2019 (3) TMI 1738 - AT - Income Tax

Exemption u/s 11 - Charitable activity u/s 2(15) - assessee society has been constituted by the Ministry of Textile for promoting the handloom sector by procuring the orders from all government departments and further giving it to the member societies - HELD THAT - Activity of the assessee are of advancement of any other object of the general public unity, which falls under the definition of the charitable purpose as defined under section 2(15) of the act. But the contention of the Assessing Officer is that said object of general public utility shall not be charitable because the assessee is engaged in the activity in the nature of trade, commerce or business or rendering any service in relation to any trade, commerce and business for cess or fee. We find that activity of the assessee are primarily motivated with the objective of promoting handloom sector in India and said activity are not for gain or profit of an individual. The executive committee of the Society also consist of all government officials with no motive of profit sharing or personal interest. The member subscription is received by the assessee in proportion of the supply by the agency and the rate decided. The said subscription fee received cannot be equated with the cess or fee against services rendered. Assessing Officer has not appreciated the activities and objective of the society properly and therefore he is not justified in holding that provision to section 2(15) will be attracted in the case of the assessee. Finding of the Ld. CIT(A) on the issue in dispute is well reasoned, and we do not find any error in the same. Accordingly we uphold the same. The ground of the appeal of the Revenue is accordingly dismissed.

Summary

Issues:
1. Whether the activities of the assessee fall under the last limb of proviso to section 2(15) of the Income Tax Act, affecting the applicability of sections 11 and 12.
2. Whether the benefit of section 11 and 12 of the Act should be allowed to the assessee society.

Analysis:
1. The case involved an appeal by the Revenue against the order of the Ld. CIT(A) for the assessment year 2010-11. The Assessing Officer had denied the benefit under sections 11 and 12 of the Income Tax Act to the assessee society, contending that its activities were not of a charitable nature but resembled trade, commerce, or business. The society procured orders for handloom products and organized exhibitions. The Ld. CIT(A) allowed the benefit of section 11 to the assessee. The Tribunal considered the nature of the activities and objectives of the society. It observed that the society was constituted by the Ministry of Textiles and operated as a nodal and implementing agency of the government, promoting the handloom sector without a profit motive. The Tribunal held that the society's activities were not for private gain or profit, but for the advancement of objectives of general public utility, qualifying as charitable purposes under section 2(15) of the Act. The Tribunal upheld the Ld. CIT(A)'s decision, dismissing the Revenue's appeal.

2. The Tribunal analyzed the activities of the assessee in detail, noting that the society's main objective was to promote the handloom sector by providing a marketing platform to member societies. It further highlighted that the society's executive committee comprised government officers without profit-sharing interests. The Tribunal emphasized that the society's activities were monitored by the Ministry of Textiles, and receipts were used for society activities. The Tribunal cited relevant case laws to support its decision, emphasizing that the society's motive was not profit-oriented but aimed at providing a platform for handloom weavers. It concluded that the Assessing Officer had not properly understood the society's activities and objectives, upholding the Ld. CIT(A)'s decision to allow the benefit of section 11 to the assessee. The Tribunal dismissed the Revenue's appeal, affirming the charitable nature of the society's activities and its eligibility for the benefits under sections 11 and 12 of the Act.

In conclusion, the Tribunal's detailed analysis focused on the charitable nature of the assessee society's activities, emphasizing its promotion of the handloom sector without a profit motive. The decision highlighted the society's role as a government-conferred entity working for the advancement of general public utility, qualifying it for the benefits under sections 11 and 12 of the Income Tax Act.