Om Prakash, J. - (1.) AT the instance of the Revenue, the Income-tax Appellate Tribunal drew up a statement of case and referred the two following questions to this court for its opinion : "1. Whether, on the facts and in the circumstances of the case, the learned Tribunal was justified in law in holding that objects Nos. 2 to 5 as mentioned in the memorandum of association of the company were supplementary and were introduced with a view to achieve the object mentioned in Clause No. 1 of the said memorandum of association and without that the corporation cannot achieve its main objects ? 2. Whether, on the facts and in the circumstances of the case, the learned Tribunal was correct in law in holding that income attributable in executing the housing schemes and the other connected schemes therewith for the benefit of Scheduled Castes and Scheduled 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 on lease or otherwise take over any roads, buildings, owned by the State Government for the purpose of construction, maintenance or management thereof. (5) To establish, maintain and operate any transport service in the State of Uttar Pradesh. The objects incidental or ancillary to the attainment of the main objects of the assessee, are as many as fifty, as enumerated in the memorandum of association which had been produced before us by the parties. We do not consider it necessary to reproduce them. It will suffice to state for the purpose of this reference that the ancillary objects are wholly different from the main objects. Besides the main and ancillary objects, the memorandum of association of the assessee sets out three other objects in Clause (C). The main objects and the ancillary objects are enumerated in Clause (A) and Clause (B) respectively in the memorandum of association.
(2.) THE assessee claimed exemption under Section 10, Clause (26B), of the Income-tax Act, 1961 (briefly, the Act), which was inserted by the Finance Act, 1980, with retrospective effect from 1st April, 1972. Section 10, Clause (26B) is as under : " 10. Incomes not included in total income. - In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included-- . . (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 either the Scheduled Castes or the Scheduled Tribes or of both. Explanation. - For the purposes of this clause, 'Scheduled Castes' and 'Scheduled Tribes' shall have the meanings respectively assigned to them in Clauses (24) and (25) of Article 366 of the Constitution." Clause (26B) was amended by the Finance Act, 1994, with effect from 1st April, 1993, and the words occurring therein in the parenthetical clause were substituted for the words "members of either the Scheduled Castes or the Scheduled Tribes or of both". As the instant case related to the assessment year 1979-80, we are concerned with the unamended clause reproduced hereinbefore. The Income-tax Officer rejected the 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 dominant object and objects Nos. 2 to 5 enumerated in Clause (A) of the memorandum of association, are "supplementary" ; (b) that without objects Nos. 2 to 5, object No. 1 cannot be achieved ; (c) that to make the housing schemes ideal, it is necessary to pursue the activities covered by the remaining objects Nos. 2 to 5 ; (d) that without pursuing objects Nos. 2 to 5, the housing scheme as envisaged by object No. 1 cannot be executed ; (e) that the assessee is not engaged in any profit earning activity; and (f) that the letter addressed by the Special Secretary to the Government of Uttar Pradesh, Lucknow, to the Secretary, Central Board of Direct Taxes, New Delhi, fully establishes that the housing schemes executed pursuant to object No. 1 by the assessee are for promoting the interests of the Scheduled Castes and Scheduled Tribes and also of the backward classes and other weaker sections. The Tribunal, however, clarified that since the assessee pursued the activities also for the promotion of the interests of the backward classes and other weaker sections, its full income is not exempted and that the income attributable to the housing schemes and other connected schemes undertaken for the benefit of Scheduled Castes and Scheduled Tribes only, is exempted.
(3.) SINCE the Tribunal partly accepted the case of the assessee, it did not go into the alternative plea of exemption under Section 10(20A) of the Act. The first question for consideration is whether the Tribunal was right in holding that object No. 1 is the main and dominant object and objects Nos. 2 to 5 as enumerated in Clause (A) of the memorandum of association of the assessee are supplementary. Object No. 2 (reproduced hereinbefore) enables the assessee to undertake works as civil engineers, to carry out construction, maintenance, the improvement of roads and buildings of all kinds, of barrages, dams, aqueducts, bridges, culverts, ropeways, electric and sanitary installations and town and village planning works. The Tribunal, to elucidate its point of view, observed ; "To elucidate further, it may be mentioned that while executing the housing schemes, the roads, dams, bridges, culverts, roadways, hospitals, etc., had to be constructed otherwise the housing scheme cannot be an ideal scheme. The Government wanted to construct the housing scheme and for achieving the object, the complete 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 dams, bridges, roads, barrages, etc., is an integral part of the housing colony is patently erroneous. Each main object, in our opinion, is independent and the activities connected therewith may be pursued independently. Our view is also fortified by the memorandum of association, inasmuch as under Clause (B), the objects incidental or ancillary to the attainment of the main objects are separately provided and besides them under Clause (C) other objects are enumerated. If objects Nos. 2 to 5 falling under Clause (A) were supplementary to object No. 1, then they would have been enumerated in Clause (B) and not in Clause (A). No doubt, the objects enumerated in Clause (B) are ancillary or incidental to the main objects enumerated in Clause (A). ;