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Income Tax - Case Laws
Showing 241 to 260 of 678 Records
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2016 (2) TMI 911 - ITAT AMRITSAR
Addition u/s 68 - Held that:- Section 68 talks of any sum found credited in the books of an assessee maintained for any previous year. As per this section, if the assessee offers no explanation, the section would apply. But this explanation has to be with regard to any sum found credited in the books. This is amply clear from the use of the expression "about the nature and source thereof" ("thereof" being the operative word). Then, in case the explanation offered by the assessee is not found by the Assessing Officer to be satisfactory, the section can be invoked. This explanation, obviously, harks back to any sum found credited in the books. The words "the sum so credited" again relate to any sum found credited in the books "so credited", here being the pregnant expression.
Thus, a plain reading of the section establishes that it operates only where books are maintained by an assessee and a sum is found credited therein.
Now, in the present case, it remains undisputed that the assessee has not maintained any books during the year. Thus, the provisions of section 68 of the Act are not at all attracted and they have been wrongly applied by the authorities below. - Decided in favour of assessee.
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2016 (2) TMI 910 - ITAT MUMBAI
Addition under section 14A - Held that:- Recently the Hon’ble Delhi High Court in the case of “Eicher Goodearth Ltd. vs. CIT” (2015 (5) TMI 685 - DELHI HIGH COURT) has held that if the expenditure is incurred for the purpose of promotion of business-more specifically to retain control or as part of his strategic investment of the assessee company, such expenses by way of interest out go would have to be treated as allowable under section 36(1)(iii) of the Act.
We direct the AO to verify the claim of the assessee regarding the strategic investments and exclude the strategic investments while calculating the disallowance under rule 8D for the purpose of section 14A of the Income Tax Act. - Decided in favour of assessee for statistical purposes.
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2016 (2) TMI 909 - ITAT CHANDIGARH
Addition of interest made an account of interest free advances given - Held that:- Impugned advance made to Deepak Infrastructure was from the interest free funds of the assessee firm more particularly out of the interest free capital of the partner Mr. Deepak Kumar and therefore no disallowance u/s 36(1)(iii) could be made in the present case. We therefore, find no infirmity in the order of ld. CIT(A) in this regard and concur which the finding of the Ld. CIT(A) directing the deletion of disallowance of interest - Decided in favour of assessee
Disallowance of interest u/s 36(1)(iii) on interest free advances made by the assesee to certain person - Held that:- At the impugned advance have been made out of interest free funds available with the assessee and thus there was no occasion what so ever of disallowing interest u/s 36(1)(iii) of the Income Tax Act, 1961. Reliance placed by the Ld. DR on the jurisdictional High Court decision in the case of Abhishek Industries [2006 (8) TMI 123 - PUNJAB AND HARYANA High Court] is misplaced since the same has been overruled by subsequent decision of the the Apex Court in Hero Cycle Ltd. The argument of the Ld. DR that the advance were for non business purpose, we find has merit since no evidence was brought on record by the assessee before us or before the lower authorities to substantiate its arguments, but having said so no disallowance u/s 36(1)(iii) can still be made in the present case as we have held that there were sufficient interest free funds available with the assessee to make the impugned advance and the presumption in the such cases is that they are made out of the interest free funds available and not the interest bearing funds. In view of the above we hold that the disallowance of interest u/s 36(1)(iii) pertaining to the Miss. Anjali Dhand, Mr. Akash Singhal and Mr. Virender Kumar upheld by the Ld. CIT(A) be deleted. - Decided in favour of assessee
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2016 (2) TMI 907 - ITAT MUMBAI
Transfer pricing adjustment - selection of comparable - analisation of comparables which are in dispute under the TNMM method - Held that:- ICRA MANAGEMENT CONSULTANCY SERVICES LTD - Under the TNMM, one has to see the transaction undertaken are comparable or not and whether any adjustment is required to obtain a reliable result, because under TNMM the net margin are less affected by transactional differences and is more tolerant to some minor functional differences between controlled and uncontrolled transactions. However, if any unique function or property significantly affects the operating costs or net margin or has a bearing in the generation of revenue itself, then it cannot be considered to be a fit comparable for benchmarking the net margins. Here it is not the case where there is any unique functions materially affecting the revenue or net margins vis-a-vis the functions performed by ICRA. Hence on functional level it is a good comparable. As stated earlier, in the earlier years, the TPO has accepted ICRA to be a comparable and in later years the Tribunal in AY 2008-09 & 2009-10 has held ICRA Management to be good comparable qua the functions of the assessee and there being no material change on facts, functional profile or any other factor in this year, then as matter of consistency, we do not want do deviate from our findings given in the earlier years. There cannot be a pick and choose of comparables every year unless there are some material difference in facts and circumstances compelling to take a different conclusion. Thus, we hold that ICRA Management is a good comparable and should be included in the list of final comparables.
Kinetic Trust Ltd. company as in the earlier two years, the Kinetic Trust Ltd has been held to be good comparable based on its functional profile. So far as functions are concerned, it is evident from the Directors’ reports, which are placed in the paper book from pages 187 to 230. It is seen that, the company is concentrating on its main activity of corporate consultancy services and financial services. Being a NBFC has not changed the nature of activity undertaken by the company and its core business competency and its revenue is from consultancy services. So far as the turnover filter applied by the TPO, we find that, first of all at the time of selection process, the assessee has not considered the turnover filter for accepting or rejecting the comparables. The turnover filter cannot be one of the tool for cherry picking by either of the parties at a later stage, as it has to be done at the threshold level only, i.e. at the time of search process and by applying quantitative filter. However, once turnover filter has not been applied then comparability has to be done at qualitative level based on FAR Analysis. If on FAR analysis there are differences on account of either assets deployed and risk assumed materially affecting costs or margins then probably such comparability can be rejected. But here in this case, merely on the ground that it has a low turnover cannot be the reason or criteria for rejection. As this comparable has been held to be a good comparable by the TPO himself and Tribunal in two years have accepted to be a good comparable. Thus as a matter of consistency, we hold that Kinetic Trust Ltd. should be included in the comparability list.
IDC India Ltd. - as discussed functions performed by the IDC India Ltd while dealing with Ld. Counsel’s argument that functions of advisory services are quite similar to the functions of the assessee and, therefore, we accept the assessee’s contention that this comparable cannot be rejected. Accordingly, same is directed to be included in the comparability list.
Future Capital Advisors Ltd - DRP has rejected this comparable on the ground that it is in the process of shutting down its business. However, during the year, it has continued to render the investment advisory services and the realignment agreement was effective from 1st January, 2010, the realignment is also for investment advisory activities. Thus, there is not much impact on the net margins especially in the assessment year 2010-11, therefore, this company cannot be rejected and TPO is directed to include the same in the final comparability list.
Integrated Capital Services Ltd comparable has rightly been rejected and shall not be included in the final comparables.
Motilal Oswal Investment and Advisor Ltd cannot be put into the comparability list and is directed to be excluded as the wide range of activities include portfolio management, credit syndication, counseling on M&A, etc. This whole range of functions and activities carried out by Motilal Oswal is definitely are far wider and much different from investment advisory services where core functions is to give advices for making the investments in diversified fields
Addition of 3% markup additionally made over and above the comparative margin arrived at - Held that:- We agree that such an additional mark-up applied by the TPO is without any FAR analysis or without any benchmarking exercise with any comparables and more importantly without any analysis of assessee’s own facts. The assessee is providing non-binding investment advisory services to its AE and such services as highlighted by Ld. Counsel include; identifying and analyzing potential investment opportunities, evaluating and making recommendations to THPL with respect to specified investments. The monitoring functions performed by the assessee are part and parcel of the portfolio advisory services rendered by it because, the activities carried out by the assessee while undertaking portfolio monitoring activities include analysis of the latest development in the industry, ongoing performance of the industries and providing necessary information to its AE from time to time. This aspect has been noted by the ITAT, Mumbai Bench in the case of Carlyle India Advisors Private Limited (2013 (4) TMI 486 - BOMBAY HIGH COURT ) and in other decisions cited above by the Ld. Counsel. Thus, we hold that no such addition or adjustment on account of extra markup can be made
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2016 (2) TMI 905 - ITAT CHENNAI
Disallowance u/s 14A - Held that:- Addition made on account of section 14A where investments are made in sister concerns such as equity shares and share application money. However, if the investments are made from borrowed funds, section 14A of the Act would be applicable and learned Assessing Officer shall compute the disallowance under section 14A read with rule 8D in accordance with law.
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2016 (2) TMI 904 - ITAT CHANDIGARH
Deduction under section 80IA - initial assessment year selection - Held that:- Choosing of initial assessment year for claiming deduction under section 80IA of the Act in a block of ten years out of fifteen years is with the assessee i.e. it is the option of the assessee to choose the initial assessment year for claiming deduction under section 80IA of the Act. Further, the loss claimed by the assessee in respect of eligible business is to be set off against the income of the assessee from other ineligible business as in respect of assessment years and there is not need to notionally carry forward these losses up to the initial assessment year and write off the same out of the profits of eligible business.
Disallowance u/s 37 - Held that:- CIT (Appeals) has given detailed finding with respect to each and every individual item of the expenses incurred under the head ‘business promotion’ and as regards the disallowance sustained by the learned CIT (Appeals), the assessee has not been able to give any evidence to prove that these expenses were incurred wholly and exclusively for the purposes of business. Wherever required, the CIT (Appeals) has given relief to the assessee. We hereby confirm the order of the learned CIT (Appeals) in this regard.
Disallowance of rental expenses - Held that:- We are in agreement with the findings of the learned CIT (Appeals) that even though the sister concerns have not paid their part of rental expenses for using the premises but to arrive at the correct computation of taxable income of the assessee, it would be necessary to claim deduction on account of rental expenditure to that extent which is only attributable to the assessee company
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2016 (2) TMI 903 - ITAT AHMEDABAD
Entitlement to deduction u/s.80P(2)(a)(i) - Held that:- Interest earned by the assessee is eligible for deduction under section 80P - Decided in favour of assessee.
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2016 (2) TMI 901 - BOMBAY HIGH COURT
Entitled to a claim of deduction on account of depreciation in respect of the assets which has been acquired and used for the purpose of activities of the trust - Held that:- Amount spent on acquiring assets are taken as application of income for the purposes of Section 11 of the Act and the depreciation claimed thereafter on the same amount i.e. the value of fixed assets during the subsequent years is being granted on the user of the same. There is no question of double deduction in allowing of depreciation in respect of assets acquired and used by the Trusts. See M/s.Jawaharlal Nehru Port Trust (2015 (6) TMI 684 - BOMBAY HIGH COURT ) and The Watch Tower Bible & Tract Society of India [2015 (1) TMI 480 - BOMBAY HIGH COURT] - Decided in favour of assessee.
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2016 (2) TMI 900 - ITAT DELHI
Extension of stay - Held that:- On a consideration of the peculiar facts and circumstances of the case and the position of law as considered including the arguments of the parties before us on the issues involved we find that non-disposal of the appeal in the facts of the present case is solely on the grounds of adjournments sought by the Revenue on each of the dates the appeal came up for hearing;
Where no arguments assailing the assessee’s claim that prima facie the issue is covered in assessee’s favour having been advanced by the Revenue. Nothing has been placed before us by the Revenue disputing the assessee’s claim of irreparable loss to the running of the business has been placed before us nor there is any rebuttal on the plea of Liquidity crunch faced by the assessee.
In these above peculiar facts we are of the view that the present case is a fit case for extending stay for a further period of 3 months or disposal of appeal whichever is earlier. We find that the appeal is listed for hearing on 16th Feb. 2016. The Revenue is directed to file Paper Books if any well in advance. Needless to state that no adjournment on any reasonable ground shall be sought by the assessee.
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2016 (2) TMI 899 - DELHI HIGH COURT
Violation of the principles of natural justice - fictitious payments of commission - Held that:- While the wisdom of applying Section 33 of the IEA to the evidence of Mr. Meattle may be doubtful, the Court is of the view that de hors the evidence of Mr. Meattle, the evidence of Mr. Jhunjhunwala was by itself sufficient to draw an adverse inference against the Assessee that the payments of commission were fictitious. The Court is not persuaded to hold that Mr. Jhunjhunwala had made contradictory and inconsistent statements particularly since he was never confronted with those inconsistencies and contradictions by the Assessee. If, as is urged by the Assessee, Mr. Meattle’s statements are to be entirely kept aside, then Mr. Jhunjhunwala’s statements can be examined for their intrinsic worth. The Assessee took a calculated risk in declining to cross-examine Mr. Jhunjhunwala on the understanding that it had to be preceded by the cross-examination of Mr. Meattle.
Two conclusions that could be drawn from the above narration are that there is no violation of principles of natural justice as far as the Assessee is concerned, and the uncontroverted statements of Mr. Jhunjhunwala were sufficient to substantiate the case of the Revenue against the Assessee.
Penalty u/s 271(1)(c) - Held that:- Here the question is not mere making of a wrong claim but in making a claim that is demonstrably false. With the Assessee failing to establish the genuineness to the commission payments the essential conditions for attracting penalty under Section 271 (1) (c) of the Act stood fulfilled. The impugned orders of the ITAT and the CIT (A) deleting the penalty are hereby set aside. The penalty as ordered by the AO is restored. The question framed is answered in the negative, i.e., in favour of the Revenue and against the Assessee.
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2016 (2) TMI 897 - BOMBAY HIGH COURT
Validity of assessment - Jurisdiction of AO - Held that:- An draft assessment order passed under Section 144C(1) of the Act bestows certain rights upon an eligible assessee such as to approach the DRP with its objections to such a draft assessment order. This is for the reason that an eligible assessee's grievance can be addressed before a final assessment order is passed and appellate proceedings invoked by it. However, these special rights made available to eligible assessee under Section 144C of the Act are rendered futile, if directly a final order under Section 143(3) of the Act is passed without being preceded by draft assessment order.
The assessment order dated 23rd March, 2015 passed by the Assessing Officer for the assessment year 2012-13 is completely without jurisdiction. This is so as it has not been preceded by a draft assessment order. Hence, the foundational/basic order viz. the assessment order dated 23rd March, 2015 is set aside and quashed as being without jurisdiction. Consequent orders passed on rectification application as well as on penalty are also quashed and set aside being unsustainable.
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2016 (2) TMI 896 - ITAT BANGALORE
Short deduction of tax at source - payment to non-residents - eligibility for the benefit of DTAA - Computing the rate of 20% under section 206AA - Held that:- The provisions of TDS has to be read along with DTAA for computing the tax liability on the sum in question and therefore when the recipient is eligible for the benefit of DTAA then there is no scope for deduction of tax at source @ 20% as provided under the provisions of section 206AA. Similarly, on the issue of jurisdiction, the question of computing the rate of 20% under section 206AA of the Act is a debatable issue when the recipient is eligible for the benefit of provisions of DTAA and therefore the Assessing Officer cannot proceed to make the adjustment while issuing the intimation under Section 200A. This is beyond the scope of the said provisions. - Decided in favour of assessee
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2016 (2) TMI 893 - ITAT HYDERABAD
Disallowance u/s 14 r.w.r 8D - Held that:- Since assessee has investments and shares which are yielding exempt incomes, we have no option than to confirm the amount under Rule 8D(2)(iii). - Decided against assessee
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2016 (2) TMI 892 - ITAT DELHI
TDS u/s 194J OR 194C - design & drawings of the work are prepared by BHEL which is executed by the contractors under the supervision of BHEL - technical services - work by subcontractors - short deduction of tax - Held that:- CIT (A) has rightly observed that the scope of work given to the sub-contractors is for erection, testing, commissioning and trial operation and handing over of boiler units, electrostatic precipitators etc. and these activities involve construction work, welding, erection, alignment, transportation of equipment and materials etc. with the help of men & machines, which cannot be termed as technical services as per the definition given in section 9 of the Act. The ld. CIT (A) correctly stated that the contracts awarded by the assessee are for the Erection/Testing/ Commissioning of Plant & Machinery and are in the nature of carrying out any work including supply of labour for carrying out such work. We take note that the supply of labour to carry out the work/contract involves both skilled & unskilled labour. Further, we take note that for commission of power plant, qualified engineers and skilled manpower along with unskilled labour need to use by the sub-contractors for execution of the contract including testing/trial operations. The nature and scope of the subcontract as rightly held by the ld. CIT (A) was actual execution of work involving the services of technical personnel as well as non-technical personnel. In a turn-key project like commissioning of power plant etc. what the assessee intended to get from its sub-contractor was a physical output, a tangible structure and not merely the services of its qualified engineers/ staff.
CIT (A) has rightly observed that any payment for technical services in order to be covered u/s 194J, should be a consideration for acquiring or using technical know-how provided or made available by human element. The work entrusted for the sub-contractors is part of the contract offered to the assessee by its client and hence the sub-contractors also come in the purview of the Act and the assessee has deducted the tax is u/s 194C from the payments made to it. The amounts paid to sub-contractors is either for erection, installation, fabrication, commissioning, testing & trial operation of some parts of the Power Plant and therefore cannot be termed as technical services as per the definition in Explanation 2 to section 9 (1) (vii).
We also take note that in any case, the sub-contractors have already offered the payments received from the assessee to tax and so the short deduction of tax cannot be demanded from the assessee as per the case law of Hon'ble Supreme Court in Hindustan Coca Cola Beverage (P) Ltd. V. CIT (2007 (8) TMI 12 - SUPREME COURT OF INDIA). - Decided in favour of assessee
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2016 (2) TMI 891 - ITAT MUMBAI
Addition u/s 42 - application filed by for extending the exploration period as AO held that there was no voluntary surrender of the oil fields, that the assessee could not claim deduction u/s. 42(1) - FAA allowed the claim - Held that:- Purposive interpretation of the provisions of the Act will be useful to decide the issue. Section 42 of the Act was brought on statute with a very specific purpose- to encourage oil exploration. Purpose to introduce it was to tide over the ever increasing import bill of petroleum products. PSC is the testimony of the efforts and intention of the government to deal with the oil crisis. To encourage the oil exploration area incentive in form of introduction of section 42(1)was given to the assessees. As an exception capital expenditure and other expenditure are fully allowed, under section 42(1)(a)of the Act, even when the exploration of oil results in failure. Such expenditure is not being amortised or not is being allowed partially year after year-it has to be allowed in full. If the background of the legislation is considered it becomes clear that there was no scope for bringing in the concept of voluntarily surrender/forced surrender. The Act has not provided such terms in the section and therefore there was no justification in denying the assessee a legitimate benefit. We find that the PSC had distinguished relinquishment and termina -tion of contracts. As per Article4 of PSC(Pg-1. 19 of the PB)‘if the contractor exercises the option provided in paragraph (b)of Article 3. 5 the contractor shall, after any development area has been designated, relinquish all of the contract area not included within the said develop ment area’. Article-30of PSC(pg. 1. 84)deals with termination of contract. It provides 10 circumstances under which the government could terminate the contract. Clearly relinquishment and termination of agreement are two different concepts as per the PSC. In his letter, dated 28. 03. 2007, the DGHC has informed the assessee that its contract stood relinquished
The termination condition of the PSC deals with totally different situations. We find that the letter dt. 28. 3. 2007 talks of Article -4 and not of Article- 30 of the PSC. Clearly, the case of the assessee does not fall in the category of termination. Considering the above, we are of the opinion that the order of the FAA does not suffer from any legal or factual information. So, confirming his order, we decide effective ground of appeal against the AO. - Decided in favour of assessee
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2016 (2) TMI 890 - ITAT AHMEDABAD
Levy of fees under section 234E - intimation issued under section 200A in respect of processing of TDS - Held that:- We find that the issue in all these appeals is now squarely covered in favour of the assessee by the decision of ITAT Amritsar Bench in the case of Sibia Healthcare Private Limited vs. DCIT [2015 (6) TMI 437 - ITAT AMRITSAR] adjustment in respect of levy of fees under section 234E was indeed beyond the scope of permissible adjustments contemplated under section 200A.
As intimation under section 200A, raising a demand or directing a refund to the tax deductor, can only be passed within one year from the end of the financial year within which the related TDS statement is filed, and as the related TDS statement was filed on 19th February 2014, such a levy could only have been made at best within 31st March 2015. That time has already elapsed and the defect is thus not curable even at this stage. In view of these discussions, as also bearing in mind entirety of the case, the impugned levy of fees under section 234E is unsustainable in law. We, therefore, delete the impugned levy of fee under section 234E of the Act. - Decided in favour of assessee.
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2016 (2) TMI 889 - ITAT MUMBAI
Set off interest on income tax refund received from interest on income tax paid - Held that:- The set off of interest paid against that received shall accordingly be subject to the two being for the same period, and to the extent of interest income for the said period. Two, the interest rate paid to the Revenue is higher than the interest rate paid by it. Now, without question, interest as an expenditure u/s. 57(iii), i.e., under which provision deduction in its respect is claimed and allowed, could only be allowed to the extent of interest attributable to the rate at which interest is received from the Revenue. This is as nobody can be said to have borrowed funds at a rate (of interest) to earn interest income at a lower rate – there being no scope for earning any income, which is only net of expenditure, under such an arrangement. It needs to be appreciated that it is only toward earning (net) interest that the expenditure is allowed u/s. 57(iii), presuming a nexus between the ‘funds’ borrowed and lent. True, the interest rates are not in the control of the assessee, but statutorily defined. That, in fact, is a basis on which we have opined of the interest suffered as being a statutory liability, unconnected with the earning of interest, so that it is not admissible as a deductible in the first place. However, even granting deductibility, the parameters of section 57(iii) do not admit of expenditure being incurred to sustain a predetermined loss, which again points to the expenditure being involuntary - another aspect of the matter emphasizing its’ non-deductibility. The deduction for interest paid would thus be limited to the quantum of interest received on the like (principal) amount for the same period, defined as from a particular date to a particular date. Subject to these two caveats, forming part of the application of the principle of deductibility of interest expenditure to Revenue against that received from it, accepted by us in principle respectfully following the decisions by the co-ordinate benches of this tribunal, we allow the assessee’s claim - Decided in favour of assessee
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2016 (2) TMI 888 - ITAT MUMBAI
Bogus purchase - addition as assessees income - Held that:- AO was not justified in holding that the entire bogus purchases by the assessee from the aforesaid two parties in the assessee’s undisclosed income.
The assessee had earned commission @ 5% for clandestinely facilitating the bogus transactions of the parties to purchases and sales.
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2016 (2) TMI 887 - ITAT DELHI
Eligibility of registration u/s 12AA - Held that:- It is now well settled that at the time of grant of registration u/s 12AA, the ld. Commissioner is required only to examine the objects of the society. A bare perusal of the objects of society makes it clear that the pre-dominant object of the society is to impart education. - Decided in favour of assessee
As we have directed for registration of society u/s 12AA in terms of observations the assessee’s claim for approval u/s 80G(5)(vi) is allowed.
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2016 (2) TMI 886 - ITAT DELHI
Entitlement to deduction u/s 11 - Held that:- Merely because the assessee receives some recognition fees will not deviate the fact that the main object of the assessee is to promote sports which is apparently for the advancement of general public utility as provided in Section 2(15) of the Act which defines charitable purposes. The words "advancement of any other object of general public utility" would exclude objects of private gain; but this requirement is also stratified in the present case because the object of private profit is eliminated by the assessee under the objects as per Memorandum of Association of Society which was quoted in Assessment Order. The test to be applied is whether the predominant object of the activity involved in carrying out the object of general public utility is to subserve the charitable purpose or to earn profit. Where the predominant object of the activity is to carry out the charitable purpose and not to earn profit, it would not lose its character of a charitable purpose merely because some profit arises from the activity. The exclusionary clause does not require that the activity must be carried on in such a manner that it does not result in any profit. The restrictive condition that the purpose should not involve the carrying on of any activity for profit would be satisfied if profit making is not the real object. Therefore the assessee is entitled for the deduction under Section 11 of the Act. - Decided in favour of assessee.
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