2018 (7) TMI 2313 - AT - Income Tax

Exemption u/s.11 - assessee is carrying out activities which are commercial in nature resulting in huge surplus and thus hit by the proviso to section 2(15) introduced w.e.f. 01-04-2009 ? - HELD THAT - As decided in assessee own case 2017 (9) TMI 1892 - ITAT PUNE for the A.Yrs. 2010-11 and 2011-12 Activities undertaken by the assessee seen with reference to the dominant activity of the Trust shows that it has been carried out for the advancement of the dominant object of the Trust and the fees generation is only incidental to the activities carried out by the assessee and are not hit at all by the proviso to Sec.2(15) As we hold that the assessee is entitled to exemption u/s.11 of the Act. As such, it is not the case of the Revenue that the assessee earned huge profits abnormally depicting the profit motive of such activities. Further, it is not the case of the Revenue that such profits are not ploughed back into the trust for achieving the objects of the Trust. Thus, the ground raised by the Revenue for both the assessment years are dismissed.

Summary

Issues:
- Whether the CIT(A) was right in allowing the benefit of exemption u/s.11 of the Act when the assessee is carrying out commercial activities?
- Validity of reopening of assessment u/s.147/148 of the Act.
- Whether the activities of the assessee are hit by the proviso to section 2(15) introduced w.e.f. 01-04-2009?

Analysis:

Issue 1: Exemption u/s.11 of the Act
- The Revenue filed two appeals against separate orders of CIT(A)-10, Pune for A.Yrs. 2009-10 & 2012-13, raising similar grounds related to the exemption u/s.11 of the Act.
- The AO opined that the trust's activities were commercial in nature, disallowed certain claims, and determined the income of the assessee.
- CIT(A) held that the assessee was not hit by the provisions of section 2(15) of the Act, as the activities were incidental to the main objects of the Trust.
- The Tribunal, referring to past judgments and the Memorandum of Association, concluded that the assessee was entitled to exemption u/s.11 as the dominant activity was not for profit but for general public utility.
- The Tribunal dismissed the Revenue's appeals, stating that there was no abnormal profit motive and the profits were ploughed back into the trust for its objectives.

Issue 2: Validity of Reopening of Assessment
- CIT(A) held that the reopening of assessment u/s.147/148 of the Act was valid, which was not contested further in the Tribunal's decision.

Issue 3: Activities Hit by Proviso to Section 2(15)
- The Tribunal found that the activities of the assessee were not hit by the proviso to section 2(15) introduced in 2009, as the fees generation was incidental and not the dominant purpose of the Trust's activities.
- The Tribunal upheld the CIT(A)'s decision based on the rule of consistency and past judgments, dismissing the Revenue's grounds for both assessment years.

In conclusion, the Tribunal dismissed the Revenue's appeals, upholding the exemption u/s.11 of the Act for the assessee, as the activities were deemed to be for general public utility and not driven by a profit motive. The Tribunal also confirmed the validity of the assessment reopening and ruled that the activities were not hit by the proviso to section 2(15) introduced in 2009.