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2017 (4) TMI 175 - AT - Income TaxExemption u/s 11 - non charitable activity - Held that:- The assessee is a society created to take over the state resource center for adult education from Andhra Mahila Sabha on a mutually agreed terms and to run it with the assistance of the Govt. of India. Mere buying and selling may not be considered as commercial activity with the presence of some profit, which may be for the purpose meeting certain incidental expenditure in the society. In the given case, assessee has purchased some books and distributed the same as per the directions of Govt. of AP to Anganwadis with a minimum profit of 5% which also fixed in consultation with the State Govt. This 5% margin will be utilized to meet the expenditure in State Resource Centre (SRC) which was taken over by the assessee. As per the income and expenditure statement extracted by the AO, profit earned by the assessee is about 3% which may be applied by the society for the mandate under the National Literacy Mission to undertake the task of procurement and supply of teaching material. Therefore, one cannot jump into conclusion merely because there is buying and selling activity. Whether it is in the nature of commercial activity or not has to be determined. It can be termed as commercial activity when it is carried out with the intention of making only profit. When there is no presence of motive to make profit, it cannot be considered as commercial activity. In the given case, rates and profit margin is determined with the consultation of State Govt. and the assessee has no role to play in determining the profit margin in the above transaction. Hence, it clearly shows that presence of profit, which also fixed by the State Govt., does not mean that the assessee is carrying on commercial activity. Moreover, whatever profit generated by the assessee are applied for the mandate under National Literacy Mission or to run/meet the administrative expenses of the society. Thus assessee is not carrying any commercial activity and the provisions of section 2(15) will not apply to the case of the assessee. Accordingly, we uphold the order of the CIT(A) in directing the AO to allow exemption u/s 11 - Decided in favour of assessee
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