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?
Not where the charge is for the regulatory and administrative functions the body is obliged to perform. The Delhi High Court held that a body satisfying clause (a) of s.10(46) does not lose the exemption under clause (b) merely because it charges and receives money as fee, reimbursement, rent or consideration for transfer of rights in property, provided those receipts are directly connected with and have a nexus to the functions it is mandated to perform. The rejection order was quashed and a notification directed.
Decided by the High Court (Sanjiv Khanna J and Prathiba M. Singh J) on 2018-02-26, reported as W.P.(C) No. 732/2017 (Delhi High Court). It bears on section 10(46), section 2(15), section 11 of the Income Tax Act 1961, in Capital Gains Exemptions, How Tax Law Is Read and Charitable Trusts & Exemption matters.
Section 10(46) became the main route for statutory bodies once the Finance Act 2002 narrowed s.10(20) and deleted s.10(20A), and the standard ground of refusal is that the body's receipts look commercial. This decision draws the line where it belongs — on the nexus between the receipt and the statutory function, not on whether money changed hands. It matters especially for development authorities, whose lease and transfer receipts are the largest single item and the ones most readily labelled trade. The reasoning runs closely parallel to what the Supreme Court later said in ACIT v. Ahmedabad Urban Development Authority about statutory bodies charging for public functions under the proviso to s.2(15), and a practitioner should cite both. Two updates must be carried: s.10(46A), inserted by the Finance Act 2023, now provides a separate route for a body, authority, board, trust or commission constituted for a public purpose, and it should be considered alongside s.10(46) rather than instead of it.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The petitioner authority applied for a notification under s.10(46) in respect of specified income including grants, lease proceeds, rents, interest and municipal charges. The application was rejected by order dated 8 June 2015 on the footing that the authority was engaged in commercial activity and so fell foul of the requirement in clause (b) of s.10(46) that the body must not be engaged in any commercial activity. The authority challenged the rejection by writ petition.
The writ petition was allowed. The order dated 8 June 2015 was set aside and quashed, the petitioner's activities were held not to be 'commercial activity' within the meaning of clause (b) of s.10(46), and the respondents were directed to issue the necessary notification in respect of the specified income within three months of receipt of the order (paras 32 and 36).
The Court read clauses (a) and (b) of s.10(46) together. A body established by or under a Central, State or Provincial Act with the object of regulating or administering an activity for the benefit of the general public satisfies clause (a); clause (b) then asks whether it is engaged in any commercial activity. The Court held that the receipt of money does not by itself make the activity commercial. Where the body charges and receives money by way of fee, reimbursement, or even consideration as rent or for transfer of rights in movable and immovable properties, and those receipts are directly connected with and have a nexus with the regulatory and administrative functions that the body is obliged and mandated to perform and execute, no disentitlement under clause (b) arises (para 32). On that test the authority's activities were not commercial and the rejection could not stand.
Consequently we would hold that an authority/body satisfying the requirements of clause (a) would not incur disentitlement under clause (b) when it charges and receives money by way of fee, reimbursement or even consideration as rent or for transfer of rights in movable and immovable properties directly connected and having nexus with regulatory and administrative functions that they are obliged and mandated to perform and execute.
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Handle my notice → Ask a CA on WhatsAppNot where the charge is for the regulatory and administrative functions the body is obliged to perform. The Delhi High Court held that a body satisfying clause (a) of s.10(46) does not lose the exemption under clause (b) merely because it charges and receives money as fee, reimbursement, rent or consideration for transfer of rights in property, provided those receipts are directly connected with and have a nexus to the functions it is mandated to perform. The rejection order was quashed and a notification directed. This was decided by the High Court (Sanjiv Khanna J and Prathiba M. Singh J) and bears on section 10(46), section 2(15), section 11 of the Income Tax Act 1961. It is reported as W.P.(C) No. 732/2017 (Delhi High Court). Section 10(46) became the main route for statutory bodies once the Finance Act 2002 narrowed s.10(20) and deleted s.10(20A), and the standard ground of refusal is that the body's receipts look commercial. This decision draws the line where it belongs — on the nexus between the receipt and the statutory function, not on whether money changed hands. It matters especially for development authorities, whose lease and transfer receipts are the largest single item and the ones most readily labelled trade. The reasoning runs closely parallel to what the Supreme Court later said in ACIT v. Ahmedabad Urban Development Authority about statutory bodies charging for public functions under the proviso to s.2(15), and a practitioner should cite both. Two updates must be carried: s.10(46A), inserted by the Finance Act 2023, now provides a separate route for a body, authority, board, trust or commission constituted for a public purpose, and it should be considered alongside s.10(46) rather than instead of it. If it applies to you, the first step is this: Set out, receipt head by receipt head, the statutory provision that obliges or empowers the body to perform the function for which the money is charged — that nexus is what the Court tested.
The petitioner authority applied for a notification under s.10(46) in respect of specified income including grants, lease proceeds, rents, interest and municipal charges. The application was rejected by order dated 8 June 2015 on the footing that the authority was engaged in commercial activity and so fell foul of the requirement in clause (b) of s.10(46) that the body must not be engaged in any commercial activity. The authority challenged the rejection by writ petition. The matter was decided on 2018-02-26 by the High Court (Sanjiv Khanna J and Prathiba M. Singh J). On those facts the High Court held as follows. The writ petition was allowed. The order dated 8 June 2015 was set aside and quashed, the petitioner's activities were held not to be 'commercial activity' within the meaning of clause (b) of s.10(46), and the respondents were directed to issue the necessary notification in respect of the specified income within three months of receipt of the order (paras 32 and 36).
The Court read clauses (a) and (b) of s.10(46) together. A body established by or under a Central, State or Provincial Act with the object of regulating or administering an activity for the benefit of the general public satisfies clause (a); clause (b) then asks whether it is engaged in any commercial activity. The Court held that the receipt of money does not by itself make the activity commercial. Where the body charges and receives money by way of fee, reimbursement, or even consideration as rent or for transfer of rights in movable and immovable properties, and those receipts are directly connected with and have a nexus with the regulatory and administrative functions that the body is obliged and mandated to perform and execute, no disentitlement under clause (b) arises (para 32). On that test the authority's activities were not commercial and the rejection could not stand. In the words reproduced by the source cited on this page: "Consequently we would hold that an authority/body satisfying the requirements of clause (a) would not incur disentitlement under clause (b) when it charges and receives money by way of fee, reimbursement or even consideration as rent or for transfer of rights in movable and immovable properties directly connected and having nexus with regulatory and administrative functions that they are obliged and mandated to perform and execute."
It was decided by the High Court on 2018-02-26 and is reported as W.P.(C) No. 732/2017 (Delhi High Court). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 10(46), section 2(15), section 11, 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 helps the taxpayer. The writ petition was allowed. The order dated 8 June 2015 was set aside and quashed, the petitioner's activities were held not to be 'commercial activity' within the meaning of clause (b) of s.10(46), and the respondents were directed to issue the necessary notification in respect of the specified income within three months of receipt of the order (paras 32 and 36). It arises in Capital Gains Exemptions, How Tax Law Is Read and Charitable Trusts & Exemption matters, on section 10(46), section 2(15), section 11 of the Income Tax Act 1961, and was decided by Sanjiv Khanna J and Prathiba M. Singh 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. Distinguish receipts that fund the mandated function from any activity carried on independently for profit, and disclose the second rather than letting the officer find it. Where the body is a statutory authority, plead ACIT v. Ahmedabad Urban Development Authority alongside this decision; the s.2(15) proviso reasoning and the s.10(46) clause (b) reasoning support each other. Check whether s.10(46A) inserted by the Finance Act 2023 fits the body better than s.10(46), since it does not turn on a list of specified income. If a notification is directed or granted, confirm the exact heads of specified income it covers; the exemption attaches to specified income, not to the body at large.
Still good law. Nine later decisions cite this judgment. The Karnataka High Court applied it in DIT (Exemptions) v M/s Karnataka Industrial Areas Development Board (30 September 2020), listing it among the High Court decisions on the point and holding 'the different High Courts have taken a similar view, namely, in the cases (a) to (f) stated (supra) that which we respectfully agree', and dismissing the Revenue's appeal on that footing. Three practical points a practitioner needs. First, the Revenue carried this judgment to the Supreme Court and lost: the Delhi High Court records in M/s Delhi State Industrial and Infrastructure Development Corporation v Union of India (24 December 2021) at para 2 that 'an appeal filed by the Revenue against the order has been dismissed by the Supreme Court'. No reasons are reported, so under Kunhayammed that dismissal leaves the judgment standing but is not itself an affirmance. Second, the Central Government acted on it - the same judgment records that 'vide Notification dated 23rd June, 2020, the Respondents have notified Greater Noida Industrial Development Authority under Section 10(46) of Act, 1961'. Third, in the Delhi cases that follow (New Okhla Industrial Development Authority, 24 August 2020 and 2 December 2021; Yamuna Expressway Industrial Development Authority, 25 August 2020) the judgment is cited by counsel and the Court's order is a direction to decide the pending representation, so those are not substantive applications. Separately, the Supreme Court's restatement of section 2(15) in ACIT v Ahmedabad Urban Development Authority (19 October 2022) now governs the charitable-purpose question for such authorities; that judgment mentions Greater Noida only at para 47, in the recital of the assessee's submissions, and neither approves nor disapproves it. Nothing overruling, doubting or confining this judgment was found. 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.
I read the judgment through indiankanoon ?type=print and confirmed para 32 by a second retrieval; the two returns were identical. The specified income the authority had applied for is described in the report as grants, lease proceeds, rents, interest and municipal charges. No ITR citation appeared in the text read. 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 writ petition was allowed. The order dated 8 June 2015 was set aside and quashed, the petitioner's activities were held not to be 'commercial activity' within the meaning of clause (b) of s.10(46), and the respondents were directed to issue the necessary notification in respect of the specified income within three months of receipt of the order (paras 32 and 36).
TaxSphere, “Greater Noida Industrial Development Authority v Union of India”, https://taxnotice.vittsphere.com/caselaw/case/greater-noida-industrial-development-authority-10-46-commercial-activity/ (validity last checked 2026-09-08)
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