Section 11 exemption for a development authority sustained as planned development was not treated as commercial activity.

A statutory development authority engaged in planned development and public welfare was treated as not carrying on commercial activity merely because it undertook development functions or earned receipts from those functions. Applying binding precedent from the assessee's earlier years and coordinate bench decisions, the tribunal held that the proviso to section 2(15) was not attracted and the exemption under section 11 remained available. The principle of consistency also supported the result, as no materially different facts were shown for the year under consideration. The issue was therefore decided in favour of the assessee and against the Revenue.

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Issues: Whether the assessee development authority was entitled to exemption under section 11 of the Income-tax Act, 1961, and whether the proviso to section 2(15) of that Act was attracted.

Analysis: The appeal was decided by following the binding precedent in the assessee's own earlier years and other coordinate bench decisions dealing with similar development authorities. The governing view applied was that a statutory development authority, when pursuing its object of planned development and public welfare, is not to be treated as carrying on commercial activity merely because it undertakes development functions or earns receipts from such activity. On that basis, the proviso to section 2(15) was held inapplicable and the claim for exemption under section 11 was sustained. The decision also rested on the principle of consistency, as no materially different facts were shown for the year under consideration.

Conclusion: The issue was answered against the Revenue and in favour of the assessee; exemption under section 11 was upheld and the proviso to section 2(15) was held not to apply.

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