ITAT Delhi: Section 11/12 Exemption Allowed as BARC Investment Did Not Violate Section 11(5)

DCIT(E) Vs Indian Broadcasting Foundation (ITAT Delhi)

The Revenue appealed against the CIT(A)’s order dated 05.06.2018 concerning an assessment under Section 143(3) of the Income Tax Act, 1961. The assessee, a not-for-profit company registered under Section 12A, had invested Rs.15 lakh in equity shares of Broadcast Audience Research Council (BARC) and Rs.2.85 crore as share application money.

The Assessing Officer held that these transactions contravened Section 11(5), amounting to a violation under Section 13(1)(d), and denied the assessee the exemptions under Sections 11 and 12. The income was assessed at Rs.6,22,39,580 and taxed at the maximum marginal rate under Section 164(2). The CIT(A) allowed the assessee’s appeal.

Before ITAT, the Revenue challenged the treatment of the BARC transactions as permissible under Section 11(5), relying on the Assessing Officer’s findings. The assessee submitted that the Delhi High Court had observed in its own case that the amounts were deposited with BARC not by way of investment or choice but due to Central Government policy.

ITAT noted that its coordinate bench had already decided the issue on merits for Assessment Years 2013-14 and 2014-15. It had found that BARC was a not-for-profit company established pursuant to TRAI recommendations and Central Government policy, and that the assessee and BARC pursued wider objectives relating to the television industry.