JCIT (OSD) Vs Jalandhar Improvement Trust (ITAT Chandigarh)
The Revenue filed an appeal before the Income Tax Appellate Tribunal against the order of the Commissioner of Income Tax (Appeals) dated 12 January 2018 for assessment year 2014–15. Although multiple grounds were raised, the dispute centered on a single issue: whether the assessee trust qualified as a “charitable institution” and was entitled to exemption under Sections 11 and 12 of the Income Tax Act.
The assessee had filed its return of income on 29 September 2014. The case was selected for scrutiny, and a notice under Section 143(2) was issued on 24 September 2015. The Assessing Officer held that, following amendments to the definition of “charitable purpose” introduced by the Finance Acts of 2009 and 2010 with effect from assessment year 2009–10, the assessee was not engaged in charitable activities. According to the Assessing Officer, the trust was carrying on business activities such as sale of plots and development of sites. Despite detailed submissions by the assessee, the Assessing Officer rejected its explanations, treated the trust as an association of persons, and denied exemption under Section 11.
The assessee challenged this decision before the Commissioner of Income Tax (Appeals). The appellate authority examined the assessment order, submissions, and judicial precedents relied upon by the assessee. It was noted that the Assessing Officer’s primary reasoning was that the nature of receipts indicated business activity, thereby attracting the proviso to Section 2(15) of the Act. The Commissioner, however, accepted the assessee’s contention that its objects were charitable in nature, as previously recognized by judicial authorities, including the Punjab & Haryana High Court in the case of a similarly placed improvement trust.
