2015 (3) TMI 445 - AT - Income Tax

Charitable activity u/s 2(15) - Exemption available u/s 11 and u/s 80G - assessee involved in technical support, training, research and reserves material related to participatory development since its inception - Assessing Officer opined that the assessee involves carrying on activities in the nature of running services in relation to trade, commerce or business as applicable in providing consultancy workshop training program, conducting research on behalf of other agency, hence, it does not deserve any relief - non-approval of continuance of exemption under section 80G(5)(vi)- Held that - Activities of the assessee can in no way be covered in trade, commerce etc. as it is not charging any fee from the beneficiaries who are poor communities. It is also worth noting that the NGOs who have engaged the assessee are itself charitable institutions like WHO, UNICEF etc. and they ensure that the grant etc. given to the assessee are fully utilized only for the purpose of charitable activities and not for any business. The assessee did not have any receipt in excess of expenditure during the year. The books of account clearly show that no amount of current receipt or out of unutilized receipt of the past has been treated as profit in the sense it would be treated, had it been a business and that no amount has ever been given to any member of the board of the society or any member of the assessee society except the reimbursement of expenses incurred in connection with the board s meeting. It is also not the case of the department that any part of profit or gain shown as receipt over expenditure has been transferred to any member of the society. Thus, the activity of the assessee society is certainly not for making profit and it is certainly not in the nature of any trade, business or commerce, so as to be headed by the first proviso to sec. 2(15) of the Act even if it is treated as advancement of any general public utility. The activities as discussed hereinabove of the present assessee cannot be held to be engaged in the activity of advancement of any other object of general public utility. The activities carried on by the assessee cannot be said to be beyond its main aims and objects and it is also an undisputed fact that the assessee society continued to enjoy registration under sec. 12A of the Act as a charitable trust and that the charitable purpose for which the assessee society was established remained unchanged. Under the circumstances, we while setting aside the first appellate order as well as order of the learned DIT(E) direct the Assessing Officer to allow the assessee the claimed exemption under sec. 11(12) of the Act and the ld. DIT(E) is directed to allow the application of the assessee for continuance of the approval granted under sec. 80G(5)(vi) of the Income-tax Act, 1961. - Decided in favour of assessee.

Summary

Issues Involved:
1. Non-approval of continuance of exemption under section 80G(5)(vi) of the Income-tax Act, 1961.
2. Denial of exemption available under section 11 of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Non-approval of Continuance of Exemption under Section 80G(5)(vi):
The assessee, a society registered under the Societies Registration Act, 1861 and under section 12AA of the Income-tax Act, 1961, had been granted approval under section 80G(5)(vi) of the Act. The Learned CIT(Appeals) upheld the Assessing Officer's view that the assessee's activities fell under the "advancement of general public utility" as defined in the 6th limb of Section 2(15) of the Income-tax Act, 1961. The authorities below concluded that the assessee was involved in activities in the nature of trade, commerce, or business by providing consultancy, workshop training programs, and conducting research on behalf of other agencies. Consequently, the approval for exemption under section 80G(5)(vi) was not continued.

2. Denial of Exemption under Section 11:
The assessee argued that its activities were charitable in nature, falling under the categories of relief of the poor, education, and medical relief. The assessee provided evidence that it was engaged in charitable activities for NGOs like UNICEF, Helppage India, ILO, Save the Children, Care India, and others. The Assessing Officer, however, denied the exemption under sections 11/12, treating the assessee's activities as consultancy services for fees, thus falling under the "advancement of general public utility" and being hit by the first proviso to section 2(15) of the Act.

Arguments and Evidence:
The assessee contended that its activities were fully charitable and complied with the provisions of sections 11/12 of the Income-tax Act, 1961. The society was involved in providing services to destitute, orphans, sex workers, drug addicts, and other disadvantaged groups without charging any fees from the beneficiaries. The expenses were reimbursed by NGOs, and any surplus was refunded back to them. The learned AR referred to various documents, agreements, and CBDT circulars to support the charitable nature of the activities. The AR also cited several judicial precedents to argue that the activities fell under the first three limbs of charitable purposes, namely, relief of the poor, education, and medical relief.

Tribunal's Findings:
The Tribunal examined the nature of the activities undertaken by the assessee, which included planning and conducting capacity-building programs, field visits, community mobilization, and research related to health, education, and social exclusion. The Tribunal found that the activities were charitable and not in the nature of trade, commerce, or business. The NGOs engaging the assessee were themselves charitable institutions, ensuring that the grants were utilized for charitable purposes. The Tribunal noted that the assessee did not have any receipts in excess of expenditure and that no profits were distributed to any members of the society.

Conclusion:
The Tribunal held that the activities of the assessee were charitable and fell within the first three limbs of charitable purposes as defined in section 2(15) of the Act. The activities did not involve trade, commerce, or business, nor did they render any service in relation to trade, commerce, or business for a fee. The Tribunal set aside the orders of the lower authorities and directed the Assessing Officer to allow the claimed exemption under sections 11/12 of the Act. The DIT(E) was directed to allow the application for continuance of the approval granted under section 80G(5)(vi) of the Income-tax Act, 1961.

Decision:
The appeals were allowed in favor of the assessee, with the Tribunal directing the authorities to grant the claimed exemptions and continue the approval under section 80G(5)(vi).

Decision pronounced in the open court on 09.01.2015.