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2025 (4) TMI 910 - AT - Income TaxEntitlement for deduction u/s. 11 and 12 - charitable activity or not? - HELD THAT - We have perused the order passed by the Coordinate Bench of this Tribunal in 2025 (2) TMI 863 - ITAT BANGALORE in which a similar dispute arose in respect of the A.Ys. 2014-15 2016-17 and 2017-18 which were decided by the Coordinate Bench by following the earlier order passed in the case of Bangalore Development Authority 2019 (6) TMI 429 - ITAT BANGALORE hold that the denial of exemptions under Sections 11 and 12 of the Act is unjustified. The assessee s activities are undeniably charitable and the provisions of the Act support its exemption claim. The addition made by the AO and upheld by the CIT(A) is therefore quashed. Thus assessee is entitled for deduction u/s. 11 and 12 of the Act.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment revolve around the eligibility of the assessee, a local planning authority, for exemptions under Sections 11 and 12 of the Income Tax Act, 1961. The issues include:
ISSUE-WISE DETAILED ANALYSIS 1. Relevant Legal Framework and Precedents The legal framework primarily involves Sections 11, 12, and 2(15) of the Income Tax Act, 1961. Section 11 and 12 provide for exemptions on income derived from property held under trust for charitable or religious purposes. Section 2(15) defines "charitable purpose" and includes relief of the poor, education, and advancement of any other object of general public utility. The proviso to Section 2(15) excludes activities involving trade, commerce, or business from the definition of charitable purposes if they exceed a specified threshold. The Tribunal referenced several precedents, including the Bangalore Development Authority case, which held that activities undertaken by statutory authorities in fulfillment of public duties do not constitute trade or business. The Supreme Court's decision in the Ahmedabad Urban Development Authority case was also pivotal, clarifying that activities conducted on a cost or nominal basis do not fall within the scope of trade, commerce, or business. 2. Court's Interpretation and Reasoning The Tribunal interpreted the statutory provisions and precedents to determine that the assessee's activities do not fall within the scope of trade or business. The Tribunal emphasized that the primary purpose of the assessee's activities was the planned urban development and public welfare, not profit generation. The Tribunal also noted that the assessee operates under stringent government regulation, with all receipts and expenditures subject to government approval, further supporting the non-commercial nature of its activities. 3. Key Evidence and Findings The Tribunal relied on the financial statements of the assessee, which demonstrated significant expenditures on public welfare activities such as environmental preservation and development of lakes. The Tribunal also considered the statutory framework governing the assessee, which mandates that any surplus or assets revert to the State Government upon dissolution, underscoring the public welfare objective. 4. Application of Law to Facts The Tribunal applied the legal principles established in the cited precedents to the facts of the case, concluding that the assessee's activities align with the definition of "charitable purposes" under Section 2(15). The Tribunal found that the collection of fees by the assessee was for specific statutory purposes and did not constitute income in the sense of trade or business. 5. Treatment of Competing Arguments The Tribunal addressed the arguments presented by the revenue authorities, which contended that the assessee's activities were commercial in nature due to the collection of fees and generation of surplus. The Tribunal rejected this argument, emphasizing that the intent and purpose of the activities, not the generation of surplus, determine their nature under the Act. The Tribunal also criticized the lower authorities for disregarding binding precedents and failing to consider the statutory framework governing the assessee. 6. Conclusions The Tribunal concluded that the assessee's activities are charitable in nature and not subject to the proviso to Section 2(15). Consequently, the assessee is entitled to exemptions under Sections 11 and 12 of the Act. The Tribunal quashed the orders of the lower authorities and allowed the appeals filed by the assessee. SIGNIFICANT HOLDINGS The Tribunal's judgment contains several significant holdings:
The Tribunal's final determination was that the assessee is entitled to the exemptions under Sections 11 and 12 of the Income Tax Act, 1961, and the appeals filed by the assessee were allowed.
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