2019 (10) TMI 662 - AT - Income Tax

Exemption u/s. 11(1) - charitable activity u/s 2(15) - HELD THAT - We are of the considered view that the assessee is a charitable and non-profit institution and also found that assessee is not involved in any trade, commerce or business activity which attracts the mischief of the Proviso of section 2(15) of the Act and the assessee has been enjoying the exemption u/s. 11(1) and also u/s. 10(23C)(iv) in the past and accordingly following the principle of consistency the AO was rightly directed to allow the exemption to the assessee u/s. 11(1) of the Act with all the consequential benefits by the CIT(A). Hence, we do not find any infirmity in the order of the Ld. CIT(A), therefore, we uphold the same and reject the grounds raised by the Revenue and accordingly, dismiss the appeal filed by the Revenue.

Summary

Issues involved:
1. Whether the assessee is entitled to exemption under section 11 of the Income Tax Act disregarding the nature of its activities.
2. Whether the activities of the assessee fall under the last limb of proviso to section 2(15) of the Act.
3. Whether the income generated by the assessee from commercial activities impacts its eligibility for exemption.

Issue 1: Exemption under Section 11
The appeal by the Revenue challenged the order passed by the Ld. CIT(A) allowing exemption u/s. 11 for the assessment year 2011-12. The AO raised concerns about the commercial nature of the activities carried out by the assessee, particularly related to the publication of newspapers and income generated from advertisements. The Ld. CIT(A) relied on past judgments and held that the assessee, a charitable institution, was not involved in trade, commerce, or business activities for profit. The Tribunal agreed, emphasizing the charitable nature of the organization's activities and its consistent eligibility for exemptions under the Act in previous years.

Issue 2: Nature of Activities under Proviso to Section 2(15)
The dispute also centered on whether the activities of the assessee fell under the last limb of the proviso to section 2(15) of the Act, related to the advancement of any other object of general public utility. The Revenue argued that the assessee's activities, including newspaper publication, were commercial in nature, thus disqualifying it from exemption. However, the Ld. CIT(A) and the Tribunal found that the assessee's primary objective was charitable, utilizing income from activities for social, economic, and political advancement without a profit motive. They concluded that the assessee did not engage in trade, commerce, or business activities that would trigger the proviso to section 2(15).

Issue 3: Impact of Commercial Activities on Exemption
The Revenue contended that the assessee's income from commercial activities, such as newspaper publication, rendered it ineligible for exemption under section 11. The Ld. CIT(A) and the Tribunal, however, emphasized that the primary purpose of the assessee's activities was charitable, with income generated from commercial endeavors being utilized for charitable initiatives. They highlighted the consistent acceptance of the assessee's exemption claims in previous assessment years, reinforcing the charitable nature of its operations. The Tribunal upheld the Ld. CIT(A)'s decision, dismissing the Revenue's appeal and affirming the assessee's entitlement to exemption under section 11.

In conclusion, the judgment by the Appellate Tribunal ITAT DELHI upheld the assessee's eligibility for exemption under section 11 of the Income Tax Act for the assessment year 2011-12. The decision was based on the charitable nature of the organization's activities, the absence of profit motives, and the utilization of income for charitable purposes, despite income generated from commercial activities like newspaper publication. The Tribunal rejected the Revenue's appeal, affirming the Ld. CIT(A)'s order and emphasizing the consistent application of exemptions to the assessee in previous years.