2017 (5) TMI 1664 - AT - Income Tax

Miscellaneous application u/s. 254(2) - Exemption u/s.11 denied - running of Suguna Auditorium Hall is a business activity of assessee and not incidental to the main objective of the assessee - Application u/s. 254(2) as the A.R wanted to review the Order of Tribunal as denying exemption claim - HELD THAT - Tribunal first meticulously mentioned the arguments of the learned AR for the assessee the points raised by him then the relevant case-laws relied upon by the AR of the assessee. Thereafter the Tribunal considered the same and passed a speaking order for not entertaining the claim of the assessee. While rejecting the claim of the assessee the Tribunal placed reliance on the judgement of Supreme Court and also Tribunal order. Thus in view of our detailed discussion and applying the ratio of the decision of the Apex Court we concluded that the CIT(A) is justified in rejecting the exemption u/s. 11 of the I.T. Act 1961. From the order of the Tribunal dated 29.06.2016 it is evident that the Tribunal considered the arguments of the assessee s counsel as well as the ratio of the decisions of the Supreme Court elaborately discussing the same in the order. Hence it cannot be said that the Tribunal has not considered the case-law cited by the learned AR for the assessee as alleged in the Miscellaneous Application. On the contrary the Tribunal in the order after taking note of the case-law relied upon by the parties gave the findings. Article 141 of the Constitution of India provides that the law declared by the Supreme Court shall be binding on all courts and Tribunals in the Indian Territory. The declaration of law is complete as soon as the judgement is pronounced. - Decided against assessee.

Summary

Issues:
1. Denial of exemption u/s.11 of the Act to the assessee.
2. Applicability of the proviso to sec.2(15) of the Act.
3. Scope and limitations of the power of the Tribunal to recall or rectify orders under section 254(2) of the Income-tax Act, 1961.

Issue 1: Denial of exemption u/s.11 of the Act to the assessee:
The Tribunal dismissed the assessee's appeal regarding the denial of exemption u/s.11 of the Act, stating that the activity of running the 'Suguna Auditorium Hall' was deemed a business activity under section 11(4A) and not incidental to the main charitable objective. The Tribunal differentiated this case from the Thanthi Trust judgment, emphasizing the lack of a nexus between the activities and the charitable objectives of the assessee. The assessee argued that the main objective was education, and the auditorium was rented out to support this objective. The AR highlighted the proportion of auditorium receipts to total receipts, citing relevant Circulars and judicial precedents to support the claim for exemption u/s.11 of the Act.

Issue 2: Applicability of the proviso to sec.2(15) of the Act:
The AR contended that the new proviso introduced by the Finance Act, 2015, changing the benchmark for taxing income from activities not related to charitable purposes to 20% of total receipts, should not apply to the assessee based on maintained accounts and legal interpretations. Referring to the CBDT's Circular and the Bombay High Court judgment in a similar case, the AR argued that the income from the auditorium should be eligible for exemption u/s.11 of the Act.

Issue 3: Scope and limitations of the power of the Tribunal under section 254(2) of the Income-tax Act, 1961:
The Tribunal clarified that a Miscellaneous Application for review or rectification cannot be entertained under section 254(2) as the power of review is not expressly conferred. It emphasized that the scope of review does not extend to re-hearing the case on merit, citing legal precedents. The Tribunal highlighted the limited nature of the power to rectify mistakes apparent from the record under section 254(2), stating that recalling an order for re-adjudication is not permissible. It outlined the parameters for applying section 254(2) and concluded that the application filed by the assessee was dismissed based on the detailed consideration of arguments and relevant case laws in the original order.

In conclusion, the Tribunal upheld the denial of exemption u/s.11 of the Act to the assessee, dismissed the Miscellaneous Application, and clarified the limitations of the Tribunal's power under section 254(2) regarding review or rectification of orders. The judgment emphasized the importance of legal precedent, thorough consideration of arguments, and adherence to statutory provisions in tax matters.