2013 (3) TMI 699 - HC - Income Tax

Summary

Issues involved:
The judgment deals with the following Issues:
1. Whether the Tribunal was justified in allowing exemption u/s.11 of the Income Tax Act, 1961 to the respondent-assessee despite the argument that it cannot be considered a valid trust.
2. Whether the absence of profit motive is a decisive factor for eligibility of exemption u/s.11 and 12 of the Act.

Issue 1: Exemption u/s.11 of the Income Tax Act:
The respondent-assessee was granted registration u/s 12AA of the Income Tax Act and subsequently claimed exemption of its entire income u/s 11 of the Act. The assessing officer denied the exemption and sought to tax the entire income. However, the CIT (A) allowed the appeal of the respondent-assessee based on the decision of the Apex Court in CIT V/s. Gujarat Maritime Board. The Tribunal, in the impugned order, held that the respondent-assessee was established to provide residential settlement to slum dwellers without any profit motives. The Tribunal concluded that the primary purpose of the respondent-assessee was to promote the welfare of the general public by providing accommodation to economically weaker sections of society. Following the decision in Gujarat Maritime Board, the Tribunal determined that the purpose and object of the respondent-assessee was charitable in nature, leading to the dismissal of the revenue's appeal.

Issue 2: Profit Motive for Exemption:
The Tribunal found that the respondent-assessee had no profit motive and its primary purpose was to promote the welfare of the general public by providing accommodation to economically weaker sections of society. The Tribunal held that when the primary purpose is to promote the welfare of the general public, it qualifies as a charitable purpose for the Act. Therefore, the Tribunal did not find any reason to entertain the proposed question of law raised by the revenue.

In conclusion, all the appeals filed by the revenue for the assessment years 2005-06, 2007-08, and 2008-09 were dismissed by the High Court, with no order as to costs.