Holding

A GPU charity can carry on trade, commerce, or business or provide services in relation thereto for consideration only if such activity is in the course of actual carrying out of its GPU object and the aggregate receipts from such activity do not exceed 20% of total receipts (or earlier limits), and charging on cost or nominal basis is not considered trade, commerce, or business.

Summary

The Supreme Court interpreted the proviso to Section 2(15) of the Income Tax Act, 1961, which defines 'charitable purpose' for entities advancing 'any other object of general public utility' (GPU). The Court held that a GPU charity cannot engage in trade, commerce, or business, or provide services in relation thereto, for any consideration (cess, fee, or other consideration). However, such activities are permissible if they are undertaken in the course of actually carrying out the GPU object and the aggregate receipts from such activities do not exceed 20% of the total receipts of the previous year (or earlier limits of Rs. 10 lakhs or Rs. 25 lakhs). Charging amounts on a cost basis or with a nominal markup is not considered trade, commerce, or business. The Court clarified that Section 11(4A) must be read harmoniously with Section 2(15), and the requirement of maintaining separate books of account ensures compliance with the quantitative limit. The judgment also addressed various categories of assessees: statutory corporations, regulatory bodies, trade promotion bodies, non-statutory bodies, sports associations, and private trusts, providing specific guidance for each. The appeals were disposed of with different outcomes: revenue's appeals against statutory bodies were rejected; against cricket associations were remitted; against GS1 India were allowed; and against the Tribune Trust were dismissed.

Issues considered

Whether the proviso to Section 2(15) of the Income Tax Act, 1961, prohibits GPU charities from engaging in any activity in the nature of trade, commerce, or business, or rendering any service in relation thereto, for a cess, fee, or any other consideration.
Whether such activities are permissible if they are incidental to the attainment of the GPU object and the income is ploughed back into the charity.
What is the correct interpretation of the terms 'trade, commerce, or business', 'service in relation to any trade, commerce, or business', and 'cess, fee, or any other consideration' in the context of GPU charities.
Whether statutory corporations, regulatory bodies, trade promotion bodies, non-statutory bodies, sports associations, and private trusts can claim exemption as GPU charities under the amended Section 2(15).
Whether the quantitative limit of 20% of total receipts (or earlier limits) applies to receipts from activities in the nature of trade, commerce, or business.
Whether Section 11(4A) and other provisions (Section 13(8), seventeenth proviso to Section 10(23C), third proviso to Section 143(3)) are consistent with the amended definition of charitable purpose.

Legislation cited

Chartered Accountants Act, 1949s. 15, s. 15A, s. 18, s. 19, s. 21A, s. 21B, s. 21C
Gujarat Housing Board Act, 1961
Gujarat Industrial Development Act, 1962s. 32(2)
Gujarat Maritime Board Act, 1981s. 20, s. 25(2), s. 3(2), s. 32, s. 73, s. 74, s. 75, s. 76
Gujarat Town Planning and Urban Development Act, 1976s. 40, s. 91, s. 95
Income Tax Act, 1961s. 10(23C), s. 10(46), s. 11(4), s. 11(4A), s. 12AA, s. 13(1)(bb), s. 13(8), s. 143(3), s. 2(15)
Karnataka Industrial Areas Development Act, 1966s. 28, s. 29, s. 3, s. 43, s. 46, s. 5, s. 6
Seeds Act, 1966s. 11, s. 8

Subjects

Income TaxCharitable PurposeGeneral Public UtilityTrade Commerce BusinessTax ExemptionInterpretation of StatuteSection 2(15)Section 11(4A)Statutory CorporationsRegulatory BodiesTrade Promotion BodiesSports AssociationsPrivate Trusts

Judgment

[2022] 15 S.C.R. 899 899

ASSISTANT COMMISSIONER OF INCOME TAX A
(EXEMPTIONS)
v.
AHMEDABAD URBAN DEVELOPMENT AUTHORITY
(Civil Appeal No. 21762 of 2017) B
OCTOBER 19, 2022
[UDAY UMESH LALIT, CJI, S. RAVINDRA BHAT AND
PAMIDIGHANTAM SRI NARASIMHA, JJ.]
Income Tax Act 1961: ss. 2(15) proviso – Tax exemption –
C
Claim of, by Charitable institutions advancing an object of generally
public utility-GPU – ‘Charitable Purpose’ – Interpretation of – Term
of “any other object of generally public utility not being charitable
purpose if it involves the carrying on of any activity in the nature of
trade, commerce or business or any activity of rendering any service
in relation to any trade, commerce or business, for a cess or fee or D
any other consideration, irrespective of the nature of use or
application, or retention, of the income from such activity” –
Interpretation and scope of – Held: Assessee advancing general
public utility cannot engage itself in any trade, commerce or business,
or provide service in relation thereto for any consideration, “cess,
E
or fee, or any other consideration” – However, in the course of
achieving the object of general public utility, the concerned trust,
society, or other such organization, can carry on trade, commerce
or business or provide services in relation thereto for consideration,
provided that the activities of trade, commerce or business are
connected to the achievement of its objects of GPU; and the receipt F
from such business or commercial activity or service in relation
thereto, does not exceed 20% of total receipts of the previous year
– Charging of any amount towards consideration for an activity
advancing general public utility, which is on cost-basis or nominally
above cost, cannot be considered to be “trade, commerce, or
G
business” or any services in relation thereto – It is only when the
charges are markedly or significantly above the cost incurred by
the assessee, that they would fall within the mischief of “cess, or
fee, or any other consideration” towards “trade, commerce or
business” – Section 11(4A) must be interpreted harmoniously with
s. 2(15), the requirement in s. 11(4A) of maintaining separate books H
899
900 SUPREME COURT REPORTS [2022] 15 S.C.R.

A of account is also in line with the necessity of demonstrating that
the quantitative limit prescribed in the proviso to s. 2(15), has not
been breached – ss. 10(23C), 13(8), 11(4A) and 143(3).
s. 11(4), 11(4A) – Business held under Trust and Trust carrying
on business – Distinction between – Discussed.
B ss. 2(15) – Tax exemption, claim of by the Statutory
corporations, authorities or bodies; Statutory regulatory bodies/
authorities; Trade Promotion bodies, councils, associations or
organizations; Non-statutory bodies-ERNET, NIXI and GS1 India;
State Cricket Associations;and Private trusts as a General Public
C Utility charity – Certain kinds of income or receipts, may not be
characterized as derived from trade, commerce or business in relation
to activities of General Public Utility, for a consideration – Held:
As regards, Statutory Authorities, corporations, or bodies receipts
are prima facie to be excluded from the mischief of business or
commercial receipts, since their objects are essential for
D advancement of public purposes/functions – However, if the
consideration or amounts charged are significantly higher than the
cost and a nominal mark-up, then the receipts would indicate that
the activities are in fact in the nature of “trade, commerce or business”
and would have to comply with the quantified limit in the proviso to
E s. 2(15) – For the Statutory regulators, to be considered as one with
‘charitable purpose’ eligible for exemption under the IT Act, the
overall quantitative limit prescribed in the proviso to s. 2(15) (as
amended from time to time) has to be complied with – Trade
promotion bodies involved in advancement of objects of general
public utility can claim exemption – However, income or receipts
F for providing the additional services would be business or commercial
in nature – As regards, non-statutory bodies performing public
functions, such as ERNET and NIXI are engaged in important public
purposes – Fees or consideration charged by them for the purposes
provided are nominal – However, their claim have to be ascertained
G on year to year basis – Further, GSI India is involved in
advancement of general public utility, its services are for the benefit
of trade and business, from which they receive significantly high
receipts – Therefore, GSI India is not eligible for the exemption –
Private Trusts-Tribune Trust cannot benefit from exemption offered
to entities covered by s. 2(15) as the income received from
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 901
URBAN DEVELOPMENT AUTHORITY

advertisements, constituted business or commercial receipts – Limit A
prescribed in the proviso to s. 2(15) has to be adhered to for the
Trust’s claim of being as a charity eligible for exemption – So far as
Sports associations is concerned, matter requires further scrutiny.
Interpretation of Statute : Aids to Interpretation – History of
legislation, other extrinsic aids to construction of the statute, viz, B
speeches in Parliament and departmental circulars – Relevance of
– Explained.
Disposing of the appeals, the Court
HELD: 1.1 As regards the general test under Section 2(15)
of the Income Tax Act, 1961, it is clarified that an assessee C
advancing general public utility cannot engage itself in any trade,
commerce or business, or provide service in relation thereto for
any consideration (“cess, or fee, or any other consideration”).
However, in the course of achieving the object of general public
utility, the concerned trust, society, or other such organization, D
can carry on trade, commerce or business or provide services in
relation thereto for consideration, provided that (i) the activities
of trade, commerce or business are connected (“actual carrying
out...” inserted w.e.f. 01.04.2016) to the achievement of its objects
of GPU; and (ii) the receipt from such business or commercial
activity or service in relation thereto, does not exceed the E
quantified limit, as amended over the years (Rs. 10 lakhs w.e.f.
01.04.2009; then Rs. 25 lakhs w.e.f. 01.04.2012; and now 20% of
total receipts of the previous year, w.e.f. 01.04.2016). Generally,
the charging of any amount towards consideration for such an
activity (advancing general public utility), which is on cost-basis F
or nominally above cost, cannot be considered to be “trade,
commerce, or business” or any services in relation thereto. It is
only when the charges are markedly or significantly above the
cost incurred by the assessee in question, that they would fall
within the mischief of “cess, or fee, or any other consideration”
towards “trade, commerce or business”. Iit is clarified as to what G
kind of services or goods provided on cost or nominal basis would
normally be excluded from the mischief of trade, commerce, or
business. Section 11(4A) must be interpreted harmoniously with
Section 2(15), with which there is no conflict. Carrying out activity
in the nature of trade, commerce or business, or service in relation H
902 SUPREME COURT REPORTS [2022] 15 S.C.R.

A to such activities, should be conducted in the course of achieving
the GPU object, and the income, profit or surplus or gains must,
therefore, be incidental. The requirement in Section 11(4A) of
maintaining separate books of account is also in line with the
necessity of demonstrating that the quantitative limit prescribed
in the proviso to Section 2(15), has not been breached. Similarly,
B
the insertion of Section 13(8), seventeenth proviso to Section
10(23C) and third proviso to Section 143(3) (all w.r.e.f.
01.04.2009), reaffirm this interpretation and bring uniformity
across the statutory provisions. [Para 253][1058-C-H; 1059-A-
C]
C 1.2 The amounts or any money whatsoever charged by a
statutory corporation, board or any other body set up by the state
government or central governments, for achieving what are
essentially ‘public functions/services’ (such as housing, industrial
development, supply of water, sewage management, supply of
D food grain, development and town planning, etc.) may resemble
trade, commercial, or business activities. However, since their
objects are essential for advancement of public purposes/
functions (and are accordingly restrained by way of statutory
provisions), such receipts are prima facie to be excluded from
the mischief of business or commercial receipts. However, at
E the same time, in every case, the assessing authorities would
have to apply their minds and scrutinize the records, to determine
if, and to what extent, the consideration or amounts charged are
significantly higher than the cost and a nominal mark-up. If such
is the case, then the receipts would indicate that the activities
F are in fact in the nature of “trade, commerce or business” and as
a result, would have to comply with the quantified limit (as
amended from time to time) in the proviso to Section 2(15) of the
IT Act. [Para 253 B.1, B.2][1059-C-G]
1.3 In clause (b) of Section 10(46) of the IT Act,
G “commercial” has the same meaning as “trade, commerce,
business” in Section 2(15) of the IT Act. Therefore, sums charged
by such notified body, authority, Board, Trust or Commission (by
whatever name called) will require similar consideration – i.e.,
whether it is at cost with a nominal mark-up or significantly higher,
to determine if it falls within the mischief of “commercial activity”.
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 903
URBAN DEVELOPMENT AUTHORITY

However, in the case of such notified bodies, there is no quantified A
limit in Section 10(46). Therefore, the Central Government would
have to decide on a case-by-case basis whether and to what extent,
exemption can be awarded to bodies that are notified under
Section 10(46). For the period 01.04.2003 to 01.04.2011, a
statutory corporation could claim the benefit of Section 2(15)
B
having regard to the judgment of this Court in the Gujarat
Maritime Board’s case. Likewise, the denial of benefit under
Section 10(46) after 01.04.2011 does not preclude a statutory
corporation, board, or whatever such body may be called, from
claiming that it is set up for a charitable purpose and seeking
exemption under Section 10(23C) or other provisions of the Act. C
[Para 253, B-3, B-4][1059-G-H; 1060-A-D]
1.4 The income and receipts of statutory regulatory bodies
which are for instance, tasked with exclusive duties of prescribing
curriculum, disciplining professionals and prescribing standards
of professional conduct, are prima facie not business or D
commercial receipts. However, this is subject to the caveat that
if the assessing authorities discern that certain kinds of activities
carried out by such regulatory body involved charging of fees
that are significantly higher than the cost incurred (with a nominal
mark-up) or providing other facilities or services such as
admission forms, coaching classes, registration processing fees, E
etc., at markedly higher prices, those would constitute commercial
or business receipts. In that event, the overall quantitative limit
prescribed in the proviso to Section 2(15) (as amended from time
to time) has to be complied with, if the regulatory body is to be
considered as one with ‘charitable purpose’ eligible for exemption F
under the IT Act. Like statutory authorities which regulate
professions, statutory bodies which certify products (such as
seeds) based on standards for qualification, etc. will also be
treated similarly. [Para 253, C.1, C.2][1060-D-G]
1.5 Bodies involved in trade promotion (such as AEPC), or G
set up with the objects of purely advocating for, coordinating and
assisting trading organisations, can be said to be involved in
advancement of objects of general public utility. However, if such
organisations provide additional services such as courses meant

H
904 SUPREME COURT REPORTS [2022] 15 S.C.R.

A to skill personnel, providing private rental spaces in fairs or trade
shows, consulting services, etc. then income or receipts from
such activities, would be business or commercial in nature. In
that event, the claim for tax exemption would have to be again
subjected to the rigors of the proviso to Section 2(15) of the IT
Act. [Para 253, D][1060-G-H; 1061-A-B]
B
1.6 Non-statutory bodies performing public functions, such
as ERNET and NIXI are engaged in important public purposes.
The materials on record show that fees or consideration charged
by them for the purposes provided are nominal. In the
circumstances, it is held that the said two assessees are driven
C by charitable purposes. However, the claims of such non- statutory
organisations performing public functions, will have to be
ascertained on a yearly basis, and the tax authorities must discern
from the records, whether the fees charged are nominally above
the cost, or have been increased to much higher levels. It is held
D that though GS1 India is in fact, involved in advancement of
general public utility, its services are for the benefit of trade and
business, from which they receive significantly high receipts. In
the circumstances, its claim for exemption cannot succeed having
regard to amended Section 2(15). However, the Court does not
rule out any future claim made and being independently assessed,
E if GS1 is able to satisfy that what it provides to its customers is
charged on cost-basis with at the most, a nominal markup. [Para
253 E.1, E.2][1061-B-F]
1.7 So far as the state cricket associations are concerned
(Saurashtra, Gujarat, Rajasthan, Baroda, and Rajkot), the matter
F requires further scrutiny. Accordingly, a direction is issued that
the AO shall adjudicate the matter afresh after issuing notice to
the concerned assessees and examining the relevant material
indicated in the previous paragraphs of this judgment.
Furthermore, if any consequential order needs to be issued, the
G same shall be done and resulting actions, including assessment
orders shall be passed in accordance with the law under relevant
provisions of the IT Act. [Para 253, F][1061-F-H]
1.8 So far as the appeal by assessee-Tribune Trust is
concerned, despite advancing general public utility, the Trust
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 905
URBAN DEVELOPMENT AUTHORITY

cannot benefit from exemption offered to entities covered by A
Section 2(15) as the records reveal that income received from
advertisements, constituted business or commercial receipts.
Consequently, the limit prescribed in the proviso to Section 2(15)
has to be adhered to for the Trust’s claim of being as a charity
eligible for exemption, to succeed. Therefore, despite differing
B
reasoning, the impugned judgment of the High Court does not
call for interference. [Para 253, G][1062-A-C]
2.1 The limited relief, given by the second proviso to s.
2(15) of the Income Tax Act, 1961, to ‘general public utility’ –
GPU charities (for the period 2009-2015) was that in case such
GPU category charities did carry on activities undertaken in the C
course of actual carrying out of their GPU objects that were in
the nature of trade, commerce or business, or rendered any
service in relation to trade, business, etc., and collected fee, cess,
or other consideration, such income could still be exempt, if it
did not exceed 10,00,000 (and later, 25,00,000). By the D
amendment of 2015, the second proviso was deleted and two
conditions were introduced, with respect to permissibility of
carrying on trade, commerce, etc: (i) such activity is undertaken
in the course of actual carrying out of such advancement of any
other object of general public utility; and (ii) the aggregate
receipts from such activity or activities during the previous year, E
do not exceed twenty percent of the total receipts, of the trust or
institution undertaking such activity or activities, of that previous
year. [Para 136][997-C-F]
2.2 Parliamentary endeavour, was to alter the regime
applicable to taxation of GPU category charities, under the IT F
Act. The absolute bar imposed on GPU charities from carrying
on activities in the nature of trade, commerce or business, or of
rendering any service in relation to any trade, commerce or
business, for a cess or fee or any other consideration, evidences
this intent. The original Section 2(15) did not allude to trade, G
commerce or business, or any service in relation to such activities.
It only enjoined the GPU charities from involving themselves
from carrying on of any activity for profit 127 (which was

H
906 SUPREME COURT REPORTS [2022] 15 S.C.R.

A interpreted in Surat Art Silk). This substantial change brought
about by the amendments of 2008 -2012 and 2015 is the
prohibition from engaging in any kind of activity in the nature of
business, commerce, or trade or any rendering any service in
relation thereto, and earning income by the way of cess, fee or
consideration. The express deletion of the reference to ‘activity
B
for profit’ on the one hand, and the enactment of an expanded list
of what cannot be done by GPU charities if they are to retain
their characteristic as charities, is an emphatic manner in which
Parliament wished to express itself. [Para 138][998-A-D]
2.3 Not every state activity resembling commerce can be
C considered per se exempt from union taxation, in the context of
Article 289. Mere sale or lease of government property does
not imply trade or business. The crucial or determinative element
in the venture, so to say, is whether performance of a function is
actuated by profit motive. The careful analysis of the amended
D proviso to Section 2(15), reveal that the prohibition applies in a
four-fold manner- (a) The bar to engaging in trade, commerce or
business, (b)The bar to providing any service in relation to trade,
commerce or business, (c) wherein “for a fee, cess or any other
consideration” is the controlling phrase for both (a) and (b) (which
are collectively referred to as “prohibited activities” for brevity)
E (d) irrespective of the application of the income derived from
such ‘prohibited activities’. [Para 141, 142][1001-F-H; 1002-A-
B]
2.4 The impermissibility of any trade, or commercial activity
or service, and income, from them, was intended to be conveyed
F through the prohibition, in the first part of the definition of GPU
charities. The necessary implication which arises is that income
(received as fee, cess, or any other consideration) derived from
such ‘prohibited activities’ is necessarily motivated by profit. The
ordinary meaning of fee or consideration would be synonymous
G with something of value, usually in monetary terms. However,
the use of the expression “cess” facially lends a different colour
to all the three expressions. [Para 143][1002-B-D]
2.5 “Fee, cess and any other consideration” has to receive
a purposive interpretation, in the present context. If fee or cess
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 907
URBAN DEVELOPMENT AUTHORITY

or such consideration is collected for the purpose of an activity, A
by a state department or entity, which is set up by statute, its
mandate to collect such amounts cannot be treated as
consideration towards trade or business. Therefore, regulatory
activity, necessitating fee or cess collection in terms of enacted
law, or collection of amounts in furtherance of activities such as
B
education, regulation of profession, etc., are per se not business
or commercial in nature. Likewise, statutory boards and
authorities, who are under mandate to develop housing, industrial
and other estates, including development of residential housing
at reasonable or subsidized costs, which might entail charging
higher amounts from some section of the beneficiaries, to cross- C
subsidize the main activity, cannot be characterized as engaging
in business. The character of being ‘state’, and such corporations
or bodies set up under specific laws (whether by states or the
centre) would, therefore, not mean that the amounts are ‘fee’ or
‘cess’ to provide some commercial or business service. In each
D
case, at the same time, the mere nomenclature of the
consideration being a “fee” or “cess”, is not conclusive. If the
fee or cess, or other consideration is to provide an essential
service, in larger public interest, such as water cess or sewage
cess or fee, such consideration, received by a statutory body,
would not be considered “trade, commerce or business” or E
service in relation to those. Non-statutory bodies, on the other
hand, which may mimic regulatory or development bodies - such
as those which promote trade, for a section of business or industry,
or are aimed at providing facilities or amenities to improve
efficiencies, or platforms to a segment of business, for fee,
F
whether charged by subscription, or specific fee, etc, may not be
charitable; when they claim exemption, their cases would require
further scrutiny. [Para 144][1002-D-H; 1003-A-B]
2.6 What Parliament intended – through the amendments
in question was to proscribe, involvement or engagement of GPU
charities, from any form (“in the nature of”) of activities that were G
trade, business or commerce, or engage or involve in providing
services in relation to trade, business or commerce- for a fee,
cess or other consideration. The inclusion of the term “in the
nature of” was by design, to clarify beyond doubt, that not only
H
908 SUPREME COURT REPORTS [2022] 15 S.C.R.

A business, trade or commerce, but all activities in the nature of,
or resembling them, were proscribed. Likewise, service in
relation to such activities, i.e., services relating, or pertaining
to, such proscribed activities, too were forbidden. The reference
to fee or cess, is in the opinion of the court, only to emphasize
that even a statutory consideration, for a service to business,
B
trade or commerce, would take the activity outside the definition
of a GPU charity. The sense in which the expressions “cess, fee
or other consideration” are used, is that if any amount, is received
for trading, or business or commercial activity, or any services to
such activity, then, notwithstanding their nomenclature (as fee
C or cess, i.e. that they are fixed under a law) the GPU charity cannot
claim tax exempt status. To bring home this even more pointedly-
and underline a break from the past, the application of such
amounts (received in the course of trade, commerce, or business,
or towards services in relation thereto) would be irrelevant, as
evidenced by the term “irrespective”, in the fourth limb of
D
reading Section 2(15). [Paras 150, 151][1006-D-H]
2.7 Section 2(15) - in the wake of its several amendments
between 2008 and 2015 - can be juxtaposed with the
interpretation of the unamended Section 2(15) by this Court. In
Surat Art Silk’s case, the principle enunciated was that so long as
E the predominant object of GPU category charity is charitable, its
engagement in a non-charitable object resulting in profits that
are incidental, is permissible. Profits and gains from such activities
which were non-charitable had to be deployed or “fed” back to
achieve the dominant charitable object. The paradigm change
F achieved by Section 2(15) after its amendment in 2008 and as it
stands today, is that firstly a GPU charity cannot engage in any
activity in the nature of trade, commerce, business or any service
in relation to such activities for any consideration (including a
statutory fee etc.). This is emphasized in the negative language
employed by the main part of Section 2(15). Therefore, the idea
G of a predominant object among several other objects, is discarded.
The prohibition is relieved to a limited extent, by the proviso
which carves out the condition by which otherwise prohibited
activities can be engaged in by GPU charities. The conditions
are; that such activities in the nature of trade, commerce, business
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 909
URBAN DEVELOPMENT AUTHORITY

or service (in relation to trade, commerce or business for A
consideration) should be in the course of “actual carrying on” of
the GPU object, and the quantum of receipts from such activities
should be exceed 20% of the total receipts. Both parts of the
proviso: (i) and (ii) (to Section 2 (15)) have to be read
conjunctively-given the conscious use of “or” connecting the two
B
of them. This means that if a charitable trust carries on any activity
in the nature of business, trade or commerce, in the actual course
of fulfilling its objectives, the income from such business, should
not exceed the limit defined in sub-clause (ii) to the proviso. [Paras
152, 153][1007-A-G]
2.8 What has to be examined, therefore, is whether the C
business itself is held under trust or is carried on by and on behalf
of the trust. Importantly Section 11(1) of the Act starts with the
expression “subject to the provisions of Sections 60 to 63........”.
Those provisions are in Chapter V of the Act. Section 60 provides
for the consequences of a transfer of income where there is no D
transfer of assets. It says that where a person transfers merely
the income from an asset without transferring the asset itself, he
would continue to be chargeable to income tax. Section 61
provides for the consequences of a revocable transfer of assets
and says that the same would be the position where a person is in
receipt of income by virtue of a revocable transfer of assets. E
Section 62 provides for the consequences of a transfer of assets
for a specified period, and serves as an exception to Section 61.
An assessee has to be divested of the asset before ceasing to be
assessable in respect of the income from it. A mere direction
that the income from the business shall be applied to the charitable F
objects of a trust, without there being a settlement of the business
itself upon trust, does not result in any trust or legal obligation.
[Para 163][1012-F-H; 1013-A-B]
2.9 The journey which began with Surat Art Silk’s case was
interpreted in Thanthi Trust’s case to mean that the carrying on G
of business by GPU charity was permissible as long as it inured
to the benefit of the trust. The change brought about by the
amendments in questions, however, place the focus on an entirely
different perspective: that if at all any activity in the nature of

H
910 SUPREME COURT REPORTS [2022] 15 S.C.R.

A trade, commerce or business, or a service in the nature of the
same, for any form of consideration is permissible, that activity
should be intrinsically linked to, or a part of the GPU category
charity’s object. Thus, the test of the charity being driven by a
predominant object is no longer good law. Likewise, the ambiguity
with respect to the kind of activities generating profit which could
B
feed the main object and incidental profit-making also is not good
law. What instead, the definition under Section 2(15) through its
proviso directs and thereby marks a departure from the previous
law, is – firstly that if a GPU charity is to engage in any activity in
the nature of trade, commerce or business, for consideration it
C should only be a part of this actual function to attain the GPU
objective and, secondly – and the equally important consideration
is the imposition of a quantitative standard - i.e., income (fees,
cess or other consideration) derived from activity in the nature
of trade, business or commerce or service in relation to these
three activities, should not exceed the quantitative limit of
D
10,00,000 (w.e.f. 01.04.2009), 25,00,000 (w.e.f. 01.04.2012),
and 20% (w.e.f. 01.04.2016) of the total receipts. Lastly, the
“ploughing” back of business income to “feed” charity is an
irrelevant factor – again emphasizing the prohibition from
engaging in trade, commerce or business. [Para 167][1014-A-F]
E 2.10 If one understands the definition in the light of the
above enunciation, the sequitur is that the reference to “income
being profits and gains of business” with a further reference to
its being incidental to the objects of the Trust, cannot and does
not mean proceeds of activities incidental to the main object,
F incidental objects or income derived from incidental activities.
The proper way of reading reference to the term “incidental” in
Section 11(4A) is to interpret it in the light of the sub-clause (i) of
proviso to Section 2(15), i.e., that the activity in the nature of
business, trade, commerce or service in relation to such activities
should be conducted actually in the course of achieving the GPU
G object, and the income, profit or surplus or gains can then, be
logically incidental. The amendment of 2016, inserting sub clause
(i) to proviso to Section 2(15) was therefore clarificatory. Thus
interpreted, there is no conflict between the definition of charitable
purpose and the machinery part of Section 11(4A). Further, the
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 911
URBAN DEVELOPMENT AUTHORITY

obligation under Section 11(4A) to maintain separate books of A
account in respect of such receipts is to ensure that the
quantitative limit imposed by sub-clause (ii) to Section 2(15) can
be computed and ascertained in an objective manner. [Para
168][1014-F-H; 1015-A-B]
2.11 The conclusion recorded is also supported by the B
language of seventh proviso 142 to Section 10(23C). Whereas
Section 2(15) is the definition clause, Section 10 lists out what is
not income. Section 10(23C) – by sub-clauses (iv) and (v) exempt
incomes of charitable organisations. Such organisations and
institutions are not limited to GPU category charities but rather
extend to other types of charities (i.e. the per se kind as well). C
The controlling part of Section 10(23C) along with the relevant
clauses (iv) and (v) seek to exclude income received by the
concerned charities. However, the provisos hedge such
exemption with conditions. The seventh proviso - much like
Section 11(4A) and the definition - carve out an exception, to the D
exemptions such that income derived by charities from business,
are not exempt. The seventh proviso virtually echoes Section
11(4A) in that business income derived by a charity (in the present
case, the GPU charities) which arises from an activity incidental
to the attainment of its objective is not per se excluded. [Para
169][1015-B-E] E
2.12 Classically, the idea of charity was tied up with
eleemosynary. However, “charitable purpose” – and charity as
defined in the Act have a wider meaning where it is the object of
the institution which is in focus. Thus, the idea of providing
services or goods at no consideration, cost or nominal F
consideration is not confined to the provision of services or goods
without charging anything or charging a token or nominal amount.
Therefore, pure charity in the sense that the performance of an
activity without any consideration is not envisioned under the
Act. If one keeps this in mind, what Section 2(15) emphasizes is
G
that so long as a GPU’s charity’s object involves activities which
also generates profits (incidental, or in other words, while actually
carrying out the objectives of GPU, if some profit is generated),
it can be granted exemption provided the quantitative limit (of
not exceeding 20%) under second proviso to Section 2(15) for
receipts from such profits, is adhered to. Yet another manner of H
912 SUPREME COURT REPORTS [2022] 15 S.C.R.

A looking at the definition together with Sections 10(23) and 11 is
that for achieving a general public utility object, if the charity
involves itself in activities, that entail charging amounts only at
cost or marginal mark up over cost, and also derive some profit,
the prohibition against carrying on business or service relating
to business is not attracted - if the quantum of such profits do not
B
exceed 20% of its overall receipts. [Para 170-172][1015-E-G;
1016-C-E]
2.13 The insertion of Section 13(8), the seventeenth proviso
to Section 10(23C) and third proviso to Section 143(3) (all of which
were inserted by Finance Act, 2012, but w.r.e.f. 01.04.2009),
C further reinforces the interpretation of this Court, of “charitable
purpose”. These provisions, form the machinery to control the
conditions under which income is exempt. The effect of the
seventeenth proviso to Section 10(23C) is to impose the same
condition i.e., that that the trade, commerce or business activity
D or service relating to trade, business or commerce, should be
part of the GPU’s activities, to achieve its object of advancing
general public utility. The other condition– which is drawn in as
part of the exemption condition, is that if such trading or
commercial activity takes place the receipts should be confined
to a prescribed percentage of the overall receipts. Section 13(8)
E too reinforces the same condition. [Para 174][1017-B-D]
2.14 The change intended by Parliament through the
amendment of Section 2(15) was sought to be emphasised and
clarified by the amendment of Section 10(23C) and the insertion
of Section 13(8). This was Parliaments’ emphatic way of saying
F that generally no commercial or business or trading activity ought
to be engaged by GPU charities but that in the course of their
functioning of carrying out activities of general public utility, they
can in a limited manner do so, provided the receipts are within
the limit spelt out in Clause (ii) of the proviso to Section 2(15).
G [Para 175][1017-D-F]
3. The conclusions arrived at by way of this judgment,
neither precludes any of the assessees (whether statutory, or
non-statutory) advancing objects of general public utility, from
claiming exemption, nor the taxing authorities from denying
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 913
URBAN DEVELOPMENT AUTHORITY

exemption, in the future, if the receipts of the relevant year A
exceed the quantitative limit. The assessing authorities must on
a yearly basis, scrutinize the record to discern whether the nature
of the assessee’s activities amount to “trade, commerce or
business” based on its receipts and income (i.e., whether the
amounts charged are on cost-basis, or significantly higher). If it
B
is found that they are in the nature of “trade, commerce or
business”, then it must be examined whether the quantified limit
(as amended from time to time) in proviso to Section 2(15), has
been breached, thus disentitling them to exemption. [Para 253,
H][1062-C-E]
The Trustees of Tribune Press, Lahore v. CIT, Punjab C
[1939] 7 ITR 415; Charitable Gadodia Swadeshi Stores
v. CIT [1944] 12 ITR 385; CIT v. P. Krishna Warriar
[1964] 8 SCR 36; CIT v. Andhra Chamber of Commerce
[1965] 1 SCR 565; All India Spinners Association of
Mirzapur v. CIT [1944] 12 ITR 482; Sole Trustee, Lok D
Shikshana Trust v. Commissioner of Income Tax (1976)
1 SCC 254 : [1976 ] 1SCR 461; Indian Chamber of
Commerce v. CIT (1976) 1 SCC 324 : [1976] 1SCR
830; Assistant Commissioner v. Surat Art Silk Cloth
Manufacturers’ Association (1980) 2 SCC 31 : [1980]
2 SCR 77; Indian Chamber of Commerce v. E
Commissioner of Income Tax (1976) 1 SCC 324 : [1976]
1 SCR 830; Dharmadeepti v. CIT (1978) 3 SCC 499 :
[1978] 3 SCR 1038; Assistant Commissioner of Income
Tax v. Thanthi Trust (2001) 2 SCC 707 : [2001] 1 SCR
727; New Delhi Municipal Council v. State of Punjab F
(1997) 7 SCC 339 : [1996] 10 Suppl. SCR 472; CIT,
Bombay v. Bar Council of Maharashtra (1981) 3 SCC
308 : [1981] 3 SCR542; Shri Ramtanu Cooperative
Housing Society Ltd. v. State of Maharashtra (1970) 3
SCC 323 : [1971]1 SCR 719; Gujarat Industrial
Development Corporation v. CIT [1997] Supp 3 SCR G
466; HSIDC v. Hari Om Enterprises (2009) 16 SCC
208 : [2008] 9 SCR 821; Commissioner of Central
Excise v. Maharashtra Industrial Development
Corporation 2017 SCC Online Bom 10021; Navnit Lal
C. Jhaveri v. K.K. Sen [1965] 1 SCR 909; UCO Bank H
914 SUPREME COURT REPORTS [2022] 15 S.C.R.

A Calcutta v. Commissioner of Income Tax, West Bengal
1999 (4) SCC 599 : [1999] 3 SCR 635; State of Punjab
v. Bajaj Electricals Ltd. [1968] SCR 2 636; Khoday
Distilleries Ltd. v. State of Karnataka (1995) 1 SCC
574 : [1994] 4 Suppl. SCR 477; State of Gujarat v. M/
s. Raipur Manufacturing [1967] 1 SCR 618; Central
B
Excise, Bolpur v. Ratan Melting and Wire Industries
(2008) 13 SCC 1 : [2008] 14 SCR 653; Greater Noida
Industrial Development Authority v. Union of India &
Ors 2018 Scc Online Delhi 7536; Shri Ramtanu Co-
operative Housing Society Limited v. State of
C Maharashtra (1970) 3 SCC 323 : [1971] 1 SCR 719;
Kerala State Electricity Board v. Indian Aluminium Co.
Ltd. (1976) 1 SCC 466 : [1976] 1 SCR 552; Trustees
of the Port of Madras v. Aminchand Pyarelal and Ors.
(1976) 3 SCC 167 : [1976] 1 SCR 721; State of Gujarat
v. Mahesh Dhiarjlal Thakkar (1980) 2 SCC 322; Sodan
D
Singh & Ors. v. New Delhi Municipal Committee & Ors.
[1989] 3 SCR 1038; T.M.A Pai Foundation and Ors. v.
State of Karnataka & Ors. (2002) 8 SCC 481 : [2002]
3 Suppl. SCR 587; CIT, Madras v. M/s Madurai Mills
Company Limited (1973) 4 SCC 194 : [1973] 3 SCR
E 662; Karnataka Industrial Areas Development Board
v. Prakash Dal Mill (2011) 6 SCC 714 : [2011] 5 SCR
26; State of Karnataka v. All India Manufacturer’s
Organisation (2006) 4 SCC 683 : [2006] 1 Suppl. SCR
86; State of Tamil Nadu v. Board of Trustees of the Port
of Madras [1999] 2 SCR 195; Commissioner of Income
F
Tax v. Gujarat Maritime Board [2007] 12 SCR 962;
State of Karnataka v. Shreyas Papers Pvt. Ltd. AIR 2006
SC 865 : [2006] 1 SCR 235; Ashoka Smokeless Coal
India (P) Ltd. v. Union Of India (2007) 2 SCC 640 :
[2006] 9 Suppl. SCR 954; New Delhi Municipal
G Committee v. State of Punjab [1996] Supp 10 SCR 472;
Physical Research Laboratory v. K.G Sharma [1997]
3SCR 733; Yogiraj Charity Trust v. CIT [1976] 3 SCR
947; Commissioner of Income Tax v. Andhra Pradesh
Road Transport Corporation [1986] 1 SCR 570;
Queens’s Educational Society v. CIT 2015 (8) SCC 47
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 915
URBAN DEVELOPMENT AUTHORITY

: [2015] 3 SCR838; CST v. Sai Publication Fund [2002] A
2 SCR 743; Chameli Singh v. State of U.P & Ors. (1996)
2 SCC 549 : [1995] 6 Suppl. SCR 827; Sri. P.G. Gupta
v. State of Gujarat & Ors. 1995 (1) SCALE 653; P.
Vajravelu Mudaliar v. Special Deputy Collector, Madras
& Ors. [1965] 1 SCR 614; Dalco Engineering Pvt. Ltd.
B
v. Satish Prabhakar Padhye & Ors. (2010) 4 SCC 378
: [2010] 4 SCR15; State of A.P v. H. Abdul Bakhi &
Bros. [1964] 7 SCR 664; ICAI Accounting Research
Foundation v. DGIT(E) 321 ITR 73 (Del); Bureau of
Indian Standards v. DGIT(E) 358 ITR 78 (Del); GS1
India v. DGIT(E) 360 ITR 138 (Del); Dir. Of Supp. & C
Disp. v. Board of Revenue [1967] 3 SCR 778; Barendra
Prasad Ray v. ITO [1981] 3 SCR 387; State of Gujarat
v. Raipur Manufacturing Co. Ltd. [1967] 1 SCR 618;
Customs & Excise Commissioner v. Lord Fisher (1981)
2 All ER 147; Nabha Power Limited v. Punjab SPCL
D
(2018) 11 SCC 508: [2017] 14 SCR 301; State of
Gujarat v. Maheshkumar Dhirajal Thakkar (1980) 2
SCC 322; Saurashtra Education Foundation v. CIT
[2005] 273 ITR 139 (Guj.); Gujarat State Co-operative
Union v. CIT [1992] 195 ITR 279 (Guj.); American
Hotel and Lodging Association v. CBDT (2008) 10 SCC E
509 : [2008] 8 SCR 117
Victoria Technical Institute v CIT [1991] 188 ITR 57
(SC); Aditnar Educational Institution v. Addl. CIT
(1997) 3 SCC 346 : [1997] 1 SCR 948; Thiagarajar
Charities v. ACIT (1997) 4 SCC 724 : [1997] 3 F
SCR965; Director of Income Tax v. Bharat Diamond
Bourse [2003] 259 ITR 280 (SC); Visvesvarya
Technological University v. Assistant Commissioner of
Income Tax (2016) 12 SCC 258 :[2016] 4 SCR 362;
J.K Synthetics & Another v. Union of India & Ors. 1981
SCC OnLine Del 457; Ellerman Lines v. Commissioner G
of Income Tax (1972) 4 SCC 474 : [1972] 2 SCR 168;
Adityapur Industrial Area Development Authority v.
Union of India (2006) 5 SCC 100 : [2006] 1 Suppl.
SCR 757; Commissioner of Income Tax v. Federation
of Indian Chambers of Commerce and Industries [1981] H
916 SUPREME COURT REPORTS [2022] 15 S.C.R.

A 3 SCR 489; Duparquet Co. v. Evans 297 U.S. 216
(1936); Bhuwalka Steel Indus. Ltd. & Ors. v. Bombay
Iron and Steel Labour Bd. & Ors. [2009] 16 SCR 618;
Chief Justice of Andhra Pradesh & Ors. v. L.V.A. Dixitulu
& Ors. [1979) 1 SCR 26; Lohia Machines Ltd. and
Ors. v. Union of India & Ors. [1985] 2 SCR 686;
B
Commissioner of Customs (Import), Mumbai v. Dilip
Kumar & Company & Ors. 2018 (9) SCC 1 : [2018] 7
SCR 1191; State of West Bengal v. Union of India [1964]
1 SCR 371; Ellerman Lines Ltd. v. Commissioner of
Income Tax [1972] 2 SCR 168; K.P. Verghese v.
C Commissioner of Income Tax [1982] 1 SCR 629; Union
of India v. Azadi Bachao Andolan [2003] Supp 4 SCR
222; CIT v. Vatika Township (2015) 1 SCC 1 : [2014]
12 SCR 1037; Keshavji Ravji & Co. and Ors. v.
Commissioner of Income Tax (1992) 2 SCC 231;
Commissioner of Customs v. Indian Oil Corporation
D
[2004] 2 SCR 511; S.K. Gupta & Anr. v. K.P. Jain &
Anr. (1979) 3 SCC 54 : [1979] 2 SCR 1184; Indira
Nehru Gandhi v. Shri Raj Narain and Anr. (1975) Supp.
SCC 1; Kalya Singh v. Genda Lal and Ors. [1975] 3
SCR 783; Vanguard Fire and Insurance Company Ltd.
E v. M/s. Fraser and Ross and Anr. [1960] 3 SCR 837;
N.K. Jain and Ors. v. C.K. Shah and Ors. [1991] 1 SCR
938;G. Venkataswami Naidu v. Commissioner of Income
Tax [1959] Supp 1 SCR 646; State of Tamil Nadu v.
Burmah Shell Oil Storage Distribution Company of India
Ltd. [1973] 2 SCR 636; State of Tamil Nadu v. Shakti
F
Estates [1989] 1 SCR 408; Director of Civil Supplies v.
Member Board of Revenue [1967] 3 SCR 778;
Renusagar Power Co. Ltd. v. General Electric Co.
[1985] 1 SCR 432; Mansukhlal Dhanraj Jain v. Eknath
Vithal Ogale [1995] 1 SCC 996; Doypack System (P)
G Ltd. v. Union of India 1988 (2) SCC 299 : [1988] 2
SCR 962; Physical Research Laboratory v. K. G. Sharma
(1997) 4 SCC 257 : [1997] 3 SCR 733; Town
Investments v. Department of Environment 1977 1
ALLER 813; Brothers Etc. v. Deputy Commissioner,
Raichur and Ors. [1967] 1 SCR 548; India Cement Ltd.
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 917
URBAN DEVELOPMENT AUTHORITY

& Ors. v. State of Tamil Nadu and Ors. [1989] Supp 1 A
SCR 692; Vijayalashmi Rice Mill and Ors. v.
Commercial Tax Officers, Palakol & Ors. (2006) 6 SCC
763 : [2006] 4 Suppl. SCR 279; The Commissioner of
Income Tax, Lucknow v. U.P. Forest Corporation [1998]
2 SCR 22; Union of India & Ors. v. State of U.P. &
B
Ors. [2007] 12 SCR 792; Union of India v. Purna
Municipal Corporation [1991] Supp 1 SCR 183;
Municipal Corporation, Amritsar v. Senior
Superintendent of Post Offices, Amritsar Division & Anr.
[2004] 1 SCR 913; Commissioner of Central Excise,
Mumbai v. Fiat India (P) Ltd. & Ors. [2012]12 SCR C
975; Commissioner of Income Tax v. Dawoodi Bohara
Jamat (2014) 16 SCC 222; S.RM.M.CT.M. Tiruppani
Trust v. Commissioner of Income Tax (1998) 2 SCC 584
: [1998] 1 SCR 653; Gadodia Swadeshi Stores v.
Commissioner of Income Tax, Punjab [1944] 12 ITR
D
385; J.K. Trust v. CIT [1985] 1 SCR 65; Thiagesar
Dharma Vanikam v. CIT [1963] 50 ITR 798 Madras;
Raja P.C. Lall Choudhary v. CIT, Bihar & Orissa [1957]
31 ITR 226 Patna; Director of Income Tax v. Bharat
Diamond Bourse (2002) 10 SCC 392; Bangalore Water
Supply and Sewage Undertaking v. A Rajappa (1978) E
2 SCC 213:[1978] 3 SCR 207; Greater Noida Industrial
Development Authority v. Union of India (hereafter
“GNIDA”) [2018] 406 ITR 418; CIT v. Yamuna
Expressway Industrial Development Authority (2017)
395 ITR 18; Tamil Nadu Cricket Association v. Director
F
of Income Tax (Exemptions) & Ors. [2014] 360 ITR
633; Sahney Steel & Press Works Ltd v. Commissioner
of Income Tax [1997] Supp 4 SCR 189; Commissioner
of Income Tax v. Ponni Sugars 2008 (9) SCC 337 :
[2008] 13 SCR570 – referred to.
Halsbury’s Laws of England, Vol. 32 para 487 G

Case Law Reference
[1939] 7 ITR 415 referred to Para 6
[1944] 12 ITR 385 referred to Para 6
H
918 SUPREME COURT REPORTS [2022] 15 S.C.R.

A [1964] 8 SCR 36 referred to Para 7
[1965] 1 SCR 565 referred to Para 8
[1944] 12 ITR 482 referred to Para 8
[1976] 1SCR 461 referred to Para 11
B [1976] 1SCR 830 referred to Para 13
[1980] 2 SCR 77 referred to Para 14
[1976] 1SCR 830 referred to Para 15
[1978] 3 SCR1038 referred to Para 17
C
[2001] 1 SCR 727 referred to Para 22
[1996] 10 Suppl. SCR 472 referred to Para 36
[1981] 3 SCR542 referred to Para 41
[1971] 1 SCR719 referred to Para 44
D
[1997] Supp 3 SCR 466 referred to Para 44
[2008] 9 SCR821 referred to Para 44
[2017] SCC Online Bom 10021 referred to Para 44
[1965] 1 SCR 909 referred to Para 45
E
[1999] 3 SCR 635 referred to Para 45
[1968] SCR 2 636 referred to Para 46
[1994] 4 Suppl. SCR477 referred to Para 46

F [1967] 1 SCR 618 referred to Para 46
[2008] 14 SCR653 referred to Para 47
[2018] SCC Online Delhi 7536 referred to Para 47
[1971] 1 SCR719 referred to Para 47
G [1976] 1 SCR 552 referred to Para 47
[1976] 1 SCR 721 referred to Para 47
(1980) 2 SCC 322 referred to Para 49
[1989] 3 SCR 1038 referred to Para 49
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 919
URBAN DEVELOPMENT AUTHORITY

[2002] 3 Suppl. SCR 587 referred to Para 49 A
[1973] 3 SCR 662 referred to Para 49
[2011] 5 SCR 26 referred to Para 50
[2006] 1 Suppl. SCR86 referred to Para 50
[1999] 2 SCR 195 referred to Para 51 B
[2007] 12 SCR 962 referred to Para 51
[2006] 1 SCR235 referred to Para 51
[2006] 9 Suppl. SCR954 referred to Para 51
C
[1996] Supp 10 SCR 472 referred to Para 51
[1997] 3SCR 733 referred to Para 51
[1976] 3 SCR 947 referred to Para 51
[1986] 1 SCR 570 referred to Para 51
D
[2015] 3 SCR838 referred to Para 51
[2002] 2 SCR 743 referred to Para 51
[1995] 6 Suppl.SCR 827 referred to Para 52
1995 (1) SCALE 653 referred to Para 52
E
[1965] 1 SCR 614 referred to Para 56
[2010] 4 SCR15 referred to Para 57
[1964] 7 SCR 664 referred to Para 58
321 ITR 73 (Del) referred to Para 65 F
358 ITR 78 (Del) ) referred to Para 65
360 ITR 138 (Del) ) referred to Para 65
[1967] 3SCR 778 referred to Para 67
[1981] 3 SCR 387 referred to Para 67 G
[1967]1 SCR 618 referred to Para 67
(1981) 2 All ER 147 referred to Para 67
[2017] 14 SCR301 referred to Para 75
H
920 SUPREME COURT REPORTS [2022] 15 S.C.R.

A [1980] 2 SCC 322 referred to Para 76
[2005] 273 ITR 139 (Guj.) referred to Para 80
[1992] 195 ITR 279 (Guj.) referred to Para 80
[2008] 8 SCR117 referred to Para 80
B [1991] 188 ITR 57 (SC) referred to Para 82
[1997] 1 SCR 948 referred to Para 82
[1997] 3 SCR 965 referred to Para 82
[2003] 259 ITR 280 (SC) referred to Para 82
C
[2016] 4 SCR362 referred to Para 83
[1981] SCC OnLine Del 457 referred to Para 83
[1972] 2 SCR168 referred to Para 84
[2006] 1 Suppl. SCR757 referred to Para 90
D
[1981] 3 SCR 489 referred to Para 98
297 U.S. 216 (1936) referred to Para 108
[2009] 16 SCR 618 referred to Para 109
[1979) 1 SCR 26 referred to Para 110
E
[1985] 2 SCR 686 referred to Para 111
[2018] 7SCR1191 referred to Para 111
[1964] 1 SCR 371 referred to Para 112

F [1972] 2 SCR 168 referred to Para 119
[1982] 1 SCR 629 referred to Para 119
[2003] Supp 4 SCR 222 referred to Para 119
[2014] 12SCR1037 referred to Para 119
G (1992) 2 SCC 231 referred to Para 120
[2004] 2 SCR 511 referred to Para 121
[1979] 2 SCR 1184 referred to Para 124
(1975) Supp. SCC 1 referred to Para 124
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 921
URBAN DEVELOPMENT AUTHORITY

[1975] 3 SCR 783 referred to Para 124 A
[1960] 3 SCR 837 referred to Para 124
[1991] 1 SCR 938 referred to Para 124
[1959] Supp 1 SCR 646 referred to Para 131
[1973] 2 SCR 636 referred to Para 131 B
[1989] 1 SCR 408 referred to Para 131
[1967] 3 SCR 778 referred to Para 131
[1985] 1 SCR 432 referred to Para 132
C
[1995] 1 SCC 996 referred to Para 132
[1988] 2 SCR 962 referred to Para 132
[1997] 3 SCR 733 referred to Para 139
1977 1 ALLER 813 referred to Para 140
D
[1967] 1 SCR 548 referred to Para 145
[1989] Supp 1 SCR 692 referred to Para 146
[2006] 4 Suppl. SCR279 referred to Para 146
[1998] 2 SCR 22 referred to Para 147
E
[2007]12 SCR 792 referred to Para 148
[1991] Supp 1 SCR 183 referred to Para 148
[2004] 1 SCR 913 referred to Para 148
[2012]12 SCR 975 referred to Para 149 F
(2014) 16 SCC 222 referred to Para 154
[1998] 1 SCR 653 referred to Para 154
[1944] 12 ITR 385 referred to Para 158
[1985] 1 SCR 65 referred to Para 159 G
[1963] 50 ITR 798 Madras referred to Para 162
[1957] 31 ITR 226 Patna referred to Para 162
(2002) 10 SCC 392 referred to Para 170
H
922 SUPREME COURT REPORTS [2022] 15 S.C.R.

A [1978] 3 SCR 207 referred to Para 170
[2018] 406 ITR 418 referred to Para 183
(2017) 395 ITR 18 referred to Para 183
[2014] 360 ITR 633 referred to Para 222
B [1997] Supp 4 SCR 189 referred to Para 236
[2008] 13 SCR 570 referred to Para 236
CIVIL APPELLATE JURISDICTION : Civil Appeal No.21762
of 2017.
C From the Judgment and Order dated 02.05.2017 of the High Court
of Gujarat at Ahmedabad in Tax Appeal No.425 of 2016.
With
C.A. Nos. 8193, 5057 of 2012, 5058 OF 2014, 9974 of 2018, 5056
D of 2012, 4196, 4374 of 2015, 9380, 13071, 12058, 16375, 12869, 17527,
21845 of 2017, 5719, 9886, 9200, 9860, 10114 of 2018, 1643/2019, 3596,
6762, 3972, 3343, 3359, 3971, 3347, 6489, 10598, 7643, 8321, 8554, 9172,
10406, 11259, 11884 of 2018, 226, 170, 2047, 2335, 3971, 4449, 4957 of
2019, 213, 783 of 2020, 4430, 2477, 2478 of 2021; 7705, 7696, 7720,
E 7780, 7717, 7707, 7698, 7699, 7695, 7719, 7703, 7718, 7700, 7701, 7702,
7721, 7723, 7722, 7704, 7708, 7724, 7709, 7710, 7711, 7725, 7726, 7712,
7727, 7713, 7714, 7728, 7754, 7730, 7733, 7734, 7735, 7738, 7741, 7742,
7743, 7745, 7753, 7697, 7729, 7715, 7731, 7732, 7716, 7736, 7737, 7739,
7740, 7744, 7746, 7747, 7748, 7749, 7750, 7751, 7752 of 2022
F
N. Venkataraman, ASG, Arvind datar, Kavin Gulati, Ms. Radhika
Suri, Ajay Vohra, Dhruv Agrawal, Arvind P. Datar, K. K. Chythanya,
Sanjay Jhanwar, Harish N. Salve, Tushar Hemani, Manish Shah, K.V.
Viswanathan, Harish Salve, Saurabh Soparkar, S. N. Bhat, Sr. Advs.,
G Rupesh Kumar, Ms. Gargi Khanna, Shyam Gopal, V. Chandrashekara
Bharathi, Ms. Alka Agarwal, H. R. Rao, Raj Bahadur Yadav, B. V.
Balaram Das, Mrs. Anil Katiyar, Mrs. Prabha Swami, Nikhil Swami, A
V A Siva Kartikeya, Ms. Divya Swami, Rajat Navet, Kushagra Pandit,
Pradeep K. Bakshi, Garvesh Kabra, Kumar Dushyant Singh, Rohit
H Sharma, Rounak Nayak, Anshul Chowdhary, Ms. Arju Chaudhary, P. S.
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 923
URBAN DEVELOPMENT AUTHORITY

Sudheer, Gursharan H.Virk, Ms. Simranjit H.Virk, Prashanth Undurti, A
Ms. Esha T, Jaymin R. Brahmbhatt, Nakul Mohta, Ms. Misha Rohatgi
Mohta, Devansh Shrivastava, Johnson Subba, Mahinder Singh Hura,
Jasmeet Singh, Saif Ali, Divjot Singh Bhatia, Pushpendra S. Bhadoriya,
Ms. Rusheet Saluja, Ms. Mamta Chakrabarti, Yajur Bhalla, Deepak
Samota, Ashish Vajpayee, Rohit Kumar Pihal, Shubham Bhalla, Manish B
JP Shah, Balaji Srinivasan, Ms. Pallavi Sengupta, Shahrukh Mohammed,
Ms. Kavita Jha, Anant Mann, Udit Naresh, Rohit Jain, Aniket D. Agarwal,
Abhishek Kumar Singh, Pramod Dayal, Nikunj Dayal, Rahul
Unnikrishnan, Dr. Rakesh Gupta, Somil Agarwal, Anshul Mittal, Ambhoj
Kumar Sinha, Anand Sukumar, S. Sukumaran, Sharath S., Ajit V. Ghatikar,
C
Bhupesh Pathak, S. Krishnan, K. V. Mohan, R. K. Raghavan, Rajat
Sharma, Tarun Gupta, Ashish Virmani, Kanu Agrawal, Ms. Bina
Madhvan, Ms. Aditi Sethi, Rajat Nair, Sanjay Kumar Visen, Ms. Adira
A. Nair, Ms. Babita Mishra, Rishabh Sancheti, Ms. Padma Priya, Anchit
Bhandari, Sushant Rao, Ms. Saloni Bhandari, Ms. Racheeta Chawla,
Vivek Singh, Rakesh Uttamchandra Upadhyay, Ms. Aarti U. Mishra, D
Rishabh Kumar Pandey, Surrender Singh Manak, Mishra Saurabh, Kabir
Hathi, Jatin Zaveri, Neel Kamal Mishra, D. S. Mishra, Ms. Deepanwita
Priyanka, Siddharth Batra, Ms. Archna Yadav, Ms. Shivani Chawla,
Chinmay Dubey, Malak Manish Bhatt, Sarim Naved, Kabir Dixit, Ms.
Anshu Davar, Kamran Javed, D. P. Chaturvedi, Tarun Kumar Thakur, E
Ms. Parvati Bhat, Anuj Verma, Mrs. Anuradha Mutatkar, Mehul Sharma,
Karunankar Mahalik, Advs. for the appearing parties.
The Judgment of the Court was delivered by
S. RAVINDRA BHAT, J.
F
Index *
I. Brief history of legislative changes and this court’s
interpretation ................................................................ 5
A. Provisions of the Income Tax Act, 1922 ............ 5
G
B. The new law: Income Tax Act, 1961 .................. 8
C. The judgment in Surat Art Silk ......................... 11

* Ed Note: Pagination in the Index is as per the original judgment. H
924 SUPREME COURT REPORTS [2022] 15 S.C.R.

A D. Relevant changes brought about to the IT Act, 1961
(Finance Act, 1983 and 1991) ......................... 17
E. The judgment in Thanthi Trust ......................... 18
F. Deletion of certain exemptions: Section 10 (20A) and
Section 10 (23) .................................................. 20
B
G. Amendments to Section 2 (15) by Finance Act, 2008
(w.e.f. 01.04.2009) ............................................ 21
II. Submissions of parties ............................................... 22
A. Arguments on behalf of the revenue ................ 22
C
B. Arguments of the assessee-organizations ....... 26
C. Revenue’s rebuttal arguments ........................... 54
III. Analysis and reasoning ............................................ 55
A. Aids to interpretation ........................................ 62
D
(i) History of the legislation ................................. 62
(ii) Other extrinsic aids to construction of the
statute .................................................................. 63
B. Interpretation of Section 2(15), the definition
E clause.................................................................. 70
Summation of interpretation of Section 2(15) ..... 85
C. Sections 10, 11, 12, 12A, 12AA and 13 of the IT
Act ....................................................................... 86
F Distinction between business held under Trust [Section
11(4)] and Trust carrying on business [Section 11(4A)]
87
D. What kinds of income or receipts may not be
characterized as derived from trade, commerce,
G business or in relation to such activities, for a
consideration ..................................................... 98
(i) Statutory corporations, authorities or bodies ... 98
(ii) Statutory regulatory bodies/authorities ........ 109
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 925
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

(iii) Trade Promotion bodies, councils, associations or A
organizations ....................................................... 114
(iv) Non-statutory bodies - ERNET, NIXI and GS1
India .................................................................... 116
(v) State Cricket Associations ........................... 122
B
(vi) Private trusts .............................................. 135
IV.Summation of conclusions ...................................... 141
A. General test under Section 2(15) ....................... 141
B. Authorities, corporations, or bodies established by
C
statute .............................................................. 142
C. Statutory regulators ........................................ 143
D. Trade promotion bodies ................................. 144
E. Non-statutory bodies ...................................... 144
D
F. Sports associations ........................................ 145
G. Private Trusts .................................................. 145
H. Application of interpretation ......................... 146
1. Leave granted in all matters where leave has not already been
E
granted. C.A. No. 21762/2017 (Assistant Commission of Income Tax,
Exemptions v. Ahmedabad Urban Development Authority) is taken
as the lead matter.
2. Religious and charitable trusts have existed in one form or the
other, tracing their origins to the instinct of benevolence, which is part of
F
human nature. Indian philanthropy has enriched its cultural heritage,
particularly in catering to the educational, medical, socio-economic, and
religious needs of the people. Here its role has been supplementary to
the efforts of the State, which has recognized the public utility of this
impulse, and granted tax exemptions.Indian income-tax laws have
favoured charities, even granted preferential treatment since 1886. The G
law, while granting exemption to income from religious and
charitable trusts has taken effective measures to minimise misuse of
trust funds. As a result, a charitable trust loses tax exemption if certain
provisions are not complied with, and if its activities do not fall under
H
926 SUPREME COURT REPORTS [2022] 15 S.C.R.

A Section 10 of the Act. Such trusts also have to apply their income to the
charitable objects within a specified period, maintain proper audited
accounts, and invest or utilise funds in a manner so that no benefit is
derived by the settlor, trustees, their relatives, or other persons. 1
3. The scope and amplitude of the definition “charitable purpose”
B under the Income Tax Act, 1961 (hereafter “Income Tax Act” or “the
IT Act”) has engaged the courts’ (including that of this court) attention
on myriad occasions. The expression “not involving the carrying on
of any activity for profit” in the last limb of the definition [Section
2(15) prior to amendment by Finance Act, 1983] was the subject of
debate in no less than five judgments of this court (including that of a
C five-member bench).
4. In these batch of appeals and special leave petitions, the primary
question which falls for consideration is the correct interpretation of the
proviso to Section 2(15)2 of the IT Act introduced by amendment w.e.f.
01.04.2009. It is necessary, at this stage, to notice that the IT Act visualized
D three kinds of charitable purposes: medical relief, education, and relief
for the poor – which are described hereafter as “per se purposes”. To
this list, Parliament has, by amendments, added other categories, such
as preservation of environment (including watersheds, forests, and
wildlife) and preservation of monuments or places or objects of artistic
E or historic interest, and yoga. The last – or the residual purpose included
by the definition - is “advancement of any other object of general
public utility” (hereafter referred to as “GPU category”), which is the
subject of interpretation in the present case.
5. The Director General of Income Tax for exemptions,
F Commissioner of Income Tax (“CIT”) in various states, and other officials
of the Income tax department (hereafter compendiously referred to as
1
Sections 11, 12, 12-A and 13 of the Income-tax Act, 1961.
2
“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
G 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:..…”
H (emphasis supplied)
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 927
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

“the revenue”) have appealed the decisions of various High Courts, which A
have held that the carrying on of any trade, commerce, or business, is
not a per se bar or disqualification for a GPU category charitable trust
to claim to be such, precluding its tax-exempt status under the IT Act.
I. Brief history of legislative changes and this court’s
interpretation B
A. Provisions of the Income Tax Act, 1922
6. The provisions of the erstwhile Income Tax Act, 1922 (hereafter
“the old Act”) enabled tax exemption claims by trusts for their income
from business activity, provided trusts were created thereon. The Privy
Council in The Trustees of Tribune Press, Lahore v. CIT, C
Punjab 3 (hereafter “In Re: Trustees of the Tribune”) held that the
income of the Tribune Press fell within section 4(3)(i) of the old Act, and
it was implied that income from the press was derived from property
held under trust to maintain a newspaper, to keep up its liberal policy and
to devote surplus funds to improve the newspaper. The word “property” D
occurring under section 4(3)(i) of that Act was also held4 to include a
business too. The old Act was amended twice with the object of
eliminating and getting rid of tax exemptions for trusts, which were
otherwise eligible for it. The first amendment of 1939 inserted5 a new
3
(1939) 7 ITR 415(hereafter “In Re: Trustees of the Tribune”).
4
In Commissioner of Income Tax v. P. Krishna Warriar, (1964) 8 SCR 36 : (1964) 53
E
ITR 176 this court, citing and relying on In re, Trustees of the Tribune [(1939) ITR 415
PC] held that:
“This Court in J.K. Trust, Bombay v. Commissioner of Income Tax, Excess Profits Tax,
Bombay [(1957) 32 ITR 535] endorsed the said view and held that “property” is a term
of the widest import and that business would undoubtedly be property unless there was
something to the contrary in the enactment. If business was property, it could be held F
under trust for religious and charitable purposes. As the business of running the Arya
Vaidya Sala vested under trust for religious and charitable purposes, it would fall under
clause (i), if the other conditions laid down therein were satisfied.”
5
Section 4(3) of the Indian Income-tax (Amendment) Act, 1939, reads as follows:
“(3) Any income, profits or gains falling within the following classes shall not be
included in the total income of the person receiving them:]
(i) Subject to the provisions of clause (c) of sub-section (1) of section 16, any income G
derived from property held under trust or other legal obligation wholly for religious or
charitable purposes, in so far as such income is applied or accumulated for application
to such religious or charitable purposes as relate to anything done within the taxable
territories, and in the case of property so held in part only for such purposes, the income
applied or finally set apart for application thereto:
(ia) Any income derived from business carried on on behalf of a religious or charitable
institution when the income is applied solely to the purposes of the institution and- H
928 SUPREME COURT REPORTS [2022] 15 S.C.R.

A clause (ia) in the then existing provision. This provided that income
derived from business carried on by or on behalf of a charitable trust or
religious institution could be limited to only such business income as was
derived by the trust or institution from business carried on either in the
course of the carrying on of a trust’s primary purpose, or carried on
mainly by the beneficiaries of the trust or institution. The Lahore High
B
Court in Charitable Gadodia Swadeshi Stores v. CIT6, observed:
“Viewed in its proper perspective, therefore, clause (ia) can
be taken to apply only such business as is carried on behalf
of religious or charitable institutions which were not held
under trust and not to such business as was itself held under
C trust or was conducted by or on behalf of such charitable or
religious institutions as were held under trust. If it was intended
to narrow down the scope of clause (1) so as to withdraw the
exemption enjoyed by a business held under trust or
conducted by or on behalf of a religious or charitable trust,
D the new clause should have been added as proviso to the old
clause.”
7. The Act was again amended by the Finance Act, 1953 7 wherein
clause (ia) was deleted from section 4(3)(i) of the old Act and instead
(a) the business is carried on in the course of the carrying out of a primary purpose of
E the institution, or
(b) the work in connection with the business is mainly carried on by beneficiaries of the
institution”
6
(1944) 12 ITR 385
7
Section 4 of Finance Act, 1953 added proviso to Section 4(3)(i); it reads as follows:
“Provided that such income shall be included in the total income—
[(a) if it is applied to religious or charitable purposes without the taxable territories, but
F in the following cases, namely:—
(i) where the property is held under trust or other legal obligation created before the
commencement of the-Indian Income-tax (Amendment) Act, 1953 (XXV of 1953), and
the income therefrom is applied to such purposes without the taxable territories; and
(ii) where the property is held under trust or other legal obligation created after such
commencement, and the income therefrom is applied without the taxable territories to
G charitable purposes which tend to promote international welfare in which India is
interested,
the Central Board of Revenue may, by general or special order, direct that it shall not be
included in the total income;]
(b) in the case of income derived from business carried on on behalf of a religious or
charitable institution, unless the income is applied wholly for the purposes of the institution
and either—
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 929
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

inserted as its proviso. Parliamentary intent, in transforming old A
clause (ia) into a proviso to Section 4 (3)(i) was that whenever business
was carried on behalf of a religious or charitable institution, the conditions
prescribed in clause (b) of proviso to clause (i) had to be satisfied in
addition to the general condition of exemption set out in the substantive
part of clause (i). Parliament’s attempt to exempt income from business
B
activity upon complying with other conditions - apart from those laid
down in clause (i) - was interpreted by this court in CIT v. P. Krishna
Warriar8 (hereafter “Krishna Warriar”). The court observed that:
“The legal position may briefly be stated thus: Clause (i) of
section 4(3) of the Act takes in every property or a fractional
part of it held in trust wholly for religious or C
charitable purposes. It also takes in such property held only
in part for such purposes. Business is also property within
the meaning of said clause. Clause (b) of the proviso to section
4(3)(i) applies only to business not held in trust but carried
on on behalf of religious or charitable institutions.” D
8. The old Act defined ‘charitable purpose’ under Section 4(3) -
i.e., the definition as it stood just prior to the IT Act, 1961 coming into
force (thereby replacing the old Act) - as follows:
“4 (3) Any income, profits or gains falling within the following
classes shall not be included in the total income of the person E
receiving them
***
In this sub-section “charitable purpose” includes relief of
the poor, education, medical relief and the advancement of F
any other object of general public utility, but nothing
contained in clause (i) or clause (ii) shall operate to exempt
from the provisions of this Act that part of the income from
(i) the business is carried on in the course of the actual carrying out of a primary
purpose of the institution, or
(ii) the work in connection with the business is mainly carried on by beneficiaries of the G
institution;
(c) if it is applied to purposes other than religious or charitable purposes or ceases to
be accumulated or set apart for application thereto in which case it shall be deemed to
be the income of the year in which it is so applied or ceases to be so accumulated or set
apart.]”
8
(1964) 8 SCR 36: (1964) 53 ITR 176
H
930 SUPREME COURT REPORTS [2022] 15 S.C.R.

A property held under a trust or other legal obligation for
private religious purposes which does not enure for the
benefit of the public.”
This court had occasion to interpret the meaning of the expression
“advancement of any other object of general public utility” in CIT
B v. Andhra Chamber of Commerce9. The court considered previous
decisions in: In Re: Trustees of the Tribune (supra) and All India
Spinners Association of Mirzapur v. CIT10. Relying heavily on the
decision of the Privy Council in In Re: Trustees of the Tribune (supra),
this court held, in Andhra Chamber of Commerce that GPU objects
included all objects promoting welfare of general public, including taking
C steps to oppose or urge legislation affecting trade, commerce, etc.
B. The new law: Income Tax Act, 1961
9. Section 2 (15) of the IT Act (which came into force on
01.04.1962 and repealed the old IT Act) defined “charitable purpose” as
D follows:
“(15) — charitable purpose includes relief of the poor,
education, medical relief, and the advancement of any other
object of general public utility not involving the carrying on
of any activity for profit.”
E 10. The then Finance Minister, Mr. Morarji Desai, explained the
rationale for the new definitionon the floor of Lok Sabha:
“The definition of ‘charitable purpose’ in that clause is at
present so widely worded that it can be taken advantage of
even by commercial concerns which, while ostensibly serving
F a public purpose, get fully paid for the benefits provided by
them, namely, the newspaper industry which while running
its concern on commercial line can claim that by circulating
newspapers it was improving the general knowledge of the
public. In order to prevent the misuse of this definition in
such cases, the Select Committee felt that the words ‘not
G
involving the carrying on of any activity for profit’ should be
added to the definition.”11

9
(1965) 1 SCR 565 (hereafter “Andhra Chamber of Commerce”)
10
(1944) 12 ITR 482 (hereafter “All India Spinners Association of Mirzapur”)
11
(LVI) Lok Sabha Debates., 32nd scs., p. 3073 (August 18, 1961).
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 931
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

11. The first major decision to interpret the new definition was A
Sole Trustee, Lok Shikshana Trust v. Commissioner of Income Tax12
(hereafter “Lok Shikshana Trust”). This court turned down a contention
that newspaper business, carried on with several other objects (which
included setting up of educational institutions, dissemination of knowledge
to the Kannada speaking public through newspaper, etc.) was charitable.
B
The court noticed the changed definition:
“7.…The result thus of the change in the definition is that in
order to bring a case within the fourth category of charitable
purpose, it would be necessary to show that (1) the purpose
of the trust is the advancement of any other object of general
public utility, and (2) the above purpose does not involve the C
carrying on of any activity for profit. Both the above conditions
must be fulfilled before the purpose of the trust can be held
to be charitable purpose.
***
D
9. It is true that there are some business activities like mutual
insurance and co-operative stores of which profit-making is
not an essential ingredient, but that is so because of a self-
imposed and innate restriction on making profit in the carrying
on of that particular type of business. Ordinarily profit motive
is a normal incidence of business activity and if the activity E
of a trust consists of carrying on of a business and there are
no restrictions on its making profit, the court would be well
justified in assuming in the absence of some indication to the
contrary that the object of the trust involves the carrying on
of an activity for profit…….. By the use of the expression F
‘profit motive’ it is not intended that profit must in fact be
earned. Nor does the expression cover a mere desire to make
some monetary gain out of a transaction or even a series of
transactions. It predicates a motive which pervades the whole
series of transactions effected by the person in the course of
his activity….” G
The court also rejected the submission that the “profit” referred
to meant private profit. It held that the term had to be interpreted without
qualification.
12
(1976) 1 SCC 254(hereafter “Lok Shikshana Trust”) H
932 SUPREME COURT REPORTS [2022] 15 S.C.R.

A 12. One of the judges - Beg, J, concurred with the majority, but
after noticing that the trust deed did not contain any condition on profit-
making, expressed a slightly different view emphasizing that the actual
activity needs to be considered, rather than the absence or existence of
any condition, in the trust deed.
B 13. The next decision of importance is Indian Chamber of
Commerce v. CIT13. The appellant-chamber was a company registered
under Section 25 of the Indian Companies Act, 1913. Its memorandum
and articles of association stipulated certain broad objects, which this
court agreed fell within the expression “the advancement of any …
object of general public utility” in Section 2(15) of the Act. The objects
C were “promotional and protective of Indian trade interests and other
allied service operations”. A residual clause authorised the chamber
“to do all other things as may be conducive to the development of
trade, commerce and industries or incidental to attainment of the
above objects or any of them”. As per clauses (4) and (8) of the
D memorandum of association, the chamber’s member could not stand to
gain personally since no portion of
“income and property of the association shall be paid …
directly or indirectly, by way of dividend or bonus or otherwise
howsoever by “way of profit to the persons who at any time
E are ... members of the Association ....”
On dissolution of the association, the members could not claim
any share in the assets. The chamber, conceded before this court, that it
“by and large, strives to advance the general trade interests of India
and Indian without seeking to make profits for its members.” This
F court denied the exemption claimed, holding that:
“14… The attainment of that object shall not involve activities
for profit. What then is an activity for profit? An undertaking
by a business organisation is ordinarily assumed to be for
profit unless expressly or by necessary implication or by
G eloquent surrounding circumstances the making of profit
stands loudly negatived. We will illustrate to illumine. If there
is a restrictive provision in the bye-laws of the charitable
organisation which insists that the charges levied for services
of public utility rendered are to be on a ‘no profit” basis, it
13
H (1976) 1 SCC 324 (hereafter “Indian Chamber of Commerce”)
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 933
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

clearly earns the benefit of Section 2(15). For instance, a A
funeral home, an S.P.C.A. or a cooperative may render
services to the public but write a condition into its constitution
that it shall not charge more than is actually needed for the
rendering of the services, — maybe it may not be an exact
equivalent, such mathematical precision being impossible in
B
the case of variables, — maybe a little surplus is left over at
the end of the year — the broad inhibition against making
profit is a good guarantee that the carrying on of the activity
is not for profit. As an antithesis, take a funeral home or an
animal welfare organisation or a super bazaar run for general
public utility by an institution which charges large sums and C
makes huge profits. Indubitably they render services of
general public utility. Their objects are charitable but their
activities are for profit…
**********
16. To sum up, Section 2(15) excludes from exemption the D
carrying on of activities for profit even if they are linked with
the objectives of general public utility, because the statute
interdicts, for purposes of tax relief, the advancement of such
objects by involvement in the carrying on of activities for
profit. We appreciate the involved language we use, but when E
legislative draftsmanship declines to be simple, interpretative
complexity becomes a judicial necessity.
**********
21. The true test is to ask for answers to the following
questions: (a) Is the object of the assessee one of general F
public utility? (b) Does the advancement of the object involve
activities bringing in moneys? (c) If so, are such activities
undertaken (i) for profit or (ii) without profit? Even if (a) and
(b) are answered affirmatively, if (c)(i) is answered
affirmatively, the claim for exemption collapses. The solution G
to the problem of an activity being one for or irrespective of
profit is gathered on a footing of facts. What is the real nature
of the activity? One which is ordinarily carried on by ordinary
people for gain? Is there a built-in prescription in the
constitution against making a profit? Has there been in
practice, profit from this venture? Although, this last is a weak H
934 SUPREME COURT REPORTS [2022] 15 S.C.R.

A test. The mere fact that a service is rendered is no answer to
chargeability because all income is often derived by rendering
some service or other.”
C. The judgment in Surat Art Silk
14. The judgment by a larger, five-judge Bench, in Assistant
B Commissioner v. Surat Art Silk Cloth Manufacturers’ Association14
(hereafter “Surat Art Silk”) was the most important decision rendered
on the issue. Here a Section 25 (of the Companies Act, 1956
corresponding to Section 8 of the Companies Act, 2013) non-profit
company was established. It claimed exemption as an institutionwith
C charitable purposes as its objectives. The objects of the company included
promoting commerce and trade in Art Silk yarn, raw silk, cotton yarn,
Art Silk cloth, silk cloth, and cotton cloth, among other objects 15. Clause
5(1) of the company’s memorandum provided that its income and
property wheresoever derived was to be applied “solely for the
promotion of its objects as set forth in the Memorandum”; Clause
D 5(2) directed that no portion of the income or property could be paid or
transferred, directly or indirectly, by way of dividend, bonus, or otherwise
by way of profit, to persons, who at any time are or had been members
of the assessee. The Income Tax Appellate Tribunal (hereafter “ITAT”)
after initial remand to the Appellate Commissioner, held that “the primary
E purpose for which the assessee wasestablished was to promote
commerce and trade in Art Silk and Silk Yarn and Cloth”. The ITAT
made a direct reference of the issue, to this court, since a conflict existed
with regard to the correct interpretation of the residual clause, i.e.,
institutions engaged in the advancement of objects of general public utility,

F 14
(1980) 2 SCC 31(hereafter “Surat Art Silk”)
15
The list of objects were as follows:
“(a) To promote commerce and trade in Art Silk Yarn, Raw Silk, Cotton Yarn, Art Silk
Cloth, Silk Cloth and Cotton Cloth.
(b) To carry on all and any of the business of Art Silk Yarn, Raw Silk, Cotton Yarn as well
as Art Silk Cloth, Silk Cloth and Cotton Cloth belonging to and on behalf of the members.
(c) To obtain import licences for import of Art Silk Yarn, Raw Silk, Cotton Yarn and
G other raw materials as well as accessories required by the members for the manufacture
of Art Silk, Silk and Cotton Fabrics.
(d) To obtain export licences and export cloth manufactured by the members.
(e) To buy and sell and deal in all kinds of cloth and other goods and fabrics belonging
to and on behalf of the members.
(n) To do all other lawful things as are incidental or conducive to the attainment of the
H above objects.”
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 935
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

and whether the company was entitled to be assessed as one carrying A
on activities that amounted to charitable purposes. This court first
determined that the primary or dominant object of the company was
promotion and development of trade in silk, silk cloth, yarn and other
such items and that the other objects were subsidiary to this primary
object. It then held that the requirement of absence of profit motive,
B
was satisfied:
“7...but this requirement was also satisfied in the case of the
assessee, because the object of private profit was eliminated
by the recognition of the assessee under section 25 of the
Companies Act, 1956 and clauses 5 and 10 of its
Memorandum. It must, therefore, be held that the income and C
property of the assessee were held under a legal obligation
for the purpose of advancement of an object of general public
utility within the meaning of section 2 clause (15).”
15. This court then held that the words of prohibition occurring at
the end of Section 2(15) were applicable to the last category of charitable D
institutions, i.e., those involved in the advancement of objects of general
public utility. It further clarified that the prohibition applied to the object
and not the advancement or attainment of the said object:
“10a. It is clear on a plain natural construction of the
language used by the legislature that the ten crucial words E
“not involving the carrying on of any activity for profit” go
with “object of general public utility” and not with
“advancement”. It is the object of general public utility which
must not involve the carrying on of any activity for profit and
not its advancement or attainment. What is inhibited by these F
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. It is not
necessary that the accomplishment of the object or the means
to carry out the object should not involve an activity for profit.
That is not the mandate of the newly added words. What these G
words require is that the object should not involve the carrying
on of any activity for profit. The emphasis is on the object of
general public utility and not on its accomplishment or
attainment. The decisions of the Kerala and Andhra Pradesh
High Courts in CIT v. Cochin Chamber of Commerce and H
936 SUPREME COURT REPORTS [2022] 15 S.C.R.

A Industry [(1973) 87 ITR 83 : (Ker) 16 and A.P. State Road
Transport Corporation v. CIT [(1975) 100 ITR 392 (AC)], in
our opinion lay down the correct interpretation of the last ten
words in Section 2 clause(15). The true meaning of these last
ten words is that when the purpose of a trust or institution is
the advancement of an object of general public utility, it is
B
that object of general public utility and not its accomplishment
or carrying out which must not involve the carrying on of
any activity for profit.”
16. The court then went on to hold what is meant by “not involving
the carrying on an activity for profit”:
C
“15. …The question that is necessary to be asked for this
purpose is as to when can the purpose of a trust or institution
be said to involve the carrying on of any activity for profit.
The word “involve” according to the Shorter Oxford
Dictionary means “to enwrap in anything, to enfold or
D envelop; to contain or imply”. The activity for profit must,
therefore, be intertwined or wrapped up with or implied in
the purpose of the trust or institution or in other words it must
be an integral part of such purpose. But the question again
is what do we understand by these verbal labels or formulae;
E what is it precisely that they mean? Now there are two possible
ways of looking at this problem of construction. One
interpretation is that according to the definition what is
necessary is that the purpose must be of such a nature that it
involves the carrying on of any activity for profit in the sense
that it cannot be achieved without carrying on an activity for
F profit. On this view, if the purpose can be achieved without
the trust or institution engaging itself in an activity for profit,
it cannot be said that the purpose involves the carrying on of
an activity for profit…
********************************
G
16. The other interpretation is to see whether the purpose
of the trust or institution in fact involves the carrying on of
an activity for profit or in other words whether an activity for

16
This decision was reversed in Indian Chamber of Commerce v. Commissioner of
H Income Tax(1976) 1 SCC 324
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 937
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

profit is actually carried on as an integral part of the purpose A
or to use the words of Chandrachud, J, as he then was
in Dharmodayam case [(1977) 4 SCC 75] , “as a matter of
advancement of the purpose”. There must be an activity for
profit and it must be involved in carrying out the purpose of
the trust or institution or to put it differently, it must be carried
B
on in order to advance the purpose or in the course of
carrying out the purpose of the trust or institution. It is then
that the inhibition of the exclusionary clause would be
attracted. This appears to us to be a more plausible
construction which gives meaning and effect to the last
concluding words added by the legislature and we prefer to C
accept it. Of course, there is one qualification which must be
mentioned here and it is that if the constitution of a trust or
institution expressly provides that the purpose shall be carried
out by engaging in an activity which has a predominant profit
motive, as, for example, where the purpose is specifically
D
stated to be promotion of sports by holding cricket matches
on commercial lines with a view to making profit, there would
be no scope for controversy, because the purpose would, on
the face of it, involve carrying on of an activity for profit and
it would be non-charitable even though no activity for profit
is actually carried on or, in the example given, no cricket E
matches are in fact organised.
17. The next question that arises is as to what is the
meaning of the expression “activity for profit”. Every trust or
institution must have a purpose for which it is established
and every purpose must for its accomplishment involve the F
carrying on of an activity. The activity must, however, be for
profit in order to attract the exclusionary clause and the
question therefore is when can an activity be said to be
one for profit? The answer to the question obviously depends
on the correct connotation of the preposition “for”. This
preposition has many shades of meaning but when used with G
the active participle of a verb it means “for the purpose of”
and connotes the end with reference to which something is
done. It is not therefore enough that as a matter of fact an
activity results in profit but it must be carried on with the
object of earning profit. Profit-making must be the end to H
938 SUPREME COURT REPORTS [2022] 15 S.C.R.

A which the activity must be directed or in other words, the
predominant object of the activity must be making a profit.
Where an activity is not pervaded by profit motive but is carried
on primarily for serving the charitable purpose, it would not
be correct to describe it as an activity for profit. But where,
on the other hand, an activity is carried on with the
B
predominant object of earning profit, it would be an activity
for profit, though it may be carried on in advancement of the
charitable purpose of the trust or institution. Where an activity
is carried on as a matter of advancement of the charitable
purpose or for the purpose of carrying out the charitable
C purpose, it would not be incorrect to say as a matter of plain
English grammar that the charitable purpose involves the
carrying on of such activity, but the predominant object of
such activity must be to subserve the charitable purpose and
not to earn profit. The charitable purpose should not be
submerged by the profit making motive; the latter should not
D
masquerade under the guise of the former….”
17. The court took note of the judgment of Pathak, J.
in Dharmadeepti v. CIT17 as well as the speech of then then Finance
Minister, and further observed:
E “17. ….It is obvious that the exclusionary clause was added
with a view to overcoming the decision of the Privy Council
in the Tribune case [AIR 1939 PC 208: In Re the Trustees of
the Tribune, (1939) 7 ITR 415] where it was held that the
object of supplying the community with an organ of educated
public opinion by publication of a newspaper was an object
F of general public utility and hence charitable in character,
even though the activity of publication of the newspaper was
carried on commercial lines with the object of earning profit.
The publication of the newspaper was an activity engaged in
by the trust for the purpose of carrying out its charitable
G purpose and on the facts it was clearly an activity which had
profit making as its predominant object, but even so it was
held by the Judicial Committee that since the purpose served
was an object of general public utility, it was a charitable
purpose. It is clear from the speech of the Finance Minister
17
H (1978) 3 SCC 499
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 939
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

that it was with a view to setting at naught this decision that A
the exclusionary clause was added in the definition of
“charitable purpose”. The test which has, therefore, now to
be applied is whether the predominant object of the activity
involved in carrying out the object of general public utility is
to subserve the charitable purpose or to earn profit. Where
B
profit making is the predominant object of the activity, the
purpose, though an object of general public utility, would
cease to be a charitable purpose. But where the predominant
object of the activity is to carry out the charitable purpose
and not to earn profit, it would not lose its character of a
charitable purpose merely because some profit arises from C
the activity. The exclusionary clause does not require that the
activity must be carried on in such a manner that it does not
result in any profit. It would indeed be difficult for persons in
charge of a trust or institution to so carry on the activity that
the expenditure balances the income and there is no resulting
D
profit…..
18. The court proceeded to quote from passages in its previous
judgments, in Lok Shikshana Trust and Indian Chamber of Commerce
(supra) to the effect that if the activity of a trust consists of carrying on
a business and there are no restrictions on profit-making, the court could
assume (in the absence of something to the contrary) that the trust’s E
object involved carrying on of an activity for profit. The Constitution
Bench disagreed with the approach in both the previous judgments, and
observed:
“19. …Now we entirely agree with the learned Judges who
decided these two cases that activity involved in carrying out F
the charitable purpose must not be motivated by a profit
objective but it must be undertaken for the purpose of
advancement or carrying out of the charitable purpose. But
we find it difficult to accept their thesis that whenever an
activity is carried on which yields profit, the inference must G
necessarily be drawn, in the absence of some indication to
the contrary, that the activity is for profit and the charitable
purpose involves the carrying on of an activity for profit. We
do not think the Court would be justified in drawing any such
inference merely because the activity results in profit. It is in
H
940 SUPREME COURT REPORTS [2022] 15 S.C.R.

A our opinion not at all necessary that there must be a provision
in the constitution of the trust or institution that the activity
shall be carried on no profit no loss basis or that profit shall
be proscribed. Even if there is no such express provision, the
nature of the charitable purpose, the manner in which the
activity for advancing the charitable purpose is being carried
B
on and the surrounding circumstances may clearly indicate
that the activity is not propelled by a dominant profit motive.
What is necessary to be considered is whether having regard
to all the facts and circumstances of the case, the dominant
object of the activity is profit making or carrying out a
C charitable purpose. If it is the former, the purpose would not
be a charitable purpose, but, if it is the latter, the charitable
character of the purpose would not be lost.
20. If we apply this test in the present case, it is clear that the
activity of obtaining licences for import of foreign yarn and
D quotas for purchase of indigenous yarn, which was carried
on by the assessee, was not an activity for profit. The
predominant object of this activity was promotion of commerce
and trade in Art Silk Yarn, Raw Silk, Cotton Yarn, Art Silk
Cloth, Silk Cloth and Cotton Cloth, which was clearly an
object of general public utility and profit was merely a bye-
E product which resulted incidentally in the process of carrying
out the charitable purpose. It is significant to note that the
assessee was a Company recognised by the Central
Government under Section 25 of the Companies Act, 1956
and under its Memorandum of Association, the profit arising
F from any activity carried on by the assessee was liable to be
applied solely and exclusively for the promotion of trade and
commerce in various commodities which we have mentioned
above and no part of such profit could be distributed amongst
the members in any form or under any guise. The profit of the
assessee could be utilised only for the purpose of feeding
G this charitable purpose and the dominant and real object of
the activity of the assessee being the advancement of the
charitable purpose, the mere fact that the activity yielded profit
did not alter the charitable character of the assessee. We are
of the view that the Tribunal was right in taking the view that
H the purpose for which the assessee was established was a
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 941
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

charitable purpose within the meaning of Section 2 clause A
(15) and the income of the assessee was exempt from tax under
Section 11. The question referred to us in each of these
references must, therefore, be answered in favour of the
assessee and against the Revenue.”
19. There was, however, a discordant note in Surat Art Silk - B
A.P. Sen, J disagreed with the majority, and delivered a dissenting opinion.
Explaining how there were no restrictive words or conditions, under the
old IT Act, the learned judge held that the approach indicated in Lok
Shikshana Trustand Indian Chamber of Commerce were correct. He
felt that the previous decisions of the court were not relevant, and that if
the activities of a trust involved any activity for profit or business, the C
organization ceased to be charitable, and that such proceeds were utilized
for charitable objects, were not relevant. He also noted that “A reading
of Section 2(15) and Section 11 together shows that what is frowned
upon is an activity for profit by a charity established for advancement
of an object of general public utility in the course of accomplishing D
its objects.”The same judgment also stated that:
“if the object of the trust is advancement of an object of
general public utility and it carried on any activity for profit,
it is excluded from the ambit of charitable purpose defined in
Section 2(15). The distinction is clearly brought out by the E
provision contained in Section 13(1)(bb) inserted by Tax Laws
(Amendment) Act, 1975.”
D. Relevant changes brought about to the IT Act, 1961
(Finance Act, 1983 and 1991)
20. It is pertinent to note that the judgment in Surat Art Silk was F
delivered on 19.11.1979. The expression “not involving the carrying
on of any activity for profit” in Section 2(15) of the IT Act, was omitted
by the Finance Act, 1983, w.e.f. 01.04.1984. Prior to this, w.e.f.
01.04.1977 the following restrictive condition had been inserted18 as clause
(bb), to Section 13(1)19: G
“(bb) in the case of a charitable trust or institution for the
relief of the poor, education or medical relief, which carries
on any business, any income derived from such business,
18
Through the Taxation Laws Amendment Act, 1975.
19
Section 13 - Section 11 not to apply in certain cases.
H
942 SUPREME COURT REPORTS [2022] 15 S.C.R.

A unless the business is carried on in the course of the actual
carrying out of a primary purpose of the trust or institution”
This provision had the effect of excluding or excepting the
operation of Section 11 (which deemed certain receipts of charitable
institutions not to be part of their income). The restrictive condition in
B clause (bb) was also omitted by the Finance Act, 1983, w.e.f. 01.04.1984.
21. Below Section 11(4)20 (as it originally stood in the IT Act,
1961), Section 11(4A)21 was inserted by the Finance Act, 1983, w.e.f.
01.04.1984. Subsequently, Section 11(4A) was amended and substituted
by the following provision w.e.f. 01.04.1992 (and continues to be in force):
C “(4A) Sub-section (1) or sub-section (2) or sub-section (3) or
sub-section (3A) shall not apply in relation to any income of
a trust or an institution, being profits and gains of business,
unless the business is incidental to the attainment of the
objectives of the trust or, as the case may be, institution, and
D separate books of account are maintained by such trust or
institution in respect of such business.”

20
Section 11(4) as originally enacted, reads as follows:
“For the purposes of this section ‘property held under trust’ includes a business
undertaking so held, and where a claim is made that the income of any such undertaking
E shall not be included in the total income of the persons in receipt thereof, the Income Tax
Officer shall have power to determine the income of such undertaking in accordance
with the provisions of this Act relating to assessment; and where any income so
determined is in excess of the income as shown in the accounts of the undertaking, such
excess shall be deemed to be applied to purposes other than charitable or religious
purposes.”
21
Earlier, sub-section (4A) was inserted by the Finance Act, 1983, w.e.f. 01.04.1984,
F and read as follows:
“(4A) Sub-section (1) or sub-section (2) or sub-section (3) or sub-section (3A) shall not
apply in relation to any income of a trust or an institution, being profits and gains of
business, unless
(a) the business is carried on by a trust wholly for public religious
purposes and the business consists of printing and publication of books or is of
a kind notified by the Central Government in this behalf in the Official Gazette;
G (b) the business is carried on by an institution wholly for charitable
purposes and the work in connection with the business is mainly carried on by
the beneficiaries of the institution;
and separate books of accounts are maintained by the trust or institution in respect of
such business”

H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 943
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

E. The judgment in Thanthi Trust A
22. This court comprehensively interpreted these provisions as
they existed, in different time periods, in Assistant Commissioner of
Income Tax v. Thanthi Trust22 where this court had to decide whether
the assessee trust, created for establishing a newspaper “as an organ
of educated public opinion for the Tamil reading public and to B
disseminate news and to ventilate opinion upon all matters of public
interest through it.” could avail of tax exemption.In 1957, the settlor
executed a supplementary deed making the trust irrevocable. On
28.07.1961 another supplementary deed was executed which directed
that the trust’s surplus income (after defraying all expenses), should be
devoted to purposes such as establishing and running a school or college C
for the teaching of journalism; establishing and/or running or helping to
run schools, colleges or other educational institutions for teaching arts
and science; establishing of scholarships for students of journalism, arts
and science; establishing and/or running or helping to run hostels for
students; establishing and/or running or helping to run orphanages; and D
other educational purposes. The High Court held that exemption could
be claimed by the trust. The revenue appealed. This court noticed that
the appeals covered three distinct periods- (i) 1979-80 to 1983-84, (ii)
1984-85 to 1991-92, and (ii) 1992-93 to 1996-97. This court held that for
the first period (1979-80 to 1983-84), the activity of running a newspaper,
and the corpus held for it, by the trust, did not directly result in carrying E
on the educational activities mentioned in the supplementary deeds. The
income was found to only feed such activity, which was not the same as
carrying on in the course of actual accomplishment of the trust’s objects
of education and relief of poor, and thus not entitled to exemption. For
the next period (1984-85 to 1991-92), noting that Section 11(4) continued F
to be in existence [despite Section 11(4A) being inserted (as originally
enacted w.e.f. 01.04.1984)], dealing with the expression “property held
under trust”, and held that:
“23....Trusts and institutions are separately dealt with in the
Act (Section 11 itself and sections 12, 12A and 13, for G
example). The expressions refer to entities differently
constituted. It is thus clear that the newspaper business that
is carried on by the Trust does not fall within sub-section
(4A). The Trust is not only for public religious purposes so it
22
(2001) 2 SCC 707; (2001) 1 SCR 727. H
944 SUPREME COURT REPORTS [2022] 15 S.C.R.

A does not fall within clause (a). It is a Trust not an institution,
so it does not fall within clause (b). It must, therefore, be held
that for the assessment years in question the Trust was not
entitled to the exemption contained in section 11 in respect of
the income of its newspaper.”
B 23. For the third period (1992-93 to 1996-97), the court dealt with
the meaning and effect of Section 11(4A) (amended and substituted
w.e.f. 01.04.1992) and held that the assessee trust was entitled to be
treated as a charity:
“25. The substituted sub-section (4A) states that the income
C derived from a business held under Trust wholly for charitable
or religious purposes shall not be included in the total income
of the previous year of the Trust or institution if “the business
is incidental to the attainment of the objective of the Trust or,
as the case may be, institution” and separate books of account
are maintained in respect of such business. Clearly, the scope
D of sub-section (4A) is more beneficial to a Trust or institution
than was the scope of sub-section (4A) as originally enacted.
In fact, it seems to us that the substituted sub-section (4A)
gives Trust or institution a greater benefit than was given by
section 13(1)(bb). If the object of Parliament was to give Trusts
E and institutions no more benefit than that given by section
13(1)(bb), the language of section 13(1)(bb) would have been
employed in the substituted sub-section (4A). As it stands, all
that it requires for the business income of a Trust or institution
to be exempt is that the business should be incidental to the
attainment of the objectives of the Trust or institution. A
F business whose income is utilized by the Trust or the institution
for the purposes of achieving the objectives of the Trust or
the institution is, surely, a business which is incidental to the
attainment of the objectives of the Trust. In any event, if there
be any ambiguity in the language employed, the provision
G must be construed in a manner that benefits the assessee. The
Trust, therefore, is entitled to the benefit of section 11 for the
assessment year 1992-93 and thereafter. It is, we should add,
not in dispute that the income of its newspaper business has
been employed to achieve its objectives of education and relief

H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 945
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

to the poor and that it has maintained separate books of A
account in respect thereof.”
(emphasis supplied)
F. Deletion of certain exemptions: Section 10 (20A) and
Section 10 (23)
B
24. Section 10(20A) had been inserted by the Finance Act, 1970,
w.e.f. 01.04.1962; it exempted certain classes of income earned by housing
boards, etc., and before deletion read as follows:
“(20A) any income of an authority constituted in India by or
under any law enacted either for the purpose of dealing with C
and satisfying the need for housing accommodation or for
the purpose of planning, development or improvement of cities,
towns and villages, or for both;”
25. Similarly, Section 10(23)23 existed and provided exemption to
income earned by sport controlling boards, and associations, subject to D
specific conditions. Section 10(23) read as follows, before its deletion:
“(23) any income of an association or institution established
in India which may be notified by the Central Government in
the Official Gazette having regard to the fact that the
association or institution has as its object the control,
E
supervision, regulation or encouragement in India of the
games of cricket, hockey, football, tennis or such other games
or sports as the Central Government may, by notification in
the Official Gazette, specify in this behalf:”
26. Section 10(20A) and 10(23) were deleted/omitted by Finance
F
Act, 2002, w.e.f. 01.04.2003.While both these provisions are not directly
relevant for deciding the primary question (i.e., as to whatcharitable
purpose is, under Section 2 (15)), they still have an important bearing in
the present case. This is because in view of the circumstances that the
provisions were deleted w.e.f. 01.04.2003, housing boards, and bodies,
as well as sports associations, that were earlier claiming exemption of G
23
As amended by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 01.04.1989;
Direct Tax Laws (Amendment) Act, 1989, w.e.f. 01.04.1989; substituted by the Direct
Tax Laws (Amendment) Act, 1989, w.e.f. 01.04.1990; and further amended by the
Finance (No. 2) Act, 1991, w.r.e.f. 01.04.1990; Finance Act, 1992, w.r.e.f. 01.04.1990/
w.e.f. 01.04.1992; and Finance Act, 2000, w.e.f. 1-4-2001.
H
946 SUPREME COURT REPORTS [2022] 15 S.C.R.

A their income under these provisions, now sought to claim that they were
charities.
G. Amendments to Section 2 (15) by Finance Act, 2008 (w.e.f.
01.04.2009)
27. Section 2(15) - which had been amended last, in 198324, was
B again amended, by Finance Act, 2008, w.e.f. 01.04.2009. Some other
amendments too were made, with effect from the same date by the
Finance Act, 2009 and Finance Act, 2010. With the said amendments, as
on 01.04.2009, the provision read as follows:
(15) “charitable purpose” includes relief of the poor,
C 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:
D 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
E 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 [ten lakh rupees] or less in the previous year;]
F In the second proviso, the reference to ten lakhs was substituted,
and the figure of rupees twenty-five lakhs, was inserted, by the Finance
Act, 2011 (w.e.f. 01.04.2012). By Finance Act, 2015 (w.e.f. 01.04.2016),
the first two provisos to Section 2(15) were deleted, and instead, the
following proviso was inserted:
G “Provided that the advancement of any other object of general
public utility shall not be a charitable purpose, if it involves
24
Deletion of the expression “not involving the carrying on of any activity for profit”
and the resulting Section 2(15) read as follows:
““charitable purpose” includes relief of the poor, education, medical relief, and the
advancement of any other object of general public utility.”
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 947
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

the carrying on of any activity in the nature of trade, commerce A
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,
unless—
B
(i) such activity is undertaken in the course of actual carrying
out of such advancement of any other object of general public
utility; and
(ii) the aggregate receipts from such activity or activities
during the previous year, do not exceed twenty per cent of C
the total receipts, of the trust or institution undertaking such
activity or activities, of that previous year;”
Additionally, the same amendment also inserted “yoga” (after
“education”) as a listed category of charitable activity, in the substantive
provision. D
II. Submissions of parties
A. Arguments on behalf of the revenue
28. The learned Additional Solicitor General, Mr. N. Venkataraman
(hereafter “ASG”) tracing the genesis of Section 2(15) contended that
E
the old IT Act contained no restrictive expressions forbidding trade or
business activities by charities. He argued that decisions in In Re: Trustees
of the Tribune, Andhra Chamber of Commerce and the decision in
Krishna Warriar(supra) were in light of Section 4(3) of the old Act;
therefore, the contextual framework of this court’s decisions was entirely
different. Those decisions consequently did not rule out carrying on of F
activities akin to business, by charitable institutions established to advance
general public utility.
29. The ASG next submitted that Parliament’s intent, in changing
the law, was to expressly forbid the tax exemption benefit if the entity
was “involved” in carrying on trade or business. The revenue relied on G
the two decisions in Lok Shikshana Trust, and Indian Chamber of
Commerce (supra), highlighting that the significance of the change –
brought about by Section 2(15) of the IT Act – was noticed. Particular
reliance was placed on the observations of Beg, J in Lok Shikshana
Trust and the passages in Indian Chamber of Commerce to urge that
H
948 SUPREME COURT REPORTS [2022] 15 S.C.R.

A the involvement of an entity in the carrying on of activities for profit,
even if for advancement of charitable purpose or object, disentitled it to
tax exemption. The learned ASG urged that this court had recognized –
from its earlier decisions – that the prohibition from carrying on trade or
commerce activities applied only to charities meant to advance general
public utility and not the other categories such as education, medical
B
relief,or relief to the poor (which are per se exempt).
30. The ASG submitted that the judgments in Indian Chamber
of Commerce and Lok Shikshana Trust (supra) were conscious of the
generality of the GPU category which led Parliament to insert the
restrictive words “not involving the carrying on of any activity for
C profit”. It was argued that Parliament amended the definition due to
rampant abuse of the law by businesses claiming to be driven by charitable
purposes. Often, charities would be created merely to secure exemption
from tax, and would carry on large commercial activities, enjoying the
profits. This led Parliament to embed the exclusionary terms, depriving
D exemption if the institution otherwise fell under the GPU category charity,
but undertook activities for profit. The ASG relied on the Finance
Minister’s speech in the House at the time of the introduction of the IT
Act, and submitted that it outlines the rationale for the restrictive condition
noting that units run on commercial lines could claim that some general
public utility was promoted and claim exemption. The Select Committee
E of Parliament (at that time), felt that to prevent misuse of the definition
in such cases, the words “not involving the carrying on of any activity
for profit” should be added to the definition. ASG relied on Lok
Shikshana Trust (supra) which highlighted that this statement shed light
on the new provision.
F 31. It was submitted that Indian Chamber of Commerce (supra)
recognized this legislative history, and also held that the interpretation of
the provision had to be in tune with the advancement of the object of the
changed law. The court also was conscious that there were borderline
cases which posed difficulty in deciding ex facie whether the undertaking
G yielding profit is a “deceptive” device or a bonafide venture resulting
“in nominal surplus although substantially intended only to advance
the charitable object”.The court also held that the restrictive condition
was a “term of art and embraces objects of general public utility”.
Yet, under the garb of charitable purposes, organisations masking profit,
sprang up. The mask was charitable, but the “heart was hunger for
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 949
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

tax free profit”. The revenue highlighted the following reasoning from A
this court’s judgment in Indian Chamber of Commerce (supra):
“by the new definition the benefit of exclusion from total
income is taken away where in accomplishing a charitable
purpose the institution engages itself in activities for profit.
The Calcutta decisions are right in linking; activities for profit B
with advancement of the object. If you want immunity from
taxation, your means of fulfilling charitable purposes must
be unsullied by profit making ventures.”
32. It was then urged that before the decision in Surat Art Silk
(supra) two legislative developments took place, which reinforced the C
revenue’s view that charities cannot engage in commercial activities.
The first was the amendment, carried out in 1975 to the IT Act (w.e.f.
01.04.1976), which introduced Section 10 (23C) and had the effect of
excluding income received by inter alia, any fund or institution, established
for charitable purposes. The said provision, to the extent relevant, is
extracted as follows: D

“10. In computing the total income of a previous year of any
person, any income falling within any of the following clauses
shall not be included—
******* ******** E

“(23C) any income received by any person on behalf of-
(i) the Prime Minister’ s National Relief Fund; or
******* ***** *****
F
(iv) any other fund or institution established for charitable
purposes”
The other amendment was introduction of Section 13(1)(bb) (w.e.f.
01.04.1977) which imposedconditions on the carrying on of business, by
charitable institutions. G
33. It was urged that the combined operation of Section 2(15),
Section 10(23C) and Section 13(1)(bb) meant that only charities which
were set up for the purpose of “relief of the poor, education or medical
relief”, could claim exemption if they carried on business “in the course
of actual carrying out of a primary purpose of the trust or H
950 SUPREME COURT REPORTS [2022] 15 S.C.R.

A institution”. The studied omission of GPU category charities, in Section
13(1)(bb) meant that if such trust or institutions carried on any business,
even incidental to their objects, they would not be entitled to exemption.
34. The ASG then contended that the decision in Surat Art Silk
(supra) had the unintended consequence of ignoring the significance of
B the addition of the expression “advancement of any other object of
general public utility not involving the carrying on of any activity
for profit”.The remedy intended by Parliament, in adding the said terms
was to prevent charities (involved in the carrying on of any activity for
profit) from claiming exemption, and to ensure that purely charitable
activity-driven trusts or institutions, could claim exemption. It was
C submitted that the Constitution Bench fell into error, in holding that as
long as the ‘dominant’ objective of the charity was to promote objects of
general public utility, they were entitled to exemption.
35. The ASG further submitted that if the history of the provision,
and the further amendments were kept in mind, the question of permitting
D activities that had any business or trade, for consideration, could not
arise; however, by later amendments, GPU category charities have been
permitted to carry on activities in the nature of business, for consideration,
or service in relation to business and commerce, provided that is in the
course of actually achieving the charitable object, and also that income
E from such activities (i.e. business, etc.) does not exceed 20% of the
total receipts.
36. It was submitted that statutory corporations, agencies, boards
and authorities may trace their origins to specific Central or State laws.
However, if their activities are akin to or “in the nature of” business, or
F trade, or they provide services to businesses or trade, for consideration,
fee or even cess (since they may be enabled to do so by law) they have
to fulfil the mandate and restrictions under Section 2(15), especially
proviso (ii). The ASG cited the larger bench decision in New Delhi
Municipal Council v. State of Punjab25 (hereafter “NDMC”)to urge
that state entities are not exempt from Union taxation, if they engage in
G trade or business. It was furthermore submitted that the effect of proviso
(i) to Section 2(15) is that there can be no question of any incidental
activity; nor can the proceeds of trade claim to be exempt merely because
they are ploughed back to feed the charitable object.
25
(1997) 7 SCC 339(hereafter “NDMC”)
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 951
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

B. Arguments of the assessee-organizations A
37. Mr. S.N. Soparkar, learned Senior Advocate appeared for the
Ahmedabad Urban Development Authority (hereafter “AUDA”); the
Gujarat Industrial Development Corporation (hereafter “GIDC”) and
Gujarat Housing Board (hereafter “GHB”). Counsel submitted that all
three corporations were established by or under statutes enacted by the B
Gujarat legislature; they were treated as local authority under Section
10(20) of the IT Act, as it existed till 2003. Thereafter they were treated
as charitable institutions engaged in activities involved in the advancement
of public utility till the amendment of 2008. Learned counsel highlighted
that the AUDA was created purely for the development and
redevelopment -as well as for augmentation of roads and allotment of C
lands after redevelopment, in the areas under its control. Relying upon
the provisions of the Act constituting AUDA26, he submitted that its
mandate is to control development activities, execution of works and
dispersal of sewage, provisions of such other facilities and generally
engage in urban development in the areas it had jurisdiction over. He D
highlighted Section 40 of that Act and urged that the nature of activities,
especially disposal of properties developed by AUDA were entirely
regulated. Whilst the lion’s shares of properties developed by AUDA
were to be allotted for housing and residence, and earmarked specifically
for public amenities, roads etc., a small percentage (15%) could be sold
by public auction. It was submitted that the statutory model adopted by E
AUDA was to enable it to function as a self-sustaining unit. The disposal
of plots through allotment and especially by public auction were the main
modes through which it could generate revenue. The entire revenue or
income so generated was to be kept in a fund under Section 91; and its
accounts were mandatorily audited by the State’s Accountant General F
under Section 95.
38. It was argued that like AUDA, the GIDC too was also set up
by virtue of a statute27, i.e. GIDA, 1962 for the purposes of securing and
assisting rapid and orderly establishment and organisation of industrial
areas and estates in Gujarat, as well as establishing commercial centres G
for such industrial areas and estates. Like AUDA, its accounts were
audited by the Accountant General; the audited report was to be laid
before the State legislature (Section 26(4)) and the land developed by
26
Gujarat Town Planning and Urban Development Act, 1976
27
Gujarat Industrial Development Act, 1962 (referred to as “GIDA”) H
952 SUPREME COURT REPORTS [2022] 15 S.C.R.

A the GIDC could be dealt with only in accordance with law, i.e., the
regulations framed under the GIDA, its constituting enactment, further
to Section 32(2).As far as GHB is concerned, learned counsel submitted
that like the other statutory corporations it was also established by virtue
of a special law28. The functions of this Board were identical to that of
AUDA and its mandate is to regulate and develop building activities
B
aimed for the purposes of providing housing.
39. Learned counsel urged that none of the three boards carry on
any business activity; their functions are controlled by the parent
enactments under which they were created. Furthermore, on advancing
of its affairs in such a manner that if any surpluses are generated, they
C were used for furthering the objectives of law. Thus, for instance, if
surplus is generated in the activities of AUDA, GIDC, or GHB, those
would not be handed to the State Government, which previously had
control over them but rather kept in a separate fund to be utilised for
further development, expansion and development activities by each of
D such corporations. These cannot be construed as carrying on any trade,
business or commerce.
40. It was submitted that the decisions in In Re: Trustees of the
Tribune; Krishna Warriar and Lok Shikshana Trust (supra) were all
in the context of entities which carried on business. Moreover, in the
E first two decisions, the law as it then stood did not contain any restriction
prohibiting trade or commerce activity. Learned counsel submitted that
the judgment in Indian Chamber of Commerce (supra) was specifically
overruled in Surat Art Silk (supra). Therefore, it may be treated as
having no precedential value on subject. Learned counsel highlighted
the observations in Surat Art Silk (supra) and submitted that as long as
F the activities involved are mainly charitable and for advancement of
public utility, its purposes are deemed to be charitable even if it carries
on some business or trade-like activities for the purpose of generating
income. What is important, it was argued, is whether the main or dominant
purpose of business or activity is motivated by profit. In such cases, the
G entity is debarred from claiming that it is a charity and cannot claim the
benefit of tax exemption. Therefore, what is to be understood from the
ratio in Surat Art Silk (supra) is that the main purpose or principal
objective or motivation for the activity should not be to carry on trade or
business. It should be to advance the purpose of general public utility. If
28
H Gujarat Housing Board Act, 1961.
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 953
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

such a purpose is fulfilled, the carrying on of some activity which might A
result in surplus, would not disentitle the entity from the benefit of tax
exemption.
41. Learned counsel then made a brief reference to the judgment
in CIT, Bombay v. Bar Council of Maharashtra29 arguing that Surat
Art Silk (supra) was followed in this decision. He also cited Thanthi B
Trust (supra). Counsel highlighted that the object of the assessee there,
was charitable and required that the business ought to be carried out for
the purposes of achieving the charitable purpose. Having regard to the
nature of Section 13(1)(bb), which existed for the relevant period, the
court held that the income which the trust derived was through a business
and it only fed the charity. In this light, the court rejected the trust’s C
contention with respect to the entitlement to claim tax benefit for the
first part. Counsel pointedly referred to the observations in paragraph 24
of the said decision and submitted that the court noticed the difference
in language brought about by the substitution of Section 11(4A) (w.e.f.
01.04.1992). The new provisions enabled the Trust to carry on business D
for it was incidental to the attainment of its activities.
42. Elaborating on Thanthi Trust further, counsel highlightedthat
the scope of the provision, i.e. Section 11(4A) had been ruled by this
court as more beneficial to the trust or institution, than had existed
previously before its amendment. Therefore, as long as the Trust carried E
on its activities mainly for charitable purposes - any income derived
from incidental trading or business activities, would not result in it being
characterised as an entity carrying on business; in other words, it was
one carrying on a charitable objective or purpose.
43. Learned counsel also relied upon Circular 11/2008 dated F
19.12.2008 which highlighted that whether the activities carried on by
any charitable institutions are in the nature of trade or whether they are
essentially charitable is a question of fact. It also spelt out that if an
assessee is engaged in any activity, in the nature of trade, commerce or
business or rendering any services in relation to such trade etc., it could
not claim that its object was charitable. In such event, “the object of G
general public utility will only be a means or defence to highlight
the true purpose which is trade, service or business………….”. It
was emphasised therefore that the circular and the speech of the Finance
Minister during the budget clearly pointed out organisations, trust or
29
(1981) 3 SCC 308 (hereafter “Bar Council of Maharashtra”) H
954 SUPREME COURT REPORTS [2022] 15 S.C.R.

A entities which were masquerading as charitable but in reality carrying
on business. On the other hand, genuine charitable organisations which
generated income for their sustenance could not be denied the benefit of
tax exemption under the Income Tax Act.
44. Counsel relied on the decisions in Shri Ramtanu Cooperative
B Housing Society Ltd. v. State of Maharashtra30, Gujarat Industrial
Development Corporation v. CIT31(hereafter “GIDC case”), HSIDC
v. Hari Om Enterprises 32and Commissioner of Central Excise v.
Maharashtra Industrial Development Corporation 33and urged that
statutory organizations set up for housing and other essential development,
cannot be regarded as commercial or business entities.
C 45. Learned counsel relied upon the Constitution Bench decision
of this Court in Navnit Lal C. Jhaveri v. K.K. Sen34 (hereafter “Navnit
Lal Jhaveri”), where the court had held while interpreting the provisions
of an enactment that the executive’s understanding –in the form of
circulars in the context of taxing statutes – were valuable guides to
D interpretation. The observations in Navnit Lal Jhaveri (supra) were
relied on to submit that the circulars in that case was used to in fact
soften the rigor of a newly introduced provision. Learned counsel also
relied upon the judgment of this Court in UCO Bank Calcutta v.
Commissioner of Income Tax, West Bengal35and in Lok Shikshana
Trust (supra)where the Court had specifically rejected the contention
E that a speech made in Parliament cannot be looked into to discern the
intent of the lawmaker. In that case, the Court had stressed that the real
meaning of all the words used could be understood specifically by referring
to the past history of the legislation and the speech of the mover of the
amendment.
F 46. Learned counsel argued that the expressions “trade”,
“business” or “commerce” always mean and have been interpreted to
mean activities driven by profit. In this context, reliance was placed on
this court’s decisions in State of Punjab v. Bajaj Electricals Ltd 36.;
Khoday Distilleries Ltd. v. State of Karnataka37 and State of Gujarat
G 30
(1970) 3 SCC 323
31
1997 (Supp 3) SCR 466; (1997) 7 SCC 17(hereafter “GIDC case”).
32
(2009) 16 SCC 208
33
2017 SCCOnline Bom 10021 (para 10-12)
34
(1965) 1 SCR 909 (hereafter “Navnit Lal Jhaveri”)
35
1999 (4) SCC 599 (hereafter “UCO Bank Calcutta”)
36
1968 SCR (2) 636
H 37
(1995) 1 SCC 574
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 955
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

v. M/s. Raipur Manufacturing38. It was submitted that in all contexts, A
the primary meaning of the expression “trade” is “exchange of goods”
for money and connotates that such activity is necessarily or always
carried on to earn profit. It was, therefore, argued that Section 2(15)
cannot be read in isolation, but should be construed in the light of the
minister’s speech while introducing the amendment, and the Circular
B
(i.e. Circular 11/2018). Therefore, if an organisation is created and carries
on its activities with a view to earn profit as was held in Bajaj
Electricals, Khoday Distilleries, and Raipur Manufacturing (supra),
it is precluded from claiming to be a charitable organisation. On the
other hand, if the entity is primarily set up for the charitable purpose, i.e.,
to carry on activities for the advancement of general public utility, but it C
also carries activities that generate surplus or money, they cannot be
per se excluded from consideration for tax benefit.
47. Learned Senior Counsel Mr. Kavin Gulati argued for NOIDA
and relied upon the Constitution Bench judgment of this court in
Commissioner of Central Excise, Bolpur v. Ratan Melting and Wire D
Industries39 to urge that a circular cannot define an ambit of a provision.
He highlighted the decision rendered by the Delhi High Court in Greater
Noida Industrial Development Authority v. Union of India & Ors40,
where the assessee’s activities were held to be not “commercial activity”
within the meaning of clause (b) to S.10(46).41 He also relied on other
decisions – of this court, to the same effect, in Kerala State Electricity E
Board v. Indian Aluminium Co. Ltd.42and Trustees of the Port of
Madras v. Aminchand Pyarelal and Ors.43.
48. Mr. Gulati relied on theGIDC case (supra) to argue that the
word “development” in S.10(20-A) of the IT Act, 1961 has to be
understood in its wide sense. It was urged that development authorities F
like NOIDA fall under Section 2(15) of the IT Act, 1961 if they satisfy
the test in Section 11(7) of the IT Act, 1961. It was contended that
38
(1967) 1 SCR 618
39
(2008) 13 SCC 1
40
2018 SccOnline Delhi 7536
41
The High Court had relied upon the ratio in Shri Ramtanu Co-operative Housing
G
Society Limited v. State of Maharashtra (1970) 3 SCC 323 , which ruled that the true
character of the corporation in that case i.e., the Maharashtra Development Corporation
was to act as an architectural agent for the development and growth of industrial towns
and for their establishment.
42
(1976) 1 SCC 466
43
(1976) 3 SCC 167 H
956 SUPREME COURT REPORTS [2022] 15 S.C.R.

A Surat Art Silk (supra)was clear that engagement by a trust with a
commercial activity is not per se prohibited, as long as its object is the
attainment of an object of general public utility. Pointing to the Explanatory
Notes (to the Provisions of the Finance Act, 2015) - with respect to
proviso to Section 2(15), counsel urged that the proviso operates at the
stage of registration of trust under Section 12AA(1A) of the IT Act,
B
1961, when the authorities satisfy themselves with respect to the
genuineness of the activity and scope of the trust.
49. It was lastly argued that the expression “trade” carries within
it the idea of profitability: counsel cited State of Gujarat v. Mahesh
Dhiarjlal Thakkar 44, Sodan Singh &Ors. v New Delhi Municipal
C Committee & Ors45 and T.M.A Pai Foundation and Ors. v. State of
Karnataka & Ors46. Reliance was placed upon the judgment in CIT,
Madras v. M/s Madurai Mills Company Limited 47 to urge that
interpretation of the definition of expression “charitable purpose” should
not be coloured by considerations stemming from legislative history, which
D override the plain words of a statute.
50. Mr. K. K. Chythanya, senior counsel appeared for M/s
Karnataka Industrial Areas Development Board (“KIADB”). He urged
that KIADB was formed under Section 5 of the Karnataka Industrial
Areas Development Act, 1966 (“KIAD Act”) and it functions on “no
E profit-no loss” basis as is evident from the preamble48, the aims and
objectives49 of the board as well as Sections 3, 5, 6, 28, 29, 43 and 4650
44
(1980) 2 SCC 322
45
1989 (3) SCR 1038
46
(2002) 8 SCC 481
47
(1973) 4 SCC 194
48
F “It is considered necessary to make provision for the orderly establishment and
development of Industries insuitable areas in the State. To achieve this object, it is
proposed to specify suitable areas for Industrial Development and establish a Board to
develop such areas and make available lands therein forestablishment of Industries.”
49
Promote rapid and orderly development of industries in the state.;Assist in
implementation of policies of Government within the purview of KIAD Act;Facilitate in
establishing infrastructure projects:Function on “No Profit – No Loss” basis.
G 50
• Section 5 – Established and incorporated for securing the establishment of industrial
areas in the State of Karnataka and generally for promoting the rapid and orderly
establishment and development of industries and for providing industrial infrastructual
facilities and amenity in industrial areas in the State of Karnataka.
• Section 6 – All the members of the Board are government officials;
• Section 46 - the members & other employees of the Respondent are deemed to be
public servants.
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 957
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

of the KIAD Act. Reliance was placed on Karnataka Industrial Areas A
Development Board v. Prakash Dal Mill51which held that KIADB is
“state” under Article 12 of the Constitution, and it was urged that KIADB
was an extension of the Karnataka Government. The board exercises
power of eminent domain and it performs governmental functions. Its
activities, therefore, cannot be regarded as trade or business. Reliance
B
was placed upon State of Karnataka v. All India Manufacturer’s
Organisation 52.
51. It was submitted that in the absence of profit motive, the activity
is not trade, commerce or business- within the meaning of first proviso
to Section 2(15) of the IT Act, 1961. Reliance was placed upon Khoday
Distilleries (supra), State of Tamil Nadu v. Board of Trustees of the C
Port of Madras53and several other decisions54. It was argued that
wherever it is intended, profit element is wholly excluded from activity-
reliance was placed on provisions of the Karnataka VAT Act, The Central
Goods and Service Tax Act (“CGST Act”) and Section 2(31) of the IT
Act. In the present context, the activities of the Board do not amount to D
“trade”, “commerce” or “business” and the first proviso to Section 2(15)
is attracted only if the primary/dominant objects are (a) in the nature of
trade, commerce or business; or (b) rendering any service in relation to
any trade, commerce or business. To substantiate this argument, counsel
relied on Surat Art Silk (supra), Commissioner of Income Tax v.
Gujarat Maritime Board 55 (hereafter “Gujarat Maritime Board E
case”) and other decisions56. Hence, if the main activity is not “business”,
the connected, incidental or ancillary activities of sales carried out in

• Section 3 & 28 - Government of Karnataka (GOK) that acquires the land from the
public.
• Section 29 – GOK determines the price and pays the compensation.
F
• Section 43 - No duty under the Karnataka Stamp Act, 1957, or fees under the Indian
RegistrationAct, 1908.
51
(2011) 6 SCC 714
52
(2006) 4 SCC 683
53
1999 (2) SCR 195 (hereafter, “Board of Trustees of the Port of Madras”)
54
State of Karnataka v. Shreyas Papers Pvt. Ltd. AIR 2006 SC 865; Ashoka Smokeless G
Coal India (P) Ltd. v. Union Of India (2007) 2 SCC 640; New Delhi Municipal Committee
v. State of Punjab 1996 Supp 10 SCR 472; and Physical Research Laboratory v. K.G
Sharma 1997 (3) SCR 733.
55
2007 (12) SCR 962; (2007) 14 SCC 704(hereafter “Gujarat Maritime Board case”).
56
Yogiraj Charity Trust v. CIT 1976 (3) SCR 947; Commissioner of Income Tax v.
Andhra Pradesh Road Transport Corporation 1986 (1) SCR 570; Queens’s
Educational Society v. CIT 2015 (8) SCC 47. H
958 SUPREME COURT REPORTS [2022] 15 S.C.R.

A furtherance of and to accomplish their main objects would not normally,
amount to business, unless an independent intention to conduct ‘business’
in these connected, incidental or ancillary activities is established by the
revenue. The judgments in CST v. Sai Publication Fund57and the Board
of Trustees of the Port of Madras (supra) was relied upon. It was
urged that the revenue’s contention that statutory authorities’ claim for
B
exemption is confined to the provision in Section 10(46). He urged that
in terms of Section 11(7)58 the Board has an option to claim exemption
either under Section 11 or under Section 10(46). There is no bar for
claiming exemption under either of those provisions.
52. Mr. Dhruv Agrawal, learned senior counsel appearing for the
C U.P Awas Evam Vikas Parishad adopted the submissions of senior counsel
Mr. Soparkar and K.K Chythyanya. He also urged that the realization
of the right to shelter and housing is an integral part of right to life, and
contended that the predominant activity of the assessee involves the
fulfilment of those objectives, especially for the weak and poorer sections
D of the society. He relied on this court’s decision in Chameli Singh v.
State of U.P &Ors.59 which had stated that right to social justice includes
right to shelter, and that these statutory corporations are the means to
ensure that.
53. Mr. K. V. Viswanathan, senior counsel appearing on behalf of
E GS1 India submitted that the assessee is involved in issuing bar codes
which is a global language of standardised coding and the is a universally
accepted standard for identification of products. The GS1 barcode is a
global standard which is an intellectual property of GS1 (an international
non-profit organisation headquartered at Brussels) and it has affiliates in
each country with the assistance of national governments. GS1 India
F the assessee, is an affiliate; it was registered as a society in the year
1996, with the Joint Secretary-Ministry of Commerce as its President
and the administrative control vests with the Ministry of Commerce,
Government of India. It was registered as a charitable GPU category
57
2002 (2) SCR 743
58
G Inserted by Finance (2) Act, 2014 and amended by Finance Act, 2020
59
(1996) 2 SCC 549. The court had cited Article 25(1) of the Universal Declaration of
Human Rights and Article 11(1) of the International Covenant on Economic, Social and
Cultural Rights, 1966 and relied on Sri. P.G. Gupta v. State of Gujarat & Ors. 1995 (1)
SCALE 653 - where a Bench of three Judges of this Court had considered the mandate
of the human right to shelter and read it into Article 19(1)(e) and Article 21 of the
Constitution of India to guarantee the right to residence and settlement.
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 959
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

society in 1996. All the trade bodies60 as well Bureau of Indian Standards A
are members of its governing council.
54. It was submitted that the revenue had granted exemptions to
the assessee society under Section 12A and Section 10(23C)(iv) while
issuing various certificates from time to time (from AY 1996-1997 to
2007-2008); therefore, it had accepted that the assessee’s object and B
purpose was charitable, i.e., advancement of general public utility. Also,
to reflect that there is no business/trade/commerce involved and profit
motive is absent the learned counsel relied upon the decision of the
assessee society to issue substantial discounts to the extent of 50% to
deserving sectors like cottage industries to enable augmentation of market
for such sectors, as well as the letter written by CEO-GS1 to the President C
GS1 (i.e. Joint Secretary, Ministry of Commerce) to permit reduction of
fee from 400 too 70 per farm/plot, for issuing Global Location Number
(GLN) to farmers, which was approved.
55. Regarding the statutory provisions it was submitted that the
words “trade, commerce or business” in the proviso to Section 2(15) of D
the IT Act cannot be read in isolation and have to be seen in context of
“charitable purpose” and, even after a series of amendments -from the
Finance Act, 2008 to Finance Act, 2015 there is essentially, no change in
the basis of determination of what amounts to a trade, commerce or
business and therefore the tests as laid down in Surat Art Silk (supra) E
still holds the field to interpret these words.
56. Counsel urged that Parliament is assumed to have used the
word ‘involves’ found in proviso to Section 2(15) as interpreted in Surat
Art Silk (supra), in the sense that an activity is involved in the advancement
of an object when it is enwrapped or enveloped in the activity of F
advancement, so that the resulting activity has a dual nature or is twin
faceted. The well-known principle of construction, that where the
legislature uses in an Act, a legal term which has received judicial
interpretation, it must be assumed that the term is used in the sense in
which it has been judicially interpreted unless a contrary intention appears,
was relied upon, and the decision in P. Vajravelu Mudaliar v. Special G
Deputy Collector, Madras &Ors.61 was cited in that context.
60
Federation of Chambers of Indian Commerce and Industry; Confederation of Indian
Industry; Associated Chambers of Commerce and Industry of India (ASSOCHAM);
The Agricultural and P rocessed Food Products Export Development
Authority (APEDA).
61
1965 (1) SCR 614 H
960 SUPREME COURT REPORTS [2022] 15 S.C.R.

A 57. Countering the contentions of the revenue that if entities making
profit but not involved in commercial activity desire exemption, they ought
to apply under Section 10(46) IT Act, it was submitted that the expression
“constituted by or under an Act” in Section 10(46) does not include all
entities like the assessee, which is a not a statutory corporation, but a
“not for profit” society registered under the Societies Act. It was argued
B
that the distinction between “established by and under an Act” is well
settled and includes entities which are statutory corporations as contrasted
from non-statutory ones. The judgment in Dalco Engineering Pvt. Ltd.
v. Satish Prabhakar Padhye & Ors.62 was referred to, in this context
where this court ruled that
C “…when the words “by and under an Act” are preceded by
the words “established”, it is clear that the reference is to a
corporation established, that it is brought into existence, by
an Act or under an Act. In short, the term refers to a statutory
corporation as contrasted from a non-statutory corporation
D incorporated or registered under the Companies Act.”
58. Learned senior counsel lastly submitted that an activity, to be
“trade, commerce or business”, must be profit driven. Profit motive is a
quintessential element and an activity without profit motive will not result
in “trade, commerce or business” in terms of the decision in State of
E A.P v. H. Abdul Bakhi & Bros63. If exemption is not granted to the
assessee it will face a liability of around 300 crore (from FY-2007-08
to 2020-21), which given its financial condition will jeopardise its existence
and functioning.
59. Ms. Radhika Suri, learned counsel argued on behalf of
F Bhatinda Improvement Trust and adopted the submissions of Mr.
Soparkar. She urged, in addition, that it is obligatory on part of the assessee
(a statutory corporation) to use the monies received for public utility
purpose and the price fixation of lands/plots sold by them is also regulated
through statutory regulations. Therefore, such activities qualify the test
of general public utility. Ms. Suri also relied on the decision of the Delhi
G High Court in Greater Noida Industrial Development Authority (supra)
to the effect that there is need to distinguish commercial activity which
constitutes disqualification under clause (b) to Section 10(46) of the Act,
and charging and payment of fee, service charges, reimbursement of
62
(2010) 4 SCC 378
63
H 1964 (7) SCR 664
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 961
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

costs or consideration for transfer of rights for performing and undertaking A
regulatory or administrative duties for general public interest, when these
are not guided and undertaken with profit motive or intent.Further, reliance
was placed on The Commissioner of Income Tax (Exemptions),
Chandigarh v. M/s Hoshiarpur Improvement Trust, Hoshiarpur 64 to
explain the characteristics of the assessee. Learned counsel further laid
B
emphasis on provisions of the regulations under the Punjab Improvement
Trust Rules and regulations to show the procedure adopted by the board
in fixing prices.
60. Mr. Gursharan S. Virk, argued that the Gujarat Maritime Board
(GMB), is a statutory one, constituted under Section 3(2)65 of the Gujarat
Maritime Board Act, 1981 (GMB Act); it performs functions which, C
prior to the enactment of the Act, were being performed directly by the
State Government66. The Preamble to the Act notes that it is constituted
for administration, control and management of minor ports in the State
of Gujarat, and for all matters connected therewith. The Board’s powers
under the GMB Act apply to works carried out by GMB as conservator D
of ports under the provisions of the Indian Ports Act67; it is charged with
essential functions such as development and upkeep of jetties, wharves,
docks, piers, places of anchorage, light-houses, light-ships, beacons, buoys,
pilot boats, and other appliances necessary for safe maritime navigation,
etc. and for development of minor ports in general68. It is also entitled to
undertake essential maritime services such as stevedoring, landing, E
shipping or trans-shipping, piloting, hauling, mooring and hooking vessels/
goods, etc.69 Hence it was urged, that GMB’s functions are, essential
and sovereign in nature, and relate to the development, safety and
protection of the waterfront.
61. It was submitted that the GMB is not engaged in any business F
or trade, is not engaged in any activity which generates profit and does
not (also statutorily cannot) use money for anything except for
64
ITA No. 78 of 2016
65
Section 3 (2):- “ The board shall be a body corporate by the name aforesaid having
perpetual succession and a common seal with power, subject to the provisions of this G
Act to acquire, hold and dispose of property, both movable and immovable, and to
contract, and may by the said name sue and be sued.”
66
Section 20 of the GMB Act
67
Section 83 of the GMB Act
68
Section 25(2) of the GMB Act
69
Section 32 r/w Sections 37-30 of the GMB Act
H
962 SUPREME COURT REPORTS [2022] 15 S.C.R.

A development of minor ports in the state of Gujarat and the features of
the GMB Act. These features in context of the controversy at hand,
under the provisions of the IT Act, were considered by this court in the
Gujarat Maritime Board case (supra). The decision discussed Sections
73, 74 & 75 of the GMB Act, which provide for management of all
monies received by the GMB; and Section 76 of the GMB Act, which
B
permits the setting aside of surplus money only for “expanding existing
facilities or creating new facilities at the ports” or for meeting with
contingencies caused on account of “fire, cyclones, shipwrecks or
other accidents or for any other emergency.” It was stressed that
that judgment clearly indicates GMB has no profit motive. It was
C therefore, urged that the provisions of the GMB Act, indicate the
overwhelming public purpose carried out by it without profit motive and
that utilization of funds is only for the purpose of development,
management and safety of minor ports; all these entitles GMB to
exemption.
D 62. Mr. Rohit Jain, learned counsel, appeared on behalf of the
Education and Research Network (ERNET) and National Internet
Exchange of India (NIXI). On behalf of ERNET it was submitted that it
was started as a planned project of the Government of India under the
Department of Electronics (DoE) with the support of the United Nations
Development Program (UNDP). The program was focused on
E integrating information technology and internet tools with learning
environment, to enhance the quality of education. However, funding by
the UNDP ended in 1992. The DoE nevertheless continued to support
the project till 1998 and thereafter the body was registered as an
autonomous society under administrative control of the Ministry of
F Communication and Information Technology, Govt. of India on
27.01.1998. It was registered under Section 12A of the IT Act, 1961 on
26.03.2004 and its activities fell within the meaning of “charitable purpose”
under Section 2(15). It duly complied with Sections 11 and 12 of the IT
Act, 1961.
G 63. NIXI was created in 2003 by the Government of India under
the Ministry of Information Technology, for promotion and growth of
internet services in India, regulating the internet traffic and acting as
internet exchange, to undertake “.in” domain name registration thereby
saving valuable foreign exchange, and take care of national concern. It
was urged that this is a Section 25 company barred from undertaking
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 963
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

any commercial or business activity for profit and is bound by strict A
licensing conditions, including prohibition on alteration in the memorandum
of association, without prior consent of the government. The “charitable”
nature of the same has also been upheld under Section 12A of the IT
Act, 1961.
64. Learned counsel submitted that ERNET is a “not for profit” B
society wherein considering its objects, it receives only subscription fees
mainly from schools, colleges, universities, scientific research institutes,
etc. This subscription fees is charged on “actual basis” and utilized
towards promotion of its objectives. The charitable character of the
assessee is apparent and not in dispute since it has been accepted by the
revenue up to AY 2008-09. Also, the final factual findings recorded by C
lower authorities conclusively demonstrate that the assessee is engaged
in ‘advancement of general public utility’, and qualifies as a ‘charitable
purpose’ as it does not carry any trade commerce or business, and the
income earned is not derived in the course of any commercial activity.
65. Learned counsel also submitted that the assessee carries on D
R & D work which enables educational institutions with Information
and Communication Technology infrastructure for making education reach
the public at large solely for charitable purpose and further reliance was
placed upon ICAI Accounting Research Foundation v. DGIT(E)70,
Bureau of Indian Standards v. DGIT(E)71 and GS1 India v. DGIT(E)72. E
66. Mr. Ajay Vohra, learned senior counsel, appearing for the
Apparel Export Promotion Council (AEPC) urged that it is a non-profit
organization set up with approval of the Central Government, for
promotion of exports of garments from India (i.e., promotion of trade).
It was registered under Section 12AA(1) of the IT Act, on 18.05.1979 F
and is engaged in the activity of promotion of the export of all kind of
ready-made garments, knitwear, and garments made of leather, jute and
hemp. It does not per se engage in any activity for profit, and its mandate
is to ensure that Indian apparel manufacturers, are given forums and
platforms, to showcase their products. For that purpose, the AEPC
charges subscriptions, and provides services, which have general public G
utility. These activities are by way of booking large spaces in fairs, and
such like events, especially in overseas locales, so that Indian
70
321 ITR 73 (Del)
71
358 ITR 78 (Del)
72
360 ITR 138 (Del) H
964 SUPREME COURT REPORTS [2022] 15 S.C.R.

A manufacturers can interact with other overseas buyers, and are enabled
to promote trade. It was submitted that there is ex-officio involvement
on behalf of the Central Government, in the AEPC’s activities, including
in its policy formulation levels.
67. Mr. Vohra relied upon the Memo Explaining Provisions in the
B Finance Bill, 200873, the speech of Finance Minister in Lok Sabha on
Finance Bill, 200874, CBDT Circular No. 11 dated 19/12/200875 to submit
that proviso to Section 2(15) only bars commercial/business activities
undertaken for profit motive. It was submitted that mere earning of
income and/or charging any fees is not barred by the proviso; rather,
carrying of any activity in the nature of trade, commerce or business or
C rendering service in relation thereto is barred. Reliance was placed upon
judgments in Dir. Of Supp. & Disp. v. Board of Revenue76 which
follows H. Abdul Bakhi& Bros (supra), Barendra Prasad Ray v.
ITO77and State of Gujarat v. Raipur Manufacturing Co. Ltd.78 to
argue that in “business” there must be some real and systematic, or
D organized course of activity or conduct with the set purpose of making
profit. Counsel referred to Sai Publication Fund (supra) where this
court observed that since primary and dominant activity of the trust was
to spread message of Saibaba and hence not business, then any incidental
or ancillary activity of publishing and selling of books and literature cannot
be regarded as business. Reference was made to Customs & Excise
E Commissioner v. Lord Fisher79 which held that there are six indicia to
determining business namely (a) serious undertaking earnestly pursued,
(b) reasonable continuity, (c) substantial in amount, (d) conducted
regularly on business principles, (e) predominantly concerned with making
taxable supplies for consideration, (f) such as those commonly made by
F persons seeking to make profit. Other judgments too were cited; and
reference was made to definitions in the Concise Oxford Dictionary,
Webster’s New Twentieth Century Dictionary, Black’s Law Dictionary,
and Sampath Iyengar’s Law of Income Tax.
68. Mr. Ajay Vohra, urged that AEPC has been claiming exemption
G under Section 11 from AY 1979-80 to 1990-91. During AY 1991-92, the
73
298 ITR (St.)
74
Quoted in ITPO v. DGIT(E) : 371 ITR 333 (Del) (hereafter “ITPO”)
75
308 ITR (St.)
76
1967 (3) SCR 778
77
1981 (3) SCR 387
78
1967 (1) SCR 618
H 79
(1981) 2 All ER 147
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 965
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

Assessing Officer (“AO”) denied the exemption on the ground that it A
was carrying on business. That order was eventually set aside by the
ITAT which, held that it was entitled to exemption under Section 11 of
the Act. Subsequently, an amendment was brought to Section 11(4A) and
AEPC had to maintain separate books of accounts. In AY 1992-93, the
AO again denied exemption. On appeal, the issue was decided in favour
B
of AEPC by the ITAT. The Delhi High Court upheld the order of the
ITAT in a judgment80. AEPC received entrance fee and membership
fee which, it claimed were exempt on the principle of mutuality. This
issue too was resolved in its favour from the AY 1992-93 to AY 1997-98
by the jurisdictional High Court. From the assessment year 1998-99 to
the assessment year 2008-09, the AO accepted the assessee’s claim C
that income was exempt under Section 11 of the Act.
69. During AY 2009-10 and 2010-11, the AO denied exemption
under Section 11 on the ground that the newly inserted proviso to Section
2(15) was attracted; and thus the assessee was ineligible for exemption
under Section 11. The AO held that the assessee was rendering services D
in relation to trade, commerce business for consideration and the receipt
of which exceeds 10 lakhs. The CIT(A) allowed the assessee’s appeal
following the decision of the High Court in its case, and there being no
changes in the facts and circumstances of the case. The ITAT upheld
the findings of the first appellate authority as it observed that the assessee
did not carry any activity with an object of profit, and thus the question E
of attracting the proviso did not arise.
70. Ms. Prabha Swami, learned counsel submitted that the A.P
State Seed Certification Agencyis a statutory society set up under Section
881 of the Seeds Act, 1966 which is represented by the representatives
of Seedsmen Association, seed farmers, farming community and members F
representing Central Seed Certification Board. While explaining the
charitable characteristic of the society the counsel pointed out that the
society was duly registered and its Memorandum of Association clearly
inter-alia stated that the object for which it was established was to see
that the cultivators adopt all scientific methods for production of quality G
seeds in accordance with the Seeds Act and to carry on educational
80
Reported at 244 ITR 736
81
"Section 8. The State Government or the Central Government in consultation with the
State Government may, by notification in the Official Gazette, establish a certification
agency for the State to carry out the functions entrusted to the certification agency by or
under this Act”. H
966 SUPREME COURT REPORTS [2022] 15 S.C.R.

A programs designed to promote the use of certified seeds. Charges are
collected from the traders or the societies engaged in the trade of seeds.
The society provides quality seeds to the farmers and hence traders are
prevented from selling inferior variety of seeds. Highlighting the activities
of the authority, it was urged that farmers are benefited by various
services it offers - inspection of fields at the time of seed production,
B
supervision while processing seeds and issuing a validation certificate at
the time of packing, sampling, and seed testing. The society (which is
not involved in trade, commerce or business) is therefore rendering
service to the general public as they are encouraging farmers to purchase
quality seeds and help prevent loss to them, and loss of natural resources.
C Mr. Sanjay Jhawar, learned counsel for Rajasthan State Seed Corporation
also adopted the submissions of Ms. Prabha Swami.
71. Mr. Sanjay Visen, learned counsel argued on behalf of M/s
Raebareli Development Authority, Raebareli, urging that the assessee is
a body constituted under the U.P Urban Planning and Development Act,
D 1973. As their activities were aimed at public purpose, it applied for
registration u/s 12AA of the IT Act, 1961. It was submitted that the
assessee’s income was earlier exempted under Section 10(20A) of the
IT Act, 1961 which was omitted by the Finance Act, 2002; however, this
did not restrict the assessee from getting registered under Section12AA
of IT Act, as the object of the authority is to provide shelter to homeless
E people, which is charitable.
72. Mr. Harish Salve, learned senior counsel appearing on behalf
of Saurashtra Cricket Association drew attention of this court towards
the ambit of Section 4(3) of Income Tax Act, 1922 (i.e., the old Act), as
compared to Section 2(15) of the IT Act, 1961 which defines ‘charitable
F purpose’. He also presented the construction of Section 11 in light of
Thanthi Trust (supra). It was emphasized that the objects of a trust are
decisive and every surplus cannot be construed as profit, as is discussed
in Krishna Warriar (supra). Profits from trade or business arising out
of property held under trust for charitable purpose, if ploughed back to
G the extent of 100% cannot be termed as a commercial activity. This was
the principal idea in omitting Section13(1)(bb) as it was considered as
restrictive for carrying out such activities. It was argued that, substitution
of the definition of “charitable purpose” in Section 2(15) by the Finance
Act, 2008 has not changed the law. The words “in relation to any
trade, commerce or business” and “for a cess, fee or consideration”
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 967
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

in the proviso to Section 2(15) implies that advancement of object of a A
trust may not involve activities of profit. It was urged that the amendment
appears to have undermined this court’s decision in Surat Art Silk (supra).
73. It was argued that the crucial part of the definition of “charitable
purpose” is the word “cess” employed in the proviso. As an explanatory
measure, the activities of promotional councils were taken into B
consideration - for example Surat Art Silk supported silk manufacturers.
If such activity is for a cess or a fee, the organization ceases to be
charitable. Activities in the nature of trade, commerce or business are
not charitable if they are for a fee or other consideration. Fees collected
by the private organizations forms the content of Section 2(15). However,
amounts based on tariff regulations imposed by the controlling law, or C
statute-based fee is neither “fee” nor “cess” under that provision. Further,
the consideration involved is vis-à-vis the activity or service. The test is
the object for which the consideration is paid, and what it entails, wherein
the words “any other consideration” is for the activities in aid or service
of business. In this regard it was submitted that, in true sense the word D
“business” implies profit, however statutory organizations are excluded
from its ambit. Fee or consideration collected by such organizations should
not be taken in the sense of profiteering, as it is for the advancement of
their objectives. In this sense the word “cess” can be read down as non-
statutory.
E
74. It was submitted that the phrase “cess, fee or any other
consideration” in the proviso to Section 2(15) covers the second part of
the proviso, i.e., it is relatable to “service in relation to” trade, commerce
or business. Mr. Salve submitted that any statutory cess, or fee,
authorized or compelled by law, which is within the domain of the state
legislature, cannot be construed as taxable, having regard to the principles F
indicated in the judgment of this court, in NDMC (supra). He relied on
Article 289 of the Constitution of India, and submitted that it is only if a
state engages – by itself, or through an agency, directly in trading activity,
that the immunity from Union taxation is lifted. In the present case,
those agencies set up by the State, essentially through law, to carry out G
welfare activities, such as regulation and housing, cannot per se be
characterized as trading concerns.
75. Mr. Salve submitted that cricket associations are operating
purely to advance their objective of promoting the sport. They should
not be considered as pursing activities in furtherance of trade, commerce H
968 SUPREME COURT REPORTS [2022] 15 S.C.R.

A or business. The word “cess” has to be read down in reverse (reverse
ejusdem generis) and it should be read non-statutorily while adopting
purposive interpretation of the same. Reliance was placed on Nabha
Power Limited v. Punjab SPCL82 to state that a purposive interpretation
of “cess”, is to be adopted.
B 76. It was also argued that the sport of cricket is a form of education
and if it is not considered as a field of education, it is still an object of
general public utility. The primary regulating body i.e., the BCCI,
promotes sport in the entire country and worldwide, and the assessees
herein are its second and third tier associations.The revenue generated
by BCCI flows to state and regional cricket associations in the form of
C grants to maintain stadia, conduct matches, organize training camps, and
other ancillary purposes. Counsel relied on the objects of Saurashtra
Cricket Association which inter alia include, the control, supervision,
regulation, encouragement, promotion and development of the game of
cricket in the Association’s jurisdiction.Other objects include creation,
D fostering friendly relationships through sports tournaments and the
creation of a healthy sportsmanship spirit, through the medium of sports
in general and cricket in particular. All other objects were similar, including
“to arrange, and/or manage among other things league and/or any
other tournaments”; organize matches, lay out grounds for playing
cricket, organization of matches in aid of public charities, etc. If these
E associations sell tickets and generate revenue through other activities,
those do not necessarily mean that their objects are commercial or to
promote trade. Selling tickets for a sport performance or match is to
promote cricket, and not trade. Mr. Salve also urged that the expression
“trade” has a particular meaning; he referred to State of Gujarat v.
F MaheshkumarDhirajal Thakkar83 where the court observed that
“the word trade in its narrow popular sense means ‘exchange
of goods for goods or for money with the object of making
profit’. In its widest sense it includes any business carried on
with a view to earn profit84. Further, the word takes its meaning
G from the context.”
77. Likewise, with regard to “business” the counsel referred to
H.Abdul Bakhi & Bros. (supra) which had discussed the term and
82
(2018) 11 SCC 508
83
(1980) 2 SCC 322
84
H Halsbury’s Laws of England, Vol. 32 para 487
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 969
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

explained that any activity should be driven by profit motive.85 Lastly, A
the judgment in Secretary, Ministry of Education & Broadcasting,
Govt. of India & Ors. v. Cricket Association of Bengal86 was cited
to explain the dominant purpose of the BCCI. That judgment highlighted
what is relevant and applicable is the test of predominant character of
the activity, and not that an institution incidentally earns surplus or profit.
B
78. Mr. Arvind Datar, learned senior counsel appeared on behalf
of the Institute of Chartered Accountants of India (hereafter “ICAI”)
as well as The Tribune Trust.
79. Counsel submitted that ICAI is a premier professional
accountancy body of the country established under the Chartered C
Accountants Act, 1949 (“CA Act”) to impart formal and quality education
in accounting and thereafter to regulate the profession of Chartered
Accountancy in India. It is under the control and supervision of the
Ministry of Corporate Affairs, Government of India. Section 1587of the
CA Act defines the functions of Council of Institute which include holding
D
85
"the expression ‘business’ though extensively used is a word of indefinite import, in
taxing statutes it is used in the sense of an occupation, or profession which occupies the
time, attention and labour of a person, normally with the object of making profit. To
regard an activity as business there must be a course of dealings, either actually
continued or contemplated to be continued with a profit motive, and not for sport or
pleasure. But to be a dealer a person need not follow the activity of buying, selling and
supplying the same commodity. Mere buying for personal consumption i.e. without a E
profit motive will not make a person a dealer within the meaning of the Act, but a person
who consumes a commodity bought by him in the course of his trade, or use in
manufacturing another commodity for sale, would be regarded as a dealer”.
86
(1995) 2 SCC 161
87
15. Functions of Council (1) The Institute shall function under the overall control,
guidance and supervision of the Council and the duty of carrying out the provisions of
this Act shall be vested in the Council. F
(2) In particular, and without prejudice to the generality of the foregoing powers, the
duties of the Council shall include –
(a) to approve academic courses and their contents;
(b) the examination of candidates for enrolment and the prescribing of fees therefor;
(c) the regulation of the engagement and training of articled and audit assistants;
(d) the prescribing of qualifications for entry in the Register;
(e) the recognition of foreign qualifications and training for the purposes of enrolment; G
(f) the granting or refusal of certificates of practice under this Act;
(g) the maintenance and publication of a Register of persons qualified to practice as
chartered accountants;
(h) the levy and collection of fees from members, examinees and other persons;
(i) subject to the orders of the appropriate authorities under the Act, the removal of
names from the Register and the restoration to the Register of names which have been
removed; H
970 SUPREME COURT REPORTS [2022] 15 S.C.R.

A of examinations for chartered accountancy course candidates and
regulation of engagement and training of articled clerks and audit
assistants.
80. It was submitted that holding of coaching and revision classes,
and surplus generated due to the fees collected from that activity is not
B a business or commercial activity. Counsel urged that it is wholly incidental
and ancillary to the objects of the institute - which is to provide education
and conduct examinations of the candidates enrolled for chartered
accountancy courses, so as to bring out true professionalism. Therefore,
separate books of accounts are not required to be maintained in terms of
Section 11(4A) read with the fifth and seventh proviso to Section 10(23C)
C of IT Act, 1961. It was urged that ICAI was not hit by the proviso to
Section 2(15) of the IT Act (inserted w.e.f. 01.04.2009) since its activities
fall within the purview of the clause “education” specified in the definition
of the expression “charitable purpose” in S. 2(15) of the said Act, and
not the residuary clause relating to the GPU category, wherein the proviso
D solely applies to the latter. In this regard the counsel referred to the
Gujarat High Court judgment in Saurashtra Education Foundation v.
CIT88 which took into account the observations made in another judgment
by the same High Court in Gujarat State Co-operative Union v. CIT89,
to hold that the ICAI was existing solely for educational purposes and its
activities clearly fall within the category of ‘education’ in Section 2(15)
E of the Act. In further support of this proposition, reliance was placed on
American Hotel and Lodging Association v. CBDT90 to argue that
(j) the regulation and maintenance of the status and standard of professional
qualifications of members of the Institute;
(k) the carrying out, by granting financial assistance to persons other than members of
the Council or in any other manner, of research in accountancy;
F (l) the maintenance of a library and publication of books and periodicals relating to
accountancy;
(m) to enable functioning of the Director (Discipline), the Board of Discipline, the
Disciplinary Committee and the Appellate Authority constituted under the provisions of
this Act;
(n) to enable functioning of the Quality Review Board;
G (o) consideration of the recommendations of the Quality Review Board made under
clause (a) of Section 28B and the details of action taken thereon in its annual report; and
(p) to ensure the functioning of the Institute in accordance with the provisions of this Act
and in performance of other statutory duties as may be entrusted to the Institute from
time to time.
88
(2005) 273 ITR 139 (Guj.)
89
(1992) 195 ITR 279 (Guj.)
90
H (2008) 10 SCC 509
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 971
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

ICAI is entitled to be notified under Section 10(23C)(iv) r/w Section A
2(15) of the Act, 1961.
81. Counsel submitted that profit motive is an essential element,
or the driving force, for any business or commercial activity. The activities
of ICAI are not of such nature. Counsel relied upon the judgment in
NDMC (supra)which ruled that profit motive is the core aspect of trade B
and business, in the context of Article 289 of the Constitution of India,
which talks about exemption of property and income of a state from
Union Taxation.
82. It was argued that there is a distinction between nature of
commercial ventures and charitable institutions such as ICAI. The word C
‘profit’ should never be used with a body set up for public purposes, to
regulate activities, in public interest and the intent of the organization/
establishment must be taken into consideration. In support, Board of
Trustees of the Port of Madras (supra) was cited,where the Port trust’s
activities included sale of unclaimed and unserviceable goods in discharge
of various statutory charges, items, etc. They were part of the Port D
Trust’s main activities of service. The court said that they cannot be
treated as ‘business’ and that the Port Trust had no intention to carry on
business in the sale of unserviceable/unclaimed goods. Reliance was
placed on Surat Art Silk (supra), Andhra Pradesh State Road Transport
Corporation (supra), Victoria Technical Institute v CIT91, Aditnar E
Educational Institution v. Addl. CIT 92, Thiagarajar Charities v.
ACIT93, Director of Income Tax v. Bharat Diamond Bourse94 and
Gujarat Maritime Board case (supra). The observations in T.M.A Pai
(supra) that there can be reasonable revenue surplus, by the educational
institution for the purpose of development of education and expansion of
the institution, was also referred to. F

83. Learned senior counsel further relied on the explanatory notes
to the provisions of the Finance Act, 2008, specifically towards
amendment made to Section 2(15) of the IT Act, aimed at streamlining
the definition of “charitable purpose” as discussed in para 595 and the
91
(1991) 188 ITR 57 (SC)
G
92
(1997) 3 SCC 346
93
(1997) 4 SCC 724
94
(2003) 259 ITR 280 (SC)
95
"5. Streamlining the definition of “charitable purpose”
5.1 Sub-section (15) of section 2 of the Act defines “charitable purpose” to include relief
of the poor, education, medical relief, and the advancement of any other object of H
972 SUPREME COURT REPORTS [2022] 15 S.C.R.

A ratioVisvesvarya Technological University v. Assistant Commissioner
of Income Tax96 to submit that there is no loss to the character of a
GPU charity where surplus generated is ploughed back. Further, a
judgment of the Division Bench of the Delhi High Court in J.K Synthetics
& Another v. Union of India & Ors.97 was referred to contend that it
is not open for the revenue authorities, without any cogent reason and
B
merely at its own caprices, to refuse to follow the conclusion reached on
the earlier occasion, and to take up a totally different stand in subsequent
years - as was done in this case while refusing to grant exemption under
Section 10 (23C) of IT Act, 1961 to the ICAI.
84. Learned counsel further submitted that the present case
C involves two circulars issued by the Board viz. Circular No. 1/2009 dated
27.03.2009 and Circular No. 11/2008 dated 19.12.2008 which are
clarificatory and not contrary to any provisions of the Act, 1961 and
hence the ratio of the decision in Ratan Melting and Wire Industries
(supra) does not apply. Reliance was placed on observations made in
D Navnit Lal Zaveri (supra) and Ellerman Lines v. Commissioner of
Income Tax98 to urge that these circulars are classified as “beneficial”.
They place a purposive interpretation on a statutory provision. Such
circulars enormously reduce litigation and hardship of assessees and
they play a vital role in the proper administration of taxes.
E 85. It was argued that the demand against ICAI is from 2004-05
and the fees collected from students have already been spent on various
general public utility. This is based on the argument that they are engaged in the
“advancement of an object of general public utility” as is included in the fourth limb of
the current 12 It has been noticed that a number of entities operating on commercial
lines are claiming exemption on their income either under sub-section
F (23C) of section 10 or section 11 of the Act on the ground that they are
charitable institutions. This is based on the argument that they are engaged in the
“advancement of an object of general public utility” as is included in the fourth limb of
the current definition of “charitable purpose”. Such a claim, when made in respect of
an activity carried out on commercial lines, is contrary to the intention of the provision.
5.2 With a view to limiting the scope of the phrase “advancement of any other object of
general public utility”, sub-section (15) of section 2 has been amended to provide that
G 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.”
96
(2016) 12 SCC 258
97
1981 SCC OnLine Del 457
H 98
(1972) 4 SCC 474
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 973
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

infrastructure development and other capital expenditure items. The A
surplus amounts remaining were invested in government securities/FDs
of nationalized banks, so the demands raised will seriously prejudice the
assessees.
86. On behalf of the Tribune Trust, Mr. Datar argued that the
charitable nature of the trust can be traced back to the In Re: Trustees B
of the Tribune (supra) judgment rendered by the Privy Council, which
allowed the trust’s appeal against the judgment of Lahore High Court
(that rejected exemption for the trust’s income for AY 1932-33). The
Privy Council considered the objects of the trust and held it was not
founded for private profit and prima facie the trust’s object was of
general public utility, since by supplying newspapers in the province the C
trust involved the dissemination of educated public opinion. It was urged
that the impugned judgment passed by the Punjab and Haryana High
Court99 in Tribune’s case dismissing the Tribune’s appeal, erroneously
relied on para 17 of Surat Art Silk decision (supra) which wrongly quoted
the Privy council judgment in the Tribune’s case. D
87. It was further argued that collecting advertisements for
consideration cannot be treated as business activity undertaken by profit
because the sale price of the newspaper is 2 whereas the cost of
printing each newspaper is 12 and the deficits can be made up only
through advertisements. Placing reliance on the extracts from the will of E
the late Sardar Dyal Singh Majithia it was urged that the trustees were
under a duty to devote the surplus income for the improvement of the
newspaper and hence prayed for allowing the appeal.
88. Upon this court’s query with respect to advancing submissions
on the constitutional aspect in the ITPO judgment (supra), the learned F
senior counsel advanced his submissions on the validity of Section 2(15)
in the context of Article 14 and Article 289. It was submitted that
classification made in the ITPO judgment i.e., institutions driven by profit
motive vis-à-vis institutions driven by motive to advance objective of
GPU, was correct and is in tune with the decision of this court in NDMC
(supra). It was urged that Article 289(1) will not apply to ITPO as its G
income and property cannot be regarded as income and property of a
State. It was also submitted that proviso to Section 2(15) applies only to
the last limb i.e., “advancement of object of general public utility”
and not to the preceding limb “education” and in respect of charity
99
ITA Nos. 62 of 2015 and 147 of 2016 (O&M) H
974 SUPREME COURT REPORTS [2022] 15 S.C.R.

A there is no discernible difference between the two. Since there is no
intelligible differentia and rational nexus in this regard, this discrimination
offends Article 14.
89. It was argued that the term “for a cess or fee or any other
consideration” used in Section 2(15) is clearly violative of Article 14
B as it fails to make a distinction between activities that are carried out by
the State or by the instrumentalities or agencies of the State, and those
carried out by commercial entities for which a consideration is charged.
In addition, Article 289(1) exempts states’ property and income from
Union taxation. To permit levy of income tax on cess or fee collected by
a state would violate Article 289(1), hence the word “cess” or “fee” in
C the proviso is liable to be declared unconstitutional and violative not only
of Article 14 but of Article 289 as well, in the context of state undertakings.
For Central institutions, it was submitted that cess or fee can never fall
within the definition of “income” under Section 2(24) read with Entry 82
of List-I and cannot be subject to tax.
D C. Revenue’s rebuttal arguments
90. In rebuttal to the submissions advanced by the assessees, the
ASG relied upon Adityapur Industrial Area Development Authority
v. Union of India100 and submitted that there is no constitutional immunity
from taxation, for the state, because by Article 289(2) even state or its
E instrumentalities/agencies are not immune from taxation if they carry on
trade or business. In light of Article 289(2), there is no constitutional bar
for the States (or the Union) to engage or carry on trade or business,
and Article 289 allows the Parliament to impose taxes on such trade or
business. The ratio in NDMC (supra) has to be read in light of the
F provisions and the judgment rendered in Shri Ramtanu Cooperative
Housing Society (supra) should in turn be read in light of NDMC. The
decisive factor therefore is not the status of the entity, but the nature of
activity carried by it. If the nature of activity is trade or business with a
profit motive, then the same can be taxed even if it is carried by state or
its instrumentalities. It was also contended that Article 289 does not
G grant absolute any immunity from taxation.
91. The revenue further submitted that the validity of the
amendment can be tested especially in the case of exclusions or
exemptions on limited grounds - invalidity, arbitrariness, unreasonableness,
100
H (2006) 5 SCC 100
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 975
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

discrimination; and the assessees have not made out a case under any A
such ground. Also, by referring to In Re: Trustees of the Tribune and
All India Spinners Association of Mirzapur(supra), it was contended
that “general public utility” is only a statutory creation so as to form part
of charitable purposes and it can always be given a statutory import by
subjecting it to conditions and limitations prescribed under Section 2(15),
B
at different points of time. In other words, it can always be regulated or
modulated through statutory prescriptions, conditions, and limitations while
granting an exemption from taxation. The submission of the assessees,
that one has to look only at the objects to determine if it constitutes
charitable purpose for Section 2(15) of the Act, is to be rejected because
exemptions or exclusions are not based on mere objects of trust but on C
whether the purpose of the trust is “advancement of any other object
of general public utility”.
III. Analysis and reasoning
92. The history of the statute and the evolving interpretation of
“charitable purpose” reveals that in -P. Krishna Warriar(supra), this D
court extensively considered the previous jurisprudence on the subject
(in light of the pre-existing Section 4(3) of the old law), as well as the
amendment introduced in 1953. At that time, income of a charitable
organization, earned from business was subject to limitations. The
limitations were that (i) the business was to be carried on in the course E
of the actual carrying out of a primary purpose of the trust or
institution; or (ii) the work in connection with the business was to be
mainly carried on by beneficiaries of the institution. These
expressions were considered in Krishna Warriar (supra), where the
court held that the term “property” (of a trust) was of widest amplitude,
which included business. The following decision, in Andhra Chamber F
of Commerce (supra) where the chamber of commerce had among its
objects, one enabling it to advocate policies or legislation, or oppose them,
in addition to the object of promoting business, held that the incidental
inclusion of such objects, involving espousing a political purpose, did not
undermine its essential or main purpose, of advancing objects of general G
public utility. The new provision, i.e., Section 2(15) of the IT Act, defined
“charitable purpose” restrictively: to deny tax exemption to activities
for profit which were carried on by a trust for the advancement of an
object of general public utility. The reason for this change (discussed
previously) was that the advantage of tax exemption was not intended
H
976 SUPREME COURT REPORTS [2022] 15 S.C.R.

A to charitable trusts that were commercial concerns, which while ostensibly
serving a public purpose, were fully paid for the benefits provided by
them.
93. The first two decisions of some note are Lok Shikshana
Trust and Indian Chamber of Commerce (supra). The former decision,
B by majority, held that to qualify as a charitable purpose, two ingredients
had to be satisfied. It was held that the change in the definition meant
that to be the fourth category of charitable purpose, it was necessary to
show that
“(1) the purpose of the trust is the advancement of any other
C object of general public utility, and (2) the above purpose
does not involve the carrying on of any activity for profit.
Both the above conditions must be fulfilled before the purpose
of the trust can be held to be charitable purpose.”
94. In Indian Chamber of Commerce this court categorically
D held that even if the activity for profit, is to further an object of general
public utility, the charity could not claim of exemption. The court went
on to indicate the following test:
“21. The true test is to ask for answers to the following
questions: (a) Is the object of the assessee one of general
E public utility? (b) Does the advancement of the object involve
activities bringing in moneys? (c) If so, are such activities
undertaken (i) for profit or (ii) without profit? Even if (a) and
(b) are answered affirmatively, if (c)(i) is answered
affirmatively, the claim for exemption collapses. The solution
to the problem of an activity being one for or irrespective of
F profit is gathered on a footing of facts. What is the real nature
of the activity? One which is ordinarily carried on by ordinary
people for gain? Is there a built-in prescription in the
constitution against making a profit?....”
95. The decision in Surat Art Silk, needs careful scrutiny, not
G only because it is by a larger Bench, but also because it has been the
bulwark of the assessee’s contentions- and has been the premise upon
which almost all High Courts have interpreted Section 2 (15) after its
amendment, in 2008. As noticed earlier, the old Act (in Section 4(3)) did
not contain any terms, restricting or prohibiting charities from engaging
in commercial activities or those which yielded profit. No doubt, the idea
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 977
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

of income from business carried on”behalf of a religious or charitable A
institution” being exempt, provided “the business is carried on in the
course of the actual carrying out of a primary purpose of the
institution” was introduced by amendment, in 1953. This was interpreted
in Andhra Chamber of Commerceand Krishna Warriar (supra).
However, Parliament clearly intended a departure, when it introduced
B
the new Section 2 (15) under the IT Act. The earlier decisions in Indian
Chamber of Commerce, and Lok Shikshana Trust (supra) noticed this
change. Surat Art (supra) was yet another a departure. While
itconsidered the previous decisions of the court, it consciously departed
from them, and even overruled the interpretation in Indian Chamber of
Commerce (supra). The larger Bench in Surat Art Silk agreed with the C
previous decisions to the effect that the motivation for the activity in
question (i.e., for it to be charitable) should not be deriving of profits.
However, the larger Bench enunciated the principle of ‘predominant
object’ and held that what was of importance was “whether the
predominant object of the activity involved in carrying out the object
D
of general public utility is to subserve the charitable purpose or to
earn profit” and that such an entity would not lose its charitable character
merely because some profit arose from the said activity.
96. Thus, was born the ‘predominant object’ test, of an organization,
to determine whether it was essentially charitable, or ‘for profit’. If the
predominant object was not for profit, but advancement of general public E
utility, that some profits were earned, would not debar it from claiming to
be an organization with a charitable purpose. However, if the predominant
object was such that profit making was“enwrapped”or
“intertwined”with it, the organization or trust could not be called
charitable. Crucially, the court emphasized that the manner of carrying F
on of the activity in question, was determinative:
“the nature of the charitable purpose, the manner in which
the activity for advancing the charitable purpose is being
carried on and the surrounding circumstances may clearly
indicate that the activity is not propelled by a dominant profit G
motive.”
97. Interestingly, the test proposed by the majority judgment in
Surat Art Silk is similar to the one advocated in Indian Chamber of
Commerce (which it overruled). The difference in approach is that Surat
Art Silk advocated the “predominant object” test to see whether the H
978 SUPREME COURT REPORTS [2022] 15 S.C.R.

A object is for advancement of general public utility, bereft of profit motive,
whereas in Indian Chamber of Commerce (supra), the court did not
deal with or visualize consideration of a “predominant object”. The second
difference between the two decisions, is that Surat Art Silk stated that
there is no need for an express provision in the constitution of a given
trust, eschewing profit motive, whereas in Indian Chamber of
B
Commerce, the necessity of such a condition was highlighted.
98. The judgments of this court, after Surat Art Silk
(supra),noticed the enunciation of, and the need to apply the test of
“dominant” object. In Commissioner of Income Tax v. Federation of
Indian Chambers of Commerce and Industries101 it was, thus held:
C
“In other words, the majority view in the Surat Art Silk’s case
(supra) was that the condition that the purpose should not
involve the carrying on of any activity for profit would be
satisfied if profit-making is not the real object. The theory of
dominant or primary object of the trust has, therefore, been
D treated to be the determining factor, even in regard to the
fourth head of charity, viz., the advancement of any other
object of general public utility, so as to make the carrying on
of business activity merely ancillary or incidental to the main
object.”
E 99. In Bar Council of Maharashtra (supra) this court considered
whether a bar council, constituted under the Advocates Act, 1961,
performed activities that were charitable in nature; it was held that the
statute obliged several activities whose dominant object was advancement
of public utility, without profit motive. This court held that the provisions
F of the Act
“enjoined upon avowedly with the objective of protecting the
litigating public from unscrupulous professionals by taking
them to task for any misconduct on their part; it is also one of
the obligatory functions of a State Bar Council to promote
and support measures for law reform as also to conduct law
G
seminars and organise talks on legal topics by eminent jurists,
obviously with a view to educate the general public, the
function prescribed by Clause (eee) is obviously charitable
in nature, the same being to organise legal aid to the poor.

101
H 1981 (3) SCR489
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 979
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

Amongst these various obligatory functions one under Clause A
(d) is to safeguard the rights, privileges and interests of the
advocates on its roll and it is difficult to regard it as a primary
or dominant function or purpose for which the body is
constituted. Even this function apart from securing speedy
discharge of obligations by the litigants to the lawyers ensures
B
maintenance of high professional standards and
independence of the Bar which are necessary in the
performance of their duties to the society. In other words, the
dominant purpose of a State Bar Council as reflected by the
various obligatory functions is to ensure quality service of
competent lawyers to the litigating public, to spread legal C
literacy, promote law reforms and provide legal assistance to
the poor while the benefit accruing to the lawyer-members is
incidental…”
100. The view that prevailed, after the decision in Surat Art Silk
(supra), therefore, was that so long as the “dominant” object of a trust D
was charitable, and it did not essentially involve in business or commercial
activity, the generation of profits, or surpluses by it, through activities,
incidental to that main or dominant activity, did not undermine its
charitable purpose, as long as the surpluses or profits, were used for
the advancement of an object of general public utility.
101. An interesting detail, is that the old Act did not define E
“charitable purpose” restrictively, in the manner that the IT Act did,
when enacted, in 1961. This lent a fair degree of interpretive flexibility,
to the courts, to decide whether a commercial or business element, could
be interwoven with a charitable object. The amendment of 1953 ensured
that income “applied or accumulated for application to such .. F
charitable purposes as relate to anything done within the taxable
territories, and in the case of property so held in part only for such
purposes, the income applied or finally set apart for application…” 102
could not be includedas taxable income of any charitable organization.
This provision is a precursor for Section 11 under the IT Act. In other
words, the structure of the old Act did not prohibit the carrying on of G
business; it spelt out a condition that any income derived from business
“carried on in the course of the actual carrying out of a primary
purpose of the institution” if applied for charitable purposes, was
exempt.
102
Section 4(3)(i) of the old IT Act. H
980 SUPREME COURT REPORTS [2022] 15 S.C.R.

A 102. The second aspect is thatSurat Art Silk(supra), was rendered
in the context of Section 2(15) of the IT Act, as it stood originally.
However, by the Taxation Laws Amendment Act, 1975 (w.e.f.
01.04.1977), Section 13(1)(bb) was inserted. That provision excluded
the operation of Sections 11 and 12 (under which income of charities
were entitled to be exempted) in the case of income derived from
B
business by charities engaged in medical relief, education and relief to
the poor, unless the business fulfilled a condition:
“(bb) in the cases of a charitable trust or institution for the
relief of the poor, education or medical relief, which carries
on any business, any income derived from such business,
C unless the business is carried on in the course of the actual
carrying out of a primary purpose of the trust or institution;”
103. The interpretation in Surat Art Silk (supra), obviously could
not have been affected, in the light of a subsequent amendment; however,
what is of significance is that with effect from 01.04.1977, the condition
D of actual carrying on a primary purpose of the trust while conducting
business was visualised only in the case of trusts involved in relief of the
poor, education or medical relief. The majority judgment in Surat Art
Silk(supra)recognized this:
“8. […] Where therefore, there is a charitable trust or
E institution falling within any of the first three categories of
charitable purpose set out in Section 2 Clause (15) and it
carries on business which is held by it under trust for its
charitable purpose, income from such business would not be
exempt by reason of Section 13(1)(bb). Section 11 Sub-section
F (4) would, therefore, have no application in case of a
charitable trust or institution falling within any of the first
three heads of ‘charitable purpose’.”
Yet, the court enunciated and applied the ‘predominant object’
test.103 The conscious omission of the last object,i.e., theGPUcategory,
G in the newly inserted 13(1)(bb), therefore, meant that when those trusts,
while carrying out the object of advancement of general public utility,
had to conduct of business, the income was to be taxed (because the
main provision, under Section 13(1) excluded the operation of Sections
11 and 12).
103
H See para 19 of Surat Art Silk (extracted above at paragraph 18 of this judgment).
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 981
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

104. The next significant change, which occurred was with the A
Finance Act, 1983 (w.e.f.01.04.1984). This amendment:
(a) omitted the restrictive words under Section 2(15) i.e. “not
involving the carrying on of any activity for profit”
(b) omitted Section 13(1)(bb)
B
(c) Section 11(4A) was inserted104, by which- in relation to charities
set up with the object of general public utilities, “business”could
be “carried on by an institution wholly for charitable purposes
and the work in connection with the business is mainly carried
on by the beneficiaries of the institution, and separate books
of account are maintained by the trust or institution in respect C
of such business”.
105. It is therefore clear that after 1 April, 1984, the statute did
not contain any restriction as to the nature of activity that could be
carried on by GPU category charity. Furthermore, the condition in Section
13(1)(bb) - which applied to other kinds of trusts, i.e., that their incomes D
could be exempt under Section 11 to the extent they arose out of business,
if the business was “in the course of the actual carrying out of a
primary purpose of the trust”- was deleted. On the other hand, the
wording of Section 11(4A) did seem to indicate that business activity
was permissible if the objects of the trust were wholly charitable, and E
such business were to be carried on by its beneficiaries.This legal position
continued, till the amendments in question were carried out, in relation to
Section 2(15) in 2008.
106. Section 2 begins with the expression “unless the context
otherwise requires”- as a preface to every expression which is sought F
to be defined, under the IT Act. The 1922 Act did not contain any words
of restriction, in the definitionclause. The IT Act, however, defined
charitable purpose- at the outset, restrictively, and then, substantively
104
“(4A) Sub-section (1) or sub-section (2) or sub-section (3) or sub-section (3A)
shall not apply in relation to any income, being profits and gains of business, unless–
(a) the business is carried on by a trust wholly for public religious purposes and the G
business consists of printing and publication of books or publication of books or is of
a kind notified by the Central Government in this behalf in the Official Gazette; or
(b) the business is carried on by an institution wholly for charitable purposes and the
work in connection with the business is mainly carried on by the beneficiaries of the
institution, and separate books of account are maintained by the trust or institution in
respect of such business. …”
H
982 SUPREME COURT REPORTS [2022] 15 S.C.R.

A enacted provisions that give effect to Parliamentary intent. Section 10
(23C)(iv) exempts any “income” of”any other fund or institution
established for charitable purposes which may be approved by the
prescribed authority, having regard to the objects of the fund or
institution and its importance throughout India or throughout any
B State or States” from taxation.
A. Aids to interpretation
(i) History of the legislation
107. The amendments (i.e. Finance Act 2008, Finance Act 2009,
Finance Act 2012 and Finance Act 2015) do not throw light – by way of
C
statement of objects and reasons or notes on clauses. The court, therefore
would have to resort to the surrounding circumstances that led to the
amendment.
108. The words of a statute are to be construed in their terms,
according to the circumstances in which they occur. At the same time,
D there is some authority for the proposition that statutes – particularly
amending provisions, may be considered in the light of the previous history
of the legislation. Justice Cardozo in Duparquet Co. v. Evans105said
thatin questions relating to construction, “history is a teacher that is
not to be ignored”.In a similar vein, Chief Judge Learned Hand said
E that “statutes always have some purpose or object to accomplish,
whose sympathetic and imaginative discovery is the surest guide to
their meaning” 106.
109. Some decisions of this Court have highlighted this aspect. In
Bhuwalka Steel Indus. Ltd. & Ors. v. Bombay Iron and Steel Labour
F Bd. & Ors.107 this court observed that
“The legislative intent of the enactment may be gathered from
several sources which are, from the statute itself, from the
preamble to the statute, from the Statement of Objects and
Reasons, from the legislative debates, reports of committees
G and commissions which preceded the legislation and finally
from all legitimate and admissible sources from where they
may be allowed. Reference may be had to legislative history
105
297 U.S. 216 (1936)
106
Cabell v. Markham(1945) 148 F 2d 737
107
2009 (16) SCR 618
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 983
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

and latest legislation also. But, the primary rule of construction A
would be to ascertain the plain language used in the enactment
which advances the purpose and object of the legislation...”
110. In Chief Justice of Andhra Pradesh & Ors. v. L.V.A.
Dixitulu & Ors.108 again, the court held that resort to the history of the
legislation is legitimate, for interpreting a provision: B
“..in order to ascertain the true meaning of the terms and
phrases employed, it is legitimate for the Court to go beyond
the arid literal confines of the provision and to call in aid
other well-recognised rules of construction, such as its
legislative history, the basic scheme and framework of the C
statute as a whole, each portion throwing light on the rest,
the purpose of the legislation, the object sought to be
achieved, and the consequences that may flow from the
adoption of one in preference to the other possible
interpretation.”
D
111. Other decisions109 have also commented on the use of history
of the legislation as a tool for its construction.It is, therefore, clear that
courts can look at the previous history of the statute, and the changes it
underwentto discern what is intended by the lawmakers when an
amendment is introduced, or a new law enacted. In light of these factors,
it would therefore, also be useful for the court to consider the background E
which led to the amendment – firstly in 2008 and thereafter in 2012 and
2015, seeking to restrict the nature of activities that a GPU category
charity can legitimately undertake.
(ii) Other extrinsic aids to construction of the statute
F
(a) Speeches in Parliament
112. Speeches made in the legislature or Parliament, can be looked
into for throwing light on the rationale for an amendment. There is
some authority for that proposition.110 Some light can be discerned from
the statement of the finance minister on the floor of Parliament, who
G
108
1979 (1) SCR26
109
Lohia Machines Ltd. and Ors. v. Union of India & Ors1985 (2) SCR 686;
Commissioner of Customs (Import), Mumbai v. Dilip Kumar & Company & Ors 2018
(9) SCC 1
110
State of West Bengal v. Union of India 1964 (1) SCR 371:
“A statute, as passed by Parliament, is the expression of the collective intention of the
H
984 SUPREME COURT REPORTS [2022] 15 S.C.R.

A answered to the criticism levelled against the change brought about by
the amendment in 2008. The finance minister commented on the criticism
levelled against the amendment to Section 2(15) in the following words:
“I once again assure the House that genuine charitable
organisations will not in any way beaffected. The CBDT will,
B following the usual practice, issue an explanatory circular
containingguidelines for determining whether an entity is
carrying on any activity in the nature of trade,commerce or
business or any activity of rendering any service in relation
to any trade, commerce orbusiness. Whether the purpose is a
charitable purpose will depend on the totality of the facts of
C thecase. Ordinarily, Chambers of Commerce and similar
organisations rendering services to theirmembers would not
be affected by the amendment and their activities would
continue to beregarded as “advancement of any other object
of general public utility”.”
D (b) Departmental circulars
113. Learned counsel for the assessees relied upon Circular No.
1/2009 dated 27.03.2009 and Circular No.11/2008 dated 19.12.2008
issued by the Central Board of Direct Taxes. The relevant part of Circular
No. 11/2008 reads as follows:
E
“3. The newly inserted proviso to section 2(15) will apply
only to entities whose purposeis ‘advancement of any other
object of general public utility’ i.e. the fourth limb of the
legislature as a whole, and any statement made by an individual, albeit a Minister, of the
intention and objects of the Act cannot be used to cut down the generality of the words
F used in the statute.”
At the same time, later decisions have relaxed the rigor of this rule. In K.P. Varghese v.
Income-tax Officer,1982 (1) SCR 629,this court, referring to the budget speech of the
Minister stated:
“Now it is true that the speeches made by the Members of the Legislature on the floor of
the House when a Bill for enacting a statutory provision is being debated are inadmissible
for the purpose of interpreting the statutory provision but the speech made by the Mover
G of the Bill explaining the reason for the introduction of the Bill can certainly be referred
to for the purpose of ascertaining the mischief sought to be remedied by the legislation
and the object and purpose for which the legislation is enacted.”
Other decisions following the same approach are Ramesh Yeshwant Prabhoo v.
Prabhakar Kashinath Kunte1995 (Supp 6) SCR 371; Novartis AG v. Union of India
(2013) 6 SCC 1;Surana Steels (P) Ltd. v. Commissioner of Income Tax 1999 (2) SCR
H 589 and Kalpana Mehta & Ors. v. Union of India (UOI) and Ors2017 (7) SCC 295.
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 985
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

definition of ‘charitable purpose’ contained in section 2(15). A
Hence, such entities will not be eligible for exemption under
section 11 or undersection 10(23C) of the Act if they carry
on commercial activities. Whether such an entity is carrying
on an activity in the nature of trade, commerce or business is
a question of fact which will be decided basedon thenature,
B
scope, extent and frequency of the activity.
3.1. There are industry and trade associations who claim
exemption from tax u/s 11 on the ground that theirobjects are
for charitable purpose as these are covered under ‘any other
object of general public utility’.Under the principle of
mutuality, if trading takes place between persons who are C
associated together andcontribute to a common fund for the
financing of some venture or object and in this respect have
no dealings
or relations with any outside body, then any surplus returned
to the persons forming such association is notchargeable to D
tax. In such cases, there must be complete identity between
the contributors and theparticipants.
Therefore, where industry or trade associations claim both to
be charitable institutions as well as mutualorganizations and
their activities are restricted to contributions from and E
participation of only their members,these would not fall under
the purview of the proviso to section 2(15) owing to the
principle of mutuality. However, if such organizations have
dealings with non-members, their claim to be charitable
organizationswould now be governed by the additional F
conditions stipulated in the proviso to section 2 (15).”
114. Circular No. 1/2009 dated 27.03.2009 contains explanatory
notes to provisions of the Finance Act, 2008. It inter alia reads as follows:
“5. Streamlining the definition of “charitable purpose”
G
5.1 Sub-section (15) of section 2 of the Act defines “charitable
purpose” toinclude relief of the poor, education, medical relief,
and the advancement of any otherobject of general public
utility. It has been noticed that a number of entities operatingon
commercial lines are claiming exemption on their income either
under sub-section(23C) of section 10 or section 11 of the Act H
986 SUPREME COURT REPORTS [2022] 15 S.C.R.

A on the ground that they are charitable institutions. This is
based on the argument that they are engaged in the
“advancement of an object of general public utility” as is
included in the fourth limb of the currentdefinition of
“charitable purpose”. Such a claim, when made in respect of
an activity carried out on commercial lines, is contrary to the
B
intention of the provision.
5.2 With a view to limiting the scope of the phrase
“advancement of any otherobject of general public utility”,
sub-section (15) of section 2 has been amended toprovide
that the advancement of any other object of general public
C utility shall not bea charitable purpose, if it involves the
carrying on of any activity in the nature oftrade, commerce
or business, or any activity of rendering any service in relation
toany trade, commerce or business, for a cess or fee or any
other consideration,irrespective of the nature of use or
D application, or retention, of the income from suchactivity.
Scope of this amendment has further been explained by the
CBDT vide itscircular no.11/2008 dated 19th Dec 2008.”
115. Senior counsel appearing for the assessees relied on Section
119 of the IT Act as well as decisions of this court, reported as Navnit
E Lal Jhaveri (supra) and UCO Bank Calcutta (supra) and argued that
departmental circulars are binding upon tax administrators, and should
be legitimately considered as aids of construction. This was in support
of their reliance on the circulars in the present case (No.11/2008 and
No. 1/2009).

F 116. This court in Navnit Lal Jhaveri (supra) considered Sections
2(6A)(e) and 12(1B) of the IT Act which were introduced by the Finance
Act, 15, 1955 (w.e.f. 01.04.1955). As a result of these amendments, the
combined effect of the two provisions was that three kinds of payments
made to shareholders companies to which those applied, were treated
as taxable dividend to the extent of the accumulated profits held by the
G company. The provision was challenged. It was noticed that while
introducing the amendment, the Finance Minister assured that outstanding
loans and advances – otherwise liable to taxation as dividends in AY
1955-56, would not be subjected to tax if it were shown that they had
been genuinely refunded to the respective companies before 30.06.1955.
H The government felt that unless such a step was taken, the operation of
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 987
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

Section 12(1B) would lead to extreme hardship, as it would cover the A
aggregate of all outstanding loans of past years and could have led to
unreasonably high liability on shareholders to whom the loans might have
been advanced. A circular [No. 20(XXI-6) /55] was issued by the Central
Board of Revenue on 10.05.1955. The court, in that context, observed
that:
B
“It is clear that a circular of the kind which was issued by the
Board would be binding on all officers and persons employed
in the execution of the Act under s. 5(8) of the Act. This circular
pointed out to all the officers that it was likely that some of
the companies might have advanced loans to their
shareholders as a result of genuine transactions of loans, C
and the idea was not to the effect such transactions and not
to bring them within the mischief of the new provision.
The officers were, therefore, asked to intimate to all the
companies that if the loans were repaid before the 30th June,
1955, in a genuine manner, they would not be taken into D
account in determining the tax liability of the shareholders to
whom they may have been advanced. In other words, past
transactions which would normally have attracted the stringent
provisions of s. 12(1B) as it was introduced in 1955, were
substantially granted exemption from the operation of the said E
provisions by making it clear to all the companies and their
shareholders that if the past loans were genuinely refunded
to the companies, they would not be taken into account under
s. 12(1B). Section 12(1B) would, therefore, normally apply to
loans granted by the companies, to their respective
shareholders with full notice of the provisions prescribed by F
it.”
117. This court ultimately upheld the amendments. As is evident,
the judgment noticed that the circular sought to soften the rigors of the
otherwise harsh consequence of immediate application of the
amendment. There was nothing in the circular to make it applicable for G
all times to come. It was more in the nature of the government issuing a
temporary suspension of operation of the substantive provision, introduced
by the amendment.
118. In UCO Bank, Calcutta (supra), this court had to deal with
circulars issued under Section 145 regarding the method of accounting H
988 SUPREME COURT REPORTS [2022] 15 S.C.R.

A to be followed, in the context of bank loans to be written off, when an
assessee was following the mercantile system (of accounting). The court
inter alia, held that under Section 119 (2) of the IT Act, the Central
Board of Direct Taxes is empowered, for proper and efficient
management of assessment and collection of revenue to issue general
or special orders in respect of any class of incomes or class of cases
B
setting forth directions or instructions, not being prejudicial to assessees,
as the guidelines, principles or procedures to be followed in the work
relating to assessment. The court held that the
“9. […] The Board thus has power, inter alia, to tone down
the rigour of the law and ensure a fair enforcement of its
C provisions, by issuing circulars in exercise of its statutory
powers under Section 119 of the Income-tax Act which are
binding on the authorities in the administration of the Act.
Under Section 119(2)(a), however, the circulars as
contemplated therein cannot be adverse to the assessee. Thus,
D the authority which wields the power for its own advantage
under the Act is given the right to forego the advantage when
required to wield it in a manner it considers just by relaxing
the rigour of the law or in other permissible manners as laid
down in Section 119. The power is given for the purpose of
just, proper and efficient management of the work of
E assessment and in public interest.”
119. The view expressed in Navnit Lal Jhaveri (supra), and later
elaborated in UCO Bank (supra) appears to have found resonance in
other decisions111 of this court. A recent instance where this court took
aid of explanatory circulars is in CIT v.Vatika Township112 when after
F holding that the amendment in question applied prospectively, the court
also supported that holding by citing the revenue’s understanding about
such prospective application, in a circular. What is of note in that judgment,
is that the question of whether circulars or explanatory notes issued by
the executive are binding aids of construction was not discussed; more
G importantly, the court first interpreted the statute, in its own terms, and
then cited the circular.

111
Ellerman Lines Ltd. v. Commissioner of Income tax 1972 (2) SCR 168; K.P. Verghese
v. Commissioner of Income Tax 1982 (1) SCR 629; Union of India v. Azadi Bachao
Andolan 2003 (Supp 4) SCR 222
112
(2015) 1 SCC 1
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 989
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

120. That circulars are per se not binding upon courts, in regard A
to interpretation of a statutory provision and, at best are guides or aid to
interpretation for departmental authorities, who are bound to take them
into account, was pithily stated in Keshavji Ravji & Co. and Ors. v.
Commissioner of Income Tax113 where the court observed as follows:
“This contention and the proposition on which it rests, namely, B
that all circulars issued by the Board have a binding legal
quality incurs, quite obviously, the criticism of being too
broadly stated. The Board cannot preempt a judicial
interpretation of the scope and ambit of a provision of the
‘Act’ by issuing circulars on the subject. This is too obvious a
proposition to require any argument for it. A circular cannot C
even impose on the tax payer a burden higher than what the
Act itself on a true interpretation envisages. The task of
interpretation of the laws is the exclusive domain of the courts.
However, this is what Sri Ramachandran really has in mind -
circulars beneficial to the assessees and which tone down D
the rigour of the law issued in exercise of the statutory power
under Section 119 of the Act or under corresponding
provisions of the predecessor Act are binding on the
authorities in the administration of the Act. The Tribunal, much
less the High Court, is an authority under the Act. The circulars
do not bind them. But the benefits of such circulars to the E
assessees have been held to be permissible even though the
circulars might have departed from the strict tenor of the
statutory provision and mitigated the rigour of the law. But
that is not the same thing as saying that such circulars would
either have a binding effect in the interpretation of the F
provision itself or that the Tribunal and the High Court are
supposed to interpret the law in the light of the circular. There
is, however, support of certain judicial observations for the
view that such circulars constitute external aids to
construction.”
121. This view was accepted in Commissioner of Customs v. G
Indian Oil Corporation114, which articulated the position with some
degree of clarity. Commenting on Navnit Lal Jhaveri (supra) and other
decisions, it was observed that:
113
1992 (2) SCC 231
114
2004 (2) SCR511 H
990 SUPREME COURT REPORTS [2022] 15 S.C.R.

A “30. No proposition was laid down in that case that even if
the circular was clearly contrary to the provisions of the Act
it should prevail, On the other hand, the learned Judges were
inclined to view the circular as granting the benefit of
exemption from the operation of the impugned provisions
subject to fulfilment of certain conditions. Navnit Lal’s case
B
was referred to and construed in two cases decided by
Benches of two learned Judges. The first one was the case of
Ellerman Lines Ltd. v. Commissioner of Income Tax, West
Bengal [1971]82ITR913(SC) and the other is K.P. Varghese
v. I.T. Officer, Ernakulam [1981]131ITR597(SC) . In both
C these cases it was assumed that Navnit Lal’s case was an
authority for the proposition that even if the directions given
in the circular clearly deviate from the provisions of the Act,
yet, the Revenue is bound by it. These three decisions were
repeatedly referred to and relied on in the subsequent decisions
in which the issue arose as regards the binding nature of the
D
circulars either under the Income Tax Act or under the Central
Excise Act. In between, there was the three Judge Bench
decision in Sirpur Paper Mills Ltd. v. Commissioner of Wealth
Tax [1970]77ITR6(SC) in which Section 13 of the Wealth Tax
Act corresponding to Section 5(8) of the Income Tax Act, 1922
E fell for consideration. This Court took the view that the
instructions issued by the Board may control the exercise of
the power of the departmental officials in matters
administrative but not quasi-judicial. There is yet another
decision of a three Judge Bench which seems to make a dent
on the weight of the proposition that the circulars of the Board,
F
even if they are plainly contrary to the provisions of the Act,
should be given effect to and binding on the authorities
concerned in the administration of the Act. That is the case of
KeshavjiRavji& Co. v. I.T. Commissioner [1990] 183 ITR
1(SC)”
G 122. In view of a conflict between decisions, on the binding nature
of circulars issued by the Board (in the context of decisions of authorities
dealing with indirect taxation issues) this court, by a five-judge decision,
in Ratan Melting and Wire Industries (supra)held that
“6. Circulars and instructions issued by the Board are no
H doubt binding in law on the authorities under the respective
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 991
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

statutes, but when the Supreme Court or the High Court A
declares the law on the question arising for consideration, it
would not be appropriate for the Court to direct that the
circular should be given effect to and not the view expressed
in a decision of this Court or the High Court. So far as the
clarifications/circulars issued by the Central Government and
B
of the State Government are concerned they represent merely
their understanding of the statutory provisions. They are not
binding upon the court. It is for the Court to declare what the
particular provision of statute says and it is not for the
Executive. Looked at from another angle, a circular which is
contrary to the statutory provisions has really no existence in C
law.”
123. In the opinion of this court, the views expressed in Keshavji
Ravji, Indian Oil Corporation and Ratan Melting and Wire Industries
(though the last decision does not cite Navnit Lal Jhaveri), reflect the
correct position, i.e., that circulars are binding upon departmental D
authorities, if they advance a proposition within the framework of the
statutory provision. However, if they are contrary to the plain words of
a statute, they are not binding. Furthermore, they cannot bind the courts,
which have to independently interpret the statute, in their own terms. At
best, in such a task, they may be considered as departmental understanding
on the subject and have limited persuasive value. At the highest, they E
are binding on tax administrators and authorities, if they accord with and
are not at odds with the statute; at the worst, if they cut down the plain
meaning of a statute, or fly on the face of their express terms, they are
to be ignored.
B. Interpretation of Section 2(15), the definition clause F

124. Section 2 of the Income Tax Act opens with the phrase
“unless the context otherwise requires”. It has been held in S.K. Gupta
& Anr. v. K.P. Jain & Anr.115 that where the definition of a term is
preceded by this phrase, normally, the definition given in the section
“should be applied and given effect to but this normal rule can be G
deviated if there is something in the context to show that the definition
should not be applied”. This rule was also adopted in Indira Nehru
Gandhi v. Shri Raj Narain and Anr. 116 by Khanna, J and in Kalya
115
(1979) 3 SCC 54.
116
(1975) Supp. SCC 1 H
992 SUPREME COURT REPORTS [2022] 15 S.C.R.

A Singh v. GendaLal and Ors 117. Previously, in Vanguard Fire and
Insurance Company Ltd. v. M/s. Fraser and Ross and Anr. 118, it was
held that the term “unless the context otherwise requires” implies that
the word or term so defined should be applied – subject to the context. It
was held that in view of such a qualification, the Court has not only to
look at the words but also to look at the context, collocation, and the
B
object of such words in respect of such matters and factor the meaning
to be conveyed by the use of the words under the circumstances. Almost
the same reasoning has been echoed in N.K. Jain and Ors. v. C.K.
Shah and Ors 119.
125. The importance of terms expressly defined in a statute is
C that they are internal and binding aids to interpretation. The prefacing –
to any definition – of the phrase “unless the context otherwise requires”
merely signifies that in case there is anything expressly to the contrary,
in any specific provision(s) in the body of the Act, a different meaning
can be attributed. However, to discern the purport of a provision, the
D term, as defined has to prevail, whenever the expression is used in the
statute. This rule is subject to the exception that when a contrary intention
is plain, in particular instances, that meaning is to be given. Therefore, in
the light of the previous discussion, this court would interpret the true
meaning of “charitable purpose” after its amendment in 2008, taking
into consideration the subsequent changes.
E
126. As observed at the beginning of this judgment, GPU charities
have been recognized as distinct from the ‘per se categories’of charity
(education, medical relief, relief to the poor; and later - preservation of
water sheds, monuments, environment, and yoga). The judgment of this
court in Dharmadeepti (supra) has clarified that the per se categories
F – are not subjected to the restrictive condition of eschewing activities of
profit. This enunciation of the principle has been endorsed in all later
decisions – starting with Surat Art Silk (supra). Therefore, the restriction
imposed by Parliament against charities – prohibiting them from carrying
on activities of profit do not apply to the first six categories. Although the
G occasion did not so arise in Surat Art Silk (supra) (since this Court was
dealing with AYs prior to 1975), the provision in Section 13(1)(bb) which
prevailed then with effect from 01.04.1977 made the position clearer in
117
(1975) 3 SCR 783
118
(1960) 3 SCR 837
119
H (1991) 1 SCR 938
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 993
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

that it permitted these per secategory charities, in the course of their A
actual carrying on of their activities, to earn profits. Of course, this
provision was deleted from 01.04.1984. Alongside, the restriction imposed
on GPUs from engaging in activities for profit, was also deleted.
127. As noticed in Thanthi Trust (supra), Section 11(4A) was
originally introduced with effect from 01.04.1984 and substituted w.e.f. B
01.04.1991. At that stage, the statute as it stood, did not restrict GPU
category charities from carrying on activities of profit or from carrying
on business. This court nevertheless was bound by the decision in Surat
ArtSilk (supra) which had ruled that:
(i) A GPU category charity with a constitution granting C
discretion to the trustees to engage in charitable and non-
charitable activities, could not claim the exemption;
(ii) The main or dominant purpose of the GPU category charity
had to be essentially charitable. If it was so, and it incidentally
entailed carrying on activities that led to profit, it was entitled D
to exemption.
128. This court’s understanding of the law as expressed in Thanthi
Trust was therefore, coloured by the statute as it existed, and the
formulation in Surat Art Silk (supra).As a result, Thanthi Trust,
interpreted Section 11(4A) in this background and held that the assessee E
in that case incidentally was engaged in activities for profit. The court
was also of the opinion that Section 11(4A) was wider than the revenue
urged it to be, in that activities by way of business could not be carried
on incidentally by a Trust, which otherwise was a GPU category trust.
129. As noticed earlier, between Surat Art Silk (supra) and the F
decisions rendered thereafter (i.e., Bar Council of Maharashtra,
Federation of Indian Chamber of Commerce and Industriesand
Thanthi Trust) there were two changes in lawin 1983 w.e.f. 01.04.1984
– on the one hand deleting the restrictive words prohibiting GPU
categories from carrying on profit, and deleting Section 13(1)(bb), and
introducing Section 11(4A), on the other. There was otherwise no G
meaningful statutory change. The position therefore, continued as it was
for about 25 years.
130. After its introduction, by amendment in 2008, Section 2(15)
read as follows:
H
994 SUPREME COURT REPORTS [2022] 15 S.C.R.

A (15) “charitable purpose” includes relief of the poor,
education, medical relief, 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
B 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;”
131. The term “in the nature of” occurring in Section 2(15) has
C frequently been interpreted by this court. In G. Venkataswami Naidu v.
Commissioner of Income Tax120 the isolated transaction of sale of land
was held not to be activity in the nature of trade or business. In State of
Tamil Nadu v.Burmah Shell Oil Storage Distribution Company of
India Ltd.121 the test indicated was whether the “frequency, volume,
D continuity and regularity of transactions carried on with a profit-
motive”. In State of Tamil Nadu v. Shakti Estates122, the assessee’s
activities in leasing forest lands, clearing them, and creation of wooden
sleepers, which were sold, as well as charcoal, which was sold, in a
series of “sustained, systematic and organised activities” was held
to be in the nature of business. In Director of Civil Supplies v. Member
E Board of Revenue123 this court outlined, what would be activity in the
nature of business:
“To regard an activity as business there must be a course of
dealings, either actually continued or contemplated to be
continued with a profit- motive; there must be some real and
F systematic or organised course of activity or conduct with a
set purpose of making profit. To infer from a course of
transactions that it is intended thereby to carry on business
ordinarily there must exist the characteristics of volume,
frequency, continuity and system indicating an intention to
continue the activity of carrying on the transactions for a
G
profit. But no single test or group of tests is decisive of the
intention to carry on the business. “
120
1959 (Supp 1) SCR 646
121
1973 (2) SCR 636
122
1989 (1) SCR 408
123
H 1967 (3) SCR 778
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 995
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

132. The term “in relation to” was interpreted in Renusagar A
Power Co. Ltd. v. General Electric Co.124 in an arbitration clause- as
follows:
“25... (2) Expressions such as “arising out of or “in respect
of or “in connection with” or “in relation to” or “in
consequence of or “concerning” or “relating to” the contract B
are of the widest amplitude and content..”
In Mansukhlal Dhanraj Jain v. Eknath Vithal Ogale125 this
court underlined the amplitude to the term “relating to”:
“16. It is, therefore obvious that the phrase “relating to
recovery of possession” as found in Section 41(1) of the Small C
Cause Courts Act is comprehensive in nature and takes in its
sweep all types of suits and proceedings which are concerned
with the recovery of possession of suit property from the
licensee and, therefore, suits for permanent injunction
restraining the Defendant from effecting forcible recovery of D
such possession from the licensee-Plaintiff would squarely
be covered by the wide sweep of the said phrase.”
In Doypack System (P) Ltd. v. Union of India126, this court
ruled that the expression “in relation to” is broad and is akin to the
“concerning with” and “pertaining to”; and is also expansive. The E
court observed:
“50. The expression “in relation to” (so also “pertaining to”),
is a very broad expression which presupposes another subject
matter. These are words of comprehensiveness which might
have both direct significance as well as indirect significance F
depending on the context [internal citation omitted]. Assuming
that the investments in shares and in lands do not form part
of the undertaking but are different subject matters, even then
these would be brought within the purview of the vesting by
reason of the above expressions. In this connection reference
may be made to 76 Corpus Juris Secundum at pages 620 and G
621 where it is stated that the term “relate” is also defined as
meaning to bring into association or connection with. It has
124
1985 (1) SCR 432
125
1995 (1) SCR 996
126
1988 (2) SCC 299 H
996 SUPREME COURT REPORTS [2022] 15 S.C.R.

A been clearly mentioned that “relating to” has been held to be
equivalent to or synonymous with as to “concerning with”
and “pertaining to”. The expression “pertaining to” is an
expression of expansion and not of contraction.”
133. The position, therefore, with respect to what kind activities
B GPU charities could legitimately undertake, was in a state of flux till
2015. However, the amendments cumulatively point to prohibitions that
were constant:
(1) the prohibition applicable to such charities involved in
carrying on activities “in the nature of trade, commerce
C 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”
(2) “irrespective of the nature of use or application, or
retention, of the income from such activity” (i.e. activity
D in the nature of trade, commerce or business for a cess,
fee or other consideration).
134. By retrospective amendment, in Section 2(15), after the
proviso, a second proviso was inserted with effect from 01.04.2009.-
“Provided further that the first proviso shall not apply if the
E aggregate value of the receipts from the activities referred to
therein is ten lakh rupees or less in the previous year;”;
With the introduction of the second proviso, the resulting situation
was that the first proviso (of exclusion of income through an activity as
referred to) was inapplicable if the aggregate value of the receipts of
F such activity did not exceed 10,00,000, and later by Finance Act, 2012
– this was enhanced to 25,00,000.
135. The next important change took place through the Finance
Act, 2015, which, w.e.f. 01.04.2016 substituted the two provisos to
Section 2(15) with the following proviso:
G “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
H other consideration, irrespective of the nature of use or
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 997
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

application, or retention, of the income from such activity, A
unless—
(i) such activity is undertaken in the course of actual
carrying out of such advancement of any other object
of general public utility; and
(ii) the aggregate receipts from such activity or activities B
during the previous year, do not exceed twenty per cent
of the total receipts, of the trust or institution
undertaking such activity or activities, of that previous
year;”
136. The limited relief, given by the second proviso, to GPU C
charities (for the period 2009-2015) was that in case such GPU category
charities did carry on activitiesundertaken in the course of actual
carrying out of their GPU objects that were in the nature of trade,
commerce or business, or rendered any service in relation to trade,
business, etc., and collected fee, cess, or other consideration, such income D
could still be exempt, if it did not exceed 10,00,000 (and later,,
25,00,000). By the amendment of 2015, the second proviso was deleted
and two conditions were introduced, with respect to permissibility of
carrying on trade, commerce, etc:
(i) such activity is undertaken in the course of actual carrying E
out of such advancement of any other object of general
public utility; and
(ii) the aggregate receipts from such activity or activities during
the previous year, do not exceed twenty percent of the total
receipts, of the trust or institution undertaking such activity F
or activities, of that previous year.
137. Having thus far discussed a nature of the changes to the
term “charitable purpose” and how judicial thinking has shaped it, this
court would now explore the all important question of the scope of the
term of “any other object generally public utility” not being charitable
G
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, irrespectiveof the nature of use or
application, or retention, of the income from such activity.”
H
998 SUPREME COURT REPORTS [2022] 15 S.C.R.

A 138. Parliamentary endeavour, was to alter the regime applicable
to taxation of GPU category charities, under the IT Act. The absolute
bar imposed on GPU charities from carrying on activities in the nature
of trade, commerce or business, or of rendering any service in relation
to any trade, commerce or business, for a cess or fee or any other
consideration, evidences this intent. The original Section 2(15) did not
B
allude to trade, commerce or business, or any service in relation to such
activities. It only enjoined the GPU charities from involving themselves
from carrying on of any activity for profit127(which was interpreted in
Surat Art Silk). This substantial change brought about by the
amendments of 2008 -2012 and 2015 is the prohibition from engaging in
C any kind of activity in the nature of business, commerce, or trade or any
rendering any service in relation thereto, and earning income by the way
of cess, fee or consideration.In the opinion of this court, the express
deletion of the reference to ‘activity for profit’ on the one hand, and the
enactment of an expanded list of what cannot be done by GPU charities
if they are to retain their characteristic as charities, is an emphatic manner
D
in which Parliament wished to express itself.
139. Counsel on both sides went to great lengths and cited several
judgments for the proposition that “trade or business” are terms which
imply profit-making. They relied on Khoday Distilleries (supra); M/s.
Raipur Manufacturing (supra); Board of Trustees of the Port of
E Madras (supra), and Physical Research Laboratory v. K. G.
Sharma128. It was contended by the revenue, that the reference to terms
“business, trade or commerce” and “service in relation to” such
activities are meant to imply that profit motive should be completely
absent. At the same time - on behalf of the assessees, it was contented
F that if the proscribed activities i.e., business, commerce or trade or service
in relation to such activities - is not the main or dominant object of the
GPU charity, any incidental involvement in such activities is
permissible. Counsel on behalf of many assessees urged that some of
them are statutory corporations chargedwith developing housing industrial
infrastructure sector, regulation of professions (such as chartered
G accountants, etc.). It was underlined that such corporations are agencies
of the state, recognized as “State” under Article 12 of the Constitution,
and carry out the essential purposes for which they were set up, which
127
“…the advancement of any other object of general public utility not involving the
carrying on of any activity for profit”
128
(1997) 4 SCC 257.
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 999
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

otherwise state departments would have been expected to carry out. It A
was then emphasized that the activities of such corporations cannot be
characterized as motivated by profit- rather their essential purposes are
to achieve objects of general public utility.
140. In Town Investments v. Department of Environment129, it
was remarked that “business” is an ‘etymological chameleon’. In NDMC B
(supra) - while dealing with the question of immunity of states and state
corporations, municipal corporations and local authorities from union
taxation, this court (in a nine-judge bench composition) interpreted Article
289 of the Constitution130 and discussed the nature of the activities that
could be carried on by state or state agencies:
C
“Section 155(1) which by its own force levied taxes upon the
trading and business operations carried on by the Provincial
Governments did not either define the said expressions or
specify which trading or business operations are subject to
taxation. On this account, the proviso was not and could not
be said to have been, ineffective or unenforceable. It was D
effective till 26-1-1950. Clause (2) of Article 289 also similarly
does not define or specify — nor does it require that the law
made thereunder should so define or specify. It cannot be
said that unless the law made under and with reference to
clause (2) specifies the particular trading or business E
operations to be taxed, it would not be a law within the
meaning of clause (2). Coming back to the language of clause
(2), a question is raised, why does the proviso speak of
taxation in respect of trade or business when the main limb
of sub-section (1) speaks only of taxes in respect of lands or
buildings and income? Is the ambit of proviso wider than the F
129
1977 1 ALLER 813
130
289. Exemption of property and income of a State from Union taxation.—(1) The
property and income of a State shall be exempt from Union taxation.
(2) Nothing in clause (1) shall prevent the Union from imposing, or authorising
the imposition of, any tax to such extent, if any, as Parliament may by law provide in
respect of a trade or business of any kind carried on by, or on behalf of, the Government
G
of a State, or any operations connected therewith, or any property used or occupied for
the purposes of such trade or business, or any income accruing or arising in connection
therewith.
(3) Nothing in clause (2) shall apply to any trade or business, or to any class of
trade or business, which Parliament may by law declare to be incidental to the ordinary
functions of government. H
1000 SUPREME COURT REPORTS [2022] 15 S.C.R.

A main limb? Is it an independent provision of a substantive
nature notwithstanding the label given to it as a proviso? Or
is it only an exception? It is asked. We are, however, of the
considered opinion that it is more important to give effect to
the language of and the intention underlying the proviso than
to find a label for it. It is clarificatory in nature without a
B
doubt; it appears to be more indeed. It is concerned mainly
with the “income” (of Provincial Governments) referred to in
the main limb of sub-section (1). It speaks of tax on the “lands
or buildings” in that context alone, as we shall explain in the
next paragraph. The idea underlying the proviso is to make it
C clear that the exemption of income of Provincial Government
operates only where the income is earned or received by it as
a Government; it will not avail where the income is earned or
received by the Provincial Government on account of or from
any trade or business carried on by it — that is a trade or a
business carried on with profit motive. In the light of the
D
language of the proviso to Section 155 and clause (2) of Article
289, it is not possible to say that every activity carried on by
the Government is governmental activity. A distinction has to
be made between governmental activity and trade and
business carried on by the Government, at least for the
E purposes of this clause. It is for this reason, we say, that unless
an activity in the nature of trade and business is carried on
with a profit motive, it would not be a trade or business
contemplated by clause (2). For example, mere sale of
government properties, immovable or moveable, or granting
of leases and licences in respect of its properties does not
F
amount to carrying on trade or business. Only where a trade
or business is carried on with a profit motive — or any
property is used or occupied for the purpose of carrying on
such trade or business — that the proviso [or for that matter
clause (2) of Article 289] would be attracted. Where there is
G no profit motive involved in any activity carried on by the
State Government, it cannot be said to be carrying on a trade
or business within the meaning of the proviso/clause (2),
merely because some profit results from the activity [ For
example, almost every State Government maintains one or more
guest houses in Delhi for accommodating their officials and
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 1001
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

others connected with the affairs of the State. But, when some A
rooms/accommodation are not occupied by such persons and
remain vacant, outsiders are accommodated therein, though
at higher rates. This activity cannot obviously be called
carrying on trade or business nor can it be said that the
building is used or occupied for the purpose of any trade or
B
business carried on by the State Government.] . We may pause
here a while and explain why we are attaching such restricted
meaning to the words “trade or business” in the proviso to
Section 155 and in clause (2) of Article 289. Both the words
import substantially the same idea though, ordinarily
speaking, the expression “business” appears to be wider in C
its content. The expression, however, has no definite meaning;
its meaning varies with the context and several other factors.
…Having regard to the context in which the words “trade or
business” occur — whether in the proviso to Section 155 of
the Government of India Act, 1935 or in clause (2) of Article
D
289 of our Constitution — they must be given, and we have
given, a restricted meaning, the context being levy of tax by
one unit of Federation upon the income of the other unit, the
manifold activities carried on by Governments under our
constitutional scheme, the necessity to maintain a balance
between the Centre and the States and so on.” E
(emphasis supplied)
141. From NDMC (supra), it is clear that not every state activity
resembling commerce can be considered per se exempt from union
taxation, in the context of Article 289. The court also emphasized that
mere sale or lease of government property does not imply trade or F
business. The crucial or determinative element in the venture, so to say,
is whether performance of a function is actuated by profit motive.
142. What then is the true meaning of the expressions “fee, cess
or consideration”? The careful analysis of the amended proviso to
Section 2(15), reveal that the prohibition applies in a four-fold manner- G
(a) The bar to engaging in trade, commerce or business,
(b) The bar to providing any service in relation to trade,
commerce or business,
H
1002 SUPREME COURT REPORTS [2022] 15 S.C.R.

A (c) wherein “for a fee, cess or any other consideration” is
the controlling phrase for both (a) and (b) (which are
collectively referred to as “prohibited activities” for brevity)
(d) irrespective of the application of the income derived from
such ‘prohibited activities’.
B 143. The impermissibility of any trade, or commercial activity or
service, and income, from them, was intended to be conveyed through
the prohibition, in the first part of the definition of GPU charities. The
necessary implication which arises is that income (received as fee, cess,
or any other consideration) derived from such ‘prohibited activities’ is
C necessarily motivated by profit. The ordinary meaning of fee or
consideration would be synonymous with something of value, usually in
monetary terms. However, the use of the expression “cess” facially
lends a different colour to all the three expressions.
144. “Fee, cess and any other consideration” has to receive a
D purposive interpretation, in the present context. If fee or cess or such
consideration is collected for the purpose of an activity, by a state
department or entity, which is set up by statute, its mandate to collect
such amounts cannot be treated as consideration towards trade or
business. Therefore, regulatory activity, necessitating fee or cess
collection in terms of enacted law, or collection of amounts in furtherance
E of activities such as education, regulation of profession, etc., are per se
not business or commercial in nature. Likewise, statutory boards and
authorities, who are under mandate to develop housing, industrial and
other estates, including development of residential housing at reasonable
or subsidized costs, which might entail charging higher amounts from
F some section of the beneficiaries, to cross-subsidize the main activity,
cannot be characterized as engaging in business. The character of being
‘state’, and such corporations or bodies set up under specific laws
(whether by states or the centre) would, therefore, not mean that the
amounts are ‘fee’ or ‘cess’to provide some commercial or business
service. In each case, at the same time, the mere nomenclature of the
G consideration being a “fee” or “cess”, is not conclusive. If the fee or
cess, or other consideration is to provide an essential service, in larger
public interest, such as water cess or sewage cess or fee, such
consideration, received by a statutory body, would not be considered
“trade, commerce or business” or service in relation to those.Non-
H statutory bodies, on the other hand, which may mimic regulatory or
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 1003
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

development bodies - such as those which promote trade, for a section A
of business or industry, or are aimed at providing facilities or amenities
to improve efficiencies, or platforms to a segment of business, for fee,
whether charged by subscription, or specific fee, etc, may not be
charitable; when they claim exemption, their cases would require further
scrutiny.
B
145. This Court has in some decisions considered the term “cess”.
In Shinde Brothers Etc. v. Deputy Commissioner, Raichur and
Ors.131, Justice M. Hidyatullah, (though his was a dissenting judgment,
yet no contrary opinion was expressed by majority in regard to “cess”)
said that:
C
“... The word “cess” is used in Ireland and is still in use in
India although the word rate has replaced it in England. It
means a tax and is generally used when the levy is for some
special administrative expense which the name (health cess,
education cess, road cess etc.) indicates. When levied as an
increment to an existing tax, the name matters not for the D
validity of the cess must be judged of in the same way as the
validity of the tax to which it is an increment. By Schedule
A(1) read with Section 3 of the Act, it is collected as an
additional levy with a tax, which, as described in Schedule A,
is undoubtedly one within the powers of the State Legislature E
and has been so even prior to the Constitution....”
146. The seven-judge bench judgment of this court in India Cement
Ltd. & Ors. v. State of Tamil Nadu and Ors.132, approved the definition
propounded by Hidayatulla, J. In Vijayalashmi Rice Mill and Ors. v.
Commercial Tax Officers, Palakol & Ors133 this court observed that F
“13. Hence ordinarily a cess is also a tax, but is a special
kind of tax. Generally tax raises revenue which can be used
generally for any purpose by the State. For instance, the
income tax or excise tax or sales tax are taxes which generate
revenue which can be utilised by the Union or the State G
Governments for any purpose e.g. for payment of salary to
the members of the armed forces or civil servants, police, etc.
or for development programmes, etc. However, cess is a tax
131
1967 (1) SCR 548
132
1989 (Supp 1) SCR 692
133
(2006) 6 SCC 763 H
1004 SUPREME COURT REPORTS [2022] 15 S.C.R.

A which generates revenue which is utilised for a specific
purpose. For instance, health cess raises revenue which is
utilised for health purposes e.g. building hospitals, giving
medicines to the poor, etc. Similarly, education cess raises
revenue which is used for building schools or other
educational purposes.”
B
147. The expression “cess”, therefore, implies a tax or impost
levied for some special purpose, which may be levied as an increment to
an existing tax. The term “fee”, to some extent, has a similar meaning.
In The Commissioner of Income Tax, Lucknow v. U.P. Forest
Corporation134 this court, after considering other previous decisions,
C held that exaction, through process of law, of amounts may be called
“fee” but broadly are taxes:
“compulsory exaction’s of money imposed for public purpose
and requiring no consideration to sustain it, but in a broad
generic sense as to also include fees levied essentially for
D services rendered. It is now well recognised that there is no
generic difference between a tax and a fee; both are
compulsory exaction of money by public authority.”
148. At the same time, there is also authority135 for the proposition
that charges (which may be termed as “fee” in given statutes) collected
E by local or municipal authorities, for supply of water, for sewerage, etc.,
are not “taxes”- they form consideration for the specific services, by the
concerned local authority.
149. The term “consideration” however is broader. The plain
meaning is a monetary payment, for something obtained, in the form of
F goods, or services. In Commissioner of Central Excise, Mumbai v.
Fiat India (P) Ltd. &Ors136 this court explained the meaning of that
term:
“Consideration means something which is of value in the eyes
of law, moving from the Plaintiff, either of benefit to the
G Plaintiff or of detriment to the Defendant. In other words, it
134
1998 (2) SCR 22
135
See Union of India & Ors. v. State of U.P. & Ors. 2007(12) SCR 792; Union of
India v. Purna Municipal Corporation 1991 (Supp 1) SCR 183; Municipal
Corporation, Amritsar v. Senior Superintendent of Post Offices, Amritsar Division &
Anr. 2004 (1) SCR 913.
136
H 2012(12) SCR 975
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 1005
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

may consist either in some right, interest, profit or benefit A
accruing to the one party, or some forbearance, detriment,
loss or responsibility, given, suffered or undertaken by the
other, as observed in the case of Currie v. Misa (1875) LR 10
Ex. 153.
54. Webster ’s Third New International Dictionary B
(unabridged) defines, consideration thus:
‘Something that is legally regarded as the equivalent or
return given or suffered by one for the act or promise of
another.’
55. In volume 17 of Corpus Juris Secundum (p.420-421 C
and 425) the import of ‘consideration’ has been described
thus:
‘Various definitions of the meaning of consideration are
to be found in the text-books and judicial opinions. A
sufficient one, as stated in Corpus Juris and which has D
been quoted and cited with approval is “a benefit to the
party promising or a loss or detriment to the party to whom
the promise is made.....
At common law every contract not under seal requires a
consideration to support it, that is, as shown in the definition E
above, some benefit to the promisor, or some detriment to
the promisee.’
56. In Salmond on Jurisprudence, the word ‘consideration’
has been explained in the following words.
F
A consideration in its widest sense is the reason, motive or
inducement, by which a man is moved to bind himself by
an agreement. It is for nothing that he consents to impose
an obligation upon himself, or to abandon or transfer a
right. It is in consideration of such and such a fact that he
agrees to bear new burdens or to forego the benefits which G
the law already allows him.
57. The gist of the term ‘consideration’ and its legal
significance has been clearly summed up in Section 2(d)
of the Indian Contract Act which defines ‘consideration’
thus: H
1006 SUPREME COURT REPORTS [2022] 15 S.C.R.

A ‘When, at the desire of the promisor, the promisee or any
other person has done or abstained from doing, or does
or abstains from doing, or promises to do or to abstain
from doing, something, such act or abstinence or promise
is called a consideration to the promise.’
B 58. From a conspectus of decisions and dictionary meaning,
the inescapable conclusion that follows is that
‘consideration’ means a reasonable equivalent or other
valuable benefit passed on by the promisor to the promisee
or by the transferor to the transferee. Similarly, when the
word ‘consideration’ is qualified by the word ‘sole’, it makes
C consideration stronger so as to make it sufficient and
valuable having regard to the facts, circumstances and
necessities of the case.”
150. Therefore, what Parliament intended – through the
amendments in question was to proscribe, involvement or engagement
D of GPU charities, from any form (“in the nature of”) of activities that
were trade, business or commerce, or engage or involve in providing
services in relation to trade, business or commerce- for a fee, cess or
other consideration. The inclusion of the term “in the nature of” was by
design, to clarify beyond doubt, that not only business, trade or commerce,
but all activities in the nature of, or resembling them, were proscribed.
E Likewise, service in relation to such activities, i.e., services relating, or
pertaining to, such proscribed activities, too were forbidden.
151. The reference to fee or cess, is in the opinion of the court,
only to emphasize that even a statutory consideration, for a service to
business, trade or commerce, would take the activity outside the definition
F of a GPU charity. The sense in which the expressions “cess, fee or
other consideration” are used, is that if any amount, is received for
trading, or business or commercial activity, or any services to such activity,
then, notwithstanding their nomenclature (as fee or cess, i.e. that they
are fixed under a law) the GPU charity cannot claim tax exempt status.
To bring home this even more pointedly- and underline a break from the
G
past, the application of such amounts (received in the course of trade,
commerce, or business, or towards services in relation thereto) would
be irrelevant, as evidenced by the term “irrespective”, in the fourth limb
of reading Section 2(15).
Summation of interpretation of Section 2(15)
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 1007
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

152. Section 2(15) - in the wake of its several amendments A
between 2008 and 2015 - can be juxtaposed with the interpretation of
the unamended Section 2(15) by this Court. In Surat Art Silk (supra),
the principle enunciated was that so long as the predominant object of
GPU category charity is charitable, its engagement in a non-charitable
object resulting in profits that are incidental, is permissible. The court
B
also declared that profits and gains from such activities which were
non-charitable had to be deployed or “fed” back to achieve the dominant
charitable object.
153. The paradigm change achieved by Section 2(15) after its
amendment in 2008 and as it stands today, is that firstly a GPU charity
cannot engage in any activity in the nature of trade, commerce, business C
or any service in relation to such activities for any consideration (including
a statutory fee etc.). This is emphasized in the negative language
employed by the main part of Section 2(15). Therefore, the idea of a
predominant object among several other objects, is discarded. The
prohibition is relieved to a limited extent, by the proviso which carves out D
the condition by which otherwise prohibited activities can be engaged in
by GPU charities. The conditions are:
(a) That such activities in the nature of trade, commerce,
business or service (in relation to trade, commerce or
business for consideration) should be in the course of
“actual carrying on” of the GPU object, and E
(b) The quantum of receipts from such activities should be
exceed 20% of the total receipts.
(c) Both parts of the proviso: (i) and (ii) (to Section 2 (15))
have to be read conjunctively-given the conscious use of
“or” connecting the two of them. This means that if a F
charitable trust carries on any activity in the nature of
business, trade or commerce, in the actual course of fulfilling
its objectives, the income from such business, should not
exceed the limit defined in sub-clause (ii) to the proviso.
C. Sections 10, 11, 12, 12A, 12AA and 13 of the IT Act G
154. The effect of Sections 11, 12, 12A 12AA and 13 have been
the subject of certain decisions137 of this court. These decisions have
noticed that Section 11 deals with income from trusts for charitable and
137
Commissioner of Income Tax v. Dawoodi Bohara Jamat, (2014) 16 SCC 222;
S.RM.M.CT.M. Tiruppani Trust v. Commissioner of Income Tax, (1998) 2 SCC 584 H
1008 SUPREME COURT REPORTS [2022] 15 S.C.R.

A religious purposes and sets out which shall be subject to tax. Section
11(1) relates to application of income towards the objects of the trust
and exempts income of trusts with objects wholly charitable or religious,
or parts of income which relate to such objects. Section 11(1-A) provides
for exemption of capital gains derived by trusts. Section 11(1-B), speaks
of failure to apply income as per option under Explanation (2) to Section
B
11(1). Section 11(2) relates to setting apart or accumulation of income.
Section 11(3) deals with consequences of misapplication of income or
improper investment, while Section 11(3-A) relates to modification of
purposes specified in Form 10 under Section 11(2). Sections 11(4) and
11(4-A) relate to business income of charitable trusts. Lastly, Section
C 11(5) provides for the prescribed modes of investment in regard to the
said trusts. Section 12 enacts that income of trusts created wholly for
charitable or religious purpose from voluntary contributions would be
deemed as income from the property held under such trust for the
purposes of Sections 11 and 13 of the Act. Section 12-A prescribes the
conditions for applicability of Sections 11 and 12 of the Act. It enacts
D
two essential conditions which are to be satisfied by a charitable or
religious trust for claiming exemption under those sections: firstly, that
the person in receipt of the income has made an application for registration
of the trust on or after 01.06.2007 in the prescribed form and manner to
the Commissioner and such a trust is registered under Section 12-AA
E and secondly, where the total income of the trust exceeds the maximum
amount which is not chargeable to income tax in any previous year, the
accounts of the trust must be audited by a chartered accountant and the
person in receipt of the income should furnish such audit report in the
prescribed form along with the return of income. The procedure for
grant (or refusal) of registration is prescribed by Section 12AA. Section
F
13 enlists the circumstances under which tax exemption is unavailable
to religious or charitable trusts otherwise falling under Sections 11 or 12.
Section 13 therefore, has to be read with the provisions of Sections 11
and 12 for deciding eligibility of a trust’s claim for exemption.
Distinction between business held under Trust[Section 11(4)]
G and Trust carrying on business [Section 11(4A)]
155. Section 11(4) applies to cases where the business undertaking
itself is the property held by a trust. Thus, where the property held in
trust, or where property settled by the donor or trust creator in favour of
the trustees itself is a business undertaking, then the income from such
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 1009
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

an undertaking is covered by Section 11(4). Section 11(4A) operates A
differently. It is applicable to cases where the trust carries on a business.
Section 11(4A) states that when a trust carries on a business, unless the
business is incidental or ancillary to the attainments of the objectives of
the trust, it would be disentitled to an exemption under Section 11(1). It
imposes a further condition that separate books of accounts need to be
B
maintained in such cases.
156. Section 11(1) confers an exemption from tax only where the
property itself is held under a trust or other legal obligation. It does not
apply to cases where a trust or legal obligation is not created on any
property, but only the income derived from any particular property or
source is set apart and charged for a charitable or religious purpose. C
Similarly, when a business itself has been set aside for the objects of the
trust, then such business is held under trust and will fall under sub-section
(4). However, where the profits of a business of a trust are applied for
charitable purposes, then such business and trust will be governed by
sub-section (4A). D
157. Section 11(1) of the Act exempts income derived from
property held under trust wholly for charitable or religious purposes, to
the extent to which such income is applied to such purposes in India.
The Act does not comprehensively define “property held under trust”.
Section 11(4) however, provides that for the purposes of Section 11, the E
words “property held under trust” “includes a business undertaking
so held”. Section 11(4A) as amended by the Finance (No. 2) Act, 1991
w.e.f. 01.04.1992 reads as under:-
“(4A) Sub-section (1) or sub-section (2) or sub-section (3) or
sub-section (3A) shall not apply in relation to any income of F
a trust or an institution, being profits and gains of business,
unless the business is incidental to the attainment of the
objectives of the trust or, as the case may be, institution, and
separate books of account are maintained by such trust or
institution in respect of such business.”
G
158. The question whether Section 11(4A) applies where a business
is held under trust was answered in the negative in earlier High Court
judgments. The general provision under Section 4(3)(i) of the old Act
exempted income derived from property held under trust from taxation.
Section 4(3)(ia) however, enacted that any income derived from a
business carried on behalf of a religious or charitable trust would be H
1010 SUPREME COURT REPORTS [2022] 15 S.C.R.

A entitled to exemption only if the business was carried on in the course
of carrying out of a primary purpose of the trust or the work in
connection with the business is mainly carried on by the beneficiaries
of the trust. The revenue contended there that since clause (ia) was a
special provision dealing with exemption in respect of a business carried
on for and on behalf of a trust, any claim for exemption as regards the
B
profits of such business can be made only under that provision, and if
conditions laid down therein are not satisfied, the assessee cannot rely
upon the general provision contained in Section 4(3)(i) to claim exemption
thereunder on the ground that business is property. In Gadodia Swadeshi
Stores v. Commissioner of Income Tax, Punjab138, the Lahore High
C Courtheld that the fact that the business carried on behalf of the trust
failed to satisfy the two conditions in Section 4(3)(ia) was no reason for
it be denied exemption if it fell within Section 4(3)(i). The court held that
that the two categories mentioned in the two clauses did not exclude
each other.
D 159. This judgment of the Lahore High Court was approved- by
reference by this court in J.K. Trust v. CIT139 which was followed in
Krishna Warriar (supra). By then the content of Section 4(3)(ia) had
been enacted as a proviso to clause(i) of Section 4(3), by amending Act
of 1953. After referring to the judgment of the Lahore High Court (supra)
and rejecting the argument of the revenue that a proviso in a statute be
E always read as limitation upon the effect of the main enactment Subbarao,
J. in Krishna Warriar (supra) observed as under:
“........But it is not an inflexible rule of construction that a
proviso in a statute should always be read as a limitation
upon the effect of the main enactment. Generally the natural
F presumption is that but for the proviso the enacting part of
the section would have included the subject-matter of the
proviso; but the clear language of the substantive provision
as well as the proviso may establish that the proviso is not a
qualifying clause of the main provision, but is in itself a
G substantive provision. In the words of Maxwell, “the true
principle is that the sound view of the enacting clause, the
saving clause and the proviso taken and construed together
138
See Gadodia Swadeshi Stores v. Commissioner of Income Tax, Punjab, (1944) 12
ITR 385
139
1958 (1) SCR 65
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 1011
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

is to prevail”. So construed we find no difficulty, as we will A
indicate later in our judgment, in holding that the said clause
(b) of the proviso deals with a case of business which is not
vested in trust for religious or charitable purposes within the
meaning of the substantive clause of section 4(3)(i).”
160. Therefore, to summarise on the legal position on this - if a B
property is held under trust, and such property is a business, the case
would fall under Section 11(4) and not under Section 11(4A) of the Act.
Section 11(4A) of the Act, would apply only to a case where the business
is not held under trust. There is a difference between a property or
business held under trust and a business carried on by or on behalf of the
trust. This distinction was recognized in Surat Art Silk (supra), which C
observed that if a business undertaking is held under trust for a charitable
purpose, the income from it would be entitled to exemption under Section
11(1) of the Act.
161. The interface between Sections 11(1) and (4) is of some
importance. Firstly, under Section 11(4), it is only the business which is D
held under the trust that would enjoy exemption in respect of its income
under Section 11(1). Secondly, there is a distinction between the objects
of a trust and the powers given to the trustees to effectuate the purposes
of the trust. In this regard, the observations of this court, in J.K. Trust
(supra) assume relevance. There, one of the questions which arose was E
whether the office of managing agency, which was an office of profit,
was in fact settled upon trust and, therefore, could be considered to be
business held under trust. The court held that for the purposes of Section
4(3)(i) of the 1922 Act, the office of managing agency was property
which could be held under trust. The revenue pointed out that on the
terms of the trust deed previously executed by the settlors (on 15.06.1945), F
the properties which the trustees are to hold and stand possessed of,
were only the sum of 1,00,000/-, any donations and contribution
received by the trustees and all accretions thereto, and investment in
securities made from time to time representing the accretions. It was
contended that on the terms of the trust deed, the managing agency G
which was acquired on 10.09.1945 for a period of 20 years,cannot be
said to be property held under trust since no part of the initial amount of
1,00,000/-, which was settled upon the trust, was utilised in the acquisition
of the managing agency, so as to impress it with the character of
accretion. While repelling this contention, this court held that:
H
1012 SUPREME COURT REPORTS [2022] 15 S.C.R.

A “.......But it is to be observed that clause (3) of the trust deed
expressly provides for the acquisition of the business of
managing agency on behalf of the trust and “with the help of
the trust fund” and that precisely is what has happened and
indeed, reading together Exhibits A and B, it is impossible to
resist the conclusion that both the documents formed part of
B
an integral scheme, and that what the settlors had in view in
clause 3 of Exhibit A is the very managing agency, which was
acquired under Exhibit B. There is considerable authority in
England that when trustees carry on business with the aid of
trust fund, the position in law is the same as if they actually
C employed it in the business, though, in fact, it be not actually
invested therein.”
162. It seems that the test applied in J.K. Trust (supra) that for a
business, to be considered as property held under trust, it should have
been either acquired with the help of the fund originally settled upon
D trust or the original fund settled upon trust must have a proximate
connection with the later acquisition or carrying on of the business by
the trustees. This distinction between a business held and carried on by
a trust, or a trust business run by the trustees, was noticed, in Thiagesar
Dharma Vanikam v. CIT140 by the Madras High Court and in Raja P.C.
Lall Choudhary v. CIT, Bihar & Orissa141 by the Patna High Court
E which held similarly in relation to Section 4(3)(i) of the Act of 1922
(which corresponds to Section 11(1) of the 1961 Act).
163. What has to be examined, therefore, is whether the business
itself is held under trust or is carried on by and on behalf of the trust.
Importantly Section 11(1) of the Act starts with the expression “subject
F to the provisions of Sections 60 to 63........”. Those provisions are in
Chapter V of the Act. Section 60 provides for the consequences of a
transfer of income where there is no transfer of assets. It says that
where a person transfers merely the income from an asset without
transferring the asset itself, he would continue to be chargeable to income
G tax. Section 61 provides for the consequences of a revocable transfer of
assets and says that the same would be the position where a person is in
receipt of income by virtue of a revocable transfer of assets. Section 62
provides for the consequences of a transfer of assets for a specified
140
(1963) 50 ITR 798 Madras.
141
(1957) 31 ITR 226 Patna.
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 1013
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

period, and serves as an exception to Section 61. An assessee has to be A
divested of the asset before ceasing to be assessable in respect of the
income from it. A mere direction that the income from the business shall
be applied to the charitable objects of a trust, without there being a
settlement of the business itself upon trust, does not result in any trust or
legal obligation.
B
164. It is now, necessary to consider Thanthi Trust (supra) and
its context. This court, while interpreting Section 11(4A) (as amended
w.e.f. 01.04.1992) stated that the provision requires the “business income
of a trust or institution tobe exempt is that the business should be
incidental to the attainment of objectives of the trust or institution”.
C
165. The above observations have to be understood in the light of
the facts before the court. Thanthi Trust carried on newspaper business
which was held under trust. The charitable object of the trust was the
imparting of education- which falls under Section 2(15) of the Act. The
newspaper business was incidental to the attainment of the object of
the trust, namely that of imparting education. This aspect is important, D
because the aim of the trust was a per se charitable object, not a GPU
object. The observations were therefore made, having regard to the
fact that the profits of the newspaper business were utilized by the trust
for achieving the object of education. In the light of such facts, the
carrying on of newspaper business, could be incidental to the object of E
education- a per se category. The Thanthi Trust (supra) ratio therefore,
cannot be extended to cases where the trust carries on business which
is not held under trust and whose income is utilized to feed the charitable
objects of the trust.
166. What then is the interpretation of the expression “incidental” F
profits, from “business” being “incidental to the attainment of the
objectives” of the GPU charity (which occurs in Section 11(4A))? As
stated earlier, the interpretation of that expression in ThanthiTrust (supra)
was in the context of a per se charity, i.e., where the trust’s object was
education. However, the restrictive or negative terms enjoining GPU
charities from carrying on profitable activity had been deleted in 1983 G
(w.e.f. 01.04.1984). In Surat Art Silk (supra), the court had articulated
the determinative test for defining whether a Trust was a GPU charity if
its predominant object was to carry out a charitable purpose and that if
that was the case, the fact that it earned profit would not per se deprive
it of tax exemption. This decision was interpreted in the context of Section H
1014 SUPREME COURT REPORTS [2022] 15 S.C.R.

A 11(4A) by this court in Thanthi Trust,to hold that business can be incidental
to attainment of the trust’s objects.
167. Thus, the journey which began with Surat Art Silk was
interpreted in Thanthi Trust to mean that the carrying on of business by
GPU charity was permissible as long as it inured to the benefit of the
B trust. The change brought about by the amendments in questions,
however, place the focus on an entirely different perspective: that if at
all any activity in the nature of trade, commerce or business, or a service
in the nature of the same, for any form of consideration is permissible,
that activity should be intrinsically linked to, or a part of the GPU
categorycharity’s object. Thus, the test of the charity being driven by a
C predominant object is no longer good law. Likewise, the ambiguity with
respect to the kind of activities generating profit which could feed the
main object and incidental profit-making also is not good law. What
instead, the definition under Section 2(15) through its proviso directs and
thereby marks a departure from the previous law, is – firstly that if a
D GPU charity is to engage in any activity in the nature of trade, commerce
or business, for consideration it should only be a part of this actual
function to attain the GPU objective and, secondly – and the equally
important consideration is the imposition of a quantitative standard -i.e.,
income (fees, cess or other consideration) derived from activity in the
nature of trade, business or commerce or service in relation to these
E three activities, should not exceed the quantitative limit of 10,00,000
(w.e.f. 01.04.2009), 25,00,000 (w.e.f. 01.04.2012), and 20% (w.e.f.
01.04.2016) of the total receipts. Lastly, the “ploughing” back of business
income to “feed” charity is an irrelevant factor – again emphasizing the
prohibition from engaging in trade, commerce or business.
F 168. If one understands the definition in the light of the above
enunciation, the sequitur is that the reference to “income being profits
and gains of business” with a further reference to its being incidental
to the objects of the Trust, cannot and does not mean proceeds of
activitiesincidental to the main object, incidental objects or income
G derived from incidental activities. The proper way of reading reference
to the term “incidental” in Section 11(4A) is to interpret it in the light of
the sub-clause (i) of proviso to Section 2(15), i.e., that the activity in the
nature of business, trade, commerce or service in relation to such activities
should be conducted actually in the course of achieving the GPU
object, and the income, profit or surplus or gains can then, be logically
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 1015
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

incidental. The amendment of 2016, inserting sub clause (i) to proviso A
to Section 2(15) was therefore clarificatory. Thus interpreted, there is
no conflict between the definition of charitable purpose and the machinery
part of Section 11(4A). Further, the obligation under Section 11(4A) to
maintain separate books of account in respect of such receipts is to
ensure that the quantitative limit imposed by sub-clause (ii) to Section
B
2(15) can be computed and ascertained in an objective manner.
169. The conclusion recorded above is also supported by the
language of seventh proviso142 to Section 10(23C). Whereas Section
2(15) is the definition clause, Section 10 lists out what is not income.
Section 10(23C)– by sub-clauses (iv) and (v) exempt incomes of
charitable organisations. Such organisations and institutions are not limited C
to GPU category charities but rather extend to other types of charities
(i.e. the per se kind as well). The controlling part of Section 10(23C)
along with the relevant clauses (iv) and (v) seek to exclude income
received by the concerned charities. However, the provisos hedge such
exemption with conditions. The seventh proviso- much like Section D
11(4A) and the definition - carve out an exception, to the exemptions
such that income derived by charities from business, are not exempt.
The seventh proviso virtually echoes Section 11(4A) in that business
income derived by a charity (in the present case, the GPU charities)
which arises from an activity incidental to the attainment of its objective
is not per se excluded. E

170. Classically, the idea of charity was tied up with
eleemosynary143. However, “charitable purpose” – and charity as defined
in the Act have a wider meaning where it is the object of the institution
which is in focus. Thus, the idea of providing services or goods at no
consideration, cost or nominal consideration is not confined to the F
provision of services or goods without charging anything or charging a
token or nominal amount. This is spelt out in Indian Chamber of

142
“Providedalso that nothing contained in sub-clause (iv) or sub-clause (v) or sub-
clause (vi) or sub-clause (via) shall apply in relation to any income of the fund or trust
or institution or any university or other educational institution or any hospital or other
G
medical institution, being profits and gains of business, unless the business is incidental
to the attainment of its objectives and separate books of account are maintained by it in
respect of such business:”
143
Providing relief from distress to humans based on Christian values - refer to Director
of Income Tax v. Bharat Diamond Bourse (2002) 10 SCC 392, and Bangalore Water
Supply and Sewage Undertaking v. A Rajappa (1978) 2 SCC 213. H
1016 SUPREME COURT REPORTS [2022] 15 S.C.R.

A Commerce (supra) where this Court held that certain GPUs can render
services to the public with the condition that they would not charge “more
than is actually needed for the rendering of the services, - may be it
may not be an exact equivalent, such mathematical precision being
impossible in the case of variables, - may be a little surplus is left
over at the end of the year – the broad inhibition against making
B
profit is a good guarantee that the carrying on of the activity is not
for profit”.
171. Therefore, pure charity in the sense that the performance of
an activity without any consideration is not envisioned under the Act.
If one keeps this in mind, what Section 2(15) emphasizes is that so long
C as a GPU’s charity’s object involves activities which also generates profits
(incidental, or in other words, while actually carrying out the objectives
of GPU, if some profit is generated), it can be granted exemption provided
the quantitative limit (of not exceeding 20%) under second proviso to
Section 2(15) for receipts from such profits, is adhered to.
D 172. Yet another manner of looking at the definition together with
Sections 10(23) and 11 is that for achieving a general public utility object,
if the charity involves itself in activities, that entail charging amounts
only at cost or marginal mark up over cost, and also derive some profit,
the prohibition against carrying on business or service relating to business
E is not attracted- if the quantum of such profits do not exceed 20% of its
overall receipts.
173. It may be useful to conclude this section on interpretation
with some illustrations. The example of Gandhi Peace Foundation
disseminating Mahatma Gandhi’s philosophy (in Surat Art Silk) through
F museums and exhibitions and publishing his works, for nominal cost,
ipso facto is not business. Likewise, providing access to low-cost hostels
to weaker segments of society, where the fee or charges recovered
cover the costs (including administrative expenditure) plus nominal mark
up; or renting marriage halls for low amounts, again with a fee meant to
cover costs; or blood bank services, again with fee to cover costs, are
G not activities in the nature of business. Yet, when the entity concerned
charges substantial amounts- over and above the cost it incursfor doing
the same work, or work which is part of its object (i.e., publishing an
expensive coffee table book on Gandhi, or in the case of the marriage
hall, charging significant amounts from those who can afford to pay, by
H providing extra services, far above the cost-plus nominal markup) such
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 1017
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

activities are in the nature of trade, commerce, business or service in A
relation to them. In such case, the receipts from such latter kind of
activities where higher amounts are charged, should not exceed the limit
indicated by proviso (ii) to Section 2(15).
174. The insertion of Section 13(8)144, the seventeenth proviso to
Section 10(23C) and third proviso to Section 143(3) (all of which were B
inserted by Finance Act, 2012, but w.r.e.f. 01.04.2009), further reinforces
the interpretation of this Court, of “charitable purpose”. These provisions,
form the machinery to control the conditions under which income is
exempt. The effect of the seventeenth proviso to Section 10(23C) is to
impose the same condition i.e., that that the trade, commerce or business
activity or service relating to trade, business or commerce, should be C
part of the GPU’s activities, to achieve its object of advancing general
public utility. The other condition– which is drawn in as part of the
exemption condition, is that if such trading or commercial activity takes
place the receipts should be confined to a prescribed percentage of the
overall receipts. Section 13(8) too reinforces the same condition. D
175. In the opinion of this court, the change intended by Parliament
through the amendment of Section 2(15) was sought to be emphasised
and clarified by the amendment of Section 10(23C) and the insertion of
Section 13(8). This was Parliaments’ emphatic way of saying that
generally no commercial or business or trading activity ought to be E
engaged by GPU charities but that in the course of their functioning of
carrying out activities of general public utility, they can in a limited manner
do so, provided the receipts are within the limit spelt out in Clause (ii) of
the proviso to Section 2(15).
D. What kinds of income or receipts may not be characterized F
as derived from trade, commerce, business or in relation to
such activities, for a consideration
(i) Statutory corporations, authorities or bodies
176. It would be essential now to deal with certain kinds of receipts
which GPU charities, typically statutory housing boards, regulatory G
authorities and corporations may be entitled to, if mandated to collect or
144
“(8) Nothing contained in section 11 or section 12 shall operate so as to exclude
any income from the total income of the previous year of the person in receipt thereof
if the provisions of the first proviso to clause (15) of section 2 become applicable in
the case of such person in the said previous year.” H
1018 SUPREME COURT REPORTS [2022] 15 S.C.R.

A receive. During the course of hearing, learned counsels highlighted that
statutory boards, and corporations have to recover the cost of providing
essential goods and services in public interest, and also fund large scale
development and maintain public property. These would entail recovering
charges or fees, interest and also receiving interest for holding deposits.
It was further pointed out that in some cases, income in the form of
B
rents – having regard to the nature of the schemes which the concerned
board, trust or corporation may be mandated or permitted to carry on,
has to be received. For instance, in some situations, for certain kinds of
properties, the boards may be permitted only to lease out their assets
and receive rents.
C 177. The answers to these, in the opinion of this court, are that the
definition ipso facto does not spell out whether certain kinds of income
can be excluded. However, the reference to specific provisions enabling
or mandating collection of certain rates, tariffs or costs would have to be
examined. Generically, going by statutory models in enactments (under
D which corporations boards or trust or authority by whatsoever name,
are set up), the mere fact that these bodies have to charge amounts
towards supplying goods or articles, or rendering services i.e., for fees
for providing typical essential services like providing water, distribution
of foodgrains, distribution of medicines, maintenance of roads, parks
etc., ought not to be characterized as “commercial receipts”. The
E rationale for such exclusion would be that if such rates, fees, tariffs,
etc., determined by statutes and collected for essential services, are
included in the overall income as receipts as part of trade, commerce or
business, the quantitative limit of 20% imposed by second proviso to
Section 2(15) would be attracted thereby negating the essential general
F public utility object and thus driving up the costs to be borne by the
ultimate user or consumer which is the general public. By way of
illustration, if a corporation supplies essential foodgrains at cost, or a
marginal mark up, another supplies essential medicines, and a third, water,
the characterization of these, as activities in the nature of business, would
be self-defeating, because the overall receipts in some given cases may
G exceed the quantitative limit resulting in taxation and the consequent
higher consideration charged from the user or consumer.
(a) Interpretation of Section 10(46) and Section 2(15)
178. Section (20A) was inserted by Finance Act, 1970 with effect
H from 01.04.1962. It had excluded certain classes of income, of
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 1019
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

corporations145. This court had occasion to deal with the provision while A
it was in force in the GIDC case (supra). The court had then emphasized
that the expression “development” in Section 10(20A) should be
understood widely; thus, all development programmes “relating to any
industry” fell within the purview of “development”. The court also
highlighted that nothing in the IT Act laid down how a corporation could
B
be termed as a development corporation nor was there anything
mandating that fee chargeable by such corporations was confined to
non-industrial activities.
179. The decision in Gujarat Maritime Board case (supra) was
rendered in the context of Section 10(20). That provision exempts income
accruing to local authorities, from taxation. By Finance Act, 2002, an C
Explanation was added to Section 10(20) which defined “local authority”
retrospectively. The Board ceased to enjoy exemption which it had
hitherto, in the absence of the retrospective definition. It, therefore sought
exemption, as a GPU category charity claiming that it was controlled by
objects of general public utility having regard to the provisions of its D
parent Act, i.e., the Gujarat Maritime Board Act. This court refuted the
argument of the revenue that if a corporation did not fall within the
definition of “local authority” it could not claim to be a GPU charity. It
was held that Section 10(20) and Section 11 of the 1961 Act operate in
totally different spheres. Even if the Board is not considered as a local
authority, it is not precluded from claiming exemption under Section 11(1) E
of the 1961 Act. Therefore, the court read Section 11(1) in light of the
definition of the words “charitable purposes” as defined under Section
2(15). This court also relied upon the ruling in CIT v. APSRTC (supra)
where the APSRTC – constituted under the Road Transport Corporation
Act, 1950 – having regard to the objectives of the Act, was held to be a F
GPU charity, thus entitling it to exemption in terms of the IT Act.
180. In the light of these decisions, it is evident that the revenue’s
narrow construction by which tax exemption is denied on the ground
145
Incomes not included in total income.
10. In computing the total income of a previous year of any person, any income falling
G
within any of the following clauses shall not be included-
xxxxxx xxxxxx xxxxxx
(20A) any income of an authority constituted in India by or under any law enacted either
for the purpose of dealing with and satisfying the need for housing accommodation or
for the purpose of planning, development or improvement of cities, towns and villages,
or for both. H
1020 SUPREME COURT REPORTS [2022] 15 S.C.R.

A that if an entity is not covered by Section 10(20A) – or the newly
applicable Section 10(46), it cannot claim benefit as a GPU charity under
Section 11, is unsound. These two provisions confer different though
overlapping benefits. If an entity does not fulfil the requirement of one
provision because it does not answer the description of a body under
that provision, that ipso facto is not a bar for it to claim benefit of another
B
provision.
181. Section 10(46) re-incarnated so to say Section 10(20A), which
had been deleted w.e.f. 01.04.2003. This provision, i.e., Section 10(46)
was inserted with effect from 01.04.2009 retrospectively by the Finance
Act, 2011146. The conditions for applicability of Section 10(46), i.e., that
C specified income or a class of specified income of ports, trusts or
commissions, etc., established or constituted by or under Central or State
enactments with the object of regulating or administering any activity in
the general public, is on similar lines as in the case of GPU charities.
Like in the case of GPU charities, there is a prohibition by Section
D 10(46)(b) against such corporations, etc. engaging in commercial activity.
This restriction has been introduced for the first time [as that prohibition
was absent in the now repealed Section 10 (20A)].
182. The term “commercial” is closely similar to, if not identical,
with the phrase “in the nature of trade, commerce or business.” The
other condition inSection 10(46) is that the specified income to be
E exempted,is to be notified by the Central Government in the Official
Gazette. Facially the allusion to commercial activity, appears to be in the
nature of a complete bar to activities which are akin to commerce or
business, yielding profit. However, what needs to be kept in mind is that
the object of Section 10 is to remove from the taxable net, an entire
F class of receipts of income. Given this object of Section 10, the
146
Incomes not included in total income.
10. In computing the total income of a previous year of any person, any income falling
within any of the following clauses shall not be included-
xxxxxx xxxxxx xxxxxx

(46) any specified income arising to a body or authority or Board or Trust or Commission
G (by whatever name called) or a class, thereof which-
(a) has been established or constituted by or under a Central, State or Provincial Act, or
constituted by the Central Government or a State Government, with the object of
regulating or administering any activity for the benefit of the general public;
(b) is not engaged in any commercial activity; and
(c) is notified by the Central Government in the Official Gazette for the purposes of
H this clause.
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 1021
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

interpretation of “commercial” activity has to be on the same lines as in A
the case of income derived by GPU charities, in the course of their
actual functioning, by involving in activities in the nature of trade,
commerce or business. Thus, if statutory corporations within Section
10(46) derive their income by charging a nominal mark-up over the cost
of service rendered or goods supplied, meant to recover the costs of the
B
activities they engage in primarily or to achieve the object for which
they were set up, such as development of housing, road infrastructure,
water supply, sewage treatment, supply of foodgrains, medicines, etc.,
with or without regulatory powers, the mere fact that some surplus or
gain is derived would not disentitle them from the benefit of Section
10(46). C
183. In this context, it would be useful to consider the judgment of
the Delhi and Allahabad High Courts in Greater Noida Industrial
Development Authority v. Union of India147(hereafter “GNIDA”) and
CIT v. Yamuna Expressway Industrial Development Authority148. In
GNIDA (supra), the High Court drew a distinction between bodies set D
up by the government with commercial purpose and objects – which are
motivated by profit, and other government bodies. The court held,
correctly so – that other government bodies are not entitled to exemption
as they are motivated by profit. Then, dealing with the term “commercial
activity” under Section 10(46), it was held that the decisive test is whether
the activities for which consideration in the form of fee, service charge E
etc., is collected, is “intrinsically associated, connected and had
minimum nexus with the object of regulating and administering the
activity for the benefit of the public”.
184. It was also held that if the activity is not carried on commercial
lines, i.e., with the profit motive in mind, but the body is assigned an F
administrative role, having regard to the objects of the controlling statute
or law, exemption cannot be denied under Section 10(46). As juxtaposed,
activities for profit or activities which clearly were motivated by profit –
carried on by government or statutory bodies, cannot avail of exemption.
The judgment in Yamuna Industrial Development Authority (supra) is
along the similar lines. G
185. As far as boards and corporations which are tasked with
development of industrial areas, by statute, the judgments of this court,

147
(2018) 406 ITR 418 (hereafter “GNIDA”)
148
(2017) 395 ITR 18 H
1022 SUPREME COURT REPORTS [2022] 15 S.C.R.

A in ShriRamtanu Cooperative Housing Society (supra) and Gujarat
Industrial Development Corporation (supra) have declared that these
bodies are involved in ‘development’ and are not essentially engaged in
trading. In ShriRamtanu Cooperative Housing Society (supra) this
court, by a five judge bench, held that the Maharashtra Industrial
Development Corporation is not a trading concern, and observed as
B
follows:
“These features of transfer of land, or borrowing of moneys
or receipt of rents and profits will by themselves neither be
the indicia nor the decisive attributes of the trading character
of the Corporation. Ordinarily, a Corporation is established
C by shareholders with their capital. The shareholders have
their Directors for the regulation and management of the
Corporation Such a Corporation set up by the shareholders
carries on business and is intended for making profits. When
profits are earned by such a Corporation they are distributed
D to shareholders by way of dividends or kept in reserve funds.
In the present case, these attributes of a trading Corporation
are absent. The Corporation is established by the Act for
carrying out the purposes of the Act. The purposes of the Act
are development of industries in the State. The Corporation
consists of nominees of the State Government, State Electricity
E Board and the Housing Board. The functions and powers of
the Corporation indicate that the Corporation is acting as a
wing of the State Government in establishing industrial estates
and developing industrial areas, acquiring property for those
purposes, constructing buildings, allotting buildings, factory
F sheds to industrialists or industrial undertakings. It is obvious
that the Corporation will receive moneys for disposal of land,
buildings and other properties and also that the Corporation
would receive rents and profits in appropriate cases. Receipts
of these moneys arise not out of any business or trade but out
of sole purpose of establishment, growth and development of
G industries.
17. The Corporation has to provide amenities and facilities
in industrial estates and industrial areas. Amenities of road,
electricity, sewerage and other facilities in industrial estates
and industrial areas are within the programme of work of the
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 1023
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

Corporation. The found of the Corporation consists of moneys A
received from the State Government, all fees, costs and charges
received by the Corporation, all moneys received by the
Corporation from the disposal of lands, buildings and other
properties and all moneys received by the Corporation by
way of rents and profits or in any other manner. The
B
Corporation shall have the authority to spend such sums out
of the general funds of the Corporation or from reserve and
other funds. The Corporation is to make provision for reserve
and other specially denominated funds as the State
Government may direct. The Corporation accepts deposits
from persons, authorities or institutions to whom allotment or C
sale of land, buildings, or sheds is made or is likely to be
made in furtherance of the object of the Act. A budget is
prepared showing the estimated receipts and expenditure. The
accounts of the Corporation are audited by an auditor
appointed by the State Government. These provisions in regard
D
to the finance of the Corporation indicate the real role of the
Corporation viz. the agency of the Government in carrying
out the purpose and object of the Act which is the development
of industries. If in the ultimate analysis there is excess of
income over expenditure that will not establish the trading
character of the Corporation. There are various departments E
of the Government which may have excess of income over
expenditure.
************** ******** *********
20. The underlying concept of a trading Corporation is buying
and selling. There is no aspect of buying or selling by the F
Corporation in the present case. The Corporation carries out
the purposes of the Act, namely, development of industries in
this State. The construction of buildings, the establishment of
industries by letting buildings on hire or sale, the acquisition
and transfer of land in relation to establishment of industrial G
estate or development of industrial areas and of setting up of
industries cannot be said to be dealing in land or buildings
for the obvious reason that the State is carrying out the objects
of the Act with the Corporation as an agent in setting up
industries in the State. The Act aims at building an industrial
H
1024 SUPREME COURT REPORTS [2022] 15 S.C.R.

A town and the Corporation carries out the objects of the Act.
The hard core of a trading Corporation is its commercial
character. Commerce connotes transactions of purchase and
sale of commodities, dealing in goods. The forms of business
transactions may be varied but the real character is buying
and selling. The true character of the Corporation in the
B
present case is to act as an architectural agent of the
development and growth of industrial towns by establishing
and developing industrial estates and industrial areas. We
are of opinion that the Corporation is not a trading one.”
186. In Shri Ramtanu Cooperative Housing Society (supra) no
C doubt, this court did not have to decide whether the Maharashtra Industrial
Development Corporation was entitled to tax exemption. However, it
examined the provisions of the Act, and the ratio, that such industrial
development corporations are not engaged in trading, is binding. Like in
that case, here too, the concerned state Acts (Gujarat Industrial
D Development Act, 1962 and the Karnataka Industrial Areas Development
Act, 1966) tasked the boards with planning and development of industrial
areas. Their personnel are appointed under the enactments and are
deemed to be public servants. The state government is empowered to
acquire land, in exercise of eminent domain power, for their purposes;
their audits are by the Accountant General of the concerned state, or
E auditors appointed by the state. They are authorized by law, to levy rates
and charges, for the services they provide, on pre-determined basis. In
the light of these provisions, clearly, these boards and authorities perform
objects of general public utility; and they are not driven by profit motive.
187. There is a two-fold distinction between the now-deleted
F Section 10(20A) and the newly added Section 10(46) (w.e.f. 01.06.2011).
Firstly, that the erstwhile Section 10(20A) applied to a limited class of
undertaking i.e., the bodies, or corporations, constituted by or under any
law-confined to the planning and development of housing infrastructure.
However, the newly added Section 10(46) is wider in comparison and
G the activities of any body or authority or board constituted by or under
any central or State Act with “the object of regulating or administering
any activity for the benefit of the general public”, has broader import.
In a sense, the newly added Section 10(46), resembles a GPU category
charity classified under Section 2(15). The second distinction is that
Section 10(20A) did not bar any board, or corporations, etc. from indulging
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 1025
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

in commercial activities. However, sub-clause (b) of Section 10(46) A
imposes such a bar, and the concerned body cannot claim tax exemption
if it engages in commercial activity.
188. The manner in which GPU charities has been dealt with
under the definition clause, i.e., Section 2(15), indicates that even though
trading or commercial activity or service in relation to trade, commerce B
or business appears to be barred– nevertheless the ban is lifted somewhat
by the proviso which enables such activities to be carried out if they are
intrinsically part of the activity of achieving the object of general public
utility. Furthermore, in the case of GPU charities there is a quantified
limit of the overall receipts, which is permissible from such commercial
activity. In the case of local authorities and corporations covered by C
Section 10(46) no such activities are seemingly permitted.
189. As was observed in the earlier part of this judgment – while
considering whether for the period 01.0.2003 - 31.05.2011, statutory
boards, corporations, etc. could have lawfully claimed to be GPU
charities, this court has observed that the nature of such corporations is D
not to generate profit but to make available goods and other services for
the benefit of public weal. If such corporations (falling within the
description of Section 10(46)) applied to the Central Government for
exemption, the treatment of their receipts, should be no different than
how such receipts can and should have been treated for the purposes of E
determining whether they are GPU charities, during the period when
Section 10(46) was not in existence. Furthermore, this court is of the
opinion that having regard to the observations in Gujarat Maritime
Board case (supra), the denial of exemption under one category cannot
debar such corporations from claiming income exempt status under
another category. F

(b) Summary in relation to statutory authorities/corporations
190. In light of the above discussion, this court is of the opinion
that:
(i) The fact that bodies which carry on statutory functions G
whose income was eligible to be considered for exemption
under Section 10(20A) ceased to enjoy that benefit after
deletion of that provision w.e.f. 01.04.2003, does not ipso
facto preclude their claim for consideration for benefit as
H
1026 SUPREME COURT REPORTS [2022] 15 S.C.R.

A GPU category charities, under Section 11 read with Section
2(15) of the Act.
(ii) Statutory Corporations, Boards, Authorities, Commissions,
etc. (by whatsoever names called) in the housing
development, town planning, industrial development sectors
B are involved in the advancement of objects of general public
utility, therefore are entitled to be considered as charities
in the GPU categories.
(iii) Such statutory corporations, boards, trusts authorities, etc.
may be involved in promoting public objects and also in the
C course of their pursuing their objects, involved or engaged
in activities in the nature of trade, commerce or business.
(iv) The determinative tests to consider when determining
whether such statutory bodies, boards, authorities,
corporations, autonomous or self-governing government
D sponsored bodies, are GPU category charities:
(a) Does the state or central law, or the memorandum of
association, constitution, etc. advance any GPU object, such
as development of housing, town planning, development of
industrial areas, or regulation of any activity in the general
E public interest, supply of essential goods or services - such
as water supply, sewage service, distributing medicines, of
foodgrains (PDS entities), etc.;
(b) While carrying on of such activities to achieve such objects
(which are to be discerned from the objects and policy of
F the enactment; or in terms of the controlling instrument,
such as memorandum of association etc.), the purpose for
which such public GPU charity, is set-up -whether for
furthering the development or a charitable object or
for carrying on trade, business or commerce or service
in relation to such trade, etc.;
G
(c) 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;
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 1027
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

(d) where the controlling instrument, particularly a statute A
imposes certain responsibilities or duties upon the concerned
body, such as fixation of rates on pre-determined statutory
basis, or based on formulae regulated by law, or rules having
the force of law, setting apart amenities for the purposes of
development, charging fixed rates towards supply of water,
B
providing sewage services, providing food-grains, medicines,
and/or retaining monies in deposits or government securities
and drawing interest therefrom or charging lease rent, ground
rent, etc., per se, recovery of such charges, fee, interest,
etc. cannot be characterized as “fee, cess or other
consideration” for engaging in activities in the nature of C
trade, commerce, or business, or for providing service in
relation in relation thereto;
(e) Does the statute or controlling instrument set out the policy
or scheme, for how the goods and services are to be
distributed; in what proportion the surpluses, or profits, can D
be permissively garnered; are there are limits within which
plots, rates or costs are to be worked out; whether the
function in which the body is engaged in, is normally
something a government or state is expected to engage in,
having regard to provisions of the Constitution and the
enacted laws, and the observations of this court in NDMC; E
whether in case surplus or gains accrue, the corporation,
body or authority is permitted to distribute it, and if so, only
to the government or state; the extent to which the state or
its instrumentalities have control over the corporation or its
bodies, and whether it is subject to directions by the F
concerned government, etc.;
(f) As long as the concerned statutory body, corporation,
authority, etc. while actually furthering a GPU object, carries
out activities that entail some trade, commerce or
business,which generates profit (i.e., amounts that are G
significantly higher than the cost), and the quantum of such
receipts are within the prescribed limit (20% as mandated
by the second proviso to Section 2(15)) – the concerned
statutory or government organisations can be characterized
as GPU charities. It goes without saying that the other
H
1028 SUPREME COURT REPORTS [2022] 15 S.C.R.

A conditions imposed by the seventh proviso to Section
10(23C) and by Section 11 have to necessarily be fulfilled.
(v) As a consequence, it is necessary in each case, having
regard to the first proviso and seventeenth proviso (the latter
introduced in 2012, w.r.e.f 01.04.2009) to Section 10(23C),
B that the authority considering granting exemption, takes into
account the objects of the enactment or instrument
concerned, its underlying policy, and the nature of the
functions, and activities, of the entity claiming to be a GPU
charity. If in the course of its functioning it collects fees, or
any consideration that merely cover its expenditure
C (including administrative and other costs plus a small
proportion for provision) - such amounts are not
consideration towards trade, commerce or business, or
service in relation thereto. However, amounts which are
significantly higher than recovery of costs, have to be treated
D as receipts from trade, commerce or business. It is for those
amounts, that the quantitative limit in proviso (ii) to Section
2(15) applies, and for which separate books of account will
have to be maintained under other provisions of the IT Act.
(ii) Statutory regulatory bodies/authorities
E 191. During the hearings, rival contentions were made in regard
to the facial nature of the public utility character of regulatory bodies. A
sample special case was that of the Institute of Chartered Accountants
of India (ICAI). In respect of some years, the revenue has preferred
appeals and in respect of some others, the Institute has preferred appeals.
F Reliance was placed upon the provisions of the ICAI Act and detailed
submissions were made to emphasise that it plays a pivotal role in
regulating the entire universe of vocation of Chartered Accountants –
i.e., selecting candidates that can undergo the educational course, setting
the syllabus for the Chartered Accountancy examination; holding classes,
training sessions and imparting education; conducting exams, etc. It was
G highlighted that the membership of the institute, i.e., those who are enrolled
as Chartered Accounts has grown significantly. Whereas in the end of
financial year 2005, the membership was 1.23 lakhs, it had increased to
1,86,440 on 31.03.2012. Likewise, there was an exponential growth in
the students appearing in the examination - in 2005, it was 2,96,294, and
H on 31.03.2012, it had increased to 10,70,839. Apparently, the Institute
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 1029
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

conducts distance education courses and also conducts classroom A
instruction facilities. These are integrated with the course curriculum.
Additionally, it was urged that no commercial motive was involved;
coaching and revisional classes conducted are very nominally priced-
ranging from 1500 to 2500 for one group, and from 4000 to 6000
for both groups, depending on cities where the classes are held.
B
192. During the submissions on behalf of the Institute, the financials
for different years were provided. It was revealed that the total outflow
towards salaries for 2003-04 was 55.27 lakhs and depreciation for the
same was 51.64 lakhs. The total expenditure for that year was
1.0691 lakhs. As against that, the Revenue earned from generation of
fees for the corresponding year which was 1.78 crores and the C
corresponding expenditure was 96.93 lakhs. The corresponding figures
for FY 2011-12 for salaries was 2.94 crores. The depreciation was
Rs.4.05 crores. The total expenditure thus was 6.9 crores. As against
this, the amount received towards fees was 6.36 crores and expenditure
incurred towards coaching, including salaries,provisions of course material, D
etc. was 4.34 crores. The surplus (without including administrative
expenditure) for that year was 2.01 crores. The Institute apparently
cannot distribute the surplus or utilise it for any activity other than what
is set out under the controlling statute and its rules.
193. The Revenue highlighted that conducting courses leading to E
a professional qualification and charging fees for it is in the nature of a
‘service’, and all services in relation to trade, commerce or business
squarely falls within the mischief of Section 2(15),which has to preclude
the institute’s claim for exemption as a GPU charity.
194. The Institute is a creature of the Institute of Chartered F
Accountants Act, 1949. By Section 4 of this Act, every person who
qualifies in the examination conducted by the Institute has to seek
registration as a Chartered Accountant. Only when members obtain
certificates issued by the Council of the Institute under Section 6 can
they be known as a ‘Chartered Accountant’ and be entitled to practice
that profession (Sections 6 and 7). The Council of the Institute is G
constituted under Section 9 which defines such constitution and the
manner for holding elections, etc. The functions of the Council by Section
15(2A) include approving the academic courses and their contents,
examining the candidates, regulation and articleship assistance, prescribing
qualification for entry of persons in the register, collection of fees from H
1030 SUPREME COURT REPORTS [2022] 15 S.C.R.

A members; the regulation and maintenance and status of the professional
qualifications of the members of the Institute, etc. By Section 15A,
universitiesare enabled to impart education on subjects covered by the
academic courses of the Institute. However, by Section 15A(2) while
awarding degrees or diplomas, their designation should not resemble or
be identical to what is awarded by the Institute. The finances are regulated
B
by Section 18. The Council is enjoined to maintain the register under
Section 19 and has disciplinary powers by virtue of Section 21A, 21B
and 21C of the Act.
195. These provisions of the Act clarify beyond a doubt that the
Institute performs statutory functions in the larger public interest of
C regulating the standards of education, leading up to the profession of
Chartered Accountancy and also prescribing standards of professional
etiquette, behaviour, and discipline of its members. No other entity or
body has the authority in law to perform the functions that the Institute
does. Although the Act regulating Chartered Accountancy came into
D force prior to the Constitution of India, the subject (of regulating
professions, etc.) appears to be relatable to the exercise of legislative
power under Entry 25 and 26 of the Concurrent List149. Furthermore,
they also appear to conform to Entry 65 of the Union List150 (which has
been adverted to in Entry 25 of the Concurrent List). As things stand,
the Institute is the only body which prescribes the contents of professional
E education and entirely regulates the profession of Chartered
Accountancy. There is no other body authorised to perform any other
duties which it performs. It, therefore, clearly falls in the description of a
charity advancing general public utility. Having regard to the previous
discussion on the nature of charities and what constitutes activities in
F the ‘nature of trade, business or commerce’, the functions of the Institute
149
In List III of the Seventh Schedule to the Constitution of India,
“25. Education, including technical education, medical education and universities, subject
to the provisions of entries 63, 64, 65 and 66 of List I; vocational and technical training
of labour.
26. Legal, medical and other professions”.
G 150
In List I of the Seventh Schedule to the Constitution of India,
“65. Union agencies and institutions for—
(a) professional, vocational or technical training, including the training of police officers;
or
(b) the promotion of special studies or research; or
(c) scientific or technical assistance in the investigation or detection
of crime.”
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 1031
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

ipso facto does not fall within the description of such ‘prohibited A
activities’. The fees charged by the Institute and the manner of its
utilisation are entirely controlled by law. Furthermore, the material on
record shows that the amounts received by it are not towards providing
any commercial service or business but are essential for the providing of
service to the society and the general public.
B
196. Similarly, there are several other regulatory bodies that
discharge functions which are otherwise within the domain of the State.
A singular characteristic of ICAI and other statutory bodies which can
be said to regulate specific functions and professions (including the
profession of Cost and Work Accountants, and Company Secretary, etc.)
is the powers conferred upon them by the statutes to prescribe standards C
and enforce them through disciplinary sanctions. Therefore, it is held
that bodies which regulate professions and are created by or under
statutes which are enjoined to prescribe compulsory courses to be
undergone before the individuals concerned is entitled to claim entry into
the profession or vocation, and also continuously monitor the conduct of D
its members do not ipso facto carry on activities in the nature of trade,
commerce or business, or services in relation thereto.
197. At the same time, this court would sound a note of caution. It
is important, at times, while considering the nature of activities (which
may be part of a statutory mandate) that regulatory bodies may perform, E
whether the kind of consideration charged is vastly or significantly higher
than the costs it incurs. For instance, there can be in given situations,
regulatory fees which may have to be paid annually, or the body may
require candidates, or professionals to purchase and fill forms, for entry
into the profession, or towards examinations. If the level of such fees or
collection towards forms, brochures, or exams are significantly higher F
than the cost, such income would attract the mischief of proviso to Section
2(15), and would have to be within the limits prescribed by sub-clause
(ii) of the proviso to Section 2(15).
198. The next set of ‘statutory regulatory authorities’ among the
present batch are those related to authorities set up under the Seeds G
Act, 1966 (i.e, the Andhra Pradesh State Seeds Certification Authority
and the Rajasthan State Seeds and Organic Production certification
Agency). These two entities are set up as societies under Section 8 of
the Seeds Act, and comprise of farmers, farmers co-operatives’
representatives, seed certification authorities, etc. The task of these H
1032 SUPREME COURT REPORTS [2022] 15 S.C.R.

A agencies and authorities is certification of seeds, to decide whether to
certify supply of seeds of “any notified kind or variety”, by applicants
who may wish to offer them for trade. These agencies/authorities
scrutinize the samples to ensure they conform to the requisite standard
notified under Section 6. These decisions are subject to appeal under
Section 11.
B
199. The functioning of the seed certification agency, is a crucial
one, in those only seeds conforming to prescribed standards, are permitted
to be traded and used, by farmers. Such standards are - in the context of
the fact that agriculture is one of the mainstays of the economy, and
furthermore, pivotal for food security - essential as they ensure efficacy
C of seeds and guarantee to the farmers that they can be relied upon. The
essential nature of the regulatory function performed by these certification
agencies is obvious. The nature of their activities is not by way of trade,
commerce or business, nor service in relation to trade commerce, business,
for some form of consideration.
D (iii) Trade Promotion bodies, councils, associations or
organizations
200. Surat Art Silk (supra) and other decisions, had ruled that as
long as the objects of trade promotion bodies were for general public
utility - wherein ‘trade promotion’in itself, was held to be a GPU - the
E fact that incidentally these bodies carried on some commercial activity,
leading to profit, did not preclude them from claiming to be driven by
charitable purpose. As observed earlier, the enunciation of those principles
were in the context of the unamended Section 2(15).
201. The question that arises is whether the change in definition
F impacts the claims of trade promotion bodies, federations of commerce,
or such organizations, that they are GPU charities . The judgment in
Surat Art Silk (supra) proceeded on the assumption that trade promotion
was the pre-dominant object of the GPU charity before the court, and
that other objects – including procuring licences, trade etc. were incidental.
G The assessee in Surat Silk had clear trading objects:
“(b) To carry on all and any of the business of Art Silk Yarn,
Raw Silk, Cotton Yarn as well as Art Silk f loth, Silk Cloth
and Cotton Cloth belonging to and on behalf of the members.
********* **********
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 1033
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

(e) To buy and sell and deal in all kinds of cloth and other A
goods and fabrics belonging to and on behalf of the
Members.”
This court, nevertheless, held that since the predominant object of
the assessee was trade promotion, while furthering it, the fact that
some trading occurred, leading to income, did not preclude the assessee B
from claiming tax exemption.
202. In the opinion of this court, the change in definition in Section
2(15) and the negative phraseology - excluding from consideration, trusts
or institutions which provide services in relation to trade, commerce or
business, for fee or other consideration - has made a difference. C
Organizing meetings, disseminating information through publications,
holding awareness camps and events, would be broadly covered by trade
promotion. However, when a trade promotion body provides
individualized or specialized services- such as conducting paid workshops,
training courses, skill development courses certified by it, and hires venues
which are then let out to industrial, trading or business organizations, to D
promote and advertise their respective businesses, the claim for GPU
status needs to be scrutinised more closely. Such activities are in the
nature of services “in relation to” trade, commerce or business. These
activities, and the facility of consultation, or skill development courses,
are meant to improve business activities, and make them more efficient. E
The receipts from such activities clearly are ‘fee or other consideration’
for providing service “in relation to” trade, commerce or business.
203. The revenue has appealed to this court, in respect of two
assessment years, in the case of Apparel Export Promotion Council
(AEPC). The objects of AEPC, which was set up in 1978 – include F
promotion of ready-made garment export. To achieve that end, its objects
include providing training to instil skills in the workforce, to improve skills
in the industry; guide in sourcing machinery; to serve as a body advising,
providing information on market or technical intelligence; assisting the
concerned industry in obtaining import licenses; showcase the best
capabilities of Indian garment exports through the prestigious “India G
International Garment Fair” organised twice a year by AEPC, etc. These
fairs host over 350 participants who exhibit their garment designs and
patterns. Other functions are to provide information, and to provide market
research. AEPC also assists in developing new design patterns and
garments and to perform promotional activities in individual foreign H
1034 SUPREME COURT REPORTS [2022] 15 S.C.R.

A markets. Further, AEPC sends missions and trade delegations abroad,
who participate in international fairs; and conducts surveys to gather
information on potential export of ready-made garments.
204. As part of its functioning, it also books bulk space, which is
then rented out to individual Indian exporters, who showcase their
B products and services, and ultimately secure export orders. Towards
these services, i.e., booking and providing space, AEPC charges rentals.
Now, these rents are not towards fixed assets owned by it. They are in
fact charges, or fees, towards services in relation to business; likewise,
the skill development and diploma courses conducted by it, for which
fees are charged, are to improve business functioning of garment
C exporters. Furthermore, market surveys and market intelligence, especially
country specific activities, aimed at catering to specified exporters, or
specified class of exporters, is also service in relation to trade,
commerce or business.
205. In the circumstances, it cannot be said that AEPC’s
D functioning does not involve any element of trade, commerce or business,
or service in relation thereto. Though in some instances, the recipient
may be an individual business house or exporter, there is no doubt that
these activities, performed by a trade bodycontinue to be trade
promotion. Therefore, they are in the “actual course of carrying on”
E the GPU activity. In such a case, for each year, the question would be
whether the quantum from these receipts, and other such receipts are
within the limit prescribed by the sub-clause (ii) to proviso to Section
2(15). If they are within the limits, AEPC would be – for that year,
entitled to claim benefit as a GPU charity.

F (iv) Non-statutory bodies - ERNET, NIXI and GS1 India
206. ERNET is a not-for profit society, set up under the aegis of
the Union Government. At one time, government functionaries, including
the late President, APJ Abdul Kalam, were members, on account of
their ex officiocapacity. The objects of this assessee are to
G “ 3.1.1 To advance the cause of computer communication in
the country in all its aspects and dimensions with a view to
provide rapid nationwide development of the sector and
technological and economic growth of the county.
3.1.2 To develop, design, setup and operate nationwide state
H of the art computer communication infrastructure with
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 1035
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

international connectivity directed towards research and A
development, advancement of high quality education, create
and host content, express creative and academic potential
via intranet and intranet peer to peer connectivity among
educational and research institutions in the country and the
world and make available the communication infrastructure
B
to users in academic, research and development institutions,
Govt organizations in line with national priorities.”
207. ERNET’s networks are a mix of terrestrial and satellite-
based wide-area network. It provides services through its 15 Points of
Presence (PoPs) located across the country. All those are equipped to
provide access to Intranet, Internet and Digital Library through trial leased C
circuits and radio links to the user institutions. The PoP at STPI Bengaluru
provides Intranet and Internet access through Satellite.ERNET provides,
services, namely, Network Access Services, Network Applications
Services, Hosting Services, Operations Support Services und Domain
Registration Services under srnet.in, ac.in, edu.in & res.in domains. D
Funded through government grants, its projects support educational
networks and development of internet infrastructure in numerous other
segments of society.
208. Having regard to the nature of ERNET’s activities, it cannot
be said that they are in the nature of trade, commerce or business, or E
service, towards trade, commerce or business. It has to receive fees, to
reimburse its costs. The materials on record nowhere suggest that its
receipts (in the nature of membership fee, connectivity charges, data
transfer differential charges, and registration charges) are of such nature
as to be called as fees or consideration towards business, trade or
commerce, or service in relation to it. The functions ERNET performs F
are vital to the development of online educational and research platforms.
For these reasons, it is held that the impugned judgment, which upheld
the ITAT’s order, does not call for interference.
209. The Revenue has appealed the decision of Delhi High Court
in which the National Internet Exchange of India (NIXI) was held to be G
a GPU category charity. The materials on record show that NIXI was
established in 2003 under the aegis of the Ministry of Information
Technology of the Union Government for the promotion and growth of
internet services in India, to regulate the internet traffic, act as an internet
exchange, and undertake “.in” domain name registration. Concededly, H
1036 SUPREME COURT REPORTS [2022] 15 S.C.R.

A NIXI, is a not for profit, and is barred from undertaking any commercial
or business activity. Its object is to promote the interests of internet
service providers and internet consumers in India, improve quality of
internet service, save foreign exchange, and carryon domain name
operations. It is bound by licensing conditions – which include the
prohibition from altering its memorandum, without the prior consent of
B
the Union Government. According to the submissions made on NIXI’s
behalf, it charges annual membership fee of 1000/- and registration of
second and third level domain names at 500/- and 250/-. The finding
of the ITAT and the High Court are that NIXI’s objects and functioning
are by way of general public utility and thus it is a GPU category charity.
C 210. Having regard to the findings on record and the materials
placed by the parties, it is evident that NIXI carries on the essential –
crucial purpose of promoting internet services and more importantly,
regulating domain name registration which is extremely essential for
internet users in India. A country’s need to have a domestic internet
D exchange, rather than depend on an international one, cannot be
overemphasized. The Union Government’s object of setting up of internet
exchange is part of its essential function as a government to regulate
certain segment of the communication networks. In the absence of a
single entity authorized to register “.in” domain names, there is bound to
be chaos or confusion.
E
211. In view of the foregoing discussion, this Court is of the opinion
that the revenue’s contention that NIXI does not merely carry-on public
purpose of regulatory activity but is involved in trade, commerce, or
business or in providing service in relation thereto, cannot be accepted.

F 212. The next assessee under consideration – is GS1 India. GS1
codes were developed and created by GS1 International, Belgium (an
international not-for-profit under Belgium tax law). This coding system
has been in use worldwide and is even mandatory for some services/
goods, or adopted for significant advantages being a singular identification
system, recognized and accepted all over the world. The code promotes
G universal standard in Electronic Data Inter-exchanged (EDI) and other
services. This system of coding has been accorded priority by the
Government of India as it is a compulsory requirement on products
exported from India. Government of India had set up non-profit
organizations EAN India, now known as GS1 India (the assessee).
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 1037
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

213. Counsel on behalf of GS1 India, submitted that GS1 is affiliated A
and conferred exclusive rights relating to GS1 coding in India. The GS1
code on a product, provides a unique identification to it with wide ranging
benefits and advantages which facilitate tracking, tracing of the product,
product recalls, counterfeit detection, user safety due to accuracy, wastage
control through accurate monitoring and stock levels for commodities,
B
security and safety of supply chains, detection of illegal trade, etc. The
unique identification or coding system developed and operated by GS1
International or GS1 India is recognized and accepted globally. Additionally,
the unique identification code can be enabled with RFID chip and other
electronic technology. Being one of its kinds globally, only a GS1
registered organization can set up and promote the said system/standard C
within a country. These can be used for several fields including public
distribution system, agriculture, health products, etc. and has been
successfully used for product package labels. The utility and benefits of
a universal coding system assessable by anyone across the globe, for
the consumers, government, manufacturers, traders, exporters, etc. are
D
enormous and significant. Initial registration fee of 20,000/- is charged
by GS1, plus annual fee of 4,000/- (enhanced to 5,000/- from financial
year 2006-07 onwards) from third parties, who become subscribing
members, and are entitled to use the GS1 coding system.
214. It was submitted on behalf of GS1 that it was set up as
society in 1996 and sponsored by the Union Government. The Union E
Government representatives and the representatives of the trade bodies
are its members. The activities of GS1 are extremely important and
have to be characterized as involving general public utility. It was
submitted that having regard to the fact that GS1 provides services to all
organizations regardless of whether they carry on business, trade or F
other commercial activity, a narrow interpretation confining the expression
“service in relation to” should not be adopted. It was urged, that there is
no dispute about the fact that GS1 was directed to be granted registration
under the IT Act, and that GS1 Belgium, the parent organization, so to
say, which owns the technology, has been granted the status of not for
profit charity. GS1 urges that it is not dealing or treating the prized rights G
as a right be exploited commercially to earn or generate profits.Itis not
directly or indirectly subjecting their activity to market mechanism/
dynamics (i.e., demand and supply), rather it is motivated and prompted
to serve the beneficiaries. Therefore, this is not a case of commercial
exploitation of intellectual property rights to earn profits (as contended H
1038 SUPREME COURT REPORTS [2022] 15 S.C.R.

A by the Revenue), but rather a case where a token fee has been fixed
and payable by the user of the global identification system. Clause 44 of
GSI’s Memorandum of Association of the petitioner stipulates that it is a
“Not-for-Profit” society and the funds/receipts are to only be used for
promotion of objects of the society for which it is established, including
sustenance and expansion.
B
215. The revenue contended that although GS1 India has a
monopoly, the mere fact that it is stated to be a Not for Profit Society
with some governmental involvement in its management would not
detract from its essential nature; which is to sub-serve the interest of the
business community. It was elaborated in this context that GS1 by
C providing bar codes and the coding systemsecured by license, not only
exploits the intellectual property rights but is in fact engaged in services
in relation to trade, commerce or business. Counsel pointed to the fact
that the revenues of GS1 has steadily increased over the years. It was
pointed out that according to the balance sheet the aggregate registration
D fees receipt for the year ending 31.03.2007 was 1,80,80,760/- whereas
for the year ending 31.03.2008 which had increased to 4,85,47,170/-.
Likewise, membership fees had increased from 44,40,000/- as on
31.03.2007 to 93,42,500/-. Furthermore, renewal fees for the year ending
2007 was 1,68,57,200/- whereas for the next year i.e., as on 31.03.2008
it was 1,90,50,650/-. The Revenue submitted that even where income
E and interest were to be excluded, the increase on a yearly basis was
exponential. Likewise, it was pointed out that registration fees as on
31.03.2011 was 4,24,69,850/- whereas as on 31.03.2012 it was
6,07,58,100/-; subscription fee as on 31.03.2011 was 1,02,06,720/-;
for the next year i.e., on 31.03.2012 it was 1,01,69,850/-. Likewise, the
F subscription renewal fees as on 31.03.2011 was 4,18,62,804/- and the
same head as on 31.03.2012 was 4,46,71,134/-.
216. The Revenue emphasises the fact that GS1 is a monopolist
organization, has exclusive licenses in relation to bar coding technology
which it admittedly uses for fee or other consideration. It is highlighted
that these services are provided mostly to business, trade purpose,
G manufacturing, etc.On the other hand, GS1 urges that it performs the
important public function which enables not merely manufactures but
others involved in supplies of various articles by packaging, etc., to
regulate and ensure their identity.
217. In the opinion of this Court, GS1’s functions no doubt is of
H general public utility. However,equally the services it performs are to aid
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 1039
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

businesses manufactures, tradesmen and commercial establishments. A
Bar coding packaged articles and goods assists their consignersto identify
them; helps manufactures, and marketing organizations (especially in
the context of contemporary times, online platforms which serve as
market places). The objective of GS1 is therefore, to provide service in
relation to business, trade or commerce - for a fee or other consideration.
B
It is also true, that the coding system it possesses and the facilities it
provides, is capable of and perhaps is being used, by other sectors, in the
welfare or public interest fields. However, in the absence of any figures,
showing the contribution of GS1’s revenues from those segments, and
whether it charges lower amounts, from such organizations, no inference
can be drawn in that regard. The materials on record show that the C
coding services are used for commercial or business purposes. Having
regard to these circumstances, the Court is of the opinion that the
impugned judgment and order calls for interference.
(v) State Cricket Associations
218. The revenue has preferred appeals against the decision of D
the Gujarat High Court in respect of orders made in the cases of the
Gujarat Cricket Association, the Saurashtra Cricket Association, Baroda
and Rajkot Cricket Associations and the decision of the Rajasthan High
Court, in respect of the Rajasthan Cricket Association. The main facts,
relevant for deciding the questions involved are set out in the order of E
the ITAT151 against which the Gujarat High Court rendered the impugned
judgment152. Since the legal issues are common in relation to all these
matters, the facts relating to the Gujarat Cricket Association (GCA)
may be considered for convenience.
219. The objects of GCA (and other associations) are to control, F
supervise, regulate, promote or encourage, and develop the game of
cricket in the area under its jurisdiction. The association can also undertake
any other and all activities which may be beneficial to it. GCA’s objects
include activities aimed at creating, fostering and maintaining friendly
and cordial relationship through sports tournaments and competitions, to
create a healthy spirit through the medium of sports in general, and cricket G
151
ITA Nos: 1257/Ahd/13, 3303/Ahd/16, 3304/Ahd/16, 408/Ahd/17 Assessment years:
2009-10, 2010-11, 2011-12 and 2012-13.
152
SLP (D) No. 16597/2020 against a common judgment dated 27.9.2019, which
relate to the Gujarat Cricket Association, Saurashtra, Baroda and Rajkot Cricket
Association Cricket Association.
H
1040 SUPREME COURT REPORTS [2022] 15 S.C.R.

A in particular. The other objects include: to instil the spirit of sportsmanship
in school and college students, members of other institutions, and other
citizens; instil the ideals of cricket and educate them in the same; to
select teams to represent the association in any competitive forum; to
arrange, supervise, hold, encourage and finance visits of teams; to arrange
or manage league and/or any other tournaments; to promote persons,
B
meetings, competitions and matches in relation to sports; and to offer,
give/distribute or contribute towards prizes, medals and awards; to lay
out grounds for playing the game; and to provide pavilion, stadia, other
conveniences and amenities in connection therewith. The GCA also
includes within its objects, providing coaching to deserving persons in
C the various departments of the game of cricket; engaging professional
cricketers, coaches, umpires, groundsmen, and other employees, and to
pay remuneration or honorarium to them; and to start, sponsor and/or to
subscribe to any fund for the benefit of such persons or their families.
The GCA can collect funds for the purpose of the Association and utilise
it in such manner as its Managing Committee considers desirable for the
D
fulfilment of its objects.
220. The assessing authorities denied GCA’s claim and that of the
other associations, that they were charities. Before the ITAT, it was
contended, on behalf of the revenue, inter alia, that looking at the nature
of the relationship of these state cricket associations with the Board of
E Cricket Control of India (BCCI), the amounts received by these
associations from BCCI were in the nature of consideration or fees, for
granting media rights, and collecting their share, among other things.
This amounted to a business or commercial activity. It would, in this
context, be useful to quote the observations set out in the ITAT’s order
F (which were part of the commissioner’s order). The Commissioner had
taken note of assessment proceedings in relation to BCCI, and set out
its submissions:
“9.7.2 The AO of BCCI, based on the communication of
DIT(E), Mumbai, has not granted benefit of section 11 & 12
G of the Act to BCCI. The stand taken by BCCI during its
assessment proceedings is mentioned below. The BCCI vide
its submission dated 03/12/2012 to the AO has explained its
relationship with State Cricket Association as follows:-
“1. BCCI is society registered under the Tamil Nadu Societies
H Registration Act. It was formed in the year 1929 with the object
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 1041
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

of promotion and development of cricket in India and is a A
member of the International Cricket Council (ICC) the
regulatory body for world cricket. As a member of ICC, BCCI
represents India in bilateral tours between member countries
and in ICC tournaments such as the World Cup.
2. BCCI has 30 members out of whom 25 are state cricket B
associations, 2 are private clubs and 3 are Central
Government Institutions. BCCI does not own or manage the
infrastructure and facilities that are required for cricket. It
encourages and oversees the various state associations to
promote the game, build the required infrastructure organize
tournaments, leagues, coaching camps etc. in their respective C
states. Whenever a foreign team visits India, the international
matches such as Test and ODI are allotted by BCCI to the
State Cricket Associations by a rotation policy. The matches
are conducted and managed by the respective state
associations and over time, arrangements have evolved about D
the respective responsibilities, rights, shares of revenue etc.
These have evolved in order to promote co-operation and unity
among the member associations and by applying the principles
of equity and fairness, for which the sport of cricket is
renowned.”
E
9.7.3 The BCCI in its submission dated 21/1/2013 earned
subsidy paid to SCAs and TV Subvention as stated as follows:-
“13.2
PAYMENTS TO STATE ASSOCIATIONS
F
During the year, BCCI has paid amounts to the state
associations under the head “TV, Subventions to
Associations”. This represents payment of 70% of the revenue
from sale of media rights to the state associations”.
Whenever a foreign team visits India, the international matches
G
such as Test and ODI are allotted by BCCI to the state cricket
associations by a rotation policy. The matches are conducted
and managed by the respective state associations. It is not
possible for BCCI to conduct all these matches with its own
limited personnel. It is dependent on the state associations,
H
1042 SUPREME COURT REPORTS [2022] 15 S.C.R.

A their office bearers, their employees and their network and
resources at the local centre to conduct the matches.
The association manage the entire match right from provision
of security to players, spectators in coordination with
respective state police personnel, taking other security
B measures like fire prevention etc. The association incurs a
good chunk of expenditure in conducting an International
Test/ODI/T20/IPL/CL T20 Matches.
In order to have fair and equitable sharing of the revenues,
arrangements have evolved over time, about the respective
C responsibilities, rights, shares of revenue etc. of BCCI and
the state associations. The state association is entitled to the
ticket revenue and ground sponsorship revenues. Expenses
on account of security for players and spectators, temporary
stands, operation of floodlights, Score Boards, management
of crowd. Insurance for the match, electricity charges,
D catering etc are met by the state associations. On the other
had expenditure on transportation of players and other match
officials, boarding and lodging, expenses on food for players
and officials, tour fee, match fee, etc are met by BCCI and
revenues from sponsorship belong to BCCI. In respect of
E revenues from sale of media rights, an arrangement has
evolved over time. Until 1991-92 the income from media rights
was meager. With the growth in income from media rights, it
became necessary to optimize the arrangement for sale of
media rights. For a Test series or ODI series conducted in
multiple centers and organised by BCCI and multiple state
F associations, it was found that if each state association were
to negotiate the sale of rights to events in its centre, its
negotiating strength would be low. It was, therefore, agreed
that BCCI would negotiate the sale of media rights for the
entire country to optimize the income under this head. It was
G further decided that out of the receipts from the sale of media
rights 70% of the gross revenue less production cost would
belong to the state associations. Every year, BCCI has paid
out exactly 70% of its receipts from media rights (less-
production cost) to the state associations. This amount has
been utilized by the respective associations to build
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 1043
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

infrastructure and promote cricket, making the game more A
popular, nurturing and encouraging cricket talent, and
leading to higher revenues from media rights.
************* ****************
Even in the event that exemption under section 11 is denied,
the payments to state associations must be allowed as a B
deduction, as expenditure laid out or expended wholly and
exclusively for the purpose of earning such income, it must
be appreciated that in order to earn revenues, BCCI was and
continues to be highly dependent on the state associations.
BCCI does not have the infrastructure and the resources to C
conduct the matches by itself and is dependent on the state
associations to conduct the matches. The income from media
rights is dependent on the efforts of the state associations in
conducting the matches from which the media rights accrue.
The division of revenues and expenditure is a matter of
arrangement between the parties. Certain incomes such as D
sale of ticket revenues belong to the state associations, who
meet the expenditure on the matches such as security for
players and spectators temporary stands, operation of
floodlights, Score Boards, management of crowd, insurance
for the match, electricity charges, catering etc. Whereas with E
regard to the income from sale of media rights, the arrangement
between BCCI and the State Associations has been that 70%
of the revenue would belong to the State Associations. As
shown, this has been the arrangement between the parties
for the twenty years. The State Associations are entitled by
virtue of established practice to 70% of the media right fee. F
It is in expectation of this revenue that the various state
associations take an active part and cooperate in the conduct
of the matches. This payment is therefore made only with a
view to earn the income from media rights.”
221. The ITAT accepted the assessee’s contentions, and held that G
the associations were GPU charities:
“35. Let us take a pause here and examine as to what are the
activities of the assessee cricket associations so as to be
brought within the ambit of trade, commerce or business. We
H
1044 SUPREME COURT REPORTS [2022] 15 S.C.R.

A have seen objects of the association, which are reproduced
earlier in our order, and it is not even the case of the revenue
that these objects have anything to do with any trade,
commerce or business; these objects are simply to promote
cricket. The trigger for invoking proviso to Section 2(15), as
Shri Soparkar rightly contends, has to an activity of the
B
assessee which is in the nature of trade, commerce or business.
However, the case of the revenue authorities hinges on the
allegation that the way and manner in which cricket matches
are being organized, particularly the IPL matches, the activity
of organizing cricket matches is nothing but brute commerce.
C Undoubtedly, it would appear that right from the time Kerry
Packer started his World Series Cricket in 1977, there has
been no looking back in commercialization of cricket and
the impact of this commercialization has not left Indian cricket
intact. The Indian Premier League and the rules of the game
being governed by the dictates of commercial considerations
D
may seem to be one such example of commercialization of
Indian cricket. The difficulty for the case of the revenue before
us, however, is that these matches are not being organized by
the local cricket associations. We are told that the matches
are being organized by the Board of Cricket Control of India,
E but then, if we are to accept this claim and invoke the proviso
to Section 2(15) for this reason, it will amount to a situation
in which proviso to Section 2(15) is being invoked on account
of activities of an entity other than the assessees- something
which law does not permit. We are not really concerned, at
this stage, whether the allegations about commercialization
F
of cricket by the BCCI are correct or not, because that aspect
of the matter would be relevant only for the purpose of proviso
to Section 2(15) being invoked in the hands of the BCCI. We
do not wish to deal with that aspect of the matter or to make
any observations which would prejudge the case of the BCCI.
G Suffice to say that the very foundation of revenue’s case is
devoid of legally sustainable basis for the short reason that
the commercialization of cricket by the BCCI, even if that be
so, cannot be reason enough to invoke the proviso to Section
2(15). We are alive o learned Commissioner (DR)’s suggestion
that the cricket associations cannot be seen on standalone
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 1045
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

basis as the BCCI is nothing but an apex body of these cricket A
associations at a collective level and whatever BCCI does is
at the behest of or with the connivance of the local cricket
associations, and that it is not the case that anyone can
become a Member of the BCCI because only a recognized
cricket association can become a Member of the BCCI. We
B
are also alive to learned Commissioner’s argument that what
is being sought to be protected by the charitable status of
these associations is the share of these cricket associations
from the commercial profits earned by the BCCI by organizing
the cricket matches. The problem, however, is that the activities
of the apex body, as we have explained earlier, cannot be C
reason enough to trigger proviso to Section 2(15) in these
cases. Whether these cricket associations collectively
constitute BCCI or not, in the event of BCCI being involved
in commercial activities, the taxability of such commercial
profits will arise in the hands of the BCCI and not the end
D
beneficiaries. Even in such a case the point of taxability of
these profits is the BCCI and not the cricket associations,
because, even going by learned Commissioner’s arguments,
these receipts in the hands of the cricket associations is
nothing but appropriation of profits. What can be taxed is
accrual of profits and not appropriation of profits. In any E
event, distinction between the cricket associations and the
BCCI cannot be ignored for the purposes of tax treatment.
There is no dispute that the matches were organized by the
BCCI, and the assessee cannot thus be faulted for the
commercial considerations said to be inherent in planning
F
the matches. As we make these observations, and as we do
not have the benefit of hearing the perspective of the BCCI,
we make it clear that these observations will have no bearing
on any adjudication in the hands of the BCCI. Suffice to say
that so far as the cricket associations are concerned, the
allegations of the revenue authorities have no bearing on the G
denial of the status of ‘charitable activities’ in the hands of
the cricket associations before us- particularly as learned
Commissioner has not been able to point out a single object
of the assessee cricket associations which is in the nature of
trade, commerce or business, and, as it is not even in dispute
H
1046 SUPREME COURT REPORTS [2022] 15 S.C.R.

A that the objects being pursued by the assessee cricket
associations are “objects of general public utility” under
section 2(15). All the objects of the assessee cricket
associations, as reproduced earlier in this order,
unambiguously seek to promote the cricket, and this object,
as has been all along accepted by the CBDT itself, an object
B
of general public utility.”
222. In granting relief, the ITAT was persuaded by the decision of
the Madras High Court, in Tamil Nadu Cricket Association v. Director
of Income Tax (Exemptions) &Ors.153, and held
C “54. The assessee is a member of the Board of Control for
Cricket in India (BCCI), which in turn is a member of ICC
(International Cricket Council). BCCI allots test matches with
visiting foreign team and one day international matches to
various member cricket associations which organise the
matches in their stadia. The franchisees conduct matches in
D the stadia belonging to the State cricket association. The State
association is entitled to all in-stadia sponsorship
advertisement and beverage revenue and it incurs expenses
for the conduct of the matches. BCCI earns revenue by way
of sponsorship and media rights as well as franchisee revenue
E for IPL and it distributes 70 per cent, of the revenue to the
member cricket association. Thus, the assessee is also the
recipient of the revenue. Thus, for invoking section 12AA read
with section 2(15) of the Act, the Revenue has to show that
the activities are not fitting with the objects of the association
and that the dominant activities are in the nature of trade,
F commerce and business. We do not think that by the volume
of receipt one can draw the inference that the activity is
commercial. The Income-tax Appellate Tribunal’s view that it
is an entertainment and, hence, offended section 2(15) of the
Act does not appear to be correct and the same is based on
G its own impression on free ticket, payment of entertainment
tax and presence of cheer group and given the irrelevant
consideration. These considerations are not germane in
considering the question as to whether the activities are
genuine or carried on in accordance with the objects of the
153
H [2014] 360 ITR 633 (Mad)
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 1047
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

association. We can only say that the Income-tax Appellate A
Tribunal rested its decision on consideration which are not
relevant for considering the test specified under section
12AA(3) to impose commercial character to the activity of the
association. In the circumstances, we agree with the assessee
that the Revenue has not made out any ground to cancel the
B
registration under section 12AA(3) of the Act.
55. As regards the observation of the Income-tax Appellate
Tribunal that IPL matches and Celebrity cricket matches are
also being held by the association and hence, it is an
entertainment industry, we need not go into these aspects for
the order of the Director of Income-tax (Exemptions) casts no C
doubt on the genuineness of the objects of the trust. Hence, it
is for the Assessing Officer to take note of all facts, while
considering the same under section 11 of the Income-tax Act,
1961. We disapprove the approach of the Tribunal in this
regard. In the above said circumstances, we set aside the order D
of the Income-tax Appellate Tribunal.”
223. The ITAT agreed with the assessees that TV subsidy amounts
received by the associations were “corpus donations” in furtherance of
the BCCI’s resolution dated 05.09.2001. It accordingly held that these
amounts were in the capital field, irrespective of whether they were E
fully utilized by the state association, or whether some part of it, was
given to district associations. Thus, for AY 2009-2010, the sum of
3,52,86,521 paid by BCCI to GCA was subsidy, falling in the capital
field.
224. It was urged on behalf of the Revenue that the cricket F
associations are not carrying on any charitable activity; reliance was
placed on the facts to say that substantial amounts were received by the
state associations, towards their share of sale of media rights (as
constituents or members of BCCI), which are commercial receipts.
Although the sale of those rights was by the BCCI, the lion’s share of
those amounts was that of the respective state associations. Furthermore, G
the state associations owned the stadia, and actually conducted the
matches, in respect of which stadium advertisements and sponsorship
amounts were received: these, too, were in the nature of business or
commercial activities. The assessees on the other hand, submitted that
they are distinct from the BCCI. It was sought to be urged that the H
1048 SUPREME COURT REPORTS [2022] 15 S.C.R.

A activity of sports and sport promotion is basically education, and hence,
per se exempt. Realizing the value of inculcating sportsmanship and
fostering the culture of sport, Parliament had introduced Section 10(23),
to exempt income received by sports bodies. However, that was deleted
w.e.f. 01.04.2003. It was argued that this does not preclude sports bodies,
like cricket associations from claiming to be charities. It was urged that
B
even if the court were not to consider the cricket associations to be
education-related charities, they cannot be denied the status of GPU
charities, having regard to the sports promotional nature of their objects.
It was submitted that these bodies are primarily responsible for fostering
the sport, talent spotting, nurturing it, and providing opportunities to those
C who have the aptitude and passion for the game of cricket. All these are
objects of general public utility. It was submitted that the amounts which
BCCI collects may or may not be in the course of commerce; however,
what is given to the associations is subsidy, which cannot be termed as
consideration for carrying on any commercial activity.
D 225. At the outset, the contention that sports promotion is
‘education’ and hence, per se exempt, has to be dealt with. In Lok
Shikshana Trust (supra) this court has comprehensively addressed the
scope of the term, and conclude that it would entail “scholastic” education:
“5. The sense in which the word “education” has been used
E in Section 2(15) is the systematic instruction, schooling or
training given to the young in preparation for the work of
life. It also connotes the whole course of scholastic instruction
which a person has received. The word “education” has not
been used in that wide and extended sense, according to
which every acquisition of further knowledge constitutes
F education. According to this wide and extended sense,
travelling is education, because as a result of travelling you
acquire fresh knowledge. Likewise, if you read newspapers
and magazines, see pictures, visit art galleries, museums and
zoos, you thereby add to your knowledge. Again, when you
G grow up and have dealings with other people, some of whom
are not straight, you learn by experience and thus add to
your knowledge of the ways of the world. If you are not
careful, your wallet is liable to be stolen or you are liable to
be cheated by some unscrupulous person. The thief who
removes your wallet and the swindler who cheats you teach
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 1049
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

you a lesson and in the process make you wiser though poorer. A
If you visit a night club, you get acquainted with and add to
your knowledge about some of the not much revealed realities
and mysteries of life. All this in a way is education in the
great school of life. But that is not the sense in which the
word “education” is used in clause (15) of Section 2. What
B
education connotes in that clause is the process of training
and developing the knowledge, skill, mind and character of
students by formal schooling.”
Therefore, there is no doubt that the claim of the present sport
associations will not fall within ‘education’ and will have to be examined
under the fourth limb of Section 2(15) – i.e., GPU category, if it is to C
make a case for tax exemption.
226. BCCI is the body which regulates cricket and represents the
country. Within the country it organizes and conducts the Ranji Trophy,
the Irani Trophy, the Duleep Singh Trophy, the Deodar Trophy and the
NKP Salve Challenge Trophy. These are domestic events, yet only those D
who are members of the Board and/or recognized by it can take part in
these events. The members of the Board (entitled to vote in its election)
are the state cricket associations.154 The BCCI is the country-level cricket
regulator both off and on the fields, and its functions include selection of
players and umpires. The International Cricket Council (of which BCCI, E
as the representative body of the country, is a member) possesses and
exercises all the powers to regulate international competitive cricket. It
also exercises disciplinary power – in case of violation of the rules, a
country member or the player may be derecognized. The ICC exercises
a monopoly over the sports at the international level whereas BCCI
does so at the country level. BCCI recognizes bodies which are entitled F
to participate in the nominated tournaments. Players and umpires also
are to be registered with it.
227. The game of competitive cricket, at the organizational level
is structured in such a manner that BCCI has umbilical ties with the
state associations. Not only are the latter, the members who constitute G
BCCI and elect its governing bodies, they also own vital infrastructure
necessary to play cricket: such as stadia, and all related facilities. BCCI
does not own those facilities or infrastructure and depends on them.
154
Rule 3 (a) (ii) (B) of the latest BCCI Memorandum of Association and the Rules
and Regulations H
1050 SUPREME COURT REPORTS [2022] 15 S.C.R.

A Furthermore, the state associations are the channels through which
players are mostly selected, and get opportunities to participate in state,
national and international level cricket.
228. As things stand, therefore, the state associations and BCCI
are linked closely. The management of the game of cricket is structured
B in such a way that this link is apparent at every match or fixture of
significance. In the course of conducting matches (which are scheduled
by the BCCI as the national co-ordinating body), apart from amounts
received towards sale of entry tickets, the state associations also receive
advertisement money, sponsorship fee, etc. from the BCCI. Aside from
these, media rights - i.e., broadcasting rights to each national or
C international event conducted at various locales owned by the state
associations, and digital rights (all of which are exclusive, in nature) -
are auctioned by BCCI. As noticed above, the BCCI, by its own admission,
negotiates the terms on which media rights are sold, on behalf of
the state associations:
D “For a Test series or ODI series conducted in multiple centers
and organised by BCCI and multiple state associations, it was
found that if each state association were to negotiate the sale
of rights to events in its centre, its negotiating strength would
be low. It was, therefore, agreed that BCCI would negotiate
E the sale of media rights for the entire country to optimize the
income under this head. It was further decided that out of the
receipts from the sale of media rights 70% of the gross revenue
less production cost would belong to the state associations.
Every year, BCCI has paid out exactly 70% of its receipts
from media rights (less- production cost) to the state
F associations. This amount has been utilized by the respective
associations to build infrastructure and promote cricket,
making the game more popular, nurturing and encouraging
cricket talent, and leading to higher revenues from media
rights.”
G 229. These media, or broadcasting rights, are in the nature of
intellectual property rights: under Section 37 to 40 of the Copyrights Act,
1957. These rights- especially television and digital rights enable the
licensee or the successful bidder to exploit the telecast or broadcast
commercially, by carrying advertisements of various products and
H services, in the media. Given that (i) BCCI does not own the stadia, and
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 1051
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

uses the entire physical infrastructure of the state associations (ii) A
expressly negotiates on their behalf for the sale of such rights (which
appear to be purely commercial contracts), the associations’ assertions
that they only received subsidy from BCCI, needed closer examination.
230. The income and expenditure account for the year ending on
31.03.2009 shows that the total income of the GCA was 4,03,98,736.81. B
Of these sponsorship money was 20,00,000/-; bank interest was
2,21,88,527.05 and as against the head ‘India v. South Africa test match’,
the sum of 1,51,97,741/- has been shown. Of the total of
2,21,02,441.45 shown as income, 32,24,591.25 is shown as expenditure,
only a fraction appears to have been expended towards promotion of
cricket. This is apparent from the following: C

231. The details of the subsidy amounts received from BCCI for
every match has been shown. This aggregates to over 41 lakhs.
Furthermore, the details received towards the India-South Africa test D
fixture paid between 03.04.2008-04.04.2008 has been shown. GCA
received 1,57,00,000/- towards sale of space; ticket sales yielded
27,57,700 and towards the head screen income, a sum of 3 lakhs was
received. After deducting the expenditure, the excess income received
for the year was 1,51,97,741/-.
E
232. In the case of Saurashtra Cricket Association, for the year
ended on 31.03.2012, various heads of income have been disclosed.
These include entry fees which is 5200 onwards. Interest of income
received from Fixed Deposits was to the tune of 8,85,67,418/-; total
amount of subsidy received from BCCI is 17,56,72,490/-. Of these, the
overwhelming share is towards the IPL money collected by the BCCI – F
wherein Saurashtra Cricket Association’s share worked out to a total of
17,16,32,490/-.
233. Apart from this, the BCCI also reimbursed to Saurashtra
Cricket Association the sum of 73,73,911/-. The income and expenditure
account shows a head titled “subvention income from BCCI” to the G
extent of 8,14,53,834/-. After deducting the heads of expenditure, excess
of income over expenditure for the AY was 69,96,537/-. The Cricket
Association showed in the expenditure column that the sum of
24,00,00,000/- was transferred to the Cricket infrastructure fund. For
the previous year, a sum of 21,21,00,000/- was transferred to the stadium H
1052 SUPREME COURT REPORTS [2022] 15 S.C.R.

A fund.
234. It is quite evident that the activities of the cricket associations
are run on business lines. The associations own physical and other
infrastructure, maintain them, have arrangements for permanent
manpower and have well-organised supply chains to cater to the several
B matches they host. Many such matches are not at national level and are
under-16 or under-18 matches at the regional level. However, these
activities are not to be seen in isolation but are to be regarded as part of
the overall scheme, and ecosystem in which the game of cricket is
organized in India. Talent is spotted, at local levels and dependent on the
promise shown, given appropriate exposure.
C
235. On a close scrutiny of the expenses borne, having regard to
the nature of receipts, the expenditure incurred by Cricket Associations
does not disclose that any significant proportion is expended towards
sustained or organized coaching camps or academies. Therefore, in the
opinion of this court, the ITAT fell into error in not considering the nature
D of receipts flowing from the BCCI into the corpus of GCA and SCA –
as well as other associations that are before this court- to determine
their true character. The ITAT appears to have been swayed by the
submission that the amount given by the BCCI were towards capital
subsidy.
E 236. To determine whether a given receipt is to be characterized
as falling in the revenue or capital stream, the objective for which it is
given as well as the manner in which it is utilized has to be scrutinized.
This aspect has been highlighted in Sahney Steel & Press Works Ltd v.
Commissioner of Income Tax155 in the following terms:
F “It is not the source from which the amount is paid to the
assessee which is determinative of the question whether the
subsidy payments are of revenue or capital nature. The first
proposition stated by Viscount Simon in Ostime case [28 TC
261 : (1946) 1 All ER 668] is that if payments in the nature of
G subsidy from public funds are made to the assessee to assist
him in carrying on his trade or business, they are trade
receipts.”
This has later been followed inCommissioner of Income Tax v.
Ponni Sugars 156.
155
1997 (Supp 4) SCR 189
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 1053
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

237. Recent trends have shown that media rights, especially A
broadcasting and digital media rights have yielded colossal revenues to
the BCCI. The model adopted in the last 10 years or so has been to
auction media rights in respect of events over a 3 or 5-year period. As
discussed previously, these media rights are not per se owned by BCCI,
which is but an association of persons or agglomerate of all the State
B
Cricket Association. The stadia which form the venue for these cricket
matches (in relation to which media rights are transferred or licensed)
are owned by the State Cricket Associations. According to the BCCI
itself, the State Associations can well bargain and enter into arrangements
for the sale of such media rights. However, to obtain better terms, and
gain bargaining leverage a centralized form of sale of such rights has C
been agreed and adopted by which the BCCI auctions these rights on
behalf of the State Associations. All State Associations put together are
entitled to 70% of the revenue – i.e., the proceeds of sale of the media
rights. This may or may not be in proportion to the events hosted by
each or some of the cricket associations. Yet, this forms part of the
D
arrangement by which the consideration flowing from such commercial
rights has been agreed to be shared amongst all members of the BCCI.
These rights are apparently commercial.
238. In the light of these, the Court is of the opinion that the ITAT
– as well as the High Court fell into error in accepting at face value the
submission that the amounts made over by BCCI to the cricket E
associations were in the nature of infrastructure subsidy. In each case,
and for every year, the tax authorities are under an obligation to carefully
examine and see the pattern of receipts and expenditure. Whilst doing
so, the nature of rights conveyed by the BCCI to the successful bidders,
in other words, the content of broadcast rights as well as the arrangement F
with respect to state associations (either in the form of master documents,
resolutions or individual agreements with state associations) have to be
examined. It goes without saying that there need not be an exact
correlation or a proportionate division between the receipt and the actual
expenditure. This is in line with the principle that what is an adequate
consideration for something which is agreed upon by parties is a matter G
best left to them. These observations are not however, to be treated as
final; the parties’ contentions in this regard are to be considered on their
merit.

156
2008 (9) SCC 337 H
1054 SUPREME COURT REPORTS [2022] 15 S.C.R.

A (vi) Private trusts
(a) Tribune Trust
239. The Tribune Trust was constituted pursuant to a will executed
by late Sardar Dial Singh Majithia. In clause (xxi) of his Will – after
nominating three trustees, the testator directed that they ought to maintain
B a press and a newspaper; in clause (xx) the testator directed that his
property in the Tribune Press and newspaper would vest permanently in
a Committee of Trustees who would thereafter maintain them and “keep
up the liberal policy of the newspaper and activity and the excess
income after current expenses in improving the said newspaper and
C place it on a footing of permanency”.
240. Under the old Act, a question arose as to whether the activity
of running a newspaper was one of general public utility; the revenue
disallowed the exemption for AY 1932-33. This was affirmed by the
Lahore High Court. The Privy Council by its decision in In Re: Trustees
D of Tribune (supra) allowed the trust’s appeal and held that the trust
was neither constituted for private profit either to the testator nor to any
other private person, and that the object of the paper could be described
as one “supplying the province with an organ of educated public
opinion”. The Privy Council, therefore, reasoned that the Trust was
established as a GPU charity.
E
241. Apparently, the trust was continuously treated as a GPU
category charity and exempted under Section 10(23C)(iv) from 1984-85
onwards. For AY 2009-10, after considering the revised return of the
trust, the Revenue was of the opinion that it was not entitled to claim
exemption under Section 10(23C). The Punjab and Haryana High Court
F which dealt with the Trust’s present appeal was of the opinion that in
Surat Art Silk (supra), this court had considered the judgment of the
Privy Council. In that judgment, this Court had made some observations
that even though the activity of the publication of newspaper was carried
on commercial lines with the object of earning profit, it was an activity
G engaged by the Trust for the purposes of carrying out its charitable objects.
The High Court upheld the revenue’s contention and based upon its
analysis of Section 2(15) concluded that the Trust’s income derived from
its activities were based on profit motive. In doing so, it was noticed that
85% of the trust’s revenue was from advertisements and interest. The
total revenue was 161 crores out of which 124.87 crores was received
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 1055
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

from advertisements and 11.38 crores from interest on FDRs; 17.49 A
crores was from sale of newspapers and 3.74 crores from subscriptions
of the dailies.
242. It was argued on behalf of the trust that it was never intended
and in fact, not run on profitable basis. No part of its income was ever
disbursed to any private individual through profit sharing or otherwise, B
nor distributed for any purpose other than the activities of the Trust. It
was submitted that the High Court’s surmise that the accumulation of
large profits and its assumption that the Trust could utilize them for non-
charitable purposes in future, was unfounded. In this regard, it was
submitted that till 2008-09 all assessments were completed, since the
Revenue was satisfied that more than 85% had been ploughed back to C
feed the main charitable activity.
243. It is noticed from the impugned judgment that the High Court
concedes to the fact that the trust’s activities were held by the Privy
Council to constitute financing of objects of ‘general public utility’; further
that merely because thousands of newspapers were being published D
made no difference. It still continues to be a GPU charity.
244. The question then is whether the nature of receipts and
income garnered by the Trust, in the course of actually carrying out its
activity of publishing newspaper, can be characterized as “in the nature
of trade, commerce or business” or “service in relation to trade, E
commerce or business”, for any consideration. During the course of
submissions, it was urged that advertisement revenue should not be
treated as business or commercial receipts since that virtually is the
lifeblood which sustains the activity of publication of newspapers. It
was highlighted that the object of maintaining the activity of publishing F
and distribution of newspaper remains the advancement of general public
utility, as it has the effect of both notifying and educating the general
public about the current affairs and developments. The inclusion of
advertisements also serves as information to the general public, especially
in areas of employment, availability of resources, etc. Therefore,
publication of advertisement is intrinsically connected with the activity G
of printing and publishing of newspapers.
245. The publication of advertisements for consideration, in the
opinion of the court, by the newspaper, cannot but be termed as an
activity in the nature of carrying on business, trade or commerce for a
H
1056 SUPREME COURT REPORTS [2022] 15 S.C.R.

A fee or consideration. That the newspaper published by the trust (“the
Tribune”) in this case is funded mainly through advertisement is no basis
for holding that publishing such advertisements by the Trust does not
constitute business. The object of the trust to involve or engage in
publication of newspapers. Publishing advertisements is obviously to
garner receipts which are in the nature of profit. Now, by virtue of the
B
amended definition of Section 2(15), GPU charities can engage
themselves in business or commercial activity or profit, only if the
receipts from such activities do not exceed the quantitative limit of the
overall receipts earned in a given year. While the assessee’s contention
that publication of advertisement is intrinsically linked with newspaper
C activity (thereby fulfilling sub-clause (i) of the proviso to Section 2(15),
i.e. an activity in the course of actual carrying on of the activity towards
advancement of the object) is acceptable, nevertheless, the condition
imposed by sub-clause (ii) of the proviso to Section 2(15) has to also be
fulfilled. In the present case, that percentage had been exceeded, as
evident from the record.
D
246. In the light of the foregoing discussion, this court is of the
opinion that the impugned judgment and order of the Punjab and Haryana
High Court cannot be sustained, to the extent it holds that the Tribune
trust is not a GPU charity. However, having regard to the factual analysis,
the judgment needs no interference.
E
(b) Shri Balaji Samaj Vikas Samiti
247. The revenue appeals a decision of the Allahabad High
Court157 affirming the order of the ITAT which had directed the CIT to
grant registration under Section 12AA of the Income Tax Act.
F 248. The assessee is a registered society which was formed with
the object of establishing and running a health club, Arogya Kendra; its
object included organization of emergency relief centres, etc. Other
objects, included promotion of moral values, eradication of child labour,
dowry, etc. The assessee had entered into arrangements with the state
G agencies to supply mid-day meals to students of primary schools in
different villages through contracts entered into with the Basic Shiksha
Adhikari, District Meerut. It is a matter of record that the materials for
preparation of mid-day meal was supplied by the government. The
assessee society claimed that it only obtains nominal charges for
157
Dated 09.02.2018 in ITA 49/2014.
H
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 1057
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

preparation of mid-day meals. The assessee’s claim for registration was A
rejected on the ground that it was involved in commercial activity. Upon
appeal, the ITAT agreed with the assessee that supply of mid-day meals
did not constitute business or commerce and that it promoted the objects
of general public utility.
249. The revenue in its appeal contends that the assessee’s only B
activity for the relevant year was supply of mid-day meals to primary
schools. This was not relatable to any object of the society. The assessee’s
contention is that the state ordinarily would have carried on the activity
of supply of mid-day meals. Yet, nevertheless it outsourced its activity to
an outside agency like the assessee which performed it for nominal
charges. C

250. This court is of the opinion that there is no clarity with respect
to whether the activity of supplying mid-day meals falls within the objects
clause of the assessee society. The order of the ITAT as well as the
High Court disclosed that the assessee’s objects involved maintenance
of health clubs, Arogya Kendra, promotion of moral values and provision D
of emergency relief. These do not however include the activity which it
actually performed, i.e., entering into contracts for supply of mid-day
meals and the activity of cooking and supply of mid-day meals. In the
absence of fuller material, it would not be possible for the court to assess
the activity with which the assessee was engaged, and determine whether E
it could be said to legitimately fall within the description of GPU.
251. The first consideration would be whether the activity
concerned was or is in any manner covered by the objects clause.
Secondly, the revenue authorities should also consider the express terms
of the contract or contracts entered into by the assessee with the State F
or its agencies. If on the basis of such contracts, the accounts disclose
that the amounts paid are nominal mark-up over and above the cost
incurred towards supplying the services, the activity may fall within the
description of one advancing the general public utility. If on the other
hand, there is a significant mark-up over the actual cost of service, the
next step would be ascertain whether the quantitative limit in the proviso G
to Section 2(15) is adhered to. It is only in the event of the trust actually
carrying on an activity in the course of achieving one of its objects, and
earning income which should not exceed the quantitative limit prescribed
at the relevant time, that it can be said to be driven by charitable purpose.
H
1058 SUPREME COURT REPORTS [2022] 15 S.C.R.

A 252. This court, in the normal circumstances, having regard to the
above discussion, would have remitted the matter for consideration.
However, it is apparent from the records that the tax effect is less than
Rs.10 lakhs. It is apparent that the receipt from the activities in the
present case did not exceed the quantitative limit of Rs.10 lakhs
prescribed at the relevant time. In the circumstances, the impugned order
B
of the High Court does not call for interference.
IV. Summation of conclusions
253. In view of the foregoing discussion and analysis, the following
conclusions are recorded regarding the interpretation of the changed
definition of “charitable purpose” (w.e.f. 01.04.2009), as well as the
C later amendments, and other related provisions of the IT Act.
A. General test under Section 2(15)
A.1. It is clarified that an assessee advancing general public utility
cannot engage itself in any trade, commerce or business, or provide
service in relation thereto for any consideration (“cess, or fee, or any
D other consideration”);
A.2. However, in the course of achieving the object of general
public utility, the concerned trust, society, or other such organization,
can carry on trade, commerce or business or provide services in relation
thereto for consideration, provided that (i) the activities of trade,
E commerce or business are connected (“actual carrying out…” inserted
w.e.f. 01.04.2016) to the achievement of its objects of GPU; and (ii) the
receipt from such business or commercial activity or service in relation
thereto, does not exceed the quantified limit, as amended over the years
(Rs. 10 lakhs w.e.f. 01.04.2009; then Rs. 25 lakhs w.e.f. 01.04.2012;
and now 20% of total receipts of the previous year, w.e.f. 01.04.2016);
F
A.3. Generally, the charging of any amount towards consideration
for such an activity (advancing general public utility), which is on cost-
basis or nominally above cost, cannot be considered to be “trade,
commerce, or business” or any services in relation thereto. It is only
when the charges are markedly or significantly above the cost incurred
G by the assessee in question, that they would fall within the mischief of
“cess, or fee, or any other consideration” towards “trade, commerce or
business”. In this regard, the Court has clarified through illustrations
what kind of services or goods provided on cost or nominal basis would
normally be excluded from the mischief of trade, commerce, or business,
H in the body of the judgment.
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 1059
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

A.4. Section 11(4A) must be interpreted harmoniously with A
Section 2(15), with which there is no conflict. Carrying out activity in the
nature of trade, commerce or business, or service in relation to such
activities, should be conducted in the course of achieving the GPU object,
and the income, profit or surplus or gains must, therefore, be incidental.
The requirement in Section 11(4A) of maintaining separate books of
B
account is also in line with the necessity of demonstrating that the
quantitative limit prescribed in the proviso to Section 2(15), has not been
breached. Similarly, the insertion of Section 13(8), seventeenth proviso
to Section 10(23C) and third proviso to Section 143(3) (all w.r.e.f.
01.04.2009), reaffirm this interpretation and bring uniformity across the
statutory provisions. C
B. Authorities, corporations, or bodies established by statute
B.1. The amounts or any money whatsoever charged by a
statutory corporation, board or any other body set up by the state
government or central governments, for achieving what are essentially
D
‘public functions/services’ (such as housing, industrial development,
supply of water, sewage management, supply of food grain, development
and town planning, etc.) may resemble trade, commercial, or business
activities. However, since their objects are essential for advancement of
public purposes/functions (and are accordingly restrained by way of
statutory provisions), such receipts are prima facie to be excluded from E
the mischief of business or commercial receipts. This is in line with the
larger bench judgments of this court in Ramtanu Cooperative Housing
Societyand NDMC (supra).
B.2. However, at the same time, in every case, the assessing
authorities would have to apply their minds and scrutinize the records, to F
determine if, and to what extent, the consideration or amounts charged
are significantly higher than the cost and a nominal mark-up. If such is
the case, then the receipts would indicate that the activities are in fact in
the nature of “trade, commerce or business” and as a result, would have
to comply with the quantified limit (as amended from time to time) in the
G
proviso to Section 2(15) of the IT Act.
B.3. In clause (b) of Section 10(46) of the IT Act, “commercial”
has the same meaning as “trade, commerce, business” in Section 2(15)
of the IT Act. Therefore, sums charged by such notified body, authority,
Board, Trust or Commission (by whatever name called) will require
H
1060 SUPREME COURT REPORTS [2022] 15 S.C.R.

A similar consideration – i.e., whether it is at cost with a nominal mark-up
or significantly higher, to determine if it falls within the mischief of
“commercial activity”. However, in the case of such notified bodies,
there is no quantified limit in Section 10(46). Therefore, the Central
Government would have to decide on a case-by-case basis whether and
to what extent, exemption can be awarded to bodies that are notified
B
under Section 10(46).
B.4. For the period 01.04.2003 to 01.04.2011, a statutory
corporation could claim the benefit of Section 2(15) having regard to the
judgment of this Court in the Gujarat Maritime Board case (supra).
Likewise, the denial of benefit under Section 10(46) after 01.04.2011
C
does not preclude a statutory corporation, board, or whatever such body
may be called, from claiming that it is set up for a charitable purpose and
seeking exemption under Section 10(23C) or other provisions of the Act.
C. Statutory regulators
D C.1. The income and receipts of statutory regulatory bodies which
are for instance, tasked with exclusive duties of prescribing curriculum,
disciplining professionals and prescribing standards of professional
conduct, are prima facie not business or commercial receipts. However,
this is subject to the caveat that if the assessing authorities discern that
certain kinds of activities carried out by such regulatory body involved
E
charging of fees that are significantly higher than the cost incurred
(with a nominal mark-up) or providing other facilities or services such as
admission forms, coaching classes, registration processing fees, etc., at
markedly higher prices, those would constitute commercial or business
receipts. In that event, the overall quantitative limit prescribed in the
F proviso to Section 2(15) (as amended from time to time) has to be
complied with, if the regulatory body is to be considered as one with
‘charitable purpose’ eligible for exemption under the IT Act.
C.2. Like statutory authorities which regulate professions, statutory
bodies which certify products (such as seeds) based on standards for
G qualification, etc. will also be treated similarly.
D. Trade promotion bodies
Bodies involved in trade promotion (such as AEPC), or set up
with the objects of purely advocating for, coordinating and assisting trading
H organisations, can be said to be involved in advancement of objects of
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 1061
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

general public utility. However, if such organisations provide additional A
services such as courses meant to skill personnel, providing private rental
spaces in fairs or trade shows, consulting services, etc. then income or
receipts from such activities, would be business or commercial in nature.
In that event, the claim for tax exemption would have to be again subjected
to the rigors of the proviso to Section 2(15) of the IT Act.
B
E. Non-statutory bodies
E.1. In the present batch of cases, non-statutory bodies performing
public functions, such as ERNET and NIXI are engaged in important
public purposes. The materials on record show that fees or consideration
charged by them for the purposes provided are nominal. In the C
circumstances, it is held that the said two assessees are driven by
charitable purposes. However, the claims of such non-statutory
organisations performing public functions, will have to be ascertained on
a yearly basis, and the tax authorities must discern from the records,
whether the fees charged are nominally above the cost, or have been
D
increased to much higher levels.
E.2. It is held that though GS1 India is in fact, involved in
advancement of general public utility, its services are for the benefit of
trade and business, from which they receive significantly high receipts.
In the circumstances, its claim for exemption cannot succeed having
E
regard to amended Section 2(15). However, the Court does not rule out
any future claim made and being independently assessed, if GS1 is able
to satisfy that what it provides to its customers is charged on cost-basis
with at the most, a nominal markup.
F. Sports associations F
So far as the state cricket associations are concerned (Saurashtra,
Gujarat, Rajasthan, Baroda, and Rajkot), this Court is of the opinion that
the matter requires further scrutiny, in light of the discussion in paragraphs
228-238 of the judgment. Accordingly, a direction is issued that the AO
shall adjudicate the matter afresh after issuing notice to the concerned G
assessees and examining the relevant material indicated in the previous
paragraphs of this judgment. Furthermore, if any consequential order
needs to be issued, the same shall be done and resulting actions, including
assessment orders shall be passed in accordance with the law under
relevant provisions of the IT Act.
H
1062 SUPREME COURT REPORTS [2022] 15 S.C.R.

A G. Private Trusts
So far as the appeal by assessee-Tribune Trustis concerned, it
has been held that despite advancing general public utility, the Trust cannot
benefit from exemption offered to entities covered by Section 2(15) as
the records reveal that income received from advertisements, constituted
B business or commercial receipts. Consequently, the limit prescribed in
the proviso to Section 2(15) has to be adhered to for the Trust’s claim of
being as a charity eligible for exemption, to succeed. Therefore, despite
differing reasoning, this court has held that the impugned judgment of
the High Court does not call for interference.
H. Application of interpretation
C
H. At the cost of repetition, it may be noted that the conclusions
arrived at by way of this judgment, neither precludes any of the assessees
(whether statutory, or non-statutory) advancing objects of general public
utility, from claiming exemption, nor the taxing authorities from denying
exemption, in the future, if the receipts of the relevant year exceed the
D quantitative limit. The assessing authorities must on a yearly basis,
scrutinize the record to discern whether the nature of the assessee’s
activities amount to “trade, commerce or business” based on its receipts
and income (i.e., whether the amounts charged are on cost-basis, or
significantly higher). If it is found that they are in the nature of “trade,
E commerce or business”, then it must be examined whether the quantified
limit (as amended from time to time) in proviso to Section 2(15), has
been breached, thus disentitling them to exemption.
254. In accordance with the foregoing discussion, and summary
of conclusions, the numerous appeals are disposed of as follows:
F (i) The revenue’s appeals against the Improvement Trust,
Moga158, the Hoshiarpur Improvement Trust159, Bathinda
Improvement Trust 160, Fazilka Improvement Trust161,
Sangrur Improvement Trust 162; Patiala Improvement
Trust 163, Jalandhar Improvement Trust 164, Kapurthala

G 158
CA Nos. 9974/2018 and 10371/2017
159
CA Nos. 12058/2017 and 9886/2018
160
CA Nos. 16375/2017, 2047/2019and Diary No. 5683/2019
161
CA No. 10598/2018
162
CA No. 17527/2017
163
CA Nos. 9860/2018, 8321/2018, 2335/2019, 4449/2019 and 4957/2019
164
H CA Nos. 12869/2017 and 10406/2018
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 1063
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

Improvement Trust165, Pathankot Improvement Trust166, A
Improvement Trust, Hansi 167, and the Special Leave
Petitions filed against the Gujarat Maritime Board168 and
Karnataka Water Supply and Drainage Board 169 are
rejected.
(ii) The revenue’s appeals against Ahmedabad Urban B
Development Authority170, the Gujarat Housing Board171,
the Gandhinagar Urban Development Authority172, Rajkot
Urban Development Authority 173 , Surat Urban
Development Authority174, Jamnagar Area Development
Authority175, and the Gujarat Industrial Development
C
Corporation176 are rejected. Likewise, the revenue’s appeals
against Agra Development Trust177; UP Awas Evam Vikas
Parishad178; Raebareli Development Authority179, Rajasthan
Housing Board 180 ; Mangalore Urban Development
Authority181; Mathura Vrindavan Development Authority182;
Meerut Development Authority183; Belgaum Development D
Authority184; Moradabad Urban Development Authority185,
165
CA No. 11259/2018
166
D. No. 44856/2018
167
CA No. 9200/2018
168
SLP(C) Nos. 3759/2021, 4612/2021, 5167/2021, 4678/2021, 4636/2021, 4723/
2021, 7854/2021and 11683/2021 E
169
SLP (C) Nos. 8364/2021.
170
CA Nos.21762/2017, 5719/2018, 6762/2018, 3343/2018, 3359/2018, 1643/2019,
3971/2019, SLP (C) 6686/2021, and SLP (C) No. 6580/2021
171
CA No. 6553/2019 and 783/2020
172
SLP (C) No. 5709/2021, 6005/2021 and 10490/2021
173
SLP (C) No. 7003/2021; 7166/2021; 6917/2021; 7510/2021; 7290/2021 and 7606/
F
2021
174
SLP (C) No. 10908/2021; 7789/2021 and 11072/2021
175
SLP (C) No. 7302/2021 and 7011/2021
176
D. Nos.39525/2017, 15525/2019, 21237-2019; 15488/2019; 15489/2019 and
21237/2019; CA Nos. 3971-3972/2018, 170/2019; SLP (C) No. 15055/2019
177
C.A No. 10114/2018
178
SLP(C) No. 12304/2018 G
179
C.A. No. 6489/2018
180
SLP(C) No. 10912/2018
181
C.A No. 9172/2018
182
C.A No. 11884/2018
183
C.A No. 226/2019
184
C.A. No. 213/2020
185
SLP(C) No. 7779/2018 H
1064 SUPREME COURT REPORTS [2022] 15 S.C.R.

A Yamuna Expressway Industrial Development Authority186;
Greater Noida Industrial Development Authority187; New
Okhla Industrial Development Authority188 and Karnataka
Industrial Areas Development Board189 are rejected.
(iii) The revenue’s appeals190 against ICAI are dismissed and
B for the same reasons, the appeals191 filed by the ICAI are
hereby allowed.
(iv) The revenue’s appeal - C.A. No. 21845/2017, against
Rajasthan State Seed and Organic Production Certification
Agency is rejected, whereas SLP (C) No. 15547/2013 filed
C by Andhra Pradesh State Seed Certification Agency is
allowed for the same reasons.
(v) The revenue’s appeal against APEC succeeds in part. The
impugned judgment of the High Court is set aside; the matter
is remitted for the concerned years, to the Assessing Officer.
D SLP (C) No. 14995/2019 is allowed, in the above terms.
(vi) In relation to the non-statutory bodies - the revenue’s appeal
against ERNET fails, and SLP (C) No. 15040/2019 is hereby
dismissed; and similarly the impugned judgment in relation
to NIXI is confirmed – SLP(C) No. 15079/2019 is therefore
E dismissed. However, the revenue’s appeals against GS1 –
C.A. No. 5058/2014 and C.A. No. 4374/2015, are hereby
allowed and the impugned judgments are set aside, for the
reasons elaborated in the body of the judgment.
(vii) The revenue’s appeals against the cricket associations before
F this court succeed in part, and the impugned judgments of
the Gujarat High Court and Rajasthan High Court are hereby
set aside. The matter is remitted to the concerned authorities
for determination of the question afresh in the light of the
above discussion and observations. D. No. 16597/2020, C.A
No. 7643/2018, C.A No. 8554/2018, D. No. 17255-2020,
G
186
SLP(C) No. 14574/2019
187
C.A No. 3596/2018
188
CA No. 3347/2018
189
CA Nos. 4430/2021, 2477/2021, 2478/2021
190
CA Nos. 8193/2012, 5057/2012 and 4196/2015
191
H SLP (C) No. 23975/2012; and CA No. 5056/2012
ASST. COMM’R OF INCOME TAX (EXEMPTIONS) v. AHMEDABAD 1065
URBAN DEVELOPMENT AUTHORITY [S. RAVINDRA BHAT, J.]

SLP (C) No. 1404/2021, D. No. 19394-2020, D. No. 19399- A
2020, D. No. 19403-2020, SLP (C) No. 11486/2020, SLP
(C) No. 11124/2020, D. No. 19449-2020, SLP (C) No.
12206/2020, D. No. 20986-2020, D. No.23310-2020, SLP
(C) No. 6253/2021, SLP(C) No. 19044/2021, D. No. 5806/
2021, D. No. 6662/2021 are hereby allowed.
B
(viii) In relation to the private trusts, the appeal filed bythe
assesseee, Tribune Trust - CA 9380/2017 isdismissed. The
revenue’s appeal – SLP (C) No. 30597/2018, against Shri
Balaji Samaj Vikas Samiti is dismissed, on account of low
tax effect.
C
255. This batch of matters is disposed of, in the above terms.
Pending applications, if any, are dismissed.

Nidhi Jain Appeals disposed of.
(Assisted by : Shashwat Jain, LCRA)
D

E

F

G

H