2020 (12) TMI 1273 - AT - Income Tax

Exemption u/s 11 - whether any activity of rendering any service in relation to any trade, commerce or business for a cess or fee shall not be charitable if receipt from such activities is more than 25 lacs during the year? - assessee is a society registered u/s. 12A of the Act and is also notified u/s. 80G(5)(vi) - HELD THAT - As on identical facts in A.Y. 2011-12 2019 (11) TMI 1036 - ITAT DELHI his predecessor allowed the appeal of the assessee and directed the AO to allow exemption u/s. 11 - it is held that the assessee is apparently not involved in any trade, commerce or business and as such the proviso to section 2(15) is not applicable. Exemption under section 11(1) is allowed to the assessee. Accordingly, the Assessing Officer is directed to allow exemption under section 11, with all the consequential benefits. Ground of the appeal are allowed.

Summary

Issues:
1. Interpretation of proviso to section 2(15) of the Act regarding charitable activities exceeding 25 lacs.
2. Eligibility of the assessee for exemption under sections 11 and 12 of the Act based on the nature of activities.

Analysis:

Issue 1:
The appeal by the revenue challenges the CIT(A)'s order allowing the assessee's appeal, focusing on the proviso to section 2(15) of the Act. The revenue contends that any service activity exceeding 25 lacs in receipts related to trade, commerce, or business shall not be considered charitable. The assessee, a registered society under sections 12A and 80G(5)(vi) of the Act, engages in various activities related to rural development and related programs. The AO initially denied exemption under sections 11 and 12 based on the proviso to section 2(15) due to the nature of the assessee's activities.

Issue 2:
The CIT(A) considered the assessee's claim for exemption, citing a previous decision for A.Y. 2011-12 where the appeal was allowed. The CIT(A) found that the assessee was not involved in trade, commerce, or business, thus eligible for exemption under section 11. The Tribunal upheld the CIT(A)'s findings for A.Y. 2011-12, emphasizing that the assessee's activities did not have a profit motive and were not considered business activities. The Tribunal noted that the donor's supervision did not indicate profit motive, leading to the conclusion that the assessee was a charitable society working for the welfare of the poor and rural people.

In conclusion, the Tribunal dismissed the revenue's appeal, following the precedent set by the decision on A.Y. 2011-12. The judgment reaffirmed that the assessee's activities did not fall under trade, commerce, or business, thereby allowing exemption under section 11(1) as a charitable society. The decision highlighted the importance of assessing profit motives and the nature of activities to determine eligibility for exemption under the relevant provisions of the Act.