2011 (9) TMI 1061 - AT - Income Tax

Exemption u/s.11 - charitable purposes - Held that - In the present case, the Slum Development Authorities is established for providing residential settlements to the slum dwellers without any profit motive. Moreover, primary purpose and the predominant object are to promote the welfare of the general public by providing better residential accommodations to slum dwellers and economically deprived class of society and said purpose would be charitable in nature only. In our opinion, the activities of the SRA, present assesse are charitable in nature and hence, the assessee is entitled for exemption u/s.11 of the I.T. Act. Moreover, the assessee has been also granted the registration u/s.12AA that has not been cancelled.

Summary

Issues: Revenue's challenge to allow exemption u/s.11 of the IT Act, 1961 for A.Y. 2007-08.

Analysis:
1. The appeal involved a challenge by the revenue against the order of the Ld. CIT (A)-1, Mumbai for the assessment year 2007-08, directing the AO to allow exemption u/s.11 of the IT Act, 1961. The revenue contended that the AO should not have granted the exemption, considering the detailed discussion of the issues and facts by the AO.

2. The assessee, a local authority created by the Govt. of Maharashtra, filed its income tax return for A.Y. 2007-08 declaring 'nil' total income. However, the assessment under section 143(3) of the Act determined the taxable income at a specific amount.

3. The key issue revolved around the assessee's claim for exemption u/s.11 of the IT Act. Legislative changes in 2002 impacted the eligibility for exemption under sections 10(2) & 10(20A), excluding certain authorities like the present assessee. Despite denial of exemption in previous years, the assessee, having obtained registration u/s.12AA, sought exemption u/s.11. The CIT (A) allowed the exemption based on relevant case laws, leading to the revenue's appeal before the Tribunal.

4. The Tribunal, after considering submissions and case laws, found that the principles established by the Supreme Court in the case of Gujarat Maritime Boards were applicable to the present case. The interpretation of 'charitable purpose' under section 2(15) was crucial, emphasizing the wide connotation of 'general public utility' and the promotion of public welfare as charitable.

5. Referring to the Gujarat Maritime Boards case, the Tribunal highlighted that if an institution's primary purpose is charitable, ancillary or incidental objectives do not negate its charitable nature. In the context of the present case, where the Slum Development Authority aimed to provide residential settlements to slum dwellers without profit motives, the Tribunal deemed the activities as charitable, aligning with the Supreme Court's precedent.

6. Consequently, the Tribunal concluded that the SRA's activities were charitable, making the assessee eligible for exemption u/s.11 of the IT Act. The registration u/s.12AA further supported the assessee's position. Therefore, the Tribunal upheld the CIT (A)'s order, dismissing the revenue's appeal and confirming the exemption for the assessee for A.Y. 2007-08.