DCIT Vs Indian Broadcasting Foundation (ITAT Delhi)
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) decided the Revenue’s appeal against the order of the National Faceless Appeal Centre (NFAC) for Assessment Year 2017-18 arising from the assessment made under Section 143(3) of the Income-tax Act, 1961.
The Revenue challenged the CIT(A)’s order on two issues. The first related to allowing exemption under Sections 11 and 12 despite the assessee’s investment of ₹15 lakh in equity shares of Broadcast Audience Research Council (BARC), which the Assessing Officer treated as a violation of Section 11(5), attracting Section 13(1)(d). The second concerned the assessee’s claim that provision for doubtful debts, gratuity and leave encashment constituted application of income.
The Tribunal noted that the assessee, a not-for-profit company incorporated under Section 25 of the Companies Act, 1956 and registered under Section 12A, is an association of broadcasters whose objects include protecting stakeholders in the television broadcasting industry, spreading awareness of industry developments and supporting its members. The assessee had claimed exemption under Sections 11 and 12 while filing its return declaring nil income. During the relevant year, it subscribed to 1,50,000 equity shares of BARC for ₹15 lakh. The Assessing Officer treated this investment as one not falling within the modes specified under Section 11(5), held that Section 13(1)(d) had been violated and consequently denied exemption under Section 11.
The Tribunal observed that the issue was recurring and had already been decided in the assessee’s favour by the Tribunal for Assessment Years 2013-14, 2014-15 and 2015-16. It also noted that the Delhi High Court, by order dated 20.03.2025 for Assessment Year 2014-15, had held in favour of the assessee on the same issue. The earlier decisions recorded that BARC was established pursuant to the recommendations of the Telecom Regulatory Authority of India (TRAI) and Central Government policy as an industry-led, not-for-profit body. The investment was made to fulfil the assessee’s charitable and ancillary objects rather than for earning income or profit. BARC, being a not-for-profit company, was not permitted to distribute dividends or profits to its shareholders. The Tribunal also noted the earlier finding that the amounts were deposited with BARC not by way of investment or choice but on account of Central Government policy. Following these earlier decisions, the Tribunal held that the investment in BARC did not constitute a violation of Section 11(5) read with Section 13(1)(d). It therefore upheld the CIT(A)’s order allowing exemption under Section 11 and dismissed the Revenue’s first ground.
On the second issue, the Tribunal observed that the assessee had claimed provision for doubtful debts, gratuity and leave encashment as application of income while seeking exemption under Section 11. It found that the Assessing Officer had not independently examined the allowability of these claims because exemption under Section 11 itself had been denied on account of the alleged violation of Sections 11(5) and 13(1)(d). The CIT(A) had treated these claims as consequential to the grant of exemption.
Since the Tribunal had upheld the assessee’s entitlement to exemption under Section 11, it held that the allowability of provision for doubtful debts, gratuity and leave encashment as application of income required independent examination in accordance with the applicable provisions of law. In the interest of justice and fair play, it restored this issue to the Assessing Officer for de novo adjudication in light of its finding allowing exemption under Section 11. The Revenue’s second ground was therefore allowed for statistical purposes.
Accordingly, the Revenue’s appeal was partly allowed for statistical purposes.
Cases Discussed
- Indian Broadcasting Foundation (Delhi High Court), ITA 469 of 2023, order dated 20.03.2025
- Indian Broadcasting Foundation (ITAT Delhi), ITA No. 5589/Del/2018, order dated 08.09.2022
- Indian Broadcasting Foundation (ITAT Delhi), ITA Nos. 4193 & 4194/Del/2017, order dated 14.09.2020
- Director of Income Tax vs. Alarippu (Delhi High Court), (2000) 111 TAXMAN 511 (Delhi)
- Director of Income Tax Vs. Acme Educational Society (Delhi High Court), (2010) 326 ITR 146 (Delhi)
- CIT vs. Uttar Pradesh Cooperative Federation Ltd. (Supreme Court), AIR 1989 SC 915
- CIT v. Sir Sobha Singh Public Charitable Trust (Delhi High Court), [2001] 250 ITR 475 (Delhi)
- Anand Charitable Trust v. Commissioner of Wealth-tax (Delhi High Court), [2002] 123 Taxman 494 (Delhi)
- CIT v. Aloo Investment Co. Pvt. Ltd. (Bombay High Court), [1979] 1 Taxman 433 (Bom.)
- Third Income-tax Officer v. Jhaverbhai Patel Ch. Trust (ITAT Bombay), [1992] 43 ITD 195 (Bom.)
Five Alternative SEO Titles
ITAT Upholds Section 11 Exemption for Investment in BARC Shares
FULL TEXT OF THE ORDER OF ITAT DELHI
1. The appeal in ITA No. 5626/Del/2025 for AY 2017-18, arises out of the order of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘Id. CIT(A), in short] dated 19.06.2025 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 23.01.2020 by the Assessing Officer, NFAC, Delhi (hereinafter referred to as ‘Id. AO’).
2. The revenue has raised the following grounds of appeal before us:-
1. Whether on facts and circumstances of the case and in law, Ld. CIT(A) has erred in allowing the benefit of exemption u/s 11&12 of the Act by ho/ding that the transactions of purchasing shares worth Rs. 15 Lakhs were within the meaning of section 11(5)(vii) of the Income Tax Act, 1961.
2. On the facts and in circumstances of the case and in law, Ld CIT(A) has erred in allowing the assessee’s claim for application of income on account of provisions for doubtful debts payment of gratuity and leave encashment, such claim being consequential in nature to allowance of benefit of exemption u/s 11& 12 of the Act, to the assesssee.”
3. We have heard the rival submissions and perused the materials available on record. The assessee company has been incorporated on 2709-1999 under Section 25 of the Companies Act 1956 as a not-for-profit company. It is registered under Section 12A of the Act vide order dated 1001-2001. It is an association of broadcasters. The main aims and objects of the assessee company are to protect the interests of the various stakeholders and related entities in the field of television broadcasting, including the television viewing audiences. Its object includes spreading awareness about latest developments in the television industry and disseminating knowledge amongst its members. It supports, protects, extends and defines the rights of its members. The assessee claimed benefit of exemption under Section 11 / 12 of the Act in the return of income filed on 31-10-2017 disclosing Nil income. The assessee made an investment of Rs 15 lakhs by subscribing to 1,50,000 equity shares of Rs 10 each in Broadcast Audience Research Council (BARC), a wholly owned subsidiary. This investment was sought to be treated as an investment made other than the modes prescribed under section 11(5) of the Act resulting in violation of provisions of section 13(1)(d) of the Act. Accordingly, the Learned AO proceeded to disallow the entire claim of exemption under section 11 of the Act in the assessment.
4. We find that this is a recurring issue and this tribunal in assessee’s own case for assessment years 2013-14 and 2014-15 in ITA Nos. 4193 and 4194 /Del / 2017 dated 14-09-2020 had decided the very same issue in favour of the assessee by observing as under:-
“7. We have gone through the record in the light of the submissions made on either side. In his order Ld. CIT(A) considered the TRAI recommendations, objectives of incorporating the BARC, the recommendations of the standing committee of Parliament on information technology, the recommendations of TRP committee appointed by the Ministry of Information and Broadcasting, guidelines for Television Rating Agencies recommended by the TRAI extensively in the light of the decisions of the jurisdictional High Court in the case of Director of income tax vs. Alarippu (supra) and also Director of income tax Vs. Acme Educational Society to reach the conclusion that the assessee has not deployed its funds towards equity of BARC for seeking any income, but to fulfil some of its key objectives and in order to complying with the directions of TRAI and MIB; and that as a matter of fact, no income was earned on such deployment of funds towards the equity capital of BARC.
8. CIT(A) further held that even if it is assumed that provisions of section 13 (1) (d) of the Act are attracted, still the withdrawal of exemption will have to be restricted only to the income earned from the investment made in contravention of section 11 (5) of the Act, as borne out from paragraph No. 28.6 of CBDT circular No. 387, dated 6/7/1984. Having considered all these things, Ld. CIT(A) referred to the observations of the Hon’ble Delhi High Court in assessee’s own case at the stage of stay of demand, to the effect that the amounts in question were deposited with the BARC not by way of investment or choice, but on account of a Central government policy. As a result of consideration of all these aspects, Ld. CIT(A) returned a finding that the assessee cannot be said to have committed any violation within the meaning of the provisions of section 11 (5) rea with section 13 (1) (d) of the Act by making the deposits in question and consequently Ld. CIT(A) directed the assessing officer to allow the benefit of assumption under section 11 and 12 of the Act.
9. There is no dispute that basing on the recommendations of TRAI and policy of Central Government, BARC was required to be established as an industry led body and promoted by the Assessee; that both assessee and BARC are ‘not for profit’ companies set up for meeting wider objectives of public charitable nature, namely, promotion of Television industry and viewership in India. There is also no dispute in respect of the claim of the assessee that, being an Industry body, the assessee represents the interest of its member TV broadcasters including public sector broadcaster Doordarshan. BARC was set up to provide reliable and transparent information needed by the members and various stakeholders of assessee in taking various crucial business decisions relating to their businesses.
10. On a careful consideration of the objects of the BARC, we have no hesitation to hold that the BARC enables assessee to fulfil its ‘objects incidental or ancillary to the attainment of the main objects, like to affiliate, admit to membership, aid and to receive aid from any other society, association, company, corporation firm, partnership or person promoting or formed or intending to promote any of the objects of Company and to subscribe to or aid any such society, association, company, corporation, firm, partnership or person with a view to obtain any advantage or benefit for the purpose of the Company and to subscribe to any fund or society as may be considered deserving from time to time and to subscribe to, become a member of, corporate or collaborate with any other association or agency whose objects are altogether or in part similar to those of the Company and to procure from or communicate with any such body or association any useful information as is likely to further the objects of the Company.
11. Further, BARC, being a not for profit Company under section 25 of the Companies act, 1956, is not permitted to distribute any dividends or profits to its shareholders. More so, on liquidation, its MOA provides that any surplus left shall be transferred to another Section 25 Company undertaking similar objectives and cannot distribute any such funds to its shareholders, which establishes that the deployment of funds in BARC is not for earning any income or profit, rather only to meet the objectives of the Assessee.
12. For want of any intention to earn profit by such deployment of funds, in the light of the decisions relied upon by the assessee reported in CIT vs. Uttar Pradesh cooperative Federation Ltd AIR 1989 SC 915, CIT v. Sir Sobha Singh Public Charitable Trust [2001] 250 ITR 475 (Delhi), Anand Charitable Trust v. Commissioner of Wealth-tax [2002] 123 Taxman 494 (Delhi), Director of Income tax v. Alarippu (2000) 111 TAXMAN 511 (Delhi), Director of Income tax v. Acme Educational society (2010) 326 ITR 146 (Delhi), CIT v. Aloo Investment Co. Pvt. Ltd. [1979] 1 Taxman 433 (Bom.), and Third Income-tax Officer v. Jhaverbhai Patel Ch. Trust [1992] 43 ITD 195 (Bom.) it cannot be said that the assessee invested the amounts and committed violation within the meaning of section 13 (1) (d) of the Act. Further, whatever may be stage, the observations of the Hon’ble Delhi High Court in assessee’s own case, to the effect that the amounts in question were deposited with the BARC not by way of investment or choice, but on account of a Central government policy, can not be ignored.
13. For the reasons recorded in the preceding paragraphs, we are of the considered opinion that the findings of the Ld. CIT(A) do not suffer any illegality or irregularity so as to invite any interference by the Tribunal. Since we confirm the finding of the Ld. CIT(A) that there was no violation committed by the assessee within the meaning of the provisions under section 11 (5) of the Act read with section 13 (1) (d) of the Act we deem it not necessary to refer to the alternative pleas of the assessee. Consequently, we declined to interfere with the findings of the Ld. CIT(A).
14. Insofar as the other grounds are concerned, undoubtedly, they are consequential in nature and in view of our finding on the substantial ground as to the applicability of 11 (5) read with sectionl3 (1) (d) of the Act, we find it just and necessary to confirm the findings of the Ld. CIT(A) on those grounds also.
15. In the result, appeals of the Revenue are dismissed.”
5. Similar view was taken in assessment year 2015-16 by this tribunal in ITA No. 5589 /Del/ 2018 dated 8-9-2022 in favour of the assessee. Further, the Honble Delhi High Court vide order dated 20-3-2025 for assessment year 2014-15 decided the very same issue in favour of the assessee in ITA 469 of 2023. Pursuant to the orders of the of this tribunal and the order of the Hon’ble Delhi High Court wherein it was held that the investment made in BARC could not be construed as violation of section 11(5) read with section 13(1)(d) of the Act, accordingly, we hold that the action of the Learned AO in disallowing the claim of exemption under section 11 of the Act on this count has been rightly deleted by the Learned CITA. Accordingly, the Ground No. 1 raised by the revenue is dismissed.
6. The Ground No.2 raised by the Revenue is challenging the action of the Learned CITA in allowing the assessee’s claim for application of income on account of provision for doubtful debts, payment of gratuity and leave encashment by stating that the same is consequential in nature pursuant to allowing the benefit of exemption under section 11 of the Act.
7. We have heard the rival submissions and perused the materials available on record. It is not in dispute that assessee had claimed provision for doubtful debts, payment of gratuity and leave encashment as an application of income while claiming exemption under section 11 of the Act in the return. The Learned AO had sought to address the issue of allowability of the same as an application of income by stating that assessee is not entitled to claim of exemption under section 11 of the Act per se due to violation of provisions of section 11(5) read with section 13(1)(d) of the Act. Accordingly, the allowability of these expenditure as a deduction / application was not at all independently adjudicated by the Learned AO. The Learned CITA merely granted relief by stating that the allowability of the same would be consequential in nature pursuant to allowing the main ground of claim of exemption under section 11 of the Act. We have already held that assessee would be entitled for claim of exemption under section 11 of the Act by endorsing the view of the Learned CITA in that regard. However, with regard to availability of application of income for provision for doubtful debts, leave encashment and gratuity, the same had to be independently tested as per the provisions applicable for those issues in accordance with law. Hence, in the interest of justice and fair play, we deem it fit and appropriate to restore this issue alone to the file of Learned AO for de novo adjudication in accordance with law and in the light of our decision to allow the claim of exemption under section 11 of the Act for the Ground No. 1 raised by the revenue. With these observations, the Ground No. 2 raised by the revenue is allowed for statistical purposes.
8. In the result, the appeal of the revenue is partly allowed for statistical purposes.
Order pronounced in the open court on 08/07/2026.
