SASHA ASSOCIATION FOR CRAFT PRODUCERS, KOLKATA,KOLKATA V. I.T.O., WARD - 1(3), EXEMPTION, KOLKATA, KOLKATA

ITA 1259/KOL/2024

AI Insights

The case involves Sasha Association for Craft Producers, a society engaged in charitable activities such as providing relief to farmers and artisans, which was assessed for income tax and denied exemption under section 11 by the Assessing Officer. The Tribunal had to decide whether the society's activities, which included commercial elements, disqualified it from exemption under section 11. The Tribunal referenced previous decisions in similar cases and the CBDT's Circular No.11/2008, which clarified that activities providing relief to the poor could still be considered charitable even if they involved some commercial activities, provided these were incidental and separate books were maintained. The Tribunal concluded that the society's activities did meet the criteria for exemption under section 11.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 474484 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2017-2018
• Other Referred Cases: Collector Land Acquisition Vs. MST Katiji (1987) 167 ITR 471 SC
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAPIL MONDAL
• Assessee Lawyers: SUNIL SURANA; SETTING ASIDE
• Keywords: Reasonable cause; Gift; Charitable institution
• Section: 143(3); 119; 11; 12A; 12; 10(23C)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES “SMC”, KOLKATA BEFORE DR.MANISH BORAD, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.1259/KOL/2024 Assessment Year : 2017-18 Sasha Association for Craft Producers, 1C, Chatu Babu Lane, CIT Road, Kolkata – 700014 West Bengal PAN : AABTS5580N V/s ITO, Ward-1(3), Exempt, Kolkata Appellant Respondent आदेश / ORDER PER DR. MANISH BORAD, ACCOUNTANT MEMBER : The captioned appeal pertaining to Assessment Year 2017- 18 at the instance of assessee is directed against the order dated 05.08.2023 passed by National Faceless Appeal Centre, Delhi u/s.250 of the Income-tax Act, 1961 (in short ‘the Act’) which in turn is arising out of Assessment Order dated 30.12.2019 passed u/s. 143(3) of the Act. 2. At the outset, Ld. Counsel for the assessee submitted that the appeal is time barred by 243 days before the Tribunal. He referred to the condonation petition filed by the Executive Director of the assessee society and submitted that the assessee society has not received any mail or SMS. It was only on 29.05.2024 that the assessee society came to know that the Assessee by : Shri Sunil Surana, AR Revenue by : Shri Kapil Mondal, Addl. CIT Date of hearing : 26.11.2024 Date of pronouncement : 05.02.2025 ITA No.1259/Kol/2024 Sasha Association for Craft Producers order u/s.250 of the Act has been passed by the ld.CIT(A). The delay if any caused was beyond the control of assessee. In the backdrop of these facts, the Ld. Counsel for the assessee prayed for condoning the delay. 3. I have carefully gone through the averments made in the condonation petition and find that there was ‘reasonable cause’ which prevented the assessee in filing the appeal within the stipulated time. Therefore, the delay of 243 days in preferring the appeal before the Tribunal is condoned by virtue of decision of Hon’ble Supreme Court in the case of Collector Land Acquisition Vs. MST Katiji (1987) 167 ITR 471 SC and proceed for adjudication of the appeal. 4. Facts of the case in brief are that the assessee is a Society established in the year 1988 and duly registered with the Registrar or Societies West Bengal. It is engaged in public charitable activities providing relief to the farmers, poor, destitute and handicapped children education. Return for the A.Y. 2017-18 was filed on 31.10.2017 declaring Nil income claiming exemption u/s.11 of the Act. The assessee was granted registration u/s.12A of the Act on 28.11.1990. The case selected for scrutiny for examination of activities of the assessee as the same were found to be business/commercial in nature and statutory notices u/s.143(2)/142(1) of the Act were served on the assessee. The Assessing Officer noticed that the assessee society made export of handicraft products and sold such products domestically as well through retail outlets. Ld. AO asked the assessee to produce the relevant documents explaining the activities of the assessee and the assessee furnished the requisite details and relied on the orders of Tribunal for the Assessment Years 2009-10 to 2012-13 wherein ITA No.1259/Kol/2024 Sasha Association for Craft Producers the exemption u/s.11 of the Act was allowed to the assessee. However, ld. AO was not satisfied with the submissions advanced by the assessee society and assessed the income of the assessee at Rs.34,81,240/- as the activities of the assessee are carried out on commercial lines. 5. Aggrieved assessee preferred appeal before the ld.CIT(A) and the ld.CIT(A) confirmed the action of the AO. 6. Now the assessee is in appeal before the Tribunal assailing the impugned order passed by the ld.CIT(A). 7. On merits of the case, Ld. Counsel for the assessee submitted that the case of the assessee society is squarely covered by the decisions of the Tribunal in assessee’s own case as the Tribunal for the preceding years, namely Assessment Years. 2008-09, 2009-10, 2010-11 and subsequent assessment year 2018-19 and has allowed the exemption u/s.11 of the Act to the assessee. He therefore, submitted that the impugned order be set-aside. 8. On the other hand, ld. DR supported the orders of the authorities below. 9. I have heard the rival submissions and perused the record placed before me. The solitary issue in the instant appeal is whether the authorities below were justified in denying exemption u/s.11 of the Act to the assessee society. I have gone through the decisions of the Tribunal passed in assessee’s own case for the Assessment Years 2008-09, 2009-10, 2010-11 and 2018-19 wherein the Tribunal has allowed exemption u/s.11 of the Act to the assessee. The assessment year under consideration is 2017-18. I find the Tribunal in ITA No.980/Kol/2023, dated 22.03.2024 for the A.Y. 2018-19 has ITA No.1259/Kol/2024 Sasha Association for Craft Producers decided the issue in favour of the assessee allowing the assessee’s claim u/s.11 of the Act by observing as under : “4. Aggrieved by the above order, assessee is in appeal before this Tribunal stating that the instant issue in respect of impugned order passed by the ld. CIT(A) by confirming the direction of the AO by treating the activities of the assessee as business or trade, as when the assessee is engaged in charitable activity of giving relief to the poor which were duly accepted by the Department in earlier years and the ld. A/R submitted substantial argument before the Bench placed a copy of the judgment rendered by the Tribunal in assessee’s own case ITA No. 439-441/KOL/2017 in respect of AY 2011-12 & AY 2012-13 where the identical issue involved in which the Department went into appeal before the Tribunal against the order passed by ld. CIT(A) by which treating the assessee for providing relief to the poor by allowing assessee’s claim made u/s 11 of the Act. Ld. A/R brought to our notice by placing the relevant paragraph which are as follows: “We advert to the relevant facts pertaining to the above sole issue. There is no dispute that the assessee-society is registered body with the Registrar of Societies, West Bengal since 18.03.1988. Its objects clauses read as under:- \"3. The objects for which the Society is established are:- deed indicating, it 5% of the mark up on cost of (i) To assist Producers/Artisans working in or with welfare organizations, co-operative and Registered Societies, and others, engaged in cottage and small scale industries to marketing their products using any suitable marketing channel in the country or abroad. (ii) To assist welfare organizations, co-operative societies, Registered Societies, people engaged in cottage and small scale industries in the form of advances, locating suitable raw material sources, design and technical inputs whenever required in order to meet market commitments or requirements; (iii) To arrange exhibition and meals, organize showrooms/sales counter within the Country or abroad for sale, display of products of the producers associated with the society, with or without help of any other organization having similar aims and objectives that of the society or in collaboration with the Government Departments (Central or State) and Semi Government Organisations; (iv) To take over the assets and liabilities of any society working or defunct with objects similar to that of the Society, subject to approval by the members at a special meeting called for the purpose; ITA No.1259/Kol/2024 Sasha Association for Craft Producers (v) To take help/assistance of experts or of any organization for the betterment of the craft products viz design, quality, production and for the economic, social and cultural upliftment of the producers irrespective of caste, creed or sex; (vi) To cooperate and collaborate with national, international and other agencies working with similar and/or allied objectives as this society) preferably on specific projects; (vii) To provide relief to the distressed people during natural calamities viz. famine, drought, flood, earthquake, fire etc. (viii) To receive or accept donations, gifts, grant-in-aid, movable or immovable property from either Central or State Government, Municipalities, Corporation, District and Local Bodies or benevolent person or persons or societies, Trusts, Limited Companies Public or Private, Cooperative body, philanthropic organisations in India or abroad on such terms and conditions as the Managing Committee may consider fit and proper; (ix) To hire, purchase, build, acquire or take on rental or lease any movable and immovable property or exchange any rights and privileges for the purposes of the society; (x) To borrow money with or without security and/or with or without interest that may be required for the purposes of the society; (xi) To invest fund of the society in such manner as the Managing Committee may think fit for the safety and benefit of the society and to convert or change such investments as per decision of the Managing Committee and according to the Acts & Rules of the Government; (xii) To enter into any liability for the purpose of the society and to repay or discharge any debt or liability by mortgage, charge, pledge, hypothecation or assignment of any property of the society in such manner as the Managing Committee deems fit and proper; (xiii) To incorporate and/or grant affiliation to social service societies with objects; similar to any or all of the society and to cooperate financially or otherwise with any person or persons in aid of and in furtherance of such objects; (xiv) the society shall not distribute amongst its members any money in any form at all which the society may have earned as profit and such profits shall be applied solely for the purpose of carrying out the aims and objects of thee society. This shall not, however, prevent payment of remunerations to any person or persons or to any member in return for any Services actually rendered to the society; (xv) To do all other activities that are incidental or conducive to the attainment and furtherance of the aims and objects of the society: ITA No.1259/Kol/2024 Sasha Association for Craft Producers (xvi) To make rules and regulations in connections with the management and control of the society; 4. The income and properties of the society whatsoever derived or obtained shall be applied solely towards the promotion of the objects of the society and no portion thereof shall be paid or divided amongst any of its members by way of profits.\" 4. The assessee applied for its section 12A registration read with 80G of the Act on 03.03.1989 in the prescribed Form 10A. The DIT(E) accepted its registration application vide order dated 27.11.1990 forming part of record before us. There is no dispute between the parties at all that assessee's main activities are to work with the poor, marginal artisans and woman craft producers as well as rendering necessary assistance to them in enterprise development, skills technical upgradation and providing market excess. The Assessing Office has admittedly treated the assessee to be eligible for exemption right up to AY 2007-08, His regular assessment order dated 30.11.2009 to that effect forms part of the paper book at page 27. 5. We now come to the dispute between the parties. The Assessing Officer framed re-assessment/ assessments (supra) in the impugned three assessment years applying section 2(15) (1 proviso) of the Act inter alia on the grounds that its IEC, VAT and CST registration indicated that it is engaged in the business of retailer, exporter and wholesaler of the artisans products concerned having exorbitant profit margin of 35% on production cost (supra), there was no restriction on its membership, the relevant relief of the poor\" clause was nowhere incorporated in its objects and its dissolution clause did not prevent disbursement of profits to trustees and other parties etc. He therefore invoked sections 11, 12 & 13(8) of the Act to disallow assessee's exemption claim. 6. The CIT(A) reverses Assessing Officer's above stated action in his common lower appellate order under challenge. He has first of all considered visuals of the assessee providing all help to a variety of artisan of groups as well as individuals. The said detailed discussion is not reproduced in verbatim for the sake of brevity as it runs into seven pages in lower appellate findings. Learned Departmental Representative is fair enough in not disputing the same during the course of hearing before us. The CIT(A) therefore takes into account CBDT's Circular No.11/2008 making it clear that relief of the \"poor\" in section 2(15) indicates relief to indigent artisans as well. The assessee has therefore succeeded in lower appellate proceedings. 7. We have given our thoughtful consideration to rival contentions. Learned Departmental Representative reiterates Revenue's stand that the assessee has been wrongly held to be cover relief of the poor\" charitable purpose who rather advances objects general public utility leading to exclusives u/s. 2(15) 1st proviso squarely applicable in its case as it has been carrying out the activities concerned in the nature trade, commerce or ITA No.1259/Kol/2024 Sasha Association for Craft Producers business only. We find no merit in Revenue's instant sole substantive ground. The Board's circular (supra) hereinabove makes it sufficiently clear that the former category \"relief of the poor\" includes within its ambit any purpose such as relief to indigent artisans as under:- \"EXEMPIIO UNDER SECTION 11 IN CASE OF ASSESSEE CLAIMING BOTH TO BE CHARITABLE INSTITUTIONS AS WELL AS MUTUAL ORGANISATINS CIRCULAR NO. I1/2008, DATED 19-12-2008 Definition of Charitable purpose under section 2(15) of the Income-tax Act, 1961. Section 2(15) of the Income Tax Act, 1961 (Act') defines \"charitable purpose\" to include the following.:- (i) Relief of the poor (ii) Education (iii) Medical relief and (iv) the advancement of any other object of general public utility. An entry with a charitable object of the above nature was eligible for exemption from tax under section 11 or alternatively under section 10(23C) of the Act. However, it was seen that a number of entities who were engaged in commercial activities were also claiming exemption on the ground that such activities were for the advancement of objects of general public utility in terms of the fourth limb of the definition of charitable purpose'. Therefore, section 2(15) was amended vide Finance Act, 2008 by adding a proviso which states that the advancement of any other object of general public utility' shall not be a charitable purpose if it involves the carrying on of (a) any activity in the nature of trade, commerce or business; or (b) any activity of rendering any service in relation to business; for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention of the income from such activity. 2. The following implications arise from this amendment 2.1 The newly inserted proviso to section 2(15) will not apply in respect of the first three limbs of section 2(15), i.e., relief of the poor, education or medical relief. Consequently, where the purpose of a trust or institution is relief of the poor, education or medical relief it will constitute 'charitable purpose' even if it incidentally involves the carrying on of commercial activities. 2.2 Relief of the poor' encompasses a wide range of objects for the welfare of the economically and socially disadvantaged or needy. It will, therefore, include within its ambit purposes such as relief to destitute, orphans or the handicapped, disadvantaged women or children, small and marginal farmers, ITA No.1259/Kol/2024 Sasha Association for Craft Producers indigent artisans or senior citizens in need of aid, Entities who have these objects will continue to be eligible for exemption even if they incidentally carry on a commercial activity, subject, however, to the conditions stipulated under section 11(44) or the seventh proviso to section 10(23C) which are that (i) the business should be incidental to the attainment of the objects of the entity, and ii) separate books of account should be maintained in respect of such business. Similar entities whose object is 'education ' or 'medical relief' would also continue to be eligible for exemption as charitable institutions even if they incidentally carry on account of commercial activity subject to the conditions mentioned above. Learned Departmental Representative fails to rebut the fact that Assessing Officer has himself accepted the assessee to have been working with poor, marginal artisans and women crafts producers assisting them in enterprise development, skills and technical upgradation as well as in providing them market access for their corresponding products. It is in this backdrop of facts that we observe the assessee to be covered under the specified category of relief of the poor\" as per Board's beneficial circular issued us 119 of the Act. We therefore adopt judicial consistency to conclude that the Revenue's instant sole grievance deserves to be rejected. The CIT(A)'s common order under challenge in all these three appeals is affirmed. 8. These three Revenue's appeals are accordingly dismissed.” 5. on the other hand, ld. D/R supported the decisions rendered by the ld. CIT(A) while passing the impugned order stating that the appeal of the assessee shall be liable to be dismissed. 6. We, after going through the fact of the case and perusing the material available in the record and also considering the judgment rendered by the Tribunal in the case of the assessee where claim of the assessee was allowed by the Tribunal by dismissing the Revenue’s appeal in ITA No. 439- 441/KOL/2017 treating the assessee for providing relief to the poor by allowing assessee’s claim made u/s 11 of the Act. Accordingly, applying the same ratio rendered by this Tribunal, we allow the instant appeal of the assessee by setting aside the order passed by the authorities below and direct the AO to allow the claim of the assessee in terms of our above direction.” 10. Ld. Departmental Revenue could not rebut the above position and in the absence of anything contrary to the view taken by the Tribunal in assessee’s own case, I hold that the assessee is entitled to claim exemption u/s.11 of the Act. Grounds of appeal raised by the assessee are allowed. ITA No.1259/Kol/2024 Sasha Association for Craft Producers 11. In the result, the appeal of the assessee is allowed. Order pronounced on this 05th day of February, 2025. - Sd/- (MANISH BORAD) ACCOUNTANT MEMBER पुणे/Pune; \u0001दनांक / Dated : 05th February, 2025 Satish आदेश क\u0002 \u0003ितिलिप अ\tेिषत / Copy of the Order forwarded to : 1. अपीलाथ\u0007 / The Appellant. 2. \b\tयथ\u0007 / The Respondent. 3. The Pr. CIT concerned. 4. िवभागीय \bितिनिध, आयकर अपीलीय अिधकरण, “(SMC)” ब\u0010च, Kolkata/ DR, ITAT, “(SMC)” Bench, Kolkata. 5. गाड\u0014 फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Assistant Registrar, ITAT, Kolkata "