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2021 (3) TMI 1106 - AT - Income TaxExemption u/s 11 - objects of the assessee seems to be charitable, but the activities carried out by the assessee are commercial in nature - Claim of deprecation on assets used by assessee trust - HELD THAT -As in assessee's own case 2018 (7) TMI 1478 - ITAT DELHI Assessing Officer (AO) had ruled that the assessee was disentitled to the exemptions. The CIT(A) and the ITAT, however, reversed the decision and relied upon the decision of this Court in India Trade Promotion Organization vs. DGIT 2015 (1) TMI 928 - DELHI HIGH COURT . See assessee own case 2019 (2) TMI 1917 - DELHI HIGH COURT Double benefit claimed by the assessee i.e. towards depreciation reported in respect of the assets acquired out of previous exempt income - On this too the Tribunal relied upon a binding decision of the Supreme Court in CIT vs. Rajasthan Gujarat Charitable Foundation 2017 (12) TMI 1067 - SUPREME COURT - Revenue appeal dismissed.
Issues Involved:
1. Whether the assessee's activities are commercial in nature and thus not entitled to exemption under Section 2(15) of the Income Tax Act. 2. Whether depreciation is allowable on assets for which capital expenditure has already been claimed as a deduction. 3. Whether the provisions of Sections 11, 12, and 13 of the Income Tax Act allow for the set-off of deficit/excess expenditure of earlier assessment years against the income of the current year. Detailed Analysis: Issue 1: Commercial Nature of Activities and Exemption under Section 2(15) The Revenue contended that the assessee's activities, although appearing charitable, were commercial in nature, thus disqualifying them from exemption under Section 2(15) of the Income Tax Act. The Tribunal referenced its own decision in ITA No. 1130/Del/2016 for the assessment year 2011-12, which had not been overturned by the Delhi High Court. The Tribunal reiterated that the proviso to Section 2(15) excludes entities carrying on trade, commerce, or business from being considered as charitable. However, it was clarified that this proviso applies only to the last limb of Section 2(15) concerning the advancement of any other object of general public utility. The Tribunal emphasized that the primary and dominant activity of the assessee was promoting sports, not commercial activities, and thus it retained its charitable character. The Tribunal concluded that the assessee's activities did not amount to carrying on business, trade, or commerce, and thus, the assessee was entitled to the benefits under Sections 11 and 12 of the Act. Issue 2: Allowance of Depreciation The Revenue argued that allowing depreciation on assets for which capital expenditure had already been claimed would result in double deduction. The Tribunal dismissed this argument, citing the Supreme Court's judgment in the case of Rajasthan and Gujarat Charitable Foundation (402 ITR 441), which held that depreciation should be allowed even if the expenditure for acquiring the capital assets was treated as an application of income for charitable purposes under Section 11(1) of the Act. Thus, the Tribunal upheld the allowance of depreciation on such assets. Issue 3: Set-off of Deficit/Excess Expenditure The Revenue's grievance related to the set-off of deficit/excess expenditure of earlier assessment years against the income of the current year. The Tribunal linked this issue to the first issue, where it had already directed the Assessing Officer (AO) to allow the benefit of exemption under Sections 11 and 12 of the Act. Consequently, the Tribunal directed the AO to allow the set-off in accordance with the provisions of the Act. Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order in favor of the assessee. The Tribunal found no merit in the Revenue's arguments and confirmed that the assessee's activities were charitable, depreciation was allowable on capital assets, and the set-off of deficit/excess expenditure was permissible. The Tribunal's decision was consistent with prior rulings and judicial precedents, including those from the Delhi High Court and the Supreme Court. The order was pronounced in the open court on 23/03/2021.
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