The Income Tax Appellate Tribunal (ITAT), Jaipur Bench, has recently in appeals filed before it, held that the activities of Rajasthan State road transport corporation do not fall under “Charitable nature”, and hence that they are entitled to section 11 exception of the Income Tax Act.
The aforesaid observation was made by the Tribunal when four appeals were preferred before it by the Department, as against the order of the National Faceless Appeal Centre, Delhi (NFAC)], wherein orders were passed by the CIT(A) for the assessment year under consideration, which arose from the order passed by the DCIT (Exemption), Circle, Jaipur, under the provisions of Income Tax Act, 1961.
The brief facts of the case were that the return of income declaring total income of Rs. Nil, was e-filed on 08.10.2016, and the case was selected for complete scrutiny through CASS, with an e-notice u/s 143(2) of the Income Tax Act, 1961, beingissued on 08.07.2017,duly served upon the assessee in time.
The assessee being registered under section 12AA of the Income Tax Act, the object of the assessee corporation was to provide road transportation in the State of Rajasthan and in other states as well. And during the year under consideration, its total revenue receipts being Rs. 17,07,56,24,135/, after claiming various expenditure of Rs. 21,99,97,55,976/- as well as adjustment of disallowable expenditure, it had shown a net loss of Rs. 4,92,41,31,841.
The AO however made an addition to the income of the assessee, and it is being aggrieved by the aforesaid order of the AO that the assessee had preferred an appeal before the NFAC, who deleted the A.O’s addition. And it is being aggrieved by the same that the Department has preferred the instant appeal before the Jaipur ITAT.
While Shri Sanjay Dhariwal (CIT), on behalf on the Revenue submitted that the assessee was registered u/s 12AA of the Income Tax Act where the return of income for the assessment year 2016-17 declaring total income of Rs. Nil was e-filed on 08.10.2016, and subsequently the case of the assesseewas selected for complete scrutiny through CASS, with an e-notice u/s 143(2) of the IT Act, 1961 beingissued on 08.07.2017, it was submitted by theShri Suhani Meharwal (C.A.), the AR for the assessee by placing his reliance on the decision of the Bangalore Bench of ITAT in case of M/s Karnataka State Road. vs. ACIT, submitted the assessee corporation to be purely for charitable purposes.
Hearing the opposing contentions of both the sides and perusing the materials available on record, the ITAT Bench consisting of Rathod KamleshJayantbhai, the Accountant Member, along with Dr. S. Seethalakshmi, the Judicial Member observed as follows:
“Keeping in mind the above factual aspects and the provisions of the RTC, Act, 1950 and principle laid down in the aforesaid decision of the Hon’ble Delhi High Court in the case of India Promotion Organization (supra), in our view, will clearly show that the assessee does not driven primarily by desire or motive to earn profits but to do charity through advancement of an object of general public utility. The proviso to Sec.2(15) of the Act is therefore not applicable to the case of the assesse”
Thus, dismissing the Revenue’s appeals the ITAT Bench ruled:
“We therefore concur with the view of the CIT(A) and hold that the Assessee is entitled to the benefits of Sec.11 of the Income Tax Act. Accordingly, the A.O. is directed to grant benefit of exemption u/s 11 of the Income Tax Act for the relevant assessment year. And taking into consideration the facts and circumstances of the case, we hold that the ld. CIT(E) has rightly and fairly allowed of the assesse.”
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