Sec. 11 Relief Can’t Be Denied Without Assessing If Assessee’s Activities Were Trade, Commerce, or Business-Related

Case Details: Media Research Users Council vs. Asst. Director of Income Tax - [2023] 157 taxmann.com 470 (Mumbai-Trib.)

Judiciary and Counsel Details

• • Amit Shukla, Judicial Member & Gagan Goyal, Accountant Member
  • P. Pardiwala, Niraj Sheth & Gunjan Kakkad for the Appellant.
  • Smt Mahita Nair for the Respondent.

Facts of the Case

Assessee, registered under Section 12AB, falls within the “advancement of any other object of general public utility” category. It primarily conducted surveys/research into readership, viewership and listenership of various media and dissemination of research to various members and non-members who were basically industrial business entities. Assessee outsourced research to outside agencies who prepared Indian Readership Survey (IRS) reports, sold to subscribers members and non-members at slightly higher prices.

During the assessment proceedings, the Assessing Officer (AO) contended that the second proviso to Section 2(15) provides that if the aggregate value of the receipts from the activities exceeds the limit prescribed therein, then where the object is any other object of general public utility, it shall not be a charitable purpose. Accordingly, the AO denied the exemption under section 11.

The matter reached the Mumbai Tribunal.

ITAT Held

The Tribunal held that the issue before us was that if all the receipts are from one activity only, for which trust has been granted registration, then the threshold limit would still be applicable.? In our view, this cannot be the true purpose of the section or the judgment of the Hon’ble Supreme Court delivered in the case of Ahmedabad Urban Development Authority [2022] 144 taxmann.com 78 (SC),

If one interprets that benefits are only granted in a year when receipts for the registered general public utility (GPU) activity are below the threshold limit, it undermines the intent of Section 2(15) for trusts or bodies with GPU as their primary objective.

Before deciding the issue, it is incumbent whether the assessee generating revenue from the activities for which it has been granted status of charitable nature falls within the main section 2(15) itself or its activities are hit by proviso has not been discussed by the authorities below.

Lower authorities merely rejected the claim under section 11 as receipts exceeded the prescribed limit. Therefore, the matter was to be remanded back to AO.