IT questions Forest Corp tax exemption

The Income Tax department has moved the Supreme Court challenging the Gauhati High Court's judgement that exempted state-owned Arunachal Pradesh Forest Corporation from paying tax.

A bench headed by Justice SH Kapadia has deferred the hearing till October 19.

The High Court had held that the company was eligible for exemption under Section 10(26B) of the Income Tax Act 1961 between 1988-90, 1991-92 and 1993-1994 "" the assessment years during which it was allegedly not engaged in welfare activities for tribals in the state.

According to the department, the company's objectives did not include charity during the period under consideration.

Solicitor General GE Vahanvati said there was no clause in the Memorandum of Understanding (MoU) regarding application of income for benefit of tribal people of Arunachal Pradesh during these assessment years.

The assessee cannot claim exemption as it was not only established for promoting welfare activities, but also for undertaking commercial activities in the state, he added.

Arunachal Pradesh Forest Corporation, which was incorporated in March 1977, had amended its MoU in 1995 by incorporating one of its objectives as socio-economic development of scheduled castes and scheduled tribes through efficient utilisation of forest based resources etc.

While the exemption claim of the company was rejected by the assessing authority and the Income Tax Appellate Tribunal, the High Court had decided in favour of the assessee on the ground that it was formed with the objective to promote the interests of tribals in the state.