Lok Sabha Question No. 735 (UNSTARRED), answered on 2018-12-14
Subject: Urban Development Authority
Ministry: FINANCE
Asked by: DEVUSINH JESINGBHAI CHAUHAN

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE

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## LOK SABHA

## UNSTARRED QUESTION  NO. 735

TO BE ANSWERED ON FRIDAY THE 14 TH   December 2018/ AGRAHAYANA 23, 1940 (SAKA)

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## ' Urban Development Authority'

## 735.   SHRI DEVUSINH CHAUHAN

'Will the Minister of FINANCE be pleased to state:-

- (a) Whether the Government has agreed that Urban Development Authorities are statutory authorities and perform planning and development functions for the welfare of society and their activities cannot be termed as being in the nature of trade, commerce or business, if so, the details thereof;
- (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 been made taxable w.e.f. 01.04.2003, if so, the details thereof;
- (c) Whether the Gujarat Government has taken up the issue with his Ministry on 26/11/2014  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  action  taken  /  being  taken  by  his  Ministry  for  making  the  Urban Development authorities viable for development work ?'

## ANSWER

## MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI SHIV PRATAP SHUKLA)

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- (a) The  formation  of  Urban  Development  Authorities  ('UDAs')  and  the  nature  of activities  undertaken  by  them  are  governed  by  their  respective  constituting  Acts. These entities now claim to fall within the purview of section 2(15) of Income-tax Act, 1961 ('Act') ( which defines the term 'charitable purpose' ) and claim tax exemption u/s 11 of the Act.  Subject to conditions in the prescribed provisions, entities engaged in the  advancement of certain objects of  general  public  utility  are  not  eligible  for  tax exemption if their activities are in the nature of trade, commerce or business etc., irrespective  of  the  nature  of  use/application  or  retention  of  the  income  from  such activities.  The activities undertaken by UDAs, which include sale and purchase of land,  developing  and  selling  residential/commercial  properties,  leasing/letting  out 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 11 of the Act.

(b) Yes,  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 accommodation 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 11 [ read with section 2(15) and 12A ] or section 10(46) of the Act, their 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 Hon'ble Finance Minister, Government  of  Gujarat  (GoG)  in  his  meeting  with  Hon'ble  Finance  Minister, Government  of  India  (GoI)  on  26.12.2014,  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(20A)  of  the  Act  prior  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.

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