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2017 (7) TMI 811 - HC - Income TaxDenying the benefits of Section 11 and 12 - Non charitable activities - AO observed that, the assessee is involved in commercial activities, and it also maintains its accounts in the spirit of a commercial organization and as the assessee is enjoying income from business of developing land for industrial purposes and allotting land to industrialists on lease and is also charging consideration for land transferred to them. Held that - Considering the objects and purpose for which the assessee-Corporation is established and constituted under the provisions of the Gujarat Industrial Development Act, 1962 and collection of fees or cess is incidental to the object and purpose of the Act, and even the case would not fall under the second part of proviso to Section 2 15 of the IT Act. As the activities of the assessee is for advancement of any other object of general public utility, the same can be for charitable purpose and therefore, the assessee Corporation shall be entitled to exemption under Section 11 of the Act. No error has been committed by the learned Tribunal in holding so. - Decided in favour of assessee.
Issues Involved:
1. Justification of the Appellate Tribunal in allowing the assessee's appeal. 2. Applicability of Section 11 and 12 benefits of the Income Tax Act. 3. Interpretation of Section 2(15) r.w.s 13(8) of the Income Tax Act. 4. Nature of activities carried out by the assessee. 5. Definition and scope of "charitable purpose" under the Income Tax Act. Detailed Analysis: 1. Justification of the Appellate Tribunal in Allowing the Assessee's Appeal: The Tribunal allowed the appeals filed by the assessee, holding that the activities of the assessee could be classified as charitable and thus entitled to exemption under Section 11 of the Income Tax Act. The Tribunal concluded that the proviso to Section 2(15) of the IT Act did not apply to the assessee's activities, which were for charitable purposes. 2. Applicability of Section 11 and 12 Benefits of the Income Tax Act: The core issue was whether the assessee, Gujarat Industrial Development Corporation, could claim exemptions under Sections 11 and 12 of the IT Act. The Revenue argued that the assessee's activities were commercial in nature and thus should not qualify for these exemptions. However, the Tribunal and subsequently the High Court held that the activities were indeed charitable and thus eligible for the exemptions. 3. Interpretation of Section 2(15) r.w.s 13(8) of the Income Tax Act: The Revenue contended that the assessee's activities fell under the second limb of the proviso to Section 2(15) of the IT Act, which would disqualify them from being considered charitable. The High Court, however, agreed with the Tribunal that the activities did not constitute trade, commerce, or business, and thus the proviso to Section 2(15) did not apply. 4. Nature of Activities Carried Out by the Assessee: The High Court examined the functions and powers of the assessee as outlined in the Gujarat Industrial Development Act, 1962. The Court noted that the primary objective of the assessee was to promote and assist in the rapid and orderly establishment of industries in Gujarat, which aligned with charitable purposes. The Court emphasized that the activities were not in the nature of trade, commerce, or business. 5. Definition and Scope of "Charitable Purpose" under the Income Tax Act: The High Court referred to various precedents, including the case of Ahmedabad Urban Development Authority and the decision of the Delhi High Court in the case of Bureau of Indian Standards, to interpret the term "charitable purpose." The Court concluded that the assessee's activities fell within the scope of "advancement of any other object of general public utility" and were not commercial in nature. The Court also reiterated that the dominant object of the assessee was not profit-making but serving public utility. Conclusion: The High Court dismissed the Revenue's appeals, affirming the Tribunal's decision that the assessee's activities were charitable and thus entitled to exemptions under Sections 11 and 12 of the IT Act. The Court held that the proviso to Section 2(15) did not apply as the activities were not in the nature of trade, commerce, or business.
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