2019 (6) TMI 797 - HC - Income Tax

Benefit of exemption u/s 10(26B) - reason as assigned to decline benefit is that the main object for the incorporation of the Corporation does not indicate that it is for promoting the interest of Scheduled Castes or the Scheduled Tribes or backward classes - HELD THAT - A perusal of the objects of the appellant Corporation would disclose that the same has not been set up exclusively for Scheduled Castes or the Scheduled Tribes or backward classes even among the police personnel. If the provision in Section 10(26B) is taken note, the exemption that could be claimed is only when the institution or association has been established and formed for promoting the interest of the Scheduled Castes or the Scheduled Tribes or backward classes or of any two or all of them. In that circumstance, even if the contention as put forth on behalf of the appellant that the Appellate Tribunal has noticed that 98% of the population of Arunachal Pradesh comprises of Scheduled Tribes, that alone does not provide for any benefit to the appellant herein. Further the notifications dated 20.03.1995 and 27.8.1997 though provide for reservation in recruitment keeping in view Article 16 of the Constitution of India, that by itself cannot indicate that the Corporation has been set up for the benefit of the Scheduled Tribes. As the appellant Corporation was set up for the benefit of police personnel in Arunachal Pradesh, in the name and style of Arunachal Police Housing and Welfare Corporation Limited, for the purpose of formulating and executing housing scheme for the benefit and welfare of the employees of the Police Department, Government of Arunachal Pradesh. In that view, it is not set up for the purpose of the general population, but limited to a particular class of employees of the Government of Arunachal Pradesh and in such circumstance, all persons of the Police Department cannot be considered as belonging to Scheduled Tribe, even if the reservation policy for recruitment is kept in view. Therefore, in such circumstance, the benefit of the provision, as referred to, would not be applicable to the present case.- Decided against assessee.

Summary

Issues involved:
1. Assessment orders dated 29.12.2011, CIT (Appeals) order dated 02.07.2013, and Income Tax Appellate Tribunal order dated 31.05.2017 challenged for Assessment Years 2009-2010 and 2010-2011.
2. Applicability of exemption under Section 10(26B) of the Income Tax Act, 1961.
3. Perversity in the finding of the Income Tax Appellate Tribunal in its order dated 31.05.2017.

Analysis:
The High Court considered the appeals assailing the assessment orders and related decisions for the Assessment Years 2009-2010 and 2010-2011. The primary issue was the entitlement of the appellant corporation to the benefit of exemption under Section 10(26B) of the Income Tax Act, 1961. The substantial questions of law framed in the appeals revolved around the eligibility of the corporation for the exemption and the alleged perversity in the Tribunal's finding. The key contention was whether the appellant corporation, established for the welfare of police personnel in Arunachal Pradesh, qualified for the exemption under Section 10(26B) as it promotes the interests of Scheduled Castes, Scheduled Tribes, or backward classes.

The appellant argued that the corporation's formation aimed at benefiting police personnel, a majority of whom belong to Scheduled Tribes in Arunachal Pradesh. The appellant highlighted the reservation policies supporting Scheduled Tribes in recruitment as evidence of eligibility for the exemption. However, the Revenue contended that the authorities' assessments considered the nature of the corporation's activities and concluded that the exemption was not applicable, urging the court to uphold their decisions.

The court examined the objects of the corporation, emphasizing that it was established for the welfare of police personnel without specific reference to Scheduled Castes, Scheduled Tribes, or backward classes. The court noted that the corporation's primary purpose was to formulate and execute housing schemes for police department employees, indicating a general welfare objective rather than a targeted promotion of Scheduled Tribes' interests. The court distinguished previous cases where exemptions were granted based on specific objectives benefiting Scheduled Tribes, unlike the appellant's case.

Ultimately, the court dismissed the appeals, finding them devoid of merit based on the corporation's objectives and activities not aligning with the requirements for exemption under Section 10(26B). The court upheld the authorities' assessments, emphasizing that the exemption eligibility must be based on the corporation's establishment and activities promoting the interests of Scheduled Castes, Scheduled Tribes, or backward classes, which were not met in this case.