TaxTMI 
TaxTMI 
2018 (4) TMI 2041
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....03.2012 declaring total income at Rs. NIL. The return was selected for scrutiny assessment and accordingly statutory notices were issued and served upon the assessee. 5. During the course of the scrutiny assessment proceedings, the A.O. examined the objects of the assessee. The A.O. was of the opinion that the nature of activities carried on by the assessee are hit by the amendment brought to the provisions of Section 2(15) of the Act. Drawing support from the said Section, the A.O. treated the entire surplus of Rs. 21.62 crores as the income taxable for the year. 6. Assessee carried the matter before the ld. CIT(A) ad vehemently contended that the A.O. has grossly erred in drawing support from the amended provisions of Section 2(15) of the Act as the pre dominant object of the assessee is to carry out charitable activities and not to earn profit. The ld. CIT(A) was convinced and directed the A.O. to delete the addition of Rs. 21.62 crores. 7. Aggrieved by this, the revenue is before us. Representatives of both sides were heard at length. Case records carefully perused. 8. The objects of the assessee local authority is mentioned in the MP & CG Nagar Tatha Gram Nivesh Ad....
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....e Division Bench posed a question and answered it in the following manner: "The question, therefore, is whether when a particular Corporation is established for the purpose of developing or establishing industries in any particular area, can any one say that it is for the purpose of planning, developing or improving a particular city, town or village or a particular area ? One may establish an industry in a given area. That area for the purpose of industry may develop. But it does not necessarily mean that particular area develops by that industry alone. There may be advantages and disadvantages. On the one hand, because there are industrial activities in the area, some trade and commerce may grow, but that does not necessarily mean that it would develop that particular area. It may also create pollution and several other problems. Apart from that, the question which is required to be considered is as to whether the purpose of the corporation or the object of the corporation is to develop any city, any town or any particular area. The answer would be in the negative." 8. The Gujarat Act was enacted 'to make special provision for securing the orderly establishm....
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....oration will receive moneys for disposal of land, buildings and other properties and also/that the Corporation would receive rents and profits in appropriate cases. Receipts of these moneys arise not out of any business or trade but out of ~the sole purpose of establishment, growth and development of industries. 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 the work of the Corporation." 12. The scheme of the Gujarat Act, as is seen from a survey of the relevant provisions referred to above, would indicate that the Corporation set up thereunder is to chalk out plans for development of industrial area and industrial estate in different places which may locate in cities or towns or villages. Such schemes would normally involve planning and development of such areas. 13. The word 'development' in section 10(20A) should be understood in its wide sense. There is no warrant to exclude all development programmers relating to any industry from the purview of the word 'developme....
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....pose to establish an Industrial Development Corporation, and for purposes connected with the matters aforesaid. 4. The Corporation is established for the purpose of securing and assisting the rapid and orderly establishment and organisation of industries in industrial areas and industrial estates in the State of Maharashtra. The Corporation consists of 8 members two of whom are nominated by the State Government of whom one shall be the Financial Adviser to the Corporation, one member nominated by the State Electricity Board, one member nominated by the Housing Board and three members nominated by the State Government, from amongst persons appearing to Government to be qualified as having had experience of, and having shown capacity in industry or trade or finance or who are in the opinion of the Government capable of representing the interest of persons engaged or employed therein, and the Chief Executive Officer of the Corporation, who shall be the Secretary of the Corporation. 7. We have referred to these expressions, "industrial area", "industrial estate", "development" and "amenity" in order to appreciate the general powers of the Corporation to discharge the ....
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....d areas of the Bombay Poona sector to the underdeveloped parts of the State. The industrial areas are broadly classified into two categories, namely, first, those meant for engineering and other industries which are not obnoxious and secondly those meant for chemical industries. The establishment and growth of industries in the State is inextricably bound up with availability of land. Available land is limited. Such limited supply leads to speculation in land. Power is therefore required for compulsory acquisition of land to achieve the purposes of the Act. At the same time, land owners are not to be deprived of the legitimate benefit of reasonable increase in land values in a developing economy. 11. The principal functions of the Corporation in regard to the establishment, growth and development of industries in the State are first to establish and manage industrial estates at selected places and secondly to develop industrial areas selected by the State Government. When industrial areas are selected the necessity of acquisition of land in those areas is apparent. The Act, therefore, contemplates that the State Government may acquire land by publishing a notice specifying....
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....s a trading one. The reasons given were that the Corporation could sell property, namely, transfer land that the Corporation had borrowing powers ; and that the Corporation was entitled to moneys by way of rents and profits. Reliance was placed on the report of the Corporation and in particular on the income and expenditure of the Corporation to show that it was making profits. These features of transfer of land or borrowing of moneys or receipt of rents and profits will by themselves neither be the indicia nor the decisive attributes of the trading character of the Corporation. Ordinarily, a Corporation is established by shareholders with their capital. The shareholders have their Directors for the regulation and management of the Corporation. Such a Corporation set up by the shareholders carries on business and is intended for making profits. When profits are earned by such a Corporation they are distributed to shareholders by way of dividends or kept in reserve funds. In the present case, these attributes of a trading corporation Corporation are absent. The Corporation is established by the Act for carrying out the purposes" of the Act. The purposes of the Act are development of....
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....e are various departments of the Government which may have excess of income over expenditure. 19. There are two provisions of the Act which are not to be found in any trading Corporation. In the first place, the sums payable by any 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 the 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 u....
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....e intention of the Parliament and hence, I propose to amend the law to exclude the aforesaid cases. Genuine charitable organizations will not in any way be affected. 18. The CBDT Circular No. 11/2008 dt. 19.12.2008 has explained the implications arising from the amendment brought to the provisions of Sec 2(15) of the Act. The CBD'T clarifies that the newly inserted proviso to Sec. 2(15) will not apply in respect of the first three limbs of Sec. 2(15) i.e. relief of the poor, education or medical relief. Consequently where the purpose of a trust or institution is relief of the poor, education or medical relief, it will constitute charitable purpose, even if it is incidentally involves the carrying on of commercial activity. The Board further clarified that " the newly inserted proviso to Sec. 2( 15) will apply only to entities whose purpose is advancement of any other object of general public utility i.e. 4lh limb of the definition of the charitable purpose contained in Sec. 2(15). The Circular further clarified "in the final analysis, whether the assessee has for its objects the advancement of any other object or general public utility is a question of fact. If such as....