Local Authority's Layout Approval Fees Qualify as Charitable Activity Under Sections 11, 12; Exemption Granted Despite Commercial Nature

ITAT ruled in favor of local authority operating in Magadi town, Karnataka, reversing lower authorities' denial of exemptions under Sections 11 and 12. The authority's activities, including layout approvals and fee collection, were deemed charitable rather than commercial. Operating under government regulation with supervised fund management and audited accounts, the authority's non-profit character was established. ITAT rejected AO's Section 13(8) application, finding fees were collected for public welfare, not profit. The tribunal followed precedent from BDA case, confirming the authority's status as a state instrumentality serving public welfare. Assessment proceedings' pending status allowed Section 12AA registration benefits, following favorable interpretation principle from Shree Shayam Mandir Committee case. .....

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