2022 (2) TMI 36 - AT - Income Tax

Exemption u/s 11 - Charitable object u/s 2(15) - main object of the assessee was to run a nation-wide academic and research network, to undertake and promote R D in the area of communication, develop policy options in the country for development of network infrastructure and to act as a research centre for technological and managerial resources in the area of computer network - as held that the appellant is covered by the proviso to amended definition contained in section 2(15) and its activities are not charitable and exemption under section 11 was denied - HELD THAT - We find that this issue was discussed thread-bare by the Tribunal in the case for assessment years 2009-10 and 2010-11 2018 (1) TMI 189 - ITAT DELHI and held that no part of the function carried out by the assessee is in the nature of trade / business. The said order of the Tribunal has also been affirmed by the Hon ble Delhi High Court 2018 (5) TMI 1814 - DELHI HIGH COURT and 2018 (9) TMI 1994 - DELHI HIGH COURT respectively. Respectfully following the order of the Hon ble High Court, who has upheld the order of the Tribunal holding that the same has to be laid down by the Hon ble Delhi High Court in the case of M/s. GSI India Vs. Director General of Income Tax (Exemption) 2013 (10) TMI 19 - DELHI HIGH COURT . Not only that again in the appeal for the assessment year 2011-12 passed by the Tribunal 2018 (11) TMI 509 - DELHI HIGH COURT the Hon ble High court has again confirmed the said order. It has been brought on record that for the assessment year 2012-13 also and again for the assessment year 2015-16 same orders have been followed. Accordingly, we hold that the issues raised by the Revenue are squarely covered by the decision of the Hon ble Delhi High Court in the case of the assessee as well as by the Tribunal and, therefore, the appeals filed by the Revenue are dismissed.

Summary

Issues:
1. Whether the activities of the assessee society, though charitable in nature, are commercial in reality?
2. Whether the assessee is eligible for exemption under Section 11 of the Income Tax Act, 1961?

Analysis:
1. The Revenue challenged the order passed by the Commissioner of Income Tax (Appeals) regarding the assessment year 2014-15, contending that the society's activities, despite being charitable in objective, generated commercial income. The Revenue argued that the society earned profits through data connectivity services, which were deemed commercial. The Tribunal noted that the issues raised were previously addressed in the assessee's case for assessment years 2009-10 to 2015-16. The Tribunal and the Hon'ble Delhi High Court had already ruled in favor of the assessee, holding that the society's activities were not commercial in nature. Consequently, the Tribunal dismissed the Revenue's appeals, citing the precedent set by previous judgments.

2. The assessee, an Autonomous Society under the Department of Information & Technology, Ministry of Communication & Information Technology, aimed to operate a nationwide academic and research network. The society was registered under Section 12A of the Act as a non-profit organization. The Revenue contended that the society's transactions resembled business activities, leading to the denial of exemption under Section 11. However, the Tribunal referenced previous judgments where it was established that the society was not engaged in trade or business, thus not falling under the proviso to Section 2(15) of the Act. The Tribunal highlighted earlier orders that had been affirmed by the Hon'ble Delhi High Court, reinforcing the stance that the society's activities were charitable and not commercial. Consequently, the Tribunal dismissed the Revenue's appeals, upholding the eligibility of the assessee for exemption under Section 11.

In conclusion, the Tribunal upheld the decisions in favor of the assessee, emphasizing the non-commercial nature of the society's activities and its eligibility for exemption under Section 11 of the Income Tax Act, 1961.