2023 (9) TMI 1536 - AT - Income Tax

Exemption u/s 11 - Charitable activity or not? - whether the assessee is a charitable trust within the meaning of section 2(15) of the Act in order to entitle the assessee to claim exemption of its income earned from its activities ? - HELD THAT - We have also gone through the order of the ITAT passed in the assessee s own case for earlier years on the similar issue, which has not been disputed by the assessee either. We also noted that the grounds raised in the earlier years are also similarly worded. Therefore, looking to the similarity of the issue on hand i.e. whether the activities carried out by the assessee is a charitable as defined in the first limb of section 2(15), and whether the activities related to general public utility services as defined in the last proviso of the said section, we apply the decision of the ITAT in the case of the assessee for the earlier year 2023 (3) TMI 920 - ITAT AHMEDABAD in which the Accountant Member herein was also a party), where after detailed discussion made on the issue in the light of various judgments including that of the Hon ble Apex Court, it has been held that the activities of the assessee qualify as general public utility activities. The ITAT also restored the issue to the AO to determine whether these general public utility activities are commercial in nature in the light of the directions laid down by the Hon ble Apex Court in this regard in the case of Ahmedabad Urban Development authority 2022 (10) TMI 948 - SUPREME COURT Thus, no infirmity in the impugned order of the CIT(A), holding the activities of the assessee as qualifying as general public utility activities, which we uphold. The issue is further restored back to the AO to decide the commercial nature of the activities in accordance with the direction given by the ITAT in the earlier years. Appeal of the assessee is partly allowed for statistical purposes.

Issues Involved:
1. Delay in filing the appeal.
2. Denial of exemption under Section 11 of the Income Tax Act, 1961.
3. Determination of whether the activities qualify as "charitable" under Section 2(15) of the Act.
4. Determination of whether the activities are commercial in nature.

Detailed Analysis:

1. Delay in Filing the Appeal:
The appeal filed by the assessee was time-barred by 178 days. The assessee explained the delay was due to bureaucratic issues, such as frequent changes/transfers of officers and staff, and changes in counsel. The Tribunal found these reasons justifiable and not indicative of gross negligence or deliberate inaction. The Tribunal cited several precedents from the Hon'ble Apex Court, recognizing the slow manner of functioning of government departments plagued by red tape. Thus, the delay was condoned in the interest of justice.

2. Denial of Exemption under Section 11:
The primary issue in the appeal was the denial of exemption of income claimed by the assessee under Section 11 of the Act. The denial resulted in an income of Rs. 9,95,43,470/- being subjected to tax. The Tribunal noted that similar issues arose in the assessee's case for the assessment years 2013-14 to 2015-16, where the ITAT had restored the matter back to the AO to determine whether the activities qualified as commercially carried out general public utility activities, following the directions laid down by the Hon'ble Apex Court in ACIT vs Ahmedabad Urban Development Authority (2022) 449 ITR 1(SC).

3. Determination of Whether the Activities Qualify as "Charitable":
The Tribunal examined whether the assessee is a "charitable" trust within the meaning of Section 2(15) of the Act to claim exemption of its income under Sections 11/12. The AO and CIT(A) had held that the activities were in the nature of "advancement of any other object of general public utility" and not "charitable," as they were found to be commercial in nature. The Tribunal referred to the ITAT's decision in the assessee's case for earlier years, which held that the activities were general public utility activities. The Tribunal applied the same decision, holding that the activities qualify as general public utility activities.

4. Determination of Whether the Activities Are Commercial in Nature:
The Tribunal restored the issue back to the AO to determine whether the general public utility activities are commercial in nature, following the guidelines laid down by the Hon'ble Apex Court in the case of ACIT vs Ahmedabad Urban Development Authority (2022) 449 ITR 1(SC). The Tribunal noted that the AO had not determined the commercial nature of the activities in light of these guidelines. Therefore, the matter was sent back to the AO for reconsideration.

Conclusion:
The Tribunal upheld the CIT(A)'s order holding the activities as general public utility activities and restored the issue of their commercial nature back to the AO for reconsideration. The appeal of the assessee was partly allowed for statistical purposes. The order was pronounced in open court on 13th September 2023 at Ahmedabad.

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