Case Law Details
DCIT Vs Ernet India (ITAT Delhi)
Conclusion: Merely earning surplus by assessee did not result into the conclusion, that assessee was carrying on its activities, which could be termed as business, trade, or commerce, charging a nominal fee to use coding system and to avail of advantages and benefits therein was neither reflective of business aptitude nor indicative of profit-oriented intent. Accordingly, proviso to section 2(15) did not get attracted, and hence, there was no justification for denying exemption under section 11.
Held: Assessee was an autonomous society established under the aegis of Department of Information Technology, Ministry of Communications and Information Technology, Government of India, as a non-profit organization. Looking to the activities carried out by it, which fell within the ambit of ‘charitable purposes’ under section 2(15), it was granted registration u/s.12A vide order dated 26.03.2004. AO observed that, assessee was neither in the field of education nor in the field of medical relief or relief of poor albeit it fell within the scope of “general public utility” as per Section 2(15). AO held that looking to its receipts, its activities were commercial in nature. He observed that in view of the amendment to Section 2(15) assessee cannot be held to be carrying out charitable activities as it was carrying on activities in the nature of trade commerce or business in terms of first proviso to Section 2(15) and after detailed discussion, he held that entire surplus as per income and expenditure claimed, computed the net taxable income at Rs. 8,93,98,650/-. It was held that Assessee was engaged in research based activity which was highly cost intensive and required continuous spending on innovation and new developments as it was concerning with the education of society. Assessee was charging subscription as well as consultancy fees on actual, which fact was not denied. Therefore, merely earning surplus did not result into the conclusion, that assessee was carrying on its activities, which could be termed as business, trade, or commerce, charging a nominal fee to use coding system and to avail of advantages and benefits therein was neither reflective of business aptitude nor indicative of profit-oriented intent. Accordingly, proviso to section 2(15) did not get attracted, and hence, there was no justification for denying exemption under section 11.
FULL TEXT OF THE ITAT JUDGEMENT
The aforesaid appeal has been filed by the Revenue against the impugned order dated 20.12.2016, passed by Ld. Commissioner of Income Tax (Appeals)-XL, Delhi for the quantum of assessment passed u/s.143(3) for the Assessment Year 2012-13. In the grounds of appeal, the Revenue has raised following grounds:
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