The Commissioner Of Income Tax (Exemptions v. Jamnagar Area Development Authority

C/TAXAP/241/2020 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABADR/TAX APPEAL NO. 241 of 2020 ========================================================== THE COMMISSIONER OF INCOME TAX (EXEMPTIONS) Versus JAMNAGAR AREA DEVELOPMENT AUTHORITY ========================================================== Appearance:MRS MAUNA M BHATT(174) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ========================================================== CORAM: HONOURABLE MR. JUSTICE R.M.CHHAYA andHONOURABLE MR. JUSTICE ILESH J. VORA Date : 22/09/2020 ORAL ORDER (PER : HONOURABLE MR. JUSTICE R.M.CHHAYA) 1.0. Heard Mr. Manish Bhatt, learned Senior Advocateassisted by Mrs. Mauna Bhatt, learned advocate forthe appellant –revenue. assisted by Mrs. Mauna Bhatt, learned advocate forthe appellant –revenue. 2.0. By this appeal under Section 260-A of the Income TaxAct, 1961 (hereinafter referred to as the “Act” for thesake of brevity) the appellant – Revenue has challengedthe order dated 15.11.2019 passed by the Income TaxAppellate Tribunal, B Bench, Ahmedabad in ITANo.2428/AHD/2017 for AY 2014-15.Act, 1961 (hereinafter referred to as the “Act” for thesake of brevity) the appellant – Revenue has challengedthe order dated 15.11.2019 passed by the Income TaxAppellate Tribunal, B Bench, Ahmedabad in ITANo.2428/AHD/2017 for AY 2014-15. 3.0. The following noteworthy facts emerge from the recordof the appeal.of the appeal. 3.1. That the respondent –assessee filed it return of incomefor the Assessment Year 2014-15 on 23.1.2015 andfor the Assessment Year 2014-15 on 23.1.2015 and declared total income as NIL. On assessment beingmade under Section 143(3) of the Act, the AssessingOfficer by its order dated 28.12.2016 assessed thetotal income of the respondent –assessee atRs.9,76,50,250/-. The AO came to the conclusion thatassessee was engaged in the Area Development andTown Planning and carrying out the activity of generalpublic utility. According to the AO, the respondent –assessee was not carrying out any charitable activitiesand was squarely covered by proviso 1 & 2 to Section2(15) r/w Section 13(8) of the Act and ultimately cameto the conclusion that the respondent-assessee is noteligible for any of the exemption claimed under Section11 and 12 of the Act and accordingly passedassessment order in question. The respondent –assessee filed an Appeal before the CIT(A), which cameto be partly allowed vide order dated 21.8.2017 subjectto directions contained in para 9 of the order. Beingaggrieved and dissatisfied with the order dated21.8.2017 passed by the CIT(A), the Revenue haspreferred Appeal before the Income Tax AppellateTribunal, which also came to be dismissed vide orderdated 15.11.2019. 3.2. The Revenue in this appeal has raised the contentionto the effect that the Tribunal as well as CIT(A) havecommitted an error in coming to the conclusion thatactivity carried on by the respondent –assessee arecharitable in question and has raised the following substantial questions of law “A.Whether on facts and circumstances of the caseand in law, the Hon’ble Tribunal was justified inholding that the activities of the assessee are not inthe nature of commerce /trade under Section 11 &12 of the Act without considering the fact that theassessee is involved in widespread commercialactivities which is covered under first and secondproviso to section 2(15) of the Act? 3.2. The Revenue in this appeal has raised the contentionto the effect that the Tribunal as well as CIT(A) havecommitted an error in coming to the conclusion thatactivity carried on by the respondent –assessee arecharitable in question and has raised the following substantial questions of law “A.Whether on facts and circumstances of the caseand in law, the Hon’ble Tribunal was justified inholding that the activities of the assessee are not inthe nature of commerce /trade under Section 11 &12 of the Act without considering the fact that theassessee is involved in widespread commercialactivities which is covered under first and secondproviso to section 2(15) of the Act? B.Whether on facts and circumstances of the caseand in law, the Hon’ble Tribunal was justified inallowing the benefit of exemptions under Section 11of the Act of Rs.1,90,739/- being capital receipts/grants from Government of Gujarat withoutappreciating the fact that the assessee is covered bythe provisions of Section 2(15) r.s13(8) of the Act ?C.Whether on facts and circumstances of the caseand in law, the Hon’ble Tribunal was justified inallowing the benefit of exemptions under Section 11of the Act of Rs.8,00,00,000/- being grants underUDP 56 and UDP 78 without appreciating the factthat the assessee is covered by the provisions ofSection 2(15) r.s 13(8) of the Act ? D.Whether on facts and circumstances of the caseand in law, the Hon’ble Tribunal was justified inallowing the benefit of exemptions under Section 11of the Act on Rs.50,35,340/- being receipts towardssaleable FSI without appreciating the fact that the assessee is covered by the provisions of Section 2(15) r.w 13(8) of the Act ? E. Whether on facts and circumstances of the caseand in law, the Hon’ble Tribunal was justified inallowing the benefit of exemptions under Section 11of the Act on Rs.2,34,59,153/- being receiptstowards service and amenities fees withoutappreciating the fact that the assessee is covered bythe provisions of Section 2(15) r.w 13(8) of the Act ?F.Whether on facts and circumstances of the caseand in law, the Hon’ble Tribunal was justified inallowing the benefit of exemptions under Section 11of the Act of Rs.89,75,200/-/- being capitalexpenditure without appreciating the fact that theassessee is covered by the provisions of Section2(15) r.w 13(8) of the Act? 4.The case put forward and substantial questions of lawraised in this appeal are squarely covered by thejudgment in case of Ahmedabad Urban DevelopmentAuthority vs. Assistant Commissioner of Income Tax(Exemption) reported in 396 ITR 323 (Guj). Beforeadverting to the substantial question of law raised inthis appeal, it would be appropriate to refer to relevantprovisions of the Gujarat Town Planning and UrbanDevelopment Act, 1976 (hereinafter referred to as the“Town Planning Act”). The respondent-assessee is anUrban Development Authority constituted under Section 5 of the Town Planning Act, which reads asunder: 5.Constitution Of Area Development Authority :- (1) As soon as may be after the declaration of adevelopment area under section 3, the State Governmentshall, by notification, constitute an authority for such areato be called the area development authority of thatdevelopment area for the purpose of carrying out thefunctions assigned to an area development authority underthis Act. (2) Every area development authority constituted undersub-section (1) shall be a body corporate by the nameaforesaid, having perpetual succession and a common seal,with power to acquire, hold and dispose of property, bothmoveable and immovable, and to contract, and by the saidname sue and be sued. (3) An area development authority shall consist of the 5.Constitution Of Area Development Authority :- (1) As soon as may be after the declaration of adevelopment area under section 3, the State Governmentshall, by notification, constitute an authority for such areato be called the area development authority of thatdevelopment area for the purpose of carrying out thefunctions assigned to an area development authority underthis Act. (2) Every area development authority constituted undersub-section (1) shall be a body corporate by the nameaforesaid, having perpetual succession and a common seal,with power to acquire, hold and dispose of property, bothmoveable and immovable, and to contract, and by the saidname sue and be sued. (3) An area development authority shall consist of the following members, namely:- (i)a Chairman to be appointedby the State Government; (ii) the Chief Town Planner or hisrepresentative, ex-officio; 1 [(iii)such persons not exceedingfour from amongst the members of the local authoritiesfunctioning in the development area as may be nominatedby the State Government; (iii-a) the Presidents of the districtpanchayats functioning in the development area or in anypart therefore-officio;] (iv) Two officials of the StateGovernment to be nominated by that Government, ex-officio; (v) A non-official who possesses special knowledgeor practical experience in town planning, to be appointed bythe State Government; (vi) A member secretary to beappointed by the State Government who shall also bedesignated as the Chief Executive Authority of the areadevelopment authority. (4)The State Government may, if it thinks fit, appoint one ofthe members as the Vice Chairman of the area developmentauthority. (5)2 [The term of office and conditions of service] of themembers of an area development authority other than ex-officio members shall be such as may be prescribed andthe members shall be entitled to receive such remunerationor allowances or both as the State Government may byorder determine. 3 [(5A) The Chairman and the members ofan Area Development Authority other than ex-officiomembers shall hold office during the pleasure of the StateGovernment.] (6)(a) If the State Government is of opinion that any memberof an area development authority is guilty of misconduct inthe discharge of his duties or is incompetent or has becomeincapable of performing his duties as such member, or should for any other good and sufficient reasons, beremoved, the State Government may, after giving him anopportunity to be heard, remove him from office. (b)Anymember of the area development authority other than anex-officio member may at any time resign his office bywriting under his hand addressed to the State Governmentand upon the acceptance thereof, the office of such membershall become vacant. (7) In the event of a vacancy occurring in the office of anymember of an area development authority, the vacancyshall be filled by the State Government as soon aspossible after the vacancy has occurred by nomination orappointment,4 [ as the case may be.] (8)(i) An area development authority shall meet at suchtime and place as the Chairman may determine and may,subject to the provisions of this sub-section makeregulations for regulating the procedure and conduct of itsbusiness at its meetings. (ii)The Chairman, and in hisabsence, any other member chosen by the memberspresent from amongst themselves shall preside at ameeting of the area development authority. (iii)Allquestions at a meeting of the area development authorityshall be decided by a majority of votes of the memberspresent and voting and in the case of equality of votes, thepersons presiding shall have a casting vote. (9)(i) An area development authority may, with the previous (8)(i) An area development authority shall meet at suchtime and place as the Chairman may determine and may,subject to the provisions of this sub-section makeregulations for regulating the procedure and conduct of itsbusiness at its meetings. (ii)The Chairman, and in hisabsence, any other member chosen by the memberspresent from amongst themselves shall preside at ameeting of the area development authority. (iii)Allquestions at a meeting of the area development authorityshall be decided by a majority of votes of the memberspresent and voting and in the case of equality of votes, thepersons presiding shall have a casting vote. (9)(i) An area development authority may, with the previous sanction of the State Government, associate with itself orconsult such persons whose assistance or advice it maydesire for the purpose of performing any of its functionsunder this Act and such persons may be paid by the areadevelopment authority such remuneration or fees as maybe sanctioned by the State Government. (ii)The person soassisting or advising the area development authority maytake part in the meetings of the authority relevant to thepurpose for which he is associated or consulted but shallnot have the right to vote at a meeting or take part in themeeting of the authority relating to matters concerned withany other purpose. (10) Subject to the provisions of section 104, an areadevelopment authority may appoint such officers andother employees as it considers necessary for the efficientperformance of its functions under this Act. (11) The officers and employees appointed under sub-section (10) shall be entitled to receive such salaries orallowances and shall be governed by such terms andconditions of service, as may be determined by the StateGovernment. (12) The member Secretary of the area developmentauthority and the officers and employees of that authority shall work under the supervision and control of itsChairman. 3A. Notwithstanding anything contained in sub-section(1)the State Government to deal with the situation arising outof natural calamity or disadter may by notification,constitute the area development authority or reconstituteany existing area development authority constituted undersub-section (10 for any development area declared as suchunder Section 3, consisting of such members as it deemsfit. 4.1. The function of the respondent area developmentauthority are akin and similar to the powers and function ofthe urban development authority as provided under Section22 of the Town Planning Act, which reads as under: 22.Declaration Of Urban Development Area AndConstitution Of Urban Development Authority: (1) Where the State Government is of opinion that the object ofproper development or redevelopment of any urban area or groupof urban areas in the State together with such adjacent areas asmay be considered necessary, whether covered under adevelopment area already declared as such under section 3 ornot, will be best served by entrusting the work of development orredevelopment thereof to a special authority, instead of to an areadevelopment authority, the State Government may, bynotification, declare such area to be an urban development areaand constitute an authority for such area to be called the urbandevelopment authority of that area, and thereupon all the powersand functions of an area development authority relating to thedevelopment or redevelopment of a development area under thisAct shall, in relation to such urban development area, beexercised and performed by such urban developmentauthority1***. (2) Every notification issued under sub-section (1) shall define thelimits of the area to which it relates. (2) Every notification issued under sub-section (1) shall define thelimits of the area to which it relates. 2[(2A) The State Government may, by notification in the OfficialGazette, include in or exclude any area from an urbandevelopment area, amalgamate two or more urban developmentareas into one urban development area, sub-divide any urbandevelopment area into different urban development areas andinclude such sub-divided urban development area in any otherurban development area.] (3) Every urban development authority constituted under sub-section (1) shall be a body corporate by the name aforesaid,having perpetual succession and a common seal, with power to acquire, hold and dispose of property, both movable andimmovable, and to contract, and by the said name sue and besued. (4) The urban development authority shall consist of the followingmembers namely:- (i) a Chairman to be appointed by the State Government; (ii) such persons, not exceeding3[four in number] who aremembers of the local authority or authorities functioning in theurban development area, as may be nominated by the StateGovernment; (iii)4[Three officials] of the State Government, to be nominated bythat Government, ex-officio; (iv) the Presidents of the district panchayats functioning in theurban 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 localauthority or authorities functioning in the urban developmentarea or his or their nominee or nominees, ex-officio; 5[(vi-a) theMunicipal Commissioner of the Municipal Corporation, if any,functioning in the urban development area, ex-officio;] (vii) a member secretary to be appointed by the State Governmentwho shall also be designated as the Chief Executive Authority ofthe Urban Development Authority. (4A) Notwithstanding anything contained in sub-section (4), theState Government, to deal with the situation arising out of naturalcalamity or disaster or disaster, may by notification constitute theurban development authority or reconstitute any existing urbandevelopmentauthorityconstitutedundersub-section(1),consisting of any urban development area declared as suchunder sub-section (1), consisting of such members as it deems fit. (5) The provisions of sub-sections (5) to (12) of section 5 shallapply in relation to an urban development authority as they applyin relation to an area development authority, with themodification that references to an area development authority inthe said subsection shall be construed as references to an urbandevelopment authority.. 5.0. It also deserves to be noted that the assessee alsoundertakes task of framing and implementing the TownPlanning Scheme in the area which is do not fall within anyother local authority as defined under the Town PlanningAct. In the present appeal also, the same question whicharise for consideration of this Court as observed by the Division Bench in the case of Ahmedabad UrbanDevelopment Authority (supra) is whether activity ofassessee –respondent, AUDA can be said to be in the natureof trade, commerce and business and hence it could not beregarded as activity for charitable purpose in view of provisoto Section 2(15). This Court in the case of AhmedabadUrban Development Authority (supra) has extensivelyconsidered the provisions of the Town Planning Act and hasobserved thus: 11. While considering the aforesaid questions, therelevant provisions of the Gujarat Town Planning Act, underwhich, the Assessee has been constituted as UrbanDevelopment Authority and powers and functions of theAssessee as an Urban Development Authority are requiredto be considered, so as to appreciate whether theactivities of the Assessee being Urban Development Authoritycan be said to be in the nature of trade, commerce orbusiness ?? 11. While considering the aforesaid questions, therelevant provisions of the Gujarat Town Planning Act, underwhich, the Assessee has been constituted as UrbanDevelopment Authority and powers and functions of theAssessee as an Urban Development Authority are requiredto be considered, so as to appreciate whether theactivities of the Assessee being Urban Development Authoritycan be said to be in the nature of trade, commerce orbusiness ?? The relevant provisions of the Gujarat Town Planning Act,underwhich, the Assessee AUDA has been constituted as UrbanDevelopment Authority are as under: Section 2(viii): "Development", with all its grammaticalvariations and cognate expressions, means the carrying out ofany building, engineering, mining, or other operations in,or over, or under land or the making of any material change inany building or land or in the use of any building or land,and includes layout and subdivision of any land; Section2(xxviii):"Urban development authority" means an urbandevelopment authority constituted under section 22;Section 2(xxix):"Urban development area" means an areadeclared to be an urban development area under section 22.Section 22: Declaration Of Urban Development Area AndConstitution Of Urban Development Authority :(1) Where theState Government is of opinion that the object of properdevelopment or redevelopment of any urban area or groupof urban areas in the State together with such adjacent areas asmay be considered necessary, whether covered under adevelopment area already declared as such under section 3or not, will be best served by entrusting the work ofdevelopment or redevelopment thereof to a specialauthority, instead of to an area development authority,the State Government may, by notification, declare such area to be an urban development area and constitute anauthority for such area to be called the urban developmentauthority of that area, and thereupon all the powers andfunctions of an area development authority relating to thedevelopment or redevelopment of a development area under thisAct shall, in relation to such urban development area,be exercised and performed by such urban developmentauthority1*** (2) Every notification issued under subsection (1) shall definethe limits of the area to which it relates. 2[(2A) The StateGovernment may, by notification in the Official Gazette, includein or exclude any area from an urban development area,amalgamate two or more urban development areas intoone urban development area, subdivide any urban developmentarea into different urban development areas and includesuch subdivided urban development area in any other urbandevelopment area.] (3) Every urban development authority constituted under sub-section (1) shall be a body corporate by the name aforesaid,having perpetual succession and a common seal, withpower to acquire, hold and dispose of property, both movableand immovable, and to contract, and by the said name sue andbe sued. (3) Every urban development authority constituted under sub-section (1) shall be a body corporate by the name aforesaid,having perpetual succession and a common seal, withpower to acquire, hold and dispose of property, both movableand immovable, and to contract, and by the said name sue andbe sued. (4) The urban development authority shall consist of thefollowing members namely: (i) a Chairman to beappointed by the State Government; (ii) such persons, notexceeding3[four in number] who are members of the localauthority or authorities functioning in the urbandevelopment area, as may be nominated by the StateGovernment; (iii)4[Three officials] of the StateGovernment, to be nominated by that Government, exofficio;(iv) the Presidents of the district panchayats functioningin the urban development area, or, as the case may be, partthereof, exofficio; (v) the Chief Town planner or hisrepresentative, exofficio; (vi) the Chief Engineer orEngineers (Public Health) of the local authority orauthorities functioning in the urban development area orhis or their nominee or nominees, exofficio; 5[(via) theMunicipal Commissioner of the Municipal Corporation, ifany, functioning in the urban development area, exofficio;] (vii) amember secretary to be appointed by the State Government whoshall also bedesignated as the Chief Executive Authority of theUrban Development Authority. (5) The provisions of subsections (5) to (12) of section 5 shallapply in relation to an urban development authority as theyapply in relation to an area development authority,with the modification that references to an areadevelopment authority in the said subsection shall be construedas references to an urban development authority. (5) The provisions of subsections (5) to (12) of section 5 shallapply in relation to an urban development authority as theyapply in relation to an area development authority,with the modification that references to an areadevelopment authority in the said subsection shall be construedas references to an urban development authority. Section 23: Powers And Function Of Urban DevelopmentAuthority :(1) [The powers and functions of] an urbandevelopment authority shall be: (i) To undertake the preparationof development plans under the provisions of this Act, for theurban development area; (ii) To undertake thepreparation [and execution] of town planning schemes underthe provisions of this Act, if so directed by the StateGovernment; (iii) To carry out surveys in the urbandevelopment area for the preparation of developmentplans or town planning schemes; (iv) To guide, direct and assistthe local authority or authorities and other statutoryauthorities functioning in the urban development area inmatters pertaining to the planning, development and use ofurban land; (v) To control the development activities inaccordance with the development plan in the urbandevelopment area; 3 [(va) to levy and collect such securityfees for scrutiny of documents submitted to theappropriate authority for permission for development as may beprescribed by regulations;] (vi) To execute works in connectionwith supply of water, disposal of sewerage and provision of otherservices and amenities; 4 [(via) to levy and collect such fees forthe execution of works referred to in clause (vi) and for provisionof other services and amenities as may be prescribedby regulations;] (vii) To acquire, hold, manage and dispose ofproperty, movable or immovable, as it may deemnecessary; (viii) To enter into contracts, agreements orarrangements, with any local authority, person ororganisation as the urban development authority mayconsider necessary for performing its functions; (ix) To carry anydevelopment works in the urban development area as may beassigned to it by the State Government from time to time; (x) Toexercise such other powers and perform such otherfunctions as are supplemental, incidental or consequentialto any of the foregoing powers and functions or as may bedirected by the State Government. (2) The urban development authority may, with theapproval of the State Government, delegate 5 [any of its powersand functions] to the local authority or authorities functioningin the urban development area. (3) The urban development authority shall have its office at suchplace as the State Government may specify in this behalf. Section 40. Making And Contents Of A Town PlanningScheme : (1) Subject to the provision of this Act or any otherlaw for the time being in force, the appropriate authority maymake one or more town planning schemes for thedevelopment area or any part thereof, regard being had to theproposals in the final development plan, if any. (2) A town planning scheme may be made in accordance withthe provisions of this Act in respect of any land which is (i) In the course of development; 1 [(ii) likely to be used forresidential or commercial or industrial or for buildingpurposes; or] (iii) Already built upon. Explanation: Forthe purpose of this subsection the expression "land likelyto be used for building purposes" shall include any land likely tobe used as, or for the purpose of providing, open spaces, roads,streets, parks, pleasure or recreation grounds, parking spacesor for the purpose of executing any work upon or under the landincidental to a town planning scheme, whether in thenature of a building work or not. is (i) In the course of development; 1 [(ii) likely to be used forresidential or commercial or industrial or for buildingpurposes; or] (iii) Already built upon. Explanation: Forthe purpose of this subsection the expression "land likelyto be used for building purposes" shall include any land likely tobe used as, or for the purpose of providing, open spaces, roads,streets, parks, pleasure or recreation grounds, parking spacesor for the purpose of executing any work upon or under the landincidental to a town planning scheme, whether in thenature of a building work or not. (3) A town planning scheme may make provision for any of thefollowing matters, namely: (a) The laying out or relaying out ofland, either vacant or already built upon; (b) The filling up orreclamation of lowlying, swampy or unhealthy areas, or levellingup of land; (c) Layout of new streets or roads, construction,diversion, extension, alteration, improvement and closingup of streets and roads and discontinuance ofcommunications; (d) The construction, alteration and removalof buildings, bridges and other structures; (e) The allotment orreservation of land for roads, open spaces, gardens, recreationgrounds,schools, markets, greenbelts, dairies, transportfacilities, public purposes of all kinds; (f) Drainage, inclusiveof sewerage, surface or subsoil drainage and sewagedisposal; (g) Lighting; (h) Water supply; (i) Thepreservation of objects of historical or national interest ornatural beauty, and of buildings actually used forreligious purposes; (j) The reservation of land to theextent of ten per cent. or such percentage as near thereto aspossible of the total area covered under the scheme, for thepurpose of providing housing accommodation to the members ofsocially and economically backward classes of people; 2 [3 [(jj)(a) the allotment of land from the total area covered underthe scheme, to the extent of. (i) Fifteen per cent. forroads, (ii) five per cent. for parks, play grounds, gardens andopen space, (iii) five percent for social infrastructure such asschool, dispensary, fire brigade, public utility place asearmarked in the Draft Town Planning Scheme, and (iv) fifteenper cent. for sale by appropriate authority for residential,commercial or industrial use depending upon the nature ofdevelopment: Provided that the percentage of the allotment of landspecified in paragraphs (i) to (iii) may be altereddepending upon the nature of development and for the reasonsto be recorded in writing; (b) the proceeds from the sale of landreferred to in para (iv) of subclause (a) shall be used for thepurpose of providing infrastructural facilities; (c) the landallotted for the purposes referred to in paragraphs (ii) and (iii) ofsubclause (a) shall not be changed by variation of schemes forthe purposes other than public purpose;]] (k) the imposition of Provided that the percentage of the allotment of landspecified in paragraphs (i) to (iii) may be altereddepending upon the nature of development and for the reasonsto be recorded in writing; (b) the proceeds from the sale of landreferred to in para (iv) of subclause (a) shall be used for thepurpose of providing infrastructural facilities; (c) the landallotted for the purposes referred to in paragraphs (ii) and (iii) ofsubclause (a) shall not be changed by variation of schemes forthe purposes other than public purpose;]] (k) the imposition of conditions and restrictions in regard to the open spaceto be maintained around buildings, the percentage of buildingarea for a plot, the number, size, height and character ofbuilding allowed in specified areas, the purposes to whichbuildings or specified areas may or may not beappropriated, the subdivision of plots, the discontinuance ofobjectionable uses of lands in any area in specifiedperiods, parkings space and loading and unloading space forany building and the sizes or locations of projections andadvertisement signs; (l) the suspension, so far as may benecessary, for the proper carrying out of the scheme, of anyrule, bye law, regulation, notification or order made or issuedunder any Act of the State Legislature or any of the Actswhich the State Legislature is competent to amend:Provided that any suspension under this clause shall cease tooperate in the event of the State Government refusing tosanction the preliminary scheme, or in the event of thewithdrawal of the scheme under section 66, or on thecoming into force of the final scheme; (m) such othermatters not inconsistent with the objects of this Act as may beprescribed. Section 91: Fund Of The Appropriate Authority :(1) Anappropriate authority shall have and maintain its own fundto which shall be credited (a) All moneys received bythe authority by way of grants, loans,1[advances, fees,development charges or otherwise;] (b) All moneys derivedfrom its undertakings, projections and other sources; (c)Such amount of contributions from local authorities asthe State government may specify from time to time to becredited to the fund of the authority. (2) The fund ofan appropriate authority shall be applied towards meeting (a)Expenditure incurred in the administration of this Act; (b)Cost of acquisition of land for the purposes of this Act; (c)Expenditure for any development of land in the developmentarea; (d) Expenditure for such other purposes as theState Government may direct. (3) An appropriate authoritymay keep in current account with the State Bank" of India orany other bank approved by the State Government in thisbehalf, such sums of money out of its fund as may beprescribed and any money in excess of the said sum shall beinvested in such manner as may be approved by the StateGovernment. (4) The State Government may, make such grants,advances and loans to an appropriate authority as the StateGovernment may deem necessary for the performance of itsfunctions under this Act and all grants, loans and advances somade shall be made on such terms and conditions asthe State Government may determine. Section 95:Accounts And Audit : (1) An appropriateauthority shall maintain proper accounts and other Section 95:Accounts And Audit : (1) An appropriateauthority shall maintain proper accounts and other relevant records and prepare an annual statement ofaccounts including the balance sheet in such form as the StateGovernment may prescribe. (2) The accounts of an appropriateauthority shall be subject to audit annually by the AccountantGeneral of the State and any expenditure incurred by him inconnection with such audit shall be payable by theauthority to the Accountant General. (3) The AccountantGeneral or any person appointed by him in connection with theaudit of accounts of an appropriate authority shall have thesame rights, privileges and authority in connection with suchaudit as the Accountant General has in connection withGovernment accounts and in particular shall have theright to demand the production of books, accounts,connected vouchers and other documents and papers and toinspect the office of the appropriate authority. (4) The accountsof an authority as certified by the Accountant General or anyother person authorised by him in this behalf, together with theaudit report thereon, shall be forwarded annually to the StateGovernment. 12. From the aforesaid provisions of the Town Planning Act, itcan be gathered that Assessee has been constitutedas Urban Development Authority under the provisions ofSection 22 of the Town Planning Act. The purpose and object ofconstitution of the Urban Development Authority is properdevelopment or redevelopment of urban area. Even UrbanDevelopment Authority consists of (i) a Chairman to beappointed by the State Government; (ii) such persons, notexceeding [four in number] who are members of the localauthority or authorities functioning in the urban developmentarea, as may be nominated by the State Government; (iii) Threeofficials of the State Government, to be nominated by thatGovernment, exofficio; (iv) the Presidents of the districtpanchayats functioning in the urban development area, or, asthe case may be, part thereof, exofficio; (v) the Chief Townplanner or his representative, exofficio; (vi) the Chief Engineer orEngineers (Public Health) of the local authority orauthorities functioning in the urban development area or his ortheir nominee or nominees, exofficio; 5[(via) the MunicipalCommissioner of the Municipal Corporation, if any,functioning in the urban development area, exofficio;](vii) a member secretary to be appointed by the StateGovernment who shall also be designated as the Chief ExecutiveAuthority of the Urban Development Authority. Thus, theconstitution of the Urban Development Authority issubject to the control of the State Government. The powers andfunctions of the Urban Development Authority as contained inSection 23 are reproduced herein above. Considering Section 40of the Town Planning Act, the Town Planning Scheme preparedby the Urban Development Authority which has been prepared subject to sanction by the State Government for development ofthe Urban Development Area, also provide for roads, openspaces, gardens, recreation grounds, schools, markets, green-belts, dairies, transport facilities, public purposes of allkinds; drainage, inclusive of sewerage, surface or sub-soil drainage and sewage disposal; Lighting; Watersupply etc. The Town Planning Scheme also provide forhistorical or national interest or natural beauty, and ofbuildings actually used for religious purposes. The Scheme arealso provide for reservation of land to the extent of ten percent,or such percentage as near thereto as possible of the total areacovered under the scheme, for the purpose of providinghousing accommodation to the members of socially andeconomically backward classes of people. As per Section40(i)(jj) for the aforesaid purposes certain percentage of totalarea covered under the scheme are allotted earmarked. Fifteenpercent of total area is allotted for the purpose of roads, fivepercent for parks, play grounds, gardens and open space,five percent for social infrastructure such as school,dispensary, fire brigade, public utility place as earmarked in theDraft Town Planning Scheme and Fifteen percent for sale byappropriate authority for residential, commercial orindustrial use depending upon the nature ofdevelopment. Last Fifteen percent is earmarked under the TownPlanning Scheme for sale, by appropriate authority forresidential, commercial or industrial use. The appropriateauthority / Urban Development Authority is permitted to salethe said plots / lands to the extent of 15% of the total area tomeet with the expenditure towards drainage, roads, gardens,schools, markets, water supply etc. So that maximum price canbe fetched and the same can be utilized for the development ofthe Urban Development Area and so as to avoid any allegationof favoritism and nepotism, the plots are sold by public auction.It is required to be noted the entire amount realized by theassessee being Urban Development Authority either by sellingplots or by recovery of some fees / charges, UrbanAuthority is required to use only for the purpose of developmentin the Urban Development Area and not for any other purpose.The learned Tribunal has observed and held that as theassessee is selling the plots, to the extent of 15% of total area,by public auction and gets maximum amount, it amounts toprofitering and therefore, the activities of the Assessee can besaid to be in the nature of business. However, while holding so,learned Tribunal has not properly appreciated the object andpurpose of permitting the Urban Development Authority to salethe plots, maximum to the extent of 15% of the total area i.e. tomeet with the expenditure for providing theminfrastructural facilities like gardens, roads, lighting, watersupply, drainage system etc. The learned Tribunal has also not properly appreciated the reasons for selling the plot by holdingpublic auction i.e.; (1) to avoid any further allegation offavoritism and nepotism and (2) so that maximum marketprice can be fetched, which can be used for the development ofthe Urban Development Area. properly appreciated the reasons for selling the plot by holdingpublic auction i.e.; (1) to avoid any further allegation offavoritism and nepotism and (2) so that maximum marketprice can be fetched, which can be used for the development ofthe Urban Development Area. 12.1. At this stage decision of the Hon'ble Supreme Court in thecase of Ahmedabad Green Belt Khedut Mandal (supra) ((2014) 7SCC 357) is required to be referred to. Before the Hon'bleSupreme Court, it was contended on behalf of original landowners whose lands were included in the TP Scheme that bypermitting the Area Development Authority / UrbanDevelopment Authority to sell 15% of the total area, by that theUrban Development Authority will be making profit, theHon'ble Supreme Court has negatived the aforesaid andhas observed that the activities of the UrbanDevelopment Authority / Area Development Authority whileselling the land to the extent of 15% to the total area coveredunder the scheme cannot be said to be profitering. It is observedand held that sale upto 15% is from total area covered underthe scheme and not in respect of every plot of land. Inorder to generate financial resources for the developmentof infrastructure, the salable plot for residential,commercial and industrial use are allotted by theappropriate authority. It is further observed that the provision ofthe Act have to be read as a whole and therefore, the provisionof Section 40(3)(jj)(a)(iv) for sale is to be in consonance/ conjointly with other statutory provisions and not inisolation.Under the circumstances, the learned Tribunalhas committed gross error in considering the activities of theappellant Urban Development Authority for profiter by selling15% of the total area and thereby has committed gross error inholding the activities of the assessee in the nature oftrade, commerce or business. 12.2. Whether the activities of the appellant AUDA can be saidto be in the nature of trade, commerce or business as occurringin the first proviso to Section 2(15) of the Act, fewdecisions of the Hon'ble Supreme Court as well as other HighCourts are required to be referred to at this stage. 5.1. The Division Bench after considering the catena ofdecisions on the subject, has further observed thus: 14. Considering the aforesaid facts and circumstances and moreparticularly, considering the fact that the assessee is a statutorybody Urban Development Authority constituted underthe provisions of the Act, constituted to carry out the object and purpose of Town Planning Act and collects regulatoryfees for the object of the Acts; no services are rendered to anyparticular trade, commerce or business; whatever the income isearned / received by the assessee even while selling the plots (tothe extent of 15% of the total area covered under the TownPlanning Scheme) is required to be used only for the purpose tocarry out the object and purpose of Town Planning Act and tomeet with expenditure while providing general utility service tothe public such as electricity, road, drainage, water etc. andeven the entire control is with State Government and evenaccounts are also subjected to audit and there is no elementof profiteering at all, the activities of the assessee cannotbe said to be in the nature of trade, commerce and business andtherefore, proviso to Section 2(15)of the Act shall not be applicableso far as assessee is concerned and therefore, the assessee isentitled to exemption under Section 11 of the Income Tax Act.Therefore, the question no.1 is to be held in favour of theassessee and against the revenue. 15. Now, so far as another question which is posed forthe consideration of this Court i.e. whether while collecting thecess or fees, activities of the assessee can be said to be renderingany services in relation to any trade, commerce orbusiness is concerned, for the reasons stated above,merely because the assessee is collecting cess or fees which isregulatory in nature, the proviso to Secti