Facts of the Case

The present Income Tax Appeal was filed by the Appellant challenging the order passed by the Income Tax Appellate Tribunal (ITAT) in ITA No. 2826/Del./2017 for the Assessment Year 2012-13.

The ITAT had dismissed the Revenue’s appeal and upheld the entitlement of the assessee to exemption under Section 11 of the Income Tax Act, 1961.

The Revenue contended that the assessee’s activities were not charitable in nature.

Issues Involved

  1. Whether the activities of the assessee amounted to trade, commerce, or business under the proviso to Section 2(15) of the Income Tax Act, 1961.
  2. Whether the assessee was eligible for exemption under Section 11 of the Income Tax Act, 1961.
  3. Whether the ITAT erred in directing the Assessing Officer to grant exemption without properly appreciating the nature of activities.

Petitioner’s Arguments (Revenue)

  • The ITAT failed to appreciate that the activities of rendering services by the respondent were in the nature of trade, commerce, or business.
  • Such activities were not charitable and were hit by the proviso to Section 2(15) of the Act.
  • The ITAT erred in directing the Assessing Officer to allow exemption under Section 11.
  • The assessee could not be treated as engaged in charitable activities.

Respondent’s Arguments (Assessee)

  • The issue had already been decided in favour of the assessee in earlier assessment years.
  • The ITAT relied on its coordinate bench decision in the assessee’s own case for Assessment Year 2011-12.
  • The activities carried out were charitable in nature and eligible for exemption under Section 11.

Court’s Findings / Order

  • The Court noted that the ITAT had dismissed the Revenue’s appeal based on its earlier decision in the assessee’s own case.
  • The High Court had already dismissed the Revenue’s appeal in the earlier year (ITA 198/2022 dated 15th July 2022).
  • In view of the earlier binding decision, the present appeal was also dismissed.

Final Order:
The appeal filed by the Revenue was dismissed.

Important Clarification

  • Once an issue is decided in favour of the assessee in earlier assessment years and upheld by the High Court, the same view is to be followed in subsequent years unless there is a material change in facts or law.
  • Activities alleged to be commercial must be examined in light of judicial precedents before invoking the proviso to Section 2(15).

Sections Involved

  • Section 2(15) – Definition of “Charitable Purpose”
  • Section 11 – Income from Property Held for Charitable or Religious Purposes

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:2676-DB/MMH19072022ITA2032022_174817.pdf

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