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TMI Blog2024 (6) TMI 979X X X X Extracts X X X X X X X X Extracts X X X X ..... A) has erred in ignoring the fact that though the objects of the assessee may seem to be charitable, but activities carried out by the society which yielded income to the society are commercial in nature. 4. We take up the appeal of the assessee first. 5. The solitary ground of the assessee relates to denial of depreciation. The Ld. Representative of the parties agreed that the issue is covered in favour of the assessee and against the Revenue by the order dated 07.12.2022 of the Tribunal for AY 2012-13 in ITA No. 4172/Del/2017 wherein the assessee's claim of depreciation was negatived by the Ld. AO but on appeal filed by the assessee before the Ld. CIT(A), the assessee's claim of depreciation was allowed against which the Revenue filed appeal before the Tribunal. The Tribunal vide order (supra) decided the issue against the Revenue by observing and recording the following findings:- "13. Ground No. 3 and 4 relate to denial of depreciation by the Ld. AO which had been allowed by the Ld. CIT(A). The solitary reason given by the Ld. AO is that the assessee's claim of depreciation tantamount to a double deduction since the assessee has already claimed deduction of its capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 143(2) dated 14.09.2012 was issued and served upon the assessee. Thereafter, the assessee filed revised return on 28.03.2013 declaring income of Rs. 126,07,02,604/-. Statutory notices along with questionnaire were issued and served upon the assessee. 12. During the course of assessment proceedings vide letter dated 18.10.2013 the assessee sought relief from tax under section 11 to 13 of the Act. The Ld. AO did not consider the relief sought by the assessee as acceptable vide his order dated 01.11.2013 reproduced in para 3.1 of the assessment order. On being asked the reasons for filing revised income, the assessee made submission vide reply dated 20.02.2014 reproduced by the Ld. AO in para 4 of the assessment order. Further, vide letter dated 25.03.2014 the assessee submitted that in the original return the assessee had considered income from statutory charges (Rs. 89,25,29,214/-); income from other misc. activities (Rs. 1,36,85,223/-) and income from interest (Rs. 35,44,88,168/-) under the head "income from business" whereas in the revised return the said incomes have been considered under the head "income from other sources". This was not acceptable to the Ld. AO for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 of that order, the expression 'charitable purpose', as defined in section 2(15) cannot be construed literally and in absolute terms and it has to take colour and be considered in context of the provision of the Act. If the dominant and prime objective of institution is not a desire to earn profits but, object of promoting trade and commerce is not for itself, but for nation, it is clearly a charitable purpose. 5.1.5.1.1 Applying the above principle to the factual canvass of the case, it is found that the contentions of the AR has substantial merit. The setting up of the entity under the STPI scheme, the Memorandum of Association (2004), the legal status as a society under society registration act 1860, Objectives, Functions, Utilisation of surplus, Restraint on distribution of profits as discussed supra are neither reflective of business attitude nor indicative of the profit oriented intent & thus undeniably indicate towards a public/charitable purpose. 5.1.5.1.2 Here to recapitulate, the assessee society, registered as an autonomous society under the Societies Registration Act 1860, was formed under the then Department of Electronics (the present Department of Info ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 2(15) is to curb the practice of earning income by way of carrying on of trade or commerce and claiming the same as exempt in the garb of pursuing the alleged charitable object of general public utility. This proviso is never meant to deny the exemption to those institutions, where the predominant object is undeniably a charitable object and a public cause and in order to achieve the same incidental activities, essential in the given circumstances, are carried on. 5.1.5.3 In the aforesaid premises, the reasoning of the AO for his conclusion that all income except interest income is to be treated as 'income from business or profession are incorrect. 5.1.5.3.1 Moreover, as has been brought to my notice, the AO in the subsequent assessment year 12-13 has considered the same assessee as a charitable organization and given benefit of the Section 11 to 13. To take relevant excerpt from that order: "I have carefully examined the reply and submission of the assessee to the show cause notice and also referred the assessment order of the previous assessment year 2011-12 where in paragraph 4.2 the Assessing Officer quoting various decisions on the business activity and defini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hit by Article 14 (the equality clause enshrined in Article 14 of the Constitution). It is well-settled that the courts should always endeavour to uphold the Constitutional validity of a provision and, in doing so, the provision in question may have to be read down, as pointed out above, in Arun Kumar case (supra). 58. In conclusion, we may say that the expression "charitable purpose", as defined in Section 2(15) cannot be construed literally and in absolute terms. It has to take colour and he 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(15) of the said Act, then the proviso would be at risk of running fowl of the principle of equality enshrined in Article 14 of the Constitution of India. In order to save the Constitutional validity of the proviso, the same would have to be read down and interpreted in the context of Section 10(23C)(iv) because, In our view, the context requires such an interpretation. The correct interpretation of the proviso to Section 2(15) of the said Act would be that it carves out an exception from the charitable purpose of advancement of any othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re all income except interest income is assessable as business income. The Ld. AR defended the order of the Ld. CIT(A) and pointed out that in the immediately succeeding AY 2012-13, the Ld. CIT(A) had allowed to the assessee the benefit of section 11(1)(a) and section 11(2) against which the Revenue went in appeal before the Tribunal. The appeal of the Revenue has since been decided against the Revenue and in favour of the assessee. A copy thereof is placed in the Paper Book at pages 349-359. The Ld. AR made statement at the bar that the Revenue has not filed appeal against the order of the Tribunal in Hon'ble Delhi High Court. 18. We have considered the submission of the parties and perused the records. We observe that in the AY 2012-13 the Revenue had come up in appeal before the Tribunal against acceptance of the assessee's claim of being a charitable society and direction of the Ld. CIT(A) to the Ld. AO to compute the income of the assessee in accordance with the provisions of section 11 to 13 which would include accumulation as per section 11(1)(a) and section 11(2) of the Act. The Tribunal in its order in ITA No. 4172/Del/2017 dated 07.12.2022 gave the following findings in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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