The Principal Commissioner Of Income Tax(Exemptions v. Surat Urban Development Authority(Suda) ==========================================================

C/TAXAP/220/2020 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABADR/TAX APPEAL NO. 220 of 2020 ========================================================== THE PRINCIPAL COMMISSIONER OF INCOME TAX(EXEMPTIONS) Versus SURAT URBAN DEVELOPMENT AUTHORITY(SUDA) ========================================================== 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 and HONOURABLE MR. JUSTICE ILESH J. VORA Date : 21/09/2020 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 16.1.2020 passed by the Income TaxAppellate Tribunal, D Bench, Ahmedabad in ITANo.2431/AHD/2017 for AY 2011-12.Act, 1961 (hereinafter referred to as the “Act” for thesake of brevity) the appellant – Revenue has challengedthe order dated 16.1.2020 passed by the Income TaxAppellate Tribunal, D Bench, Ahmedabad in ITANo.2431/AHD/2017 for AY 2011-12. 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 2011-12 on 12.09.2011 anddeclared total income as NIL. On assessment beingmade under Section 143(3) of the Act, the Assessingfor the Assessment Year 2011-12 on 12.09.2011 anddeclared total income as NIL. On assessment beingmade under Section 143(3) of the Act, the Assessing Officer by its order dated 23.12.2016 assessed thetotal income of the respondent –assessee atRs.25,41,80,760/-. The AO came to the conclusionthat assessee was engaged in the Area Developmentand Town Planning and carrying out the activity ofgeneral public utility. According to the AO, therespondent –assessee was not carrying out anycharitable activities and was squarely covered byproviso 1 & 2 to Section 2(15) r/w Section 13(8) of theAct and ultimately came to the conclusion that therespondent-assessee is not eligible for any of theexemption claimed under Section 11 and 12 of the Actand accordingly passed assessment order in question.The respondent –assessee filed an Appeal before theCIT(A), which came to be partly allowed vide orderdated 28.8.2017 subject to directions contained inpara 9 of the order. Being aggrieved and dissatisfiedwith the order dated 28.8.2017 passed by the CIT(A),the Revenue has preferred Appeal before the IncomeTax Appellate Tribunal, which also came to bedismissed vide order dated 16.1.2020. 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 followingsubstantial questions of law; “A.Whether on facts and circumstances of the case and in law,the Hon’ble Tribunal was justified in holding that the re-assessment proceedings to be wrong and void ab initiowhereas the proceedings for re-assessment for reopening ofassessment was validly on the basis of information and afterrecording proper reason ? 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 followingsubstantial questions of law; “A.Whether on facts and circumstances of the case and in law,the Hon’ble Tribunal was justified in holding that the re-assessment proceedings to be wrong and void ab initiowhereas the proceedings for re-assessment for reopening ofassessment was validly on the basis of information and afterrecording proper reason ? B. Whether on facts and circumstances of the case and inlaw, the Hon’ble Tribunal was justified in holding that theactivities of the assessee are not in the nature of commerce/trade without considering the fact that the assessee isinvolved in widespread commercial activities which is coveredunder first and second proviso to section 2(15) of the Actwithout considering the merit of the issue ? C. Whether on facts and circumstances of the case and in law, the Hon’ble Tribunal was justified considering the activityof the assessee as engaged in the development of urban areawhich is in the nature of advancement of general public utilitynot hit by the newly introduced first and second proviso toSection 2 (15) of the Act without considering the merit of theissue ? D. Whether on facts and circumstances of the case and inlaw, the Hon’ble Tribunal was justified in deleting the additionof Rs.39,600/- by not appreciating the fact that the addition tofixed assets has already been allowed in earlier years asapplication of income which amounts to double deductionwithout considering the merit of the issue ? E. Whether on facts and circumstances of the case and inlaw, the Hon’ble Tribunal was justified in deleting the additionof General Development Expenditure Fund of Rs.6,34,81,654/-considering that a capital expenditure by a person need not bea capital receipt of the person receiving that amount which isassessee has received for the discharge of its objects withoutconsidering the merit of the issue ? F. Whether on facts and circumstances of the case and inlaw, the Hon’ble Tribunal was justified in allowingaccumulation of Rs.20,00,00,000/- u/s 11(2) of the Act andaccumulation @ 15% of Rs.6,37m77m889/- u/s 11(1)(a) of theAct without appreciating the fact that once the proviso ofSection 2 (15) is applicable, the benefit of section 11(12)cannot be allowed further ? G. Whether on facts and circumstances of the case and inlaw, the Hon’ble Tribunal was justified in deleting the additionof Rs.5,92,358/- on account of expenditure on housing projectconsidering the that a capital expenditure by a person neednot to be a capital receipt of the person receiving that amountwhich the assessee has received from discharge of its objectswithout considering the merit of the issue ? H. Whether on facts and circumstances of the case and inlaw, the Hon’ble Tribunal was justified in allowing carryforward of surplus of Rs.18,82,29,775/- against its futureincome in absence of any express provision in the Actregarding the same without considering the merit of the issue? 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(Exemptions) 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 underSection 22 of the Town Planning Act, which reads asunder: 22.Declaration Of Urban Development Area AndConstitution Of Urban Development Authority: 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(Exemptions) 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 underSection 22 of the Town Planning Act, which reads asunder: 22.Declaration Of Urban Development Area AndConstitution Of Urban Development Authority: (1) Where the State Government is of opinion that the objectof proper development or redevelopment of any urban areaor group of urban areas in the State together with suchadjacent areas as may be considered necessary, whethercovered under a development area already declared assuch under section 3 or not, will be best served byentrusting the work of development or redevelopmentthereof to a special authority, instead of to an areadevelopment authority, the State Government may, bynotification, declare such area to be an urban developmentarea and constitute an authority for such area to be calledthe urban development authority of that area, andthereupon all the powers and functions of an areadevelopment authority relating to the development orredevelopment of a development area under this Act shall,in relation to such urban development area, be exercisedand performed by such urban development authority1***. (2) Every notification issued under sub-section (1) shall define the limits of the area to which it relates. 2[(2A) The State Government may, by notification in the Official Gazette, include in or exclude any area from anurban development area, amalgamate two or more urbandevelopment areas into one urban development area, sub-divide any urban development area into different urbandevelopment areas and include such sub-divided urbandevelopment area in any other urban development area.] (3) Every urban 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, bothmovable and immovable, and to contract, and by the saidname sue and be sued. (4) The urban development authority shall consist of thefollowing members 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 inthe urban development area, as may be nominated by theState Government; (iii)4[Three officials] of the State Government, to be 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, partthereof, ex-officio; (v) the Chief Town planner or his representative, ex-officio; (vi) the Chief Engineer or Engineers (Public Health) of thelocal authority or authorities functioning in the urbandevelopment area or his or their nominee or nominees, ex-officio; 5[(vi-a) the Municipal Commissioner of the MunicipalCorporation, if any, functioning in the urban developmentarea, ex-officio;] (vii) a member secretary to be appointed by the State (iii)4[Three officials] of the State Government, to be 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, partthereof, ex-officio; (v) the Chief Town planner or his representative, ex-officio; (vi) the Chief Engineer or Engineers (Public Health) of thelocal authority or authorities functioning in the urbandevelopment area or his or their nominee or nominees, ex-officio; 5[(vi-a) the Municipal Commissioner of the MunicipalCorporation, if any, functioning in the urban developmentarea, ex-officio;] (vii) a member secretary to be appointed by the State Government who shall also be designated as the ChiefExecutive Authority of the Urban Development Authority.(4A) Notwithstanding anything contained in sub-section (4),the State Government, to deal with the situation arising outof natural calamity or disaster or disaster, may bynotification constitute the urban development authority orreconstitute any existing urban development authorityconstituted under sub-section (1),consisting of any urbandevelopment area declared as such under sub-section (1),consisting of such members as it deems fit. (5) The provisions of sub-sections (5) to (12) of section 5 shall apply in relation to an urban development authorityas they apply in relation to an area development authority,with the modification that references to an area development authority in the said subsection shall beconstrued as references to an urban developmentauthority.. 4.1. Section 23 of the Town Planning Act provides forpowers and functions of urban development authority.Section 23 reads as under: 23.Powers And Function Of Urban Development Authority :-(1) 1 [The powers and functions of] an urban developmentauthority shall be:- (i)To undertake the preparation of development plans underthe provisions of this Act, for the urban development area; the provisions of this Act, for the urban development area; (ii)(ii) To undertake the preparation 2 [and execution] of townplanning schemes under the provisions of this Act, if so di-rected by the State Government; planning schemes under the provisions of this Act, if so di-rected by the State Government; (iii)(iii) To carry out surveys in the urban development area forthe preparation of development plans or town planningschemes; the preparation of development plans or town planningschemes; (iv)(iv) To guide, direct and assist the local authority or author-ities and other statutory authorities functioning in the ur-ban development area in matters pertaining to the plan-ning, development and use of urban land; ities and other statutory authorities functioning in the ur-ban development area in matters pertaining to the plan-ning, development and use of urban land; (v)(v) To control the development activities in accordance withthe development plan in the urban development area; 3 [(v-a) to levy and collect such security fees for secrutiny of doc-uments submitted to the appropriate authority for permis-sion for development as may be prescribed by regulations;] the development plan in the urban development area; 3 [(v-a) to levy and collect such security fees for secrutiny of doc-uments submitted to the appropriate authority for permis-sion for development as may be prescribed by regulations;] (vi)(vi) To execute works in connection with supply of water,disposal of sewerage and provision of other services andamenities; 4 [(vi-a) to levy and collect such fees for the exe-cution of works referred to in clause (vi) and for provision ofother services and amenities as may be prescribed by regu-lations;] disposal of sewerage and provision of other services andamenities; 4 [(vi-a) to levy and collect such fees for the exe-cution of works referred to in clause (vi) and for provision ofother services and amenities as may be prescribed by regu-lations;] (vii)(vii) To acquire, hold, manage and dispose of property, mov-able or immovable, as it may deem necessary; able or immovable, as it may deem necessary; (viii)(viii) To enter into contracts, agreements or arrangements,with any local authority, person or organisation as the ur-ban development authority may consider necessary for per-forming its functions; with any local authority, person or organisation as the ur-ban development authority may consider necessary for per-forming its functions; (ix)(ix) To carry any development works in the urban develop-ment area as may be assigned to it by the State Govern-ment from time to time; ment area as may be assigned to it by the State Govern-ment from time to time; (x)To exercise such other powers and perform such other func-tions as are supplemental, incidental or consequential toany of the foregoing powers and functions or as may be di-rected by the State Government. tions as are supplemental, incidental or consequential toany of the foregoing powers and functions or as may be di-rected by the State Government. (2) The urban development authority may, with the approval ofthe State Government, delegate 5 [any of its powers andfunctions] to the local authority or authorities functioning inthe urban development area.the State Government, delegate 5 [any of its powers andfunctions] to the local authority or authorities functioning inthe urban development area. (3) The urban development authority shall have its office atsuch place as the State Government may specify in thisbehalf.such place as the State Government may specify in thisbehalf. 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 theDivision 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, the relevantprovisions of the Gujarat Town Planning Act, under which, theAssessee has been constituted as Urban Development Authorityand powers and functions of the Assessee as an UrbanDevelopment Authority are required to be considered, soas to appreciate whether the activities of the Assessee beingUrban Development Authority can be said to be in the nature oftrade, commerce or business ?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 in any 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; any 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 sucharea 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. (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 State Government,to be nominated by that Government, exofficio; (iv) thePresidents of the district panchayats functioning in 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 other functions 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 whichis (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. (2) A town planning scheme may be made in accordance withthe provisions of this Act in respect of any land whichis (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 under the 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: the 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 ofconditions 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, byelaw, 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 otherrelevant 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 district panchayats 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 preparedsubject 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 llotted 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 allegation of 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 notproperly 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 in holding 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. 6.1. The Division Bench after considering the catena ofdecisions on the subject, has further observed thus: holding 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. 6.1. 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 theobject 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 Section 2(15)of the Actshall not be applicable. As observed herein above neitherthere is element of profiteering nor the same can be said to be inthe nature of trade, commerce or business. At this stage, decisionof the Division Bench of this Court in the case of SabarmatiAshram Gaushala Trust (supra) is required to be referred to.In the case before the Division Bench, the assesseeTrust Sabarmati Ashram Gaushala Trust was engaged in theactivity of breeding milk cattle; to improve the quality of cows and oxen and other related activities. The Assessing Officer deniedthe exemption to the trust under Section 11 of the Act on theground that considerable income was generated from theactivities of milk production and sale and therefore, consideringthe proviso to Section 2(15) of the Act, the said Trust assesseewas denied the exemption under Section 11 of the Act. Whileholding that the activities of the assessee trust still can be said tobe for charitable purpose within the meaning of Section 2(15) ofthe Act and same cannot be said to be in the nature of trade,commerce or business for which proviso to Section 2(15) of the Actis required to be applied. In para 6, 7, 8 and 12, it is observedand held as under: oxen and other related activities. The Assessing Officer deniedthe exemption to the trust under Section 11 of the Act on theground that considerable income wa