Charitable status of statutory development authority upheld where incidental commercial receipts did not defeat its public utility object.

A statutory development authority may retain charitable status where its real object and statutory framework show advancement of objects of general public utility, even if it incidentally carries on trade, commerce or business-like ies. The governing principle, drawn from Supreme Court authority on section 2(15) read with section 10(23C), is that receipts or sale of plots do not by themselves negate charity if they are incidental to the statutory purpose. On that basis, cancellation of registration under section 12AA was held not sustainable, and the issue was decided in favour of the assessee and against the Revenue.

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Issues: Whether the cancellation of registration under section 12AA was sustainable when the assessee, a statutory development authority, was engaged in activities falling within the ambit of charitable purpose under section 2(15) of the Income-tax Act, 1961.

Analysis: The issue was concluded by the Supreme Court's ruling on the scope of section 2(15) read with section 10(23C), which recognises that statutory bodies engaged in the advancement of objects of general public utility may still qualify as charities, even if they incidentally carry on activities in the nature of trade, commerce or business. The controlling consideration is the real object and statutory framework of the body, and not the mere fact that it earns receipts or sells plots. Applying that principle, the respondent's activities were treated as charitable in character, and the cancellation of registration was not justified.

Conclusion: The cancellation of registration under section 12AA was not sustainable, and the issue was answered in favour of the assessee and against the Revenue.

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