1987 (4) TMI 120 - AT - Income Tax

Summary

Issues:
Whether an assessee company deriving income from the publication of a magazine is entitled to exemption under section 11 of the IT Act, 1961.

Analysis:
The case involved a company registered under section 26 of the Indian Companies Act, which was denied exemption of income under section 2(15) read with section 11 of the IT Act, 1961, by the Income Tax Officer (ITO). The ITO categorized the company's activities into two heads: activities of the company itself and activities related to hotelier and caterer. The ITO emphasized that the company's main activity, including sales of magazines and advertisements, was commercial in nature and in violation of its memorandum. The Commissioner of Income Tax (Appeals) [CIT(A)] set aside the assessment for further inquiries. The Income Tax Appellate Tribunal (ITAT) analyzed the company's objects as per the Memorandum and upheld the CIT(A)'s decision, stating that the company's activities were primarily for providing amenities and benefits to its members, aligning with the objects of general public utility. The Tribunal referred to various Supreme Court judgments to support its decision, emphasizing that the company's income was ancillary to its charitable activities.

The authorized counsel of the assessee contended that the company was non-profit making and its objects were charitable in nature as per the Memorandum. The counsel argued that the income derived was for achieving the company's charitable objects and not for profit-making purposes. The Tribunal analyzed the company's objects from the Memorandum and concluded that the company's predominant object was to carry out charitable purposes for the advancement of general public utility, rather than earning profits. The Tribunal rejected the Revenue's grounds for all assessment years and upheld the CIT(A)'s findings, citing relevant Supreme Court decisions supporting its decision.

The Tribunal dismissed all three reference applications, stating that the findings of fact were self-evident and rendered the reference academic and unnecessary. The Tribunal acknowledged the assistance of the advocates in disposing of the reference applications. Ultimately, the Tribunal upheld the CIT(A)'s decision, emphasizing the company's charitable objectives and the ancillary nature of its income generation activities.