2022 (8) TMI 290 - AT - Income Tax

Exemption u/s 11 - assessee is registered u/s. 12A as per the order of the CIT as assessee was designated for this work for providing services to the citizens as per the direction of Government of Punjab - HELD THAT - Assessee-trust is giving service for benefit of the people as per the scheduled activities directed by the State Government. The assessee-trust cannot be solely in business purpose. The observation of income and expenditure account the assessee-trust is maintaining accounts as per provision of section 11 - The objective is the benefit to the people in their social activity which the assessee-trust is served through its activities. The larger people of society have been benefitted through the activities. The income expenditure account of the assessee-trust is maintained as per the provisions of section 11 - Here, we are not inclining to the order of Revenue Authorities. The assessee is eligible for deduction u/s. 11 as per the Act. Accordingly, the addition of the assessee is deleted.

Issues Involved:
1. Disallowance of exemption u/s. 11 of the Income Tax Act, 1961 for Assessment Year 2013-14 based on the nature of activities carried out by the society.
2. Interpretation of whether the society's activities are for charitable purposes under section 2(15) of the Act.
3. Justification of assessing the surplus income of the society and denial of exemption u/s. 11 of the Act.
4. Comparison with previous orders and decisions regarding exemption u/s. 11.

Issue 1: Disallowance of Exemption u/s. 11:
The appeal was filed against the order disallowing exemption u/s. 11 of the Income Tax Act for the Assessment Year 2013-14. The society, engaged in providing services through "Suvidha Centres," was deemed by the AO to be conducting business activities rather than charitable ones. The AO added the service income back to the total income, resulting in the denial of exemption u/s. 11. The CIT(A) upheld this decision, leading to the appeal.

Issue 2: Nature of Society's Activities:
The CIT(A) disallowed the exemption u/s. 11 based on the society's activities being categorized as business or commerce, falling under the first proviso to section 2(15) of the Act due to total receipts exceeding Rs. 25 lakhs. The society claimed its activities were for charitable purposes, citing registration under section 12AA of the Act. However, the CIT(A) referenced a prior decision where exemption u/s. 11 was denied, concluding the society was not engaged in charitable activities.

Issue 3: Surplus Income Assessment and Denial of Exemption:
The CIT(A) justified assessing the surplus income of the society and denying exemption u/s. 11 by referencing past decisions and holding that the AO's actions were valid. The society's contention of engaging in charitable activities was countered by the CIT(A) based on existing precedents and lack of new evidence supporting a different outcome.

Issue 4: Comparison with Previous Orders and Decisions:
The appellate tribunal considered the society's registration u/s. 12A and its role in providing services as directed by the Government of Punjab. A comparison was drawn with a previous case where exemption was denied, highlighting differences in registration status. Reference was made to a High Court decision emphasizing that activities benefiting the general public could still qualify as charitable, even if they indirectly benefited specific members.

In conclusion, the appellate tribunal found in favor of the assessee, ruling that the society's activities were for the benefit of the people as directed by the State Government and were not solely for business purposes. The tribunal held that the society was eligible for deduction u/s. 11, leading to the deletion of the addition made by the Revenue Authorities.

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