2021 (9) TMI 306 - HC - Income Tax

Exemption u/s 11 - Proof of charitable object u/s 2(15) - Rule of Consistency - denial of exemption on the ground that conducting lectures, workshops, seminars and earning rental income from multi-storeyed building and running of hostel are commercial in nature - whether Tribunal was right in holding that the appellant society is not entitled to exemption under Section 11 in the light of the amendment made to Section 2(15) with effect from 01.04.2009? - HELD THAT - On account of the fact that the assessee had succeeded before the CIT (Appeals) for assessment year 2010-11 and the said order having become final, applying the Rule of Consistency the revenue cannot take a different stand for the assessment year under consideration, AY 2011-12. Nevertheless there are decisions wherein it has been held that though the cardinal principle is that each assessment year is a distinct and separate unit, nevertheless if the facts and the nature of activities done by the assessee and the nature of claim made by the assessee are identical for the earlier assessment years. Unless there are strong and compelling reasons to take a different view, the revenue should be bound by the decisions in the earlier as well as the subsequent assessment years so far as the said assessee is concerned. This in other words terms as the Rule of Consistency. In the instant case, for the assessment year 2010-2011, the Assessing Officer took a similar view as that of the view taken by the Assessing Officer for the assessment year under consideration AY 2011-2012. Against such decision, the assessee filed appeal before the CIT(A)-VII, Chennai. The CIT(A) after elaborately considering the factual matrix allowed the appeal filed by the assessee. In the said decision, the CIT(A) has examined the very same rental receipts received by the appellant/assessee and granted relief to the appellant/assessee. Aggrieved by the same, the revenue preferred an appeal before the Tribunal and the appeal was withdrawn by the revenue Tribunal has recorded the application filed by the revenue seeking leave to withdraw the appeal and nowhere in the said application it has been mentioned that the appeal has not been pursued on the ground of low tax effect. Rather the application states that no appeal to the Appellate Tribunal is necessary against the order of the CIT(A) dated 19.02.2014. If such was the factual position, the Assessing Officer on the date when he completed the assessment on 31.03.2014 the order passed by the CITA() in the assessee's own case for the earlier assessment year dated 19.02.2014 was available and on record. Assessing Officer was bound by the said order because the said order has not been reversed or modified on the date when the assessment order for the current assessment year 2011-2012 was passed i.e. on 31.03.2014. Therefore, the Assessing Officer ignored the cardinal principle of judicial discipline in not adhering to the orders passed by the Appellate Authority. Thus, for all the above reasons we find that the Tribunal ought not to have reversed the order passed by the CIT(A). Tax case appeal is allowed, the order passed by the Tribunal is set aside and the order passed by the CIT(A) restored. - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of Section 11 for exemption eligibility
2. Application of Rule of Consistency in tax assessments

Issue 1: Interpretation of Section 11 for exemption eligibility
The case involved an appeal under Section 260A of the Income Tax Act, 1961, challenging the denial of exemption under Section 11 for the appellant society. The substantial questions of law raised included whether the society was entitled to exemption under Section 11, the impact of the amended proviso to Section 2(15) of the Act, and the commercial nature of the society's activities. The appellant, a non-profit organization registered as a Public Charitable Trust, claimed exemption under Section 11 for the assessment year in question. The Assessing Officer, however, held that the activities were not charitable, the receipts were commercial in nature, and denied the exemption. The Commissioner of Income Tax (Appeals) allowed the appeal for the earlier year, but the Tribunal reversed this decision. The High Court emphasized the Rule of Consistency, noting that the revenue should be bound by decisions in earlier and subsequent assessment years unless there are strong reasons for a different view. The Court referred to past judgments emphasizing the importance of consistency in tax assessments and held that the Tribunal erred in reversing the CIT(A)'s decision.

Issue 2: Application of Rule of Consistency in tax assessments
The High Court highlighted the significance of the Rule of Consistency in tax assessments, emphasizing that each assessment year should be treated as a distinct unit unless there are compelling reasons for a different view. The Court cited previous decisions where the revenue was expected to maintain consistency in interpreting transactions and claims made by taxpayers. In this case, the Court noted that the revenue had accepted the appellant's claims for exemption in subsequent assessment years, indicating a lack of justification for a different stance in the year under consideration. The Court referred to specific instances where the revenue's sudden change in interpretation was deemed inconsistent and emphasized the importance of judicial and quasi-judicial consistency. Ultimately, the Court allowed the appeal, setting aside the Tribunal's order and restoring the decision of the CIT(A) for the earlier year, emphasizing the finality and binding nature of past decisions in tax assessments.