INCOME TAX ACT, 1961

Section 2(15), Proviso Section 11

Charitable trust - Exemption under section 11 - Applicability of proviso to section 2(15) - Collection of cess, fee incidental to object of advancement of objects of general public utility

Assessee-Urban Development authority engaged in Area Development and Town Planning and carrying out the activity of general public utility claimed exemption under section 11. AO noticed that assessee collected cess and fee. Accordingly, AO took the view that activity of assessee-respondent, was in the nature of trade, commerce and business and hence it could not be regarded as activity for charitable purpose in view of proviso to section 2(15). Accordingly, AO disallowed exemption. Held: Assessee was established/constituted under provisions of Gujarat Town Planning Act and collection of fees and cess was incidental to object and purpose of the Act. Profit making was neither the aim nor object of assessee. It was not principal activity. Merely because while carrying out activities for the purpose of achieving objects of general public utility, certain incidental surpluses were generated, same would not render the activity in the nature of trade, commerce or business. Accordingly, proviso to section 2(15) did not get attracted and assessee was entitled to exemption under section 11.

Followed:Ahmedabad Urban Development Authority v. Asstt. CIT (2017) 396 ITR 323 (Guj-HC) : 2017 TaxPub(DT) 1863 (Guj-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2009-10.

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