2018 (2) TMI 1875 - AT - Income Tax

Exemption u/s 11 & 12 - Corpus Contribution from Government of India and SIDBI not offered for tax - applicability of the proviso to section 2(15) - HELD THAT - As decided in assessee s own case 2017 (1) TMI 1145 - ITAT MUMBAI it is not possible to infer that assessee Trust is carrying on any regular trade, commerce or business and on the contrary it is an entity which is essentially existing for charitable purposes but conducting some activities for consideration or fee. In this background, the proviso to section 2(15) of the Act cannot be invoked to exclude assessee Trust from the purview of section 2(15) of the Act since the said proviso only seeks to exclude institutions which are carrying on regular business - Decided in favour of assessee.

Summary

Issues Involved:
1. Taxability of Corpus Contribution from Government of India and SIDBI
2. Applicability of section 2(24)(iia)
3. Claim of exemption under section 11 & 12 of the Income Tax Act

Analysis:

Issue 1: Taxability of Corpus Contribution
The assessee received Corpus Contribution from the Government of India and SIDBI, totaling ?250,00,00,000, which was not offered for tax. The Assessing Officer (AO) brought this amount to tax under section 2(24)(iia) of the Income Tax Act, as the assessee did not claim exemption under section 11 in the original return of income.

Issue 2: Applicability of section 2(24)(iia)
The assessee appealed the AO's order before the Ld. CIT(A), who dismissed the appeal following the precedent set for the AY 2010-11. The assessee then relied on a Tribunal order from the AY 2010-11, where the Tribunal allowed the appeal, emphasizing that the crucial factor is to determine if the assessee Trust is established for charitable purposes or for profit motives. The Tribunal concluded that the assessee Trust was not carrying on regular trade, commerce, or business activities, and thus, the proviso to section 2(15) of the Act could not be invoked to exclude the Trust from the purview of section 2(15). Consequently, the Tribunal set aside the CIT(A)'s order and directed the AO to allow the claim of the assessee for exemption under sections 11 & 12 of the Act.

Issue 3: Claim of exemption under section 11 & 12
In light of the Tribunal's decision for the AY 2010-11, which set aside the CIT(A)'s order and directed the AO to allow the claim of exemption under sections 11 & 12 of the Act, the Tribunal followed the same order for the current assessment year. The Tribunal allowed the appeal filed by the assessee, setting aside the order of the CIT(A) and directing the AO to grant the exemption under sections 11 & 12 of the Act.

In conclusion, the Tribunal, in line with the legal position established in previous judgments, ruled in favor of the assessee, stating that the Trust's activities were not indicative of regular trade, commerce, or business, and hence, the claim for exemption under sections 11 & 12 of the Income Tax Act was justified.