2022 (1) TMI 1376 - HC - Income Tax

Exemption u/s 11 - scope and amplitude of the definition charitable purpose - correct interpretation of the proviso to Section 2(15) charitable purpose - as per revenue assessee is involved in widespread commercial activities in nature of business and the activity of the assessee covered under the provisions of Section 2(15) of the Act and thus, exemption u/s.11 12 of the Act is not allowable to the assessee - HELD THAT - The substantial questions of law raised are no longer res integra in view of the decision of this Court in the case of Ahmedabad Urban Development Authority Vs. ACIT (Exemption) 2017 (5) TMI 1468 - GUJARAT HIGH COURT - Decided against revenue.

Summary

Issues:
- Appeal against order of Income Tax Appellate Tribunal for A.Y. 2015-16.
- Questions of law regarding exemptions u/s.11 & 12 of the Act.
- Justification of allowing exemptions by the Appellate Tribunal.
- Benefit of capital expenditure and accumulation u/s.11(1)(a).
- Benefit of accumulation u/s.11(2) and reliance on previous decisions.

Analysis:
The High Court of Gujarat heard an appeal filed by the Revenue challenging the order of the Income Tax Appellate Tribunal for the assessment year 2015-16. The Revenue raised several questions of law for consideration by the Court. These questions primarily revolved around the justification of allowing exemptions under sections 11 and 12 of the Income Tax Act. The first issue raised was whether the Tribunal was correct in granting exemptions under sections 11 and 12 despite the nature of the assessee's commercial activities falling under the provisions of Section 2(15) of the Act, which could render them ineligible for such exemptions.

The second question pertained to the Tribunal's decision to allow the benefit of Section 11 based on previous court decisions that were subject to further appeal before the Supreme Court. The third and fourth issues concerned the approval of capital expenditure and accumulation under Section 11(1)(a) and Section 11(2) respectively. The Tribunal's decision to grant these benefits was challenged on the grounds that the proviso to Section 2(15) should have rendered the assessee ineligible for such benefits.

During the hearing, senior counsel Mr. M.R. Bhatt, assisted by counsel Mr. Mujnaj Bhatt, represented the Revenue. The Court noted that the questions raised were no longer res integra in light of a previous decision involving similar issues. Citing the case of Ahmedabad Urban Development Authority Vs. ACIT (Exemption), the Court found that the issues raised in the present appeal had already been addressed in the aforementioned case. Consequently, the Court dismissed the appeal, ruling against the Revenue and upholding the decision of the Tribunal.