Income Tax Appellate Tribunal – Ahmedabad
The Dy.Commissioner Of Income … vs Surat Urban Development … on 6 December, 2021 IN THE INCOME TAX APPELLATE TRIBUNAL
“D” BENCH, AHMEDABAD
[CONDUCTED THROUGH VIRTUAL AT AHMEDABAD]
BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER&
Ms. MADHUMITA ROY, JUDICIAL MEMBER
I.T.A. No. 05/Ahd/2020
(Assessment Year: 2015-16)
ACIT(Exemptions) Vs. Surat Urban Development
Circle-2, Authority(SUDA),
Ahmedabad Suda Bhavan, Nr. Collector
Office, Nanpura, Surat, Gujarat
[PAN No. AAALS0197G]
(Appellant) .. (Respondent)
Revenue by : Shri Mohd. Usman, CIT DR
Assessee by : Shri Prateek Toshniwal, Advocate
Date of Hearing 02.12.2021
Date of Pronouncement 06.12.2021
ORDER
PER Ms. MADHUMITA ROY – JM:
The instant appeal filed by the Revenue is directed against the order
dated 10.10.2019 passed by the Commissioner of Income Tax (Appeals)-9,
Ahmedabad arising out of the order dated 26.12.2017 passed by the
DCIT(Exemptions), Circle-2, Ahmedabad under Section 143(3) of the
Income Tax Act, 1961 (hereinafter referred as to “the Act”) for A.Y. 2015-
16.
2. The issue relating to the entitlement of exemption under Section 11 &
12 of the Act is before us.
ITA No.05/Ahd/2020
ACIT vs. Surat Urban Development Authority
Asst.Year -2015-16
-2-
3. The assessee, is an autonomous body established under Section 22 of
the Gujarat Town Planning and Urban Development Act, 1976 (XXVII of
1976) and Rules made therein carrying Planned Development of areas as
defined and designed by the Government of Gujarat and also infrastructural
activities relating thereto to undertake the preparation of development plans,
monitoring and control of development of town planning as construction of
Roads, bridges and carried out work in connection with supply for water
and disposal of sewerage etc.
4. The assessee has filed its return of income on 29.10.2015 declaring at
total income at NIL upon claiming exemption under Section 11 of the Act
which was finalized under Section 143(3) of the Act on 26.12.2017 by the
Ld. AO determining the total income at Rs. 85,96,19,188/- as against the
total income of Rs. NIL. While disallowing the exemption claimed under
Section 11 & 12 of the Act by the assessee the Ld. AO observed that the
case of the assessee falls under the ambit of the proviso 1 & 2 to the Section
2(15) of the Act and disallowed as follows:
1. Claim of exemptions u/s. 11(2) of Rs. 12,60,81,401/-
2. Claim of exemptions u/s. 11(a)(a) of Rs. 13,68,09,114/-
3. Claim of exemptions for additions to fixed assets Rs. 1,07,76,025/-
4. Claim of exemptions for expdt on Gen Dev Rs. 58,59,82,648/-
The above were, in turn, deleted by the Ld. CIT(A) in appeal
preferred by the assessee. Hence, the instant appeal before us by Revenue.
ITA No.05/Ahd/2020
ACIT vs. Surat Urban Development Authority
Asst.Year -2015-16
-3-
5. At the time of hearing of the instant appeal the Ld. Counsel appearing
for the assessee submitted before us that the identical issue is covered by the
order passed by the Coordinate Bench in the appeal preferred by the
assessee in ITA No. 955/Ahd/2016 for A.Y. 2012-13 and in the appeals
preferred by the Revenue in ITA Nos. 2432&2433/Ahd/2017 for A.Y.
2013-14 & 2014-15. It was further submitted by the Ld. AR that the order
passed by the Ld. ITAT in allowing the claim of the assessee under Section
11 & 12 of the Act has been upheld by the Jurisdictional High Court in the
appeal preferred by the Revenue in Tax Appeal Nos. 341 of 2020 & 342 of
2020, a copy of each of the orders passed by the Coordinate Bench and the
Hon’ble Jurisdictional High Court have been submitted before us by the Ld.
AR.
6. The Ld. DR, however, failed to controvert the contention of the
assessee in allowing the claim of the assessee by the Coordinate Bench
confirmed by the Jurisdictional High Court.
7. We have heard the respective parties, we have also perused the
relevant materials available on record.
8. We have carefully considered the order passed by the Coordinate
Bench in ITA No. 955/Ahd/2016 for A.Y. 2012-13 and ITA Nos.
2432&2433/Ahd/2017 for A.Y. 2013-14 & 2014-15 while dealing with the
issue the Hon’ble Bench has been pleased to observe as follows:
“5. When the matter was called for hearing, the learned AR
for the assessee submitted that the assessee is a regulatory body
created by State Government u/s 22 of Gujarat Town Planning
and Urban Development Act (GTPUDA), 1976 for proper
ITA No.05/Ahd/2020
ACIT vs. Surat Urban Development Authority
Asst.Year -2015-16
-4-
development of specified area in the state which is supposed to
be ensured by the State Government. It was submitted that the
assessee is just like a government body functioning for and on
behalf of State Government. As further stated, the very purpose
of the above Act is to ensure the development of various areas of
the state in a phased and planned manner. The Government of
Gujarat as per the provisions of GTPUDA, 1976 had constituted
SUDA as an Urban Development Authori ty by its notification No.
GHB/23 UDA/1177/646(5) QZ, dated 13.U1.1978. The reason for
enactment of GTPUDA, 1976 is the development of areas for
public purpose and to create better environmental condition.
Following are the main tasks of the SUDA:
• Working for the preparation and implementation of
development measures.
• Surveying for the development of areas and land
acquisition.
• Managing urban development schemes.
• Working for water systems, sewage and other
facilities and services.
In view of the various provisions of Gujarat Town Planning and
Urban Development Act, 1976 it is claimed that assessee cannot
purchase any land & in fact assessee has not purchased any
land. As per provisions of the above Act it is very much clear
that assessee can acquire the land either by agreement or under
the provisions of Land Acquisition Act only in the cases
envisaged clauses (b), (d), (k) & (n) of sub-section (2) to section
12 of said Act. It was submitted that a perusal of said clauses
would reveal that land can be reserved for public purposes such
as schools, colleges & other educational institutions, transport
& communications. prevention or removing pollution of water or
air caused by discharge of waste etc. Further, said acquisition
can be made only by way of reservation u/s 40(3)(j) and (jja) of
the Act and said reservation is limited to the specified
percentage of total land acquired under the town planning
scheme. This reservation can be made for the purpose of
providing housing accommodation to the members of socially &
economically backward classes of the people. Further, land to
the extent of 15% can be allotted for sale for residential,
commercial or industrial use subject to the fact that proceeds
shall be used f or the purpose of providing infrastructural
facilities.
ITA No.05/Ahd/2020
ACIT vs. Surat Urban Development Authority
Asst.Year -2015-16
-5-
5.1 It was further submitted that as per Section 2(15) of the
Act. 1961, an assessee is considered as a charitable institution
if it is involved in any of the following purposes, namely:
> Relief of the poor.
> Education.
> Medical relief.
> Preservation of environment (including watersheds,
forests and wildlife).
> Preservation of monuments or places or objects of artistic
or historic interest.
> Advancement of any other object of general public utility.
5.2 Further, it was contended that the first proviso to section
2(15) of the Act states that advancement of any other obj ect of
general public utility shall not be a charitable purpose if it
involves carrying on
• any activity in the nature of t rade, commerce or business; or
• any activity of rendering any service in relation to trade,
commerce or business for a cess or fee or any other
consideration, irrespective of the nature of use or application,
or retention, of the income from such activity. It was thus
contended that the first proviso to section 2(15) shall apply in
respect of only last limb of section 2(15). Thus, if an institution
is involved in provi ding relief of the poor, education, medical
relief, preservation of environment or monuments or places or
objects of artistic or historic interest, then it shall continue to
constitute ‘Charitable purpose’ even if it incidentally involves
the carrying on of commercial activities.
5.3 The learned AR submitted that the Surat Urban
Development Authority (SUDA) is the umbrella organization of
Gujarat Government. The Authority takes over the new
infrastructure developments, residential projects for people
falling in low and middle income group. Since the assessee trust
is engaged in providing easily affordable residence to low and
middle income group, hence the assessee comes under the
purview of “Relief t o Poor” within the definition of Charitable
Purpose.
5.4 It was next submitted that since Surat is a city of
industries and enterprises, authority is also with several other
governmental and private agencies concerned to ensure planned
development of trade and industry taking consideration the
ITA No.05/Ahd/2020
ACIT vs. Surat Urban Development Authority
Asst.Year -2015-16
-6-
environmental aspects. It was thus submitted that the
development of district of Surat by providing house, roads,
development and maintenance of parks (boost to environment),
plantation of trees (again pertaining to environment), providing
sewerage systems (clean and healthy environment) are all
objects of welfare of the people of the district. Further, together
with the new developments, the Authority also has to keep f resh
and renovate the historic sites and natural attractions of the
assigned to SUDA.
5.5 It was also submitted that irrespective of the fact the
assessee trust is engaged in development of various areas as per
the provisions of the above Act which is for the public at large,
the assessee trust does not fall under the last limb of the
definition of Charitable purpose. Since the assessee is engaged
in above mentioned charitable purpose, hence it is not right to
apply first proviso to Section 2(15) of the Act.
5.6 Reliance was placed on the recent decision of the Hon’ble
Gujarat High Court in the similar case of Ahmedabad Urban
Development Authority (AUDA) vs Assistant Commissioner of
Income Tax (Exemptions) |83 taxmann.com 78| (Gujarat) (2017).
where the court was called upon to decide as to whether AUDA
constituted under Gujarat Town Planning and Urban
Development Act, 1976, to undertake preparation and execution
of town planning schemes and to execute works in connection
with supply of water, disposal of sewerage and provision of
other services and amenities, could be said to be providing
general public utility services within meaning of section 2(15)
and, thus, can claim for exemption of income under section ll of
the Act.
5.7 The Hon’ble Gujarat High Court held that:
” From the various provisions of the Town Planning Act. it
can be gathered that assessee has been constituted as
Urban Development Authority under the provisions of
section 22 of the Town Planning Act. The purpose and
object of constitution of the Urban Development Authority
is proper devel opment or re-development of urban area.
Even Urban Development Authority consists of (i) a
Chairman to be appointed by the State Government; (ii)
such persons, not exceeding [four in number] who are
members of the local authority or authorities functioning
ITA No.05/Ahd/2020
ACIT vs. Surat Urban Development Authority
Asst.Year -2015-16
-7-
in the urban development area, as may be nominated by
the State Government; (Hi) three officials of the State
Government, to he 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, ex-officio; (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, functioni ng 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.
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
are contained in section 23. 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, green-belts, dairies, transport facilities,
public purposes of all kinds: drainage, inclusive of
sewerage, surface or sub-soil drainage and sewage
disposal; Lighting; Water supply etc.
The Town Planning Scheme also provides for historical or
national interest or natural beauty, and of buildings
actually used for religious purposes. The Scheme also
provides for reservation of land to the extent often
percent, 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. As
per section 40(i)(jj)for the aforesaid purposes certain
percentage of total area covered under the scheme are
allotted earmarked. Fifteen percent of total area is
allotted for the purpose of roads, five percent for parks,
play grounds, gardens and open space, five percent for
ITA No.05/Ahd/2020
ACIT vs. Surat Urban Development Authority
Asst.Year -2015-16
-8-
social infrastructure such as school, dispensary, fire
brigade, public utility place as earmarked in the Draft
Town Planning Scheme and Fifteen percent for sale by
appropriate authority for residential, commercial or
industrial use depending upon the nature of development.
Last Fifteen percent is earmarked under the Town
Planning Scheme for sale, by appropriate authority for
residential, commercial or industrial use.
The appropriate authority/Urban Development Authority
is permitted to sale the said plots/lands to the extent of 15
per cent of the total area to meet with the expenditure
towards drainage, roads, gardens, schools, markets, water
supply etc. So that maximum price can be fetched and the
same can be utilized for the devel opment of the Urban
Development Area and so as to avoid any allegation of
favouritism and nepotism, the plots are sold by public
auction. It is required to be noted the entire amount
realized by the assessee being Urban Development
Authority either by selling plots or by recovery of some
fees/charges, Urban Authority is required to use only for
the purpose of development in the Urban Development
Area and not for any other purpose.
The Tribunal has observed and held that as the assessee is
selling the plots, to the extent of 15 per cent of total area,
by public auction and gets maximum amount, it amounts to
prof her ing and therefore, the activities of the assessee
can be said to be in the nature of business. However,
while holding so. Tribunal has not properly appreciated
the object and purpose of permitting the Urban
Development Authority to sell the plots, maximum to the
extent of 15 per cent of the total area i. e. to meet with the
expenditure for providing them infrastructural facilities
like gardens, roads, lighting, water supply, drainage
system etc. The Tribunal has also not properly
appreciated the reasons for selling the plot by holding
public auction i. e.: (I) to avoid any further allegation of
favouritism and nepotism and (2) so that maximum market
price can be fetched, which can be used for the
development of the Urban Development Area. [Para 12]
Applying the ratio of various earlier decisions on similar
issues to the facts of the case on hand and with respect to
ITA No.05/Ahd/2020
ACIT vs. Surat Urban Development Authority
Asst.Year -2015-16
-9-
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 (A UDA) 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, el ectri city, water supply
etc. if the assessee is permitted to sale the plots (land) to
the extent of 15 per cent 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. [Para 13]
Considering the aforesaid facts and circumstances and
more particularly, considering the fact that the assessee is
a statutory body – Urban Development Authority
constituted under the provisions of the Act, constituted to
carry out the object and purpose of Town Planning Act
and collects regulatory fees for the object of the Acts; no
services are rendered to any particular trade, commerce
or business; whatever the income is earned/received by
the assessee even while selling the plots (to the extent of
15 per cent of the total area covered under the Town
Planning Scheme) is required to be used only for the
purpose to carry out the object and purpose of Town
Planning Act and to meet with expenditure while providing
general utility service to the public such as electricity,
road, drainage, water etc. and even the entire control is
with State Government and even accounts are also
subjected to audit and there is no element of profiteering
at all, the activities of the assessee cannot be said to be in
the nature of trade, commerce and business and,
therefore, proviso to section 2(l5)of the Act shall not be
applicable so far as assessee is concerned and, therefore,
the assessee is entitled to exemption under section II of
the Act. [Para 14]
Now, so far as another question which is posed for the
consideration of this Court i.e. whether while collecting
the cess or fees, activities of the assessee can be said to
ITA No.05/Ahd/2020
ACIT vs. Surat Urban Development Authority
Asst.Year -2015-16
– 10 –
be rendering any services in relation to any trade,
commerce or business is concerned, for the reasons st ated
above, merely because the assessee is collecting cess or
fees which is regulatory in nature, the proviso to section
2(l5)ofthe Act shall not be applicable. As observed
hereinabove neither there is element of profiteering nor
the same can be said to be in the nature of trade,
commerce or business. [Para 15]
Having regard to the facts of the case and purpose for
which the assessee is established/constituted under the
provisions of the Gujarat Town Planning Act, collection of
fees and cess is incidental to the object and purpose of the
Act. and, thus, the case would not fall under second part
of proviso to section 2(15). [Para 15.1]
Thus, the 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) would be applicable and,
therefore, the assessee is not entitled to exemption under
section 11.
For the reasons stated above, it is held that the proviso to
section 2(15) would not be applicable so far as assessee-
A UDA is concerned and as the activities of the assessee
can be said to be providing general public utility services,
the assessee is entitled to exemption under section II.
[Para 15.2]
In view of the above, the impugned order passed by the
Tribunal is set aside. Accordingly, the assessee’s appeal is
allowed. [Para 16] ”
5.8 On the similar footing, it was contended that SUDA is an
autonomous body which was established under section 22 of the
Gujarat Town Planning and Urban Development Act, 1976
(XXVII of 1976) and Rules made under carrying Planned
Development of areas as defined and designed by the
Government of Gujarat and also infrastructural activities
relating thereto such as to undertake the preparations of
development plans, monitoring and control of development of
town planning as construction of roads, bridges and carry out
work in connection with supply of water and disposal of
ITA No.05/Ahd/2020
ACIT vs. Surat Urban Development Authority
Asst.Year -2015-16
– 11 –
sewerage and provisions for other services and activities such as
drainage system, water connection, etc. for the benefit of public
at large. SUDA is constituted to carry out the object and
purpose of Town Planning Act and collects regulatory fees for
the object of the Acts; no services are rendered to any particular
trade, commerce or business. Whatever the income is
earned/received by the assessee is required to be used only for
the purpose to carry out the object of Town Planning Act and to
meet the expenditure while providing general utility service to
the public such as electricity, road, drainage, water etc. Also,
the entire control is with State Government and even accounts
are also subjected to audit. As there is no element of
profiteering at all, the activities of the assessee cannot be said
to be in the nature of trade, commerce and business having
regard to the facts of the case and purpose for which the
assessee is established/constituted under the provisions of the
Gujarat Town Planning Act, collection of fees and cess are
regulatory fees and are incidental to the object and purpose of
the Act. It was thus contended that the case would not fall under
second part of proviso to section 2(15) of the Act. Therefore,
proviso to section 2(15) of the Act shall not be applicable so far
as assessee is concerned and, therefore, the assessee is entitled
to exemption under section 11 of the Act.
5.9 Coming to the specifics, it was contended that as per
section 11(2), where eighty-five per cent of the income referred
to in clause (a) or clause (b) of sub-section (1) read with the
Explanation to that sub-section is not applied, or is not deemed
to have been applied, to charitable or religious purposes in
India during the previous year but is accumulated or set apart,
cither in whole or in part, for application to such purposes in
India, such income so accumulated or set apart shall not be
included in the total income of the previous year of the person in
receipt of the income, provided the following conditions are
complied with, namely:–
(a) such person furnishes a statement in the prescribed form and
in the prescribed manner to the Assessing Officer, stating the
purpose for which the income is being accumulated or set apart
and the period for which the income is to be accumulated or set
apart, which shall in no case exceed five years;
(b) the money so accumulated or set apart is invested or
deposited in the forms or modes specified in sub-section (5);
ITA No.05/Ahd/2020
ACIT vs. Surat Urban Development Authority
Asst.Year -2015-16
– 12 –
(c) the statement referred to in clause (a) is furnished on or
before the due date specified under sub-section (1) of section
139 for furnishing the return of income for the previous year:
Provided that in computing the period of five years referred to
in clause (a), the period during which the income could not be
applied for the purpose for which it is so accumulated or set
apart, due to an order or injunction of any court, shall be
excluded.
Explanation.–Any amount credited or paid, out of income
referred to in clause (a) or clause (b) of sub-section (1), read
with the Explanation to that sub-section, which is not applied,
but is accumulated or set apart, to any trust or institution
registered under section 12AA or to any fund or institution or
trust or any university or other educational institution or any
hospital or other medical institution referred to in sub-clause
(iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of
clause (23C) of section 10, shall not be treated as application of
income for charitable or religious purposes, either during the
period of accumulation or thereafter. In this backdrop, it was
contended that the amount accumulated or set aside by SUDA of
Rs.37,50,00,000/- is as per section 11(2) which can be claimed
as deduction and hence, no addition can be made on the account
of same.
5.10 As regards addition of Rs.9,10,65,153/-, it was submitted
that as per Section 11(1) of the Act, subject to the provisions of
sections 60 to 63, the following income shall not be included in
the total income of the previous year of the person in receipt of
the income–
(a) income derived from property held under trust wholly for
charitable or religious purposes, to the extent to which such
income is applied to such purposes in India: and, where any
such income is accumulated or set apart for appli cation to such
purposes in India, to the extent to which the income so
accumulated or set apart is not in excess of fifteen per cent of
the income from such property;
In this background, it was submitted that the accumulation u/s
11(1)(a) of the Act is eligible for 15% deduction under the Act if
the trust fails to apply the entire income of the year. Therefore,
the addition is not justified as SUDA is eligible to claim INR
ITA No.05/Ahd/2020
ACIT vs. Surat Urban Development Authority
Asst.Year -2015-16
– 13 –
9,10,65,153/- as 15% deduction u/s ll(l)(a) of the Act as the
application of funds need not be more than 85%.
5.11 It was next contended that the Commissioner of Income
Tax (Appeals) – 9. Ahmedabad has passed an order for A.Y.
2009-10, A.Y. 2010-11, A.Y. 2011-12. A.Y. 2013-14 and A.Y.
2015-16 granting the assessee the benefit of deduction under
section 11 r.w.s. 2(15). The Commissioner of Income Tax
(Appeals) – 9, Ahmedabad in the order has stated that ” The main
issue raised by the appellant [SUDA] is covered by the latest
judgement of Hon ‘ble Gujarat High Court in the case of AUDA
vs ACIT in ITA No. 423, 424, 425 of 2016 dated 02.05.2017. ……
Both, i.e. the appellant and AUDA are constituted as Authorities
under the Gujarat Town Planning and Urban Development Act,
1976. The powers and functions of both the authorities have
been laid down under the said Act and are identical in nature.
Nowhere in the order of assessment the AO pointed out that the
appellant [SUDA] has undertaken functions beyond the mandate
of Gujarat Town Planning and Urban Development Act. The
appellant [SUDA] is registered u/s 12A of the Act. It was thus
contended that, as held by Hon’ble Gujarat High Court in
decision quoted above, the assessee cannot be considered to be
covered by the proviso to section 2(15) of the Act and hence AO
cannot withdraw the claim of exemption by invoking proviso to
section 2(15) r.w.s. 13(8) of the Act. As a corollary, the assessee
cannot be assessed u/s 28 to 44 of the Act. ”
6. The learned DR, on the other hand, relied upon the orders
of the lower authorities but could not bring any distinction qua
the decision taken in the case of Ahmedabad Urban Development
Authority (supra).
7. We have carefully considered the rival submissions. In
the instant case, Tribunal has been called upon to adjudicate
whether assessee is entitled to benefit of Section 11 and Section
12 of the Act in the circumstances of the case or not. As a
necessary concomitant thereto, an incidental question arises as
to whether the first and second proviso to Section 2(15) of the
Act is applicable in the facts of the case or not and
consequently, the activity of the assessee can be regarded as
charitable activities within the meaning of Section 2(15) of the
Act or not. The AO, in the instance case, has disallowed
exemption of Rs.37,50,00,000/- claimed under s.11(2) of the Act
and further denied the deduction of Rs.9,10,65,153/- claimed on
ITA No.05/Ahd/2020
ACIT vs. Surat Urban Development Authority
Asst.Year -2015-16
– 14 –
account of accumulation of income under s.11(1)(a) of the Act
holding the activity of the assessee authority to be non-
charitable in nature. We find that in the similar facts, the co-
ordinate bench in Vadodara Urban Development Authority vs.
ITO in ITA No. 2751/Ahd/2014 order dated 28.01.2019 has
placed reliance upon the decision of the Hon’ble Gujarat High
Court in the case of Ahmedabad Urban Development Authority
(supra) and CIT vs. Gujarat Industrial Development Corporation
(2017) 89 taxmann.com 366 (Guj) and adjudicated the issue in
favour of the assessee. The relevant operative para of the order
of the co-ordinate bench of Tribunal in Vadodara Urban
Development Authority (supra) is reproduced hereunder for ease
of reference:
“4. We have heard the respective parties, perused the
relevant materials available on record. We find that in
similar set of facts the Jurisdictional High Court passed
the orders in the case of Urban Development Authority-vs-
ACIT, where it was held as follows:
” Held, that the object and purpose of permitting the
Authority to sell the plots to a maximum extent of
15% of the total area, was to meet the expenditure
for providing infrastructural facilities like gardens,
roads, lighting, water supply, drainage system, etc.
The reasons for selling the plots by holding public
auction were; (a) to avoid any further allegation of
favoritism and nepotism and (b) so that the
maximum market price could be fetched, which
could be used for the development of the urban
development area. Considering the fact that the
assessee was a statutory body, an Authority
constituted under the provisions of the Act, to carry
out the object and purpose of Town Planning Act
and collected regulatory fees for the object of the
Acts, no services were rendered to any particular
trade, commerce or business; and whatever income
was earned by the assessee even while selling the
plots (to the extent of 15% of the total area covered
under the Town Planning Scheme) was required to
be used only for the purpose to carry out the object
and purpose of the Town Planning Act and to meet
the expenditure of providing general utility service
to the publi c such as electricity, road, drainage,
ITA No.05/Ahd/2020
ACIT vs. Surat Urban Development Authority
Asst.Year -2015-16
– 15 –
water etc. and the entire control was with the State
government and accounts were also subjected to
audit and there was no element of profiteering at
all. The activities of the assessee could not be said
to be in the nature of trade, commerce and business
and therefore, the proviso to Section 2(15) of the
Act was not applicable so far as the assessee was
concerned. Therefore, the assessee was entitled to
exemption under section 11.”
Apart from that CIT-vs.-Gujarat Industrial Development
Corporation, wherein it was held as follows:
” Section 2(15), read with section 11, of the Income-
tax Act, 1961 – Charitable purpose (Objects of
general public utility) – Assessment year 2009-10 –
Whether where assessee – corporation was
constituted under Gujarat Industrial Development
Act, 1962, for purpose of securing and assisting
rapid and orderly establishment and organization of
industrial areas and Industrial estates in State of
Gujarat, and for purpose of establishing commercial
centers in connection with establishment and
organization of such industries it could not be said
that activities carried out by assessee were either in
nature of trade, commerce or business, for a Cess or
Fee or any other consideration so as to attract
proviso to section 2(15) and same could be said to
be for charitable purpose and, consequently,.
Assessee was entitled to exemption under section
11- Held, yes (Paras 15 and 17)[In favour of
assessee] ”
5. We find that the object of t he assessee is similar to that
of the corporation before the Jurisdictional High Court
and on the similar set of facts the appeal was allowed in
favour of the assessee hence relying upon the same we
allow the claim of the assessee and the disallowance of
exemption as claimed by the assessee u/s 11 of the Act to
the tune of Rs.70,73,005/- is hereby quashed and addition
made thereon is thus deleted.
6. In the result, assessee’s appeal is thus allowed.”
ITA No.05/Ahd/2020
ACIT vs. Surat Urban Development Authority
Asst.Year -2015-16
– 16 –
8. In the light of the decision rendered by the Hon’ble
Gujarat High Court and applied by the co-ordinate bench in
Vadodara Urban Development Authority (supra) and
Gandhinagar Urban Development Authority vs. DCIT ITA No.
3621/Ahd/2015 order dated 23.07.2019, we find merit in the plea
raised on behalf of the assessee for holding the activities of
assessee to be for charitable purposes under s.2(15) of the Act
and consequence eli gibility of benefits under s.11 & Section 12
of the Act. The order of the CIT(A) is thus set aside and the AO
is directed to grant relief claimed under s.11(2) and 11(1)(a) of
the Act to the assessee in accordance with law.
9. In the result, assessee’s appeal in ITA No.955/Ahd/2016 is
allowed whereas Revenue’s appeals in ITA Nos. 2432 &
2433/Ahd/17 are dismissed.”
9. We have further carefully considered the order passed by the Hon’ble
High Court in dismissing the appeal preferred by the Revenue challenging
the same issue in Tax Appeal Nos. 341 of 2020 and 342 of 2020 the
relevant extract whereof is reproduced hereinbelow:
“342 of 2020:
1. This Tax Appeal under Section 260A of the Income Tax Act, 1961 (for
Short, ‘the Act, 1961’) is at the instance of the Revenue and is directed
against the order passed by the Income Tax Appellate Tribunal ‘D’ Bench,
Ahmedabad dated 20.02.2012 in the ITA No. 2433/Ahd/2017 for the A.Y.
2014-15.
3. We have heard Ms. Mauna Bhatt, the learned Senior Standing Counsel
appearing for the Revenue.
4. All the questions of law referred to above and proposed by the
Revenue stand squarely covered by the decision of this Court in the case of
Ahmedabad Urban Development Authority vs. ACIT reported in 396 ITR 323
(Guj).”
10. Thus, from the above we find that the assessee’s case is squarely
covered by the order passed by the Coordinate Bench in holding the
activities of the assessee for charitable purposes under Section 2(15) of the
ITA No.05/Ahd/2020
ACIT vs. Surat Urban Development Authority
Asst.Year -2015-16
– 17 –
Act and the consequential benefits under Section 11 & 12 of the Act. We
find no reason to deviate from the stand taken by the Co-ordinate Bench on
this aspect. Further that the decision of the Coordinate Bench has further
been confirmed by the Hon’ble Jurisdictional High Court. Hence,
respectfully relying upon the same we hold, that the assessee is entitled to
the benefit of the claim under Section 11 & 12 of the Act for the year under
consideration and hence the order passed by the Ld. CIT(A) in favour of the
assessee as impugned before us is according to us just and proper so as to
warrant interference and the same is, thus, hereby confirmed. The appeal
preferred by the Revenue is found to be devoid of any merit and, therefore,
dismissed.
11. In the result, the appeal preferred by the Revenue is dismissed.This Order pronounced in Open Court on 06/12/2021
Sd/- Sd/-
(WASEEM AHMED) (Ms. MADHUMITA ROY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 06/12/2021
TANMAY, Sr. PS TRUE COPY
आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. संबं धत आयकर आयु त / Concerned CIT
4. आयकर आयु त(अपील) / The CIT(A)-
5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड’ फाईल / Guard file.
आदे शानुसार/ BY ORDER,
उप/सहायक पंजीकार (Dy./Asstt. Registrar)
आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad
Comments