ASSISTANT COMMISSIONER OF INCOME TAX (EXEMPTIONS) versus AHMEDABAD URBAN DEVELOPMENT AUTHORITY

Citation: [2022] 15 S.C.R. 899 · Decided: 19-10-2022 · Supreme Court of India · Bench: UDAY UMESH LALIT · Disposal: Disposed off

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Judgment (excerpt)

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   [2022] 15 S.C.R. 899
899
ASSISTANT COMMISSIONER OF INCOME TAX
(EXEMPTIONS)
v.
AHMEDABAD URBAN DEVELOPMENT AUTHORITY
(Civil Appeal No. 21762 of 2017)
OCTOBER 19, 2022
[UDAY UMESH LALIT, CJI, S. RAVINDRA BHAT AND
PAMIDIGHANTAM SRI NARASIMHA, JJ.]
Income Tax Act 1961: ss. 2(15) proviso – Tax exemption –
Claim of, by Charitable institutions advancing an object of generally
public utility-GPU – ‘Charitable Purpose’ – Interpretation of – Term
of “any other object of generally public utility not being charitable
purpose if it involves the carrying on of any activity in the nature of
trade, commerce or business or any activity of rendering any service
in relation to any 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” –
Interpretation and scope of – Held: Assessee advancing general
public utility cannot engage itself in any trade, commerce or business,
or provide service in relation thereto for any consideration, “cess,
or fee, or any other consideration” – However, in the course of
achieving the object of general public utility, the concerned trust,
society, or other such organization, can carry on trade, commerce
or business or provide services in relation thereto for consideration,
provided that the activities of trade, commerce or business are
connected to the achievement of its objects of GPU; and the receipt
from such business or commercial activity or service in relation
thereto, does not exceed 20% of total receipts of the previous year
– Charging of any amount towards consideration for an activity
advancing general public utility, which is on cost-basis or nominally
above cost, cannot be considered to be “trade, commerce, or
business” or any services in relation thereto – It is only when the
charges are markedly or significantly above the cost incurred by
the assessee, that they would fall within the mischief of “cess, or
fee, or any other consideration” towards “trade, commerce or
business” – Section 11(4A) must be interpreted harmoniously with
s. 2(15), the requirement in s. 11(4A) of maintaining separate books
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SUPREME COURT REPORTS
[2022] 15 S.C.R.
of account is also in line with the necessity of demonstrating that
the quantitative limit prescribed in the proviso to s. 2(15), has not
been breached – ss. 10(23C), 13(8), 11(4A) and 143(3).
s. 11(4), 11(4A) – Business held under Trust and Trust carrying
on business – Distinction between – Discussed.
ss. 2(15) – Tax exemption, claim of by the Statutory
corporations, authorities or bodies; Statutory regulatory bodies/
authorities; Trade Promotion bodies, councils, associations or
organizations; Non-statutory bodies-ERNET, NIXI and GS1 India;
State Cricket Associations;and Private trusts as a General Public
Utility charity – Certain kinds of income or receipts, may not be
characterized as derived from trade, commerce or business in relation
to activities of General Public Utility, for a consideration – Held:
As regards, Statutory Authorities, corporations, or bodies receipts
are prima facie to be excluded from the mischief of business or
commercial receipts, since their objects are essential for
advancement of public purposes/functions – However, if the
consideration or amounts charged are significantly higher than the
cost and a nominal mark-up, then the receipts would indicate that
the activities are in fact in the nature of “trade, commerce or business”
and would have to comply with the quantified limit in the proviso to
s. 2(15) – For the Statutory regulators, to be considered as one with
‘charitable purpose’ eligible for exemption under the IT Act, the
overall quantitative limit prescribed in the proviso to s. 2(15) (as
amended from time to time) has to be complied with – Trade
promotion bodies involved in advancement of objects of general
public utility can claim exemption – However, income or receipts
for providing the additional services would be business or commercial
in nature – As regards, non-statutory bodies performing public
functions, such as ERNET and NIXI are engaged in important public
purposes – Fees or consideration charged by them for the purposes
provided are nominal – However, their claim have to be ascertained
on year to year basis – Further, GSI India is involved in
advancement of general public utility, its services are for the benefit
of trade and business, from which they recei

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