2020 (3) TMI 428 - AT - Income Tax

Exemption u/s 11 - charitable activity u/s 2(15) - to promote the handloom sector. - organizing exhibitions in different parts of the country for display and sale of handloom fabrics/ cloth manufactured by handloom weavers and handloom society. - Whether activities carried out by the assessee which resulted in the profits/ surplus are commercial in nature? - HELD THAT - Since the facts of the case are same as in assessment year 2010-11, respectfully following the order of the ld. CIT(A)-36 for assessment year 2010-11, it is held that the assessee cannot be said to be involved in carrying on any business, trade or commerce and the Assessing Officer is directed to allow the benefit of section 11 with consequential benefits and the Tribunal vide its order 2019 (3) TMI 1738 - ITAT DELHI has also upheld the order of the Ld. CIT(A) by holding that AO has not appreciated the activities and objective of the society properly and therefore he is not justified in holding that provision of section 2(15) will be attracted in the case of the assessee. In view of above, we do not find any infirmity in the order of the Ld. CIT(A), hence, uphold the same by respectfully following the Tribunal s order above and reject the grounds raised by the Revenue.

Summary

Issues:
1. Whether the activities of the assessee are commercial in nature despite having charitable objects.
2. Whether the assessee qualifies for exemption under sections 11 and 12 of the Income Tax Act.

Analysis:
1. The Revenue appealed against the CIT(A)'s order, arguing that the activities of the assessee, despite having charitable objects, are commercial in nature. The assessee, a society promoting the handloom sector, claimed to be a non-profit organization coordinating marketing activities for handloom products. The Assessing Officer held that the activities did not fall under charitable categories and invoked the proviso to section 2(15) to assess total income. The CIT(A) partly allowed the appeal, directing to allow benefits under section 11. The Tribunal noted previous decisions and upheld the CIT(A)'s order, emphasizing that the activities were not for individual gain but for the promotion of the handloom sector, qualifying for charitable purposes. The Tribunal dismissed the Revenue's appeal, holding that the assessee was not engaged in commercial activities.

2. The Tribunal considered the nature of the activities and objectives of the society, emphasizing that the assessee was constituted by the Ministry of Textiles and operated for the public good without profit motive. It highlighted that the society's activities were not akin to trade, commerce, or business but aimed at providing a platform for handloom weavers. The Tribunal compared the facts of the case with previous assessments and found no new grounds to deviate from the CIT(A)'s decision. Upholding the CIT(A)'s order, the Tribunal rejected the Revenue's grounds and directed the Assessing Officer to allow benefits under section 11. The Tribunal concluded that the Revenue's appeal lacked merit, affirming the charitable nature of the assessee's activities and dismissing the appeal.

In conclusion, the Tribunal upheld the CIT(A)'s decision, emphasizing the non-commercial nature of the assessee's activities despite having charitable objects. The Tribunal found no justification for invoking the proviso to section 2(15) and directed to allow benefits under section 11, affirming the charitable status of the assessee.