2022 (5) TMI 1568 - HC - Income Tax

Exemption u/s 11 - Claim denied as activities are commercial in nature and cannot be held to be charitable in view of the proviso (ii) to section 2(15) - ITAT allowed deduction - ITAT allowing the claim of accumulated funds u/s 11 (2) in absence of benefit of exemption u/s 11 and 10(23) - HELD THAT - Appellant fairly admits that the first question of law is covered by the decision of this Court 2018 (3) TMI 1601 - DELHI HIGH COURT in favour of the assessee. Also admits that the second question of law is a consequential question of law and accordingly, the same stands covered by the aforesaid judgment. Application of income on the account of depreciation - The third proposed question of law is also covered by the decision passed in Rajasthan Gujarati Charitable Foundation Poona 2017 (12) TMI 1067 - SUPREME COURT .

Summary

Issues involved:
Challenging the Order of Income Tax Appellate Tribunal for Assessment Year 2010-11; Interpretation of sections 11 and 12 of the Income Tax Act, 1961; Claim of accumulated funds under section 11(2); Application of income on account of depreciation for exemption under sections 11 and 12.

Analysis:

1. The appellant filed an appeal against the Order dated 16th January, 2019 passed by the Income Tax Appellate Tribunal (ITAT) in ITA No. 3615/Del/2015 for the Assessment Year 2010-11. The questions of law raised in the appeal were regarding the interpretation of sections 11 and 12 of the Income Tax Act, 1961. Specifically, the appellant questioned whether the ITAT erred in granting the benefit of sections 11 and 12 while ignoring the commercial nature of the activities, and whether the claim of accumulated funds under section 11(2) was allowable without the benefit of exemption under sections 11 and 10(23) of the Act.

2. The counsel for the appellant acknowledged that the first and second questions of law were covered by previous judgments in favor of the assessee. The first question was found to be covered by a decision of the Court in ITA 333/2018, and the second question was considered consequential and covered by the same judgment. Additionally, the third proposed question of law was deemed to be covered by a decision of the Supreme Court in Commissioner of Income Tax-III, Pune v. Rajasthan & Gujarati Charitable Foundation Poona, [2018] 402 ITR 441 (SC).

3. Consequently, the Court determined that no substantial question of law arose for consideration in the present appeal. Given the coverage of the issues by previous judgments and decisions, the Court dismissed the appeal and application. The judgment highlights the importance of legal precedent in determining the applicability of tax laws and exemptions under sections 11 and 12 of the Income Tax Act, 1961.

4. The analysis of the judgment underscores the significance of legal interpretations and precedents in tax matters, particularly concerning charitable activities and exemptions under the Income Tax Act. The acknowledgment of previous judgments and their application to the current case demonstrates the necessity of consistency and adherence to established legal principles in tax law. The dismissal of the appeal based on the coverage of issues by prior decisions reflects the importance of legal certainty and predictability in tax litigation.