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2018 (12) TMI 115 - AT - Income TaxCharitable activities - exemption u/s 11 denied - assessee is charging fees and receiving grant the assessee is carrying on business and therefore is not eligible for exemption - whether the activities of the assessee is hit by the amendment made to section 2 (15) of the income tax act or not? - Held that - The assessee is a society in the field of science and technology and the income of the society has been exempted from tax under section 10 (21) of the income tax act for each approval was granted earlier. Undisputedly the assessee is also registered under section 12 AA of the income tax act. The objectives of the assessee are already set out earlier. The activities of the assessee are spread all over India for the common benefit of public at-large and it provides act addition to testing and calibration laboratories in a nondiscretionary manner regardless of their ownership, legal status, size and degree of independence and other activities such as to plan, prepare, develop and disseminate certified reference materials for enhancement in quality and accuracy et cetera of testing, calibration, research and development of laboratories. The learned departmental representative could not point out any infirmity in the order of the learned Commissioner of income tax appeals which is following the decision of the jurisdictional High Court in case of ICAI vs DGIT 2013 (7) TMI 205 - DELHI HIGH COURT . No infirmity in the order of the learned Commissioner of income tax appeals and confirm his finding. Therefore assessee is eligible for exemption under section 11 and 12 of the income tax act and is not hit by the proviso to section 2 (15) of the income tax act. - Decided in favour of assessee
Issues Involved:
1. Whether the activities of the assessee fall under the last limb of Section 2(15) of the Income Tax Act as commercial activities. 2. Whether the assessee is eligible for exemption under Sections 11 and 12 of the Income Tax Act. Detailed Analysis: Issue 1: Commercial Activities under Section 2(15) The primary contention of the revenue was that the assessee’s activities are commercial in nature, falling under the last limb of Section 2(15) of the Income Tax Act, which pertains to "advancement of any other object of general public utility." The assessing officer (AO) noted that the assessee, a registered society, was generating income through fees and subscriptions amounting to ?4.37 crores and grants/subsidies of ?6 crores. The AO argued that the assessee was carrying on business activities as it charged fees, accumulated substantial funds, and generated a surplus of ?2.84 crores. Consequently, the AO denied the exemption under Sections 11 and 12, determining the total income at ?7.91 crores. Issue 2: Eligibility for Exemption under Sections 11 and 12 The Commissioner of Income Tax (Appeals) [CIT(A)] examined the objectives and activities of the assessee, which included promoting accreditation systems for laboratories, ensuring measurement standards, and enhancing quality and accuracy in testing and calibration. The CIT(A) concluded that the assessee’s activities were charitable and not commercial, relying on the Delhi High Court’s decision in ICAI vs DGIT (Exemption). The CIT(A) emphasized that the amendment to Section 2(15) targets entities where business is the main activity, not incidental to charitable activities. Tribunal's Findings: The tribunal carefully reviewed the arguments and the orders of the lower authorities. It noted that the assessee is an autonomous society formed by the Department of Science and Technology, Government of India, and is registered under Section 12AA of the Income Tax Act. The tribunal agreed with the CIT(A) that the assessee’s activities were spread across India for the public benefit and were conducted in a non-discriminatory manner. The tribunal highlighted the CIT(A)’s detailed consideration of the assessee’s objectives and activities, which aligned with the charitable purpose of promoting quality and accuracy in laboratory testing and calibration. The tribunal also referenced the legislative intent behind the amendment to Section 2(15), as clarified in the Budget Speech, which aimed to exclude entities carrying on regular trade, commerce, or business from claiming charitable status. However, it emphasized that the dominant object of the assessee was charitable, and any incidental commercial activity did not negate its charitable purpose. Conclusion: The tribunal found no infirmity in the CIT(A)’s order, which was consistent with the jurisdictional High Court’s decision in ICAI vs DGIT (Exemption). It concluded that the assessee’s activities were not hit by the proviso to Section 2(15) and confirmed the CIT(A)’s finding that the assessee is eligible for exemption under Sections 11 and 12 of the Income Tax Act. Consequently, the appeal of the revenue was dismissed. Order: The appeal of the learned assessing officer is dismissed. The order was pronounced in the open court on 28/11/2018.
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