2021 (3) TMI 177 - HC - Income Tax

Exemption u/s 10(21) - said provision mandates exemption only to the association and not to the institutions - assessee pointed out that they are notified as engaged in scientific research within the meaning of Section 35(1)(ii) of the Act and they have been claiming exemption under Section 10(21) ever since its inception from 1987 and the claim has been accepted by the Department consistently - Tribunal allowed exemption - HELD THAT - Tribunal rightly took note of the objectives of the assessee and their activities, which have been carried out ever since their inception in the year 1987. They are engaged in the research work in agricultural related activities and it is recognized as a leading nationally acclaimed society engaged in the field of research in Bio- Technology and Toxicology and they undertake various aspects including research and development studies that directly impact the safety in nonclinical, health and environmental areas and the Tribunal has rightly accepted the stand taken by the assessee and consequently reversed the finding of the AO who treated the assessee acclaimed to have been a contractor. AO treated the assessee as an institution while granting approval under Section 35(1)(ii) by the competent authority as well as by the Directorate of Income Tax (Exemption) (DITE) and not as an association and therefore, the assessee cannot claim the benefit under Section 10(21) of the Act. The above submission cannot be countenanced for more than one reason. Firstly, ever since the inception of the assessee society, they have been treated as an association. It is not disputed by the Revenue that the assessee is registered under the provisions of Tamil Nadu Societies Registration Act, 1975 and it has been treated as an association/society since 1987. The change done in the interregnum was set aside by the Tribunal, which decision stands confirmed as on date, in the light of the various orders passed by the Tribunal, which we have referred above. Therefore, the contention raised by the Revenue does not merit acceptance. The observation made by the Assessing Officer is wholly unsustainable, going by the objectives, for which, the assessee association had been established. Thus, in the light of the above undisputed position, we find no good ground to interfere with the order passed by the Tribunal. - Decided in favour of assessee.

Summary

Issues:
Interpretation of Section 10(21) of the Income Tax Act - Exemption for association or institution.

Analysis:
The appeals were filed by the Revenue challenging the order of the Income Tax Appellate Tribunal regarding the exemption claimed under Section 10(21) of the Act. The main issue raised was whether the assessee, registered as a Society, could be considered an association entitled to exemption under Section 10(21) or should be treated as an institution. The Assessing Officer partially disallowed the exemption claimed under Section 10(21) for the assessment years in question. The Commissioner of Income Tax (Appeals) partly allowed the assessee's appeals, leading to further appeals by the Revenue before the Tribunal.

The Tribunal dismissed the Revenue's appeals, upholding the exemption claimed by the assessee under Section 10(21) of the Act. The Tribunal considered the nature of the activities carried out by the assessee, focusing on education and scientific research provided to the public. The Tribunal noted the consistent acceptance of the assessee's claim for exemption by the Department based on their research and development services. The Tribunal also highlighted the erroneous view of the Assessing Officer in comparing the assessee to a hospital contractor, emphasizing the unique scientific research and development work undertaken by the assessee.

The Tribunal referenced previous decisions in the assessee's case, where it was held eligible for exemption under Section 10(21) of the Act. The Tribunal rejected the Revenue's argument that the assessee should be treated as an institution instead of an association, emphasizing the long-standing recognition of the assessee as an association. The Tribunal found no merit in the Revenue's contentions and upheld the exemption claimed by the assessee under Section 10(21) of the Act.

In conclusion, the High Court upheld the Tribunal's decision, stating that the assessee, registered as a Society and engaged in research activities, qualifies as an association entitled to exemption under Section 10(21) of the Act. The Court found the Revenue's arguments unsustainable, given the historical treatment of the assessee as an association and the nature of its established objectives. The appeals by the Revenue were dismissed, and the substantial question of law was answered against the Revenue.