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TMI Blog2023 (12) TMI 1183X X X X Extracts X X X X X X X X Extracts X X X X ..... tifies suitable recipients, who are not the direct beneficiaries of such donation but are usually other trusts who are engaged in conducting charitable activities. The role of the assessee is to identify such genuine organizations / trusts which are engaged in carrying out charitable activities in the form of giving relief to the poor etc. HELD THAT:- The assessee had further given the donation to other trusts for the purpose of carrying out charitable work itself would not disentitle the assessee from denial of exemption. Before us, we observe that it is not the case of the Department that the trusts / organisations to whom the assessee had given the donations for carrying out charitable activities had not in fact carried out any charitable activities in the first instance. Secondly, it would be useful to reproduce the relevant extracts of the decision rendered by Hon ble Supreme Court in the case of the Ahmedabad Urban Development Authority[ 2022 (10) TMI 948 - SUPREME COURT] as held that while carrying out charitable activities, the assessee trust may also collect nominal cost / consideration with the objective to effectuate the carrying out of the charitable activities. How ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Since common issues are under consideration before us, all appeals are taken up together for disposal. 2. Primarily, for all the years under consideration, three issues are involved, for which the Assessee and Department are in appeal, which can be summed up as below: 3. Issue 1: Denying exemption to the assessee under Sections 11 and 12 by invoking Section 13(8) read with the Proviso to Section 2(15) of the Act. This issue arises in all Assessment Years in the assessee s appeals before us (applicable to all Assessment Year for consideration before us where the assessee is in appeal). 4. Issue 2: Whether the CIT(A) was right in allowing depreciation to the Assessee and, if so under what provision was the depreciation to be allowed (relevant to certain Assessment Year 2014-15 where Department is in appeal on this issue) 5. Issue 3: Whether the CIT(A) was right in his conclusions with respect to Ld. Assessing Officer s action of bringing the corpus donation to tax (relevant to Assessment Years 2012-13, 2014-15 and 2015-16, where Revenue is in appeal before us and Assessment Year 2013-14, where the assessee is in appeal before us). 6. Since the appeals filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer for the various years under consideration, was of the view that the assessee is not engaged in charitable activities. The primary observations of the Ld. Assessing Officer can be summed up as under: (i) The Assessee carries on the activity of receiving donations from various donors and passing on the donations as specified by the donor to various organisations. However, as the actual charitable work is not carried on by the Assessee but by the other organisations and therefore, the case of the assessee would fall under the residuary category and therefore would be hit by Section 13(8) of the Act. Alternatively the assessee is not carrying on any activity that can be classified in any of those categories except providing financial support. (ii) The Assessee only acts as a facilitator for arranging funds for various charitable organisations who carry out the actual charitable activities, and the assessee only monitors the utilisation of these funds (iii) With respect to payroll giving, the payers have deducted tax at source for AYs 2010-11 and 2011-12, treating the same as fees for professional services. With respect to listing donations, the listing of the NGO on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, the assessee identifies suitable recipients, who are not the direct beneficiaries of such donation but are usually other trusts who are engaged in conducting charitable activities. The role of the assessee is to identify such genuine organizations / trusts which are engaged in carrying out charitable activities in the form of giving relief to the poor etc. The assessee keeps complete check on the activities carried out by such organizations / trusts to ensure that the money which has been received from donors by the assessee has been utilized for giving relief to the poor i.e. carrying out charitable activities. For this purpose, the assessee keeps a detailed account / takes a detailed report from the donee / recipient organisations to oversee whether the funds have been correctly utilised as per the specifications of the donor. For the above activities, the assessee retains a portion (ranging from 6% to 7%) of the said donations to meet the administrative expenses for carrying out the aforesaid activities of identifying the recipient organizations / trusts, for carrying out check on the activities carried out by such trusts / organisations, to give a report to the donors of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forth. 12. In response, the Ld. DR submitted that the case of the assessee is directly covered by the decision of ITAT the assessee s own case for Assessment Year 2009-10. The appeal against the said order is pending before the High Court of Gujarat for adjudication. It was submitted that there is no change in facts as compared to Assessment Year 2009-10 and the facts of the years before us for our consideration and therefore, the decision of ITAT for Assessment Year 2009-10 would apply to these years as well. Accordingly, it was submitted that Ld. CIT(Appeals) has not erred in facts and in law in dismissing the appeal of the assessee on this issue. 13. We have heard the rival contentions and perused the material on record. We observe that in the case of Agarwal Shiksha Samiti Trust 36 Taxman 165 (Rajasthan) , the High Court held that assessee-trust which was collecting donations with sole purpose of disbursing same for educational institutions run by a Shiksha Samiti, was an educational institution within meaning of Section 10(22) and was, therefore, entitled to exemption qua its income. The above case was approved by the Hon'ble Supreme Court in the case of Aditanar E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the case of the Ahmedabad Urban Development Authority 143 taxmann.com 278 (SC) , while interpreting the impact of earning of incidental income, while carrying out charitable activities by the assessee trust: A.3 Generally, the charging of any amount towards consideration for such an activity (advancing general public utility), which is on cost-basis or nominally above cost, cannot be considered to be trade, commerce, or business or any services in relation thereto. It is only when the charges are markedly or significantly above the cost incurred by the assessee in question, that they would fall within the mischief of cess, or fee, or any other consideration towards trade, commerce or business . In this regard, the Court has clarified through illustrations what kind of services or goods provided on cost or nominal basis would normally be excluded from the mischief of trade, commerce, or business, in the body of the judgment. .. 166. What then is the interpretation of the expression incidental profits, from business being incidental to the attainment of the objectives of the GPU charity (which occurs in Section 11(4A))? As stated earlier, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit of considering the impact of the aforesaid decision in the case of Ahmedabad Urban Development Authority ( supra) on the activities carried out by the assessee Trust, having been rendered at a later date. It would be useful to reproduce the relevant extracts of the ITAT the ruling the assessee s own case for Assessment Year 2009-10 for ready reference: 25. Thus, at best it can be said that in earlier year the activities of the assessee was treated as activity towards advancement of general public utility. However, we find that there was an amendment in proviso to Section 2(15) of the Act we.f. 1-4-2009 whereby two provisos were inserted in Section 2(15) which define charitable purpose as under:- Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves carrying on of any activity in the nature of trade, commerce or business, or any activity of for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity: [ Provided further that the first proviso shall not apply if the aggregate value of the receipts from the act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing advisory services for which it also received charges from the persons to whom advisory were given. The main activity of the assessee was of rendering services and for that activity it received charges which exceeded the limit specified in second proviso to Section 2(15) of the Act. Therefore, it cannot be held that the receipt generated was incidental to the attainment of the main object of the trust. Rather the receipt was generated in respect of main and only activity carried out by the assessee. Therefore this decision does not help the case of the assessee. 15. Accordingly, on perusal of the decision rendered by ITAT the assessee s own case for Assessment Year 2009-10, it is observed that the relevant time, though this issue was discussed by the ITAT in its decision, however, the Tribunal did not have the benefit of the decision rendered by the Hon ble Supreme Court in the case of AUDA supra. 16. Accordingly, in interest of justice, the matter is being restored to the file of the Assessing Officer to analyse the impact of the observations made by the Hon ble Supreme Court in the decision of AUDA supra, more specifically on the observations made by the Hon ble Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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