The Income Tax Appellate Tribunal (ITAT), New Delhi Bench allowed the exemption under Section 11 and 12 to Association of State Road Transport Undertaking as it qualified as an organization for charitable purposes.
The assessee, Association of State Road Transport Undertaking is an apex coordinating body of all Nationalized State Road Transport Corporation working under the Ministry of Road Transport and Highways and it was established with the main object of improving Public transport system in the country and to assist its members STUs by providing automobile parts at the most economical and competitive rates so that the members STUs could run its passenger buses at economical cost.
The AO on pursuing the Income Expenditure account noticed that assessee has incurred expenditure of Rs.1,96,28,414 out of the total income of Rs.24,74,22,943 and had shown a surplus of Rs.5,11,38,828.
It was further noticed that Income of the assessee includes revenue from test laboratory and consultancy receipts etc. AO was of the view that assessee had carried out its activities in the nature of trade, commerce or business and therefore, the assessee was asked to explain as to how its activities were charitable in view of the amended proviso to Section 2(15) applicable from April 1, 2009 onwards.
The assessee made the detailed submissions which were not found acceptable to AO.
The AO was of the view that the activities of the assessee cannot be considered to be education activity as it does not come under the category of systematic regular mythological imparting of lessons for the overall development of the students and further assessee’s case also could not considered under the concept of mutuality. He, therefore, concluded that assessee failed to classify as an organization for charitable purpose and as also mutual association.
Consequently, the AO completed the assessment by invoking the proviso to section 2(15) and the total income of the assessee was determined at Rs.5,11,38,830.
The assessee carried the matter before the CIT(A) who noted that the Hon’ble Tribunal in assessee’s own case on identical facts wherein it was held that the activities of the laboratory testing and consultancy to be in furtherance of main and charitable object of the assessee association and it was also held that the activities undertaken by the assessee cannot be termed as activities with the main object of profit earning motive.
The two member bench headed by the Vice President, Sushma Chowla upheld the order of CIT(A) and directed the AO to allow exemption under section 11 and 12 with consequent benefits to the assessee.
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