2021 (2) TMI 614 - HC - Income Tax

Exemption u/s 11 - charitable activity u/s 2(15) - activities of the assessee are not in the nature of commerce / trade - Tribunal held that the activities of the assessee are not in the nature of commerce / trade - as per revenue the assessee is involved in widespread commercial activities which is covered under first and second proviso to section 2(15) without considering the merit of the issue - HELD THAT - All the questions of law referred to above and proposed by the Revenue stand squarely covered by the decision of this Court in the case of Ahmedabad Urban Development Authority vs. ACIT 2017 (5) TMI 1468 - GUJARAT HIGH COURT

Summary

Issues:
1. Interpretation of provisions under the Income Tax Act, 1961 regarding the nature of activities of the assessee.
2. Justification of benefits claimed under sections 11(1)(a) and 11(2) of the Act.
3. Deletion of additions made by the Income Tax Appellate Tribunal.
4. Allowance of deemed application of funds against future income.
5. Correctness of allowing exemptions in light of pending appeals and decisions of Coordinate Bench.

Analysis:
The High Court addressed multiple issues raised by the Revenue in the Tax Appeal. The first issue involved the nature of the assessee's activities and whether they fell under the definition of commerce/trade as per the provisions of the Income Tax Act, 1961. The Revenue contended that the activities were commercial and should be considered under the relevant provisos of the Act. However, the Court found that the activities were similar to those considered in a previous case and were not in the nature of commerce/trade, thus dismissing this argument.

The second issue related to the benefits claimed by the assessee under sections 11(1)(a) and 11(2) of the Act. The Revenue questioned the justification for allowing these benefits without considering the merit of the issue. The Court referred to a previous decision involving similar circumstances and held that the benefits claimed were valid, thereby rejecting this contention.

Regarding the third issue, the Revenue challenged the deletion of certain additions made by the Income Tax Appellate Tribunal, alleging double deduction in the application of income. The Court disagreed with this argument, stating that the additions had been allowed in previous years as application of income, leading to the deletion of the said additions.

The fourth issue revolved around the allowance of deemed application of funds against future income. The Revenue questioned the absence of an express provision in the Act for such allowance. However, the Court upheld the Tribunal's decision, allowing the deemed application of funds against future income.

Lastly, the Court addressed the correctness of allowing exemptions in light of pending appeals and decisions of the Coordinate Bench. The Revenue raised concerns about the pending appeals and decisions not being accepted, leading to the allowance of exemptions. The Court, after considering the relevant precedents and decisions, upheld the Tribunal's decision to allow the exemptions, thereby dismissing the Tax Appeal.