2024 (2) TMI 918 - AT - Income Tax

Exemption u/s 11 - assessment of trust - AO denied the exemption by observing that the assessee is not performing any charitable activity within the meaning of sec. 2(15) - AO considered the contribution received from MYMUL as income of the assessee from other sources by denying exemption u/s 11 - DR submitted that the assessee in the present case is formed for the benefit of its members which will not fall u/s 2(15) and not carried out any activities which are in the charitable nature for the benefit of public at large - HELD THAT - In this case the assessee has been granted approval u/s 12AA of the Act and 80G of the Act by CIT(A) Mysore noted that at the time of granting approval u/s 12AA competent authority was of aware of fact that the assessee has catering the needs of particular class of public and accordingly approval authority found that objects of the trust constitutes charitable purpose within the meaning of 2(15) of the Act. The objects listed in the above trust deed have been continuously and consistently carried on by the assessee from year to year and there was no dispute on these facts by the AO. To serve a charitable purpose it is not necessary that the objects should benefit the whole of mankind or all persons in a country or a state. It is sufficient if the intention to benefit a section of the public as distinguished from a specified individual is present. The section of community sought to be benefited must be sufficiently definite and identifiable by some common quality of a public or impersonal nature. CIT(A)/NFAC is taken a correct view in granting the exemption under sec. 11 of the Act to the assessee and same is confirmed. This ground of the appeals of the Revenue is dismissed. Corpus donation receipts - HELD THAT - In this present case the CIT(A) granted the exemption without verifying the records and also not called for remand report from the AO. In our opinion it is appropriate to remit the issue to the file of AO to examine the issue afresh in the light of the judgment of jurisdictional High Court in the case of Sri Ramakrishna Seva Ashram 2011 (10) TMI 369 - KARNATAKA HIGH COURT and decide it accordingly wherein as held it is not necessary that a voluntary contribution should be made with a specific direction to treat it as corpus. If the intention of the donor is to give that money to a trust to keep in trust the account in deposit and utilize the income there from for carrying on a particular activity it satisfies the definition part of the corpus. The assessee would be entitled to the benefit of exemptions from payment of tax. to view of the language employed in clause (d) of sub-section (1) of section 11 the requirement is that the voluntary contributions have to be made with a specific direction. Amount incurred for giving mementoes to President and Secretaries of Milk Producers Association as an expenditure fall under the purview of section 13(1)(c) r.w.s 13(2) and 13(3) - claim of the assessee is that it has not been claimed as application of fund the said amount cannot be taxed in the hands of the assessee - HELD THAT - In our opinion whether it was spent out of tide up grants or from assessee s corpus fund it has not been used for charitable purpose and the benefit has been gone to the President and Secretaries of other Milk Producers Association. In our opinion this is covered u/s 13(1) of the Act as such provision of sec. 11 or 12 cannot be applied. Since there was a contravention this amount spent on mementoes given to President and Secretaries of Milk Producers Association to be taxed in the hands of assessee and the same was brought to tax by the NFAC Delhi and we do not find any infirmity in the order of the NFAC New Delhi and the same is confirmed and this ground of assessee in both the appeals is dismissed.

Summary

Issues Involved:
1. Granting of exemption under Section 11 of the Income Tax Act.
2. Treatment of corpus donation under Section 11(1)(d) of the Act.
3. Expenditure on mementoes and its implications under Section 13(1)(c) read with Sections 13(2) and 13(3) of the Act.
4. Levy of interest under Section 234B of the Act.

Summary:

1. Granting of exemption under Section 11 of the Act:
The Revenue appealed against the granting of exemption under Section 11 of the Act for the assessment years 2016-17 and 2017-18. The Revenue contended that the assessee's activities did not fall under the definition of "charitable purpose" as per Section 2(15) of the Act, arguing that the assessee's activities were not for the benefit of the public at large. The Tribunal upheld the CIT(A)'s decision, stating that the assessee's activities for the welfare of milk producers and their families qualify as "relief to the poor," thus entitling the assessee to exemption under Section 11 of the Act.

2. Treatment of corpus donation under Section 11(1)(d) of the Act:
The Revenue challenged the CIT(A)'s decision to grant exemption on a corpus donation of Rs. 4,34,13,684/- without calling for a remand report from the AO. The Tribunal remitted the issue back to the AO for fresh examination, directing the AO to verify the records and the purpose of the donation in light of the Karnataka High Court judgment in the case of Director of Income-tax Vs. Sri Ramakrishna Seva Ashram.

3. Expenditure on mementoes and its implications under Section 13(1)(c) read with Sections 13(2) and 13(3) of the Act:
The assessee appealed against the CIT(A)'s decision to treat the expenditure on mementoes given to Presidents and Secretaries of Milk Producers Association as falling under the purview of Section 13(1)(c) read with Sections 13(2) and 13(3) of the Act. The Tribunal upheld the CIT(A)'s decision, stating that the expenditure was not for charitable purposes and benefited specific individuals, thus violating Section 13(1) of the Act. Consequently, the amount spent on mementoes was to be taxed in the hands of the assessee.

4. Levy of interest under Section 234B of the Act:
The assessee raised grounds regarding the levy of interest under Section 234B of the Act. The Tribunal noted that the levy of interest is consequential and mandatory in nature, to be charged accordingly.

Conclusion:
The Tribunal dismissed the Revenue's appeal regarding the exemption under Section 11 of the Act, remitted the issue of corpus donation back to the AO for fresh examination, upheld the CIT(A)'s decision on the treatment of expenditure on mementoes, and acknowledged the consequential nature of the levy of interest under Section 234B of the Act. The appeals were partly allowed for statistical purposes.