Section 2(15) proviso and Section 11 exemption: incidental receipts do not defeat charitable status where predominant activity is non-commercial.

The proviso to Section 2(15) of the Income-tax Act, 1961 does not deny Section 11 exemption where the assessee's predominant activity is not business or commerce, and incidental income arises only from subsidiary activities. The text notes that research and training grants, along with other receipts, were treated by the Assessing Officer as commercial income, but the Tribunal applied the established principle that exemption cannot be refused merely because some income is earned incidentally. That approach is said to have been affirmed in earlier decisions, and the proviso was not applied to withdraw the Section 11 benefit.

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Issues: Whether the proviso to Section 2(15) of the Income-tax Act, 1961 was attracted so as to deny exemption under Section 11.

Analysis: The assessee had received research and training grants along with other income. The Assessing Officer treated the latter as commercial receipts and denied exemption on the footing that the proviso to Section 2(15) applied. The Tribunal applied the principle that where the predominant activity of an is not business or commerce, exemption cannot be denied merely because some income arises from subsidiary or incidental activity. That reasoning had already been affirmed and applied in earlier decisions.

Conclusion: The proviso to Section 2(15) was not held applicable to deny the benefit of Section 11.

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