INCOME TAX OFFICER, CHENNAI V. SHRI SHIRDI SAIBABA SPIRITUAL AND CHARITABLE TRUST, CHENNAI

ITA 1777/CHNY/2024

AI Insights

The case revolves around the eligibility of the Shri Shirdi Saibaba Spiritual and Charitable Trust for tax exemption under section 11 of the Income Tax Act for the Assessment Year 2013-14. The Income Tax Officer (ITO) had denied the exemption, categorizing the trust's activities, including the sale of devotional articles, as business activities under the first proviso to section 2(15) of the Act. However, the CIT(A) reversed this decision, leading to the revenue's appeal to the Tribunal. The Tribunal's decision was influenced by precedents set in earlier years and the Supreme Court's interpretation of section 2(15), which distinguishes between activities conducted as a business and those conducted as part of charitable purposes without a profit motive.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 29447 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Other Referred Cases: ACIT vs. Ahmedabad Urban Development Authority
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VINOD D. MUDALIAR LD
• Assessee Lawyers: DEBENDRA NARAYAN KAR
• Keywords: Depreciation; Charitable institution
• Section: 143(3); 11; 12AA; 12

Judgement Text

" आयकर अपीलीय अिधकरण “बी” \u000eा यपीठ चे\u0013ई म\u0016। IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, CHENNAI मा ननीय \u0019ी जॉज\u001c जॉज\u001c क े, उपा \u001f एवं मा ननीय \u0019ी मनोज क ुमा र अ&वा ल ,लेखा सद* क े सम । BEFORE HON’BLE SHRI GEORGE GEORGE K, VP AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपील सं ./ ITA No.1777/Chny/2024 (िनधा \u001cरण वष\u001c / Assessment Year: 2013-14) ITO (Exemptions) Ward-3, Chennai. बना म/ Vs. Shri Shirdi Saibaba Spiritual and Charitable Trust # 17, 2nd Floor, Sai Business Point, Mount Road, Saidapet, Chennai-600 015. \u0001थायीलेखासं./जीआइआरसं./PAN/TAN No. AAATS-3448-J (अपीलाथ\u001a/Appellant) : (\u001d\u001eथ\u001a / Respondent) अपीलाथ\u001aकीओरसे/ Appellant by : Shri Vinod D. Mudaliar (JCIT) -Ld. DR \u001d\u001eथ\u001aकीओरसे/Respondent by : Shri Debendra Narayan Kar (Advocate) – Ld. AR सुनवाईकीतारीख/Date of Hearing : 13-01-2025 घोषणाकीतारीख /Date of Pronouncement : 22-01-2025 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by revenue for Assessment Year (AY) 2013-14 arises out of an order of learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 24-04- 2024 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Act on 11-03-2016. The grounds taken by the revenue read as under: - 1. The Order of the Ld. CIT(A) is contrary to the law and facts of the case. 2 2. The Ld. CIT(A) erred in holding that the assessee is eligible for exemption u/s 11 of the Act and the provisions of section 2(15) of the Act are not attracted. 3. The CIT(A) erred in holding that the assessee is eligible for exemption u/s 11 of the Act and the activities of the assessee are not 'religious' whereas the assessee has applied the money for religious purpose. 4. The CIT(A) erred in holding that the activity of sale of devotional articles was utilized for carrying out the objects. 5. The CIT(A) ought to have appreciated that 1st proviso to Section 2(15) clearly stipulates that irrespective of 'application' of such income, the income from activities in the nature of trade, commerce or business is liable to tax. 6. The CIT(A) has not taken note of the Hon'ble Supreme Court judgment in the case of Ahmedabad Urban Development Authority in Civil Appeal No. 27162/2017 dated 19.10.2022 in respect of this issue before passing the impugned order. 6.1. The recent decision of Hon'ble Supreme Court in the case of Ahmedabad Urban Development Authority in Civil Appeal No. 27162/2017 dated 19.10.2022 and CBDT guidance note dated 15.12.2022, has laid down as under: \"A. General test under Section 2(15) A. 1. It is clarified that an assessee advancing general public utility cannot engage itself in any trade, commerce or business, or provide service in relation thereto for any consideration (\"cess, or fee, or any other consideration\"); 7. The Ld. CIT(A) ought to have appreciated that the total receipts by way of sale of devotional articles is Rs.1,71,98,375/- which exceeds the threshold limit as envisaged in 2% proviso to section 2(15) of the Act. Further, the commercial element is associated with such sale, as the assessee has made a profit of 32% out of such sale. 8. The Ld. CIT(A) ought to have appreciated that the above receipts of the assessee are in the nature of 'General Public Utility' as per the amended provisions of section 2(15) of the Act. 2. The Ld. Sr. DR advanced arguments supporting the order of Ld. AO whereas Ld. AR referred to the findings of Ld. CIT(A) in the impugned order and also referred to the decision of Tribunal in assessee’s own case for earlier years. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. Assessment Proceedings 3.1 The assessee earned gross total income of Rs.620.30 Lacs and it filed return of income claiming exemption u/s 11 / 12 of the Act. The assessee is a registered public charitable trust u/s 12AA of the act and also approved u/s 80G(5)(vi). Upon perusal of activities 3 of the Trust, Ld. AO noted that the assessee was engaged in religious activities. Since the income of the trust was applied for religious purposes, the surplus so earned by the assessee would not be eligible for exemption u/s 11. The surplus earned by the assessee and corpus donation received by it was computed at Rs.301.47 Lacs which was to be brought to tax. 3.2 In the alternative, it was noted by Ld. AO that the assessee was engaged in selling devotional articles / books and therefore, it was covered under first proviso to Sec.2(15) since it made a profit of 32% on such sales. The sale of articles fit into the category of objects of general public utility and the activities of the trust, being religious in nature, also fall within the ambit of advancement of any other general public utility. The selling of books and articles comes under the purview of first proviso to Sec. 2(15). 3.3 Finally, the assessee was denied exemption u/s 11 and its surplus including corpus donation was brought to tax and depreciation claim was granted against the same. Appellate Proceedings 4.1 The assessee stated that the main charitable activities of the trust were feeding the poor, providing education and medical relief. With a view to get source of income for carrying out such charitable activities, the trust sells devotional articles to people who visit the center. The surplus so derived was not for profit motive but with a view to utilize the surplus as a source of income for the purpose of carrying out objects of providing education and medical relief to the poor. The assessee also referred to the favorable decision of this Tribunal for AYs 2011-12 and 2012-13. 4 4.2 The Ld. CIT(A) concurred that identical issue was decided favorably by the Tribunal for AYs 2011-12 and 2012-13 in ITA No.1879/Mds/2015 order dated 07-11-2016 and also in ITA No.2859/Mds/2017 order dated 10-04-2018 respectively. The relevant portion of the order for AY 2012-13 has been reproduced in the impugned order. Considering the same, Ld. AO was directed to delete the impugned addition and allow the applicable exemption to the assessee. Aggrieved, the revenue is in further appeal before us. Our findings and Adjudication 5. From the facts, it emerges that the assessee is a public charitable trust and it is registered trust u/s 12AA of the act. It is also holding valid approval u/s 80G(5). The perusal of Income and Expenditure (Page No.30 of the paper-book) would show that majority of its income constitute general donations and interest income. Apparently, there is no change in the activities of the trust since its inception and the assessee-trust continue to engage in similar kind of activities. Upon perusal of order of Tribunal in assessee’s own case for AY 2012-13 ITA No.2859/Chny/2017 dated 10-04-2018, it could be seen that the assessee was denied similar exemption by Ld. AO on the ground that that it was selling books and articles at a profits and therefore, its activities were hit by proviso to Sec.2(15). The Ld. CIT(A), following Tribunal order for AY 2011-12 in ITA No.1879/Mds/2015 dated 07-11-2016, held that the assessee was eligible for exemption u/s 11 & 12. The revenue preferred further appeal before Tribunal only on the issue of depreciation and accepted the position that the assessee would be eligible for exemption u/s 11 & 12. The Tribunal dismissed the 5 appeal of the revenue on the ground of depreciation. It could thus be seen that in earlier years, the assessee has been held to be eligible for impugned exemption and there is no change in its nature of activities in this year. Therefore, Ld. CIT(A) is correct in adjudicating the appeal by following the decision of Tribunal in earlier years. 6. The Hon’ble Supreme Court in the case of ACIT vs. Ahmedabad Urban Development Authority (143 Taxmann.com 278), in para 173, held that such activities if carried out for nominal cost, would not be ipso fact become business. It was held by Hon’ble Court as under:- 173. It may be useful to conclude this section on interpretation with some illustrations. The example of Gandhi Peace Foundation disseminating Mahatma Gandhi's philosophy (in Surat Art Silk) through museums and exhibitions and publishing his works, for nominal cost, ipso facto is not business. Likewise, providing access to low-cost hostels to weaker segments of society, where the fee or charges recovered cover the costs (including administrative expenditure) plus nominal mark up; or renting marriage halls for low amounts, again with a fee meant to cover costs; or blood bank services, again with fee to cover costs, are not activities in the nature of business. Yet, when the entity concerned charges substantial amounts- over and above the cost it incurs for doing the same work, or work which is part of its object (i.e., publishing an expensive coffee table book on Gandhi, or in the case of the marriage hall, charging significant amounts from those who can afford to pay, by providing extra services, far above the cost-plus nominal markup) such activities are in the nature of trade, commerce, business or service in relation to them. In such case, the receipts from such latter kind of activities where higher amounts are charged, should not exceed the limit indicated by proviso (ii) to section 2(15) In the present case, the observation of Ld. AO that the assessee sold the books at a high mark-up is fallacious one since Ld. AO has not considered the administrative expenditure incurred on carrying out sale of books and articles. The major income of the assessee, as observed earlier, constitutes general donations and interest income. Therefore, the adjudication of Ld. CIT(A) could not be faulted with. We order so. 6 7. In the result, the appeal stand dismissed. Order pronounced on 22nd January, 2025 Sd/- Sd/- (GEORGE GEORGE K) (MANOJ KUMAR AGGARWAL) उपा \u001f / VICE PRESIDENT लेखा सद* / ACCOUNTANT MEMBER चे1ई Chennai; िदनांक Dated :22-01-2025 DS आदेशकीHितिलिपअ&ेिषत/Copy of the Order forwarded to : 1. अपीलाथ\u001a/Appellant 2. \u001d\u001eथ\u001a/Respondent 3. आयकरआयु:/CIT Chennai. 4. िवभागीय\u001dितिनिध/DR 5. गाड?फाईल/GF "