2023 (1) TMI 1174 - AT - Income Tax

Exemption u/s 11 - assessee is rendering specific service to its members as well as non-members and charging fees from them which is liable to be taxed under head Profit and gains of Business Profession and as such its activities are not charitable in nature as envisaged u/s 2(15) - CIT-A held that the activities of assessee organization charitable in nature and eligible for exemption u/s 11 - HELD THAT - It is not in dispute that for the Assessment Year 2006-07 and 2007-08 exemption had been denied on the ground that the assessee was involved in trade, commerce or business since the assessee was receiving fees and other income from known members also. The denial of the exemption has been set aside by the Ld.CIT(A) against which the Department of Revenue had approached this Tribunal and his Tribunal had allowed the exemption but directed the assessee to maintain separate books of accounts u/s 11(4A) of the Act. As against the order of the Tribunal, the assessee preferred an appeal before the Hon ble Delhi High Court 2012 (11) TMI 429 - DELHI HIGH COURT treated the assessee as charitable institution u/s 11(1) of the Act. Even in the year under consideration the exemption u/s 11(1) has been denied by invoking mischief of proviso to Section 2(15) mainly on the ground that the assessee involved in trade, commerce or business. The Ld.CIT(A) by following the principles of consistency and also orders made in assesses s own case right from the Assessment Year 2006-07 to 2014-15 and also by following orders of the Tribunal, the Hon ble Delhi High Court which treated the assessee as charitable institution u/s 11(1) of the Act and allowed the appeal.

Summary

Issues:
- Whether the activities of the assessee organization are charitable in nature and eligible for exemption under section 11 of the Income Tax Act?
- Whether the assessee is liable to be taxed under the head 'Profit and gains of Business & Profession' for rendering specific services and charging fees?

Analysis:
1. The Revenue appealed against the order of the Commissioner of Income Tax (Appeals) regarding the charitable nature of the assessee organization's activities for the assessment year 2016-17.
2. The Revenue contended that the activities of the assessee were not charitable as they involved providing services to members and non-members, charging fees, and engaging in business-like activities.
3. The assessment order taxed the assessee as an AOP and denied the benefit of sections 11 & 12 of the Act due to Section 13(8) of the Income Tax Act.
4. The Commissioner of Income Tax (Appeals) allowed the exemption under section 11 for the assessee, leading to the Revenue's appeal.
5. The Revenue argued that the activities did not qualify as charitable under section 2(15) of the Act and relied on the assessment order to set aside the Commissioner of Income Tax (Appeals) decision.
6. The assessee's counsel highlighted previous years where similar issues arose, leading to favorable decisions by the CIT(A), Tribunal, and Delhi High Court, treating the assessee as a charitable institution.
7. The Tribunal reviewed past decisions and upheld the charitable status of the assessee based on consistency with previous assessments and court orders.
8. The Tribunal found no error in the Commissioner of Income Tax (Appeals) decision, citing past rulings treating the assessee as a charitable institution.
9. Consequently, the Tribunal dismissed the Revenue's appeal, affirming the charitable status of the assessee organization.
10. The appeal of the Revenue was ultimately dismissed by the Tribunal based on the above analysis.

This detailed analysis of the judgment highlights the key issues, arguments presented by both parties, relevant legal provisions, and the final decision reached by the Tribunal regarding the charitable nature of the assessee organization's activities and eligibility for exemption under the Income Tax Act.