1988 (5) TMI 69 - AT - Income Tax

Summary

Issues:
1. Exemption under section 11 of the Income Tax Act, 1961 for the assessment year 1983-84.
2. Interpretation of the purpose of the assessee as a Federation of Hotel & Restaurant Associations of India.
3. Application of the judgment of the Supreme Court in CIT vs. Surat Art Silk Manufacturers Association.
4. Consideration of previous years' orders and decisions in similar cases.
5. Pending application for registration under section 12A.

Analysis:
The judgment involves an appeal by the assessee, a company that is a Federation of Hotel & Restaurant Associations of India, against the order of the CIT(A) denying exemption under section 11 of the Income Tax Act, 1961 for the assessment year 1983-84. The Income Tax Officer (ITO) had disallowed the exemption, stating that the assessee was not registered under section 12A(a) with the CIT, Delhi II, and that its activities were not for the advancement of a general public utility but rather for a specific group's interest. The ITO also considered the commercial nature of the assessee's activities as a hindrance to claiming charitable purpose status.

In the appeal, the CIT(A) upheld the ITO's order, citing the Supreme Court judgment in CIT vs. Surat Art Silk Manufacturers Association and categorizing the assessee as a trade association rather than a charitable organization. The CIT(A) also noted that the application under section 12A was filed after the relevant assessment year, leading to the denial of exemption under section 11. The CIT(A) directed the ITO to assess the assessee as a trade association under section 28(iii).

The assessee contended that previous years' orders in its favor were not considered, referencing tribunal decisions and subsequent assessments where exemption under section 11 was allowed. The assessee also highlighted pending registration under section 12A and cited various legal precedents supporting a liberal interpretation of provisions for tax benefits.

After considering the submissions and legal precedents, the tribunal allowed the appeal, emphasizing that the assessee had been granted exemption under section 11 for previous years and had a pending application for registration under section 12A. The tribunal noted that even in subsequent assessments, the CIT(A) had acknowledged the charitable purpose of the assessee. Therefore, the tribunal held that the assessee was entitled to claim exemption under section 11 for the assessment year 1983-84.

In conclusion, the tribunal allowed the appeal, recognizing the entitlement of the assessee to exemption under section 11 based on previous favorable decisions, pending registration application, and the charitable nature of its activities as determined in subsequent assessments.