2018 (3) TMI 1925 - AT - Income Tax

Benefit of exemption u/s 11 and 12 - activities of the assessee is to promote, coordinate and national quality initiative for building confidence and services in charging inspection and accreditation fees from various organizations - assessee s activities falls under last limb of section 2 (15) and hit by the proviso to section 2 (15) - HELD THAT - The identical issue has been decided by the coordinate bench in case of the assessee for assessment year 2009 10 which has been upheld by Hon ble Delhi High Court 2015 (1) TMI 928 - DELHI HIGH COURT in favour of the assessee where the order of the coordinate bench has been upheld - we confirm the finding of the CIT (A) holding that assessee is eligible for that exemption u/s 11 and 12 of The Income Tax Act. - Decided against revenue.

Summary

Issues:
Appeal against denial of exemption under sections 11 and 12 of the Income Tax Act based on proviso to section 2(15) - Whether activities of the assessee are charitable in nature - Whether the assessee's activities fall under the proviso to section 2(15).

Analysis:
The appeal was filed by The Deputy Commissioner Of Income Tax (Exemption) against the order of The Commissioner Of Income Tax (Appeals) for Assessment Year 2013-14, where the benefit of exemption under sections 11 and 12 of the Income Tax Act was denied to the assessee based on the proviso to section 2(15). The revenue contended that the activities of the assessee, which involved charging inspection and accreditation fees, did not qualify as charitable under section 11, falling under the proviso to section 2(15). The assessee, a society registered under The Societies Registration Act, 1860, received fees for quality application assessments and membership, leading the Assessing Officer to conclude that the activities had commercial elements. Consequently, the AO denied the exemption and determined the net taxable income.

The assessee appealed to the CIT (A), who ruled in favor of the assessee citing precedents from a coordinate bench for a previous assessment year and a decision of the Delhi High Court in a related case. The revenue then appealed to the ITAT Delhi, arguing that the assessee's activities were commercial in nature and thus fell under the proviso to section 2(15). The authorized representative for the assessee relied on previous decisions supporting the charitable nature of the activities.

Upon careful consideration, the ITAT Delhi upheld the CIT (A)'s decision, citing the earlier rulings by the coordinate bench and the Delhi High Court in favor of the assessee. The ITAT confirmed that the assessee was eligible for exemption under sections 11 and 12 of the Income Tax Act, dismissing the revenue's appeal. The judgment was pronounced on 06.03.2018, affirming the charitable nature of the assessee's activities and their eligibility for tax exemption.