1978 (8) TMI 105 - AT - Income Tax

Tribunal Upholds Exemption for Assessee's Charitable Activities under Income-tax Act, 1961

COMMISSIONER OF INCOMETAX. Versus FEDERATION OF BOMBAY CLOTH DEALERS ASSOCIATION.

COMMISSIONER OF INCOMETAX. Versus FEDERATION OF BOMBAY CLOTH DEALERS ASSOCIATION. - TTJ 007, 056, Issues:Interpretation of provisions of Income-tax Act, 1961 regarding exemption of income under s. 11 r/w s. 2 (15) for asst. yrs 1974-75 and 1975-76.Detailed Analysis:1. The issue in this case revolves around the interpretation of the Income-tax Act, 1961 regarding the exemption of income under s. 11 r/w s. 2 (15) for the assessment years 1974-75 and 1975-76. The CIT requested the Tribunal to refer a question of law to the High Court of Judicature at Bombay regarding the exemption of the assessee's income. The primary contention was whether the Tribunal was correct in holding that the income of the assessee was exempt under the specified provisions.2. The Income Tax Officer (ITO) for the relevant assessment years deviated from previous assessments and denied exemption under s. 11 to the assessee. The basis for this denial was the pending decision of the Tribunal, which was against the Department in earlier years. The ITO calculated the total income for the respective years, including property income and income from other sources.3. The assessee appealed to the Appellate Assistant Commissioner (AAC), arguing that the issue was settled by a previous Tribunal decision in their favor. The AAC allowed the appeals and granted exemption to the assessee under the relevant provisions of the Income-tax Act, 1961.4. The Department appealed to the Tribunal, urging a reconsideration of the earlier decision in light of Supreme Court judgments. The Tribunal heard arguments from both sides, where the Departmental representative's contentions were refuted by the assessee's counsel.5. The Tribunal, after careful consideration, upheld its earlier decision for the assessee. It emphasized the objectives of the Federation, highlighting that its primary aim was to organize dealers and promote cooperation, not engage in profit-making trading activities. The Tribunal analyzed the constitution of the Federation and the Approved Cloth Shops Scheme to support its conclusion.6. The Tribunal distinguished the present case from the Supreme Court decisions cited by the Department, emphasizing that the assessee's activities were in line with charitable objectives and not driven by profit motives. It drew parallels with a Madras High Court decision and reiterated that the assessee's income was derived from activities conducted for public benefit, not for profit.7. Ultimately, the Tribunal dismissed the appeals, affirming the AAC's decision to grant exemption to the assessee. It concluded that the earlier Tribunal decision did not warrant reconsideration, as the Department failed to challenge the findings on valid grounds.8. The Tribunal rejected the reference applications, stating that the decisions of the Supreme Court in similar cases rendered the issue non-referable. It highlighted that the Tribunal had considered relevant principles and factors in reaching its decision, leading to the rejection of the reference applications.In conclusion, the Tribunal's detailed analysis and application of legal principles resulted in the dismissal of the appeals and the rejection of the reference applications, affirming the exemption of the assessee's income under the specified provisions of the Income-tax Act, 1961 for the relevant assessment years.