TMI Blog2017 (8) TMI 849X X X X Extracts X X X X X X X X Extracts X X X X ..... s for promoting the interest of the scheduled tribes or not. If the Government undertaking is established for promoting the interest of scheduled tribes, it would be entitled to the benefit of Section 10(26B) of the Act. In the instant case, apart from the object of creation of the assessee company, being for development and upliftment of the scheduled tribes inhabiting the Lakshadweep Islands, it activities are also directly and indirectly, promoting the interest of the members of the scheduled tribes. The assessee which is financed and established by the Government for promoting the interest of the members of the scheduled tribes living in the Lakshadweep Islands, is entitled to the benefit of section 10(26B) of the I.T. Act. - Decided in favour of assessee. - I. T. A. Nos. 18 & 19/Coch/2017, S. P. Nos. 11 & 12/Coch/2017 - - - Dated:- 1-8-2017 - Shri Abraham P. George, AM And George George K., JM Assessee by : Shri V. V. Asokan, Sr. Adv Revenue by : Shri Shantam Bose, CIT ( DR ) ORDER Per George George K., Judicial Member These appeals at the instance of the assessee are directed against separate orders of the CIT(A)-I, Kochi both dated 24/11/2016. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal raising various grounds. For AY 2011-12 grounds two to six, which are main grounds relate to the issue of denial of claim u/s. 10(26B) of the Act. The other grounds, namely grounds seven to ten, relate to various disallowances/additions made by the Assessing Officer. For the AY 2012-13, the grounds two to six are relating to the issue of denial of claim u/s. 10(26B) of the Act, whereas grounds seven to twelve are regarding the various additions/disallowances made by the Assessing Officer. The assessee has filed a paper book comprising of 122 pages, inter alia, enclosing the Memorandum of Association of the assessee, Annual Accounts of the assessee for the assessment years 2011-12 and 2012-13, statement showing details of salary, roaster of the employees of the assessee etc. The Ld. Sr. Counsel for the assessee, Shri V.V. Asokan submitted that the assessee is a Government of India undertaking established for the development and upliftment of the scheduled tribe inhabiting the Lakshadweep Islands. It was stated that assessee was wholly financed by the Government and no private entities have any stake in the company. It was submitted that till date the company has not decl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Association are as follows: i) The prime objective of the corporation is to work for the development and upliftment of the Scheduled Tribe community of the Union Territory of Lakshadweep. ii) Survey, prospect and catch, develop, manufacture, conserve, culture and artificially breed, preserve, process, and convert deal in wholesale and/or retail and buy, sell, market, import export all varieties of fish, shellfish, squids, cattle fish, octopus, marine products like oysters, pearls and seaweed, and corals and jelly fish which are available from the sea and other waters. iii) Procure, market, sell, process, preserve, develop, deal in import and export of agricultural produce, undertake civil supplies operations, industrial raw materials and finished industrial products. iv) To carry on the business of operation of ships, both passenger and cargo and also acquire ships for operation and act as agents for operating and maintenance of both passengers and cargo vessel of UT of Lakshadweep Administration (UTLA) and other Government and private bodies. 7.1 It is stated in the written submission that the assessee company undertakes various activities for promotin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt to the residents as well as for transportation of goods and for evacuation of the sick and wounded in case of emergency. For operation and maintenance of ships/vessels a commission of 2.5% is provided to the appellant. Employment to 390 islanders who are members of the scheduled tribes are given in the vessels for a total annual expenditure of ₹ 2145 Lakhs towards salary and also employments to 51 islanders who are members of the scheduled tribes are given in the office to carry out the administrative activities of the appellant for a total annual expenditure of ₹ 160 Lakhs towards salary. D) The appellant is also the Nodal agency for disbursement of funds sanctioned and received from National Scheduled Tribe Financial Development of Corporation (NSTFDC). The appellant is entrusted with the disbursement and recovery of loans granted to scheduled tribes from NSTFDC. There is no revenue from this activity. The appellant is carrying out the said activity only for the benefit of the Scheduled Tribes in Lakshadweep. E) The appellant coordinates and monitors the procurement of vessels on behalf of UTL. The funds for this purpose are transferred to the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons for the promotion of socio-economic interests of members of the Scheduled Castes and the Scheduled Tribes. I propose to exempt from income-tax the income of all statutory corporations or bodies, associations or institutions wholly financed by the Central or a State Government, established for promoting the interests of the members of the Scheduled Castes and the Scheduled Tribes . 7.4 It is in this background that Section 10(26B) of the Act was introduced. Section 10(26B) of the I.T. Act reads as follows: 10(26B) any income of a corporation established by a Central, State or Provincial Act or of any other body, institution or association (being a body, institution or association wholly financed by Government) where such corporation or other body or institution or association has been established or formed for promoting the interests of the members of the Scheduled Castes or the Scheduled Tribes or backward classes or of any two or all of them. (a) Scheduled Castes and Scheduled Tribes shall have the meanings respectively assigned to them in clauses (24) and (25) of article 366 of the Constitution; (b) backward classes means such classes of citizens, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iting the Lakshadweep Islands, it activities are also directly and indirectly, promoting the interest of the members of the scheduled tribes. 7.7 The Hon'ble High Court of Allahabad in its judgment reported in 226 ITR 696 on the question of interpreting Section 10(26B) held that: Clause (26B) like other clauses of Section 10 provides exemption in respect of any income of a corporation established by a Central or State Government. The assessee being a body within the meaning of Clause (26B) may qualify for exemption under that clause if it is established that it was formed for promoting the interests of the members of the Scheduled Castes or the Scheduled Tribes or of both. Simply because the assessee has some other main objects besides one of the objects for promoting the interests of the members of the Scheduled Castes, there seems to be no good reason to deny the exemption, envisaged by Clause (26B). The principle of severability of common law is well recognised in our country. In so far as the income of the assessee from the main object No.1, is severable from the income accruing to it from other main income attributable to the housing schemes undertaken for promotin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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