2018 (5) TMI 2009 - AT - Income Tax

Exemption u/s 11 - activities of the assessee are charitable in nature or not? - main activity of the assessee society is to promote and protect the general mercantile and industrial interest of India acting as an arbitrator in settlement of disputes organizing periodicals seminars meetings and symposia with Government - denying the exemption u/s.11 in terms of proviso to Section 2(15) the assessee s activities are in the nature of trade and commerce or business - HELD THAT - First of all in the Assessment Years 2006-07 2007-08 the Hon ble High Court after detailed discussion had held that assessee is eligible for claim of exemption u/s.11 vide judgment and order dated 19th October 2012 2012 (11) TMI 429 - DELHI HIGH COURT . Again for the Assessment Years 2008-09 and 2009-10 the Revenue s appeal has been dismissed vide judgment and order 2016 (7) TMI 1581 - DELHI HIGH COURT . In the Assessment Years 2008-09 and 2009-10 the Tribunal has taken into note the scope of proviso to Section 2(15) and following the judgment of Hon ble Jurisdictional High Court in the case of India Trade Promotion Organization vs. DGIT (E) 2015 (1) TMI 928 - DELHI HIGH COURT held that none of the activities of the assessee falls in the category as envisaged in the proviso. Thus respectfully following the binding judicial precedent of Hon ble Delhi High Court in the case of the assessee we hold that assessee is entitled for claim of exemption u/s.11. Accordingly the order of the ld. CIT (A) is affirmed. - Decided in favour of assessee.

Summary

Issues:
1. Whether the activities of the assessee are charitable in nature.
2. Whether the assessee is eligible for exemption u/s.11 of the Income Tax Act, 1961.

Issue 1: Activities of the Assessee
The appeal was filed by the Revenue against the order passed by Ld. CIT(A)-XL, New Delhi for the Assessment Year 2010-11, questioning the charitable nature of the assessee's activities. The assessee's counsel argued that the Hon'ble Delhi High Court had previously ruled in favor of the assessee being a charitable organization and not engaged in business activities. The main activity of the assessee society was noted to be promoting and protecting mercantile and industrial interests, organizing events, and providing services. The income sources were outlined, including membership fees, specialized services, and income from services and facilities provided to both members and non-members.

Issue 2: Exemption under Section 11
The Assessing Officer had denied the claim of exemption under Section 11, citing the proviso to Section 2(15) and the assessee's income bifurcation between members and non-members. The Assessing Officer concluded that the exemption could not be granted under the principle of mutuality and invoked the proviso to Section 2(15) to deny the exemption. The ld. CIT (A) upheld the exemption under Section 11(1) based on previous orders and the judgment of the Hon'ble Delhi High Court. The ld. CIT (A) emphasized that the income from non-members indicated that the principle of mutuality did not apply, but consistency with previous orders and the High Court's judgment led to allowing the exemption under Section 11(1).

Conclusion
The Tribunal affirmed the ld. CIT (A)'s decision, stating that the assessee was entitled to the claim of exemption under Section 11 based on the binding judicial precedent of the Hon'ble Delhi High Court. The Tribunal highlighted previous judgments supporting the assessee's eligibility for exemption, dismissing the Revenue's appeal and upholding the exemption under Section 11. The judgment was pronounced in open court on 23rd May 2018, in favor of the assessee.