TaxTMI 
TaxTMI 
2020 (10) TMI 720
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....come of the respondent -assessee at Rs. 33,86,60,680/-. The AO came to the conclusion that assessee was engaged in the Area Development and Town Planning and carrying out the activity of general public utility. According to the AO, the respondent -assessee was not carrying out any charitable activities and was squarely covered by proviso 1 & 2 to Section 2(15) r/w Section 13(8) of the Act and ultimately came to the conclusion that the respondent-assessee is not eligible for any of the exemption claimed under Section 11 and 12 of the Act and accordingly passed assessment order in question. The respondent -assessee filed an Appeal before the CIT(A), which came to be partly allowed vide order dated 21.8.2017 subject to directions contained in para 9 of the order. Being aggrieved and dissatisfied with the order dated 21.8.2017 passed by the CIT(A), the Revenue has preferred Appeal before the Income Tax Appellate Tribunal, which also came to be dismissed vide order dated 15.11.2019. 3.2. The Revenue in this appeal has raised the contention to the effect that the Tribunal as well as CIT(A) have committed an error in coming to the conclusion that activity carried on by the respondent -a....
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....ment authority of that development area for the purpose of carrying out the functions assigned to an area development authority under this Act. (2) Every area development authority constituted under sub-section (1) shall be a body corporate by the name aforesaid, having perpetual succession and a common seal, with power to acquire, hold and dispose of property, both moveable and immovable, and to contract, and by the said name sue and be sued. (3) An area development authority shall consist of the following members, namely:- (i)a Chairman to be appointed by the State Government; (ii) the Chief Town Planner or his representative, ex-officio; 1 [(iii)such persons not exceeding four from amongst the members of the local authorities functioning in the development area as may be nominated by the State Government; (iii-a) the Presidents of the district panchayats functioning in the development area or in any part therefore-officio;] (iv) Two officials of the State Government to be nominated by that Government, exofficio; (v) A non-official who possesses special knowledge or practical experience in town planning, to be appointed by the State Government; (vi) A member secretary to be a....
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....r consult such persons whose assistance or advice it may desire for the purpose of performing any of its functions under this Act and such persons may be paid by the area development authority such remuneration or fees as may be sanctioned by the State Government. (ii)The person so assisting or advising the area development authority may take part in the meetings of the authority relevant to the purpose for which he is associated or consulted but shall not have the right to vote at a meeting or take part in the meeting of the authority relating to matters concerned with any other purpose. (10) Subject to the provisions of section 104, an area development authority may appoint such officers and other employees as it considers necessary for the efficient performance of its functions under this Act. (11) The officers and employees appointed under subsection (10) shall be entitled to receive such salaries or allowances and shall be governed by such terms and conditions of service, as may be determined by the State Government. (12) The member Secretary of the area development authority and the officers and employees of that authority shall work under the supervision and control of....
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....ovable and immovable, and to contract, and by the said name sue and be sued. (4) The urban development authority shall consist of the following members namely:- (i) a Chairman to be appointed by the State Government; (ii) such persons, not exceeding3[four in number] who are members of the local authority or authorities functioning in the urban development area, as may be nominated by the State Government; (iii)4[Three officials] of the State Government, to be nominated by that Government, ex-officio; (iv) the Presidents of the district panchayats functioning in the urban development area, or, as the case may be, part thereof, exofficio; (v) the Chief Town planner or his representative, ex-officio; (vi) the Chief Engineer or Engineers (Public Health) of the local authority or authorities functioning in the urban development area or his or their nominee or nominees, ex-officio; 5[(vi-a) the Municipal Commissioner of the Municipal Corporation, if any, functioning in the urban development area, ex-officio;] (vii) a member secretary to be appointed by the State Government who shall also be designated as the Chief Executive Authority of the Urban Development Authority. ....
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.... the making of any material change in any building or land or in the use of any building or land, and includes layout and subdivision of any land; Section 2(xxviii):"Urban development authority" means an urban development authority constituted under section 22; Section 2(xxix):"Urban development area" means an area declared to be an urban development area under section 22. Section 22: Declaration Of Urban Development Area And Constitution Of Urban Development Authority :(1) Where the State Government is of opinion that the object of proper development or redevelopment of any urban area or group of urban areas in the State together with such adjacent areas as may be considered necessary, whether covered under a development area already declared as such under section 3 or not, will be best served by entrusting the work of development or redevelopment thereof to a special authority, instead of to an area development authority, the State Government may, by notification, declare such area to be an urban development area and constitute an authority for such area to be called the urban development authority of that area, and thereupon all the powers and functions of an area development ....
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....s references to an urban development authority. Section 23: Powers And Function Of Urban Development Authority :(1) [The powers and functions of] an urban development authority shall be: (i) To undertake the preparation of development plans under the provisions of this Act, for the urban development area; (ii) To undertake the preparation [and execution] of town planning schemes under the provisions of this Act, if so directed by the State Government; (iii) To carry out surveys in the urban development area for the preparation of development plans or town planning schemes; (iv) To guide, direct and assist the local authority or authorities and other statutory authorities functioning in the urban development area in matters pertaining to the planning, development and use of urban land; (v) To control the development activities in accordance with the development plan in the urban development area; 3 [(va) to levy and collect such security fees for scrutiny of documents submitted to the appropriate authority for permission for development as may be prescribed by regulations;] (vi) To execute works in connection with supply of water, disposal of sewerage and provision of other servic....
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....ling up or reclamation of lowlying, swampy or unhealthy areas, or levelling up of land; (c) Layout of new streets or roads, construction, diversion, extension, alteration, improvement and closing up of streets and roads and discontinuance of communications; (d) The construction, alteration and removal of buildings, bridges and other structures; (e) The allotment or reservation of land for roads, open spaces, gardens, recreation grounds,schools, markets, greenbelts, dairies, transport facilities, public purposes of all kinds; (f) Drainage, inclusive of sewerage, surface or subsoil drainage and sewage disposal; (g) Lighting; (h) Water supply; (i) The preservation of objects of historical or national interest or natural beauty, and of buildings actually used for religious purposes; (j) The reservation of land to the extent of ten per cent. or such percentage as near thereto as possible of the total area covered under the scheme, for the purpose of providing housing accommodation to the members of socially and economically backward classes of people; 2 [3 [(jj) (a) the allotment of land from the total area covered under the scheme, to the extent of. (i) Fifteen per cent. for roads, (ii....
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....s, projections and other sources; (c) Such amount of contributions from local authorities as the State government may specify from time to time to be credited to the fund of the authority. (2) The fund of an appropriate authority shall be applied towards meeting (a) Expenditure incurred in the administration of this Act; (b) Cost of acquisition of land for the purposes of this Act; (c) Expenditure for any development of land in the development area; (d) Expenditure for such other purposes as the State Government may direct. (3) An appropriate authority may keep in current account with the State Bank" of India or any other bank approved by the State Government in this behalf, such sums of money out of its fund as may be prescribed and any money in excess of the said sum shall be invested in such manner as may be approved by the State Government. (4) The State Government may, make such grants, advances and loans to an appropriate authority as the State Government may deem necessary for the performance of its functions under this Act and all grants, loans and advances so made shall be made on such terms and conditions as the State Government may determine. Section 95:Accounts And Au....
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....cretary to be appointed by the State Government who shall also be designated as the Chief Executive Authority of the Urban Development Authority. Thus, the constitution of the Urban Development Authority is subject to the control of the State Government. The powers and functions of the Urban Development Authority as contained in Section 23 are reproduced herein above. Considering Section 40 of the Town Planning Act, the Town Planning Scheme prepared by the Urban Development Authority which has been prepared subject to sanction by the State Government for development of the Urban Development Area, also provide for roads, open spaces, gardens, recreation grounds, schools, markets, greenbelts, dairies, transport facilities, public purposes of all kinds; drainage, inclusive of sewerage, surface or subsoil drainage and sewage disposal; Lighting; Water supply etc. The Town Planning Scheme also provide for historical or national interest or natural beauty, and of buildings actually used for religious purposes. The Scheme are also provide for reservation of land to the extent of ten percent, or such percentage as near thereto as possible of the total area covered under the scheme, for the ....
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.... so that maximum market price can be fetched, which can be used for the development of the Urban Development Area. 12.1. At this stage decision of the Hon'ble Supreme Court in the case of Ahmedabad Green Belt Khedut Mandal (supra) ((2014) 7 SCC 357) is required to be referred to. Before the Hon'ble Supreme Court, it was contended on behalf of original land owners whose lands were included in the TP Scheme that by permitting the Area Development Authority / Urban Development Authority to sell 15% of the total area, by that the Urban Development Authority will be making profit, the Hon'ble Supreme Court has negatived the aforesaid and has observed that the activities of the Urban Development Authority / Area Development Authority while selling the land to the extent of 15% to the total area covered under the scheme cannot be said to be profitering. It is observed and held that sale upto 15% is from total area covered under the scheme and not in respect of every plot of land. In order to generate financial resources for the development of infrastructure, the salable plot for residential, commercial and industrial use are allotted by the appropriate authority. It is furth....
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.... while collecting the cess or fees, activities of the assessee can be said to be rendering any services in relation to any trade, commerce or business is concerned, for the reasons stated above, merely because the assessee is collecting cess or fees which is regulatory in nature, the proviso to Section 2(15)of the Act shall not be applicable. As observed herein above neither there is element of profiteering nor the same can be said to be in the nature of trade, commerce 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 t....
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....inue to be regarded as advancement of any other object of general public utility. 7.In consonance with such assurance given by the Finance Minister on the floor of the House, CBDT issued a Circular No. 11 of 2008 dated 19th December 2008 explaining the amendment as under : 3. The newly inserted proviso to section 2 (15) will apply only to entities whose purpose is advancement of any other object of general public utility ie., the fourth limb ofthe 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 ....
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.... or business which are masked as charitable purpose. 12.All these were the objects of the general public utility and would squarely fall under section 2 (15) of the Act. Profit making was neither the aim nor object of the Trust. It was not the principal activity. Merely because while carrying out the activities for the purpose of achieving the objects of the Trust, certain incidental surpluses were generated, 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 th....