TMI Blog1995 (12) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribes are exempt under section 10(26B) of the Income-tax Act, 1961, when the corporation was also formed for promoting the interests of backward classes and other weaker sections of the society ?" The main objects of the assessee a Government (public) company, as defined under section 617 of the Companies Act, 1956, named as Harijan Evam Nirbal Varg Avas Nigam Ltd. (hereinafter referred to as the assessee), are as follows : (1) To frame and execute housing schemes and schemes connected therewith in the State of Uttar Pradesh for the benefit of Harijans, backward classes and other weaker sections. (2) To undertake works as civil engineers, to carry out construction, maintenance and improvement of roads and buildings of all kinds and of barrages, dams, aqueducts, bridges, culverts, rope-ways electric and sanitary installations and town and village planning works. (3) To manufacture, buy, sell, instal, work, alter, improve, manipulate or otherwise deal in all kinds of bricks, tiles, earthenware, cement, stone, sand, hardware and other building materials, equipment, tools and machinery connected with the construction of roads and buildings of all kinds. (4) To purchase, take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee's claim for exemption under clause (26B) of section 10. On appeal, the Commissioner of Income-tax (Appeals) (CIT (Appeals) for brevity's sake) accepted the contention of the assessee that it falls within the expression " any other body " occurring in clause (26B) and is wholly financed by the Government. The Commissioner of Income-tax (Appeals), however, denied exemption on the ground that the assessee is free to pursue any of its main objects and that it is not formed only for promoting the interests of Scheduled Castes. He took the view that out of the five main objects, only one of the objects, i.e., object No. 1, relates to framing and executing housing schemes and schemes connected therewith in the State of Uttar Pradesh for the benefit of the Harijans. The Commissioner of Income-tax (Appeals) was of the view that the existence of object No. 1 alone which comes within the ambit of clause (26B), will not entitle the assessee to claim exemption under that clause, inasmuch as the assessee is free to pursue other main objects having nothing to do with object No. 1. On further appeal by the assessee, the Appellate Tribunal held : (a) that object No. 1 is the main and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lete plan and objects were mentioned in the memorandum of association. Without objects Nos. 2 to 5 the scheme cannot be executed. " We do not agree with the view taken by the Appellate Tribunal. In our opinion, construction of dams, bridges, barrages, aqueducts, ropeways, etc., are not necessary to complete a housing colony. Construction of a dam is a big and independent project in itself. May be that to complete that project, construction of temporary houses to accommodate the staff employed for construction, may be necessary but to complete a housing colony, construction of dams, barrages, aqueducts, by no stretch of imagination, can be said to be ancillary or necessary. Similarly, the remaining main objects enumerated in clause (A) of the memorandum of association, are not necessary to execute a housing scheme. A housing scheme taken up for the benefit of Harijans prima facie means to provide accommodation to the people of such a category. No doubt construction of a housing colony for the benefit of Harijans implies construction of approach roads, but in no case does it imply construction of barrages, dams, ropeways, bridges etc. The view of the Tribunal that construction of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel for the Revenue submitted before us that the assessee being formed for the benefit of Harijans and other weaker sections which expression does not find place in clause (26B), will not be entitled to exemption under that clause. The Appellate Tribunal, on the basis of the material on record, concluded that the assessee was formed " for promoting the interests of the members of the Scheduled Castes and the Scheduled Tribes besides the members of the backward classes and other weaker sections of the society ". The terms " backward classes " and " other weaker sections " not being germane to this case, the question remains whether upon consideration of the term " Harijans ", the conclusion reached by the Appellate Tribunal that the assessee was formed for promoting the interests of the members of the Scheduled Castes and the Scheduled Tribes, can be upheld. It is a matter of common knowledge that the Father of the Nation--Mahatma Gandhi--coined the word " Harijan " for the people of Scheduled Castes and the word " Girijan " for the Scheduled Tribes. Commonly understood, the term " Harijan " refers to the members of the Scheduled Castes only. The term " Harijan " does not include " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause (26B). The scope of clause (26B) is not circumscribed by the words " only ", " solely ", " exclusively " or " wholly ", but the expression used in that clause is " formed for promoting the interests of the members of either the Scheduled Castes or the Scheduled Tribes or of both ". When the word " only ", " exclusively " or " solely " is not used in clause (26B) as a prefix or suffix to the past participle " formed " occurring in that clause, we are of the view that there is no reason to read clause (26B) in a restricted manner. A corporation established by the Central or State Government or any other body, institution or association wholly financed by the Government may have several objects---some for promoting the interests of the members of the Scheduled Castes or the Scheduled Tribes or of both and some not. The said corporation or the body, in our view, will be entitled to exemption in respect of the income, which is attributable to the execution of housing schemes for the promotion of the interests of the members of the Scheduled Castes or the Scheduled Tribes or of both. Parliament has used the word " exclusively " in sub-clause (a) to the proviso to clause (21), the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Scheduled Castes and the Scheduled Tribes and raise their standard of living. Exemption under clause (26B) is in furtherance of these articles. It need hardly be mentioned that the Constitution is the supreme law of the land. All other laws, including the Income-tax Act, are subordinate to the Constitution and must be read and interpreted in the light of the constitutional provisions. We, therefore, must take into account articles 46 and 47 while interpreting section 10(26B) of the Income-tax Act, 1961, and give the latter provision a meaning which will further the object of the former articles. Clause (26B), therefore, deserves to be interpreted in such a way as to promote the schemes undertaken for ameliorating the lot of the members of the Scheduled Castes or the Scheduled Tribes or of both. A corporation or other bodies may be formed having one of the objects for promoting the interests of the members of the Scheduled Castes or the Scheduled Tribes or of both and if strict interpretation is put on clause (26B), then they will be precluded from taking the benefit of exemption. Clause (26B) is, therefore, to be interpreted in such manner as to encourage the corporations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mes under the main object No. 1 and not from the activities covered by any other object. This is not very relevant for the purpose of this case. When the assessee has several main objects, then it is capable of earning income from all those objects and it is wholly irrelevant to see whether in a given year, the assessee earned income only from one of the objects or all. Whereas the Tribunal was right to exclude the income earned from the execution of housing schemes undertaken for the promotion of backward classes, the Tribunal was wrong in allowing blanket exemption for all the activities, covered by all the main objects. If the income earned from object No. 1 is not severable from the income of other main objects and if income from all the main objects is inextricably mixed up, then the assessee will not be entitled to exemption even in respect of the income earned from the housing schemes, executed for the benefit of the members of the Scheduled Castes. The assessee will do better if it gets the main object No. 1 suitably amended to make it consistent with the provisions of section 10, clause (26B), of the Income-tax Act. Question No. 1 is, therefore, answered in the negat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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