2017 (11) TMI 1367 - AT - Income Tax

Exemption u/s 11(1) - denial of claim as the activities of the assessee is in the nature of trade, commerce/business, which falls under the Advance of any other objects of general public utility and hit by the proviso to section 2(15) - CIT-A allowed the claim - AO, while making the addition taxed the income on the ground that the receipts are from non-recognized courses, therefore, it is for non-charitable purposes Held that - Under the provisions of Explanation-2 of Section-11(1) accumulation of the amount of income, derived from property held under the trust, are permitted to be accumulated u/s 11(2) and under the provision of section 11(1) of the Act, the earning of the assessee from property held for charitable purposes is permitted to be accumulated up to the specified limit of its gross receipts. The assessee society is imparting education to the poor woman for providing vocational and non-vocational education, which has been considered by the Tribunal in its own case for AY 2009-10. The proviso to section-2(15) is applicable only in a situation, when the activities of the assessee are found against the purposes/act and the primary objective even if it is unrecognized by the university/board, it cannot be said that the education is not being imparted. Thus, we don t find any infirmity in the conclusion of the Ld. CIT(A), - Decided against revenue.

Summary

Issues:
- Exemption u/s 11(1) of the Income Tax Act, 1961
- Interpretation of the proviso to section 2(15) of the Act
- Treatment of income from unrecognized courses in relation to charitable purposes

Exemption u/s 11(1) of the Income Tax Act, 1961:
The case involved the Revenue challenging the order of the Ld. First Appellate Authority allowing exemption u/s 11(1) of the Income Tax Act. The Revenue contended that the activities of the assessee, a society registered under Societies Registration Act, were in the nature of trade, commerce, or business, falling under the proviso to section 2(15) of the Act. The assessee declared nil income, but the Assessing Officer noted discrepancies regarding income from a women training institute. The Ld. CIT(A) directed exemption on earnings from unrecognized courses, considering them under the definition of 'education'. The Tribunal upheld this decision, emphasizing that the Finance Act, 2015 did not differentiate between recognized and unrecognized courses, and the plain language of the section must be considered. The Tribunal found no evidence that the income was used for non-charitable purposes, allowing accumulation of income under relevant sections. The Tribunal concluded that the activities were charitable, dismissing the Revenue's appeal.

Interpretation of the proviso to section 2(15) of the Act:
The Tribunal analyzed the proviso to section 2(15) of the Act in the context of the activities of the assessee society. It noted that the proviso excludes activities in the nature of trade, commerce, or business from being considered charitable. However, it emphasized that even unrecognized educational courses could be deemed charitable under the broader definition of charitable purposes. The Tribunal highlighted that as long as the primary objective was charitable, even if not recognized by a university/board, it did not negate the charitable nature of the activities. The Tribunal concluded that the Ld. CIT(A) had correctly followed precedent and found no merit in the Revenue's argument against the charitable status of the activities.

Treatment of income from unrecognized courses in relation to charitable purposes:
The case involved a detailed analysis of the treatment of income from unrecognized courses concerning charitable purposes. The Tribunal considered the nature of the courses provided by the assessee society, emphasizing that the activities aimed at providing vocational and non-vocational education to underprivileged women were indeed charitable. It noted that the Finance Act, 2015 did not distinguish between recognized and unrecognized courses for charitable purposes. The Tribunal highlighted that the deposits made by the assessee were solely used for charitable activities, and there was no evidence of diversion for non-charitable purposes. Therefore, the Tribunal upheld the decision of the Ld. CIT(A) to allow exemption on earnings from unrecognized courses, dismissing the Revenue's appeal.

In conclusion, the Tribunal's judgment upheld the charitable status of the activities of the assessee society, allowing exemption u/s 11(1) of the Income Tax Act for earnings from unrecognized courses and emphasizing that the primary objective of charitable activities remained paramount, irrespective of recognition status.