We charge fees for our public utility work. Does that cost us charitable status under s.2(15)?
Only if the fees are pitched above cost. Charging on a cost or nominal mark-up basis is not trade, commerce or business; charges noticeably higher than cost are. Even permissible commercial activity must be carried on in the actual course of achieving the general public utility object, and receipts from it must stay within 20 per cent of total receipts.
Decided by the Supreme Court (Uday Umesh Lalit, CJI, S. Ravindra Bhat and Pamidighantam Sri Narasimha, JJ. (judgment delivered by S. Ravindra Bhat, J.)) on 2022-10-19, reported as (2022) 449 ITR 1 / 329 CTR 297 / 219 DTR 209 / 143 taxmann.com 278 / (2023) 291 Taxman 11 (SC) / (2023) 4 SCC 561; Civil Appeal No. 21762 of 2017 and connected appeals. It bears on section 2(15), section 10(20A), section 10(23C), section 10(46), section 11, section 11(4), section 11(4A), section 12, section 12A, section 12AA, section 13(8), section 143(3) of the Income Tax Act 1961, in Charitable Trusts & Exemption matters.
This is the judgment that decides most proviso-to-s.2(15) notices issued on general public utility trusts, statutory corporations, boards and regulators. The result is mixed: the Court accepted that fee-charging bodies remain within the GPU category, but it read the proviso with s.11(4A) as cumulative conditions, so the department will use it to attack any activity priced above cost and any year where commercial receipts cross the 20 per cent ceiling. It was decided in a batch of over 100 SLPs covering AYs 2009-10 to 2014-15, so the fact pattern is likely to resemble yours.
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A batch of appeals and special leave petitions was heard together, with Civil Appeal No. 21762 of 2017 - the Revenue's appeal against Ahmedabad Urban Development Authority - taken as the lead matter. AUDA was constituted as an urban development authority by the State Government under s.22 of the Gujarat Town Planning and Urban Development Act, 1976, its function being to prepare and execute town planning schemes. It claimed deduction under s.11 read with s.2(15); the Assessing Officer held the proviso to s.2(15) applied, and the Commissioner (Appeals) and the Tribunal confirmed the disallowance. The batch brought together urban development and housing authorities and improvement trusts across several States, State industrial development corporations, statutory regulators including the ICAI, seed certification agencies, a trade promotion body (AEPC), non-statutory bodies performing public functions (ERNET, NIXI and GS1 India), five State cricket associations and private trusts including the Tribune Trust. The common question was whether such bodies, which charge fees or cess, remained charitable under the general public utility limb after the 2008 to 2015 amendments to s.2(15).
The Court recorded its conclusions at para 253. A general public utility charity cannot engage in any trade, commerce or business, or provide service in relation to it, for any consideration - cess, fee or any other consideration (para 253 A.1). It may nonetheless do so in the course of achieving its GPU object, provided the activity is connected to the achievement of that object and the receipts do not exceed the quantified limit, which the Court sets out as having changed over time: Rs.10 lakhs with effect from 1 April 2009, Rs.25 lakhs with effect from 1 April 2012, and 20 per cent of total receipts of the previous year only with effect from 1 April 2016 (para 253 A.2). Charging on a cost basis or nominally above cost is not trade, commerce or business; it is only when charges are markedly or significantly above cost that the mischief is attracted (para 253 A.3). Section 11(4A) is to be read harmoniously with s.2(15), the activity being conducted in the course of achieving the GPU object so that any surplus is incidental, and the requirement of separate books goes to demonstrating that the quantitative limit has not been breached (para 253 A.4). Amounts charged by statutory corporations and boards for essentially public functions are prima facie outside business receipts, but assessing officers must scrutinise each case to see whether charges significantly exceed cost and a nominal mark-up (para 253 B.1 and B.2). Statutory regulators such as the ICAI are prima facie not carrying on business, subject to the same caveat (para 253 C.1). The outcomes differed by assessee: the appeals against the development authorities, housing boards, improvement trusts and the ICAI were rejected and the ICAI's own appeals allowed; the seed certification agencies succeeded; the appeal concerning AEPC succeeded in part and was remitted to the Assessing Officer; ERNET and NIXI succeeded; GS1 India lost, its receipts from trade and business being significantly high; the cricket associations' matters were set aside and remitted to the Assessing Officer for fresh determination; and the Tribune Trust's appeal was dismissed (paras 253 D to G and 254).
The Court traced the amendments from 2008 to 2015 and found a constant prohibition running through them: a GPU charity may not carry on activity in the nature of trade, commerce or business, or render service in relation to it, for a cess, fee or other consideration, and that is so irrespective of the use, application or retention of the income from the activity (paras 133 to 136). The deletion of the old reference to 'activity for profit' alongside an expanded list of what a GPU charity may not do was an emphatic expression of Parliament's intention (para 138). The consequence is a paradigm change from the position under Surat Art Silk Cloth Manufacturers Association: the idea of a predominant charitable object among several, with incidental profits fed back into it, is discarded, and the prohibition is relieved only to the extent of the proviso (paras 152 and 153). The two limbs of the proviso are to be read conjunctively, so that where a trust carries on such activity in the actual course of fulfilling its objects, the income from it must still stay within the quantitative limit (para 153(c)). On the words 'fee, cess or any other consideration' the Court gave a purposive reading: where a statutory body collects a fee or cess under enacted law for a regulatory activity, or in furtherance of education or regulation of a profession, or to provide an essential service such as water or sewage, that is not consideration for trade or business, and a statutory housing or development body may charge some beneficiaries more in order to cross-subsidise its main activity without becoming a business - though nomenclature is never conclusive, and non-statutory bodies which mimic regulatory or development bodies require closer scrutiny (paras 143 and 144). The words 'in the nature of' were used by design, so that not only trade, business and commerce but everything resembling them is proscribed (para 150). The Court also distinguished s.11(4), which applies where the business undertaking is itself the property held under trust, from s.11(4A), which applies where the trust carries on a business not held under trust (paras 155 to 160). Finally, the Court directed that assessing authorities scrutinise the record on a yearly basis, so that neither the assessee's claim nor the Revenue's denial is foreclosed for future years (para 253 H).
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".
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Handle my notice → Ask a CA on WhatsAppOnly if the fees are pitched above cost. Charging on a cost or nominal mark-up basis is not trade, commerce or business; charges noticeably higher than cost are. Even permissible commercial activity must be carried on in the actual course of achieving the general public utility object, and receipts from it must stay within 20 per cent of total receipts. This was decided by the Supreme Court (Uday Umesh Lalit, CJI, S. Ravindra Bhat and Pamidighantam Sri Narasimha, JJ. (judgment delivered by S. Ravindra Bhat, J.)) and bears on section 2(15), section 10(20A), section 10(23C), section 10(46), section 11, section 11(4), section 11(4A), section 12, section 12A, section 12AA, section 13(8), section 143(3) of the Income Tax Act 1961. It is reported as (2022) 449 ITR 1 / 329 CTR 297 / 219 DTR 209 / 143 taxmann.com 278 / (2023) 291 Taxman 11 (SC) / (2023) 4 SCC 561; Civil Appeal No. 21762 of 2017 and connected appeals. This is the judgment that decides most proviso-to-s.2(15) notices issued on general public utility trusts, statutory corporations, boards and regulators. The result is mixed: the Court accepted that fee-charging bodies remain within the GPU category, but it read the proviso with s.11(4A) as cumulative conditions, so the department will use it to attack any activity priced above cost and any year where commercial receipts cross the 20 per cent ceiling. It was decided in a batch of over 100 SLPs covering AYs 2009-10 to 2014-15, so the fact pattern is likely to resemble yours. If it applies to you, the first step is this: Work out, year by year, the receipts from the activity said to be commercial as a percentage of total receipts for that period, because the 20 per cent test is applied for the relevant period and not across a block of years.
A batch of appeals and special leave petitions was heard together, with Civil Appeal No. 21762 of 2017 - the Revenue's appeal against Ahmedabad Urban Development Authority - taken as the lead matter. AUDA was constituted as an urban development authority by the State Government under s.22 of the Gujarat Town Planning and Urban Development Act, 1976, its function being to prepare and execute town planning schemes. It claimed deduction under s.11 read with s.2(15); the Assessing Officer held the proviso to s.2(15) applied, and the Commissioner (Appeals) and the Tribunal confirmed the disallowance. The batch brought together urban development and housing authorities and improvement trusts across several States, State industrial development corporations, statutory regulators including the ICAI, seed certification agencies, a trade promotion body (AEPC), non-statutory bodies performing public functions (ERNET, NIXI and GS1 India), five State cricket associations and private trusts including the Tribune Trust. The common question was whether such bodies, which charge fees or cess, remained charitable under the general public utility limb after the 2008 to 2015 amendments to s.2(15). The matter was decided on 2022-10-19 by the Supreme Court (Uday Umesh Lalit, CJI, S. Ravindra Bhat and Pamidighantam Sri Narasimha, JJ. (judgment delivered by S. Ravindra Bhat, J.)). On those facts the Supreme Court held as follows. The Court recorded its conclusions at para 253. A general public utility charity cannot engage in any trade, commerce or business, or provide service in relation to it, for any consideration - cess, fee or any other consideration (para 253 A.1). It may nonetheless do so in the course of achieving its GPU object, provided the activity is connected to the achievement of that object and the receipts do not exceed the quantified limit, which the Court sets out as having changed over time: Rs.10 lakhs with effect from 1 April 2009, Rs.25 lakhs with effect from 1 April 2012, and 20 per cent of total receipts of the previous year only with effect from 1 April 2016 (para 253 A.2). Charging on a cost basis or nominally above cost is not trade, commerce or business; it is only when charges are markedly or significantly above cost that the mischief is attracted (para 253 A.3). Section 11(4A) is to be read harmoniously with s.2(15), the activity being conducted in the course of achieving the GPU object so that any surplus is incidental, and the requirement of separate books goes to demonstrating that the quantitative limit has not been breached (para 253 A.4). Amounts charged by statutory corporations and boards for essentially public functions are prima facie outside business receipts, but assessing officers must scrutinise each case to see whether charges significantly exceed cost and a nominal mark-up (para 253 B.1 and B.2). Statutory regulators such as the ICAI are prima facie not carrying on business, subject to the same caveat (para 253 C.1). The outcomes differed by assessee: the appeals against the development authorities, housing boards, improvement trusts and the ICAI were rejected and the ICAI's own appeals allowed; the seed certification agencies succeeded; the appeal concerning AEPC succeeded in part and was remitted to the Assessing Officer; ERNET and NIXI succeeded; GS1 India lost, its receipts from trade and business being significantly high; the cricket associations' matters were set aside and remitted to the Assessing Officer for fresh determination; and the Tribune Trust's appeal was dismissed (paras 253 D to G and 254).
The Court traced the amendments from 2008 to 2015 and found a constant prohibition running through them: a GPU charity may not carry on activity in the nature of trade, commerce or business, or render service in relation to it, for a cess, fee or other consideration, and that is so irrespective of the use, application or retention of the income from the activity (paras 133 to 136). The deletion of the old reference to 'activity for profit' alongside an expanded list of what a GPU charity may not do was an emphatic expression of Parliament's intention (para 138). The consequence is a paradigm change from the position under Surat Art Silk Cloth Manufacturers Association: the idea of a predominant charitable object among several, with incidental profits fed back into it, is discarded, and the prohibition is relieved only to the extent of the proviso (paras 152 and 153). The two limbs of the proviso are to be read conjunctively, so that where a trust carries on such activity in the actual course of fulfilling its objects, the income from it must still stay within the quantitative limit (para 153(c)). On the words 'fee, cess or any other consideration' the Court gave a purposive reading: where a statutory body collects a fee or cess under enacted law for a regulatory activity, or in furtherance of education or regulation of a profession, or to provide an essential service such as water or sewage, that is not consideration for trade or business, and a statutory housing or development body may charge some beneficiaries more in order to cross-subsidise its main activity without becoming a business - though nomenclature is never conclusive, and non-statutory bodies which mimic regulatory or development bodies require closer scrutiny (paras 143 and 144). The words 'in the nature of' were used by design, so that not only trade, business and commerce but everything resembling them is proscribed (para 150). The Court also distinguished s.11(4), which applies where the business undertaking is itself the property held under trust, from s.11(4A), which applies where the trust carries on a business not held under trust (paras 155 to 160). Finally, the Court directed that assessing authorities scrutinise the record on a yearly basis, so that neither the assessee's claim nor the Revenue's denial is foreclosed for future years (para 253 H). In the words reproduced by the source cited on this page: "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"."
It was decided by the Supreme Court on 2022-10-19 and is reported as (2022) 449 ITR 1 / 329 CTR 297 / 219 DTR 209 / 143 taxmann.com 278 / (2023) 291 Taxman 11 (SC) / (2023) 4 SCC 561; Civil Appeal No. 21762 of 2017 and connected appeals. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 2(15), section 10(20A), section 10(23C), section 10(46), section 11, section 11(4), section 11(4A), section 12, section 12A, section 12AA, section 13(8), section 143(3), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. The Court recorded its conclusions at para 253. A general public utility charity cannot engage in any trade, commerce or business, or provide service in relation to it, for any consideration - cess, fee or any other consideration (para 253 A.1). It may nonetheless do so in the course of achieving its GPU object, provided the activity is connected to the achievement of that object and the receipts do not exceed the quantified limit, which the Court sets out as having changed over time: Rs.10 lakhs with effect from 1 April 2009, Rs.25 lakhs with effect from 1 April 2012, and 20 per cent of total receipts of the previous year only with effect from 1 April 2016 (para 253 A.2). Charging on a cost basis or nominally above cost is not trade, commerce or business; it is only when charges are markedly or significantly above cost that the mischief is attracted (para 253 A.3). Section 11(4A) is to be read harmoniously with s.2(15), the activity being conducted in the course of achieving the GPU object so that any surplus is incidental, and the requirement of separate books goes to demonstrating that the quantitative limit has not been breached (para 253 A.4). Amounts charged by statutory corporations and boards for essentially public functions are prima facie outside business receipts, but assessing officers must scrutinise each case to see whether charges significantly exceed cost and a nominal mark-up (para 253 B.1 and B.2). Statutory regulators such as the ICAI are prima facie not carrying on business, subject to the same caveat (para 253 C.1). The outcomes differed by assessee: the appeals against the development authorities, housing boards, improvement trusts and the ICAI were rejected and the ICAI's own appeals allowed; the seed certification agencies succeeded; the appeal concerning AEPC succeeded in part and was remitted to the Assessing Officer; ERNET and NIXI succeeded; GS1 India lost, its receipts from trade and business being significantly high; the cricket associations' matters were set aside and remitted to the Assessing Officer for fresh determination; and the Tribune Trust's appeal was dismissed (paras 253 D to G and 254). It arises in Charitable Trusts & Exemption matters, on section 2(15), section 10(20A), section 10(23C), section 10(46), section 11, section 11(4), section 11(4A), section 12, section 12A, section 12AA, section 13(8), section 143(3) of the Income Tax Act 1961, and was decided by Uday Umesh Lalit, CJI, S. Ravindra Bhat and Pamidighantam Sri Narasimha, JJ. (judgment delivered by S. Ravindra Bhat, J.). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Put costing on record to show that the fee recovers cost or carries only a nominal mark-up, since the Court made cost-versus-charge the decisive test. Show how the charged activity is carried on in the actual course of achieving the stated object, rather than arguing only that the surplus is ploughed back. Do not argue that being a statutory or regulatory body by itself puts you outside the proviso; the Court placed such bodies inside the GPU category and then applied the same tests to them.
Still good law. Followed by the Supreme Court in CIT (Exemption) v. Khurja Development Authority [2025] 179 taxmann.com 463 / [2025] 307 Taxman 382 (SC), decided 9 October 2025, which set aside cryptic High Court orders and restored the Revenue's appeals to the Allahabad High Court for fresh consideration in the light of the law laid down here - its CASE REVIEW records this judgment as followed. That Court also recorded that this judgment stands clarified by the order of 3 November 2022 in the same matter, ACIT (Exemptions) v. Ahmedabad Urban Development Authority [2022] 144 taxmann.com 78 / 449 ITR 389 / [2023] 290 Taxman 137 (SC) / (2023) 7 SCC 249. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Two cautions. The 20 per cent ceiling is not the figure for every year. The judgment records the limit as Rs.10 lakhs from 1 April 2009, Rs.25 lakhs from 1 April 2012, and 20 per cent of total receipts only from 1 April 2016 (para 253 A.2), so for an older year the money limit governs. And this judgment did not decide every assessee before it in favour of charity: GS1 India's claim failed, the Tribune Trust's appeal was dismissed, and the five State cricket associations and AEPC were remitted to the Assessing Officer for fresh determination (paras 253 D to G and 254). The Court also directed that the question be examined afresh on a yearly basis, so nothing here forecloses either a claim or a denial in a later year (para 253 H). Check the clarification order in the same matter, ACIT(E) v. Ahmedabad Urban Development Authority [2022] 449 ITR 389 / [2023] 290 Taxman 137 (SC), dated 3 November 2022, before relying on the ceiling in a borderline year. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The Court recorded its conclusions at para 253. A general public utility charity cannot engage in any trade, commerce or business, or provide service in relation to it, for any consideration - cess, fee or any other consideration (para 253 A.1). It may nonetheless do so in the course of achieving its GPU object, provided the activity is connected to the achievement of that object and the receipts do not exceed the quantified limit, which the Court sets out as having changed over time: Rs.10 lakhs with effect from 1 April 2009, Rs.25 lakhs with effect from 1 April 2012, and 20 per cent of total receipts of the previous year only with effect from 1 April 2016 (para 253 A.2). Charging on a cost basis or nominally above cost is not trade, commerce or business; it is only when charges are markedly or significantly above cost that the mischief is attracted (para 253 A.3). Section 11(4A) is to be read harmoniously with s.2(15), the activity being conducted in the course of achieving the GPU object so that any surplus is incidental, and the requirement of separate books goes to demonstrating that the quantitative limit has not been breached (para 253 A.4). Amounts charged by statutory corporations and boards for essentially public functions are prima facie outside business receipts, but assessing officers must scrutinise each case to see whether charges significantly exceed cost and a nominal mark-up (para 253 B.1 and B.2). Statutory regulators such as the ICAI are prima facie not carrying on business, subject to the same caveat (para 253 C.1). The outcomes differed by assessee: the appeals against the development authorities, housing boards, improvement trusts and the ICAI were rejected and the ICAI's own appeals allowed; the seed certification agencies succeeded; the appeal concerning AEPC succeeded in part and was remitted to the Assessing Officer; ERNET and NIXI succeeded; GS1 India lost, its receipts from trade and business being significantly high; the cricket associations' matters were set aside and remitted to the Assessing Officer for fresh determination; and the Tribune Trust's appeal was dismissed (paras 253 D to G and 254).
TaxSphere, “ACIT v Ahmedabad Urban Development Authority”, https://taxnotice.vittsphere.com/caselaw/case/acit-v-ahmedabad-urban-development-authority/ (validity last checked 2026-08-19)
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Our trust runs a business and puts the profit into its objects. Does s.11(4A) still deny the exemption?
The Assessing Officer says my statutory authority's port charges and lease rentals are trade or business, so the proviso to s.2(15) denies exemption. How is that tested after Ahmedabad Urban Development Authority?
Our s.10(46) application has been rejected because we charge lease rent and fees. Does charging for what we do make us commercial and disentitle us?
Section 10(20A) has been omitted and we are outside the new s.10(20) Explanation. Can we still say our income is the State's income and immune under Article 289?
