Facts of the Case

The present appeals were filed by the Revenue challenging a common order dated 5 October 2020 passed by the Income Tax Appellate Tribunal (ITAT) for Assessment Years 2013–14 and 2014–15.

The Respondent, an assessee society (Petrotech), had been granted exemption under Sections 11 and 12 of the Income Tax Act. The Revenue contended that the activities carried out by the assessee were in the nature of trade, commerce, or business, and therefore, such exemption should not be allowed.

Issues Involved

  1. Whether the activities of the assessee society qualify as charitable activities or fall under trade, commerce, or business.
  2. Whether exemption under Sections 11 and 12 of the Income Tax Act, 1961 can be denied on this ground.
  3. Whether any substantial question of law arises for consideration by the High Court.

Petitioner’s Arguments (Revenue)

  • The ITAT failed to properly appreciate that the Respondent’s activities were commercial in nature.
  • Since the activities constituted trade or business, the assessee was not eligible for exemption under Sections 11 and 12.
  • The Revenue argued for denial of tax exemption benefits granted to the assessee society.

Respondent’s Arguments (Assessee)

  • Though not expressly recorded in detail, the Respondent relied on earlier decisions in its own case.
  • The assessee contended that its activities had already been adjudicated and held to be eligible for exemption.

Court’s Findings / Order

  • The High Court observed that the issues raised were already covered by a prior judgment dated 20 December 2017 in the assessee’s own case (ITA 1172/2017).
  • It was noted that although the Revenue had filed an appeal before the Supreme Court (Civil Appeal No. 9553/2018), no stay had been granted on the earlier judgment.
  • The Court relied on principles laid down in:
    • Kunhayammed & Others vs State of Kerala (2000) 6 SCC 359
    • Shree Chamundi Mopeds Ltd. vs Church of South India Trust Association (1992) 3 SCC 1
  • Accordingly, the Court held:
    • No substantial question of law arises.
    • The appeals filed by the Revenue are dismissed.

Important Clarification

The Court clarified that the present order shall be subject to the final outcome of the pending Civil Appeal before the Supreme Court.

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:4059-DB/MMH28092022ITA3722022_183534.pdf


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