The main legal point established in the judgment is the interpretation of the term 'commercial activity' in the context of Section 10(46) of the Income Tax Act, 1961, and the relevance of profit motive in determining commercial activity.

SANJIV KHANNA, J.

Greater Noida Industrial Development Authority (hereinafter referred to as, the petitioner) has filed the present writ petition for setting aside and quashing the order dated 8th June, 2015 passed by the Additional Commissioner of Income Tax, ITA Division, Central Board of Direct Taxes, rejecting their request for issue of notification of exemption under Section 10(46) of the Income Tax Act, 1961 (Act, for short).

2. The respondents to the present writ petition are Ministry of Finance, Central Board of Direct Taxes and Assistant Commissioner of Income Tax, Circle-3, Noida, Uttar Pradesh, who is the Assessing Officer of the petitioner. For the sake of convenience, we would refer to them as respondents.

3. On 22nd November, 2011 the petitioner had made an application with the respondents for issue and grant of exemption notification under Section 10(46) of the Act. The respondents by letter dated 22nd May, 2013, had required the petitioner to furnish information as per proforma enclosed along-with audited balance sheets. These were furnished by the petitioner by detailed reply and documents vide letter dated 28th June, 2013. By communication dated 3rd January, 2014, the respondents had again required the petitioner to furnish documents in the proforma enclosed. The petitioner thereupon submitted reply dated 5th February, 2014 furnishing information as per proforma enclosed. By another communication dated 28th March, 2014, the petitioner was required to furnish application in the standardized proforma enclosed with the letter. The petitioner submitted their application, in the desired proforma vide letter dated 29th March, 2014. The respondents thereupon vide letter dated 13th November, 2014 had expressed their prima facie view that the petitioner did not meet the prescribed conditions for approval under Section 10(46) of the Act and had required the petitioner to furnish clarification with necessary documents for claiming eligibility. By communication dated 10th December, 2014, the petitioner referred to their meeting with the Additional Commissioner of Income Tax, ITA Division, Central Board of Direct Taxes, on 28th November, 2014 and enclosed therewith list of income sought to be notified for the purpose of Section 10(46) of the Act. The petitioner had requested that the following income should be notified for exemption under Section 10(46) of the Act :-

“a. Grants received from the State Government.

b. Moneys received from the disposal/90 years lease of immovable properties.

c. Moneys received by the way of lease rent & fees or any other charges from the disposal/90 years lease of immovable properties.

d. The amount of interest earned on the funds deposited in the banks.

e. The amount of interest/penalties received on the deferred payment received from the Allotees of various immovable properties.

f. Water, sewerage and other municipal charges from the Allotees of various immovable properties.”

4. The respondents, vide impugned order dated 8th June, 2015, have rejected the petitioner's prayers for issue of notification of exemption under Section 10(46) of the Act in respect of the aforesaid income for the following reasons :-

“3. The applicant (Greater Noida Industrial Development Authority) has been constituted under Section 3 of the Uttar Pradesh Area Development Act, 1976 (U.P. Act No. 6 of 1976).

4. The objects of the applicant are to undertake works relating to housing schemes and land development schemes and include acquisition, distribution, sale, letting of properties.

5. It is noticed that the applicant has been making huge profits out of its activity of acquiring land and selling it at much higher prices for residential, industrial, institutional and commercial purposes and the activities of the applicant are commercial in nature.

6. Vide Board's letter dated 13/11/2014, the applicant was asked to clarify as to how various activities of the authority are not commercial in nature. The applicant has furn