2016 (9) TMI 1540 - AT - Income Tax

Denying exemption u/s 11(1) - charitable activity u/s 2(15) - assessee promotes exchange of traditional Indian values and generates awareness of the cultural traditions and heritage of India specifically amongst the youth - HELD THAT - For achieving these goals SPICMACAY organizes activities, at college and school levels which are hosted by various local Chapters of the Organisation. In my view the Ld.CIT(A) was right in holding that, mere receipt of fees or some other amounts, does not mean that the assessee is involved in any trade, commerce or business. As rightly relied on the decision of the Chennai Bench of the ITAT in the case of Hansadwari vs. DIT(E) 2012 (3) TMI 168 - ITAT CHENNAI which held that advancement of traditional music and culture and conducting music programmes for that purpose, could never be considered as an activity in the nature of trade, or commerce or business u/s 2(15) of the Act. In the earlier years also this argument of the assessee was accepted by the Ld.CIT(A). In my view the Ld.CIT(A) has rightly applied the decision of the Jurisdictional High Court in the case of India Trade Promotion Organisation vs. DGIT(E) (supra) and granted relief to the assessee. - Decided in favour of assessee.

Summary

Issues:
1. Whether the assessee society qualifies as a charitable organization under the Income Tax Act.
2. Whether the income received by the assessee is contractual in nature.
3. Whether the TDS deducted by parties on contractual payments should be treated as sponsorship receipts.

Analysis:

Issue 1:
The Revenue challenged the order of the Ld.CIT(A) claiming that the assessee society was engaged in business activities and not eligible for charitable status under Section 2(15) of the Income Tax Act. The AO denied exemption u/s 11(1) based on this premise. However, the Ld.CIT(A) found merit in the submissions of the assessee, emphasizing that the activities of the society, promoting Indian classical music and culture, were in the nature of general public utility and not commercial. The Ld.CIT(A) relied on past decisions and the High Court's interpretation of Section 2(15), concluding that the assessee was indeed a charitable institution eligible for exemption u/s 11(1).

Issue 2:
Regarding the contention that the income received by the assessee was contractual, the Tribunal referenced a previous case where it was established that tax deducted at source does not automatically classify a receipt as taxable. The Tribunal dismissed the Revenue's appeal, upholding the assessee's plea for tax exemption based on the principle of mutuality. This decision reaffirmed that the mere deduction of tax at source does not determine the nature of the receipt in the hands of the recipient.

Conclusion:
The Tribunal upheld the Ld.CIT(A)'s order, affirming the charitable status of the assessee society and dismissing the Revenue's appeal. The judgment emphasized the non-commercial nature of the society's activities and clarified that TDS deductions did not alter the tax-exempt status of the income received.