2021 (10) TMI 1412 - HC - Income Tax

High Court upholds assessee's exemption under Income Tax Act despite amended provisions

The Commissioner of Income Tax Exemptions, The Asst. Commissioner Of Income-Tax Exemptions, Circle-1, Bengaluru Versus M/s Karnataka Industrial Area Development Board

The High Court upheld the assessee's entitlement to exemption under Section 11 of the Income Tax Act for the assessment year 2011-12, despite activities ... Exemption u/s 11 - scope and amplitude of the definition “charitable purpose” - correct interpretation of the proviso to Section 2(15) for “charitable purpose” - scope of amendment to section 2[15] - HELD THAT:- As the issue involved herein is squarely covered by the Co-ordinate Bench ruling of this Court in the assessee’s own case in Karnataka Industrial Area Development Board [2020 (11) TMI 483 - KARNATAKA HIGH COURT] As no reasons to differ from the findings of the Co-ordinate Bench on the issue involved herein. Hence, we answer the substantial questions of law in favour of the assessee Issues:1. Challenge to the order of the Income Tax Appellate Tribunal under Section 260A of the Income Tax Act, 1961 for the assessment year 2011-12.2. Entitlement of exemption under Section 11 of the Act for the assessee despite activities falling under amended provisions of Section 2(15) of the Act.3. Interpretation of legislative intention behind the amendment to Section 2(15) regarding exemption eligibility for certain entities.4. Consideration of whether the Tribunal's order can be deemed as perverse due to profit from the sale of land exceeding the prescribed limit under the proviso to Section 2(15) of the Act.Analysis:The appeal was filed by the Revenue challenging the order of the Income Tax Appellate Tribunal related to the assessment year 2011-12. The substantial questions of law raised included the entitlement of the assessee for exemption under Section 11 of the Act despite the activities being within the amended provisions of Section 2(15) of the Act. The Tribunal's decision was questioned regarding the interpretation of legislative intent behind the amendment to Section 2(15) and the eligibility for exemption for entities involved in commercial activities exceeding the prescribed limit. The Tribunal was also accused of being perverse for not observing that the profit from the sale of land alone exceeded the limit, making it ineligible for charitable purpose under the proviso to Section 2(15) of the Act.The respondent's counsel argued that the issue was covered by a Co-ordinate Bench ruling in the assessee's own case decided earlier. The Revenue's counsel did not dispute this fact. Consequently, the High Court found no reason to differ from the findings of the Co-ordinate Bench and ruled in favor of the assessee, dismissing the appeal. The judgment was based on the precedent set by the Co-ordinate Bench and the lack of disagreement from the Revenue's side regarding the applicability of the ruling to the current case.