1989 (2) TMI 68 - HC - Income Tax

Summary

Issues Involved:
1. Whether the assessee-corporation can be considered a public charitable institution within the meaning of section 2(15) of the Income-tax Act, 1961.
2. Whether the income of the assessee-corporation is liable to be excluded for assessment purposes u/s 11 of the Income-tax Act, 1961.

Summary of Judgment:

Issue 1: Public Charitable Institution
The primary issue was whether the assessee-corporation, established by the Government to improve the conditions of Scheduled Tribes and to end their exploitation, qualifies as a public charitable institution u/s 2(15) of the Income-tax Act, 1961. The Tribunal had concluded that the corporation's activities were commercial in nature and not held under trust for a charitable purpose. However, the High Court disagreed, emphasizing that the corporation's predominant objective was not to earn profits but to uplift the Scheduled Tribes. The court noted that the corporation was set up by the Government to provide relief to the poor and advance the interests of the Scheduled Tribes, which qualifies as an object of general public utility. The court held that the corporation's activities, though resulting in some profit, were incidental and not the primary objective.

Issue 2: Income Exclusion u/s 11
The second issue was whether the income of the assessee-corporation is exempt from tax u/s 11 of the Income-tax Act, 1961. The Tribunal had found that no part of the corporation's income was applied for any charitable purpose. The High Court, however, held that the corporation's income was indeed applied for the benefit of the Scheduled Tribes, which is a charitable purpose. The court emphasized that the corporation's profits were used for the welfare of the Scheduled Tribes and not for private gain. Therefore, the income of the corporation was liable to be excluded from assessment u/s 11.

Conclusion:
The High Court concluded that the assessee-corporation is a public charitable institution within the meaning of section 2(15) of the Income-tax Act, 1961, and its income is exempt from tax u/s 11 of the Act. The reference was answered accordingly, with no costs.