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(b) that the manner in which the plots of land are sold out in Town Planning Scheme disposal of sub plots in a defined manner and purpose and utilization of proceeds for infrastructural development only and all these process are carried out without any intend of making any profit out of and therefore activities carried out cannot be termed as business or commercial activity.

(c) with respect to proposed disallowance of deduction claimed u/s. 11, it was submitted that the assessee trust is duly registered u/s. 12AA of the Income-tax Act. It was further submitted that even the order cancelling the registration has been cancelled by the Hon'ble ITAT, Ahmedabad and thus the assessments are to be framed as per the provisions of Section 11, 12 & 13 of the Income-tax Act.

Hence, the second limb of the proviso to section 2(15) is also satisfied.

Ahmedabad Urban Development Authority Vs. ADIT (Exemption)-4 Appeals

26.Supposing, after notification of the scheme, the law had stipulated and the government had decided to outsource the development work to a third party (a infrastructure company) with similar rights and the entitlements as given to AUDA, could it be urged that the Infrastructure Development Company doing the same work as AUDA was not engaged in activity in the nature of trade or business. It would have definitely constituted its business income. It is, then, not possible to urge otherwise to suggest that the activity is not in the nature of trade or business. The nature of the activities of the appellant are no different from that of a developer of a real estate. The difference in the scale of operation or the mode of recovery or degree of profits or how such profits are utilised would not alter the nature of the activity.

27. There are many activities in the nature of infrastructure development like roads, power, housing, etc where the government, instead of constituting an authority, enters into agreement with Infrastructure Development companies. These private companies are allowed to recover their cost and earn profits as a cocessionaires or the Govt. may also make direct payments. The income in all such cases would undoubtedly be assessed on profits from business.

28.The mere fact that the same activity is done by an instrumentality of the state will not alter the character of the activity. The activity will still be in the nature of business or trade.

25. The ld.counsel for the Revenue drew our attention towards section 52(3) of the T.P. Act. He pointed that the Town Planning Officer shall estimate the cost of this scheme (development) and the contribution to be levied on each owner of the plan is to be notified. The final amount of compensation payable to the owners of each plan or the recovery to be made from them is worked out by the authority. In other words, for example, a scheme has 50 plots of 500 sq.meters in a row. The Town Planning Officer would work out cost of developed plot. Thereafter, he will set off the cost equivalent to value of 40% of the land taken from the owners used in development of 500 plots. In case the cost of development is higher, then, the recoveries would be made from the land owners for taking 500 plots in their names. In case, cost is lower than the value of 40% of the land, then compensation will be paid to the owners. The ld.counsel for the assessee has emphasized that it got the land free of cost. It is wrong to suggest that the assessee got the land free of cost. The cost of land is embedded in the expenditure required to be incurred on development of scheme. Shri G.C. Srivastava, in our understanding has rightly pointed out that, supposing, after notification of the scheme, the law had stipulated and the government had decided to outsource the development work to a third party (a infrastructure company with similar rights and entitlement as given to AUDA, could it be Ahmedabad Urban Development Authority Vs. ADIT (Exemption)-4 Appeals urge that infrastructure development company doing similar work, as AUDA was not engaged in the activity in the nature of trade ? The most crucial factor, which weighed with us that the assessee has been working with profit motive is, that the Town Planning Officer is well aware about the cost of development. In spite of that the assessee has never sold the 15% of the land on cost basis. For example, the assessee has developed 1500 sq.yards of land in a scheme, the cost to develop a scheme is Rs.60000/-. The assessee should have allotted 15% 1500 sq.yards of land at the rate of 400 per sq.yards to the needy persons/institutions by draw of lots. Instead of this, the assessee has fixed a base price, and thereafter, put the land on auction. It allotted the land to the highest bidder. It has sold the land keeping in view the profit in mind.