2019 (4) TMI 1904 - HC - Income Tax

Exemption u/s 11 - benefit of Section 2(15) - assessee is nationally designated entity entitled to allocate domain names to its applicants who seek it in India - HELD THAT - As decided in own case 2018 (1) TMI 898 - DELHI HIGH COURT Both the appellate authorities have concluded that the assessee‟s objects are charitable; it provides basic services by way of domain name registration, for which, it charges subscription fee on annual basis and also collects connectivity charges. In addition, we notice that the assessee is the only nationally designated entity entitled to allocate domain names to its applicants who seek it in India. Apparently, it is also an affiliate national body of the ICAMM and authorized to assign .in registration and domain names in terms of Central Government‟s letter dated 20.11.2004. In that sense, the assessee (though not a statutory body) is carrying on regulatory work. It‟s case would therefore be a fortiori on a different footing than Chamber of Commerce, and other such trade bodies, set up not for profit basis but should have been held to be charitable organizations such as Bureau of Indian Standards, ICAI Accounting Research Foundation, etc. See Bureau of Indian Standards v. Director General of Income Tax (Exemption) (2012 (11) TMI 891 - DELHI HIGH COURT) ; ICAI Accounting Research Foundation v. Director General of Income Tax (Exemption) 2009 (8) TMI 61 - HIGH COURT OF DELHI . No question of law arises

Summary

Issues:
Revenue appealing ITAT decision granting relief to the respondent under Section 2(15) and 11 of the Income Tax Act, 1961.

Analysis:
The High Court considered the Revenue's appeal against the ITAT decision granting relief to the respondent/assessee under Section 2(15) and 11 of the Income Tax Act, 1961. The Court referred to a previous judgment for Assessment Year 2009-10 where the Revenue's appeal was rejected on identical grounds. In that case, the CIT(A) had set aside the findings of the AO, bringing certain receipts to tax as commercial in nature. The assessee, a Section 25 Companies Act entity, had been granted registration under Section 12A and was engaged in general public utility services. The AO contended that the subscription fees and charges for services provided were commercial in nature and not charitable. However, the CIT(A) and ITAT found that the assessee's objects were charitable, providing basic services like domain name registration and connectivity charges. The Court noted the unique position of the assessee as the only nationally designated entity for domain name allocation in India, carrying out regulatory work. The Court compared the assessee to other charitable organizations like Bureau of Indian Standards and ICAI Accounting Research Foundation. Ultimately, the Court found no question of law arising and dismissed the appeal.

The Court reiterated that the assessee's objects were charitable, providing essential services and regulatory work, distinguishing it from commercial entities. The lower appellate authorities had correctly concluded that the services provided were in line with the charitable objects for which the assessee was established. The Court highlighted the unique position of the assessee as a nationally designated entity for domain name allocation, further supporting its charitable nature. The Court referenced previous judgments to emphasize the distinction between charitable organizations and commercial bodies. Based on these considerations, the Court found no legal question meriting interference and upheld the lower appellate authorities' conclusions.

In conclusion, the High Court dismissed the Revenue's appeal, affirming the lower appellate authorities' findings that the assessee's activities fell within the ambit of charitable objects. The Court emphasized the nature of services provided by the assessee, its regulatory role, and its unique position in domain name allocation. By comparing the assessee to recognized charitable organizations, the Court established the validity of the lower appellate authorities' conclusions. Consequently, the Court found no legal grounds to interfere with the decision and upheld the grant of relief to the respondent under Section 2(15) and 11 of the Income Tax Act, 1961.