2018 (9) TMI 791 - AT - Income Tax

Denial of registration u/s 12AA(3) - proof of charitable activities - Held that - The facts are identical to the facts of the case decided by the Tribunal for Assessment Year 2009-10 in assessee s own case wherein held activities of the assessee society do not involve the carrying of any activity in the nature of trade, commerce or business or any activity of running any service in relation to any trade, commerce or business. The proviso inserted in sec. 2(15) w. e. f. 01. 04. 2009 is not attracted in the case of the assessee. We, therefore, hold that the Learned CIT(Appeals) following the said order of the ITAT has rightly decided that the Assessing Offices was not justified in denying the benefit of exemption under sections 11 and 12 available to the assessee by applying the proviso to section 2(15). The first appellate order being comprehensive and reasoned one thus does not need any interference. The same is upheld and the grounds are accordingly rejected - Decided against revenue

Summary

Issues Involved:
1. Interpretation of the proviso to Section 2(15) of the Income Tax Act, 1961.
2. Eligibility of the assessee for exemption under sections 11 and 12 of the Act.
3. Commercial nature of activities conducted by the assessee.
4. Application of the first proviso to Section 2(15) to the assessee's case.

Analysis:

Issue 1: Interpretation of the proviso to Section 2(15) of the Income Tax Act, 1961
The case involved a dispute regarding the applicability of the proviso to Section 2(15) of the Income Tax Act, 1961. The Tribunal analyzed whether the activities carried out by the assessee fell within the scope of trade, commerce, or business, as stipulated in the proviso. The Tribunal referred to previous decisions and concluded that the proviso was not attracted to the assessee's case, as the activities did not involve carrying on trade, commerce, or business. The Tribunal upheld the CIT(A)'s decision based on this interpretation.

Issue 2: Eligibility of the assessee for exemption under sections 11 and 12 of the Act
The assessee, a charitable society promoting Indian art and culture, sought exemption under sections 11 and 12 of the Income Tax Act, 1961. The Assessing Officer initially denied the exemption, invoking the proviso to Section 2(15). However, the CIT(A) partly allowed the appeal of the assessee, considering the nature of the activities and previous decisions in the assessee's favor. The Tribunal upheld the CIT(A)'s decision, emphasizing the benefit of exemption available to the assessee under sections 11 and 12.

Issue 3: Commercial nature of activities conducted by the assessee
One of the key contentions was whether the activities conducted by the assessee were purely commercial in nature, thus attracting the proviso to Section 2(15). The Revenue argued that the property was utilized for commercial activities, making the proviso applicable. In contrast, the assessee's representative contended that the activities were not commercial but fell within the scope of promoting Indian art and culture, as per the society's objectives. The Tribunal, after considering both arguments, sided with the assessee based on the nature of the activities and previous legal precedents.

Issue 4: Application of the first proviso to Section 2(15) to the assessee's case
The Tribunal examined whether the first proviso to Section 2(15) was applicable to the assessee's case, considering the nature of its activities. The Tribunal referenced earlier decisions and concluded that the proviso did not apply to the assessee, as its activities did not align with trade, commerce, or business. The Tribunal upheld the CIT(A)'s decision to grant relief to the assessee, citing consistency with previous judgments and legal interpretations.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to grant exemption to the assessee under sections 11 and 12 of the Income Tax Act, 1961. The judgment emphasized the importance of analyzing the nature of activities to determine the applicability of relevant provisions and highlighted the significance of legal precedents in such tax matters.