Lok Sabha Question No. 4677 (UNSTARRED), answered on 2018-03-23
Subject: Urban Development Authorities
Ministry: FINANCE
Asked by: DEVUSINH JESINGBHAI CHAUHAN

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE

## LOK SABHA UNSTARRED QUESTION

"Urban Development Authorities"

## 4677 . SHRI DEVUSINH CHAUHAN

"Will the Minister of FINANCE be pleased to state:

- (a) whether the Urban Development Authorities are statutory authorities and perform planning and development functions for the welfare of society and their activities cannot be termed as in the nature of   trade, commerce or business, if the details thereof; being
- (b) whether these authorities enjoyed complete exemption from Income Tax u/s 10(20-A) of the Income Tax Act, 1961 till 2002-2003 and their income has made taxable W.e.f. Ist April 2003, if the details thereof; been
- (c) whether the Government of Gujarat has taken up the issue with his Ministry on 26 December , 2014 for   favourable action on this crucial issue to enable Urban Development Authorities to become financially more viable for development of the Urban periphery; and
- (d) if so, the favourable action taken /being taken by the Government for the Urban Development authorities viable for development work?" making

'` ;

## ANSWER

## (SHRI SHIV PRATAP SHUKLA)

- (a) The forrnation of Urban Development Authorities (UDAs) and the nature of activities undertaken by them are governed by their respective constituting Acts. 1961 ('Act) (which 2(15) of Income-tax Act; defines the term 'charitable purpose) and claim tax 11 of the Act. Subject to conditions in the exemption u/s the prescribed provisions, entities engaged in advancement of certain objects of general public utility are not exemption if their activities are in the nature of eligible for commerce or business etc. irrespective of the nature of use/application or retention of the activities\_ The activities undertaken income from such by UDAs, which include sale and purchase of land, developing and residential/commercial properties, leasing/letting out tax trade, selling
- premises on rent and earning revenue through leasing out of hoardings etc. are generally of such nature and hence do not qualify for tax exemptions u/s 1l of the Act.
- (b) till 31.03.2003 any income of an authority constituted in India by or under law enacted either for the purpose of dealing with and satisfying the need for housing accommnodation or for the purpose of planning; development Or improvement of cities, towns and villages, or for both was exempt u/s 10(20A) This provision was discontinued w.e.f: 01.04.2003\_ Thereafter , unless such entities qualify for tax exemption u/s 1l [read with section 2(15) and 12A] or section 10(46) of the Act, their Yes,
- income does not qualify for exemption\_
- (c)&(d) A representation dated 26.10.2015 stating that the issue of exemption to Urban Development Authorities (UDA) was raised by the Honble Finance Minister, Government of" Gujarat (GoG) in his meeting with Hon ble Finance Minister Government of' India (Gol) on was received from the Addl. Chief Secretary, Government of Gujarat: Further representations were also received in this regard . It has been stated that the income of UDAs enjoyed complete exemption from taxation, till 2002-03 under section 10(2OA) of the Income-tax Act, 1961 (the Act) to its omission; and later, by obtaining registration under section 12AA of the Act; before it became taxable due to modification of the   provisions  relating to charitable purpose W.e.f: 01.04.2009. The issue of exemption to UDAs was examined and not found feasible in view of the stated policy of the Government to do away with the exemptions and deductions in a moderate tax regime. prior