Industrial development corporation retains charitable status where development receipts do not show trade, commerce or business

A statutory industrial development corporation constituted for orderly establishment and development of industries remained within the public-utility limb of section 2(15) because its leasing, allotment and related charges did not, by themselves, show trade, commerce or business in the commercial sense. The decisive test was whether its affairs were conducted on commercial lines with a dominant profit motive or had departed from its statutory objects; on the facts, they had not. As the first proviso to section 2(15) did not apply, section 13(8) also did not operate to deny exemption under sections 11 and 12.

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Issues: Whether the assessee-corporation's activities of developing industrial areas and allotting land for industrial use fell within the proviso to section 2(15), and whether, in consequence, it was denied exemption under sections 11 and 12 by virtue of section 13(8).

Analysis: The assessee was constituted under the Gujarat Industrial Development Act, 1962 for orderly establishment and development of industries and industrial estates. The statutory functions and powers showed that its activities were undertaken in furtherance of that public purpose, and the receipts from leasing, allotment and related charges did not by themselves establish that it was carrying on trade, commerce or business in the commercial sense contemplated by the proviso. The decisive inquiry was whether the corporation was conducting its affairs solely on commercial lines with a profit motive or had deviated from its statutory objects. On the facts found, the activities remained aligned with the objects of public utility, and the proviso to section 2(15) was held inapplicable. Since section 13(8) operates only where the first proviso to section 2(15) applies, it also did not disqualify the assessee from exemption.

Conclusion: The assessee was held to be entitled to claim charitable status under section 2(15), and the denial of exemption under sections 11 and 12 was rejected.

Ratio Decidendi: A statutory development corporation carrying out its mandated public-utility objects does not lose charitable status merely because it earns receipts from its development and allotment activities, unless those activities are shown to be carried on as trade, commerce or business with a dominant profit motive.

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