1979 (9) TMI 94 - AT - Income Tax

Summary

Issues:
1. Whether the assessee qualifies as a charitable organization under section 2(15) read with section 11 of the Income Tax Act, 1961.

Analysis:
The judgment by the Appellate Tribunal ITAT Bombay involved two appeals by the assessee concerning its assessment for the assessment years 1973-74 and 1974-75. The primary issue was whether the assessee, an Association of persons, met the criteria to be considered a charitable organization under the Income Tax Act. The Income Tax Officer (ITO) had rejected the assessee's claim for exemption under section 11, citing a Supreme Court decision and concluding that the assessee's activities involved profit and did not qualify for the exemption. However, the Appellate Assistant Commissioner (AAC) held that the assessee was not involved in public charity, making the profit activity aspect irrelevant.

The assessee contended that it was established for charitable or religious purposes as per section 2(15) of the IT Act, emphasizing its Memorandum of Association to support its charitable nature. The assessee argued that even though some activities generated profit, they were not profit-oriented and were not intended to make a profit. The Departmental Representative, on the other hand, supported the AAC's decision, highlighting the assessee's involvement in a labor pool activity as evidence against its charitable status.

The Tribunal analyzed the Memorandum of Association and relevant case laws to determine the charitable nature of the assessee. It concluded that for an organization to be considered charitable, it must benefit a sufficiently large section of the public, and it is not necessary to benefit all individuals. The Tribunal found that the assessee, primarily benefiting Bombay Custom House Clearing Agents, still served a public purpose akin to other associations held for charitable purposes. Regarding the profit-generating activity, the Tribunal noted that any profit or loss was incidental and not intentional, leading to the acceptance of the assessee's claim as a charitable organization entitled to benefits under section 11 of the IT Act.

In the final decision, the appeals by the assessee were allowed, affirming the Tribunal's finding that the assessee qualified as a charitable organization under the Income Tax Act, 1961.