2021 (6) TMI 246 - AT - Income Tax

Exemption u/s. 11 - claim of exemption u/s.11 was rejected on the ground that construction of road in village Palitana and Shankheswar was not object of the trust - CIT-A allowed the exemption - HELD THAT - We consider that approach road is an integral part of the temple structure created by the assessee without which it is difficult for the public to access the temple monument and the nature of roads constructed by the assessee was specifically linked to the structure of the temple which was part of the object of the assessee as specified in the clauses 4, 5, 7 and 9 of the object of the trust relating to create, repair, colour building, etc. elaborated in the order of the ld. CIT(A). Considering the aforesaid facts and circumstances, we do not find any infirmity in the decision of ld. CIT(A) in holding that the construction of road was an activity of charitable nature and the assessee was entitled for the benefit u/s. 11 of the act. Therefore, we do not find any merit in the appeal of the revenue and the same is dismissed.

Summary

Issues:
Appeal against exemption u/s. 11 of the Income Tax Act, 1961 for A.Y. 2015-16.

Analysis:
1. The appeal before the ITAT Ahmedabad concerned the denial of exemption u/s. 11 of the Act for the assessment year 2015-16 by the Assessing Officer based on the construction of roads by the trust, which was deemed beyond the trust's objects as per the trust deed.

2. The Assessing Officer contended that the construction of roads was not a specified object of the trust and thus rejected the claim of exemption u/s. 11. The trust, however, argued that the road construction was for the advancement of a religion and its tenets, falling within the broader scope of the trust's objects to benefit people or society.

3. The CIT(A) allowed the appeal of the assessee, emphasizing that the roads constructed by the trust were used not only by followers of Jainism but also by the general public, making them integral to the temple structures created by the trust. The CIT(A) noted that the construction of roads was linked to the trust's objects specified in the trust deed, justifying the charitable nature of the activity.

4. The ITAT upheld the decision of the CIT(A), affirming that the construction of roads was a charitable activity and fell within the trust's objects, as outlined in clauses 4, 5, 7, and 9 of the trust deed. The ITAT concluded that the trust was entitled to claim the benefit u/s. 11 of the Act, dismissing the revenue's appeal against the exemption.

5. The ITAT's judgment highlighted the importance of considering the broader charitable purposes served by activities undertaken by trusts, even if not explicitly mentioned in the trust deed, and emphasized the need to interpret such issues holistically. The decision underscored the significance of the specific context and objectives of the trust in determining the eligibility for tax exemptions under the Income Tax Act, 1961.