2021 (3) TMI 1355 - AT - Income Tax

Exemption u/s 11 12 - charitable activity u/s 2(15) - assessee is carrying on the activities of medical relief for eradication and education of HIV AIDS patients - Whether the activity of the Assessee did not cease to be a charitable acitivity for the purposes of Section 2(15) because the Assessee charged a management fee for defraying its administrative expenses? - HELD THAT - As decided in own case 2019 (7) TMI 1448 - DELHI HIGH COURT assessee is a company registered under Section 25 of the Companies Act. It gives 85% of the donation received by it to the Government of India for HIV Aids and only 15% of its total donation is given to other societies for awareness and treatment of poor HIV Patients. The entire amount spent by the Assessee is through societies and trusts. It also runs its own project for the welfare of HIV and AIDS patients. In the above circumstances it has been held that merely because the Assessee charges management fees to defray the administrative costs it would not make its essential activity a business activity.- Decided against revenue.

Summary

Issues:
- Appeal by Revenue against CIT(A) orders for assessment years 2013-14 and 2014-15.
- Whether activities of the society were commercial in nature despite charitable objects.
- Allowance of exemption under sections 11 & 12 of the Income Tax Act.

Analysis:
1. Identical Issues in Appeals: The Tribunal heard two separate appeals by the Revenue against CIT(A) orders for different assessment years but involving identical issues. The grievances raised by the Revenue primarily focused on the alleged commercial nature of the society's activities despite its charitable objectives and the allowance of exemptions under sections 11 & 12 of the Income Tax Act.

2. Precedent and Legal Position: The counsel for the assessee highlighted settled precedents in favor of the assessee, citing specific Tribunal decisions for assessment year 2010-11. The Tribunal noted that the Hon'ble High Court of Delhi had not interfered with the Tribunal's decision, emphasizing the absence of any supporting decisions in favor of the Revenue.

3. Consideration of Authorities' Orders: Upon careful consideration of the lower authorities' orders, the Tribunal found merit in the counsel's contentions. The Tribunal referred to the Tribunal's findings for assessment year 2010-11, emphasizing the charitable nature of the society's activities aimed at HIV/AIDS relief and prevention, which were considered as falling under medical relief, a category of charitable purpose.

4. High Court Decision: The matter was elevated to the Hon'ble High Court of Delhi, which upheld the Tribunal's decision for assessment year 2010-11. The High Court concurred with the Tribunal's view that charging a management fee to cover administrative costs did not alter the essential charitable nature of the society's activities, particularly in the context of HIV/AIDS relief efforts.

5. Final Disposition: In light of the High Court's decision and the established legal position, both appeals by the Revenue were dismissed. The Tribunal pronounced the order on 22/03/2021, affirming the allowance of exemptions under sections 11 & 12 of the Income Tax Act for the assessee, based on the charitable nature of its activities focused on medical relief for HIV/AIDS patients.

By relying on established precedents, legal interpretations, and the specific charitable objectives of the society, the Tribunal upheld the CIT(A)'s orders, emphasizing the charitable nature of the society's activities despite any ancillary commercial aspects related to managing administrative expenses.