Court affirms charitable nature of activities, grants exemption under IT Act, dismisses Revenue's appeal.

The court upheld the deletion of the addition of Rs.11,47,731 and granted exemption under sections 11 and 12 of the IT Act to the assessee. The activities were deemed charitable, not commercial, with no evidence of a profit motive. The court emphasized consistency in granting exemptions and ruled the proviso to section 2(15) inapplicable for the relevant assessment year. The Revenue's appeal was dismissed, affirming the charitable nature of the assessee's activities.

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Issues:
Challenge to deletion of addition of Rs.11,47,731 and eligibility for exemption u/s. 11, 12 of the IT Act.

Issue 1: Deletion of addition of Rs.11,47,731

The appeal by the Revenue challenged the deletion of the addition of Rs.11,47,731 by the ld. CIT(A) for the assessment year 2008-09. The AO questioned whether the assessee was hit by the provisions of section 2(15) of the Act. The assessee argued that the activities were not commercial but for 'General Public Utility' and hence charitable. The assessee sold flats for the poorest section of society, emphasizing the charitable nature of the activity. The ld. CIT(A) allowed the appeal, stating that the amendment to section 2(15) was not applicable for the year under consideration. The AO's addition was held unjustified, and the surplus was directed to be deleted, citing consistency in previous assessments and registration granted u/s. 12AA.

Issue 2: Eligibility for exemption u/s. 11, 12 of the IT Act

The assessee contended that the activities were charitable and not business-related, supported by the nature of the fees charged and the sale of flats for the poor. The ld. CIT(A) found that the activities were not commercial and granted exemption u/s. 11, 12 of the IT Act. The AO's reliance on the proviso to section 2(15) inserted post-amendment was deemed inapplicable for the assessment year under appeal. The principle of consistency in granting exemption on similar activities in previous and subsequent years was upheld. The Revenue's argument that the activities were business-related was refuted based on the charitable nature of the trust's objectives and the absence of evidence to suggest profit motive.

Conclusion:

The judgment upheld the deletion of the addition and the eligibility for exemption u/s. 11, 12 of the IT Act based on the charitable nature of the activities and the absence of evidence supporting a profit motive. The decision emphasized the importance of consistency in granting exemptions and highlighted that the proviso to section 2(15) was not applicable for the assessment year in question. The appeal by the Revenue was dismissed, affirming the findings of the ld. CIT(A) regarding the charitable status of the assessee's activities.

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