Section 11 Exemption: ITAT remits the matter to AO for fresh consideration [Read Order]

The Income Tax Appellate Tribunal (ITAT), remitted the matter to the Assessing Officer for fresh consideration in respect of the Exemption under  Section 11 of the Income Tax Act.

The assessee, M/s.Karnataka Udyog Mitra is a charitable society having registration under 12AA of the Income Tax Act. For the assessment year 2013-2014, the return of income was filed declaring `Nil’ income, after claiming exemption under section 11. The assessment was taken up for scrutiny by issuance of notice under section 143(2). The Assessing Officer concluded the assessment vide order wherein the assessee’s claim of exemption under section 11 of the Income Tax Act was denied, in view of proviso to section 2(15).

The Assessing Officer denied the benefit of exemption under section 11 (a) on the grounds that the assessee acts as a single window facilitation for the purpose of setting up industries in the State of Karnataka. For this service the assessee is charging a fee from the prospective investors.

The AO observed that Proviso to section 2(15) of the Act applies in the case of the assessee which does not allow to treat the assessee being engaged in charitable activities if it is involved in the carrying of any activity in the nature of trade, commerce or business.

The AO also noted that second proviso to section 2(15) which exempts an entity whose receipts from the activities mentioned in the 1st proviso is Rs.25 lakhs or less does not apply to the assessee’s case because its gross receipt for the financial years 2011-12 and 2012-13 are Rs.4,61,85,545/- and Rs.11,45,42,500/- respectively.

The CIT(A) on an appeal made by the assessee concluded that from the clarification issued by the CBDT Circular, it is clear that the assessee is not entitled to the claim of exemption of its income on the ground that it does not fall under the proviso to section 2(15).

The coram consisting of Chandra Poojari and George George K noted that The Assessing Officer had treated the entire income as commercial or business, falling under the first proviso to section 2(15) and denied exemption under section 11 of the Income Tax Act.

The ITAT said that the matter needs to be examined de novo by the AO. Accordingly, the issues were restored to the files of the AO and directed the AO to afford a reasonable opportunity of hearing to the assessee and take a decision in accordance with law.

To Read the full text of the Order CLICK HERE

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