2023 (5) TMI 1217 - AT - Income Tax

Tribunal Grants Assessee Tax Exemption

Improvement Trust Versus The ACIT, Exemption Circle, Chandigarh

Improvement Trust Versus The ACIT, Exemption Circle, Chandigarh - [2023] 105 ITR (Trib) 502 (ITAT [Chand]) Issues Involved:1. Condonation of Delay in Filing the Appeal2. Denial of Exemption under Section 11 of the Income Tax ActCondonation of Delay in Filing the Appeal:The Assessee filed an appeal with a delay of 34 days, attributing the delay to the Covid Lockdown Period. The Tribunal found the explanation justified and condoned the delay, allowing the appeal to be considered on merits.Denial of Exemption under Section 11:The core issue was whether the activities of the Assessee-Trust were charitable in nature, thus entitling it to exemption under section 11 of the Income Tax Act. The Assessing Officer (AO) had denied the exemption, arguing that the Assessee's activities, involving the sale of plots and commercial spaces, were in the nature of trade, commerce, or business, and thus did not qualify as charitable activities under the proviso to section 2(15) of the Act.The Assessee contended that its activities were charitable, aimed at the improvement of the town, and similar exemptions had been granted in previous years by the ITAT and approved by the High Court. The Assessee cited the case of the Moga Improvement Trust, where similar activities were deemed charitable.The AO's stance was that the Assessee's activities were commercial, akin to those of a builder, and thus did not qualify for exemption under sections 11 and 12. The CIT(A) upheld this view, noting that the Assessee's receipts from such activities exceeded 20% of its total receipts, invoking the amended proviso to section 2(15).Tribunal's Findings:The Tribunal referred to the Hon'ble Supreme Court's decision in 'Ahmedabad Urban Development Authority' (449 ITR 1 SC), which clarified that statutory bodies engaged in activities mandated by law for public utility purposes do not fall under the mischief of 'trade, commerce, or business' merely because they charge fees or sell properties at market rates. The Court emphasized that such activities, if incidental to the main charitable purpose and not driven by profit motives, do not disqualify the entity from claiming exemption under section 11.The Tribunal noted that the High Court had previously granted exemption to the Assessee for similar activities in earlier years, a decision upheld by the Supreme Court. It concluded that the facts for the year under consideration had not changed and thus, the Assessee's activities did not fall under the proviso to section 2(15). Consequently, the Assessee was entitled to exemption under section 11.Conclusion:The Tribunal allowed the appeal, reversed the order under appeal, and granted the Assessee exemption under section 11 of the Income Tax Act for the assessment year 2016-17. The order was pronounced on 25.05.2023.