Tax-Exempt Status Granted to Urban Development Authorities in India

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Case Name:

Commissioner of Income Tax vs Jodhpur Development Authority and Urban Improvement Trust of Sri Ganganagar (High Court of Rajasthan)

D.B. Income Tax Appeal No.63/12

Date: 5th July 2016

Key Takeaways:

1. The Supreme Court has interpreted "charitable purpose" under the Income Tax Act broadly to include activities that promote general public welfare, even if they generate some profits.

2. As long as the primary/dominant purpose of an institution is charitable, any incidental profit-making activities will not disqualify it from tax-exempt status.

3. Urban development authorities established by the government to plan, coordinate and supervise urban development are engaged in "charitable purposes" that benefit the general public.

Issue:

Whether the activities of the Jodhpur Development Authority (JDA) and Urban Improvement Trust of Sri Ganganagar (UIT), which involve commercial transactions like land sales, can still be considered "charitable purposes" under the Income Tax Act, entitling them to tax-exempt status.

Facts:

- The JDA and UIT are statutory bodies established by the Government of Rajasthan to plan, coordinate and supervise urban development in their respective regions.

- In addition to their urban planning functions, the authorities also engage in commercial activities like selling developed land, plots, and constructed properties.

- The tax department argued that these commercial activities disqualify the authorities from being considered charitable institutions eligible for tax exemptions.

- The ITAT had granted tax-exempt status to the JDA and UIT under Section 12A of the Income Tax Act, which the tax department appealed against.

Arguments:

- Tax Department's Argument: The commercial activities of the JDA and UIT, such as selling land and properties, mean they are not engaged in "charitable purposes" as defined under the law. The first proviso to Section 2(15) excludes activities involving trade, commerce or business from being considered charitable.

- JDA and UIT's Argument: Their primary purpose is urban development for public welfare, which falls under the definition of "charitable purpose" in Section 2(15). Any profits earned from ancillary commercial activities are incidental and do not negate the charitable nature of their work.

Key Legal Precedents:

- Commissioner of Income Tax vs. Gujarat Maritime Board (2008) - The Supreme Court held that if the primary purpose is charitable, incidental profit-making activities do not change the charitable nature of the institution.

- Commissioner of Income Tax vs. Andhra Pradesh State Road Transport Corporation (1986) - The Supreme Court ruled that an institution established for public welfare, with no profit motive, is engaged in charitable activities even if it earns some income.

- Additional Commissioner of Income Tax vs. Surat Art Silk Cloth Manufacturers Association (1980) - The Supreme Court stated that as long as the purpose does not involve carrying on an activity for profit, the requirement of "charitable purpose" is met.

Judgment:

The High Court dismissed the tax department's appeals and upheld the ITAT's orders granting tax-exempt status to the JDA and UIT under Section 12A. The court ruled that the primary purpose of these urban development authorities is to promote public welfare, which falls under the definition of "charitable purpose" in the Income Tax Act. Any commercial activities they undertake are ancillary and incidental to this dominant charitable objective, and do not disqualify them from tax exemptions.

FAQs:

1. Why were the JDA and UIT granted tax-exempt status despite their commercial activities?

The court found that the primary purpose of these urban development authorities is to promote public welfare through urban planning and development, which qualifies as a "charitable purpose" under the law. Any profits earned from ancillary commercial activities like land sales are incidental and do not negate the charitable nature of their work.

2. How did the court interpret the term "charitable purpose" in this case?

The court relied on several Supreme Court precedents that have interpreted "charitable purpose" broadly to include activities that benefit the general public, even if they generate some profits. As long as the dominant objective is charitable, incidental profit-making does not disqualify an institution from being considered charitable.

3. What is the significance of this case for urban development authorities in India?

This judgment establishes that statutory bodies created by the government to plan and oversee urban development can be granted tax-exempt status, as their work is considered to serve a "charitable purpose" that benefits the public. This provides greater financial stability and incentives for such authorities to carry out their mandate of improving cities and towns across India.

1. These appeals arising out of various orders passed by the Income Tax Appellate Tribunal (ITAT), Jodhpur Bench, Jodhpur, raising a common question of law regarding the entitlement of Jodhpur Development Authority (JDA), Jodhpur and Urban Improvement Trust (UIT), Sri Ganganagar, under Section 12A of the Income Tax Act, 1961 (for short “the Act of 1961”), were heard together and are being disposed of by this common judgment.

2. The Appeal No.63/12 is directed against order dated 19.1.12 of the ITAT, Jodhpur, partly allowing the appeal preferred by the assessee-JDA, Jodhpur, against the order dated 22.3.10 of Commissioner of Income Tax-I (CIT-I), Jodhpur, rejecting an application seeking registration under Section 12A read with Section 12AA of the Act of 1961. Similarly, the Appeal No.92/13, is directed against the order of ITAT dated 18.1.13, allowing an appeal preferred by the UIT, Sri Ganganagar, against the order dated 28.3.11 of

application seeking registration under Section 12A of the Act of 1961. The Appeal Nos.95/13, 96/13 and 98/13 are directed against a common order of the ITAT dated 18.1.13 of the ITAT, Jodhpur, allowing the appeals of the assessee- UIT, Sri Ganganagar against the different orders of the Commissioner of Income Tax (Appeals) [CIT (A)], affirming the assessment orders passed by the Assessing Officer (AO), for the assessment years 2004-05, 2005-06 and 2006-07 and remanding the matter back to the AO for all the assessment years. The Appeal No.12/15 is directed against the order of the ITAT, Jodhpur dated 23.7.14, dismissing the appeal of the Revenue against the order dated 30.10.13 of CIT(A),Bikaner, partly allowing the appeal of assessee-UIT, Sri Ganganagar, against the assessment order dated 26.12.12 passed by the AO for the assessment year 2010-11, keeping in view the registration granted to the assessee under Section 12A of the Act of 1961.

3. These appeals were admitted by this court by different orders on the following substantial questions of law:

Appeal No.63/12

“Whether on the facts and in the present circumstances of the case, the learned Tribunal was justified in directing grant of registration to the Assessee despite the facts that it clearly falls within the ambit of First Proviso to S.2(15) of the Act?” Appeal No.92/13

“Whether on the facts and in the present circumstances of the case, the learned Tribunal was justified in directing grant of registration to the Assessee despite the facts that it clearly falls within the ambit of First Proviso to S.2 (15) of the Act?”

Appeal No.95/13

“Whether the Income Tax Appellate Tribunal is justified in deleting the additions made by assessing officer by treating the Urban Improvement Trust, Sriganganagar, a commercial establishment?”

Appeal No.96/13 “Whether the Income Tax Appellate Tribunal is justified in deleting the additions made by assessing officer by treating the Urban Improvement Trust, Sriganganagar, a commercial establishment?”

Appeal No.98/13

“Whether the Income Tax Appellate Tribunal is justified in deleting the additions made by assessing officer by treating the Urban Improvement Trust, Sriganganagar, a commercial establishment?”

Appeal No.12/15

“Whether the Income Tax Appellate Tribunal is justified in deleting the additions made by Assessing Officer by treating the Urban Improvement Trust, Sriganganagar, a commercial establishment?”

4. Precisely, the question comes for consideration of this court is whether the activities of JDA, Jodhpur and UIT, Sri Ganganagar, which have been constituted and established by the Government of Rajasthan under the provisions of Jodhpur Development Authority Act, 2009 ('JDA Act') and Urban Improvement Trust Act, 1959 ('UIT Act'), for the purposes of planning, coordinating and supervising the proper, orderly and rapid development of Jodhpur Region and for the purposes of improvement and expansion of the urban area of Sri Ganganagar as specified, respectively, fall within the definition of 'charitable purposes' as defined under Section 2(15) of the Act of 1961 so as to make them entitled to registration under the provisions of Section 12A read with Section 12AA of the Act of 1961, for claiming the benefit of exemption under Section 11 and 12 read with Section 13 of the Act of 1961?

5. Learned counsel appearing for the Revenue submitted that it is not in dispute that the JDA, Jodhpur and UIT, Sri Ganganagar, were created for the purpose of development of city of Jodhpur and the urban area of Sri Ganganagar respectively by executing the plans, projects and scheme for such development and to provide for matter connected therewith but then, the source of income/receipt of JDA, Jodhpur and UIT, Sri Ganganagar is from sale of developed land, plots, constructed houses, shops, rents and also house property, tax, interest on advances/FDR, land use conversion charges etc.; the activities which are being carried out systematically, continuously and regularly for earning profit at commercial level. Learned counsel contended that the ITAT has not appreciated the purpose and meaning of first proviso to Section 2(15) of the Act of 1961 brought on statute book by Finance Act, 2008 w.e.f. 1.4.09, which specifically provides that the advancement of any object of public utility shall not be charitable purpose, if it involves the carrying on of 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 nature of use or application or retention of the income from such activity. Learned counsel would submit that the activities of JDA, Jodhpur and UIT, Sri Ganganagar being in the nature of trade, commerce and business, the advancement of objects of general public utility by these establishments cannot be recognized as charitable purpose so as to make them entitle for registration under Section 12A read with Section 12AA of the Act of 1961. Learned counsel submitted that the ITAT has seriously erred in observing that pre dominant object of the assessees being to carry out charitable purpose, such activity will not loose its character of charitable purpose merely because some profit arises from such activities. In support of the contention, learned counsel has relied upon a Bench decision of Jammu & Kashmir High Court in the matter of “Jammu Development Authority vs. Union of India & Anr.” (ITA No.164/12, decided on 12.11.13).

6. On the other hand, learned counsel appearing for the assessee-JDA, Jodhpur, while drawing the attention of this court to the provisions of Section 3 of the JDA Act, contended that JDA has been constituted and established under the JDA Act to secure the integrated development of Jodhpur Region as defined under Section 2(8) of the JDA Act. Learned counsel submitted that so as to achieve the said object for which the JDA is constituted, it is required to discharge the functions as specified under Section 16 of JDA Act, which are certainly the functions to be discharged for the welfare of public at large. Learned counsel submitted that Section 2(15), gives inclusive definition of 'charitable purpose' and while specifically including relief of the poor, education, medical relief, preservation of environment including water sheds, forests and wildlife and preservation of monuments of places or objects of artistic or historic interest, it is provided that the advancement of any other object of general public utility, shall also fall within its ambit and therefore, the advancement of any object for benefit to the public or a section of the public as distinguished from benefit to an individual or a group of individuals would be charitable purpose. Learned counsel submitted that indubitably, the JDA has been constituted and established for the development of Jodhpur Region and its primary purpose and pre dominant object is to promote welfare of the general public and not to extend any benefit to an individual or group of individuals and therefore, even if some profit earning activity is undertaken by the JDA, which is ancillary or incidental to its dominant object, it will not be ceased to be an institution engaged in advancement of the objects of general public utility or an institution engaged in carrying out charitable purposes. In support of the contentions, learned counsel has relied upon a decisions of the Hon'ble Supreme Court in the matters of “Commissioner of Income Tax vs. Gujarat Maritime Board”, (2008) 295 ITR, 561, CIT vs. Andhra Chamber of Commerce”, (1965) 55 ITR, 722 and “CIT vs. A.P.State Road Transport Corporation”, (1986) 159 ITR, 1, the decision of Allahabad High Court in the matter of “CIT vs. Lucknow Development Authority”, (2014) 264 CTR 433 (All.), decisions of Gujarat High Court in the matters of “CIT vs. Kandla Port Trust”, (2014) 364 ITR 164 (Guj.) and “CIT vs. Rajkot Municipal Corporation”, (2014) 112 DTR 363 (Guj.) and a decision of this court in the matter of “CIT-II, Jodhpur vs. Krishi Upaj Mandi Samiti, Didwana” (D.B.Income Tax Appeal No.181/10, decided on 16.1.15).

7. Learned counsel appearing on behalf of the assessee- UIT, Sri Ganganagar submitted that UIT, Sri Ganganagar is a statutory body, established by the State Government in exercise of the power conferred under Section 8 of UIT Act for the purpose of carrying out the improvement of the urban area of Sri Ganganagar as specified by a notification issued under Section 3 of the UIT Act. Learned counsel submitted that the main objects of the assessee are to prepare the Master Plan and the Scheme for planned development and execution thereof, to construct the roads, to provide water and electricity facility, to construct the drainage system, to improve the gardens and open spaces, to provide housing facility by allotting the residential plots etc. which are in the nature of general public utility and therefore, even if in furtherance of the object, some activity is undertaken by the assessee wherein income is earned but which does not involve profit motive as such, such activity being ancillary and incidental to the objects of the assessee, the predominant object of the assessee of undertaking activity of general public utility shall not cease to be an activity for charitable purpose. Learned counsel submitted that the activity of the assessee squarely falls within the definition of 'charitable purpose' within the meaning of Section 2(15) of the UIT Act and therefore, the order impugned passed by the ITAT, holding the assessee entitled for the benefit of registration under Section 12A of the Act of 1961, cannot be faulted with. In support of the contentions, learned counsel has relied upon the decision of the Hon'ble Supreme Court in Gujarat Maritime Board's case (supra), the decision of Madhya Pradesh High Court in the matter of “CIT vs. Krishi Upaj Mandi Samiti”, (2011) 331 ITR 140 (MP), the decision of this court in the matter of “CIT vs. Krishi Upaj Mandi Samiti”, (2011) 331 ITR 135 (Raj.), the decision of Punjab & Haryana High Court in the matter of “CIT vs. Improvement Trust”, (2009) 308 ITR, 361 (P& H), the decision of Allahabad High Court in the matter of “CIT-I vs. State Urban Development Agency (SUDA)”, (2013) 218 TAXMAN, 146 (All) and a decision of the Karnataka High Court in the matter of “CIT vs. Bagalkot Town Development Authority”, MANU/KA/3984/2015.

8. We have considered the rival submissions of the learned counsels for the parties and perused the relevant provisions as also the various decisions cited at the Bar.

9. Before proceeding to examine the issue whether the activities of the assessees fall within the definition of 'charitable purposes' so as to make them entitle for registration under Section 12A of the Act of 1961, the reference to the provisions germane to the lis between the parties, would be apposite.

10. As per the Section 11 (1) of the Act of 1961, subject to provisions of Section 60 to 63, the income of the charitable or religious trust in receipt of the income as specified under sub clauses of the aforesaid section, applied for charitable or religious purposes and the income in form voluntary contribution with the specific directions that they shall form part of the corpus of the trust or institution in the manner and to the extent specified shall not be included in the total income of the previous year. Sub-section (2) of Section 11 deals with situation where income referred to in clause (a) and (b) of sub-section (1) read with Explanation to the sub-section is not applied or is not deemed to have been applied to the charitable purpose or religious purposes in India during the previous year but is accumulated or set apart either in whole or in part for application to such purposes in India and mandates that such income shall not be included in the total income of the previous year of the person in the receipt of the income on the compliance of the conditions specified in sub-clauses (a) and (b). Sub-section (3) of Section 11, provides that any income referred to in sub-section (2) which is applied to purposes other than charitable or religious purposes as aforesaid or ceases to be accumulated or set apart for application thereto, or ceases to remain invested or deposited in any of forms or modes specified in sub-section (5) or is not utilized for the purpose for which it is so accumulated or set apart during the period referred to in clause (a) of that sub-section or in the year immediately following the expiry thereof or is credited or paid to any trust or institution registered under Section 12A or 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 be deemed to be the income of such person of the previous year in which it is so applied or ceases to be accumulated or set apart or ceases to remain so invested or deposited or credited or paid or as the case may be, of the previous year immediately following the expiry of the aforesaid period.

11. Section 12 provides that any voluntary contribution received by the trust created wholly for charitable or religious purposes or any institution established wholly for such purposes, not being contributions made with the specific direction that they shall form part of corpus of the trust or institution shall for the purposes of Section 11 be deemed to be income derived from property held under trust wholly for charitable or religious purposes and the provisions of that section and Section 13 shall apply accordingly.

12. Section 13, a non obstante clause provides that the provisions of Section 11 or Section 12 shall not operate as to exclude from total income of the previous years of the person in respect of various income enumerated under clauses (a) to (d) thereof.

13. But then, applicability of provisions of Section 11 and Section 12 of the Act of 1961 so as to claim the exclusion from total income of the previous year of the person is subject to fulfillment of the conditions specified under Section 12A of the Act, which includes the making of an application by the trust for registration and granting of the registration by the Commissioner in accordance with the procedure laid down under Section 12 AA.

14. Section 12AA, lays down the procedure to be followed by the Commissioner for grant or refusal of the application seeking registration under clause (a) or clause (aa) of sub- section (1) of Section 12A. As per the procedure laid down, the registration shall be granted by the Commissioner on being satisfied about the objects of the trust or institution and genuineness of its activities. By virtue of provisions of sub-section (3) of Section 12AA, where a trust or institution has been granted registration under clause (b) of sub- section (1) or has obtained registration at any time under Section 12A (as it stood before the amendment by the Finance(No.2) Act, 1996) and subsequently, the Commissioner is satisfied that such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he is empowered to pass an order in writing cancelling the registration of such trust or institution after giving a reasonable opportunity of being heard to the trust or institution.

15. It is to be noticed that the registration of the trust or institution under Section 12A is condition precedent for claiming exemption under Section 11 & 12 of the Act but the registration under Section 12A by itself does not make a trust or institution entitled to claim exemption under Section 11 & 12 of the Act unless, the conditions for claiming exemption as envisaged under Section 11 & 12 of the Act, are satisfied. Obviously, the entitlement of the person or the trust claiming exclusion of the income under Section 11 or 12 has to be determined by the AO after making necessary inquiries regarding the fulfilment of the requisite conditions as enumerated under the aforesaid provisions. But, the fact remains that under Section 12AA, the scope of the enquiry under Section 12AA for the purpose of grant of registration under Section 12A shall be confined with regard to the objects of the trust or institution and genuineness of its activities and it cannot travel to the extent that whether the income of the trust in respect whereof exemption is claimed, is wholly applied for the religious or charitable purpose or not so as to make them entitle to claim exemption under Section 11 & 12 of the Act of 1961.

16. As noticed hereinabove, the contention of the Revenue is that since the assessees are involved in carrying on activities in the nature of trade and commerce, by virtue of first proviso to Section 2(15), their activity/objects cannot be recognized as for charitable purposes so as to make them entitled for registration under Section 12A of the Act of 1961.

17. Section 2(15) of the Act of 1961 which defines 'charitable purposes' reads as under:

“(15) 'charitable purpose' includes relief of the poor, education, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility;

Provided that the advancement of any other object of general public utility shall not be a 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;

Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is twenty-five lakh rupees or less in the previous year;”

18. The 'charitable purpose' as defined under Section 2 (15) and particularly, the expression 'any other object of general public utility' used therein, have been interpreted by the Hon'ble Supreme Court and various High Courts in catena of decisions, which may be beneficially referred.

19. In Andhra Chamber of Commerce's case (supra), while considering the expression 'object of general public utility' as used in Section 4(3) of the Income Tax Act, 1922, the Hon'ble Supreme Court observed:

“ The expression “object of general public utility” in s.4(3) would prima facie include all objects which promote the welfare of the general public. It cannot be said that a purpose would cease to be charitable even if public welfare is intended to be served thereby if it includes the taking of steps to urge or oppose legislation affecting trade, commerce or manufacture. If the primary purpose be advancement of objects of general public utility, it would remain charitable even if an incidental entry into the political domain for achieving that purpose e.g. promotion of or opposition to legislation concerning that purpose, is contemplated.” (emphasis added)

20. In Sole Trustee, Lok Shikshana Trust vs. CIT, (1975) 101 ITR, 254, the Hon'ble Supreme Court observed: “If the profit must necessarily feed a charitable purpose under the terms of the trust, the mere fact that the activities of the trust yield profit will not alter the charitable character of the trust. The restrictive condition that purpose should not involve the carrying on of any activity for profit would be satisfied if profit making is not the object.”

21. In the matter of “Additional CIT vs. Surat Art Silk Cloth Manufactures Association”, (1980) 121 ITR, 1, the Hon'ble Supreme Court held that if the primary or dominant purpose of a trust or institution is charitable, another object which by itself may not be charitable but which is merely ancillary or incidental to the primary or dominant purpose would not prevent the trust or institution from being a valid charity. The court further observed that true meaning of the words in Section 2(15) viz. 'not involving carrying on any activity of profit' is that when the purpose of a trust or institution is advancement of an object of general public utility, it is that object of general public utility which must not involve carrying on of any activity for profit and not its advancement or attainment. The court observed that what is inhibited by these last ten words is the linking of activity for profit with the object of general public utility and not its linking with the accomplishment or carrying out of the object. Thus, so long as purpose does not involve carrying on of any activity for profit, the requirement of definition would be met and it is immaterial how the money's for achieving or implementing such purpose are found whether by carrying on an activity for profit or not.

22. In Andhra Pradesh Road Transport Corporation's case (supra), the Hon'ble Supreme Court while relying upon the earlier decisions in the matter of “Additional CIT vs. Surat Art Silk Cloth Manufactures Association”, (1980) 121 ITR 1 and “CIT vs. Bar Council of Maharashtra”, (1981) 130 ITR 28 (SC), held that if predominant object is to carry out a charitable purpose and not earn profit, the purpose would not lose its charitable character merely because some profit arises from the activity.

23. In Gujarat Maritime Board's case (supra), the Hon'ble Supreme Court after due consideration of various earlier decisions, observed :

“We have perused a number of decisions of this court which have interpreted the words, in section 2 (15), namely , “any other object of general public utility”. From the said decisions it emerges that the said expression is of the widest connotation. The word “general” in the said expression means pertaining to a whole class. Therefore, advancement of any object of benefit to the public or a section of the public as distinguished from benefit to an individual or a group of individuals would be a charitable purpose (CIT v. Ahmedabad Rana Caste Association [(183) 140 ITR 1 (SC)]. The said expression would prima facie include all objects which promote the welfare of the general public. It cannot be said that a purpose would cease to be charitable even if public welfare is intended to be served. If the primary purpose and the predominant object are to promote the welfare of the general public the purpose would be charitable purpose. When an object is to promote or protect the interest of a particular trade or industry that object becomes an object of public utility, but not so, if it seeks to promote the interest of those who conduct the said trade or industry (CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC)]. If the primary or predominant object of an institution is charitable, any other object which might not be charitable but which is ancillary or incidental to the dominant purpose, would not prevent the institution from being a valid charity (Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 (SC)).

The present case in our view is squarely covered by the judgment of this court in the case of CIT v. Andhra Pradesh State Road Transport Corporation [1986] 159 ITR 1 (SC) in which it has been held that since the Corporation was established for the purpose of providing efficient transport system, having no profit motive, though it earns income in the process, it is not liable to income-tax. Applying the ratio of the said judgment in the case of Andhra Pradesh State Road Transport Corporation [1986] 159 ITR 1 (SC), we find that, in the present case, the Gujarat Maritime Board is established for the predominant purpose of development of minor ports within the State of Gujarat, the management and control of the Board is essentially with the State Government and there is no profit motive, as indicated by the provisions of sections 73, 74 and 75 of the 1981 Act. The income earned by the Board is deployed for the development of minor ports in the State of Gujarat. In the circumstances, in our view the judgment of this court in Andhra Pradesh State Road Transport Corporation [1986] 159 ITR 1 squarely applies to the facts of the present case.” (emphasis added)

24. In “Commissioner of Income Tax vs. Krishi Upaj Mandi Samiti, Jaisalmer”, (2011) 331 itr 135 (Raj.), a Bench of this court while considering the entitlement of Krishi Upaj Mandi Samiti, a statutory body, constituted and established under the Rajasthan Agricultural Produce Market Act, 1961, observed that may be the income received by the Samiti by way of cess or mandi fees is not shown to be spent wholly for the purpose of relief of the poor, education, or medical relief, but under the scheme of the Act, being the Rajasthan Agricultural Produce Markets Act, 1961, the entire amount received by the samiti is required to be spent for the purposes mentioned therein, which obviously include advancement of “any other object of general public utility”.

25. In Lucknow Development Authority's case (supra), while examining the question regarding applicability of proviso to Section 2(15), Allahabad High Court observed:

“29. For the applicability of proviso to Section 2(15), the activities of the trust should be carried out on commercial lines with intention to make profit. Where the trust is carrying out its activities on non- commercial lines with no motive to earn profits, for fulfillment of its aims and objectives, which are charitable in nature and in the process earn some profits, the same would not be hit by proviso to section 2(15). The aims and objects of the Mere selling some product at a profit will not ipso facto hit assessee by applying proviso to Section 2(15) and deny exemption available under Section 11. The intention of the trustees and the manner in which the activities of the charitable trust institution are undertaken are highly relevant to decide the issue of applicability of proviso to Section 2(15).”

26. Coming to the decision of Jammu & Kashmir High Court in Jammu Development Authority's case (supra), relied upon by learned counsel for the Revenue, reveals that the appeal preferred by the Jammu Development Authority was dismissed by the court observing that there are findings of facts that the assessee-appellant has not been acting to advance any of the object concerning general public utility. Further while referring to first proviso to Section 2(15), the court has observed that “we find that no substantial question of law much less a substantial question of law would emerge from the impugned order of Income Tax Appellate Tribunal warranting admission of the appeal.” A bare perusal of the order reveals that the catena of decisions of the Hon'ble Supreme Court referred to hereinabove, interpreting the effect of first proviso in context of the main provision of Section 2(15), which defines 'charitable purpose', were not brought to the notice of the court and therefore, the said order passed by the court by merely recording its ipse dixit does not help the Revenue in any manner.

27. From various decisions of the Hon'ble Supreme Court discussed hereinabove, the settled position of law emerges is that if the primary or predominant object of an institution is charitable, any other object which might not be charitable but which is ancillary or incidental to the dominant purpose, may be involving element of profit, would not prevent the institution from being a valid charitable trust.

28. In the backdrop of settled position of law discussed hereinabove, adverting to the facts of the present case, indubitably, JDA is a statutory body constituted and established under the provisions of Section 3 of JDA Act with a main object to secure the integrated development of Jodhpur Region and for that purpose to discharge inter alia the functions of Urban Planning including preparation of Master Development Plan and Zonal Development Plans; formulation and sanction of the projects and schemes for the development of Jodhpur Region or any part thereof; execution of the project and schemes directly by itself or through a local authority or other agency; coordinating execution of projects or schemes for the development of Jodhpur Region supervision or otherwise ensuring adequate supervision over the planning and execution of any project or scheme the expenses of which in whole or in part are to be met from Jodhpur Region Development Funds; preparing schemes and advising the concerned authorities, department and agencies in formulating and undertaking schemes for development of agriculture horticulture, forestry, dairy development, transport, communication, schooling, cultural activities, sports, medicine, tourism and similar other activities; to prepare Master Plan for traffic control and management; devise policy and programmes of action for smooth flow of traffic and matters connected therewith; undertaking housing activity in Jodhpur Region etc., are essentially the functions, which promote the welfare of the general public. Of course, while discharging the said functions, the JDA also discharges function to acquire, hold, manage and dispose of property movable or immovable as may be deemed necessary and also enters into contract, agreements or arrangements with any person or organization may deem necessary for performing its function and in this process, it might be earning income but the primary object of the JDA certainly does not involve any profit motive whatsoever. It is pertinent to note that as per the provisions of Section 51 of the JDA Act, for the purpose of discharging the statutory functions, “The Jodhpur Region Development Fund” is created to which all money received by the authority is credited including amount of contribution to be made by the State Government, such other money as may be paid to the authority by the State Government, Central Government or any other authority or agency by way of grant, loans advances or otherwise, income derived from premium on second and subsequent sale of vacant land, income from levy on vacant land, all fees, costs and charges received by the JDA under the JDA Act or any other law for time being in force, all money received by the JDA from the disposal of land buildings and other property movable and immovable and other transactions including lease money, urban assessment development charges and other similar charges and all money received by way of rents and profits or in any other manner or from any other source. A fortiori, as per the mandate of Section 54 of the JDA Act, all property funds and other assets vesting in the JDA shall be held and applied by it for the purposes and subject to the provisions of the Act. Suffice it to say that the entire funds of the JDA is mandatorily required to be utilized for discharging the functions to achieve the object of integrated development of Jodhpur Region. Thus, predominant object of the JDA being to secure the integrated development of the Jodhpur Region which is undoubtedly falls within the expression 'advancement of any other objects of general public utility' within the definition of Section 2(15) of the Act of 1961 and therefore, on account of profit being earned by it through some of the activities, undertaken by it, which are ancillary or incidental to the main object of general public utility, it does not cease to be charitable in character so as to render it ineligible to claim registration under Section 12A read with Section 12AA of the Act of 1961. As a matter of fact, it is not even the case of the Revenue that the object of general public utility sought to be achieved by constitution and establishment of the JDA as such, involve carrying on of any activity for profit and therefore, it is immaterial if some income is earned by ancillary and incidental activities, which as per the mandate of the relevant statute, is used for achieving or implementing such object. The genuineness of the activities of the JDA, which are regulated by the provisions of the JDA Act and the Rules made thereunder, cannot be doubted. Thus, the order passed by the ITAT holding the JDA, Jodhpur entitled for registration under Section 12A read with Section 12AA of the Act of 1961, does not suffer from any infirmity or illegality.

29. Coming to the question of entitlement of UIT, Sri Ganganagar, for registration under Section 12A of the Act of 1961, as noticed above, the UIT, Sri Ganganagar, a statutory body, has been constituted and established under Section 8 of UIT Act for the purpose of carrying out improvement of urban area of Sri Ganganagar. It is to be noticed that for achieving the object as mandated by Section 29 of the UIT Act, the UIT frames schemes for improvement of the specified urban area, which inter alia may provide for the acquisition of any land or other property necessary or effected by the execution of the scheme; the re-laying out of any land comprised in the scheme; the construction and re-construction of the buildings; the formation, construction and alteration of streets; the closure or demolition of dwellings or portion of the dwellings unfit for human habitation; the draining, water supply and lighting of the streets; the forming of open spaces for the benefits of the area comprised in the scheme or any adjoining area; all or any of the sanitary arrangements required for the area comprised in the scheme; the establishment and construction of the markets and other places of public requirement and convenience; the division of any land into plots for the erection of buildings for residential purposes; the provision of facilities for communication; the reclamation or reservation of the land for garden, afforestation and provision of fuel and grass supply and other needs of population; the planting and preservation of trees and plantation and any other matter for which in the opinion of the State Government it is expedient to make provisions with a view to improvement of the area comprised in scheme or the general efficiency thereof etc.. Undoubtedly, the aforesaid statutory functions which are being discharged by the UIT, are the activities undertaken for welfare of the public at large and certainly, fall within the expression of 'any other object of general public utility', as used in Section 2 (15) of the Act of 1961. It is true that while discharging aforesaid functions to achieve its predominant object of improvement of the urban area specified, the UIT, Sri Ganganagar is also engaged in sale, letting or exchange of any property or land comprised in the scheme and it is also empowered to levy betterment charges in terms of Section 62 of the UIT Act, but then, such activities undertaken by the UIT are apparently incidental and ancillary to its main object of improvement of specified urban area. It is pertinent to note that as per the mandate of Section 61 of the UIT Act, the UIT is under an obligation to constitute a fund to be called 'Improvement Fund' and as per the mandate of sub-section (2) (iii) and (v), all rents, profits and sale proceeds of lands, buildings and other property vested or vesting in or acquired by the trust under the said Act and all fees and charges payable to or received by the trust under the said Act are credited to the said Fund, which is utilised for the achievement of the predominant object of improvement of the urban area. Thus, for the parity of the reasons indicated above, while arriving at the conclusion regarding the entitlement of JDA, Jodhpur for registration under Section 12A read with Section 12 AA of the Act of 1961, the order passed by the ITAT, holding the UIT, Sri Ganganagar entitled for registration under Section 12A read with Section 12AA of the Act of 1961, also cannot be faulted with.

30. In view of the conclusions arrived at as aforesaid, the appeals preferred by the Revenue against the orders of the ITAT, restoring the matters back to the files of Assessing Officer for the assessment year 2004-05, 2006-07 and 2010-11, for passing the assessment orders afresh, also deserve to be dismissed.

31. At this stage, it may be noticed that the JDA, Jodhpur has also preferred an appeal against order dated 19.1.12 of the ITAT denying the registration from the date of creation fo the trust and instead allowing it only from the first day of financial year in which application is made, is pending consideration before this court and therefore, the question with regard to the entitlement of the JDA, Jodhpur, for registration under Section 12A from the date prior to it is allowed by ITAT is not dealt with by this court while deciding these appeals.

32. In the result, the Appeal No.63/12, questioning the legality of the order of the ITAT, Jodhpur dated 19.1.12 in ITA No.508/Jodh/2010 and the Appeal No.92/13, questioning the legality of order dated 18.1.13 passed by the ITAT, Jodhpur in ITA No.169/Jodh/2011, holding the JDA, Jodhpur and UIT, Sri Ganganagar entitled for registration under Section 12A of the Act of 1961, are dismissed. Consequently, the Appeal Nos.95/13, 96/13 and 98/13, directed against a common order of the ITAT dated 18.1.13 of the ITAT, Jodhpur and Appeal No.12/15, directed against order dated 23.7.14 of the ITAT, Jodhpur, are also dismissed. No order as to costs.

(KAILASH CHANDRA SHARMA),J. (SANGEET LODHA),J.