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2022 (2) TMI 650 - HC - Income TaxExemption u/s 11 - whether Tribunal erred treating the assessee as a charitable institution, even when the activities of the assessee fell under the last limb of Section 2(15)? - HELD THAT - This Court in Commissioner of Income Tax (Exemptions) Delhi vs. Association of State Road Transport Undertakings 2021 (10) TMI 179 - DELHI HIGH COURT has held that it is settled law that the first proviso to Section 2(15) of the Act does not exclude entities which are for charitable purpose but are conducting some activities for a consideration or a fee A perusal of the paper books reveals that the assessee-society is running a printing press and publishing a newspaper. The profit so generated is used for charitable purposes and apparently there is no profit motive in the activities of the assessee. As such it cannot be said that the assessee is involved in any trade, commerce or business. Consequently, the mischief of proviso to Section 2(15) of the Act is not attracted to the present batch of matters. In any event, the assessee-society is charitable in nature as the profit, if any, made by the assessee-society is ploughed back for charitable activities. It is pertinent to mention that the assessee-society was set up by the late freedom fighter Lala Lajpat Rai. The appellant itself has granted the assessee registration under Section 12A, recognition under Section 10(23C)(vi) and Exemption under Section 80G of the Act. Consequently, this Court is in agreement with the finding of the ITAT that the assessee-society does not carry on any business, trade or commerce with the intent of earning and distributing profit. - Decided in favour of assessee.
Issues:
1. Challenge to order of Income Tax Appellate Tribunal regarding exemption under Section 11 of the Income Tax Act, 1961. 2. Classification of the assessee as a charitable institution under Section 2(15) of the Act. 3. Determination of whether the activities of the assessee are commercial in nature. 4. Application of income earned through commercial activities for charitable purposes. 5. Compliance with the judgment of the Constitutional Bench of the Supreme Court in a specific case. Issue 1: Challenge to ITAT Order on Exemption under Section 11: The appellant filed appeals challenging the ITAT's order dismissing appeals related to Assessment Years 2010-11 to 2014-15. The ITAT upheld the exemption under Section 11(1) and 10(23C)(iv) of the Act for the appellant, a charitable institution. The ITAT found that the appellant's activities were not profit-motivated and did not constitute trade, commerce, or business. Citing the case of India Trade Promotion Organization vs. DGIT, the ITAT concluded that the appellant's activities aligned with charitable purposes, thus exempting them from the proviso of Section 2(15) of the Act. Issue 2: Classification of the Assessee as a Charitable Institution: The Principal Commissioner of Income Tax raised questions regarding the ITAT's classification of the assessee as a charitable institution under Section 2(15) of the Act. The appellant argued that the activities of the assessee were commercial in nature and generated income for the society. However, the Court noted that the profit generated by the assessee was used for charitable purposes, indicating a lack of profit motive. The Court emphasized that the assessee's registration under Section 12A, recognition under Section 10(23C)(vi), and exemption under Section 80G supported its charitable nature. Issue 3: Commercial Nature of Assessee's Activities: The appellant contended that the assessee's activities were commercial, but the Court found that the profit generated by the printing press and newspaper publication was utilized for charitable objectives. The Court highlighted that the late freedom fighter Lala Lajpat Rai established the assessee-society, further reinforcing its charitable nature. Issue 4: Application of Income for Charitable Purposes: The Court emphasized that the assessee's profit, if any, was reinvested in charitable activities, indicating a genuine charitable intent. The Court agreed with the ITAT's finding that the assessee did not engage in business, trade, or commerce with a profit distribution motive. Issue 5: Compliance with Supreme Court Judgment: The Court referred to the Supreme Court's stance on interference with lower court findings, emphasizing the limited scope for High Court intervention in factual matters. It concluded that there was no perversity in the ITAT's decision, leading to the dismissal of the appeals due to lack of merit. In summary, the High Court upheld the ITAT's decision to grant exemption to the appellant as a charitable institution under Sections 11(1) and 10(23C)(iv) of the Income Tax Act, 1961. The Court found that the appellant's activities were genuinely charitable, with profits being utilized for charitable purposes and not for profit distribution. The Court dismissed the challenges raised by the Principal Commissioner of Income Tax, emphasizing the charitable nature of the assessee and the consistency in applying exemptions.
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