2022 (7) TMI 903 - HC - Income Tax

Exemption u/s 11 - Assessee cannot be treated to be engaged in charitable activities - assessee gets grant from Central and State Government and also donation from the various organization like, 'Gate foundation' etc. - ITAT upheld the decision of the CIT(A) holding that the assessee is not engaged in any trade, commerce or business and thus proviso of section 2(15) is not attracted to the case of the assessee - HELD THAT - This Court in the case of Institute of Chartered Accountants of India and Anr. Vs. Director General of Income Tax (Exemptions), Delhi 2013 (7) TMI 205 - DELHI HIGH COURT with reference to State of Andhra Pradesh Vs. H Abdul Barhi Bros 1964 (4) TMI 75 - SUPREME COURT has observed that merely because a fee or some other consideration is collected or received by an institution, it would not lose its character of having been established for a charitable purpose. Also in the case of PCIT vs Servants of People Society 2021 (11) TMI 684 - DELHI HIGH COURT held that assessee/society does not carry on any business, trade or commerce with the intent of earning and distributing profit. - Decided in favour of assessee.

Summary

Issues:
Challenge to ITAT order regarding charitable activities exemption under Section 11 of the Income Tax Act 1961.

Analysis:
The appeal challenges the ITAT order concerning the exemption under Section 11 of the Income Tax Act 1961. The Appellant argues that the respondent's activities are not charitable in nature, invoking the proviso to section 2(15) of the Act. The Appellant contends that the ITAT erred in directing the Assessing Officer to allow the exemption under Section 11 without considering the nature of the Assessee's activities.

The Assessee is engaged in uplifting the poor and providing training in rural areas, receiving grants from the government and donations from organizations. The Appellant denied the exemption under section 11 for the current assessment year, but the CIT(A) granted the exemption with all benefits. The Revenue appealed to the ITAT, which upheld the CIT(A) decision by determining that the Assessee is not involved in trade, commerce, or business, hence the proviso of section 2(15) does not apply.

The ITAT noted the absence of evidence indicating a profit motive in the Assessee's activities. The Assessee did not charge fees beyond project costs and the donor's supervision did not establish a profit motive. Following the rule of consistency, the ITAT dismissed the Revenue's appeal, emphasizing the Assessee's relief activities for the poor.

The Court referred to precedents emphasizing that collecting fees does not negate charitable purposes. The Assessee running a printing press for charitable purposes was considered not engaged in trade, commerce, or business for profit distribution. The Court agreed with the CIT(A) and ITAT findings that the Assessee did not pursue profit distribution.

The Court found no substantial question of law in the appeal and dismissed it. The judgment highlights the importance of substantial questions of law and the limited scope of High Court interference with lower courts' factual findings.

This detailed analysis provides a comprehensive overview of the judgment's key points, including the arguments, findings, and legal principles applied in the case.