2022 (9) TMI 1501 - AT - Income Tax

Exemption u/s 11 - claim of the assessee for deduction u/s 11 has been rejected by AO holding that the assessee s activities were not for charitable purposes within the meaning of 2(15) - HELD THAT - We have perused the orders passed by the authorities below including the order passed by the Co-ordinate Bench 2019 (1) TMI 289 - ITAT INDORE by allowing the issue in favour of the assessee, assessee society was constituted by the State Govt. for the benefit of General Public to provide them information regarding employments, education institutions and other information of the govt. schemes. The objectives of the assessee society are publication of weekly newspaper namely Rozgar Aur Nirman to supply the material related to advertisement of public welfare schemes of Government of Madhya Pradesh and its undertaking and do such all other acts that are necessary for achievement of the objectives of the society. Therefore, the Revenue Authorities are not justified in holding that the assessee was involved in carrying on the activity in the nature of trade, commerce or business. The main object of the assessee is for the benefit of General Public to provide them information regarding employments, education institutions and other information of the govt. schemes, therefore, we find force in the contention of the assessee that profit making is not the driving force or objective of the assessee and income generated by the assessee does not find its way into the pockets of any individuals or entities. It is to be utilized fully for the purposes of the objects of the assessee. We are of the view that since the object of promoting employments/educational institutions/govt. schemes for the general public is a charitable purpose, the expression 'charitable purpose', as defined in section 2(15) cannot be construed literally and in absolute terms. It has to take colour and be considered in the context of section 10(23C)(iv) as also held in the above judicial pronouncements. We are of the view that the authorities below are not justified in disallowing the entire exemption. We, therefore, direct the AO to delete the disallowances. - Decided in favour of assessee.

Summary

Issues:
1. Applicability of exemption under Section 11 of the Income Tax Act, 1961 for the assessee.
2. Interpretation of the term "charitable purposes" under Section 2(15) of the Act.
3. Consideration of the activities of the assessee society for determining eligibility for exemption.

Analysis:
1. The appeal was filed by the assessee against the order rejecting the claim for deduction under Section 11 of the Income Tax Act, 1961. The assessee, a society wholly owned by the Government of Madhya Pradesh, engaged in activities like publication of newspapers, production of films, and TV reports. The claim for deduction under Section 11 was disallowed by the Assessing Officer, treating the excess income over expenditure as business income. The first appellate authority upheld this decision, leading to the appeal before the ITAT Indore.

2. The primary issue revolved around whether the activities of the assessee society qualified as "charitable purposes" under Section 2(15) of the Act. The Co-ordinate Bench, in a previous judgment, had observed that the society was established for the benefit of the general public, providing information on employments, educational institutions, and government schemes. The Bench held that the society's objectives aligned with charitable purposes as profit-making was not its driving force. The expression "charitable purpose" was interpreted in the context of promoting employment, education, and government schemes for the public, leading to the conclusion that the assessee was a charitable institution eligible for exemption under Section 11.

3. The ITAT Indore, after considering the submissions and the previous judgment of the Co-ordinate Bench, concluded that there were no changed circumstances to deviate from the earlier decision. Relying on the previous order, the ITAT allowed the appeal, holding that the assessee was indeed a charitable institution under Section 11 of the Act. Consequently, the addition made by the authorities below was deleted, and the assessee's appeal was allowed.

In conclusion, the ITAT Indore ruled in favor of the assessee, allowing the appeal and recognizing the society as a charitable institution eligible for exemption under Section 11 of the Income Tax Act, 1961.