Commercial character of industrial development activities brought a statutory corporation within the proviso to section 2(15), affecting exemption claims.

A statutory corporation engaged in industrial plot development, allotment, lease premium collection and infrastructure provision was treated as carrying on commercial activities in the facts stated, so its objects were held to fall within the proviso to section 2(15) and exemption under section 11 was denied. A dissolution clause in the governing statute did not, by itself, make the corporation a revocable trust, because dissolution and revocation are distinct concepts. Claims that lease rent, development charges and interest were held on behalf of the Government required factual verification on the underlying resolutions and records. The brought forward deficit claimed under section 11 was not available once exemption failed, while depreciation under section 32 remained allowable under the normal computation provisions.

---

---

Issues: (i) Whether the assessee was entitled to exemption under section 11 and whether its activities were hit by the proviso to section 2(15); (ii) Whether the receipts claimed to have been collected on behalf of the Government of Maharashtra were taxable in the assessee's hands; (iii) Whether the brought forward deficit was allowable as a deduction; (iv) Whether book depreciation was allowable.

Issue (i): Whether the assessee was entitled to exemption under section 11 and whether its activities were hit by the proviso to section 2(15).

Analysis: The assessee was a statutory corporation under the Maharashtra Industrial Development Act, 1961 and was not a revocable trust merely because the Act contained a dissolution provision. Dissolution and revocation are distinct concepts, and section 58 did not make the corporation revocable at the will of the State Government. However, the nature of the assessee's operations, consisting of development and allotment of industrial plots, collection of lease premiums and charges, and provision of infrastructure facilities, was held to be commercial in the present factual setting. The activities were no longer confined to a purely charitable object of general public utility and the profit-oriented auction-based disposal of plots brought the case within the proviso to section 2(15).

Conclusion: The assessee was not entitled to exemption under section 11 on this ground, and the proviso to section 2(15) applied against the assessee.

Issue (ii): Whether the receipts claimed to have been collected on behalf of the Government of Maharashtra were taxable in the assessee's hands.

Analysis: The assessee asserted that lease rent, development charges and interest received in the course of certain activities belonged to the State Government and were therefore shown as liabilities rather than income. That claim had not been examined on the basis of the governmental resolutions and supporting materials relied upon, and the issue required factual verification as to the legal character of the receipts and the extent, if any, of the obligation to remit them to the Government.

Conclusion: The matter was remitted to the Assessing Officer for fresh examination.

Issue (iii): Whether the brought forward deficit was allowable as a deduction.

Analysis: Since the assessee's income was to be computed under the normal provisions of the Act and the exemption claim did not survive, the brought forward deficit computed under section 11 could not be set off in the manner claimed.

Conclusion: The deduction for brought forward deficit was disallowed.

Issue (iv): Whether book depreciation was allowable.

Analysis: Depreciation under section 32 is a normal deduction in computing taxable income under the Act, and it could not be denied merely because the assessee's computation was being considered under the regular provisions.

Conclusion: The assessee was entitled to depreciation under section 32.

Final Conclusion: The appeal succeeded only in part, with one issue remanded for fresh adjudication and depreciation relief granted, while the exemption claim and set-off of brought forward deficit were rejected.

Ratio Decidendi: A statutory corporation engaged in plot development and allied infrastructure activities may fall within the proviso to section 2(15) where its operations are commercial in character, and a dissolution clause does not by itself make the entity a revocable trust.

---