TMI Blog2016 (1) TMI 1024X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. In view of the aforesaid, we do not find any merit in the submissions of the ld. DR so as to disturb the finding of the ld. CIT(A) on this issue - Decided in favour of assessee Disallowance u/s 40A(3) - Held that:- Once the claim of the assessee for exemption under S.11 has been accepted, the disallowance made by the Assessing Officer under S.40A(3) has no legs to stand, and the ground of the assessee before the learned CIT(A) becomes infructuous. - Decided in favour of assessee - ITA No.913/Hyd/2015 - - - Dated:- 4-11-2015 - SMT P.MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER For The Appellant : Shri B.Kurmi Naidu, DR For The Respondent : Shri C.S.Subramanyam Shri V. Sivakumar ORDER Per Smt. P. Madhavi Devi, Judicial Member : This appeal by the Revenue is directed against the order of the Commissioner of Income-tax(Appeals) 9, Hyderabad dated 17.4.2015, whereby it was held that the assessee is eligible for exemption under S.11 of the Act. 2. Brief facts of the case are that assessee is a society registered under S.12A of the Act. The return of income for the year under consideration was filed by it on 27.9.2011 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of the assessee for exemption is based on the consistent view taken by the learned CIT(A) in assessee s own case for earlier years. It has been brought to our notice that the issue relating to assessee s claim for exemption under S.11, is also covered in favour of the assessee, by the decisions of the Tribunal dated 6.6.2014 in ITA Nos.894, 895/Hyd/2013 and 1067/Hyd/2012 for assessment years 2006-07 to 2008-09; and dated 3.7.2015 in ITA Nos.33 and 339/Hyd/2015 for assessment years 2009-10 and 2010-11 respectively. A copy each of both these orders have been furnished before us by the learned counsel for the assessee alongwith the written submissions filed by him. 6. In its recent decision dated 3.7.2015 in assessee s own cases for the assessment years 2009-10 and 2010-11, the Tribunal, besides taking note of the earlier order of the Tribunal dated 6.6.2014 on this issue for assessment years 2006-07 to 2008-09 (supra), after due consideration of the nature of the activities of the assessee in constructing Jagannadha Temple as well as letting out of the function hall held that the assessee is entitled for exemption under S.11 of the Act for the elaborate reasons discussed in para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4/09 would automatically disentitle the assessee from being considered as having been established for charitable purpose and thereby depriving it from claiming exemption u/s 11 of the Act. A plain reading of section 2(15) of the Act, also makes it clear that the proviso applies only to the last limb of charitable purpose i.e. advancement of any other object of general public utility . The intention of the legislature in introducing the proviso to section 2(15) as could be gathered from the speech of the Hon ble Finance Minister on the floor of Parliament, explanatory notes, departmental circulars, is to deny exemption to trusts or institutions who in the garb of charity are purely engaged in commercial or business activities and whose main intention is to earn profit. The proviso is never meant to deprive genuine trusts and institutions whose main object is charity but in process of achieving the main object they undertake some income generating activity which is ancillary and incidental to the main object. Further, income generated from such activity is also utilized for achieving the main charitable object. The true import and effect of proviso to section 2(15) of the Act came ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss , as find place in the first proviso to section 2(15), the court held that merely because fees or some other consideration is collected or received by an institution, it would not lose its character of having been established for charitable purpose. The Court observed, in this context, the dominant activity of the institution has to be looked into. If the dominant activity of the institution is not business, trade or commerce, then, any such incidental or ancillary activity would also not fall within the categories of trade or commerce or business. The driving force of the trust or institution should not be a desire to earn profit, but, utilize the same for achieving the charitable objects for which it is established. The Hon be High Court laying down the principle as to how the proviso to section 2(15) should be construed, held as under: 58. In conclusion, we may say that the expression II charitable purpose , as defined in section 2(15) cannot be construed literally and in absolute terms. It has to take colour and be considered in the context of section 10(23C)(iv) of the said Act. It is also clear that if the literal interpretation is given to the proviso to section 2( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is charitable in nature, proviso to section 2(15) cannot be applied to deny exemption to assessee u/s 11 of the Act. In our view, AO without examining the issue in proper perspective has abruptly concluded that assessee is not entitled to exemption u/s 11 of the Act only because proviso to section 2(15) was introduced w.e.f. 01/04/09. In our view, proviso to section 2(15) of the Act will not apply automatically to every trust or institution irrespective of the fact, whether the dominant object of the trust or institution is charitable purpose or earning profit. When in the present case assessee is registered as charitable institution and there is no change in the aims and objects of assessee in the impugned AY and the activities of assessee over the years remains the same, the proviso to section 2(15) cannot be applied to assessee to deny exemption u/s 11 of the Act. In view of the aforesaid, we do not find any merit in the submissions of the ld. DR so as to disturb the finding of the ld. CIT(A) on this issue. Accordingly, we uphold the order of ld. CIT(A) by dismissing the grounds raised. 7. Facts and circumstances of the case in the year under appeal, viz. assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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