2019 (11) TMI 1036 - AT - Income Tax

Exemption u/s 11 - charitable purpose u/s 2(15) - profit motive - supervision of activities by the Donor - Whether the activities of the assessee involved rendering of services in relation to carrying on of a commerce or business and hence, proviso to Section 2(15) is clearly applicable in case of the assessee - contention of the assessee is that the activity of the assessee falls under the main limb of definition of the charitable purpose of relief to poor - alternative contention of the assessee is that even if the activities of the assessee are considered under the limb of advancement of general public utility, same is not in the nature of trade, commerce or business as no profit motive is involved in providing the services and no extra fee is charged from the clients except cost of the projects - HELD THAT - As far as the activity of the assessee under the limb of advancement of general public utility is concerned, we find that AO has not brought on record any evidences which could suggest that the activities of the assessee have been carried out with profit motive. DR also even could not controvert the fact that the assessee has not charged any fee from the clients except the cost of project actually incurred. In the sanction letter of grant to the assessee, there is mention of supervision or monitoring of the activities by the donor, but that in itself is not sufficient to hold that any profit motive is involved. It is quite normal that the donor want to verify whether the grants have been incurred for the intended purpose, which in our opinion, is in any manner does not establish that the activities of the assessee is business activity. Assessee is not engaged in any trade, commerce or business and thus mischief of proviso of section 2(15) is not attracted in the case of the assessee. Accordingly, we uphold the finding of the Ld. CIT(A) on the issue in dispute. In the assessment years 2009-10 and 2010-11, the Assessing Officer has held the assessee as engaged in providing relief to poor within the meaning of section 2(15) of the Act. The assessee has claimed that its activity during the year under consideration has remained same and there is no change as compared to assessment years 2009-10 and 2010-11. In such circumstances, in view of the rule of consistency also the exemption granted under section 11 of the Act should not have been denied to the assessee. - Appeal of the Revenue is dismissed.

Summary

Issues:
1. Applicability of proviso to Section 2(15) in case of the assessee.
2. Denial of exemption under section 11 of the Act to the assessee.
3. Rule of consistency in granting exemption under section 11 of the Act.

Analysis:

Issue 1:
The Revenue contended that the activities of the assessee fall under the proviso to Section 2(15) due to services rendered in relation to carrying on trade or commerce. The Revenue argued that the assessee receives fees for services provided, invoking the proviso. However, the assessee argued that its activities align with the charitable purpose of relief to the poor, not involving profit motives or extra charges. The Ld. CIT(A) found merit in the assessee's submissions, holding that the assessee is not engaged in trade, commerce, or business, thus not falling under the proviso to Section 2(15).

Issue 2:
The Assessing Officer denied exemption under section 11 of the Act to the assessee, citing the proviso to Section 2(15). The Ld. CIT(A) disagreed, allowing the exemption under section 11(1) with all benefits. The assessee argued that its activities were consistent with relief to the poor, as supported by various projects aimed at uplifting economically disadvantaged communities. The Ld. counsel highlighted the absence of profit motives and extra fees charged, emphasizing the charitable nature of the activities. The Tribunal upheld the Ld. CIT(A)'s decision, dismissing the Revenue's appeal.

Issue 3:
The assessee claimed that the rule of consistency should apply, as it had been granted exemption under section 11 in previous assessment years. The Ld. counsel emphasized that there were no changes in the activities compared to prior years, warranting the continuation of the exemption. Citing the decision in Radhasoami Satsang case, the assessee argued for consistent treatment. The Tribunal agreed, noting the lack of evidence supporting a change in the nature of activities, and dismissed the Revenue's appeal based on the rule of consistency.

In conclusion, the Tribunal upheld the Ld. CIT(A)'s decision, allowing the exemption under section 11 of the Act to the assessee. The judgment emphasized the charitable nature of the assessee's activities and the absence of profit motives or involvement in trade, commerce, or business, leading to the dismissal of the Revenue's appeal.