9911796707
|
Home
Issues Involved:
1. Whether the assessee is a charitable institution within the meaning of section 2(15) of the Income-tax Act and is entitled to exemption under section 11 of the said Act. 2. Whether the donation received is exempt under section 12 of the Act. Detailed Analysis: 1. Charitable Institution Status and Exemption under Section 11: The assessee, a society registered in Orissa, claimed exemption under section 11 of the Income-tax Act on the grounds that its income was applied for charitable purposes. The society derived income from running a printing press and publishing a daily newspaper. The Assessing Officer initially ignored the claim for exemption, leading to repeated assessments and remand reports. The CIT(A) noted several deficiencies in the assessments, including the failure to obtain and examine the Memorandum of Association of the society. The remand report highlighted the society's objects, activities, and reasons for rejecting the exemption claim. The primary reason for rejection was that the society's activities involved a regular commercial venture, which did not qualify as charitable under the Supreme Court's decision in Sole Trustee, Loka Shikshana Trust v. CIT. The CIT(A) observed that the society's activities of running a printing press and publishing a newspaper were conducted on commercial lines, with no evidence of fulfilling charitable objectives such as training in printing and journalism or providing financial help through prizes and scholarships. The activities were deemed to be normal business operations rather than charitable endeavors. The CIT(A) concluded that the society's dominant purpose was profit-making, not public charity, and thus did not qualify for exemption under section 11. The assessee's counsel argued that the CIT(A) relied on the outdated decision of Sole Trustee, Loka Shikshana Trust, which had been implicitly overruled by later Supreme Court decisions in Surat Art Silk Cloth Mfrs. Association and Thiagarajar Charities. The counsel contended that the society's profits were accumulated for charitable purposes and that the dominant object was not profit-making. The counsel emphasized that the test should be whether the activity is carried out for charitable purposes, not whether it results in profit. The Tribunal considered the objects of the society, which included promoting social justice, liberty, equality, and fraternity, publishing newspapers and journals, and training people in journalism and printing. The Tribunal noted that the society was a non-profit organization and that its surplus assets could not be distributed to members but had to be given to similar charitable institutions upon dissolution. The Tribunal distinguished the case from Sole Trustee, Loka Shikshana Trust, noting that the society had a specific clause stating it was a non-profit organization. The Tribunal referred to the Supreme Court's decisions in Surat Art Silk Cloth Mfrs. Association and Thiagarajar Charities, which emphasized that the predominant object should be charitable, and profit-making should be incidental. The Tribunal concluded that the society's activities were conducted on commercial lines and involved profit-making, which was intertwined with its charitable objects. Therefore, the society did not qualify for exemption under section 11 due to the restrictive words in section 2(15) of the Act. 2. Exemption of Donations under Section 12: The Tribunal did not provide a separate detailed analysis on the exemption of donations under section 12, as the primary focus was on the society's status as a charitable institution under section 2(15) and its entitlement to exemption under section 11. The rejection of the society's charitable status under section 2(15) inherently affected its claim for exemption of donations under section 12. Conclusion: The Tribunal held that the society is not entitled to exemption under section 11 read with section 2(15) of the Income-tax Act due to its commercial activities and profit-making nature, which were intertwined with its charitable objects. Consequently, all the appeals were dismissed.
|
