2016 (4) TMI 1003 - AT - Income Tax

Object of Trust - scope of section 2(15) of the Income Tax Act Addition on account of surplus generated from Premwati Cafeteria - Held that - The pre-dominant objects and the vision make it clear that the main object of the assessee is to provide medical relief, impart education to the society at large and relief to the poor. Hence, the proviso to Section 2(15) does not apply to the facts of the assessee s case. In our opinion, the proviso is an exception to the main section, the definition of the charitable purpose has been given in sub-Section (15) of Section 2 of the Act, which is an inclusive definition and includes relief to the poor, education and medical relief. The assessee is also providing medical relief to the society at large and the registration u/s 12A of the Act has been allowed to the assessee vide order of DIT(E) Delhi dated 28.07.2006, the assessee trust is also having approval u/s 80G(5)(vi) of the Act vide order dated 27.09.2006. In the present case, the AO was of the view that the sales of the Cafeteria Premwati were in the nature of commercial receipts in the course of advancement of any other objects of public utility as laid down in the proviso to Section 2(15) of the Act and not were the receipts within the meaning of Section 11(4A) of the Act. However, nothing is brought on record to substantiate that the income generated from the said Cafeteria was not utilized by the assessee for achievement of the main objects i.e. to provide medical relief to the poor or to impart the education The property held under trust includes business undertaking, so held, and if the business is incidental to the attainment of the objectives of the trust and separate books of accounts are maintained by such trust or institution in respect of such business then also the income is exempt so long as the business carried on by the trust; is incidental to the attainment of main object which is charitable in nature. In the present case also nowhere it is established that the income earned by the assessee trust was not used for attainment of the main object or it was used elsewhere. Therefore, the addition made by the AO was not justified and the ld. CIT(A) rightly deleted the same. See Divya Yog Mandir Trust Vs JCIT 2013 (10) TMI 211 - ITAT DELHI - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of addition of ?46,43,003/- made by the AO on account of surplus generated from Premwati Cafeteria.
2. Applicability of the amended provisions of Section 2(15) of the Income Tax Act.
3. Whether running of the cafeteria is incidental to the main object of providing relief to the poor.

Detailed Analysis:

1. Deletion of Addition of ?46,43,003/-:
The primary issue in this appeal is the deletion of the addition of ?46,43,003/- made by the Assessing Officer (AO) due to surplus generated from Premwati Cafeteria. The AO considered this surplus as commercial income and not charitable. The CIT(A) deleted the addition, holding that the activities of the trust fell under the first and third limbs of Section 2(15) of the Act, i.e., relief of the poor and medical relief.

2. Applicability of Amended Provisions of Section 2(15):
The AO argued that the activities of the trust, specifically running the cafeteria, fell under the fourth limb of Section 2(15) of the Act, which pertains to the advancement of any other object of general public utility. The AO contended that since the cafeteria generated income, it should be considered a commercial activity. However, the CIT(A) and the Tribunal found that the trust's activities were primarily for the relief of the poor and medical relief, which are explicitly charitable purposes under the first three limbs of Section 2(15). The Tribunal referenced Circular No. 11/2008, which clarifies that the proviso to Section 2(15) does not apply to trusts engaged in relief of the poor, education, or medical relief, even if they incidentally involve commercial activities.

3. Running of Cafeteria as Incidental to Main Object:
The trust argued that running the cafeteria was incidental to its main charitable objectives, specifically providing medical relief to the poor. The cafeteria was established to provide hygienic vegetarian food to visitors of the Akshardham complex, with surplus funds used exclusively for the trust's charitable activities. The Tribunal noted that the trust maintained separate books of accounts for the cafeteria, as required under Section 11(4A) of the Act. The Tribunal held that the cafeteria's operations were incidental to the trust's primary charitable objectives and that the income generated was used for charitable purposes, thus qualifying for exemption under Section 11.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to delete the addition made by the AO, concluding that the trust's activities were charitable in nature and that the surplus generated from the cafeteria was incidental to its main charitable objectives. The appeal by the department was dismissed.