2017 (5) TMI 985 - HC - Income Tax

Entitlement to get benefit of section 12AA - proof of charitable activities - Held that - Similar substantial questions of law have been considered and decided against revenue in Commissioner of Income Tax (Exemption)), Lucknow Vs. M/S Yamuna Expressway Industrial Development Authority 2017 (4) TMI 1154 - ALLAHABAD HIGH COURT wherein held as observations made in para-11 of the order passed by CIT (E), in our view, are nothing but an irrational, illogical and misconceived approach so as to exclude respondents-authorities from the ambit of definition of charitable purposes . - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of Section 2(15) of the Income Tax Act, 1961.
2. Consideration of commercial activities in relation to charitable objects.
3. Eligibility for benefit under Section 12AA of the Income Tax Act, 1961.
4. Comparison with similar cases regarding registration under Section 12A.

Interpretation of Section 2(15) of the Income Tax Act, 1961:
The appeal involved the question of whether the Income Tax Appellate Tribunal (ITAT) was justified in upholding the order of the Commissioner of Income Tax (Appeals) by not considering the amended provision of Section 2(15) of the Income Tax Act, 1961. The appellant argued that the provision for charging tax applies when the total receipt of entities engaged in the advancement of general public utility exceeds a certain threshold. The appellant contended that their activities, involving sales of plots, shops, and flats, constitute trade, commerce, or business, making the amended provision of Section 2(15) applicable. The court analyzed the nature of the appellant's activities and the applicability of the amended provision in the given scenario.

Consideration of Commercial Activities in Relation to Charitable Objects:
Another issue raised was whether the ITAT erred in ignoring the precedent set in a specific case by the Supreme Court regarding activities run on commercial lines not falling within the ambit of charitable objects. The appellant argued that their activities were commercial in nature, primarily aimed at making profits, and therefore, not entitled to the benefits of charitable status. The court examined the commercial aspects of the appellant's operations and assessed whether they aligned with the charitable objectives as defined under the law.

Eligibility for Benefit under Section 12AA of the Income Tax Act, 1961:
The appellant contested the ITAT's decision to uphold the order of the Commissioner of Income Tax (Appeals) and grant the benefit of Section 12A to the assessee. The appellant argued that their activities, aimed at the advancement of general public utility, were conducted in a purely commercial manner, similar to a case involving the Jammu Development Authority where registration under Section 12A was not allowed. The court reviewed the nature of the appellant's activities, the commercial aspects involved, and the applicability of Section 12A in light of previous judgments and legal precedents.

Comparison with Similar Cases Regarding Registration under Section 12A:
The court noted that similar substantial questions of law had been addressed in a previous judgment involving the Commissioner of Income Tax (Exemption), Lucknow Vs. M/S Yamuna Expressway Industrial Development Authority. The court referenced this earlier judgment and concluded that the questions raised in the present appeal were also answered against the Revenue. Consequently, the court dismissed the appeal based on the findings and reasoning provided in the previous judgment, thereby affirming the decision against the appellant.