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Income Tax Appellate Tribunal, ‘D’ BENCH: CHENNAI
Before: SHRI MAHAVIR SINGH, HON’BLE & SHRI GIRISH AGRAWAL, HON’BLE
आदेश / O R D E R
PER MAHAVIR SINGH, VICE PRESIDENT:
This appeal by the assessee is arising out of the order of the Commissioner of Income Tax (Appeals)-17, Chennai, in 16 dated 22.01.2018. The assessment was framed by the ITO (Exemptions), Ward-2, Chennai, for the AY 2012-13 u/s.143(3) of the Income Tax Act, 1961 (hereinafter “the Act”) vide his order dated 27.03.2015.
2. At the outset, the Ld.Counsel for the assessee stated that this matter is in the second round and in the first round the issue was decided against the assessee by the Tribunal and matter carried to the Hon’ble High Court in Tax Case Appeal No.402 of 2019 dated 28.06.2019. The issue was framed by the Hon’ble High Court in the following four substantial questions of law:
Whether the Appellate Tribunal is correct in law in denying the tax exemption under Section 11 of the Act for the assessment year under consideration despite the continued availability of registration under Section 12A(a) of the Act for the appellant as a public charitable trust?
Whether the Appellate Tribunal is correct in law in denying the tax exemption under Section 11 of the Act for the assessment year under consideration on the misconstruction of the Provisos below Section 2(15) of the Act while recording perverse findings of fact on the activity pursued as a trading activity?
3. Whether the Appellate Tribunal is correct in confirming the assessment order passed for the assessment year under consideration without examining the objects and financial statements of the appellant for the purpose of considering the grant of tax exemption on the principles of mutuality? And
4. Whether the Provisos below Section 2(15) of the Act would get attracted to the activity of the appellant aimed at protecting the environment for http://www.judis.nic.in the purpose of testing the availability of tax exemption benefit under Section 11 of the Act?
The Hon’ble High Court without answering to the substantial questions, remanded the matter to the file of the Tribunal by observing the following in Para Nos.6 & 7:
6. The order impugned before us in this appeal is identical to that of the common order impugned in TCA.Nos.705 to 707 of 2018, as the said common order was followed in the present order passed by the Tribunal.
Therefore, this appeal needs to be disposed of on the same lines as TCA.Nos.705 to 707 of 2018 were disposed of.
In the result, the above tax case appeal is allowed, the impugned order passed by the Tribunal is set aside and the matter is remanded to the Tribunal for a fresh consideration of all the issues that may be raised by both the assessee as well as the Revenue. The appeal filed before the Tribunal for the assessment year 2012- 13 can be taken up together with the appeals http://www.judis.nic.in relating to the assessment years 2009-10, 2010-11 and 2011-12, which were remanded for a fresh consideration before the Tribunal vide our judgment dated 24.6.2019 in TCA.Nos.705 to 707 of 2018. We make it clear that we have not expressed any opinion on the merits of the contentions advanced by the appellant assessee nor
:: 3 :: the defence, which was raised by the Revenue. Consequently, the substantial questions of law raised are left open. No costs.
The Ld.Counsel for the assessee stated that the Tribunal in the earlier order in 2007 & 2008/Chny/2014 for the AYs 2009-10, 2010-11 & 2011-12, dated 25.11.2019, has allowed the claim of the assessee of exemption u/s.11 of the Act by holding that activities of the assessee are not hit by the proviso to Sec.2(15) of the Act, wherein, the Tribunal held as under:
We have considered the rival submission and perused the materials available on record.
At the outset, the perusal of the objects supra clearly show that the main objects of the assessee is to assist in the international trade relating to leather and leather products and to secure objectives towards the said needs. The objects are also specifically controlled with the clear Proviso that there shall be no intention of earning profits nor are the activities to be carried on outside India.
Admittedly, it is a fact that the Wattle extracts is not available for sale in India. Wattle extracts are basically solid mimosa extracts. The said product is an organic product with high quantity of bio-degradable vegetable tanning completely soluble in water. Thus, the assessee herein admittedly procured the said Wattle extracts and has distributed the same only to his members. There is no outsider dealings in respect of the assessee. Admittedly, one cannot do business with one’s own members.
This being so, the primary condition of the Proviso to Section 2(15) which talks of “carrying on any activity in the nature of trade, commerce or business” itself fails. The assessee is not doing any trade, commerce or business in dealing with the Wattle extracts. It imports the products for its members and distributes the same for its members in the course of which minor surpluses are generated. This surplus is also not used for any other purposes but for doing charitable activities as permitted in the by-laws. Further, the assessee has been granted registration u/s.12AA after considering the main and primary objects of the assessee which has been extracted above.
This being so, it cannot be said that the activity of the assessee in importing or procuring the Wattle extracts and distributing the same within its members is an activity which is hit by the Proviso to Section 2(15) of the Income Tax Act, 1961.
In the circumstances, the Assessing Officer is directed to grant the assessee the benefit of exemption u/s.11 of the Income Tax Act, 1961 in respect of the excess of income over expenditure as generated by the assessee.
In the result, the appeal of the assessee is allowed and in respect of the appeals filed by the Revenue, though even on merits, the issue is liable to be held in favour of the assessee on account of tax effect also, the appeals of the Revenue are dismissed.
In view of the above, the Ld.Counsel for the assessee stated that the facts and circumstances are exactly identical in this year and issue is exactly same. The Ld.Counsel for the assessee drew our attention to the grounds raised i.e. Ground Nos.1-13, wherein, the only one issue raised is whether the assessee is eligible for claim of exemption u/s.11 of the Act or it is hit by the proviso to Sec.2(15) of the Act. When this was put to Sr.DR, Mr.G.Johnson, could not controvert the above facts and circumstances or the order of the Tribunal.
As the facts and issue in this year i.e. AY 2012-13 is identical what was in AYs 2009-10, 2010-11 & 2011-12 before the Tribunal, taking a consistent view, we allow the appeal of the assessee.
7. In the result, the appeal filed by the assessee is allowed.
Order pronounced on the 04th day of March, 2022, in Chennai.