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2020 (7) TMI 272 - AT - Income TaxExemption u/s 11 - Claim denied as activities carried out by the appellant were in the nature of business and confirmed computation of the excess of income over expenditure of previous year arising out of charitable activity of appellant as Income from business as per the manner - HELD THAT - As decided in own case 2019 (10) TMI 973 - ITAT AHMEDABAD Activities carried out by the assessee is for advancement of any other object of general public utility without any intention of the profit motive after considering the provision of the Gujarat Maritime Board Act, 1981 and fact of the case, it cannot be said that the activities carried out by the assessee are in the nature of trade commerce or business. Predominant object of the assessee is to administer control on miner ports in the State of Gujarat and there is no profit motive as demonstrated by the provision of section 73, 74 and 75 of the Gujarat Maritime Board Act, 1981. The Gujarat Maritime Board is under legal obligation to apply the income which arises directly and substantially from the business held under trust for the development of minor ports in the state of Gujarat. Further after following the decision of Hon'ble Gujarat High Court in the case of AUDA 2017 (5) TMI 1468 - GUJARAT HIGH COURT and GIDC, 2017 (7) TMI 811 - GUJARAT HIGH COURT the fees collected by the assessee is incidental to the object and purpose of attainment of the main object for development of mining ports as enumerated in the provision of the Gujarat Maritime Board Act, 1981,therefore, we consider that activity of the assessee is for advancement of any other object of general public utility and not hit by the proviso to section 2(15) of the act, therefore, the assessee is entitled for exemption u/s. 11. Issue involved has already been decided by this tribunal in the own case of the assessee in its favour. Accordingly we set aside the finding of the learned CIT(A) and direct the AO to allow the benefit of the exemption to the assessee under section 11 and 12 of the Act. Hence the ground of appeal of the assessee is allowed.
Issues Involved:
1. Whether the activities carried out by the appellant are in the nature of business and if the income arising from such activities should be treated as business income under Section 11(4) of the Act. 2. Applicability of the first and second proviso to Section 2(15) of the Act and the provisions of Section 13(8). 3. Eligibility for exemption benefit of 15% of gross receipts. 4. Deduction of "addition to assets" as application of income. 5. Treatment of dividend income as exempt. Detailed Analysis: 1. Nature of Activities and Treatment of Income: The primary issue is whether the activities carried out by the appellant, a trust constituted under the Gujarat Maritime Board Act, 1981, are in the nature of business. The AO observed that the trust earned income from various services such as port maintenance, marine services, and storage rentals, among others. The AO concluded that these activities are in the nature of trade, commerce, or business, thereby invoking the proviso to Section 2(15) of the Act. Consequently, the AO denied the exemption under Section 11, treating the income as business income. The assessee contended that the proceeds from these services were utilized for charitable objectives, relying on the Supreme Court judgment in Commissioner Sales Tax vs. Sai Publication. However, the AO disagreed, and the CIT(A) upheld the AO's decision, emphasizing that the activities were not charitable as defined under Section 2(15) of the Act. 2. Applicability of Section 2(15) and Section 13(8): The CIT(A) referred to the Finance Act, 2008, which narrowed the definition of "charitable purpose" by including a proviso that excludes activities in the nature of trade, commerce, or business from being considered charitable if they involve charging a fee. The CIT(A) also cited CBDT Circular No. 11 of 2008, which clarified that such activities would not qualify as charitable. The CIT(A) concluded that the appellant's activities fell under the proviso to Section 2(15), thus making Section 13(8) applicable, which denies the benefits of Sections 11 and 12. 3. Exemption Benefit of 15% of Gross Receipts: The CIT(A) ruled that since the appellant's activities were treated as business income, it was not eligible for the 15% exemption benefit under Section 11(1)(a). The CIT(A) directed that the income should be computed as per the provisions of Sections 28 to 44 of the Act, allowing for depreciation but not treating the expenditure on fixed assets as application of income. 4. Deduction of "Addition to Assets": The CIT(A) held that the appellant, being treated as an Association of Persons (AoP) and taxed under Sections 28 to 44, could not claim the expenditure on fixed assets as application of income. Instead, the amount spent on fixed assets would be capitalized, and depreciation could be claimed accordingly. 5. Treatment of Dividend Income: While the CIT(A) agreed that dividend income was exempt, the appellant did not advance any argument regarding the application of Section 13(1)(d) concerning investments in Public-Sector Companies/Corporations. Therefore, the ground of appeal related to this issue was dismissed. Tribunal's Decision: The Tribunal noted that the issue had already been decided in favor of the assessee in its own case for previous assessment years. The Tribunal referred to the Gujarat Maritime Board Act, 1981, which indicated that the management and control of the trust were with the state government and there was no profit motive. The Tribunal also cited previous judicial pronouncements, including the Supreme Court's decision in CIT vs. Gujarat Maritime Board, which recognized the trust as a charitable entity. The Tribunal concluded that the activities carried out by the appellant were for the advancement of public utility without profit motive and were not in the nature of trade, commerce, or business. Therefore, the appellant was entitled to exemption under Sections 11 and 12 of the Act. The Tribunal set aside the CIT(A)'s findings and directed the AO to allow the exemption benefits. Additional Ground of Appeal: The Tribunal noted that the appellant did not advance any argument regarding the application of Section 13(1)(d) concerning investments in Public-Sector Companies/Corporations. Therefore, this ground of appeal was dismissed. Conclusion: The appeal was partly allowed, with the Tribunal directing the AO to grant the exemption benefits under Sections 11 and 12 of the Act, while dismissing the additional ground of appeal related to Section 13(1)(d).
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