2015 (10) TMI 1013 - HC - Income Tax

Entitlement to exemption under Sections 11 and 12 - whether the activities of the Assessee would fall within the scope of general public utility under Section 2 (15)? - ITAT allowed the claim - Held that - The ITAT has returned a factual finding, after analysing the documents on record, that the activities of the Assessee can in no way be termed as trade and commerce etc. as it is not charging any fee from the beneficiaries who belong to the poor communities. The ITAT also noted that the NGOs like the WHO, UNICEF etc. which have engaged the Assessee are themselves charitable instructions. They ensure that the grants given to the Assessee are utilized for the purpose of charitable activities and not for any business. The consultants fees were also paid out of such grants. Further, the Revenue was not able to show that any part of the profit or gains has been transferred to any member of the Assessee society. - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of 'general public utility' under Section 2(15) of the Income Tax Act, 1961.
2. Entitlement to exemption under Sections 11 and 12 of the Act for a society providing relief services to the poor.

Analysis:
1. The appeal before the Delhi High Court revolved around the interpretation of the term 'general public utility' under Section 2(15) of the Income Tax Act, 1961. The Assessee, a society registered under the Societies Registration Act and Section 12A of the Act, was granted approval under Section 80G(5)(vi) for providing services of relief to the poor, education, and medical relief. The key question was whether the activities of the Assessee fell within the scope of 'general public utility' and whether the Assessee was entitled to exemption under Sections 11 and 12 of the Act.

2. The Income Tax Appellate Tribunal (ITAT) had conducted a detailed analysis of the documents on record and found that the Assessee's activities did not amount to trade or commerce, as it did not charge any fee from the beneficiaries who were from poor communities. The ITAT also noted that organizations like WHO and UNICEF, which engaged the Assessee, were charitable institutions ensuring that grants were used for charitable activities. Consultants' fees were paid from these grants, and the Revenue failed to demonstrate any profit transfer to members of the Assessee society. Consequently, the Court, based on these factual findings, concluded that no substantial question of law arose from the ITAT's order, dismissing the appeal by the Revenue under Section 260A of the Income Tax Act, 1961.

In summary, the judgment clarified the interpretation of 'general public utility' for a society providing relief services to the poor under Sections 11 and 12 of the Income Tax Act, 1961. The decision highlighted the importance of factual findings and the absence of profit transfer in determining eligibility for tax exemption, ultimately leading to the dismissal of the Revenue's appeal.