2018 (5) TMI 1881 - AT - Income Tax

Exemption u/s 11 12 denied - charitable activity or not? - Assessee trust is receiving fee and charges from the universities and selling text books to the students - assessee trust is only publishing and selling text book and reading material which is being supplied to the students only.- 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 are of the considered view that the ld. CIT (A) has passed well-reasoned order in the light of the settled proposition of law in the case cited as Delhi Music Society vs. DGIT 2011 (12) TMI 124 - DELHI HIGH COURT , CIT vs. Doon Foundation 1985 (1) TMI 36 - CALCUTTA HIGH COURT . - Decided against revenue

Summary

Issues:
1. Interpretation of section 2(15) of the Income Tax Act, 1961 regarding the nature of activities carried out by the assessee society.
2. Whether the assessee society is involved in trade, commerce, or business activities.
3. Application of the rule of consistency in determining tax exemptions for the assessee society.
4. Assessment of the predominant activities and major sources of income of the assessee society in relation to invoking the proviso to section 2(15) of the Act.

Issue 1: Interpretation of section 2(15) of the Income Tax Act, 1961
The judgment involves the interpretation of section 2(15) of the Income Tax Act, 1961, specifically focusing on whether the assessee society, registered under section 12AA of the Act, is involved in imparting education or engaged in business activities. The Revenue contended that the society's activities of selling, publishing, and earning income from advertisements constitute business activities, not educational endeavors.

Issue 2: Involvement in Trade, Commerce, or Business
The key point of contention was whether the assessee society's activities, such as selling books and earning income from advertisements, amount to engaging in trade, commerce, or business. The assessee argued that since its primary income sources were grants from government bodies and membership fees, the proviso to section 2(15) should not be applicable.

Issue 3: Rule of Consistency
The judgment applied the rule of consistency, citing previous years where the income from publication and sale of goods was accepted, and exemptions under sections 11 and 12 were allowed. The order emphasized that no new facts were presented to deviate from this established consistency, referring to the Radhaswami Satsang case.

Issue 4: Predominant Activities and Income Sources
The Tribunal analyzed the predominant activities and major sources of income of the assessee society to determine whether invoking the proviso to section 2(15) was justified. It highlighted that the society's core activities were promoting education and sports, with income primarily derived from grants and membership fees, which did not align with engaging in trade, commerce, or business.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the order passed by the CIT (A). The decision was based on the Tribunal's findings that the assessee society's activities were primarily educational and not indicative of engaging in business. The judgment referenced legal precedents and the rule of consistency to support the decision, emphasizing the nature of the society's income sources and activities in relation to the provisions of the Income Tax Act, 1961.