2015 (7) TMI 1115 - AT - Income Tax

Tribunal grants appeal to charitable trust for tax exemption under section 11

M/s Tamil Film Producers Council Versus The Dy. Director of Incometax (Exemptions) -I Chennai

M/s Tamil Film Producers Council Versus The Dy. Director of Incometax (Exemptions) -I Chennai - TMI Issues:Assessee's eligibility for exemption u/s 11 of the Act based on the nature of services provided and applicability of the first proviso to section 2(15) of the Act introduced by Finance Act, 2008.Analysis:Issue 1: Eligibility for exemption u/s 11 of the ActThe appeal concerns the eligibility of the assessee, a registered charitable trust u/s 12AA of the Act, for exemption u/s 11. The Assessing Officer disallowed the exemption claim, citing the activity of the assessee as service related to trade, commerce, or business. The ld. Representative for the assessee argued that despite providing services to trade, commerce, or business, the assessee should still be eligible for exemption u/s 11. Reference was made to the judgment of the Hon'ble Madras High Court and the statement of the Hon'ble Finance Minister during the introduction of Finance Act, 2008. On the other hand, the Departmental Representative contended that the assessee was collecting fees from Tamil Film Producers, indicating a commercial aspect to the services provided. The first proviso to section 2(15) introduced by the Finance Act, 2008, was highlighted, stating that services related to trade, commerce, or business may not qualify as charitable purposes.Issue 2: Applicability of the first proviso to section 2(15) of the ActThe Tribunal analyzed the applicability of the first proviso to section 2(15) introduced by the Finance Act, 2008, which clarified that services rendered in relation to trade, commerce, or business are not eligible for exemption as charitable purposes. The Tribunal noted that this proviso came into effect from 1.4.2009, making it applicable from the financial year 2009-10 onwards. As the assessment year in question was 2009-10, the Tribunal determined that the first proviso could not be applied retroactively. The Tribunal emphasized that the activity of the assessee was considered a general public utility, and registration u/s 12AA was granted. Therefore, for the relevant year, the assessee was deemed eligible for exemption u/s 11, subject to meeting conditions outlined in sections 11, 12, and 13 of the Act. The Tribunal directed the Assessing Officer to reassess the issue considering the aforementioned conditions, without expressing an opinion on the exemption for subsequent years. The orders of the lower authorities were set aside, and the issue was remitted back to the Assessing Officer for fresh consideration.In conclusion, the Tribunal allowed the appeal for statistical purposes, emphasizing the need for a reassessment based on the provisions of sections 11, 12, and 13 of the Act for the assessment year 2009-10.