Case Law Details
CIT Vs GS1 India (Delhi High Court)
Introduction: In a significant ruling, the Delhi High Court denied GS1 India’s tax exemption claim under section 2(15) of the Income Tax Act, stating that the services provided by the organization were primarily for the benefit of trade and business.
Analysis: The dispute arose concerning the Assessment Year (AY) 2013-14 when GS1 India claimed a tax exemption under section 2(15) of the Income Tax Act. The appellant, the revenue authority, contested this claim, and the matter reached the Delhi High Court.
Mr Rishabh Sancheti, representing GS1 India, did not oppose the appeal, mainly due to the precedent set by the Supreme Court in a similar case. In Assistant Commissioner of Income Tax (Exemptions) v. Ahmedabad Urban Development Authority, the Supreme Court ruled that despite GS1 India’s involvement in advancing public utility, the nature of their services—benefiting trade and business—did not qualify for exemption.
The verdict signifies a key interpretation of Section 2(15) of the Income Tax Act. Despite GS1’s contribution to the public utility, its high receipt generation from services rendered to businesses effectively nullified the exemption claim.
Conclusion: In conclusion, the Delhi High Court ruling is a significant legal precedent in interpreting the tax exemption guidelines under Section 2(15) of the Income Tax Act. It underlines that, notwithstanding the public utility of services, entities with business-oriented benefits and significant commercial receipts may not be eligible for tax exemptions. This interpretation is likely to influence future claims made by organizations offering similar services.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. This is an application moved on behalf of the appellant/revenue, seeking Condonation of delay in re-filing the appeal.
1.1 According to the appellant/revenue, there is a delay of 300 days.
2. Mr Rishabh Sancheti, who appears on behalf of the respondent/assessee, says that he does not oppose the prayer made in the application.
3. Accordingly, the application is disposed of.
4. This appeal concerns Assessment Year (AY) 2013-14.
5. Via this appeal, the appellant/revenue seeks to assail the order dated 06.08.2021 passed by the Income Tax Appellate Tribunal [in short, “Tribunal”].
6. Mr Sancheti says that Supreme Court has considered whether the activities carried out by the respondent/assessee fall within the ambit of proviso to Section 2(15) of the Income Tax Act, 1961 [in short, “Act”], in Assistant Commissioner of Income Tax (Exemptions) v. Ahmedabad Urban Development Authority, 2022 INSC 1112, concerning several other assesses (including the respondent/assessee),
6.1 Therefore, Mr Sancheti says that he would have no objection if the impugned order passed by the Tribunal is set aside, in terms of paragraph 253.E.2 of the aforesaid judgment.
6.2 For the sake of convenience, the said portion of the aforesaid judgment is extracted hereafter :
“E.2 It is held that though GS1 India is in fact, involved in advancement of general public utility, its services are for the benefit of trade and business, from which they receive significantly high receipts. In the circumstances, its claim for exemption cannot succeed having regard to amended Section 2(15). However, the Court does not rule out any future claim made and being independently assessed, if GS1 is able to satisfy that what it provides to its customers is charged on cost-basis with at the most, a nominal markup ”
[Emphasis is ours]
7. As submitted by learned counsel for the respondent/assessee, the impugned order passed by the Tribunal is set aside, in terms of the above-captioned observations of the Supreme Court, contained in paragraph E.2 of the judgment rendered in Ahmedabad Urban Authority.
8. The appeal is disposed of, in the aforesaid terms.
9. Parties will act based on the digitally signed copy of the order.
