2013 (12) TMI 1409 - AT - Income Tax

Object of general public utility Held that - Following the assessee s own case for the A.Y. 2008-09 - On performance in the nature of Dance Drama Music education and making auditorium available for school and colleges theatre groups and taking nominal charges for making the auditorium available for such activities cannot be termed as unreasonable The assessee was considered as charitable organization Activity of making available to other institution for the purpose of promoting dance drama music etc. is in the nature of charitable activities and same does not result in any earning to the trust - To earn income for the purpose of carrying on the charitable activities the trust had partly let out the premises so as to earn regular income - Decided against Revenue.

Summary

Issues:
- Exemption u/s. 11 & 12 of the Income Tax Act, 1961
- Classification of activities as charitable or business
- Interpretation of section 2(15) of the Income Tax Act, 1961

Exemption u/s. 11 & 12:
The Revenue appealed against the order of the Ld. Commissioner of Income Tax (A) allowing exemption u/s. 11 & 12 of the Income Tax Act, 1961 for the assessment year 2009-10. The Revenue contended that the assessee, a society registered u/s. 12A(a) of the I.T. Act, was engaged in hiring an auditorium and providing space on rent, earning business income, and not involved in educational or medical relief activities. The Assessing Officer concluded that the principal activity was profit-motivated, rejecting the claim of charitable institution status. However, the Ld. Commissioner of Income Tax (A) noted that the Hon'ble Jurisdictional High Court had upheld the charitable nature of the activities for the preceding year, emphasizing the promotion of arts and culture as charitable. The Ld. Commissioner observed that the activities were similar to previous years, where the High Court had recognized the charitable nature. Consequently, the Ld. Commissioner upheld the exemption, finding no reason to interfere with the previous orders.

Classification of Activities:
The core issue revolved around the classification of the assessee's activities as charitable or business-oriented. The Assessing Officer argued that the hiring of the auditorium and letting of property were profit-driven, not charitable. The Assessing Officer also highlighted the lack of donations received, questioning the charitable nature of the trust. However, the Ld. Commissioner of Income Tax (A) disagreed, relying on the High Court's decision and detailed evidence provided by the assessee. The Ld. Commissioner found that the activities, including making the auditorium available for cultural events and supporting other charitable organizations, aligned with charitable purposes. The Ld. Commissioner emphasized that the High Court's previous ruling and the consistent nature of the activities supported the charitable status of the trust.

Interpretation of Section 2(15):
The interpretation of section 2(15) of the Income Tax Act, 1961 was crucial in determining the eligibility for exemption. The Assessing Officer invoked the amended proviso to section 2(15), arguing that the trust's activities fell outside the scope of charitable purposes. However, the Ld. Commissioner of Income Tax (A) analyzed the activities in light of the High Court's decision and found that the trust's actions aligned with charitable objectives. The Ld. Commissioner concluded that the proviso did not apply as the trust was not engaged in trade, commerce, or business activities. The Ld. Commissioner's decision was supported by detailed evidence provided by the assessee, demonstrating the charitable nature of the activities. Ultimately, the Appellate Tribunal upheld the Ld. Commissioner's order, dismissing the Revenue's appeal and affirming the charitable status of the trust.