DDIT (E), New Delhi V. The Young Women's Christian Association of India, New Delhi

ITA 2408/DEL/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6664 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 29-10-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 23-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P MEENA
• Keywords: Business income; Charitable institution; Maximum Marginal Rate; Benefit of exemption; Revenue expenditure
• Section: 80G; 12A; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H NEW DELHI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SH. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 2408/DEL/2013 AY: 20 09-10 DY. DIRECTOR OF INCOME TAX (E), VS THE YOUNG WOMENS CHRISTIAN TRUST CIRCLE-IV, NEW DELHI. ASSOCIATION OF INDIA, 10, SANSAD MARG, NEW DELHI-110001 (PAN: AAATY0787 E) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI O.P.MEENA, SR. DR RESPONDENT BY : SHRI SALIL AGARWAL, ADV. SHRI SHAILESH GUPTA, ADV. ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER THE PRESENT APPEAL IS FILED BY THE DEPARTMENT AND I S DIRECTED AGAINST THE ORDER DATED 4.2.2013 PASSED BY THE LD. CIT (A)-XXI, NEW DELHI FOR ASSESSMENT YEAR 2009-10. 2. THE ASSESSEE, THE YOUNG WOMENS CHRISTIAN ASSOCI ATION OF INDIA (YWCA), IS REGISTERED U/S 12A OF THE INCOME T AX ACT, 1961 (HEREINAFTER CALLED THE ACT) SINCE 12.09.1975. T HE ASSESSEE HAS ALSO BEEN GIVEN APPROVAL FOR EXEMPTION U/S 80G OF T HE ACT WHICH HAS BEEN RENEWED FROM TIME TO TIME. THE ASSESSEE I S ALSO REGISTERED WITH THE REGISTRAR OF SOCIETIES. I.T.A. NO. 2408/DEL/2013 ASSESSMENT YEAR 2009-10 2 3. THE RETURN FOR THE YEAR UNDER CONSIDERATION WAS FILED AT NIL INCOME. DURING THE COURSE OF SCRUTINY ASSESSMENT P ROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE WA S RUNNING GUEST HOUSES AT DIFFERENT LOCATIONS AND WAS EARNING REVENUES FROM CUSTOMERS WHO WERE UTILIZING THE GUEST HOUSES. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAD EARNE D THE FOLLOWING REVENUES FROM THE GUEST HOUSES (1) REVENUE FROM ROOMS - RS. 1,26,78, 329/- (2) REVENUE FROM FOOD & BEVERAGES - RS. 2,99,40,474 /- (3) REVENUE FROM SERVICE CHARGES - RS. 12,16,146 /- 4. THE ASSESSEE WAS ISSUED A SHOW CAUSE TO EXPLAI N ITS STAND WITH REFERENCE TO THE PROVISIONS OF SECTION 2(15) O F THE ACT. THE ASSESSEE TOOK THE PLEA THAT ALL THE ACTIVITIES/EARN INGS WERE COVERED UNDER THE PRINCIPLE OF MUTUALITY AND HENCE THE SURPLUS GENERATED WAS EXEMPT. THE ASSESSEE ALSO SUBMITTED THAT IT WAS A CHARITABLE ORGANISATION WITHIN THE DEFINITION OF SE CTION 2(15) OF THE ACT WITH THE OBJECTIVE OF PROMOTING EDUCATION, HEALTH, LEADERSHIP AND SKILLS TRAINING OF THE EMPOWERMENT O F WOMEN. HOWEVER, THE ASSESSING OFFICER WAS OF THE OPINION T HAT THE ASSESSEE COULD NOT PROVE THAT ITS OBJECTS FALL UNDE R THE CATEGORY OF RELIEF TO THE POOR, EDUCATION, MEDICAL RELIEF, [PRE SERVATION OF I.T.A. NO. 2408/DEL/2013 ASSESSMENT YEAR 2009-10 3 ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILD LIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF A RTISTIC OR HISTORIC INTEREST]. HENCE, AS PER THE ASSESSING OFFICER, THE OBJECTS OF THE ASSESSEE WOULD FALL UNDER THE GENERAL OBJECT OF PUBLIC UTILITY . THEREAFTER, THE ASSESSING OFFICER PROCEEDED TO C ONCLUDE THAT CHARITABLE TRUSTS WITH THE GENERAL OBJECT OF P UBLIC UTILITY ARE REQUIRED TO ESCHEW ANY ACTIVITY WHICH IS IN THE NAT URE OF TRADE, COMMERCE OR BUSINESS OR THE RENDERING OF ANY SERVIC E IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS TO REMAIN CHARIT ABLE TO CONTINUE REGISTRATION U/S 12A OF THE ACT. AS PER T HE ASSESSING OFFICER, THE EFFECT OF THE AMENDMENT TO SECTION 2(1 5) OF THE ACT W.E.F. 01.04.2009 WAS THAT THE TRUSTS HAVING OBJECT OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY COULD NOT DO BUSINESS EVEN IF THEY COMPLIED WITH THE PROV ISIONS OF SECTION 11(4A) BEYOND THE GROSS REVENUE PRESCRIBED. THE ASSESSING OFFICER ALSO OBSERVED THAT THE ASSESSEE H AD NOT MAINTAINED SEPARATE BOOKS OF ACCOUNT FOR THE BUSINE SS OF RUNNING GUEST HOUSES AND CANTEENS AND HENCE THE PRO VISIONS OF SECTION 11(4A) WERE VIOLATED. HE FINALISED THE ASS ESSMENT AT RS.42,62,080/- BY TREATING THE NET SURPLUS AS BUSIN ESS PROFITS TO BE TAXED AT THE MAXIMUM MARGINAL RATE. I.T.A. NO. 2408/DEL/2013 ASSESSMENT YEAR 2009-10 4 5. ON AN APPEAL BEFORE THE LD. FIRST APPELLATE AUTH ORITY, THE ASSESSEE ARGUED THAT THE ASSESSING OFFICER WAS WRON G IN CONCLUDING THAT THE ASSESSEE ASSOCIATION WAS ENGAGE D IN THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SO AS TO ATTRACT THE PROVISO TO SECTION 2(15) OF THE ACT. T HE ASSESSEE ALSO CONTESTED THE ALLEGATION OF THE ASSESSING OFFICER T HAT SEPARATE BOOKS OF ACCOUNTS HAVE NOT BEEN MAINTAINED BY THE A SSESSEE. ON A CONSIDERATION OF THE FACTS OF THE CASE, THE LD. C IT(A), WHILE ALLOWING THE APPEAL OF THE ASSESSEE, GAVE A FINDING THAT THE ASSESSEES ACTIVITIES FALL UNDER THE FIRST THREE LI MBS VIZ. RELIEF TO THE POOR, EDUCATION OR MEDICAL RELIEF AND HENCE WIL L NOT BE HIT BY THE NEWLY INSERTED PROVISO TO SECTION 2(15). 6. AGGRIEVED, THE DEPARTMENT IS NOW IN APPEAL BEFOR E US. THE LEARNED DEPARTMENTAL REPRESENTATIVE, WHILE SUPPORTI NG THE ORDER OF THE ASSESSING OFFICER, SUBMITTED THAT THE ASSESS EE HAS CLAIMED THAT IT IS A CHARITABLE ORGANIZATION AS DEFINED IN SEC. 2(15) BUT THE ACTIVITY OF RUNNING OF GUEST HOUSES CANNOT BE INCID ENTAL TO THE CHARITABLE OBJECTS OF THE ASSOCIATION. HE SUBMITTED THAT NOWHERE HAS THE ASSESSEE SHOWN THAT ITS OBJECTS CAN BE CLAS SIFIED UNDER THE CATEGORY OF RELIEF OF THE POOR, EDUCATION, MEDI CAL RELIEF, [PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND I.T.A. NO. 2408/DEL/2013 ASSESSMENT YEAR 2009-10 5 WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES O R OBJECTS OF ARTISTIC OR HISTORIC INTEREST ]. HE SUBMITTED THAT THE ONUS IS ON THE ASSESSEE TO PROVE THE CHARITABLE PURPOSE. THEREFORE , IN ABSENCE OF A VALID PROOF, THE ACTIVITY OF THE ASSESSEE IS TO B E TREATED UNDER THE OBJECT OF GENERAL PUBLIC UTILITY. IT WAS FURTHE R SUBMITTED THAT FROM THE AMENDMENT IT EMERGES THAT CHARITABLE TRUST S FALLING WITHIN THE CLASSIFICATION OF OBJECT OF GENERAL PUBL IC UTILITY ARE REQUIRED TO REFRAIN FROM ANY ACTIVITY WHICH IS IN T HE NATURE OF TRADE, COMMERCE OR BUSINESS OR THE RENDERING OF ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS TO REMA IN CHARITABLE AND TO CONTINUE WITH REGISTRATION U/S 12A OF THE AC T. IT WAS FURTHER SUBMITTED THAT TRUSTS CARRYING OUT ACTIVITI ES UNDER THE RESIDUARY LIMB OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY CANNOT DO BUSINESS EVEN IF THEY COMPLY WITH PROVISIONS OF SECTION 11(4 A). IT WAS SUBMITTED THA T THE END USE OF BUSINESS PROFITS FOR CHARITABLE PURPOSES IS OF NO R ELEVANCE DUE TO THE AMENDMENT IN SECTION 2(15). HE SUBMITTED THAT, THEREFORE, THE PROFITS EARNED FROM GUEST HOUSES/CANTEENS ETC. WILL NOT GET EXEMPTION U/S 11(4A). 7. IN RESPONSE, THE LD. AR SUBMITTED THAT THE MAIN OBJECTS OF THE ASSOCIATION ARE AS UNDER:- I.T.A. NO. 2408/DEL/2013 ASSESSMENT YEAR 2009-10 6 '>TO TAKE OVER THE WHOLE OR ANY OF THE ASSETS AND L IABILITIES OF THE UNINCORPORATED ASSOCIATION KNOWN AS THE NATION AL YOUNG WOMENS CHRISTIAN ASSOCIATION OF INDIA, BURMA AND CEYLON AND THE FEDERATION, DEVELOPMENT, AND EXTENSION OF YOUNG WOMENS CHRISTIAN ASSOCIATIONS IN INDIA, AND FOR S UCH PURPOSE THE MAKING (IF NECESSARY) OF GRANTS IN AID TO SUCH ASSOCIATION. >TO CONSIDER AND DISCUSS ALL QUESTIONS AFFECTING TH E INTEREST OF THE ASSOCIATION. >TO PROVIDE FOR THE DELIVERY OF LECTURES, THE FORMA TION OF CLASSES AND TO TAKE OTHER SUITABLE MEANS FOR THE PR OMOTION OF THE SPIRITUAL, INTELLECTUAL, PHYSICAL AND SOCIAL WELL BEING OF YOUNG WOMEN IN INDIA. >TO PURCHASE, HIRE OR OTHERWISE ACQUIRE FOR THE PUR POSE OF THE ASSOCIATION ANY REAL OR IMMOVEABLE AND PERSONAL OR MOVEABLE PROPERTY AND IN PARTICULAR ANY LANDS, BUI LDINGS, FURNITURE, HOUSE HOLD EFFECTS, UTENSILS, BOOKS, NE WS PAPERS, PERIODICALS, MUSICAL INSTRUMENTS, FITTINGS, APPARA TUS, APPLIANCES CONVENIENCES AND ACCOMMODATION, AND SO FAR AS THE LAW OR THE LICENCE OF THE LOCAL GOVERNMENT MAY FROM TIME TO TIME ALLOW TO SELL, DEMISE, LET MORTGAGE OR DIS POSE OF THE SAME.' 8. THE LD. AR SUBMITTED THAT YWCA OF INDIA IS COMMI TTED TO EMPOWERING WOMEN, IRRESPECTIVE OF CASTE, CREED, CLA SS OR RELIGION, I.T.A. NO. 2408/DEL/2013 ASSESSMENT YEAR 2009-10 7 THROUGH DEVELOPMENT PROGRAMMES THAT ARE RESPONSIVE TO THE CHANGING NEEDS OF A CHANGING SOCIETY. THE FOCUS OF THE PROGRAMMES AND PROJECTS HAS PARTICULARLY TARGETED W OMEN IN THE MARGINALIZED COMMUNITIES THROUGH COMMUNITY BASED PROGRAMMES. THE WORK OF YWCA OF INDIA IS PRESENT IN OVER 80 LOCAL BRANCHES SPREAD ACROSS THE COUNTRY. IT WAS SU BMITTED THAT VISION AND MISSION OF THE YWCA OF INDIA IS TO PROMO TE EDUCATION, HEALTH, LEADERSHIP AND SKILLS TRAINING AND OTHER AC TIVITIES FOR THE EMPOWERMENT OF WOMEN, AND THE AFORE MENTIONED ACTIV ITIES ARE TO BE TREATED AS CHARITABLE ACTIVITIES FALLING WITHIN THE AMBIT OF SECTION 2(15) OF THE INCOME TAX ACT, 1961, SECTION 11 AND SECTION 12 OF THE INCOME TAX ACT, 1961. IT WAS SUBM ITTED THAT THE ASSOCIATION IS OVER 150 YEARS OLD AND WIDELY KN OWN FOR ITS SOCIAL AND ECONOMIC WORK IN INDIA. THE ASSOCIATION BEING AFFILIATED TO WORLD YWCA IS ALSO KNOWN OVERSEAS FOR ITS WORK IN PROVIDING RELIEF TO THE POOR AND THE MARGINALIZED. IT WAS SUBMITTED THAT THE ASSESSING OFFICER HAS LABELLED T HE ACTIVITIES OF THE ASSOCIATION AS BEING IN THE NATURE OF BUSINESS ACTIVITIES OVERLOOKING THE FOLLOWING ACTIVITIES OF THE ASSOCIA TION WHICH IT CARRIES AND WHICH ARE DULY PERMITTED U/S 2(15) OF T HE ACT VIZ. PROVIDING RELIEF TO THE POOR, EDUCATION, AWARENESS - AIDS / I.T.A. NO. 2408/DEL/2013 ASSESSMENT YEAR 2009-10 8 TREATMENT OR REHABILITATION OF AFFECTED PATIENTS, P ROVIDING SUPPORT TO NEGLECTED OLD AND INFIRM SENIOR CITIZENS UNDER A DOPT A GRANNY PROJECT, PROVIDING RELIEF/REHABILITATION TO VICTIMS OF NATURAL CALAMITIES, ETC.. IT WAS SUBMITTED THAT THE AFORESA ID ACTIVITIES ARE CARRIED ON BY THE ASSOCIATION AT DIFFERENT PLACES A ND FOR WHICH IT MAINTAINS SEPARATE BOOKS OF ACCOUNTS WHICH ARE SEPA RATELY AUDITED AT THE YEAR END AND ULTIMATELY CONSOLIDATED FOR PURPOSES OF FILING OF RETURN. AS FAR AS RUNNING OF CANTEENS IS CONCERNED, THE LD.AR SUBMITTED THAT SINCE JULY 1998, YWCA OF INDIA IS RUNNING A CANTEEN IN THE CHRISTIAN MEDICAL COLLEGE HOSPITAL CAMPUS AT VELLORE TO PROVIDE FOOD TO THE PATIENTS OF THE HOSP ITAL, NURSING STAFF, POOR HOSPITAL STAFF (SUCH AS POOR AND MARGIN ALIZED WATCHMEN, WASHER MEN, SECURITY STAFF, GARDENERS AND OTHER MENIAL STAFF), HOSPITAL STUDENTS AND DOCTORS AND AL SO CARE TAKERS OF THE PATIENTS. THE CANTEEN IS BEING RUN BY YWCA WITH THE SOLE AIM TO PROVIDE FREE FOOD TO THE GENERAL WARD PATIEN TS WHO ARE POOR AND MARGINALIZED. ON AN AVERAGE, ON DAILY BASIS, FR EE FOOD TO ABOUT 100 POOR PATIENTS AND TO 100 POOR AND MARGINA LIZED HOSPITAL STAFF IS BEING SUPPLIED. IN ADDITION, THE CANTEEN PROVIDES FOOD AT SUBSIDIZED RATES (50 - 40 PERCENT BELOW THE NORMAL RATES) TO ABOUT 200 HOSPITAL STAFF IN THE CATEGORY OF NURS ING STAFF, I.T.A. NO. 2408/DEL/2013 ASSESSMENT YEAR 2009-10 9 MEDICAL STUDENTS AND DOCTORS. NOT ONLY THIS, FOOD T O PATIENTS CARE-TAKERS AND VISITORS IS ALSO PROVIDED BELOW THE NORMAL RATES. IT WAS FURTHER SUBMITTED THAT DURING THE YEAR FROM CANTEEN ACCOUNTS, SUM OF RS. 1,00,000/- WAS DONATED TO SALE M YWCA FOR HIV/AID PATIENTS. SINCE THE CANTEEN IS BEING RUN O N CHARITABLE LINES, IT HAS THE EXEMPTION FROM LEVY OF VAT AS PER NOTIFICATION ISSUED UNDER TAMIL NADU GENERAL SALES TAX 1959. IT WAS FURTHER SUBMITTED THAT APART FROM RUNNING THE ABOVE CANTEEN , THE ASSOCIATION ALSO HAS COMMERCIAL ACTIVITY IN THE SHA PE OF RUNNING OF GUEST HOUSES IN DELHI, ANANDGIRI AND WYOMING. TH IS COMMERCIAL ACTIVITY IN THE SHAPE OF RUNNING GUEST H OUSES HAS BEEN THERE FOR THE LAST 50 YEARS AND NEVER EVER, EX CEPTING THE YEAR UNDER CONSIDERATION, THIS ACTIVITY BEEN DISPUT ED AS NOT BEING CHARITABLE. IN SUPPORT, THE LD. AR DREW OUR ATTENTI ON TO THE PHOTOCOPIES OF ASSESSMENT ORDERS FOR THE LAST THREE ASSESSMENT YEARS I.E. 2008-09, 2007-08 AND 2006-07. HE SUBMITT ED THAT THE CHARITABLE CHARACTER OF THE ASSOCIATION HAS ALWAYS REMAINED INTACT AND NEVER EVER, THE CHARITABLE STATUS OF THE ASSOCIATION HAS BEEN DISMANTLED. AS REGARDS OTHER CHARITABLE ACTIVI TIES, IT WAS SUBMITTED THAT THE CENTRAL OFFICE WHICH HAS AFFILIA TION TO 84 LOCAL YWCAS ACROSS INDIA AND IS ITSELF AFFILIATED TO WORL DWIDE YWCA I.T.A. NO. 2408/DEL/2013 ASSESSMENT YEAR 2009-10 10 ORGANIZATION. THIS OFFICE ADMINISTERS AND MONITORS THE INTEREST OF LOCAL YWCAS AND ALSO HELPS IN ARRANGING FUNDS FOR D OING ACTIVITIES FOR BETTERMENT/UPLIFTMENT OF NEEDY WOMEN AT VARIOUS UNITS OF YWCA OF INDIA AND ALSO IN PROVIDING FREE F OOD TO POOR PEOPLE AT VARIOUS UNITS OF YWCA OF INDIA AND ALSO T O PROVIDE ACCOMMODATION AT NOMINAL RATES TO OLD AGE PEOPLE. THE HEAD OFFICE IS ALSO PARTNERING WITH THE GOVERNMENT OF IN DIA IN GIVING SUGGESTIONS FOR CREATION OF LAWS FOR WELFARE OF WOM EN VIZ. PROTECTION OF WOMEN AGAINST SEXUAL HARASSMENT AND D OMESTIC VIOLENCE. THE HEAD OFFICE IS MAINLY FOCUSED ON CAP ACITY BUILDING AND TRAINING OF WOMEN WITH A FOCUS ON WOMEN EMPOWER MENT, HEALTHCARE, HYGIENE, HIV AWARENESS PROGRAMMES AND M ANY OTHER CHARITABLE ACTIVITIES. 9. REGARDING YWCA GUEST HOUSES/ HOSTELS IN DELHI, ANANDGIRI, CHANDIGARH AND WYOMING, THE LD. AR SUBMITTED THAT T HE BASIC PURPOSE OF THESE GUEST HOUSES/HOSTELS IS TO PROVIDE ACCOMMODATION TO NEEDY/POOR WOMEN FREE OF COST OR A T SUBSIDIZED RATES ALONG WITH PROVIDING FREE VOCATIO NAL TRAINING IN THE STREAMS OF FASHION DESIGNING, BEAUTICIAN, ENGLI SH SPEAKING, COMPUTER TRAINING AND TEACHER TRAINING. HE SUBMITT ED THAT THESE I.T.A. NO. 2408/DEL/2013 ASSESSMENT YEAR 2009-10 11 GUEST HOUSES/HOSTELS ALSO PROVIDE ROOMS TO THE GENE RAL PUBLIC FOR THE PURPOSE OF SELF SUSTENANCE. 10. YWCA DAY CARE CENTRE FOR OLD AGE PEOPLE AT DEH RADUN AND YWCA OLD AGE HOME (SPREADACRES) AT DEHRADUN IS FOR THE BENEFIT OF SENIOR CITIZENS AND WOMEN EMPOWERMENT. IT IS A CENTRE TO HELP AND PROVIDE ACCOMMODATION TO ELDERLY HOMELESS PEOPL E. THEY ARE MADE TO ENGAGE IN SMALL ACTIVITIES SO AS TO KEEP TH EM BUSY AND FREE FROM DEPRESSION AND FAMILY SICKNESS. THEY DO ACTIVITIES LIKE LIFAFA MAKING, NAMKEEN MAKING, CHAIR CANING AND EARN SOME MONEY IN ORDER TO LIVE A HAPPY AND PROSPEROUS LIFE. YWCA ALSO PROVIDES FOOD, CLOTHING AND GENERAL ITEMS FOR THE U PKEEP OF THE DAY CARE CENTRE AND OLD AGE HOMES AND FOR THE SAME, FUNDS ARE EITHER ARRANGED INTERNALLY OR ARE TRANSFERRED FROM OTHER UNITS OF YWCA. IT WAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER SIDE- STEPPING THE CHARITABLE FEATURES HAS MOST ARBITRARI LY CONCLUDED THAT THE ACTIVITIES ARE WHOLLY COMMERCIAL AND AS A RESULT HAS BROUGHT TO TAX THE ENTIRE SURPLUS OF THE ASSOCIATIO N. HE HAS ALSO OVERLOOKED THE CLARIFICATIONS PROVIDED BY CBDT IN I TS CIRCULAR NO. 11/2008 DATED 19 TH DEC, 2008 WHICH STATES THAT THE COMMERCIAL ACTIVITY OF ANY NGO WILL NOT BE SUBJECT TO TAX IF A LONG WITH COMMERCIAL ACTIVITIES IT IS ENGAGED IN PROVIDING RE LIEF OF THE POOR, I.T.A. NO. 2408/DEL/2013 ASSESSMENT YEAR 2009-10 12 EDUCATION, MEDICAL RELIEF. HE SUBMITTED THAT THE NE WLY INSERTED PROVISO TO SECTION 2(15) WILL APPLY ONLY TO ENTITIE S WHOSE PURPOSE IS ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY I.E. THE FOURTH LIMB OF THE DEFINITION OF CHARITABLE PURPOSE CONTAINED IN SECTION 2(15). HE DREW OUR ATTENTION TO OBJECTS 4, 7 AND 8 OF THE OBJECTS CLAUSE OF THE MEMORANDUM WHICH PROVIDE THAT THE INCOME AND PROPERTY OF THE SHALL BE APPLIED SOLELY TOWARDS THE PROMOTION OF THE OBJECTS OF THE ASSOCIATION AS SET FORTH IN THIS MEMORANDUM AND THAT NO PORTION THEREOF SHALL BE PAI D OR TRANSFERRED DIRECTLY OR INDIRECTLY BY WAY OF DIVIDE ND, BONUS OR OTHERWISE HOWSOEVER BY WAY OF PROFIT TO THE MEMBERS OF THE ASSOCIATION. HE SUBMITTED THAT AS PER THE OBJECTS EVERY MEMBER OF THE ASSOCIATION UNDERTAKES TO CONTRIBUTE TO THE ASSETS OF THE ASSOCIATION IN THE EVENT OF THE SAME BEING WOUND UP DURING THE TIME THAT HE IS A MEMBER OR WITHIN ONE YEAR AFTERWA RDS FOR THE PAYMENT OF THE DEBTS AND LIABILITIES OF THE ASSOCIA TION CONTRACTED BEFORE THE TIME AT WHICH HE CEASES TO BE A MEMBER A ND OF THE COSTS, CHARGES AND EXPENSES OF WINDING UP THE SAME AND FOR THE ADJUSTMENT OF THE RIGHTS OF THE CONTRIBUTORIES AMON GST THEMSELVES. HE SUBMITTED THAT THE OBJECTS CLAUSE AL SO PROVIDES THAT IF UPON THE WINDING UP OR DISSOLUTION OF THE A SSOCIATION THERE I.T.A. NO. 2408/DEL/2013 ASSESSMENT YEAR 2009-10 13 REMAINS AFTER THE SATISFACTION ALL ITS DEBTS AND LI ABILITIES ANY PROPERTY WHATSOEVER, THE SAME SHALL NOT BE PAID TO OR DISTRIBUTED AMONG THE MEMBERS OF THE ASSOCIATION, BUT SHALL BE GIVEN OR TRANSFERRED TO SOME OTHER INSTITUTION OR INSTITUTIO NS HAVING OBJECTS SIMILAR TO THE OBJECTS OF THIS ASSOCIATION. THUS, THE ACTIVITIES OF THE ASSOCIATION ARE PURELY CHARITABLE AND THE CARRYING ON OF SOME COMMERCIAL ACTIVITIES DOES NOT DISENTITL E THE ASSOCIATION FROM THE BENEFITS CONFERRED BY SECTION 11 OF THE INCOME TAX ACT. HE FURTHER SUBMITTED THAT SECTION 2 (15) READ WITH CBDT CIRCULAR NO 11 DATED 19 LH DEC, 2008 CLEARLY PERMITS ANY ASSOCIATION WHICH IS CARRYING ON ALL OR ANY ONE OF THESE ACTIVITIES:- RELIEF TO THE POOR, EDUCATION, MED ICAL RELIEF TO SIMULTANEOUSLY CARRY ON COMMERCIAL ACTIVITY ALSO AN D IS NOT DEBARRED FROM THE BENEFITS OF SECTION 11. HE SUBMIT TED THAT THE ASSESSING OFFICER HAS PAID NO HEED TO THESE FACTS A ND HAS BROUGHT THE ASSESSEE ASSOCIATION UNDER THE TAX NET ON THE M ISCONCEIVED PLEA THAT THE ASSESSEE ASSOCIATION IS ENGAGED IN BU SINESS ACTIVITY AND HENCE, SHOULD BE TAXED AT THE MAXIMUM MARGINAL RATE AND ON THIS NOTION HAS BROUGHT THE ENTIRE SURPLUS FOR T HE YEAR TO TAX. IT WAS ALSO SUBMITTED THAT THE AO HAS FAILED TO REA LISE THAT THE PROVISIONS OF THIS SECTION GET ATTRACTED ONLY ON TH AT PART OF I.T.A. NO. 2408/DEL/2013 ASSESSMENT YEAR 2009-10 14 INCOME WHICH HAS VIOLATED SECTION 13 (1) ( C) AND 1 3(1) (D) AND THE ASSESSEE ASSOCIATION HAS NOT VIOLATED ANY OF TH ESE SECTIONS. HE ALSO SUBMITTED A PROJECT-WISE CHART SHOWING THE REVENUE GENERATED AND THE EXPENDITURE INCURRED FOR THE VARI OUS CHARITABLE PROJECTS DURING THE ASSESSMENT YEAR UNDER CONSIDERA TION AND A BRIEF NOTE ON EACH CHARITABLE ACTIVITY OF THE ASSES SEE. 11. WE HAVE GONE THROUGH THE RELEVANT RECORDS AND H AVE HEARD THE RIVAL SUBMISSIONS. THE TERM RELIEF FOR POOR H AS ASSUMED IMPORTANCE AFTER THE RECENT AMENDMENT REGARDING BUS INESS ACTIVITIES OF CHARITABLE ORGANIZATIONS. THE TERM R ELIEF FOR POOR HAS TO BE UNDERSTOOD IN A WIDER PERSPECTIVE. FOR IN STANCE, IT IS NOT NECESSARY THAT THE OBJECT SHOULD BE FOR THE BET TERMENT OF ALL THE POOR PEOPLE LIVING IN A PARTICULAR COUNTRY OR P ROVINCE. IT WOULD BE SUFFICIENT IF THE OBJECTS ARE FOR THE BENE FITS OF A SECTION OF THE PUBIC AS DISTINGUISHED FROM INDIVIDUALS. IT MAY BE NOTED THAT IN ORDER TO BECOME CHARITABLE, THE RELIEF SHOU LD BE FOR A SECTION OF THE COMMUNITY WHICH COULD BE WELL DEFINE D AND IDENTIFIED BY SOME COMMON QUALITY OF PUBLIC NATURE. THE HONBLE SUPREME COURT IN THE CASE OF THIAGARAJAR CHARITIES V. ACIT 225 ITR 1010 (SC) HAS HELD THAT THE SCOPE OF RELIEF FO R POOR' IS VERY WIDE AND IT CAN EVEN INCLUDE BUSINESS CARRIED ON FOR THE BENEFIT OF I.T.A. NO. 2408/DEL/2013 ASSESSMENT YEAR 2009-10 15 THE POOR. IN THIS CASE, THE OBJECTS OF THE THIAGARAJAR TRUST WERE STUDIED AND DEBATED WHETHER THEY COULD BE CONSIDERE D AS RELIEF FOR POOR. THE OBJECTS OF THE TRUST WHICH WERE HELD TO BE TOWARDS RELIEF FOR POOR WERE AS UNDER:- ' A. TO ESTABLISH, MAINTAIN, RUN, DEVELOP, IMPROVE , EXTEND, GRANT, DONATIONS FOR AND TO AID AND ASSIST IN THE ESTABLIS HMENT, MAINTENANCE, RUNNING, DEVELOPMENT, IMPROVEMENT, AND EXTENSION OF ELEMENTARY SCHOOLS, SECONDARY SCHOOLS. HIGH SCHO OLS, COLLEGES, UNIVERSITIES, WORKSHOPS, WEAVING INDUSTRIAL TECHNOL OGICAL AND OTHER ART, CRAFT AND SCIENCE INSTITUTES, SCHOOLS AN D INSTITUTIONS OF TAMIL OR SANSKRIT LEARNING, HOSTELS FOR THE BENEFIT S OF STUDENTS AND GENERALLY ALL KINDS OF EDUCATIONAL INSTITUTIONS WHETHER GENERAL, TECHNICAL, VOCATIONAL, PROFESSIONAL, OR OF OTHER DESCRIPTION WHATSOEVER FOR THE WELFARE AND UPLIFTMENT OF THE GE NERAL INDIAN PUBLIC AND TO INSTITUTE AND AWARD SCHOLARSHIPS IN I NDIA FOR STUDY, RESEARCH, APPRENTICESHIP FOR ALL OR ANY OF THE SAID PURPOSES. B. TO ESTABLISH, MAINTAIN, RUN, DEVELOP, IMPROVE, E XTEND, GRANT DONATIONS FOR AND TO AID AND ASSIST IN THE ESTABLIS HMENT, MAINTENANCE, RUNNING, DEVELOPMENT, IMPROVEMENT AND EXTENSION OF LIBRARIES, READING ROOMS, RECREATION CENTERS AND ALL OTHER FACILITIES AS ARE CALCULATED TO BE OF USE IN IMPART ING EDUCATION TO THE INDIAN PUBLIC. C. TO ESTABLISH, MAINTAIN, RUN, DEVELOP, IMPROVE, EXTEND, GRANT, DONATIONS FOR AND TO AID AND ASSIST IN THE ESTABLIS HMENT, MAINTENANCE, RUNNING, DEVELOPMENT, IMPROVEMENT, AND EXTENSION OF HOSPITALS, CLINICS, DISPENSARIES SANAT ORIA, MATERNITY HOMES AND ALL SIMILAR INSTITUTIONS AS WILL AFFORD T REATMENT, CURE, I.T.A. NO. 2408/DEL/2013 ASSESSMENT YEAR 2009-10 16 REST, RECUPERATION AND OTHER ALLIED ADVANTAGES IN T HE WAY OF ALLEVIATING THE SUFFERINGS OF HUMANITY. D. TO CONDUCT POOR FEEDING AND GENERALLY TO GIVE F OOD AND CLOTHING TO THE DEFECTIVES AND TO AFFORD RELIEF TO PEOPLE IN DISTRESS AND AFFECTED BY FAMINE , PESTILENCE AND OTHER ACCIDENTS AND CONDUCT OR GRANT DONATIONS FOR THE INMATES OF ORPHA NAGES.' 12. THE HON'BLE APEX COURT HELD THAT BUSINESS INV OLVING THE POOR AND BENEFICIARIES CANNOT BE SAID TO BE BUSINES S OR ACTIVITY FOR PROFIT. THE HON'BLE APEX COURT PROVIDED TWO REA SONS (I) THE BUSINESS IS ONLY A MEANS OF ACHIEVING THE OBJECT OF THE TRUST; IT IS A MEDIUM THROUGH WHICH THE OBJECTS ARE ACCOMPLIS HED (II) THE BUSINESS HELD AS CORPUS PROPERTY UNDER TRUST PR ODUCES OR RESULTS IN INCOME, LIKE ANY OTHER PROPERTY. IN THE LIGHT OF THIS DECISION , BUSINESS ACTIVITIES INVOLVING THE BENEFICIARIES AN D DONE ONLY WITH THE MOTIVE OF PROVIDING RELIEF TO TH E POOR , CANNOT BE CONSIDERED AS BUSINESS. 13. THE ISSUE OF BUSINESS/COMMERCIAL ACTIVITIES W AS ALSO CONSIDERED BY THE HON'BLE SUPREME COURT IN THE CASE OF ASSTT. CI T V. THANTHI TRUST 247 ITR 785. T HE HONBLE SUPREME COURT HELD THAT EVEN THE BUSINESS OF WEAVING CLOTH AND ST ITCHING CLOTHING BY EMPLOYING WOMEN, CARRIES ON THE BUSINES S IN THE COURSE OF ACTUALLY ACCOMPLISHING ITS PRIMARY OBJECT OF AFFORDING I.T.A. NO. 2408/DEL/2013 ASSESSMENT YEAR 2009-10 17 RELIEF TO THE POOR AND IT WOULD QUALIFY FOR THE EXE MPTION UNDER SECTION 11. IN THIS CASE THE HON'BLE APEX COURT HEL D THAT, ..AS IT STANDS AMENDED IN 1992, ALL THAT IS REQUIRED UNDER SECTION 11(4A) FOR THE BUSINESS INCOME OF A TRUST OR INSTITUTION T O BE EXEMPT FROM TAX IS THAT THE BUSINESS SHOULD BE INCIDENTAL TO TH E ATTAINMENT OF THE OBJECTIVES OF THE TRUST OR INSTITUTION. A BUSIN ESS WHOSE INCOME IS UTILIZED BY THE TRUST OR INSTITUTION FOR THE PUR POSES OF ACHIEVING THE OBJECTIVES OF THE TRUST OR INSTITUTION IS A BUS INESS WHICH IS INCIDENTAL TO THE ATTAINMENT OF THE OBJECTIVES OF T HE TRUST OR INSTITUTION IS, SURELY, A BUSINESS WHICH IS INCIDEN TAL TO THE ATTAINMENT OF THE OBJECTIVES OF THE TRUST. IN ANY E VENT, IF THERE BE ANY AMBIGUITY IN THE LANGUAGE EMPLOYED, THE PROVISI ON MUST BE CONSTRUCTED IN A MANNER THAT BENEFITS THE ASSESSEE. THE TRUST IS, THEREFORE, ENTITLED TO THE BENEFITS OF SECTION 11 F OR THE ASSESSMENT YEAR 1992-93 AND THEREAFTER. 14. IN THE LIGHT OF THE ABOVE TWO SUPREME COURT R ULINGS, IT IS CLEAR THAT THE SCOPE OF THE TERM RELIEF FOR POOR I S VERY WIDE AND CANNOT BE CONSTRICTED WITH LIMITED INTERPRETATION O F CONFINING IT TO SOME RELIEF OR EMERGENCY SUPPORT TO THE POOR IN THE SHORT RUN. THE SCOPE OF THE TERM RELIEF FOR POOR IS WIDE ENOUG H TO INCLUDE ANY KIND OF ACTIVITY WHICH PROVIDES SUPPORT OR BENE FIT TO THE I.T.A. NO. 2408/DEL/2013 ASSESSMENT YEAR 2009-10 18 POOR. IN THIS PROCESS, AN ACTIVITY SHALL NOT BE CON SIDERED AS BUSINESS PROVIDED IT SATISFIES THE CONDITION OF BEI NG ONLY A MEDIUM TO ACHIEVE THE OBJECT OF RELIEF TO THE POOR. COMING TO THE FACTS AND THE FIGURES OF THE CASE, THE PROJECT-WISE SURPLUS/DEFICIT FOR THE YEAR, AS SUBMITTED BY THE LD. AR, IS AS UND ER: REVENUE GENERATED & EXPENDITURE INCURRED DURING 200 9-10 NAME OF THE PROJECT/ACTIVITY GROSS REVENUE EXPENDITURE SURPLUS/DEFICIT HEADQUARTERS, DELHI 6862042 3866075 2995967 GUEST HOUSE, DELHI 9231652 10171397 (939746) HOSTEL, ANANDGIRI 6354021 5467121 886901 YWCA CANTEEN, VELLORE 28495989 27404043 1091946 HOSTEL, WYOMING 894374 800493 93881 WOMENS HOSTEL, CHANDIGARH 1557327 1159107 398220 DAY CARE CENTRE, DEHRADUN 169064 300366 (131302) SENIOR CITIZENS ACCOMMODATION, DEHRADUN 122550 256338 (133788) TOTALS 53687019 49424940 4262079 A PERUSAL OF THE CHART SHOWS THAT AGAINST A GROSS R EVENUE OF RS. 5,36,87,019/-, THE ASSESSEE HAS EXPENDED A SUM OF R S. 4,942,490/- AND THE NET SURPLUS COMES TO RS. 42,62 ,079/- WHICH IS ONLY 7.93% OF THE GROSS RECEIPTS. IT IS AL SO SEEN THAT THE ASSESSEE HAS INCURRED DEFICITS IN ITS GUEST HOUSE A T DELHI, DAY CARE CENTRE AT DEHRADUN AND SENIOR CITIZENS ACCOMMO DATION AT I.T.A. NO. 2408/DEL/2013 ASSESSMENT YEAR 2009-10 19 DEHRADUN WHICH HAD TO BE FUNDED FROM THE SURPLUS AT OTHER PROJECTS. HENCE, IT CAN BE LOGICALLY INFERRED THAT THE SURPLUS EARNED IS ONLY INCIDENTAL TO THE CHARITABLE ACTIVIT IES. ALSO, THERE IS NO FINDING BY THE AO ABOUT ANY DIVERSION OF FUND S FOR THE INDIVIDUAL BENEFIT OF ANY MEMBER OF THE ASSOCIATION OR FOR THE BENEFIT OF HIS RELATIVE. ALSO THERE IS NO FINDING B Y THE AO REGARDING ANY KIND OF VIOLATION OF ANY OTHER CONDIT IONS BY THE ASSESSEE, AS LAID DOWN IN SECTION 13 OF THE ACT. TH EREFORE, IN VIEW OF THE FACTUAL MATRIX OF THE CASE AS WELL AS THE JU DICIAL PRECEDENTS AS AFORESAID, WE ARE OF THE CONSIDERED O PINION THAT THE ASSESSEE IS ENGAGED IN PROVIDING RELIEF TO THE POOR, EDUCATION AS WELL AS MEDICAL RELIEF. WE HAVE NO HESITATION IN HOLDING THAT THE ACTIVITIES OF THE ASSESSEE ASSOCIATION FALL WIT HIN THE AMBIT OF THE FIRST THREE LIMBS VIZ. RELIEF TO THE POOR, EDUC ATION OR MEDICAL RELIEF AND IT WILL NOT BE HIT BY THE NEWLY INSERTED PROVISO TO SECTION 2(15). 15. MOREOVER, CBDT CIRCULAR NO. 11/2008 DATED 19 TH DEC, 2008 STATES THAT THE COMMERCIAL ACTIVITY OF ANY CHARITAB LE TRUST WILL NOT BE SUBJECT TO TAX IF ALONG WITH COMMERCIAL ACTI VITIES IT IS ENGAGED IN PROVIDING RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF. I.T.A. NO. 2408/DEL/2013 ASSESSMENT YEAR 2009-10 20 IN THIS CONTEXT, PARA 2.1, 2.2, AND 3 OF THE CIRCUL AR BEING RELEVANT ARE BEING REPRODUCED HEREUNDER: 2.1 THE NEWLY INSERTED PROVISO TO SECTION 2(15) WI LL NOT APPLY IN RESPECT OF THE FIRST THREE LIMBS OF SECTIO N 2(15), I.E., RELIEF OF THE POOR, EDUCATION OR MEDICAL RELIEF CON SEQUENTLY, WHERE THE PURPOSE OF A TRUST OR INSTITUTION IS RELI EF OF THE POOR, EDUCATION OR MEDICAL RELIEF, IT WILL CONSTITUTE CH ARITABLE PURPOSE EVEN IF IT INCIDENTALLY INVOLVES THE CARRY ING ON OF COMMERCIAL ACTIVITIES. 2.2 RELIEF OF THE POOR ENCOMPASSES A WIDE RANGE OF OBJECTS FOR THE WELFARE OF THE ECONOMICALLY AND SOCIALLY DISADVANTAGED OR NEEDY. IT WILL, THEREFORE, INCLUDE WITHIN ITS AMBIT PURPOSES SUCH AS RELIEF TO DESTITUTE, ORPHANS OR THE HANDICAPPED, DISADVANTAGED WOMEN OR CHILDREN, SMALL AND MARGINAL FARMERS, INDIGENT ARTISANS OR SENIOR CITIZ ENS IN NEED OF AID. ENTITIES WHO HAVE THESE OBJECTS WILL CONTIN UE TO BE ELIGIBLE FOR EXEMPTION EVEN IF THEY INCIDENTALLY CA RRY ON A COMMERCIAL ACTIVITY, SUBJECT, HOWEVER, TO THE CONDI TIONS STIPULATED UNDER SECTION 11(4A) OR THE SEVENTH PROV ISO TO SECTION 10 (23C) WHICH ARE THAT (I) THE BUSINESS SHOULD BE INCIDENTAL TO THE ATTAINMENT OF THE OBJECTIVES OF THE ENTITY, AND (II) SEPARATE BOOKS OF ACCOUNT SHOULD BE MAINTAINED IN RESPECT OF SUCH BUSINESS. SIMILARLY, ENTITIES WHOSE OBJECT IS EDUCATION OR MEDICAL RELIEF WOULD ALSO CONTINUE TO BE ELIGIBLE FOR EXEM PTION AS I.T.A. NO. 2408/DEL/2013 ASSESSMENT YEAR 2009-10 21 CHARITABLE INSTITUTIONS EVEN IF THEY INCIDENTALLY C ARRY ON COMMERCIAL ACTIVITY SUBJECT TO THE CONDITIONS MENTI ONED ABOVE. 3. THE NEWLY INSERTED PROVISO TO SECTION 2(15) WIL L APPLY ONLY TO ENTITIES WHOSE PURPOSE IS ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY I.E. THE FOURTH LIMB OF THE DEFINITION OF CHARITABLE PURPOSE CONTAINED IN SECTION 2(15). HE NCE, SUCH ENTITIES WILL NOT BE ELIGIBLE FOR EXEMPTION UNDER S ECTION 11 OR UNDER SECTION 10(23C) OF THE ACT IF THEY CARRY ON C OMMERCIAL ACTIVITIES. WHETHER SUCH AN ENTITY IS CARRYING ON A N ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS IS A QUESTION OF FACT WHICH WILL BE DECIDED BASED ON THE NATURE, SCOPE, EXTENT AND FREQUENCY OF THE ACTIVITY. 16. IT IS SEEN THAT THE OPENING LINE OF PARA 3 IS C LEARLY STATING THAT PROVISO TO SECTION 2(15) WILL APPLY ONLY TO ENTITIES WHOSE PURPOSES IS ADVANCEMENT OF ANY OTHER OBJECT OF GENE RAL PUBLIC UTILITY. WE HAVE ALREADY HELD THAT THE ACTIVITIES O F THE ASSESSEE ASSOCIATION FALL WITHIN THE AMBIT OF THE FIRST THRE E LIMBS VIZ. RELIEF TO THE POOR, EDUCATION OR MEDICAL RELIEF AND IT WIL L NOT BE HIT BY THE NEWLY INSERTED PROVISO TO SECTION 2(15). ACCORD INGLY, THE BENEFIT OF THIS CIRCULAR SHOULD ALSO ACCRUE TO THE ASSESSEE AND, THEREFORE, THE BENEFIT OF EXEMPTION CLAIMED BY THE ASSESSEE U/S 11 CANNOT BE RIGHTFULLY DENIED. WE, ACCORDINGLY, RE FUSE TO I.T.A. NO. 2408/DEL/2013 ASSESSMENT YEAR 2009-10 22 INTERFERE WITH THE ORDER PASSED BY THE LD. CIT (A) AND UPHOLD THE SAME. 17. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 29/2/ 2016. SD/- SD/- (J. SUDHAKAR REDDY) (SUDHANSHU SRIVAST AVA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: THE 29TH OF FEBRUARY, 2016 GS COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER ASSTT. REGISTRAR