2018 (6) TMI 1774 - AT - Income Tax

Exemption u/s 11 - Charitable activity u/s 2(15) - assessee is rendering services and charging fees for it and generating surplus - HELD THAT - The assessee claims to be engaged in the maintaining of national/international youth centres at suitable centres in India for the benefit of foreign students and youth delegates as well as individuals visiting India - As decided in own case 2016 (12) TMI 1860 - DELHI HIGH COURT mere circumstance of collection of such amounts did not result in the assessee s losing their essential character of being established for charitable purposes - Decided in favour of assessee.

Summary

Issues:
Interpretation of proviso to section 2(15) of the Income-tax Act, 1961 for exemption eligibility under sections 11 and 12 for a non-profit organization engaged in charitable activities.

Analysis:
The appeal by the Revenue challenges the order of the CIT(A) regarding the eligibility of the assessee for exemption under sections 11 and 12 of the Income-tax Act, 1961 for A.Y 2011-12. The Revenue contends that the assessee's commercial activities, including charging fees for services rendered and generating surplus, fall under the proviso to section 2(15) of the Act, making them ineligible for the said exemptions.

The facts reveal that the assessee, established by the Ministry of Industry, deals with certifying bodies, educational institutions, and hospitals seeking accreditation. The Assessing Officer, upon reviewing the financial statements, observed that the assessee charges fees for accreditation services and receives grants, leading to the application of the proviso to section 2(15) of the Act. Consequently, the Assessing Officer invoked section 13(8) to tax the surplus income at the maximum marginal rate.

In response, the assessee argued before the CIT(A) that it operates as a non-profit organization engaged in charitable activities, thus qualifying for exemption under section 11(1) of the Act. The CIT(A), after analyzing the facts and legal precedents, concluded that the assessee's charitable nature exempts it from the provisions of section 2(15) and makes it eligible for the exemption under section 11 of the Act.

Upon review, the Tribunal found no distinguishing decision favoring the Revenue and relied on previous decisions of co-ordinate benches and the jurisdictional High Court, which upheld the Tribunal's decision. The Tribunal dismissed the Revenue's appeal, affirming the assessee's eligibility for exemption under sections 11 and 12 of the Act for the relevant assessment year.

In light of the above analysis and consistent with previous legal interpretations, the Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal and confirming the assessee's entitlement to exemptions under sections 11 and 12 of the Income-tax Act, 1961 for A.Y 2011-12.