Tribunal upholds exemption for society under Income Tax Act despite profit-making

The Tribunal upheld the exemption under section 11(1) of the Income Tax Act for the assessee, a society registered under the Societies Registration Act, 1860, despite profit-making activities. It dismissed the Revenue's appeals, stating there was no reason to deviate from earlier decisions. Additionally, the Tribunal dismissed the Revenue's appeal on the deletion of interest income, finding the funds were used for a charitable purpose. Disallowance of depreciation on assets purchased by application of receipts was also dismissed, citing a prospective nature of the relevant section. Both Revenue's appeals and the assessee's cross objections were dismissed.

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Issues:
- Exemption under section 11(1) of the Income Tax Act for the assessee
- Deletion of addition of interest income
- Allowance of depreciation on assets purchased by application of receipts

Exemption under section 11(1) of the Income Tax Act for the assessee:
The Revenue challenged the orders of the Commissioner of Income Tax (Appeals) for the assessment years 2005-06, 2010-11, and 2011-12. The key issue was the direction given by the Commissioner to the Assessing Officer to allow the exemption under section 11(1) of the Act to the assessee. The Revenue contended that the assessee, a society registered under the Societies Registration Act, 1860, was denied the exemption under section 11(1) due to profit-making activities. However, the Tribunal, after considering previous decisions and the facts of the case, upheld the exemption for the assessee, stating that there was no reason to deviate from earlier decisions and dismissed the Revenue's appeals.

Deletion of addition of interest income:
Regarding the deletion of addition of interest income made by the Assessing Officer, the Tribunal referred to a similar case from a previous year where the interest-free funds transferred by the assessee to another society with charitable objectives were eventually used for constructing a school building. The Tribunal held that the funds had reached the intended destination and were used for a charitable purpose, thereby dismissing the Revenue's appeal on this ground.

Allowance of depreciation on assets purchased by application of receipts:
The issue of disallowance of depreciation on assets purchased by the application of receipts was also addressed. The Tribunal noted that a recent decision by the Honorable Apex Court clarified that subsection (6) of section 11, inserted by the Finance Act, 2014, was prospective in nature. Therefore, the Tribunal dismissed the Revenue's appeal related to the disallowance of depreciation, stating that it cannot be denied. The cross objections by the assessee were not pressed and were accordingly dismissed. In conclusion, the appeals of the Revenue and the cross objections of the assessee were dismissed by the Tribunal.

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