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2022 (7) TMI 786 - AT - Income TaxExemption u/s 11 - entitlement to mutuality benefit - Whether the assessee is charitable trust? - HELD THAT - As decided in 2020 (9) TMI 199 - ITAT PUNE own case exhibition by the assessee trust is only furtherance of the charitable activity of the trust wherein, the healthy environment is provided for businessmen so that all the stake holders i.e. businessmen and customers are benefited and they also make aware of various activities like pollution control, city development, legal assistance etc which are in the nature of charitable activities and these certainly reached out to the greater number of people of the society. It is not disputed that clause (vii) in the Memorandum of Objects is one of the pertinent object of the assessee trust and fulfillment of such object benefited the public at large by holding the exhibition and therefore, is a part of charitable activity conducted by the assessee trust. Merely having surplus in one year does not change the character of the trust to a business or profit making entity which is otherwise a charitable trust advancing work of general public utility and certainly not hit by the first proviso to Section 2(15) of the Act. Since the Assessing Officer has denied the benefit of sections 11 and 12 which has been upheld by the Ld. CIT(Appeals) also on the ground that the assessee did not fall within the scope of charitable purposes defined in section 2(15) of the Act because of carrying on or rendering of any services in business, trade and commerce and this in our considered opinion is not a correct interpretation of the provision. We, therefore, set aside the order of the Ld. CIT(Appeal) and direct the Assessing Officer to grant benefit of exemption u/s. 11 and 12 of the Act to the assessee. It is therefore, clear that there is hardly any need for us to proceed any further so far as both the parties' respective substantive grounds pleaded in the instant set of two cross appeals each are concerned. We adopt judicial consistency therefor and restore the instant issue of assessee's section 11 exemption back to the Assessing Officer to be decided in light of co-ordinate foregoing detailed discussion. CIT(A)'s identical lower appellate order(s) under challenge herein in all these four cross appeals holding the assessee as eligible/partly eligible for mutuality benefit (supra) are reversed once it has been held entitled for section 11 exemption benefit in principle. Appeal allowed for statistical purposes.
Issues Involved:
1. Delay in filing appeals. 2. Entitlement to section 11 exemption under the Income Tax Act, 1961. 3. Determination of whether the assessee is a charitable trust. Detailed Analysis: 1. Delay in Filing Appeals: The Assessee's and Revenue's cross appeals suffered from delays of 118 and 261 days, respectively. Both parties filed their cases during the Covid-19 pandemic, which was cited as the reason for the delay. The Tribunal condoned the delay due to the pandemic circumstances. 2. Entitlement to Section 11 Exemption: The primary grievance of the assessee in both appeals was the entitlement to section 11 exemption in its entirety, which had been partially disallowed by the Assessing Officer and only partially accepted by the CIT(A) to the extent of "mutuality" benefit. The Revenue, on the other hand, contended that the assessee did not fulfill the three monetary conditions of being a "mutual" organization as per the Bangalore Club Vs. CIT (2013 350 ITR 209 SC). The Tribunal noted that the issue of the assessee's entitlement to section 11 exemption is recurring. It referenced a co-ordinate bench order dated 03-09-2020, which had decided similar issues against the department. 3. Determination of Whether the Assessee is a Charitable Trust: The Tribunal examined whether the assessee trust is entitled to the benefit of exemption under sections 11 or 12 of the Act in terms of Section 2(15) and whether the assessee qualifies as a charitable trust. The assessee, a registered trust, was engaged in promoting unity and cooperation among the Promoters and Builders Association of Pune. The trust had gross receipts from various activities, including exhibitions. The Assessing Officer had denied the exemption, stating that the trust's activities involved trade, commerce, or business, thus falling under the first proviso to section 2(15) of the Act. This decision was upheld by the CIT(A), who observed that the trust's activities were primarily for the mutual benefit of its members and not for public utility. The Tribunal, however, noted that the assessee trust had been consistently granted exemptions in previous years. It emphasized that the trust's activities, such as organizing exhibitions, were in line with its charitable objectives and benefited the public at large. The Tribunal found no evidence that the trust charged subscriptions for exhibitions or operated with a profit motive. The Tribunal referred to several judicial precedents, including the Delhi Bench's decision in the case of Society of Indian Automobile Manufacturers Vs. Income Tax Officer and the Pune Bench's decision in Assistant Commissioner of Income Tax Vs. Mahratta Chamber of Commerce Industries and Agriculture. These cases highlighted that incidental surplus from charitable activities does not disqualify an entity from being considered charitable. The Tribunal concluded that the assessee's activities were charitable in nature and not aimed at profit-making. It reversed the CIT(A)'s order and directed the Assessing Officer to grant the benefit of exemption under sections 11 and 12 to the assessee. Conclusion: The Tribunal allowed the Assessee's and Revenue's appeals for statistical purposes, restoring the issue of section 11 exemption to the Assessing Officer for reconsideration in light of the detailed discussion and judicial precedents. The Tribunal's order was pronounced on June 30, 2022.
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