2004 (7) TMI 44 - HC - Income Tax

Exemption as a charitable institution under sections 11 to 13 - assessee develops various kinds of plants that restore environmental balance and also helps in the conservation of various plants in the State of Tamil Nadu - assessee-society are growing plants, which are sold in pots and also develops seeds, garden implements, manure, etc. by engaging 54 employees - If that be so, the respondent has to receive a minimum sale consideration for giving payment to the employees and such act of the respondent/assessee-society by itself, in our considered opinion, cannot be construed as commercial in nature. Similarly the reason that they have not conducted flower show for the past ten years has not changed the character of the charitable object of the society as defined under section 2(15) hence, respondents are entitled for exemption under section 11(4A)

Summary

Issues:
1. Whether the respondent/assessee is a charitable institution under section 2(15) of the Income-tax Act, 1961?
2. Whether the respondent/assessee is entitled to exemption under sections 11 to 13 of the Income-tax Act?

Analysis:

Issue 1:
The case involves a dispute regarding the status of the respondent/assessee as a charitable institution under section 2(15) of the Income-tax Act, 1961. The respondent is a society engaged in the business of selling agri-horticultural products and conducting activities like growing plants, selling seeds, and utilizing premises for shooting movies and TV serials. The assessing authority contested the charitable nature of the respondent due to the absence of a flower show and the commercial activities conducted. The Commissioner of Income-tax (Appeals) upheld the assessing authority's decision, but the Tribunal ruled in favor of the respondent.

Issue 2:
The second issue pertains to whether the respondent/assessee is eligible for exemption under sections 11 to 13 of the Income-tax Act. The Tribunal held that the respondent is entitled to exemption under section 11(4A) of the Act. The court considered the activities of the respondent, such as growing plants for environmental balance and engaging in the sale of plants, seeds, and other related products, as falling within the definition of charitable purpose under section 2(15) of the Act. The court emphasized that engaging in commercial activities like charging for shooting movies does not alter the charitable nature of the respondent's activities.

In conclusion, the High Court dismissed the appeal filed by the Revenue, upholding the Tribunal's decision that the respondent/assessee is indeed a charitable institution entitled to exemption under sections 11 to 13 of the Income-tax Act. The court highlighted that the respondent's activities align with the definition of charitable purpose and that engaging in certain commercial activities does not negate their charitable status.