Tribunal restores section 11 exemption issue for reconsideration by Assessing Officer

The Tribunal allowed the Assessee's and Revenue's appeals for statistical purposes, restoring the issue of section 11 exemption to the Assessing Officer for reconsideration in light of the detailed discussion and judicial precedents. The Tribunal's order was pronounced on June 30, 2022.

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Issues Involved:
1. Delay in filing appeals.
2. Entitlement to section 11 exemption under the Income Tax Act, 1961.
3. Determination of whether the assessee is a charitable trust.

Detailed Analysis:

1. Delay in Filing Appeals:
The Assessee's and Revenue's cross appeals suffered from delays of 118 and 261 days, respectively. Both parties filed their cases during the Covid-19 pandemic, which was cited as the reason for the delay. The Tribunal condoned the delay due to the pandemic circumstances.

2. Entitlement to Section 11 Exemption:
The primary grievance of the assessee in both appeals was the entitlement to section 11 exemption in its entirety, which had been partially disallowed by the Assessing Officer and only partially accepted by the CIT(A) to the extent of "mutuality" benefit. The Revenue, on the other hand, contended that the assessee did not fulfill the three monetary conditions of being a "mutual" organization as per the Bangalore Club Vs. CIT (2013 350 ITR 209 SC).

The Tribunal noted that the issue of the assessee's entitlement to section 11 exemption is recurring. It referenced a co-ordinate bench order dated 03-09-2020, which had decided similar issues against the department.

3. Determination of Whether the Assessee is a Charitable Trust:
The Tribunal examined whether the assessee trust is entitled to the benefit of exemption under sections 11 or 12 of the Act in terms of Section 2(15) and whether the assessee qualifies as a charitable trust. The assessee, a registered trust, was engaged in promoting unity and cooperation among the Promoters and Builders Association of Pune. The trust had gross receipts from various activities, including exhibitions.

The Assessing Officer had denied the exemption, stating that the trust's activities involved trade, commerce, or business, thus falling under the first proviso to section 2(15) of the Act. This decision was upheld by the CIT(A), who observed that the trust's activities were primarily for the mutual benefit of its members and not for public utility.

The Tribunal, however, noted that the assessee trust had been consistently granted exemptions in previous years. It emphasized that the trust's activities, such as organizing exhibitions, were in line with its charitable objectives and benefited the public at large. The Tribunal found no evidence that the trust charged subscriptions for exhibitions or operated with a profit motive.

The Tribunal referred to several judicial precedents, including the Delhi Bench's decision in the case of Society of Indian Automobile Manufacturers Vs. Income Tax Officer and the Pune Bench's decision in Assistant Commissioner of Income Tax Vs. Mahratta Chamber of Commerce Industries and Agriculture. These cases highlighted that incidental surplus from charitable activities does not disqualify an entity from being considered charitable.

The Tribunal concluded that the assessee's activities were charitable in nature and not aimed at profit-making. It reversed the CIT(A)'s order and directed the Assessing Officer to grant the benefit of exemption under sections 11 and 12 to the assessee.

Conclusion:
The Tribunal allowed the Assessee's and Revenue's appeals for statistical purposes, restoring the issue of section 11 exemption to the Assessing Officer for reconsideration in light of the detailed discussion and judicial precedents. The Tribunal's order was pronounced on June 30, 2022.

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