INCOME TAX ACT, 1961

Section 2(15), Proviso 11

Charitable trust - Exemption under section 11 - Urban development authority generating incidental surplus - Applicability of proviso to section 2(15)

Assessee was a statutory body constituted under Bangalore Development Authority Act, 1976 (BDA Act). It claimed exemption under section 11. AO denied exemption on the ground that activity of formation of layouts and allotment of sites was hit by proviso to section 2(15) as it had resulted in huge surplus and, therefore, exemption could not be allowed.Held: The fact of surplus or shortfall is not to be reckoned as the test for applicability of proviso tos ection 2(15) rather, whether the activity is embarked upon solely with the view to earn profit or not, which AO had not done. Pre-dominant object of assessee was planned urban development of Bangalore City and not profit making. Merely because surplus was generated from a particular activity, it could not be said that such activity was in the nature of trade, commerce or business. Therefore, denial of exemption under section 11 was not justified.

Relied:Ahmedabad Urban Development Authority v. ACIT (Exemptions) (2017) 396 ITR 323 (Guj) : 2017 TaxPub(DT) 1863 (Guj-HC), Jaipur Development Authority v. CIT (2014) 52 Taxmann.com 25 (JP-Trib.), Haridwar Development Authority v. CIT (2015) 57 Taxmann.com 6 (Del-Trib.), CIT v. Lucknow Development Authority (2013) 38 Taxmann.com 246 (All) and CIT v. Jodhpur Development Authority (2017) 79 Taxmann 361 (Raj.). Distinguished:Jammu Development Authority v. UOI ITA No. 164/2012, CMA-2-2012 (J & K HC), Punjab Urban Planning and Development Authority (103 TTJ 98 (Chd-Trib), Indore Development Authority-ITA No. 366/Ind/2008 (Ind-Trib) and Improvement Trust v. CIT, Bhatirda (41 Taxmann.com 403) (Asr-Trib).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2013-14 & 2014-15

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