2015 (10) TMI 2474 - AT - Income Tax

Entitlement to exemption u/s 11 - non maintaining separate books of accounts as required under provision of section 11(4A) - CIT(A) allowed the claim - Held that - There is no dispute that right from inception, the assessee trust was granted exemption u/s 11 of the Act by the tax authorities. Even, if, the property is under dispute with the BMC authorities, cannot be the sole bases for denying exemption to the assessee. So far as, non-maintenance of separate books of accounts for different sports is concerned, we are in agreement with the finding of the ld. Commissioner of Income Tax (Appeals) that different sports are single activity of sports, therefore, cannot be treated as different activities of the trust. This view find support from the ratio laid down from Hon ble Apex Court in Thanthi Trust (2001 (1) TMI 80 - SUPREME Court). There is further uncontroverted finding in the impugned order that the assessee trust is not running restaurant, bar, etc, thus, there is no question of maintaining separate registers. The activities of the assessee trust are for the attainment of objects of the trust enshrined in the trust deed. Thus, the assessee is having a valid registration u/s 12A of the Act, granted by the Director of Income Tax (Exemption) and the Assessing Officer has not specifically pointed out any violation of the trust deed as well as the provision of section 12 & 13, therefore, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income Tax (Appeals). - Decided against revenue

Summary

Issues:
Granting exemption u/s 11 of the Income Tax Act without maintaining separate books of accounts as required under section 11(4A).

Analysis:
The judgment by the Appellate Tribunal ITAT Mumbai involved a dispute regarding the granting of exemption u/s 11 of the Income Tax Act without maintaining separate books of accounts as mandated by section 11(4A). The Revenue challenged the order of the First Appellate Authority, arguing that the assessee did not maintain separate books of accounts and violated the trust deed, thus making them ineligible for exemption u/s 11 of the Act. The appellant contended that the assessee, a charitable trust engaged in Arts & Sports development, did not comply with the provisions of maintaining separate books of accounts, leading to the denial of exemption.

During the proceedings, the appellant's representative reiterated the grounds of appeal, emphasizing the non-compliance with the requirement of separate books of accounts. In response, the counsel for the assessee defended the impugned order, highlighting the charitable nature of the trust's activities and its compliance with the trust deed. The tribunal considered the submissions and examined the facts, noting that the trust was registered with the Charity Commissioner and the Income Tax department u/s 12A. The trust's primary activities focused on Arts & Sports development, with a club constructed on BMC-provided land as per agreement terms.

The Assessing Officer treated the assessee as an Association of Persons (AOP) and assessed income based on business activities due to a property dispute with BMC authorities. However, the tribunal referenced the Thanthi Trust case, emphasizing that different sports activities constitute a single activity under the trust's objectives. The tribunal found no violation of trust deed provisions or sections 12 & 13, affirming the validity of the trust's registration u/s 12A. Consequently, the tribunal upheld the Commissioner of Income Tax (Appeals) decision and dismissed the Revenue's appeal, concluding that the assessee was eligible for exemption u/s 11 of the Act.

In conclusion, the judgment highlighted the importance of maintaining separate books of accounts for different activities under a charitable trust while underscoring the trust's compliance with legal requirements and objectives as outlined in the trust deed and relevant tax provisions.