2019 (11) TMI 460 - AT - Income Tax

Exemption u/s. 11 - Valid registration U/s. 12A - HELD THAT - There is nothing on record to suggest that the registration granted U/s. 12A of the Act in the case of the assessee is revoked the assessee is entitled to the benefit of section 11 of the Act on compliance of the other relevant provisions of the Act. Further, on perusing the objects of the assessee, as observed from the order of the Ld. AO extracted hereinabove, it is apparent that the activities relate to preservation of environment, forests and wildlife. The commercial activities mentioned in the Memorandum of Association are only ancillary objects supporting the main objects of the assessee. Therefore, we are of the considered view that the assessee s objects fall under the 6th limb of section 2(15) hence in the case of the assessee the proviso to Section 2(15) of the Act is not applicable. On examining the revenue received by the assessee amounting to ₹ 3,70,59,197/- as observed in the Order of the Ld.CIT(A) which is extracted hereinabove, we are of the considered view that they are only residual income arising from the main objects / ancillary objects of the assessee-company. For the above stated reasons, we do not find the order of the Ld. AO justifiable for not granting the benefit of exemption U/s.11 of the Act and treating the amount as the taxable income of the assessee which is upheld by the Ld. CIT (A). - Decided in favour of assessee.

Summary

Issues:
1. Valid registration under Section 12A of the Act.
2. Qualification for the sixth limb of Section 2(15) of the Act.
3. Treatment of residual receipts as taxable income under Section 11 of the Act.

Analysis:
1. The appeal was filed against the order of the Ld. CIT(A)-1, Hyderabad for the Assessment Year 2013-14. The primary issues raised by the assessee were regarding the validity of registration under Section 12A of the Act. The Ld. CIT(A) had erred in holding that the assessee lacked valid registration under Section 12A of the Act. The Tribunal observed that the registration was granted to the assessee in 1991 and was still valid, entitling the assessee to the benefit of Section 11 of the Act, subject to compliance with other provisions.

2. The second issue was whether the assessee qualified under the sixth limb of Section 2(15) of the Act, related to the preservation of environment and wildlife. The Ld. CIT(A) had held that the assessee did not fall under this category and was engaged in purely commercial activities. However, the Tribunal disagreed, noting that the activities of the assessee were primarily related to the preservation of environment, forests, and wildlife. The Tribunal concluded that the proviso to Section 2(15) of the Act was not applicable in the case of the assessee, as their objectives aligned with the sixth limb of Section 2(15).

3. The final issue pertained to the treatment of residual receipts as taxable income under Section 11 of the Act. The Ld. AO had treated certain receipts as taxable income, stating that the assessee's activities were commercial in nature. However, the Tribunal found that the revenue received by the assessee was residual income arising from their primary objectives of preserving the environment and wildlife. Therefore, the Tribunal set aside the orders of the lower authorities and directed the Ld. AO to delete the tax imposed on the assessee, allowing the appeal in favor of the assessee.

In conclusion, the Tribunal ruled in favor of the assessee, upholding the validity of their registration under Section 12A, recognizing their qualification under the sixth limb of Section 2(15), and overturning the treatment of residual receipts as taxable income under Section 11 of the Act.