2019 (8) TMI 168 - HC - Income Tax

Exemption u/s 11 and 12 - Whether assessee involved in business activities and was conducting no charitable activity ? - HELD THAT - ITAT noticed that there was no change in the functions of the Assessee from earlier and it s objects were never disputed by the Revenue authorities at any stage. It was held that the Revenue failed to establish that the activities carried out by the Assessee were contrary to its objects and functions. It was unable to be established by the Revenue on facts that the Assessee was carrying on commercial activity. In the earlier AYs, this issue had been decided against the Revenue as noticed by the CIT (A) in his order dated 28th February 2011 for AY 2007-08. Consequently, the Court declines to frame any question on this issue. Deemed application of income u/s 11(1), Explanation 2 - requisite intimation not filed within the time period stipulated - HELD THAT - The Court finds that in Association of Corporation and Apex Societies of Handlooms v. Assistant DIT , 2013 (1) TMI 317 - DELHI HIGH COURT it was held by this Court that intimation in Form-10 for the purposes of claiming the benefit of the Section 11 could be furnished by the Assessee even during the assessment proceedings. On the facts of the present case, although the Assessee did not give the intimation at the time of filing the original returns, admittedly, the intimation was enclosed with the revised return filed by the Assessee. The Court accordingly does not find any error having been committed by the ITAT in holding this issue in favour of the Assessee. Depreciation to trust - assets, the full cost of which was already allowed as application of income in earlier years, even though allowing the same could lead to a situation where amount of depreciation would exceed the purchase value of the assets - HELD THAT - As pointed out by Mr. Rahul Chaudhary, learned counsel appearing for the Assessee on advance notice, that this issue is no longer res integra in view of the decision of the Supreme Court in CIT v. Rajasthan Gujarati Charitable Foundation Poona 2017 (12) TMI 1067 - SUPREME COURT The ITAT too followed the said decision and decided the issue against the Revenue. Whether an amount received as advance was in fact utilized by the Assessee for charitable purpose? - HELD THAT - Here again on facts the ITAT has found in favour of the Assessee, which finding has not been shown to be perverse. The Court accordingly declines to frame such issue as raised by the Revenue.

Summary

Issues:
1. Claim of deemed application under Section 11(1) Explanation 2 of the Income Tax Act, 1961.
2. Granting benefits of Sections 11 and 12 of the Act to the Assessee involved in business activities.
3. Allowing depreciation in assets where the amount could exceed the purchase value.
4. Utilization of an advance amount for charitable purposes by the Assessee.

Analysis:

Issue 1:
The primary issue in the appeals for AYs 2006-07 and 2007-08 was whether the ITAT correctly allowed the Assessee's claim of deemed application under Section 11(1) Explanation 2 of the Income Tax Act, 1961, despite the Assessee not filing the requisite intimation within the stipulated time period. The Court referred to previous judgments and found that the intimation could be furnished even during assessment proceedings. In the present case, although the Assessee did not provide the intimation initially, it was included with the revised return. Consequently, the Court upheld the ITAT's decision in favor of the Assessee.

Issue 2:
Another significant issue raised for AYs 2007-08 and 2008-09 was whether the Assessee, engaged in business activities, could be granted benefits under Sections 11 and 12 of the Act meant for charitable activities. The ITAT observed that there was no change in the Assessee's functions, and the Revenue failed to prove that the activities were not in line with the Assessee's objectives. Previous decisions also favored the Assessee, leading the Court to decline framing any question on this issue.

Issue 3:
Specific to AY 2008-09, the question was whether allowing depreciation in assets, where the amount could exceed the purchase value, was justified. The Court noted the decision of the Supreme Court in a similar case and the ITAT's alignment with that decision, ruling against the Revenue on this issue.

Issue 4:
For AY 2007-08, the issue of whether an advance amount received was utilized for charitable purposes was raised. The ITAT found in favor of the Assessee based on the facts presented, and the Court deemed this finding not to be perverse, declining to frame the issue as raised by the Revenue.

In conclusion, the appeals were dismissed based on the Court's analysis and findings on the various issues presented in the case.