| The Tax Publishers2019 TaxPub(DT) 2034 (Bang-Trib) : (2019) 176 ITD 0833 : (2019) 201 TTJ 0132 INCOME TAX ACT, 1961
Section 2(15), proviso Section 11
In the instant case BDA's embarkation of activity of setting up of residential layouts, including the activity of sale of sites and flats, was definitely not with a view to earn profit, but to ensure planned urban development and also to accomplish a social objective of providing an opportunity to economically weaker sections of society to be able to own a residence on their own, therefore, proviso to section 2(15) did not get attracted, even if activity of the assessee had resulted in huge surplus or profits.
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Charitable trust - Exemption under section 11 - Applicability of proviso to section 2(15) - No dominant motive to earn profit
Assessee, Bangalore Development Authority (BDA), a statutory body constituted by the State Government of Karnataka, claimed exemption under section 11. AO denied exemption on the ground that activity of assessee had resulted in huge surplus or profits, therefore, proviso to section 2(15) got attracted and further registration granted to assessee under section 12A had been cancelled. Held: The fact of surplus or shorfall is not to be reckoned as the test for applicability of proviso to section 2(15) but rather, whether the activity is embarked upon solely with a view to earn profit or not, which AO had not done. In the instant case, BDA's embarkation of activity of setting up of residential layouts, including the activity of sale of sites and flats, was definitely not with a view to earn profit, but to ensure planned urban development and also to accomplish a social objective of providing an opportunity to economically weaker sections of society to be able to own a residence on their own. Accordingly, assessee's activity was not in the nature of trade, commerce or business and proviso to section 2(15) did not, therefore, get attracted. Further, registration under section 12A which was cancelled by CIT(E), had been restored by Tribunal, therefore, denial of exemption under section 11 was not justified.
Followed:Ahmedabad Urban Development Authority v. ACIT (Exemptions) (2017) 396 ITR 323 (Guj.) : 2017 TaxPub(DT) 1863 (Guj-HC), CIT v. Lucknow Development Authority (2013) 38 taxmann.com 246 (All) : 2014 TaxPub(DT) 0157 (All-HC)
REFERRED : Director of Income Tax (Exemption) v. Karnataka Industrial Area Development Board, ITA No. 261/2013 dt. 7-11-2014 : 2015 TaxPub(DT) 2711 (Karn-HC), CIT v. Vegetable Products (1973) 88 ITR 192 (SC) : 1973 TaxPub(DT) 0421 (SC)
FAVOUR : In assessee's favour.
A.Y. : 2012-13
IN THE ITAT, BANGALORE BENCH
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