2024 (7) TMI 1483 - AT - Income Tax

Advocates welfare fund maintains tax exemption under section 11 despite revenue exceeding Rs. 25 lakhs threshold

ITAT Chennai upheld exemption under section 11 for a State advocates' welfare fund established under Tamil Nadu Advocates Welfare Fund Act, 1987. The ... Exemption u/s. 11 - Charitable activity - as per DR income derived by the assessee in the nature of ‘trade or business’ when the gross receipts exceeds Rs. 25 lakhs - claim of the assessee that the sale of welfare funds stamps to its members are even to the general public would render the activity to be advancement of other object of general public utility in terms of section 2(15) - HELD THAT:- It is an admitted fact that the Tamilnadu Advocate’s Welfare Fund Act, 1987 was created by the State Legislature dated 07.12.1987 (Act No. 49 of 1987) for providing death benefits to the family members of the deceased advocates, who have joined as member in the said scheme. The source of income for the said scheme is income generated through sale of welfare fund stamps, life time subscription from members, interest on corpus deposits and Government grant. Section 16 of the Advocate’s Welfare Act, 2001 deals with the Recognition of the Association by the State Bar Council and nothing has been mentioned therein regarding the prior approval from the Bar Council of India before forming a welfare fund. Since, the assessee fund is enacted prior to the formation of the Central Act namely Advocate’s Welfare Fund Act, 2001 and the saving clause is provided u/s. 38 by the Advocate’s Welfare Fund Act, 2001, there is an exemption for the applicability of the Central Act of the State of Tamilnadu. Since, section 23 of the Central Act provides for exemption of Income-tax to the Advocates Welfare Fund of the State against the provisions of section 11 and section 2(15) of the Act is not applicable to the Tamilnadu Advocates welfare Fund. Therefore, we are of the considered view that the assessee is exempted from income-tax and uphold the order of the ld.CIT(A) and hence, dismiss the appeal of the revenue. Issues:- Appeal against the order of CIT(A) regarding exemption u/s. 11 of the Income Tax Act, 1961 and applicability of section 2(15) of the Act.Analysis:1. The appeals by the revenue challenged the CIT(A)'s order granting exemption u/s. 11 of the Act and not applying section 2(15) to income derived by the assessee, even though it involved trade or business when gross receipts exceeded Rs. 25 lakhs.2. The case involved the Tamil Nadu Advocates Welfare Fund (TNAWF) created under the Advocates Act 1961 and the Tamil Nadu Advocates Welfare Fund Trust Committee. The fund's income sources included welfare fund stamps sale, life subscriptions, interest, grants, and other incidental income. The Assessing Officer denied exemption u/s. 11 due to trade activities, leading to the dispute.3. The CIT(A) allowed exemption u/s. 11 based on a co-ordinate bench decision, considering the welfare fund stamps sale as advancing the object of general public utility. The revenue contended that the sale of stamps without significant expenditure indicated profit motive, contrary to section 2(15).4. The respondent argued that the TNAWF was established for advocacy welfare, providing death benefits, and was exempt from Income-tax under the Advocate Welfare Fund Act, 2001. The fund's pioneer status and exemption from the Central Act supported their case for tax exemption.5. The Tribunal noted the TNAWF's establishment under the State Legislature and exemption from the Central Act due to prior enactment. Section 23 of the Central Act exempted the fund from Income-tax, concluding the assessee's exemption and upholding the CIT(A)'s order.6. In a similar appeal for assessment year 2014-15, the Tribunal applied the same reasoning as in the prior year's case, dismissing the revenue's appeal and affirming the exemption for both years.In conclusion, the Tribunal dismissed the revenue's appeals for assessment years 2013-14 and 2014-15, upholding the CIT(A)'s decision to grant exemption u/s. 11 and confirming the non-applicability of section 2(15) to the Tamil Nadu Advocates Welfare Fund.