The Income Tax Appellate Tribunal (ITAT), Mumbai Bench allowed the exemption under section 11(1)(a) as activities are undertaken by Builders Association are not trade, commerce, or business.
The assessee, Builders Association of India which is a trust filed its return of income for Assessment Year 2013-14 declaring a net deficit. As is discernible from the records, the DIT(exemption), Mumbai, vide his order had canceled the registration of the assessee trust under Section 12A, which however was restored by the Tribunal vide its order. However, the department had assailed the order of the Tribunal by preferring an appeal under Section 260A before the High Court of Bombay.
The AO observed that the assessee had claimed exemption under Section 11 of the Act. After deliberating on the objects of the assessee trust, the AO held a conviction that it existed for the purpose of the development of contractors and services to construction industries in India.
As noticed by the AO the primary objects of the assessee trust were to promote and foster feelings of unity, cooperation, and mutual help with a purpose to eliminate unhealthy competition and unfair trade practices amongst the contractors and the allied operators. As observed by the AO the assessee had claimed that its activities were charitable in nature on the ground that it was engaged in the advancement of an object of a general public utility.
However, the AO was not persuaded to subscribe to the aforesaid claim of the assessee. It was observed by the AO that as per the post-amended Section 2(15) of the Act, any activity of rendering any services in relation to any trade, commerce, and business for a cess or any other consideration, irrespective of the nature of use or application or retention of the income from such activity would not fall within the purview of charity.
The issues involved in the case was whether the activities of the assessee trust could be considered as for “charitable purpose” within the meaning of Section 2(15) of the Act and whether activities of the trust would be hit by the 1st and 2nd proviso to Section 2(15) of the Act.
The coram of M. Balaganesh and Ravish Sood while allowing the appeal of the assessee noted that the assessee’s explanation before the DIT regarding nature of receipts clearly shows that they have been received from the members while pursuing objects of the society, specifically mentioned in the “objects” for which it was granted registration under section 12A.
The court directed the AO to allow the assessee’s claim for exemption under Section11 of the Act.
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