TaxTMI 
TaxTMI 
2018 (3) TMI 227
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....tition are Ministry of Finance, Central Board of Direct Taxes and Assistant Commissioner of Income Tax, Circle-3, Noida, Uttar Pradesh, who is the Assessing Officer of the petitioner. For the sake of convenience, we would refer to them as respondents. 3. On 22nd November, 2011 the petitioner had made an application with the respondents for issue and grant of exemption notification under Section 10(46) of the Act. The respondents by letter dated 22nd May, 2013, had required the petitioner to furnish information as per proforma enclosed along-with audited balance sheets. These were furnished by the petitioner by detailed reply and documents vide letter dated 28th June, 2013. By communication dated 3rd January, 2014, the respondents had again required the petitioner to furnish documents in the proforma enclosed. The petitioner thereupon submitted reply dated 5th February, 2014 furnishing information as per proforma enclosed. By another communication dated 28th March, 2014, the petitioner was required to furnish application in the standardized proforma enclosed with the letter. The petitioner submitted their application, in the desired proforma vide letter dated 29th March, 2014. Th....
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.... that the activities of the authority are commercial in nature, following reply has been submitted. * The authority is performing, apart from the activities related to the planned development of the area, all municipal functions like roads, water supply, street lighting and power supply, sewerage, drainage, collection treatment and disposal of industrial waste and town refuse and other community facilities, services or conveniences. * Activities performed by the Authority are for the benefit of general public at large and by no stretch of imagination commercial in nature. All the amounts received by the Authority are utilized for the development of the Notified Area under its authority. * Authority is mandated only to carry on the functions/objectives as detailed by Uttar Pradesh Industrial Development Act, 1976. * Authority is not mandated to carry on any commercial/business activity from the point of view of earning profits. * Authority is performing the Sovereign functions of planned development in the notified area and provision of municipal services in that area. 7. The term as used in Section 10(46)(b) that the body or authority....
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....e extent arising to a body or authority or Board or Trust or Commission (by whatever name called) referred to in this clause, which the Central Government may, by notification in the Official Gazette, specify in this behalf;" Section 10 in separate clauses sets out and details different incomes that would not form part and are excluded from the total income of the assessee. Sub-section 46 to Section 10 states that the Central Government by issue of notification can grant exemption to specified income arising to a body, authority, board, trust or commission established or constituted under the Central, State or Provincial Act or constituted by Central Government or State Government with the object of regulating or administering any activity for the benefit of general public. Clause (b) in Section 10(46) states that the body, authority etc. should not be engaged in any commercial activity. The Explanation defines what is meant by the term "specified income" and the specified income alone is exempt. 6. A reading of the impugned order dated 8th June, 2015 would show that the respondents do not dispute and question that the petitioner has been established or constituted by the Sta....
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....ia, it was notified that the area declared as Industrial Area by above notification dated 28th January, 1991 would be an industrial township with effect from the date of publication of said notification in the official Gazette. This notification also states that the petitioner was providing municipal services. Section 6 of the UPID Act provides for functions to be performed by the Authority like the petitioner established under Section 3 of the said Act. 9. Section 6 of the UPID Act reads as under:- "6. Functions of the Authority (1) The object of the Authority shall be to secure the planned development of the industrial development area. (2) Without prejudice to the generality of the objects of the Authority, the Authority shall perform the following functions: (a) To acquire land in the industrial development area, by agreement or through proceedings under the Land Acquisition Act, 1894 for the purposes of this Act; (b) To prepare a plan for the development of the industrial development area; (c) To demarcate and develop sites for industrial, commercial and residential purpose according to the plan; (d) To provide infrastructure for....
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....rder dated 8th June, 2015 would show that the respondents have held that an activity which is continuous and has the effect of generating money is "commercial activity". It does not matter whether or not any profit intent or motive is involved. It does not also matter whether the primary function of the petitioner was planned development of the notified area and providing municipal services in the notified area and money/income generated from sale of land, rents or interest received was an integral part of the said function, duty and obligation of planned development of notified area and providing municipal services. It is undisputed that there are no share holders or members to whom dividend or surplus generated is to be paid. Money and funds from sale, rent etc. are to be used for planned development and municipal services which are for general public good. 12. The expression "commercial activity' in Sub-section 46 to Section 10 of the Act, has not been specifically defined and, therefore, meaning would have to be given keeping in mind the Legislative intent of the enactment. Normally when a word or expression is not defined for a provision, we apply Common Parlance Interpreta....
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....Black's Law Dictionary 8th Edition the word "commerce' has been defined as exchange of goods or services especially on large scale involving transportation between cities, States and nations. In Advanced Law Lexicon, 3rd Edition 2005 Vol. I, at page 878 by P. Ramanatha Aiyar, the word "commerce' has been defined as under: 'Commerce' is a term of the largest import. It comprehends intercourse for the purposes of trade in any and all its forms, including transportation, purchase, sale, and exchange of commodities between the citizens of one country and the citizens or subjects of other countries, and between the citizens of different provinces in the same State or country. Walton v. Missoury, 23 L Ed.347 (1875). "Buying and selling together, exchange of merchandise especially on a large scale between different countries or districts; intercourse for the purpose of trade in any and all its forms [Section 2 (13), Income Tax Act). (43 of 1961)] If we go by the aforesaid definition the word "commercial activity' will be of extremely wide import and would cover any transaction or activity connected with exchange of goods or property of any type, be it buying, selling o....
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....ntention whatsoever that the investment is made for any commercial purpose or gain and therefore we find that the complainant Universities fall within the definition of "consumer" under the Act and the complaints are maintainable before the National Commission." The aforesaid decision relates to the Consumer Protection Act. In the context of the said Act, the expression "commercial activity" was interpreted. Therefore, distinction can be made between commercial activity and discharge of statutory public functions which an authority or a Board may have to perform that are of general public importance and have a social and public purpose behind it. 16. Way back in 1970, a Constitution Bench of five Judges in Shri Ramtanu Co-operative Housing Society Limited and Another versus State of Maharashtra and Others, (1970) 3 SCC 323, had examined validity of Maharashtra Industrial Development Act, 1961 (3 of 1962) and in that context had referred to the functions performed by Maharashtra Development Corporation, which was to establish and manage industrial estate on selected basis and to develop industrial area selected by the State Government and for this purpose acquire and tra....
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.... person to the Corporation are recoverable by it under this Act as an arrear of land revenue on the application of the Corporation. Secondly, on dissolution of the Corporation the assets vest in and the liabilities become enforceable against the State Government. 20. The underlying concept of a trading Corporation is buying and selling. There is no aspect of buying or selling by the Corporation in the present case. The Corporation carries out the purposes of the Act, namely, development of industries in this State. The construction of buildings, the establishment of industries by letting buildings on hire or sale, the acquisition and transfer of land in relation to establishment of industrial estate or development of industrial areas and of setting up of industries cannot be said to be dealing in land or buildings for the obvious reason that the State is carrying out the objects of the Act with the Corporation as an agent in setting up industries in the State. The Act aims at building an industrial town and the Corporation carries out the objects of the Act. The hard core of a trading Corporation is its commercial character. Commerce connotes transactions of purchase and sale of....
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.... petitioner-institute pursues the activity of business, trade or commerce. To our mind, the respondent while dealing with the said question has not applied their mind to the legal principles enunciated above and have taken a rather narrow and myopic view by holding that the petitioner institute is holding coaching classes and that this amounts to business....." 18. Six tests enunciated by Lord Fisher in Customs and Excise Commissioners versus Lord Fisher, [1981] 2 All ER 147 are;- "(a) a serious undertaking earnestly pursued; (b) pursued with reasonable continuity; (c) substantial in amount; (d) conducted regularly on sound and recognized business principles; (e) predominantly concerned with the making of taxable supplies to consumers for a consideration; (f) such as consisted of taxable supplies of a kind commonly made by those who seek to make profit from them." 19. After extensively referring to the judgments of the Supreme Court in State of Punjab versus Bajaj Electricals Limited, [1968] 70 ITR 730 (SC), Barendra Prasad Ray and others versus Income Tax Officer, [1981] 129 ITR 295 (SC), Commissioner of Income Tax versus Lahore Electric Supply Company Limited, [1966] 60 ....
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.... economic status of the beneficiaries who pay, commercial value of benefits in comparison to the fee, purpose and object behind the fee etc. are several factors which will decide the seminal question, is it business? 21. Reference can be also made to the decision of the Indian Institute of Chartered Accountants of India (Supra), which had struck down the order passed by the respondents on remand after the first decision. Similar views have been expressed in Indian Trade Promotion Organization versus Director General of Income Tax (Exemptions) and Others, [2015] 371 ITR 333 (Del) and by the Punjab and Haryana High Court in the case of The Tribune Trust versus Commissioner of Income Tax and Another, [2017] 390 ITR 547 (P&H). 22. Now we would turn to the two decisions in the case of the petitioner itself. The first decision is by the Allahabad High Court in Commissioner of Income Tax (Exemption) versus Yamuna Expressway Industrial Development Authority and other connected cases, reported as [2017] 395 ITR 18 (All). This was a case relating to registration under Section 12AA read with Section 2(15) of the Act. The nature of activities undertaken by the petitioner were extensively....
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....ation to Section 10(20) of the Act. The issue involved in the said case was entirely different and related to the question whether the petitioner satisfies the said requirements of being a municipality referred to in Article 243P of the Constitution, etc. We are not in the present case concerned with the said aspect and existence of local fund. Our decision and ratio relates to a different section, the requirements of which are dissimilar and distinct. The ratio is not germane, and therefore cannot be a ground to dismiss the present writ petition. 24. Counsel for the respondents had made reference to decision of the Supreme Court in Agricultural Produce Market Committee versus Ashok Harikuni and Another, (2000) 8 SCC 61. This was a case relating to definition of the term "industry" in the Industrial Disputes Act, 1947 and whether the marketing committee was an industry. The issue raised in this litigation is entirely different. A judgment relating to a different enactment whose purpose, aim and object is different is of no relevance. Lastly, counsel for the respondents had placed reliance on judgment of a single Judge of this Court dated 22nd September, 2017 passed in Writ Petit....
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....specified. Therefore while granting exemption, the respondents can restrict and specify the income which would be exempt. All incomes earned from varied and different activities need not be granted exemption. 28. Bar and negative stipulation in clause (b) should not be interpreted as forbidding charging of fee, service charge or consideration while regulating and administering the activities for which the authority/body is established in general public interest. This would be impracticable and extremely restrictive and archaic interpretation. A more realistic, pragmatic and reasonable interpretation of the expression "any commercial activity" would be more acceptable and in consonance with the legislation in question. 29. At the same time it is apparent that all and every authority/body established by or under the statutory enactments or by Central or State governments with the object of regulating and administering any activity for the benefit of public are not entitled to claim exemption, for otherwise clause (b) of Section 10(46) would become superfluous and obtuse. We have to delineate and define the scope and ambit of disqualification envisaged by the words "any commerci....
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....is used for undertaking regulatory and administrative functions for the benefit of public. 32. Consequently we would hold that an authority/body satisfying the requirements of clause (a) would not incur disentitlement under clause (b) when it charges and receives money by way of fee, reimbursement or even consideration as rent or for transfer of rights in movable and immovable properties directly connected and having nexus with regulatory and administrative functions that they are obliged and mandated to perform and execute. Not to charge any fee or consideration for services rendered or for rights granted, specially from those who can afford, would be contrary to general public interest specified and stipulated in clause (a) of section 10(46) of the Act. 33. Therefore, we do not agree with the respondents that interpretation of the expression "any commercial activity" would include within its ambit and scope any activity for which fee, service charges or consideration is charged and paid. Equally, we would also not accept the specious and wide definition predicated only on the end use of the funds/income, and not the commercial manner in which income/funds are generated. The....