General public utility exemption upheld where industrial development body's dominant purpose was charitable, not commercial.

An institution constituted under a special State enactment for industrial development and infrastructure was treated as existing for advancement of an object of general public utility. Its statutory mandate, restricted powers and ring-fenced surplus showed that the dominant purpose was not trade, commerce or business, and incidental receipts or surplus did not alter its charitable character. On that basis, the proviso to section 2(15) of the Income-tax Act, 1961 was held inapplicable, and the institution remained entitled to exemption under section 11.

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Issues: Whether the assessee's activities fell within "advancement of any other object of general public utility" and, consequently, whether the proviso to section 2(15) of the Income-tax Act, 1961 applied so as to deny exemption under section 11.

Analysis: The assessee was constituted under a special State enactment for promoting rapid and orderly industrial development, providing industrial infrastructure and carrying out related public purposes. Its funds, powers and activities were ring-fenced by statute, and the surplus, if any, was required to be applied only for its objects. The income profile showed that the core activity was not driven by a profit motive, and the presence of receipts or surplus did not by itself convert the institution into a business concern. Applying the principle that the dominant and prime objective of the institution must be examined, and that incidental income does not destroy charitable character where the institution is not primarily engaged in trade, commerce or business, the proviso to section 2(15) was held inapplicable.

Conclusion: The assessee remained a charitable institution existing for a public utility purpose and was entitled to exemption under section 11.

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