CHHATTISGARH HOUSING BOARD,RAIPUR vs. ASSISTANT COMMISSIONER, EXEMPTION CIRCLE, RAIPUR

At the outset, Shri Shubham Mehta, CA, Ld. Authorized Representative (‘AR’) of the assessee submitted that the assessee came into the existence by the enactment of Chhattisgarh Legislature. The aim and object of the assessee was to provide housing accommodations at reasonable price to all sections of the society particularly to weaker sections and not to earn any profit from trade, commerce and business. Further, the Ld. AR submitted that the appellant assessee had sold housing units on cost to cost basis and had not derived any profit thereon. He drew out attention to the page 50 of the Paper Book to demonstrate that the assessee had not derived any profit from the sale of plots. He categorically submitted that the Income & Expenditure Account of the relevant year included interest income, rental income, etc. which resulted surplus. He contended forcefully that the question of deriving profit as a commercial entity did not arise at all. He argued that the Ld. AO had not brought any material on the record to demonstrate and to establish that the assessee had derived profit by selling its housing units. In support of his contention, Ld. AR relied on the decision of the Hon’ble Supreme Court in the case of CIT v. Andhra Chamber of Commerce [1955] 55 ITR 722, wherein it had been held as under: Chhattisgarh Housing Board vs. ACIT (E), Raipur “The expression 'object of general public utility, however, is not restricted to objects beneficial to the whole of mankind. An object beneficial to a section of the public is an object of general public utility. To serve a charitable purpose, it is not necessary that the object should be to benefit the whole or mankind or even all persons living in a particular country or province. It is sufficient if the intention to benefit a section of the public as distinguished from specified individuals."

Further, the Ld. AR placed reliance on the decision of Hon’ble Supreme Court in the case of Ahmedabad Urban Development Authority [2022] 143 taxmann.com 278 & [2022] 144 taxmann.com 78 (SC) and the Tribunal decision in the case of Raipur Development Authority [ITA No.212 of 2014] (Raipur ITAT). The Ld. AR, placing reliance on the decision of the Hon’ble Supreme Court in Ahmedabad Urban Development Authority (supra), submitted that the objective of housing Authority/Board is for advancement of public development and amount charged by such Authority/Board achieving its objectives did not, prima facie, fall within the purview of commercial receipts merely because a certain consideration had been charged as there was no element of any trade, commerce or business. He contended that neither the Ld. AO nor the Ld. CIT(A) had taken any pain to examine the case in view of the decision of Hon’ble Supreme Court in the case of Ahmedabad Urban Development Authority (supra). Further, he placed reliance on the decision of the Hon’ble Supreme Court in following cases:

The Ld. AR also submitted that the Ld. PCIT/CIT dropped the initiation of cancellation proceedings of registration of the assessee as Trust under section 12AA(3) of the Act vide order dated 08.02.2021.

Shri Raj Kumar Ghosh, CIT-DR, argued all cases except the vehemently. He, placing reliance on the findings of the Ld. CIT(A), defended the orders of Authorities below. Dr. Priyanka Patel, Sr. DR, argued the case; vehemently and defended the orders of the Authorities below.

We have heard both parties and have perused the material available on the record. We find force in the contentions/submissions/arguments of the Ld. AR. Section 2(15), which deals with definition of charitable purpose, reads as under: "charitable purpose" includes relief of the poor, education, yoga, 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:

The definition of “advancement of any other object of General Public Utility” (‘GPU’), which was the subject of interpretation in the case of Ahmedabad Urban Development Authority [2022] 143 taxmann.com 278 & [2022] 144 taxmann.com 78. The Hon’ble Supreme Court has dealt the issue related to the assessees claiming exemption as charitable organizations under the GPU Category. The ‘charitable purposes’ defined in the Act includes activities for the advancement of object of GPU subject to certain prescribed conditions. Various Hon’ble High Courts have interpreted the term ‘GPU’ widely, and by applying the ‘predominant object’ test, have held that carrying on of any trade, commerce or business is per se not a bar or disqualification for a GPU category charitable organizations. Three judges bench of the Hon’ble Supreme Court, in a batch of appeals dealing with more than 100 SLPs where not only Housing Boards such as Ahmedabad Urban Development Authority (AUDA), Gujarat Industrial Development Corporation (GIDC) and Gujarat Housing Board (GHB) etc., Chhattisgarh Housing Board vs. ACIT (E), Raipur Statutory Regulatory Bodies/Authorities such as, Institute of Chartered Accountants of India (ICAI), Andhra Pradesh State Seeds Certification Authority, etc., Trade Promotion Bodies, such as AEPC, Non-Statutory Bodies such as ERNET, NIXI and GS, Sports/Cricket Associations, such as BCCI and State Cricket Associations, Private Trusts, titled as Ahmedabad Urban Development Authority (supra), has interpreted the proviso to section 2(15) of the Act and has also answered the question as to whether the above mentioned categories of assessees were involved in the object of GPU and if so, whether they were carrying on any trade, commerce and business.

The Hon’ble Supreme court, in the case of Ahmedabad Urban Development Authority (supra), while noting the entire history of charitable enactments since early 1900, threadbare dealt with the decisions in case the Indian Chamber of Commerce, Andhra Chamber of Commerce, Surat Art Silk Mills (where predominant object test was applied), Thanti Trust and the law in this regard including the provisions of section 11(4) and 11(4A) and the distinction between these two sections. The Hon’ble Supreme Court also interpreted the relevance of CBDT Circular No. 1/2009 dated 27 March.2009 and Circular No. 11/2008 dated 19 December 2008, FM speech in the parliament as far as interpretation of an enactment was concerned. It has been held by the Hon’ble Supreme Court that section 2(15) of the Act after its amendment in 2008, 2011 and 2015 and thereafter, is that firstly a GPU charity organization is not permitted to engage in any activity in the nature of trade, commerce, business or any Chhattisgarh Housing Board vs. ACIT (E), Raipur service in relation to such activities for any consideration (including a statutory fee etc.). Moreover, rendition of service or providing any article or goods, by such Boards, Authority, Corporation, etc., on cost or nominal mark-up basis would ipso facto not be activities in the nature of business, trade or commerce or service in relation to such business, trade or commerce. On these basis, Statutory Corporations, Boards, Authorities, Trusts, Statutory Regulatory Bodies were held to be engaged in object of GPU (ICAI in relation to other activities carried on by it in addition to education). While holding so the Hon’ble Supreme Court laid down the primary test, that the consideration which is being charged is nominal and marginal above cost will be the decisive factor in determining their existence for charity purposes. In other words, the Hon’ble Supreme Court has further held that the GPU category charitable organizations would fulfil the criteria of ‘charitable purpose’ only if those do not engage in any trade, commerce, business or services in relation thereto for a cess, fee, or consideration. However, as an exception, income from business activity carried out in the course of attaining the object of GPU, would qualify for tax exemption, where the income is within the prescribed threshold and separate books of accounts are maintained. The Hon’ble Supreme Court distinguished the decision in the case of Surat Art ([1980] 2 SSC 31 as it no longer stood good due to amendments in the law. Similarly, the decision in the case of Thanthi Trust [2001] 2SCC 707 was also distinguished on the basis that the said trust was involved in ‘education’ and advancing GPU was not its objective. Chhattisgarh Housing Board vs. ACIT (E), Raipur

The Hon’ble Supreme Court in the case of Ahmedabad Urban Development Authority (supra) has further held that not every state activity resembling commerce may be considered taxable. Section 11(4A) of the Act is to be interpreted together with section 2(15) of the Act, with which there is no conflict. Carrying out an activity in the nature of trade, commerce, or business, or a related service, is conducted in the course of achieving the GPU object, and the income, profit, surplus, or gains must therefore be incidental. The requirement in section 11(4A) to maintain separate books of account also is aligned with the necessity of demonstrating that the quantitative limit prescribed in the proviso to section 2(15) of the Act has not been breached. The Hon’ble Supreme Court in the case of Ahmedabad Urban Development Authority (supra), in the cases of Statutory Corporation, Board, or any other body set-up by the State or Central Government, has held that they discharge public functions which may resemble trade, commercial, or business activities, but it is essential for advancement of public purposes/functions. The assessee in present case, a Statutory Corporation, is discharging public functions resembling trade, commercial, or business activities, but it is essential for advancement of public purposes/functions. However, since its objects are essential for advancement of public purposes or functions, its receipts are prima facie to be excluded from the scope of business or commercial receipts in case the assessee has not charged over & above the nominal mark-up which should be sufficient for its survival & reasonable growth over the years. Such receipts, as per the decision of the Hon’ble Supreme Court in the case of Ahmedabad Urban Development Authority (supra), are prima facie Chhattisgarh Housing Board vs. ACIT (E), Raipur have to be excluded from the mischief of business or commercial receipts. In this decision, the Hon’ble Supreme Court has directed the Revenue/AO to determine the nature of activities carried out and consideration/fees charged for the same. The Hon’ble Supreme Court has held that the crucial & determinative element in a Statutory Body, like the assessee in case in hand, is whether performance of a function is driven by profit motive. If the consideration/fees charged is significantly higher than the costs incurred, such income would be subject to the prescribed quantitative threshold and may lose benefit of tax exemption. The Hon’ble Supreme Court directed the Central Government may, on a case-to-case basis, decide whether and to what extent exemption can be awarded to such bodies by notifying them. Thereafter, section 10(46A) of the Act came into statute.

The Hon’ble Supreme Court in the case of Ahmedabad Urban Development Authority (supra) has held that the Act does not only envisage pure charity, i.e., charitable activities with no consideration. Where GPU category charitable organizations involve incidental activities with a consideration, it can be granted exemption provided the receipts from such activities are within the prescribed threshold. Similarly, statutory boards and authorities, which are under section 11(4A) of the Act mandate to develop housing, industrial and other estates at reasonable or subsidized costs and which might entail charging higher amounts from some section of the beneficiaries to cross-subsidize the main activity, cannot be characterized as engaging in business. Where a fee or consideration charged for an activity (advancing GPU objective) is nominal and only covers the cost Chhattisgarh Housing Board vs. ACIT (E), Raipur (including administrative expenses) or includes a nominal mark-up, it cannot be construed to be ‘trade, commerce, or business’. However, where the consideration/fees charged for an activity is substantial or significantly above the cost, such activity would fall within the ambit of ‘trade, commerce, or business’. The Hon’ble Supreme Court also provided certain instances where even though consideration is charged, it would not be construed to be in the nature of business income. This includes providing low-cost hotels, renting marriage halls for low amounts, blood bank services with fees only to cover costs, etc. The Hon’ble Supreme Court in the case of Ahmedabad Urban Development Authority (supra) has also deliberated on the availability of tax exemption to different types of charitable bodies, such as statutory organizations, regulatory bodies, trade associations, etc., under GPU category.

We have heard both parties at length and have perused the material available on record. We are of the considered view that this case is squarely covered by the decision of the Hon’ble Supreme Court in the case of Ahmedabad Urban Development Authority (supra). In view of the above observations/ comments/details, we, following the reasoning given by the Hon’ble Supreme Court in its decision in the case of Ahmedabad Urban Development Authority (supra), set aside the impugned order and remand the matter back to the file of the Ld. AO to examine that whether the consideration charged for residential units/plots by the appellant assessee is substantial or significantly above the cost plus nominal mark-up. In case, the Ld. AO finds that there is no element of profit in Chhattisgarh Housing Board vs. ACIT (E), Raipur the activates carried out by the assessee, the exemption under section 11 of the Act has to be allowed to the assessee as per law, otherwise not.

In the result, this appeal of the assessee is allowed as above for statistical purposes. to 653/RPR/2025 is held applicable mutatis mutandis in these cases/appeals also.

In the result, these appeals of the assessee are allowed as above for statistical purposes.

In the result, all appeals of the assessee are allowed as above for statistical purposes.