2024 (10) TMI 349 - AT - Income Tax

Denial of exemption u/s 11 - charitable activity or not? - objectives of the society are commercial in nature and the income received by the society from its activities in the form of trade and commerce is more than Rs. 10 Lakhs - HELD THAT - Assessee is established by Department of Electronics, Government of India and form the permission of Microwave Electronics Ltd. to make the country as reliant in the field of Micro Wave Electronics. The assessee is an autonomous body for this purpose. In the earlier years, the co-ordinate Bench has restored the appeals of the assessee to the file of the AO to decide in accordance with the decision of Hon'ble Supreme Court in case of Ahmed Urban Development Authority 2022 (10) TMI 948 - SUPREME COURT . In the stated proceedings, the learned Authorized Representative has accepted the claim of the assessee and for all these years assessed it at the return of income. Subsequently for A.Y. 2016-17, 2017-18 and 2022-23, also the earlier years were passed after scrutinizing the case of the assessee and benefit of section 11 and 12 of the Act, was allowed. Therefore, for this year, the appeal of the Revenue does not stand on strong footing for the reason that the AO in series of the assessment orders passed and restored proceedings or in independent assessment proceedings has accepted the claim of the assessee. It is not the claim of the Revenue that the fact for this year or the law in this year is different than those assessment years. Decided in favour of assessee.

Summary

Issues:
1. Whether the exemption under Section 11 of the Income Tax Act should be granted to the assessee.
2. Whether the activities of the assessee fall under the category of advancement of any other object of general public utility.
3. Whether the income of the assessee consists of activities which are in the nature of trade, commerce, or business.

Analysis:
1. The appeal was filed by the Deputy Commissioner of Income Tax against the appellate order passed by the National Faceless Appeal Centre. The issue revolved around the exemption under Section 11 of the Income Tax Act for the assessee. The Assessing Officer contended that the objectives of the society were commercial in nature, and the income received exceeded the threshold for exemption under Section 11. The Tribunal noted that the assessee was engaged in research work in the field of Micro Wave Technology and claimed exemption under Section 11. The Assessing Officer argued that the assessee did not fulfill the conditions for exemption and that its activities were not purely charitable. The Tribunal considered various arguments and ultimately held that the dominant purpose of the assessee was charitable, and its activities did not amount to carrying on business, thereby allowing the appeal of the assessee.

2. The second issue raised was whether the activities of the assessee could be categorized as the advancement of any other object of general public utility. The Assessing Officer contended that the activities of the assessee were commercial in nature and did not fall under the charitable category. However, the Tribunal, after considering the memorandum of association and judicial precedents, found that the dominant purpose of the assessee was charitable and that its activities did not amount to carrying on business. Therefore, the Tribunal held in favor of the assessee on this issue as well.

3. The third issue involved whether the income of the assessee consisted of activities in the nature of trade, commerce, or business. The Assessing Officer argued that the surplus generated by the assessee was not eligible for exemption under Section 11 and that the activities of the assessee were in the nature of business. The Tribunal considered the submissions of both parties and found that the assessee was established by the Department of Electronics, Government of India, for research purposes in the field of Micro Wave Electronics. The Tribunal noted that in previous assessment years, the claim of the assessee had been accepted, and the activities were found to be in line with the provisions of the Income Tax Act. Therefore, the Tribunal dismissed the appeal of the Assessing Officer on this issue as well.

In conclusion, the Tribunal dismissed the appeal of the Assessing Officer, upholding the exemption under Section 11 of the Income Tax Act for the assessee based on the charitable nature of its activities and the fulfillment of necessary conditions.