2017 (7) TMI 1228 - HC - Income Tax

Entitled for exemption u/s 11 - Held that - Assessing Officer has simply observed that Assessee, since engaged in business of manufacturing and sale of artificial limbs, is earning profit, but has completely ignored the fact that Assessee is a company registered under Section 25 of Companies Act, 1956 as non-profit marketing entity . In furtherance of objects of Assessee of making available artificial limbs to needed persons and without earning any profit Assessee was declined exemption and this has been indicated by both appellate authorities by recording a concurrent findings against Revenue. In absence of anything to show against concurrent findings recorded by appellate authorities, in our view, no question, what to say substantial question, has arisen in this appeal. Hence, appeal deserves to be dismissed at admission stage itself.

Summary

Issues Involved:
1. Appeal against Income Tax Appellate Tribunal's judgment denying exemption to a company registered under Section 12AA of the Income Tax Act, 1961.
2. Dispute regarding the nature of the company as a 'non-profit marketing entity' registered under Section 25 of the Companies Act, 1956.

Analysis:

Issue 1: Appeal against Denial of Exemption
The appeal under Section 260A of the Income Tax Act, 1961 challenges the judgment of the Income Tax Appellate Tribunal, Lucknow Bench, regarding the denial of exemption to the Assessee, a company engaged in the manufacturing and sale of artificial limbs. The Assessing Officer initially denied the exemption based on the Assessee's profit-making activities. However, the Commissioner of Income Tax (Appeals) reversed this decision, citing the Assessee's registration under Section 12AA of the Act. The Tribunal upheld the CIT (A)'s decision, leading to the dismissal of the Revenue's appeal. The Counsel for the Appellant argued that the Assessing Officer overlooked the Assessee's status as a company registered under Section 25 of the Companies Act, 1956, as a 'non-profit marketing entity.' Both appellate authorities affirmed that the Assessee's primary objective was to provide artificial limbs without earning profits, leading to the denial of exemption.

Issue 2: Nature of the Company as a 'Non-Profit Marketing Entity'
The crux of the matter lies in determining the nature of the Assessee as a 'non-profit marketing entity' registered under Section 25 of the Companies Act, 1956. The Counsel for the Appellant highlighted that the Assessee's core purpose was to provide artificial limbs to those in need without seeking profits. This aspect was crucial in the decision-making process of the appellate authorities, who emphasized the non-profit nature of the Assessee's operations. The concurrent findings by the appellate authorities, based on the Assessee's objectives and registration status, led the High Court to conclude that no substantial question of law arose in the appeal. Consequently, the appeal was dismissed at the admission stage.

In a separate order, a condonation of delay application was allowed after sufficient cause was shown for the delay in filing the appeal.

This detailed analysis of the judgment highlights the key issues involved, the arguments presented, and the ultimate decision reached by the High Court in the matter concerning the denial of exemption to the Assessee company.