accounts of the Corporation are audited by an auditor appoin....
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....ion. Let us now consider the various aspect of the impugned provision. "General means pertaining to whole class, "Public" means the body of people at large including any class of the public, "Utility" means usefulness. Therefore, the advancement of any object of benefit to the public or a section of the public as distinguished from individual and group of individuals would be a charitable purpose. An object of public utility need not be an object in which the whole of the public is interested. It is sufficient if well defined section of the public benefits by the objects which means that the expression "object of general public utility" is not restricted to objects beneficial to the whole mankind. An object beneficial to a section of the public is an object of general public utility. In the case of CIT Vs Swastik Trading Co. Ltd. 113 ITR 852, the Hon'ble Gujarat High Court has held that establishing and maintaining Gaushalas and Panjrapole constitutes charitable purpose. 16. The Hon'ble Finance Minister while presenting the Finance Act 2008 in his budget speech stated as follows: "Charitable purpose includes relief of the poor, education, medical rel....
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....r determining whether the entity is carrying on any commercial activity. Each case would therefore to be decided on its own facts and as the CBDT has clarified generalization is not possible. 19. Coming back to the enactment of the State Act for the constitution of the appellant company, we find that the appellant company has been constituted for the purpose of securing and assisting in the rapid and orderly establishment and organization of industries in industrial areas and industrial estates in the State of Gujarat. 20. In the case of Sole Trustee, Loka Shikshana Trust vs. CIT 101 ITR 234, the Hon'ble Justice J. Baig speaking for the Apex Court thus said that: " If the profits must necessarily feed a charitable purpose, under the terms of the trust, the mere fact that the activities of the trust yield profit will not alter the charitable character of the trust. The test now is, more clearly than in the past, the genuineness of the purpose tested by the obligation created to spend the money exclusively or essentially on charity". 21. The test for carrying on of any activity in the nature of trade, commerce or business as mentioned in the first proviso to Sec. 2(....
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....orce the proviso to Sec. 2(15) and whether any rectification order has been passed by the department or not as there being mistake of law after coming into force the first proviso to Sec. 2(15) of the Act. The facts of the case in hand are not even remotely connected with the facts of the case relied upon by the ld. D.R. 25. Without going into the merits of the decision given in the case of Ahmedabad Urban Development Authority (supra), we find that the said decision of the Co-ordinate Bench has been stayed by the Hon'ble High Court of Gujarat in Tax Appeal No. 423 & 424 of 2016 with Civil Application No. 212 & 213 of 2016. The relevant part reads as under:- "Under the circumstances, issue notice returnable on 06.06.2016. By way of ad- interim relief, the impugned order dated 19.04.2016 passed by the ITAT in ITA No. 712/Ahd/2013 and ITA Nos. 647 and 2335/Ahd/2014 is hereby stayed." 26. Referring to this order of the Hon'ble High Court of Gujarat, the ld. D.R. referred to the judgment of the Hon'ble Calcutta High Court in the case of Pijush Kanti Chowdhury vs. State of West Bengal (2007) 2 CALLT 577 (HC). It is say of the ld. D.R. that the Hon'ble Calcutta High Court ....
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....e appeal which had been dismissed by the Appellate Authority by its order dated January 7, 1991 and it cannot be said that after February 21, 1991, the said appeal stood revived and was pending before the Appellate Authority. In that view of the matter, it cannot be said that any proceedings under the Act were pending before the Board or the Appellate Authority on the date of the passing of the order dated August 14, 1991 by the learned Single Judge of the Karnataka High Court for winding up of the company or on November 6, 1991 when the Division Bench passed the order dismissing O.S.A. No. 16 of 1991 filed by the appellant-company against the order of the learned Single Judge dated August 14, 1991. Section 22(1) of the Act could not, therefore, be invoked and there was no impediment in the High Court dealing with the winding up petition filed by the respondents. This is the only question that has been canvassed in Civil Appeal No. 126 of 1992, directed against the order for winding up of the appellant-company. The said appeal, therefore, fails and is liable to be dismissed. 29. After considering the entire facts in totality, in the light of the decisions discussed hereinabove a....