ITAT Confirms Tax Exemption for Non-Profit Organization
Indian Chamber of Commerce v. DCIT [I.T.A. Nos. 933 & 934/Kol/2023] (ITAT Kolkata)
The Appellant, a non-profit organisation, sought exemption under Section 11 of the Income Tax Act for its activities, which include organizing meetings, conferences, and seminars, and earning income from membership fees, interest on deposits, and rental income.
The Ld. Departmental representative submitted that in the present case the condition as provided in the said proviso has been breached by the assessee as turnover from the receipts by appellant from organizing such meetings, conferences and seminars exceeded Rs. 25.00 Lacs and therefore the exemption u/s 11 was rightly denied by the Ld. CIT(A).
The appellant argued that its activities are charitable and do not constitute trade, commerce, or business, as they are incidental to its primary object of promoting and protecting trade, commerce, and industry. However, the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) (CIT(A)) disagreed, treating the appellant’s activities as business and denying exemption under Section 11. The AO bifurcated the income into business and charitable segments, while the CIT(A) treated all receipts as business income.
The ITAT, however, ruled in favour of the appellant, stating that its activities are charitable and not affected by the proviso to Section 2(15) of the Act, even after amendments. The Tribunal relied on the Supreme Court’s decision in the case of ACIT vs. Ahmedabad Urban Development Authority and the principle of mutuality, which holds that activities conducted for members and not for profit are not taxable. The Tribunal also noted that the appellant’s case is covered by a previous favourable decision by a Coordinate Bench for the A.Y 2009-10, which the revenue authorities have not challenged.
The ITAT’s order grants the appellant exemption under Section 11 for its entire income, including membership fees, interest, rentals, and miscellaneous sources. The Tribunal also allowed the appellant’s claims for depreciation and the deduction of the written down value (WDV) of assets sold. The ITAT’s order upheld the appellant’s appeals, confirming that the organization’s activities are charitable and not subject to tax under the Income Tax Act, and that the principle of consistency applies in this case.
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