Dominant-object test under section 2(15) protects a public utility body from losing exemption due to incidental receipts.

A statutory corporation engaged in industrial development and allied public utility functions does not fall within the proviso to section 2(15) of the Income-tax Act merely because it collects regulatory fees or earns incidental surplus from land sales. The dominant-object test applies: expressions such as trade, commerce and business must be read in context, and incidental receipts do not by themselves convert a public utility activity into a profit-making venture. On that basis, the proviso was held inapplicable and the entity continued to qualify for exemption under sections 11 and 12.

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Issues: Whether the assessee's activities fell within the proviso to section 2(15) of the Income-tax Act, 1961 as activities in the nature of trade, commerce or business, and whether the assessee was therefore disentitled to exemption under sections 11 and 12.

Analysis: The assessee is a statutory corporation constituted for industrial development and allied public utility functions. The Court applied the settled test that the expressions "trade", "commerce" and "business" in the proviso to section 2(15) must be construed in the context of the dominant object of the and that incidental receipts, fees or surplus do not by themselves convert a public utility activity into business. The Court noted that the collection of fees or proceeds from land sales was incidental to the statutory object, there was no element of profiteering, and the issue was already covered by the Court's earlier decision in the assessee's own case as well as by the Supreme Court's rejection of the Revenue's appeals in connected matters.

Conclusion: The proviso to section 2(15) was held not to apply, and the assessee remained entitled to exemption under sections 11 and 12. The question of law was answered in favour of the assessee and against the Revenue.

Ratio Decidendi: A statutory body pursuing a dominant object of general public utility does not fall within the proviso to section 2(15) merely because it collects regulatory fees or earns incidental surplus, unless the activities are in substance driven by profit-making or constitute trade, commerce or business.

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