2017 (11) TMI 1986 - AT - Income Tax

Denial of exemption under section 11 - AO treating the assessee as a mutual concern - proof of charitable purposes u/s 2(15) - HELD THAT - As decided in own case 2017 (5) TMI 295 - ITAT MUMBAI neither the Assessing Officer in the assessment order nor the learned Departmental Representative at the time of hearing has brought any material to demonstrate that there is any change in the object of the trust in the impugned assessment year as compared to earlier assessment years, wherein, the issue has been decided in favour of the assessee. For invoking the first proviso to section 2(15), it is necessary and incumbent on the part of the Assessing Officer to give a factual finding that the assessee has derived income by engaging itself in trade, business or commercial activity. In the absence of any such finding the first proviso to section 2(15) cannot be attracted. More so, when the Tribunal and the Hon'ble Jurisdictional High Court in the preceding assessment years have held that the objects of the assessee qualify the object of general public utility, hence, is existing for charitable purpose as per section 2(15) - Decided in favour of assessee.

Summary

Issues:
- Whether assessee's claim of exemption under section 11 of the Income-tax Act, 1961 as a Charitable Institution is allowable or not.

Analysis:
The case involves an appeal by the Department against an order passed by the Commissioner (Appeals) for the assessment year 2011-12. The main issue is whether the assessee's claim of exemption under section 11 of the Act as a Charitable Institution is valid. The assessee, a trust registered with the Charity Commissioner and Director of Income Tax (Exemption), filed for exemption under section 11. The Assessing Officer concluded that only income received from members would not be taxable under the principle of mutuality, while income from non-members like canteen fees, coaching fees, etc., would be taxable. The first appellate authority directed the Assessing Officer to follow the directions given for the previous assessment year. The Tribunal, in a previous judgment, upheld the assessee's claim of exemption under section 11, considering the trust as a charitable organization engaged in activities for the well-being of the public at large. The Tribunal emphasized that the trust's objects and activities qualified as general public utility, making it a charitable organization. The Tribunal also noted that the trust's members represented a cross-section of the public, not limited to private families or individuals, thus rejecting the application of the principle of mutuality. The High Court upheld the Tribunal's decision. In subsequent years, the Tribunal consistently upheld the exemption claim under section 11 for the assessee based on similar facts and reasoning.

The Tribunal found no material difference in the facts of the current case compared to previous judgments and upheld the order of the Commissioner (Appeals) by dismissing the Revenue's appeal. The Tribunal emphasized that the Assessing Officer did not provide any factual finding that the trust engaged in trade, business, or commercial activities to invoke the first proviso to section 2(15) of the Act. The Tribunal highlighted that the trust's objects aligned with general public utility, qualifying it as existing for charitable purposes under section 2(15) of the Act. The Tribunal differentiated the present case from a cited case where the trust was found to engage in trading and commercial activities, emphasizing that the facts were distinguishable. The Tribunal concluded that the Commissioner (Appeals) was justified in allowing the assessee's claim of exemption under section 11. The Tribunal, therefore, dismissed the Revenue's appeal based on consistent precedents and the trust's alignment with charitable purposes under the Act.

In conclusion, the Tribunal upheld the order of the Commissioner (Appeals) and dismissed the Revenue's appeal, emphasizing the trust's alignment with charitable purposes under section 11 of the Income-tax Act, 1961. The Tribunal reiterated the trust's engagement in activities for general public utility and rejected the application of the principle of mutuality, consistent with previous judgments and the trust's objectives.