2014 (11) TMI 379 - AT - Income Tax

Allowability of exemption u/s 11 Charitable purpose u/s 2(15) - Held that - The assessee has been recognised as a charitable institution looking to its objects and certificate under section 12A has been granted by the competent authority, vide certificate dated 21st June 1980 - In DIT (Exemption) v. Chembur Gymkhana 2012 (8) TMI 611 - Bombay High Court it has been held that the fact that the membership of the club is open to a section of the community would not detract from the fact that the club has been constituted for the advancement of any other object of general public utility - The Club is not formed for the benefit of an individual or a group of individuals as such - while affirming that the object of the Club falls within the purview of Section 2(15), the matter is remitted back to the AO for determination as to whether as regards the application of the funds, the requirements of Section 11 have been duly fulfilled as the AO did not have an occasion to consider the application of the funds with reference to provisions of Section 11, since he had come to the conclusion that the Assessee does not fulfill the charitable purpose as defined in Section 2(15) Thus, the AO is directed to compute the total income of the assessee in terms of sections 11 to 13 - Once the assessee is a charitable institution and duly recognised under section 12A, then income is to be computed in accordance with the provisions of section 11 only - Decided against revenue.

Summary

Issues:
1. Whether the assessee is eligible for exemption under section 11 of the Income Tax Act, 1961 based on the nature of its activities.
2. Whether the claim of the assessee for set off and carry forward of deficit of earlier years is permissible under the IT Act, 1961.

Analysis:

Issue 1:
The primary issue in this case was whether the assessee was entitled to exemption under section 11 of the Income Tax Act, 1961. The assessee, a charitable institution recognized under section 12A, claimed exemption under section 11 for the assessment year 2008-09. The Assessing Officer initially treated the assessee as a mutual concern and taxed its income accordingly. However, the learned Commissioner (Appeals) reversed this decision, citing previous Tribunal orders and a High Court judgment in favor of the assessee. The Tribunal noted that once an institution is recognized as charitable under section 12A, its income must be computed in accordance with section 11 unless there is a violation of section 13. The Tribunal upheld the decision of the Commissioner (Appeals) and directed the Assessing Officer to compute the assessee's income under sections 11 to 13. The Tribunal emphasized that the assessee's claim for exemption under section 11 had been consistently upheld in previous years, and therefore, the grounds raised by the Revenue were dismissed.

Issue 2:
The second issue pertained to the claim of the assessee for set off and carry forward of deficit from earlier years. The Assessing Officer had disallowed this claim, stating there was no express provision in the IT Act, 1961 permitting such allowance. However, the Tribunal did not delve deeply into this issue as the primary focus was on the eligibility of the assessee for exemption under section 11. The Tribunal's decision to dismiss the Revenue's appeal encompassed all grounds raised, including the issue of set off and carry forward of deficit. Therefore, the specific details and arguments related to this issue were not extensively discussed in the judgment.

In conclusion, the Tribunal upheld the assessee's entitlement to exemption under section 11 and directed the Assessing Officer to compute the income in accordance with the relevant provisions. The Tribunal's decision was based on the consistent recognition of the assessee as a charitable institution and previous favorable judgments in the assessee's own case. The judgment did not extensively address the issue of set off and carry forward of deficit, as the primary focus was on the assessee's eligibility for exemption under section 11.