2011 (10) TMI 697 - AT - Income Tax

Exemption under sec. 11 denied - hiring of the auditorium and providing space for rent are commercial activities and there is nothing charitable about the activities carried on by the assessee - Held that - CIT(A) correctly decided the issue in favour of the assessee after following the order of the Tribunal for Assessment Years 1986-87 to 1988-89 as held the predominant object of the letting out of the auditorium and furniture and fixture is for carrying out of the object of the trust. The learned CIT(A) also observed that his predecessor, while deciding the issue in Assessment Year 2007-08, has also followed the order of the Tribunal and decided the issue in favour of the assessee. The learned CIT(A), therefore, held that the assessee is entitled to exemption under sec. 11 of the Act. Appeal filed by the revenue is dismissed.

Summary

Issues involved:
Appeal against allowing exemption under sec. 11 of the Income-tax Act for Assessment Year 2008-09 based on the nature of activities carried out by the assessee society.

Detailed Analysis:

Issue 1: Nature of activities and claim of being a charitable institution
The Assessing Officer (AO) found the main income sources of the assessee society to be hiring charges of auditorium, rental income, and maintenance charges. The AO rejected the claim of the assessee being a charitable institution, stating that the activities were conducted with a profit motive. The AO brought the surplus to income chargeable to tax, determining the total income at Rs. 55,89,830. However, the learned CIT(A) decided in favor of the assessee, citing previous Tribunal orders for similar assessment years. The CIT(A) held that the assessee is entitled to exemption under sec. 11 of the Act due to the nature of its activities being in line with charitable purposes.

Issue 2: Commercial activities and separate books of account
The revenue contended that earning rental income and maintenance charges constitute commercial activities, requiring separate books of account. The revenue argued that there was no evidence of charitable activities aligning with the society's objectives. However, the counsel for the assessee highlighted that the society had been assessed as a charitable entity for an extended period, with no factual changes in the relevant year. The Tribunal referred to a previous decision for assessment years 1986-87 to 1988-89, where a similar issue was decided in favor of the assessee. The Tribunal upheld that the hiring of the auditorium was in furtherance of the society's objectives, thus qualifying for exemption under sec. 11.

Conclusion:
The Tribunal, following the precedent set by previous decisions, upheld the order of the CIT(A) and dismissed the appeal filed by the revenue. The Tribunal emphasized that the hiring of the auditorium and related activities were not conducted for profit but to further the society's charitable objectives, making the assessee eligible for exemption under sec. 11 of the Income-tax Act.