AADYA FOUNDATION,DELHI V. CIT(EXEMPTION), DELHI

ITA 2677/DEL/2024

AI Insights

The case involves the AADYA Foundation, a charitable trust, which appealed against the decision of the CIT(Exemptions), Delhi, denying its registration under sections 12A and 80G of the Income Tax Act. The CIT(E) had rejected the application on grounds that the trust did not justify its charitable activities and that the majority of its expenses were administrative or of a commercial nature. The Tribunal examined the evidence provided by the trust, including photographs and financial details, and found that the trust's activities were indeed charitable and that the expenses were not solely administrative but also directed towards charitable purposes.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 396675 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2023-2024
• Other Referred Cases: Institute of Chartered Accounts of India vs. Director General of Income Tax (Exemptions), DIT(E) Vs. Gujarat Cricket Association, Aruva Foundation vs. CIT, Thanthi Trust vs. DIT(E), Bosco Educational Society vs. CCIT, The Tribune Trust vs. CIT & CIT (Exemptions) vs. Improvement Trust, Moga, India Trade Promotion Organization vs. DIT(E), Samajbadi Society vs. Asstt. CIT, Ashutosh Charitable Trust of Educational & Medical Sciences vs. CIT(Exemptions), Chandigarh, CIT Exemptions vs. International Health Care Education and Research Institute
• Laws Referred To: Section 12A, Section 80G, Section 11, Section 12, Section 2(15), Section 13(8), Section 11(4A)
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JITENDER SINGH
• Assessee Lawyers: PRAMOD JAIN
• Keywords: Charitable institution
• Section: 11; 12AA; 12A; 10; 80G

Judgement Text

"ITA Nos.2676 & 2677/Del/2024 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “A” NEW DELHI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER AND SHRI S RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA Nos. 2676 & 2677/Del/2024 िनधा\u0005रणवष\u0005/Assessment Year: 2023-24 AADYA FOUNDATION, C-136, 2nd Floor, PUSHPANJALI ENCLAVE, DELHI. बनाम Vs. CIT(E) CIVIC CENTER, DELHI. PAN No.AAITA7031P अपीलाथ\u0011 Appellant \u0013\u0014यथ\u0011/Respondent Assessee by Shri Pramod Jain, CA and Shri Mukul Gupta, Adv. Revenue by Shri Jitender Singh, CIT DR सुनवाईक\bतारीख/ Date of hearing: 26.05.2025 उ\u000eोषणाक\bतारीख/Pronouncement on 29.05.2025 आदेश /O R D E R PER C.N. PRASAD, J.M. These two appeals are filed by the Assessee against the orders of the Ld. CIT(Exemptions), Delhi in denying the registration u/s 12A and 80G of the Act. 2. Ld. Counsel for the assessee referring to page 5 of the order passed by the Ld. CIT(Exemptions) submitted that the Ld. CIT(E) stated that the assessee has not justified of the charitable activities ITA Nos.2676 & 2677/Del/2024 2 have been carried out by the trust. It was also the observation of the Ld. CIT(E) that majority expenses are in the nature of administrative expenses and commercial/trade nature. Ld. Counsel for the assessee referring to pages 1 to 42 of the Paper Book submitted that the assessee has furnished all the details called for by the CIT(E) including the photographs of the assessee trust in proof for carrying out the charitable activities of distribution of food to poor people without cast, creed and religion. Ld. Counsel submitted that these photographs are placed at pages 18 to 27 of the Paper Book referring to page 28 to 29 the Ld. Counsel submits that the trust also conducting yoga classes. Ld. Counsel referring to page 1 of the Paper Book submitted that assessee filed note on activities before the CIT(E) stating that the assessee is a charitable trust involved in the activities of distributing food and clothes to the poor and providing spiritual education to strengthen the mind and body by yoga, meditation and spiritual upliftment of health mind. 3. The Ld. Counsel further submits that the Ld.CIT(E) did not point out a single incident of any activity of the trust which is not genuine, whether any surplus is accumulate, any fee collected by the trust was utilized for any purpose other than object of the ITA Nos.2676 & 2677/Del/2024 3 society. The Ld. CIT(E) had only stated that assessee is only having commercial activities, majority of expenses are administrative and assessee did not conduct charitable activities. Ld. Counsel for the assessee further submitted that the assessee trust generated revenue of Rs.10,95,908/- from the sale of educational and books and other income of Rs.1,38,804/-. Out of the total receipts, Rs.10,60,368/- was incurred towards incidental expenses directly related to such educational activities. The remaining balance was utilized for charitable purposes, mainly for distribution of food and clothing, along with minor administrative expenses such as audit fees and bank charges. Accordingly, the trust has not incurred only administrative expenses. The entire expenditure relates exclusively to costs incidental to the sale of books used for imparting spiritual education and administrative expenses are just bank charges and audit fees. While dealing with application for registration, the Ld. CIT(E) is required to examine the genuineness of the objects of the society, whether is charitable or not. At the stage of granting registration u/s 12AA, the CIT(E) is required only to assess the genuineness of activities and the objects of the trust, not the quantum or nature of income or expenditure. In the instance case, the Ld. CIT(E) had no objection on the objectives of the trust. ITA Nos.2676 & 2677/Del/2024 4 4. Reliance was placed on the following decisions by the Ld. Counsel for the assessee which is as under: - S.No. Name of case Court Held 1. Institute of Chartered Accounts of India vs. Director General of Income Tax (Exemptions), 2013 358 ITR 91/217 Taxman 152/35 taxmann.com 140 (Delhi) Hon’ble Delhi High Court Held that interviews for fees for the purpose of campus placements of its students does not amount to carrying on a business so as to deny exemption u/s 11 of the Act. It is further observed that if the object or purpose of an institution charitable, the fact that the institution collects certain charges does not alter the character of the institution. 2. DIT(E) Vs. Gujarat Cricket Association Appeal No.268/2012, dated 27/06/2019 Hon’ble Gujarat High Court Merely because the Association puts up tickets of the international cricket matches for sale and earns some profit out of the same, it would not lose its character of having been established for a charitable purpose. 3. Aruva Foundation vs. CIT, ITA No.398/Ind/2024, dated 11.12.2024 Hon’ble ITAT Indore Held that proviso to section 2(15) of the Act defining ‘charitable purpose’ itself allows commerciality in the activities of assessee but upto a ceiling limit of 20%. Further, section 11(4A) of the Act grants exemption to commercial or business activity on fulfillment of certain requirements. It is also important to note that the section 13(8) also provides that the exemption u/s 11/12 shall be denied in that previous year only in which the proviso to section 2(15) is violated. Therefore, these provisions of law clearly show that even if any object or activity of assessee, out of various multiple objects and activities, has element of commerciality, that would result in denial of exemption u/s 11/12 to that extent and in that particular previous year only but the CIT(E) in exercise of power u/s 12AB, cannot deny registration ITA Nos.2676 & 2677/Del/2024 5 to assessee. 4. Thanthi Trust vs. DIT(E), TCA No.822/2018, dated 29.10.2020 Hon’ble Madras High Court Where assessee-trust, engaged in business of publishing newspaper, did not run any school or college but utilized surplus of income from business for donation to a trust which was running educational institution, earnings of assessee being spent for charitable purpose, registration granted to it could not be cancelled. 5. Bosco Educational Society vs. CCIT, WP N.11828/2014, dated 16.06.2021 Hon’ble Madras High Court Held that where main object of assessee was in field of education as was stated in its MoA and AoA of assessee also did not allow any inference of profit motive but clearly indicated that surplus generated by assessee was to be ploughed back for fulfillment and attainment of educational activities, denial of approval to assessee u/s 10(23C)(vi) was not justified. 6. The Tribune Trust vs. CIT & CIT (Exemptions) vs. Improvement Trust, Moga [2017] 390 ITR 547 (P&H) Hon’ble Punjab & Haryana High Court The Hon’ble High Court has approved the predominant object theory that is, if the predominate motive or act of the trust is to achieve its charitable objects, then merely because some incidental income is being generated, that will not dis entitle the trust t claim exemption u/s 11 read with section 2(15) of the Act. 7. India Trade Promotion Organization vs. DIT(E) 371 ITR 333 (Delhi) Hon’ble Delhi High Court The Hon’ble High Court reading down the scope of the proviso to section 2(15) has held that an assessee could be said to be engaged in business, trade or commerce only where earning of profit was the predominant motive, purpose and object of the assessee and that mere surplus from incidental or ancillary activities did not disentitle claim of exemption u/s 11 of the Act. 8. Samajbadi Society vs. Asstt. CIT, 79 ITD 112 (Cuttack) Hon’ble ITAT Cuttack Held that profit making should not be in accomplishing or carrying out the objects but should be for the purpose of ITA Nos.2676 & 2677/Del/2024 6 the trust or the object of the trust and if the object is without an activity of making profit, the trust does not cease to be a charity merely because it makes profit and is involved in an activity of profit in accomplishing or carrying out the object. In other words, profit making is not prohibited if it subserves the charity. 9. Ashutosh Charitable Trust of Educational & Medical Sciences, vs. CIT(Exemptions), Chandigarh, ITA No.864/CHD/2016, dated 12.01.2017 ITAT Chandigarh At the stage of grant of registration u/s 12AA of the Act, CIT is required to examine the objects of the assessee trust and genuineness of its activities. At the time of registration u/s 12AA of the Act, which is necessary for claiming exemption u/s 11 and 12, the CIT(Exemptions) is not required to look into the activities, wher such activities have not or are in the process of its initiation. Where assessee trust is set up to achieve its objectives of establishing educational/medical institutions, is in the process of establishing such institution and receives donations, registration u/s 12AA cannot be refused on the ground that trust has not yet commenced charitable activities. At this stage only, genuineness of the objects has to be tested and not the activities which have not commenced. 10. CIT Exemptions vs. International Health Care Education and Research Institute, SLP 19528/2018, dated 11.02.2025 Hon’ble Supreme Court The Supreme Court clarified that while registration u/s 12AA is necessary for claiming exemptions under sections 10 and 11, it does not automatically guarantee those exemptions. The Assessing Officer retains the authority to scrutinize the trust’s activities and deny exemptions if they are not genuinely charitable or not in accordance with the trust’s stated objectives. The court emphasized that the Commissioner, when ITA Nos.2676 & 2677/Del/2024 7 considering an application u/s 12AA, should primarily focus on the genuineness of the trust’s proposed activities and their alignment with the trust’s objectives as outlined in the trust deed. The Supreme Court’s decision reinforces the principle that at the registration stage, the focus is on the trust’s plans and stated objectives, not its past actions. 5. On the other hand, the Ld. DR strongly supported the orders of the authorities below. 6. Heard rival submissions, perused the orders of the authorities below and the submissions made before us. On perusal of the order of the Ld. CIT(Exemptions) it is noticed that the reasons for rejection of registration was i) non justification of charitable activities; ii) majority of the expenses are in the nature of administrative expenses and commercial/trade the appellant could not establish that the expenses were incurred for charitable purpose and therefore the assessee is not for charitable purpose. The Ld. CIT(E) did not doubt the objects of the assessee trust as not charitable in nature. The materials placed before us in the form of photographs which were also filed before the Ld. CIT(E) clearly show that the assessee was distributing food to poor people as per the objects of the trust. The Ld. CIT(E) did not make any comments on the genuineness of the objects of the trust. The registration u/s ITA Nos.2676 & 2677/Del/2024 8 12A as well as 80G was denied certain expenses are in the nature of administrative and commercial. As held by various High Courts while granting registration u/s 12A one has to see whether the objects of the trust are charitable and the activities of the trust are genuine. The evidences furnished by the assessee prove that the assessee is a charitable trust and the activities carried on by the assessee are genuine. The queries raised and details required by the Ld. CIT(E) were all subject matter of verification by the AO while completing the assessment. Since the genuineness of the objects of the trust and the activities of the trust were not doubted by the Ld. CIT(E). He should not have rejected the registration u/s 12A as well as 80G of the Act. Thus, we direct the Ld. CIT(E) to restore the provisional registration granted to the assessee us 12A and also direct to grant registration u/s 12A as well as 80G to the assessee trust. 7. In the result, appeals of the assessee are allowed. Order pronounced in the open court on 29/05/2025 Sd/- Sd/- (S RIFAUR RAHMAN) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 29.05.2025 *Kavita Arora, Sr. P.S. ITA Nos.2676 & 2677/Del/2024 9 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "