THE KRISHNA DISTRICT LORRY OWNERS ASSOCIATIONS,VIJAYAWADA vs. INCOME TAX OFFICER, EXEMPTION WARD, RAJAHMUNDRY

On being aggrieved by the order of the Ld. AO, assessee filed an appeal before Ld. CIT(A). Assessee made similar submissions before Ld. CIT(A). Assessee also submitted before Ld. CIT(A) that the assessee was considered as a charitable society and the exemption under section 11 of the Act was allowed in the earlier years and subsequent years. However, Ld. CIT(A) rejected the submissions made by the assessee thereby partly allowed the appeal of the assessee.

On being aggrieved by the order of the Ld. CIT(A), assessee is in appeal before us by raising following grounds of appeal: - “1. The orders passed under sections 143(3), 143(3A), and 143(3B) of the Income Tax Act, dated 13.04.2021, and upheld by the orders under section 250 of the IT Act, dated 05.03.2024, are contested on the basis of being contrary to the facts of the case and provisions of the law.

The Learned CIT(A) overstepped jurisdiction by negating the charitable nature of the trust's objectives, despite prior approval and registration under section 12A of the IT Act. This decision lacks a valid basis and contravenes established legal principles.

The appellant seeks a reversal of the lower authorities' orders in the interest of justice and fair play, considering the erroneous interpretations and conclusions drawn by the Learned CIT(A). Additional grounds, if any, may be presented during the course of the hearing to substantiate these contentions.”

Ground Nos. 1 and 6 are general in nature and needs no adjudication.

Ground Nos. 2 to 5 relates to denial of exemption claimed under section 11 of the Act by the assessee. On this issue, Ld. Authorised Representative [hereinafter “Ld.AR”] submitted that assessee is a charitable organisation registered under section 12A and 80G of the Act. Assessee was assessed as charitable organization and the benefit of exemption under section 11 of the Act was allowed in the earlier assessment years. He pleaded that the even though the principle of res-judicata does not apply to the income tax proceedings, however, there is no change in the facts and circumstances of the case during the assessment year and hence denial of exemption claimed under section 11 of the Act is not justifiable. Further, he also submitted that the assessee was owning a building and in order to move to a larger premises the old building was let out on rent and the rental income was used for the benefits of its members. He argued that since there is a building existing in the old premises it cannot be discarded and hence being let out for use the proceeds towards benefit

Per contra, Ld. Departmental Representative [hereinafter in short “Ld.DR”] submitted that the assessee is engaged in the business activities and is confined to a single district and not to the benefit of the public at large. He also submitted that the assessee is charging fee from the driving school activities which shall be considered as commercial in nature. Further he also submitted that assessee has received donation of around Rs.1 Crore which is the more than 20% as per section 2(15) of the Act and hence assessee is not entitled for exemption under section 11 of the Act. He therefore pleaded that the order of the Revenue Authorities be upheld.

Countering the argument of the Ld. DR, Ld.AR submitted that the assessee is charging a nominal fee from the driving school activities in order to Page No. 5 (A.Y. 2018-19) The Krishna District Lorry Owners Associations compensate overhead expenditure incurred by the assessee while maintaining the vehicles used for driving school purpose and therefore it does not amount to assessee being engaged in the commercial activities with a profit motive.

We have heard both the sides and perused the material available on record including the submissions of the assessee. It is an undisputed fact that the assessee is a registered society under section 12A of the Act. It is also an undisputed fact assessee was claiming exemption under section 11 of the Act for the earlier assessment years and even during the scrutiny proceedings of the earlier assessment years this benefit was never denied to the assessee. Even though the principle of res-judicata does not apply to the Income Tax Proceedings, we notice that there is no change in the activities of the assessee during the impugned assessment year except for the fact that the assessee has incurred certain expenditure towards Golden Jubilee Celebrations out of specific donations received from transport companies. We are of the opinion that the expenditure incurred for the Golden Jubilee celebrations is not an annual affair and only one time expenditure during the impugned assessment year which cannot be a ground for denial of exemption claimed under section 11 of the Act. We once again reiterate that the revenue has not denied the benefit of section 11 of the Act for the earlier assessment years and as held by the Hon’ble Supreme Court in the case of Radhasaomi Satsang v. CIT [(1992) 193 ITR 321] in the absence of change in the activities of the trust, the benefit

In the result, appeal filed by the assessee is allowed.