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2019 (4) TMI 1800
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....ned CIT(A) is bad in law as well as on facts. 2. The learned CIT(A) has erred in law as well as on facts in holding that the appellant authority functions with profit motive and its activities are in the nature of trade, commerce or business without appreciating that the appellant authority has been constituted u/s. 5 of the Gujarat Town Planning and Urban Development Act 1973 (GTPUD) with sole objective to carry out the development and town planning schemes. 3. The learned CIT(A) has failed to appreciate that collection of fees, charges or any amount as prescribed under GTPUD Act and rules thereunder cannot be said to the activities in the nature of trade, commerce or business. 4. The learned CIT(A) has failed to appreciate that the activities &. objectives of the appellant authority are to be seen holistically and not each of them on standalone basis. 5. The learned CIT(A) has erred in law as well as on facts in wrongly applying first proviso to Section 2(15) to the appellant's case. 6. The learned CIT(A) has erred in law as well as on facts in contending that the appellant authority is not eligible to claim exemption u/s. 11 of th....
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....ng to Rs. 4,25,77,240/- and added to the total income of the assessee. 6. The aggrieved assessee preferred an appeal before the Ld. CIT (A). The assessee before the Ld. CIT (A) submitted that merely charging fees for the above-said activity does not mean that it is like trade, commerce or business. 6.1 The object of the assessee is not to earn profit but to advance the object of general public utility and accordingly, the 1st and 2nd proviso attached to section 2(15) cannot be applied to it. 6.2 The assessee further submitted that the JADA had been constituted under the provision of Gujarat Town Planning and Urban Development Act, 1976 (in short GTPUD Act, 1976) which was wholly owned and controlled by the State Government of Gujarat for planning, coordinating and rapid development of areas. It also carried out work for construction of roads, sewerage, parks, playgrounds, health, and cultural institution, etc. for the benefits of the public at large. As such it had no intention to earn profit but to recover the cost by charging the fees. 6.3 The assessee in addition to the above submits and justifies its receipt and its nature before the Ld. CIT (A) as detailed under: ....
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....ng which is known as JADA Building near Sat Rasta, Jamnagar which is partly used by JADA itself for its main administrative office and remaining portion of the building is sold out & used by other Government bodies like L/C, Central Excise Department etc. Other Loan 1,96,41,3637- It is liability towards interest payable on loan granted by the Government to JADA. Advance of FSI & SPB Plot 16,44,4257- It represents amount received for providing FSI rights in Sardar Patel Bhavan Project constructed by JADA. Advance of TP plot 33,87,75,387 This is amount has been received towards the sale of plot covered under TP scheme. However, amount shown as liability due to registration of documents are pending because of court cases are pending for disputes. Advance of Premium Fee 67,08,4407- It represents amount received as advance (being 10%) of the total Premium Fees on sale / lease of plot as per stipulated clause contained in the tender which is adjusted / refunded on final execution of sale agreement. The other account viz. premium fees accordingly represent balance 90% of the total price of sale/lease of plot Advance for Solid waste Management Project 53,07....
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....ntribution-Rs. 15,68,250/- (iii) Service and Amenities Fees-Rs. 3,08,42,086/- (i) JADA receives fees at the prescribed rates from the applicants for carrying out development work. (ii) JADA has received the amount of Rs. 15,68,250/- from Vibhapar Gram Panchayat towards construction of road. (iii) JADA receives service and amenities fees from the applicants for permission granted to carry out development work for execution of works in connection with supply of water, disposal of sewerage and provision of other services and amenities in a particular area / under the TP scheme. Since the aforesaid amounts are not in the nature of income at the time of receipt and they are to be apportioned against expenditure wherever it is incurred for the said amounts and to be adjusted against the net amount to be paid by the applicant in the town planning scheme and therefore the same is recognized and accounted for as liability in the books of account. 7. The Ld. CIT (A) after considering the submission observed that the assessee merely constituted under the GTPUD Act, 1976 cannot enjoy the blanket exemption, and therefore it cannot be concluded that the pro....
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....e case of Ahmedabad Urban Development Authority (supra) has decided the issue in favor of the assessee. The relevant extract of the judgment is extracted below: "13. Applying the aforesaid decisions to the facts of the case on hand and with respect to the activities of the AUDA - Ahmedabad Urban Development Authority under the provisions of the Gujarat Town Planning Act by no stretch of imagination, it can be said that the activities of the assessee (AUDA) can be said to be in the nature of trade, commerce or business and/or its object and purpose is profiteering. Merely because under the statutory provisions and to meet with the expenditure of Town Planning Scheme and/or providing various services under the Town Planning Scheme, such as road, drainage, electricity, water supply etc. if the assessee is permitted to sale the plots (land) to the extent of 15% of the total area under the Town Planning Scheme and while selling the said plots they are sold by holding the public auction, it cannot be said that activities of the assessee is profiteering, to be in the nature of trade, commerce and business. 13.1 In the case of Lucknow Development Authority, Gomti Nagar....
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....e or business. At this stage, decision of the Division Bench of this Court in the case of Sabarmati Ashram Gaushala Trust (supra) is required to be referred to. In the case before the Division Bench, the assessee Trust-Sabarmati Ashram Gaushala Trust was engaged in the activity of breeding milk cattle; to improve the quality of cows and oxen and other related activities. The Assessing Officer denied the exemption to the trust under Section 11 of the Act on the ground that considerable income was generated from the activities of milk production and sale and therefore, considering the proviso to Section 2(15) of the Act, the said Trust- assessee was denied the exemption under Section 11 of the Act. While holding that the activities of the assessee trust still can be said to be for charitable purpose within the meaning of Section 2(15) of the Act and same cannot be said to be in the nature of trade, commerce or business for which proviso to Section 2(15) of the Act is required to be applied. In paras 6, 7, 8 and 12, it is observed and held as under: "6. The legal controversy in the present Tax Appeal centers around the first proviso. In the plain terms, the proviso prov....
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....fourth limb of the definition of charitable purpose contained in section 2 (15). Hence, such entities will not be eligible for exemption under section 11 or under section 10 (23C) of the Act if they carry on commercial activities. Whether such an entity is carrying on any activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of the activity. 3.1 There are industry and trade associations who claim exemption from tax under section 11 on the ground that their objects are for charitable purpose as these are covered under any other object of general public utility. Under the principle of mutuality, if trading takes place between persons who are associated together and contribute to a common fund for the financing of some venture or object and in this respect have no dealings or relations with any outside body, then any surplus returned to the persons forming such association is not chargeable to tax. In such cases, there must be complete identity between the contributors and the participants. Therefore, where industry or trade associations claim both to be charitable institutions as wel....
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....nerated, would not render the activity in the nature of trade, commerce or business. As clarified by the CBDT in its Circular No. 11/2008 dated 19th December 2008 the proviso aims to attract those activities which are truly in the nature of trade, commerce or business but are carried out under the guise of activities in the nature of public utility." 15.1 Applying the aforesaid decision to the facts of the case on hand and the object and purpose for which the assessee is established/constituted under the provisions of the Gujarat Town Planning Act and collection of fees and cess is incidental to the object and purpose of the Act, even the case would not fall under second part of proviso to Section 2(15) of the Act. 15.2 Considering the aforesaid facts and circumstances of the case, we are of opinion that the learned Tribunal has committed a grave error in holding the activities of the assessee in the nature of trade, commerce or business and consequently holding that the proviso to Section 2(15) of the Act shall be applicable and therefore, the assessee is not entitled to exemption under Section 11 of the Act. For the reasons stated above, it is held that the prov....