2018 (5) TMI 1880 - AT - Income Tax

Exemption u/s 11 denied - Whether objects of the assessee seem to be charitable in nature but the activities which yielded income to the assessee are commercial in nature? - CIT(A) deleted the addition holding the assessee a charitable association and directed the Assessing Officer to allow exemption u/s. 11(1) of the Act, as the assessee is not involved in any trade, commerce or business activities to attract the mischief of proviso to section 2(15) - HELD THAT - When predominant activities of the assessee trust are promotion of education sports activities and its major source of income is grant from the Ministry of HRD and Ministry of Youth Affairs and Sports, membership fees from the universities etc., no ground is made out to invoke the proviso to section 2 (15) of the Act. Moreover, it is the admitted case of the Revenue that the assessee trust is only publishing and selling text book and reading material which is being supplied to the students only. So, merely receiving fee and charges from the universities and selling text books to the students do not amount to entering into trade, commerce and business activities , particularly when the assessee trust is being run on the basis of the grants by the Government of India and on the basis of fee being collected from universities and its members. We find that the issue involved in this appeal is squarely covered in favour of the assessee by the decision of co-ordinate Bench in assessee s own case for A.Y. 2010-11

Summary

Issues:
Appeal against refusal of exemption u/s. 11(1) of the IT Act for assessment year 2011-12.

Analysis:
The appeal pertains to the refusal of exemption claimed by the assessee society u/s. 11(1) of the IT Act. The Assessing Officer had denied the exemption on the grounds that the activities of the assessee were not charitable as per section 2(15) of the IT Act, resulting in the determination of total income at ?6,30,50,050 taxable in the hands of the assessee. However, the ld. CIT(A) overturned this decision, deeming the assessee a charitable association and directing the Assessing Officer to grant exemption u/s. 11(1) of the Act. The crux of the matter was whether the activities of the assessee constituted trade, commerce, or business activities, thereby affecting the eligibility for exemption under section 2(15).

The appellant contended that a similar issue had been decided in favor of the assessee by the ITAT Delhi Bench for the A.Y. 2010-11, emphasizing the consistency in the treatment of income from publication and sale of goods in previous years. The co-ordinate Bench had ruled in favor of the assessee, highlighting that the predominant activities of the trust were related to education and sports, with income primarily derived from grants and membership fees. The selling of textbooks to students and receiving fees from universities did not amount to engaging in trade, commerce, or business activities, especially given the reliance on government grants and university fees for operations.

The decision of the co-ordinate Bench was based on established legal principles, citing precedents such as Delhi Music Society vs. DGIT, CIT vs. Doon Foundation, and The Student Union in London Hospital Medical College vs. IRC and Attorney General. The order of the ld. CIT(A) was considered well-reasoned in light of these legal precedents, leading to the dismissal of the Revenue's appeal. No new material or contrary decision was presented by the Revenue to challenge the co-ordinate Bench's ruling, resulting in the dismissal of the appeal and upholding of the exemption for the assessee society under section 11(1) of the IT Act for the assessment year 2011-12.