Case Law Details

Case Name : Surat Urban Development Authority (SUDA) Vs DCIT (ITAT Ahmedabad)
Appeal Number : ITA No. 955/Ahd/2016
Date of Judgement/Order : 20/02/2020
Related Assessment Year : 2012-13
Courts : All ITAT (7336) ITAT Ahmedabad (485)

Surat Urban Development Authority (SUDA) Vs DCIT (ITAT Ahmedabad)

The issue under consideration is that whether the activities carried out by Surat Urban Development Authority are considered as Charitable Activities and hence entitled to the exemption under section 11 of the Income Tax Act or not?

The assessee is a regulatory body created by State Government u/s 22 of Gujarat Town Planning and Urban Development Act, 1976 for proper development of specified area in the state which is supposed to be ensured by the State. It was submitted that the assessee is just like a government body functioning  for and on behalf of State Government. The very purpose of the above Act  is  to  ensure the development of various areas of the state in a phased and planned manner.

It was further submitted that as per Section 2(15) of the 1961, an assessee is considered as a charitable institution if it  is  involved in  any of the following purposes, namely Relief of the poor, Medical, 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.

The Surat Urban Development Authority (SUDA) is the umbrella organization of Gujarat 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 to Poor” within the definition of Charitable Purpose.

In the light of the decision rendered by the Honorable Gujarat High Court and applied by the co- ordinate bench in Vadodara Urban Development Authority (supra) and Gandhinagar Urban Development Authority DCIT ITA No. 3621/ Ahd/ 2015 order dated 23.07.2019, ITAT find merit in the plea raised on behalf of the assessee for holding the activities of assessee to be for charitable purposes under section 2 (15 ) of  the Act and consequence eligibility of benefits under  section 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.

FULL TEXT OF THE ITAT JUDGEMENT

The captioned appeals by the Assessee and Revenue are directed against the Commissioner of Income Tax (Appeals)-9, Ahmedabad. The relevant details are tabulated as under:

ITA Nos. Name of assessee AY CIT/CIT (A)’ s order dated AO’ s penalty order dated AO’ s order under Section
955/Ahd/16 Surat Urban Development Authority (SUDA) 2012-13 10.02.2016 24.03.2015 143(3) of the Income Tax Act, 1961 (in short ‘ the Act’)
2432/Ahd/17 – Do- 2013-14 28.08.2017 28.03.2016 – Do-
2433/Ahd/17 – Do- 2014-15 – Do- 21.12.2016 – Do-

2. The grievances raised being common in all three appeals were heard together and disposed of by way of the common order.

3. We shall take up appeal assessee’s appeal in ITA No. 955/ Ahd/2016 concerning AY 2012- 13 as a lead case for adjudication.

ITA No. 955/Ahd/ 2016 – AY- 2012-13 (Assessee’s appeal)

4. The grounds of appeal filed by the assessee read as under:

“ 1. On the facts and circumstances of the case as well as law on the subject, the learned Assessing Officer as well as Ld. Commissioner of Income Tax ( Appeals)- 9, Ahmedabad have erred in holding that assessee is not  entitled to the benefit of section 11 & 12 of the Income Tax Act, 1961 .

2. On the facts and circumstances of the case as well as law on the subject, the learned Assessing Officer as well as Commissioner of Income Tax ( Appeals)- 9, Ahmedabad have erred in holding that f irst & second proviso to section 2(15 ) of the Act, 1961 is applicable in the assessee’ s case.

3. On the tacts and circumstances of the case as well as law on the subject, the learned Assessing Officer as well as Commissioner of Income Tax ( Appeals)- 9, Ahmedabad have erred in disallowing exemption of INR 37, 50 , 00, 000/-  claimed  u/ s 11(2 ) of the Act. 1961 & deduction of INR 9 , 10, 65, 153/- claimed on account of income u/ s 11( 1)( a) of the Act 1961.”

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 development of specified area in the state which is supposed to be ensured by the State 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 Authority 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 for the purpose of providing infrastructural facilities.

5.1 It was further submitted that as per Section 2(15) of the 1961, an assessee is considered as a charitable institution if it  is  involved in  any of the following purposes, namely:

> Relief of the

> Medical

> 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 object of  general  public utility shall not be a charitable purpose if it involves carrying on

  • any activity in the nature of trade, 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 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 providing 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 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 to 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 environmental 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 fresh 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 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. i t 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 development 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 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, i f 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.

 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, f ive percent for parks,  play  grounds,  gardens  and open space, f ive percent for social infrastructure such as school, dispensary, f ire 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 { he development 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, i t 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, l ighting, 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  the  activities  of  the AUDA- Ahmedabad Urban Development Authority under the  provisions  of the Gujarat Town Planning Act  by  no  stretch of  imagination, i t  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 i ts  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. i f 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, i t  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(l 5 )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 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(l 5 )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, i t 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 sewerage and provisions for other services and activities such as drainage  system,  water  connection,   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);

(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 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 application 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 ll(l)( 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  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 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 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 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 f ind that in similar set of facts the Jurisdictional High Court passed the orders in the case of Urban Development Authority- vs- ACIT, where i t 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  l ike gardens, roads, l ighting, 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 public such as electricity, road, drainage, 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 i t 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 i t  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 the 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 70, 73, 005/- is hereby quashed and addition made thereon is thus deleted.

6. In the result, assessee’ s appeal is thus ”

8. In the light of the decision rendered by the Honorable Gujarat High Court and applied by the co- ordinate bench in Vadodara Urban Development Authority (supra) and Gandhinagar Urban Development Authority 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 section 2(15 ) of  the  Act and consequence eligibility 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 2432 & 2433/ Ahd/ 17 are dismissed.

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