The Income Tax Appellate Tribunal ( ITAT ) has directed the Assessing Officer ( AO ) to allow exemption under Section 11 of the Income Tax Act, 1961 acknowledging that profit derived from services rendered as a public utility service was very meager.
The common issue raised by the assessee, The Institute of Indian Foundry men in all these appeals was against the orders of CIT(A) upholding the assessment orders passed by the AO wherein the AO has treated that the activities of the trust as commercial activity by invoking the proviso to section 2(15) of the Act thereby the denying of exemption under Section 11 of the Income Tax Act.
Mr. Sunil Surana representing the assessee submitted that the assessee is registered under Section 12A of the Income Tax Act. Further submitted that the assessee derived income from membership, advertisement, contractual receipts, publication of journals /directories etc. Further submitted that the interest earned on the deposits along with other income was applied for general public utility.
Further that the provisions of section 2(15) of the Income Tax Act stated that charitable purpose of relief to poor, education, medical relief, preservation of environment, preservation of monuments or places or object of artistic or historic interest and the advancement of any other object of general public utility provided that the advancement of any other object of general public utility shall not be a charitable purpose if it involves the carrying on of any activity in nature of trade, commerce or business for a cess or fee or any other consideration
On the other hand Mr. B. K. Singh, relied on the order of authorities below and submitted that provision to Section 2(15) is clearly attracted as receipts from the said activity exceed 10 lakhs and therefore the object of general public utility cannot be considered as charitable.
The two member bench of the tribunal comprising Sonjoy Sarma (Judicial member) and Rajesh Kumar (Accountant member) inclined set aside the order of CIT (A) and further uphold that the assessee was entitled to exempt under Section 11 of the Income Tax Act during the year on the ground that the profit derived from the services rendered as public utility service is very meager or there is deficit. Accordingly, the AO is directed to allow the exemption under Section 11 of the Income Tax Act. Accordingly, the appeals of the assessee were allowed.
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