2015 (7) TMI 1115 - AT - Income Tax

Eligibility for exemption u/s 11 - registration u/s 12AA - non charitable activity - Held that - It is not in dispute that the activity of the assessee was considered to be a general public utility and the DIT(E) has granted registration u/s 12AA of the Act. Therefore, for the year under consideration, the assessee is eligible for exemption u/s 11 subject to fulfillment of further conditions as laid down in sections 11,12 and 13 of the Act. Since the lower authorities have not considered the conditions laid down in sections 11, 12 & 13 of the Act, this Tribunal is of the considered opinion that the Assessing Officer has to reconsider the issue afresh. It is made clear that the first proviso to section 2(15) of the Act would be applicable from assessment year 2010-11, therefore, in view of the changing scenario, the eligibility of the assessee has to be examined by the Assessing Officer afresh from assessment year commencing from 2010-11. We are not expressing any opinion with regard to exemption for assessment year 2010-11. Suffice to say that subject to fulfillment of conditions of section1 11,12 & 13 of the Act, the assessee is eligible for exemption for assessment year 2009-10. Accordingly, the orders of the lower authorities are set aside and the entire issue is remitted back to the file of the Assessing Officer to reconsider the issue afresh in the light of the provisions of sections 11, 12 & 13 of the Act and thereafter decide the same in accordance with law after giving a reasonable opportunity of hearing to the assessee. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
Assessee's eligibility for exemption u/s 11 of the Act based on the nature of services provided and applicability of the first proviso to section 2(15) of the Act introduced by Finance Act, 2008.

Analysis:

Issue 1: Eligibility for exemption u/s 11 of the Act
The appeal concerns the eligibility of the assessee, a registered charitable trust u/s 12AA of the Act, for exemption u/s 11. The Assessing Officer disallowed the exemption claim, citing the activity of the assessee as service related to trade, commerce, or business. The ld. Representative for the assessee argued that despite providing services to trade, commerce, or business, the assessee should still be eligible for exemption u/s 11. Reference was made to the judgment of the Hon'ble Madras High Court and the statement of the Hon'ble Finance Minister during the introduction of Finance Act, 2008. On the other hand, the Departmental Representative contended that the assessee was collecting fees from Tamil Film Producers, indicating a commercial aspect to the services provided. The first proviso to section 2(15) introduced by the Finance Act, 2008, was highlighted, stating that services related to trade, commerce, or business may not qualify as charitable purposes.

Issue 2: Applicability of the first proviso to section 2(15) of the Act
The Tribunal analyzed the applicability of the first proviso to section 2(15) introduced by the Finance Act, 2008, which clarified that services rendered in relation to trade, commerce, or business are not eligible for exemption as charitable purposes. The Tribunal noted that this proviso came into effect from 1.4.2009, making it applicable from the financial year 2009-10 onwards. As the assessment year in question was 2009-10, the Tribunal determined that the first proviso could not be applied retroactively. The Tribunal emphasized that the activity of the assessee was considered a general public utility, and registration u/s 12AA was granted. Therefore, for the relevant year, the assessee was deemed eligible for exemption u/s 11, subject to meeting conditions outlined in sections 11, 12, and 13 of the Act. The Tribunal directed the Assessing Officer to reassess the issue considering the aforementioned conditions, without expressing an opinion on the exemption for subsequent years. The orders of the lower authorities were set aside, and the issue was remitted back to the Assessing Officer for fresh consideration.

In conclusion, the Tribunal allowed the appeal for statistical purposes, emphasizing the need for a reassessment based on the provisions of sections 11, 12, and 13 of the Act for the assessment year 2009-10.