2017 (8) TMI 1631 - AT - Income Tax

Denial of exemption under section 11 - charitable activity u/s 2(15) - assessee was registered under section 12A - HELD THAT - As decided in assessee's own case 2015 (1) TMI 696 - ITAT MUMBAI all the activities are carried out in accordance with the objects and none of its activities have been found to be non genuine. The assessee's explanation before the DIT regarding nature of receipts clearly shows that they have been received from the members while pursuing objects of the society, specifically mentioned in the objects for which it was granted registration u/s 12A. Otherwise also, if any transaction of the trust which are incidental or ancillary towards fulfillment of the objects of other general public utility, will not normally amount to business trade or commerce, unless there is some intention to carry out business, trade or commerce on a permanent basis or for a reasonable continuity. The LD. DIT has not brought any evidence or material on record to show that the assessee was carrying out the activities on business or commercial principle or outside its objects. Thus on the facts of the present case it cannot be held that assessee's case is hit by proviso to section 2(15) or the registration granted earlier can be canceled within the ambit of section 12AA(3). We find that the assessee s appeal is for A.Y. 2010- 11 but the assessee was granted the registration in A.Y. 2009-10 itself by the Tribunal. Therefore, assessee s appeal is allowed. In A.Y. 2011-12, the Ld. CIT(A) has followed the order of 2009-10. Therefore, Revenue s appeal is dismissed.

Summary

Issues:
Denial of exemption under section 11 of the Income Tax Act for assessment years 2010-11 & 2011-12.

Analysis:
The appeals were filed against the order of the Commissioner of Income Tax (Appeals) regarding the denial of exemption under section 11 of the Act for the assessment years 2010-11 & 2011-12. The assessee, a charitable trust, had its registration withdrawn by the DIT but reinstated by the ITAT. The AO denied the exemption under section 11, stating that the assessee was not engaged in charitable activities as per the proviso to section 2(15) of the Act. The CIT(A) upheld the AO's decision, leading to the current appeals.

The main contention of the assessee was that the Tribunal had previously ruled in their favor in a similar case for the assessment year 2009-10. The assessee argued that the issue in controversy had already been decided in their favor by the Tribunal. The Revenue, on the other hand, relied on the orders of the Revenue Authorities.

The Tribunal, in the previous case for the assessment year 2009-10, analyzed the proviso to section 2(15) in detail. Referring to judicial scrutiny and a High Court case, it discussed the implications of the proviso, particularly focusing on activities related to trade, commerce, or business. The Tribunal emphasized the broad definition of "business" and the importance of profit motive in determining whether an activity falls under the proviso. It highlighted that activities must be pursued with reasonable continuity and based on sound business principles to be considered as business. The Tribunal concluded that the assessee's activities were in line with its charitable objects and not indicative of business activities.

Based on the previous ruling and the interpretation of the proviso to section 2(15), the Tribunal allowed the assessee's appeal for the assessment year 2010-11. Since the CIT(A) had followed the same order for the assessment year 2011-12, the Revenue's appeal was dismissed. The Tribunal pronounced the order in favor of the assessee, allowing their appeal and dismissing the Revenue's appeal.