INCOME TAX ACT, 1961

Section 26(15), Proviso Section 11

Charitable trust - Exemption under section 11 - Applicability of proviso to section 2(15) - Main object of trust to provide credit insurance cover to Indian Exporters -- Received policy premium and paid claims to export parties

Assessee was a trust registered under section 12AA and its object was to promote exports from India and to protect payment risks for transactions for which ECGC was unable to provide cover owing to lack of capacity or commercial consideration. Assessee also aimed at meeting the cost of insurance which ECGC would levy for project exports in certain circumstances. AO noticed that assessee had received policy premium from three entities and paid claims to various export parties. Accordingly, AO took the view that proviso to section 2(15) got attracted to assessee's case and it was not entitled for exemption under section 11.Held: Primary and dominant object of assessee-trust was to provide credit insurance cover to Indian Exporters in accordance with schemes formulated by Govt. of India. Ministry of Commerce, Govt. of India, was the settler of Trust and Trust was not empowered to carry out any other activity. Since main object of assessee was not to earn profit, proviso to section 2(15) did not get attracted on account of mere receipt of policy premium and, therefore, no exemption could be denied to assessee under section 11.

Followed:India Trade Promotion Orgaization v. DGIT(E), 2015 Taxman.com 404 (Del) : 2015 TaxPub(DT) 0623 (Del-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2011-12 & 2012-13

INCOME TAX ACT, 1961

Section 4

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