TaxTMI 
TaxTMI 
2024 (9) TMI 140
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....TA Nos. 944, 945&946/CHNY/2024 also. 3. Brief facts of the case are as under: "The appellant is a non profit organization registered as a society under Societies (registration) Act with the objects to promote the welfare and causes of craftsmen. The appellant has been registered u/s 12A of the Act being an organization established with the objects of charitable purpose. For the relevant Assessment year, the appellant filed its return of Income disclosing NIL income. During the assessment u/s 143(3) of the Income Tax Act, the Joint Commissioner of Income Tax (JCIT) invoked proviso to section 2(15) in respect of certain income which in her view were in the nature of trade and commerce and by denying the exemption available u/s 11, charged to tax the net surplus for the year aggregating to Rs 5.53.933/-as a chargeable income under the head business, disallowed depreciation claim of Rs 1,09,198/- and further charged to tax the corpus donation amounting to Rs 75,90,000/-. The JCIT also levied interest us 234B amounting to Rs 8.63,9281/- The trust is helping poor craftman who develop their skills and market their ware. The trust is only helping poor craftman and hence the proviso to s....
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....le proceeds of their products is directly received by the Craftsmen/Artisans, who pay a small amount to the Appellant towards their expenses for conducting the Fairs and Exhibitions. The Appellant also provides marketing and branding supports to artisans, helping them to develop promotional materials improved packaging and enhanced product promotion. Apart from the above, the Appellant has opened shops known as Kamala shops at Delhi, Kolkata and Chennai for selling exclusively products made by the Artisans/Craftsmen. Thus the artisans and craftsman will have a wider and upmarket client. Through these shops the Appellant purchases handicrafts made by Artisans and handmade fabrics with uniqueness and sell the same to the Public. The sale price of these products at Kamala shops are priced at cost paid to the artisans for their products plus a small margin to cover the administrative over heads of the appellant. The Financial results of the Appellant over the years would show that the sale price has resulted in meagre or marginal profits and in some years losses. In case where there are losses the Appellant depends on donation from well-wishers to make good the shortfalls. In this mann....
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....s the donations received in AY 2011-12). Further, while the CIT(A) has attempted to apply the ratio of the Apex Court decision, supra, he has omitted to consider a very important part of the decision wherein the Supreme Court has read down/clarified the manner of application of the second proviso to section 2(15). The First proviso to Section 2(15) provides that any business, trade or commerce or for services rendered in connection with business trade or commerce would disentitle the institution from claiming deduction under sec 11 and as per Section 13(8) the income of the institution would be subject to tax. To mitigate the rigors of the above provisions, Second provisio was introduced whereby if the receipts from the commercial activities is less than the amount mentioned in the second proviso for the relevant assessment year (Rs. 10 lakhs from 1.4.2009:, Rs. 25 lakhs w.e.f 1.4.2012 and 20% w.e.f 1.4.2016 of the total receipts). then the first proviso would not be applicable and the institution will be entitled to deduction/s 11. The CIT(A) has applied this restriction taking the entire receipt of the appellant from these activities and holding that it is more than 20% of the to....
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....d decide whether such profits derived from the activities is in excess of the limits prescribed under 2nd proviso to section 2(15) and not take the entire receipts from such activities for determination of complying with the 2nd proviso to section 2(15), as per the decision of the Apex Court. The AO and CIT(A) has disallowed depreciation claimed by the Appellant on the ground that the investments depreciable capital assets have been allowed as deduction in the year of investment and hence granting depreciation on the same assets would amount to double deduction. This issue has been considered by various High Courts and decided in favour of the Assessees. The Supreme Court has held that profits of the Trust should be determined on a commercial basis and depreciation should be allowed as a deduction till amendment to sec. 11(6) w.e.f 1.4.2015. 6. Per contra, the ld. DR-JCIT relied upon the orders of the lower authorities and prayed for the dismissal of the appeals filed by the assessee. 7. We have heard the rival submissions and perused the records of the appeal files, written notes filed by the ld.Counsel for the assessee, orders of the lower authorities and judgment of the Hon'bl....