2021 (11) TMI 576 - HC - Income Tax

Exemption u/s 10(26B) - claim for exemption was rejected by firstly by noting that the assessee is not a Corporation constituted/established under an Act of the Centre, State or Provincial Act, but a Company formed under the Companies Act AND assessee never claimed the status under Section 10(26B) of the Act in any of the previous assessment years - Whether the Tribunal is right in granting exemption to the assessee under Section 10(26B)? - HELD THAT - The incorporation of assessee under the Companies Act gives the assessee the status of a body corporate and the objects, indisputably, of the assessee are promoting the interests of the members of the Scheduled Castes or the Scheduled Tribes or backward classes or of any two or all of them of Lakshadweep Union Territory. The argument of learned Senior Counsel that Corporation established by Provincial Act does not fit into the literal or plain reading of Section 10(26B). The argument that the Corporation is established by the Centre/State by an enactment is unavailable from the expression used in Section 10(26B) of the Act. This Court is construing Section 10(26B), both by keeping in mind the golden rule of construction and also Noscitur a Sociis, a nd the inescapable conclusion is that the assessee though incorporated under the Companies Act falls within the ambit of exemption envisaged by Section 10(26B) and is entitled to benefit of exemption. Centre/State Governments, as the case may be, bring into existence what is known as Government Companies. All these companies are not immediately entitled to be bracketed within the ambit of Section 10(26B) because the existence of that Company is relatable to the primary aim of promoting the interests of the members of the Scheduled Castes or the Scheduled Tribes or backward classes or of any two or all of them. The assessee is a body viz., incorporated under the Companies Act and formed to achieve or promote the interests of the members of the Scheduled Castes or the Scheduled Tribes or backward classes or of any two or all of them, receives full financial assistance from the Government, hence is entitled to exemption. We are in agreement with the reasoning and the conclusion recorded by the Tribunal and for the above reasons as well, substantial question no.1 is answered in favour of the assessee and against the Revenue/

Issues Involved:
1. Applicability of Section 10(26B) of the Income Tax Act to a company registered under the Companies Act.
2. Entitlement of the assessee to the benefit of Section 10(26B) of the Income Tax Act.
3. Validity of the Tribunal's conclusion based on submissions without independent findings.
4. Legality of the Tribunal's interference with the Assessing Officer's order.

Issue-wise Detailed Analysis:

1. Applicability of Section 10(26B) of the Income Tax Act to a company registered under the Companies Act:
The primary issue was whether the assessee, a company incorporated under the Companies Act, qualifies for exemption under Section 10(26B) of the Income Tax Act. The Revenue argued that the exemption applies only to corporations established by a Central, State, or Provincial Act, not to companies formed under the Companies Act. The court, however, interpreted Section 10(26B) to include any body, institution, or association wholly financed by the Government and formed for promoting the interests of Scheduled Castes, Scheduled Tribes, or backward classes. The court found that the assessee, being a government-owned company with objectives aligned with the statutory requirements, falls within the scope of Section 10(26B).

2. Entitlement of the assessee to the benefit of Section 10(26B) of the Income Tax Act:
The Tribunal had previously held that the assessee, being financed and established by the Government for promoting the interests of Scheduled Tribes in Lakshadweep, is entitled to the benefit of Section 10(26B). The court agreed with this conclusion, emphasizing that the assessee's incorporation under the Companies Act does not disqualify it from the exemption, as it meets the criteria of being a body wholly financed by the Government and formed for the specified purpose.

3. Validity of the Tribunal's conclusion based on submissions without independent findings:
The Revenue contended that the Tribunal's decision was based solely on the assessee's submissions without independent findings or evidence. The court, however, upheld the Tribunal's reasoning, noting that the Tribunal had relied on judicial precedents and a proper interpretation of the statute. The court found no perversity or unreasonableness in the Tribunal's conclusion.

4. Legality of the Tribunal's interference with the Assessing Officer's order:
The Tribunal had interfered with the Assessing Officer's order, which denied the exemption under Section 10(26B). The court supported the Tribunal's interference, stating that the Tribunal correctly applied the law and judicial precedents to grant the exemption. The court emphasized that the assessee's status as a government-owned entity formed for the benefit of Scheduled Tribes justifies the exemption.

Conclusion:
The court answered all substantial questions of law in favor of the assessee and against the Revenue. The appeals were dismissed, affirming the Tribunal's decision to grant the exemption under Section 10(26B) of the Income Tax Act to the assessee. The court highlighted the broad and inclusive interpretation of the statute to encompass government-owned entities formed for promoting the interests of Scheduled Castes, Scheduled Tribes, or backward classes.

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