1983 (6) TMI 59 - AT - Income Tax

Summary

Issues:
1. Dispute over exemption under section 10(26B) of the Income-tax Act, 1961 granted to the assessee by the Commissioner (Appeals).

Analysis:
The judgment revolves around the dispute raised by the revenue regarding the exemption granted to the assessee under section 10(26B) of the Income-tax Act, 1961. The assessee, a company established by the Haryana Government for the welfare of Scheduled Castes, claimed exemption under section 10(26B) for the assessment year 1978-79. The Income Tax Officer (ITO) initially denied the exemption, which was later overturned by the Commissioner (Appeals) who ruled in favor of the assessee, holding that the entire income was exempt from tax under section 10(26B).

The revenue challenged the Commissioner (Appeals)' decision, arguing that the assessee was not wholly financed by the Government and therefore not eligible for the exemption under section 10(26B). The counsel for the assessee, on the other hand, presented evidence including the company's establishment report, memorandum, articles of association, and financial details to support the claim that the assessee was fully financed by the Government, thus meeting the criteria for exemption under section 10(26B).

Upon considering the submissions from both sides, the Appellate Tribunal upheld the decision of the Commissioner (Appeals). The Tribunal analyzed the provisions of section 10(26B) which exempt income of a corporation established by a government act or wholly financed by the government for the benefit of Scheduled Castes. The Tribunal found that the assessee fell under the second category as it was initiated and fully financed by the Haryana Government, as evidenced by the shareholding pattern, capital structure, and loan details, all pointing to government financing. The Tribunal emphasized that the assessee's establishment and financing by the government aligned with the purpose of section 10(26B) to provide exemptions to such entities.

Furthermore, the Tribunal noted that even if the assessee did not strictly fall under the first limb of section 10(26B) pertaining to corporations established by an act, its establishment and complete government financing justified the exemption under the broader interpretation of the provision. Therefore, the Tribunal dismissed the revenue's appeal, affirming the decision to grant exemption to the assessee under section 10(26B) of the Income-tax Act, 1961 for the relevant assessment year.