Tribunal Affirms Charitable Status, Grants Tax Exemption u/s 11; Dismisses Revenue's Appeal, Citing SC Precedent.

The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to grant the assessee exemption under Section 11 of the Income Tax Act. The Tribunal concluded that the assessee's activities were charitable, not constituting trade, commerce, or business, and therefore not subject to the proviso to Section 2(15). This decision was consistent with prior judicial interpretations, including the dismissal of the Revenue's Special Leave Petition by the SC in a related case. The Tribunal's order was pronounced on 04/11/2020, reinforcing the assessee's eligibility for tax exemption.

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Issues Involved:
1. Exemption under Section 11 of the Income Tax Act.
2. Applicability of the proviso to Section 2(15) of the Income Tax Act.
3. Nature of activities carried out by the assessee and whether they constitute trade, commerce, or business.
4. Reliance on previous judicial decisions, including those of the Tribunal and High Courts.

Detailed Analysis:

1. Exemption under Section 11 of the Income Tax Act:
The core issue is whether the assessee is entitled to exemption under Section 11 of the Income Tax Act. The Assessing Officer (AO) denied the exemption, arguing that the activities of the assessee trust were in the nature of trade, commerce, or business, thus falling under the proviso to Section 2(15) of the Act. The AO calculated the total taxable income of the assessee as Rs. 112,986,740 after disallowing the exemption.

2. Applicability of the proviso to Section 2(15) of the Income Tax Act:
The AO contended that the activities of the assessee trust, which involved upgrading local cattle through cross-breeding and charging fees for services, were commercial in nature. Therefore, the trust's activities were hit by the amendment to Section 2(15) of the Act, which came into effect on 01.04.2009. Consequently, the AO held that the trust lost its charitable character for the assessment year in question and was not entitled to exemption under Section 11 in view of the provision of Section 13(8) of the Act.

3. Nature of activities carried out by the assessee and whether they constitute trade, commerce, or business:
The CIT(A) reversed the AO's decision, holding that the activities of the assessee were not in the nature of carrying out business or trade. The CIT(A) relied on previous judicial decisions, including CIT v. Sri Balaji Samaj Vikas Samiti, DIT (Exemption) v. Sabarmati Ashram Gaushala Trust, and the Tribunal's order in the assessee's own case for AY 2012-13. The CIT(A) concluded that the assessee's activities were for general public utility and thus charitable in nature, making the assessee eligible for exemption under Sections 11 and 12 of the Act.

4. Reliance on previous judicial decisions, including those of the Tribunal and High Courts:
The Tribunal upheld the CIT(A)'s decision, noting that similar issues had been addressed in the assessee's own case for AY 2009-10 and 2012-13. The Tribunal referred to the decision in Sabarmati Ashram Gaushala Trust, where it was held that activities generating surplus incidental to the principal charitable activities do not constitute trade, commerce, or business. The Tribunal emphasized that the objects of the trust were charitable and for general public utility, with profit-making being neither the aim nor the principal activity.

The Tribunal also highlighted that the Special Leave Petition filed by the Revenue against the decision in Sabarmati Ashram Gaushala Trust was dismissed by the Supreme Court, reinforcing the view that the proviso to Section 2(15) does not apply to the assessee's activities.

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s order that allowed the assessee's exemption under Section 11 of the Income Tax Act. The Tribunal's decision was based on the consistent judicial interpretation that the assessee's activities were charitable and not in the nature of trade, commerce, or business, thus not attracting the proviso to Section 2(15) of the Act. The order was pronounced in the open Court on 04/11/2020.

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