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Karnataka Industrial Area Development Board .v. Addl DIT (E), (2020) 121 taxmann.com 88 / (2021) 277 Taxman 36 (Karn)(HC)

S. 11 : Property held for charitable purposes – Statutory body- Functions of assessee were fully controlled by instructions issued by Government – Assessee was engaged in charitable activity through advancement of an object of general public utility. [ S. 2(15) , Karnataka Industrial Area Development Act, 1987 ]

On appeal the High Court  allowing the appeal held that :

  • main component of income of the assessee is derived in the form of interest and there is no profit element in earning income as interest;
  • that the assessee has been established to promote rapid and orderly development of industries in the State and to assist in implementation of the policy of the Government;
  • to facilitate in establishing infrastructure projects and to function on ‘No Profit-No Loss’ basis;
  • profit making is not the driving force or objective of the assessee;
  • AO has not disputed that the assessee fulfills all the conditions for allowing exemption except proviso to Section 2(15) of the Act.

Thus, the Tribunal has correctly held that the proviso to section 2(15) of the Act is not applicable to the case of the assessee. (ITA No. 205 of 2016, dt. 30/09/2020)  (AY. 2009-10 )