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2019 (9) TMI 683 - AT - Income TaxExemption u/s 11 - charitable activity u/s 2(15) - exemption u/s 10(23C)(iv) - HELD THAT - Section 2(15) of I.T. Act read with 3rd proviso to Section 143(3) of I.T. Act was invoked and exemption U/s 10(23C)(iv) was denied to the assessee. Further, out of assessee s claim for depreciation was allowed by the AO and the remaining amount was disallowed on the ground that capital expenditure incurred on acquisition of fixed assets in the earlier years had been already allowed to the assessee as application of income. AO took the view that depreciation was to be allowed only on the value of assets acquired during the year under consideration. The assessee filed appeal before CIT(A) against the aforesaid Assessment Order. CIT(A) followed the order of his predecessor for Assessment Year 2011-12 and held in his appellate order dated 08.07.2016 that mischief of proviso of Section 2(15) of I.T. Act was not attracted on the facts on the assessee s case. CIT(A) also based his decision on the order of Income Tax Appellate Tribunal ( ITAT ) for Assessment Year 2009-10 in assessee s own case in appeal 2017 (10) TMI 1410 - ITAT DELHI in which it was held by ITAT that the assessee was not engaged in any sort of commercial activity and all the activities were in furtherance of main objects of the assessee s society, which remained charitable and further held that authorities below were not justified in deny the exemption of the assessee society. CIT(A) further noticed that the order of the AO was identical to the order of the AO for Assessment Year 2009-10. - Decided in favour of assessee.
Issues Involved:
1. Whether the activities of the assessee fall within the purview of commercial activities under Section 2(15) of the Income Tax Act. 2. Whether the assessee is entitled to claim exemption under Section 10(23C)(iv) of the Income Tax Act. 3. Whether allowance of depreciation on fixed assets, acquisition of which has been allowed as application of income in earlier years, amounts to double deduction. Issue-wise Detailed Analysis: Issue 1: Commercial Activities under Section 2(15) The Revenue contended that the assessee's activities were commercial as they provided benefits only to selected persons and not to the public at large. The Assessing Officer (AO) denied exemption under Section 10(23C)(iv) by invoking provisos to Section 2(15) of the Income Tax Act, asserting that the assessee's activities were of a commercial nature. The CIT(A) and ITAT, however, found that the assessee's activities were not commercial but were in furtherance of its charitable objectives, which include cultural and intellectual activities. The ITAT upheld the CIT(A)'s decision, referencing the assessee's continuous charitable status and past favorable judgments, including ITAT's decision for AY 2009-10, which confirmed that the assessee was not engaged in commercial activities. Issue 2: Entitlement to Exemption under Section 10(23C)(iv) The Revenue argued that mere notification under Section 10(23C)(iv) does not entitle the assessee to claim exemption unless it is proven that the activities are within the scope of the section. The AO had denied the exemption, claiming that the assessee's activities of selling food and beverages and charging a license fee were profit-oriented. The CIT(A) and ITAT, however, noted that these activities were incidental to the main charitable objectives and were conducted on a no-profit, no-loss basis. The ITAT referenced past judgments, including the Delhi High Court and Supreme Court rulings, which supported the view that incidental income to further charitable purposes does not disqualify an entity from exemption under Section 10(23C)(iv). Issue 3: Double Deduction on Depreciation The AO allowed only part of the depreciation claimed by the assessee, arguing that allowing depreciation on assets whose acquisition cost had already been treated as application of income would result in double deduction. The CIT(A) and ITAT disagreed, citing the Supreme Court's decision in CIT vs. Rajasthan & Gujarati Charitable Foundation Poona, which allowed depreciation on such assets. The ITAT confirmed that the assessee was entitled to full depreciation, following judicial precedents that supported the assessee's claim. Conclusion: The ITAT dismissed the Revenue's appeal, affirming the CIT(A)'s order that the assessee's activities were charitable and not commercial, thus qualifying for exemption under Section 10(23C)(iv). The ITAT also upheld the allowance of full depreciation on fixed assets, aligning with the Supreme Court and Delhi High Court rulings. The decision was based on consistent judicial precedents and the assessee's established charitable status over the years.
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