2022 (1) TMI 544 - HC - Income Tax

Exemption u/s 10(23C)(iv)/11/12 - whether activities of the respondent/assessee do not qualify for charitable purpose in view of the Proviso to Sec 2(15)? - HELD THAT - In a writ petition being India Trade Promotion Organization vs. Director General of Income Tax (Exemptions) Others 2015 (1) TMI 928 - DELHI HIGH COURT the learned predecessor Division Bench issued a Mandamus to the appellant herein to grant approval to the respondent herein under Section 10(23C)(iv) of the Act. As revenue states that the revenue has preferred a Special Leave Petition 2017 (7) TMI 1313 - SC ORDER as against the judgment passed in WP which is pending consideration in the Supreme Court. In the said Special Leave Petitions Leave has been granted. Admittedly there is no stay of the judgment passed by the learned predecessor Division Bench. Consequently in view of the judgment of the Supreme Court in Kunhayammed and Others Vs. State of Kerala And Another 2000 (7) TMI 67 - SUPREME COURT and Shree Chamundi Mopeds Ltd. Vs. Church of South India Trust Association CSI Cinod Secretariat Madras 1992 (4) TMI 183 - SUPREME COURT the present appeals and pending applications are dismissing being covered by the judgment passed by the learned predecessor Division Bench in WP in India Trade Promotion Organization case supra .

Summary

Issues:
Challenging order of Income Tax Appellate Tribunal for assessment years 2009-10, 2010-11, and 2011-12 regarding charitable purpose qualification under Income Tax Act.

Detailed Analysis:

Issue 1: Charitable Purpose Qualification
The appellant challenged the ITAT order, arguing that the respondent's activities do not qualify as charitable under the Proviso to Sec 2(15) of the Income Tax Act, 1961. The appellant contended that the respondent does not qualify for exemptions under Section 10(23C)(iv)/11/12 of the Act due to this reason.

Issue 2: Precedent from Writ Petition
Referring to a previous writ petition, the Division Bench issued a Mandamus directing approval to the respondent under Section 10(23C)(iv) of the Act. The judgment emphasized that the dominant activity of the institution should not be profit-making but should aim at promoting trade and commerce for public utility. It highlighted that a literal interpretation of the Proviso to Section 2(15) could risk violating the principle of equality under Article 14 of the Constitution.

Issue 3: Pending Special Leave Petition
The appellant/revenue informed about a pending Special Leave Petition (SLP) in the Supreme Court against the judgment of the writ petition. The SLP has been granted leave for consideration. However, as there is no stay on the previous judgment, the present appeals and pending applications are dismissed following the precedent set by the Division Bench in the writ petition.

Conclusion:
The High Court upheld the judgment of the Division Bench in the writ petition, emphasizing that institutions primarily driven by charitable motives for public utility qualify for exemptions under the Income Tax Act. The Court dismissed the present appeals based on the precedent set by the earlier judgment, pending the outcome of the SLP in the Supreme Court.