2018 (8) TMI 970 - AT - Income Tax

Exemption u/s 11 - Charitable activity - last limb of proviso to section 2(15) - activities carried out by the society which yielded income to the society are commercial in nature - CIT(A) has allowed the benefit of exemption by observed that, the assessee is purely a charitable and non-profit organization and I do not find that the assessee is involved in any trade, commerce or business and accordingly the AO is directed to allow the exemption to the assessee u/s 11(1) with all the consequential benefits. - Held that - we do not see any merit in this appeal of the department. - Decided against the revenue.

Summary

Issues Involved:
Appeal by department against CIT(A) order denying exemption under section 11 & 12 to assessee providing hostel services.

Analysis:
The department raised grounds challenging CIT(A)'s decision to grant exemption to the assessee under section 11 & 12 of the Act, arguing that the activities were commercial in nature. However, the assessee contended that it was involved in charitable activities and not in trade, commerce, or business. The CIT(A) decided in favor of the assessee, citing earlier orders and emphasizing the charitable nature of the organization. The ITAT upheld the CIT(A)'s decision, noting that similar issues had been decided in favor of the assessee in previous assessment years. The High Court also ruled in favor of the assessee, dismissing the department's appeal. As a result, the appeal by the department and the Cross Objection by the assessee were both dismissed.

This case revolved around the interpretation of the proviso to section 2(15) of the Act and whether the assessee's activities qualified for exemption under section 11 & 12. The department argued that the assessee's commercial activities fell within the proviso, thus disqualifying them from the exemption. However, the CIT(A), ITAT, and High Court all found in favor of the assessee, emphasizing the charitable nature of the organization and the absence of profit-seeking motives. The decisions were based on precedent, including earlier orders and relevant case law, which supported the assessee's eligibility for exemption under the Act.

Overall, the judgment highlighted the importance of considering the primary objectives and nature of an organization's activities in determining its eligibility for tax exemption under charitable provisions. The consistent findings in favor of the assessee across different forums underscored the significance of past decisions and established precedents in shaping the outcome of tax disputes. The case exemplified the application of legal principles and interpretations to specific factual scenarios, ultimately resulting in the dismissal of the department's appeal and the Cross Objection by the assessee.