2025 (10) TMI 44

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....Tax Act, 1961 dated 20.11.2017 for Assessment Year 2006-07. 2. Brief facts of the case are that assessee is a Local Authority and constituted in terms of section 3 of Uttar Pradesh Industrial Area Development Act, 1976. The assessee is granted registration u/s 12AA of the Act in terms of the order of ld. CIT(E), Lucknow dated 08.05.2017 as a charitable institution carrying out activity of General Public Utility. The assessee is functioning as an arm of State Government through its officers and engaged in the work of village development, infrastructure development for the whole area including municipal infrastructure like sewer, water, electricity, roads, and social infrastructure. The surplus generated is utilized for the development wor....

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....s of accounts in respect of those assessee's who are engaged in business or profession. The Ld. AR further submits that assessee is maintaining books of accounts which are sufficient to deduce surplus, if any, and to identify the assets as well as liabilities of the assessee. He further submits that on the basis of such books of accounts financial statements were prepared and produced before the AO during assessment proceedings. The financial statements reflect all the particulars of assets, liabilities, income and expenditure from which the surplus is worked out. He further submits that books of accounts of the assessee are subjected to audit as per sub-section 2 of section 22 of Uttar Pradesh Industrial Development Act, 1976 and, accordin....

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....desh Development Act, 1976 and, therefore, its receipts are exempted in terms of section 10(46) of the Act. It is further seen that Hon'ble Supreme Court in the case of CIT(Exemptions) vs. Ahmedabad Urban Development Authority [2023] 4 SCC 561 has held that assessee is eligible for registration u/s 12A of the Act and further held that its activities are not commercial in nature and are eligible for exemption u/s 10(46) of the Act. The relevant para No. 199 and 200 of the said order are as under: "199. The term "commercial" is closely similar to, if not identical, with the phrase "in the nature of trade, commerce or business". The other condition in Section 10(46) is that the specified income to be exempted, is to be notified b by t....

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....een bodies set up by the Government with commercial purpose and objects which are motivated by profit, and other government bodies. The Court held, correctly so that other government bodies are not entitled to exemption as they are motivated by profit. Then, dealing with the term "commercial activity" under Section 10(46), it was held that the decisive test is whether the activities for which consideration in the form of fee, service charge. etc. is collected, is "intrinsically associated, connected and had minimum nexus with the object of regulating and administering the activity for the benefit of the public". It was also held that if the activity is not carried on commercial lines i.e. with the profit motive in mind, but the body is assi....