Citation- Sree Narayana Dharma Sabha Kodungallur v. Income-tax Officer (Exemption) [2024]
ITAT- Cochin
ITA No.- 150 to 154 (Coch) of 2024
Assessment Year- 2012-13, 2013-14, 2015-16, 2016-17, 2018-19
Date of Order- November 8, 2024
Brief Facts:
The assessee, a trust registered under Section 12A of the Income-tax Act (“IT Act”) was engaged in charitable activities and earned income through its "kuri" and finance business.
The income earned through business was entirely used to achieve the trust’s objectives, such as relief to the poor and medical relief, as detailed in its bye-laws.
The Assessing Officer (AO) denied the trust’s claim for exemption under Section 11, treating the income as business income, citing provisions of Section 2(15) and alleging the activity was primarily commercial.
The Commissioner (Appeals) upheld this decision.
Observations of the Court:
The Tribunal observed as follows-
The Tribunal examined the trust’s bye-laws and financial statements, noting that the income was consistently used for charitable purposes, including relief to the poor and medical relief.
It found that the trust’s kuri and finance activities were not conducted with the primary intent of earning profits, unlike commercial entities. Instead, these activities were incidental and necessary to support the trust's charitable objectives.
The Tribunal referenced Circular No. 11/2008 issued by CBDT, which clarified that incidental commercial activities do not disqualify a trust from tax exemption if the income is used for charitable purposes.
Citing previous judicial precedents of Bharathakshemam v. Pr. CIT by Kerala High Court and Malanadu Farmers Society V. Dy. CIT (Exemptions) by Cochin Tribunal, the Tribunal emphasised that the denial of exemption for the relevant years was inconsistent with earlier and subsequent assessments where the exemption was allowed.
Hence, the Tribunal ordered that the trust's income from kuri and finance business qualifies for exemption under Section 11, as it was used to fulfil the charitable objectives outlined in the bye-laws. The orders of the Assessing Officer and Commissioner (Appeals) were set aside, and the appeals filed by the trust were allowed.
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