9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (4) TMI 397 - HC - Income TaxExemption u/s 11 and 12 - Whether ITAT was not justified in allowing exemption under Sections 11 and 12 to the assessee, when the actual work of the assessee is to receive and simply transfer grants to other NGOs and the assessee is found to be charging service charges from its donor in various forms like management fee, etc. for execution of projects? - HELD THAT - Admittedly, the present case is covered by the decision passed by learned predecessor Division Bench of this Court in assessee s own case for the Assessment Year 2010-11 in CIT (Exemption), Delhi vs. M/s India HIV/AIDS Alliance 2019 (1) TMI 1268 - ITAT DELHI as held 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 - No substantial question of law arises.
Issues:
Challenge to orders passed by Income Tax Appellate Tribunal regarding exemption under Sections 11 and 12 of the Income Tax Act, 1961 for Assessment Years 2013-14 & 2014-15. Justification of exemption for an entity involved in receiving and transferring grants to other NGOs while charging service fees. Determination of whether the activity of the entity is charitable despite yielding commercial income. Analysis: The appellant challenged the orders of the Income Tax Appellate Tribunal (ITAT) for the Assessment Years 2013-14 & 2014-15, arguing against the exemption granted under Sections 11 and 12 of the Income Tax Act, 1961. The appellant contended that the ITAT erred in allowing the exemption to an entity that primarily received and transferred grants to other NGOs while also levying service charges, such as management fees, from donors for project execution. This raised the question of the charitable nature of the entity's activities, considering the commercial income generated. The High Court referred to a previous decision in a similar case for the Assessment Year 2010-11 involving the same entity, where it was established that charging a management fee to cover administrative expenses did not alter the charitable nature of the entity's activities. The Court noted that the entity allocated a significant portion of donations to the Government for HIV/AIDS purposes and ran projects for the welfare of affected individuals. Despite charging management fees, the core activities were deemed charitable, as the essential purpose was not profit-making but social welfare. Given the precedent set by the earlier decision, the High Court found no substantial question of law to be considered in the present appeals. The Court emphasized that the issues raised were already addressed and resolved in the prior judgment, leading to the dismissal of the current appeal. Consequently, the appellant's challenge to the ITAT's orders regarding exemption under Sections 11 and 12 of the Income Tax Act, 1961 for the relevant Assessment Years was not upheld, as the activities of the entity were deemed charitable despite the commercial aspects involved.
|
