SHRI MAHESH SEVA SAMITI , AMRAVATI V. INCOME TAX OFFICER WARD-3, AMRAVATI, AMRAVATI

ITA 403/NAG/2017

AI Insights

The case involves Shri Mahesh Seva Samiti, a public charitable trust, which appealed against the order of the CIT(A)-1, Nagpur, denying them the section 11 exemption for the assessment year 2010-11. The trust argued that the income generated from running a marriage hall and guesthouse was used exclusively for charitable purposes such as education and medical aid. However, both the CIT(A) and the Tribunal found that these activities, being commercial in nature, do not fall under the charitable activities as defined post the amendment to section 2(15) of the Income Tax Act, 1961. The Tribunal referenced the Supreme Court's decision in New Noble Educational Society vs. CCIT, which supported the view that such activities, if carried out in a business-like manner, do not qualify for tax exemptions under the head of 'charitable activities'.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 136793 (ITAT-NAGPUR)
• Duration Of Justice: 5 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 01-11-2022
• Assessment Year: 2010-2011
• Appeal Filed On: 17-12-2017
• Other Referred Cases: New Noble Educational Society vs. CCIT [2022] 143 taxmann.com 276 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Charitable institution; Source of fund
• Section: 11; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR – VIRTUAL COURT BEFORE SHRI S. S. GODARA, JUDICIAL MEMBER आयकर अपील सं. / ITA No.403/NAG/2017 िनधाᭅरण वषᭅ / Assessment Year: 2010-11 Shri Mahesh Seva Samiti, Badnera Road, Amravati- 444601. PAN : AAATM1457F Vs. ITO, Ward- 3, Amravati. Appellant Respondent आदेश / ORDER PER S. S. GODARA, JM: This assessee’s appeal for assessment year 2010-11 arises against the CIT(A)-1, Nagpur’s order dated 28.09.2017 passed in case no. CIT(A)-1/508/2012-13, involving proceedings u/s 143(3) of the Income Tax Act, 1961; in short “the Act”. Heard both the parties. Case file perused. 2. Coming to the assessee’s sole substantive grievance that both the learned lower authorities have erred in law and on facts in denying impugned section 11 exemption, it is noticed at the outset Assessee by : Shri Mahavir Atal Revenue by : Shri G. J. Ninawe Date of hearing : 02.11.2022 Date of pronouncement : 29.12.2022 ITA No.403/NAG/2017 2 that the CIT(A)’s detailed discussion upholding the assessment findings assessing the income herein as Rs.9,55,996/- reads as follows :- “4.0 Appellant’s submissions along with assessment order and records have been considered carefully. Return filed by the appellant, its financial statements along with various case laws, as relied on by the appellant, have also been perused. There is no denying the fact that the appellant trust is carrying out its activities as per its objects, as mentioned in the Memorandum. Besides educational, medical, relief to the poor, these objects also include construction of Samaj Bhavan (Community Centre), Marriage Hall, Atithiniwas (guesthouse). These objects and activities do not fall in any of the limbs of section 2(15) of the I.T. Act i.e. educational, medical relief to the poor, yoga, preservation of environment/monuments. They definitely fall in the category of advancement of any other objects of general public utility. Thus the amended provisions of section 2(15), as amended by the Finance Act, 2010 w.r.e.f. 01.04.2009, are found applicable to the appellant’s case. The appellant has contended before AO and even in appeal that receipts earned from marriage hall, restaurant, guesthouse etc. have been applied towards education, medical relief and relief to the poor. Also these activities are not carried out as business or trade. However, it is difficult to comprehended as to how giving marriage hall on rent, including making arrangements and charging for caterers and decorators; running of guesthouse by charging room-wise rent are activities incidental to alleged main objects of education, medical relief and relief to the poor. It is further seen that the appellant is also getting fixed rental income from restaurant, namely Shivalaya and mobile tower erected at its premises. It has been held by various courts that any business activity integrally required for the dominant charitable activity is also a charitable activity. In the appellant’s case, this is not found to be so. Even presuming that the appellant is not carrying out these activities for profit motive, as contended by the appellant, these activities fall into object of general public utility only. AO has analysed, in detail, the activities carried out by the appellant, income earned application thereof on objects of education etc. and other objects (Para-8.2 Pg.6). 4.1 After perusal of entire material on records, AO is found justified in denying the exemption claimed by the appellant u/s 11 of the I.T. Act as per amended provisions of section 2(15) of the I.T. Act & facts of the case. Accordingly, assessment of appellant’s income at Rs.9,56,000/- is, hereby, confirmed. 5.0 In the result, the appeal is dismissed.” ITA No.403/NAG/2017 3 3. Learned counsel has taken pains to file detailed written submissions reads as follows :- “The appellant is a public charitable trust having aims of education, medical and assistance to poor for which total amount is spent at Rs.650161/- as under : Education - 430000 + 42240 = 4,72,240/- Medical relief - 38941 + 65156 = 1,04,097/- Relief to poor - 29200 = 29,200/- Religious - = 44,624/- 6,50,161/- The activity of running AtithiGruha and hall is only for generating the funds exclusively for education, medical aid and not utilized for any other purpose. Regular books of accounts are maintained and duly audited. Separate books of accounts are maintained for Atithi wherein surplus is 360130/-. The gross receipt of the trust is 38,82,479/- which includes net receipt of Rs 360130/- from AtithiGruha. The net available surplus from the activity including accrued interest is at Rs.12,92,554/-. Out of this amount of Rs 6,50,161/- is spent for charity by distributing education aid, medical aid and financial assistance to poor all by bank cheques whereof details are included in paper book. The aims and objects of trust are also included in paper book. It is very clearly mentioned in the aims & object and constitution that for funding the main object of education, medical and financial aid to poor, the activity of AtithiGruha and marriage hall be undertaken on charitable basis. Thus the activity is incidental to main objects of educational, medical and financial aid and is not at all a GPU activity. The funds are required for providing charitable aid which cannot be raised only by way of donations. To provide charitable aid to the poor year after year, source of fund is necessary. It is not at all the intention of legislature to bar genuine trust from helping poor by raising funds from such activity. The fact that appellant trust is carrying on charitable activity is affirmed by the AO as well as CIT Appeals and for funding these charitable activities the funds generated from AtithiGruha are exclusively used for charitable cause. The recent decision of Hon'ble Supreme Court is supportive to the activity of appellant trust and there is no adverse impact. Requested to appreciate the documents embodied in paper book.” ITA No.403/NAG/2017 4 4. The Revenue has placed strong reliance on the CIT(A)’s foregoing detailed discussion upholding the assessment findings. 5. I have given my thoughtful consideration to foregoing vehement arguments and find no merit in assessee’s stand. It has already come on record that the assessee has been carrying out its activities in the nature of business by running marriage hall and events including various types of arrangement like catering, decoration, running of guesthouse by charging room-wise rent etc which could be hardly term as “charitable” as per hon’ble apex court’s latest landmark’s decision in New Noble Educational Society vs. CCIT [2022] 143 taxmann.com 276 (SC). Learned counsel at this stage sought to draw a distinction that their lordships had dealt with an issue of “general public utility” u/s 2(15) than the assessee’s specific object of carrying out educational activities. His written submissions also plead that the assessee has been derived the impugned income to be applied for charitable purposes only. All these arguments fell to evoke this tribunal’s concurrence once it has come on record that the assessee has been carried out business activities only in light of CIT(A)’s detailed discussion which are ITA No.403/NAG/2017 5 nowhere rebutted till date. The assessee’s instant sole substantive grievance stands rejected accordingly. 6. This assessee’s appeal is dismissed in above terms. Order pronounced on this 29 th day of December, 2022. Sd/- (S. S. GODARA) JUDICIAL MEMBER पुणे / Pune; ᳰदनांक / Dated : 29 th December, 2022. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A)-1, Nagpur. 4. The Pr. CIT-1, Nagpur. 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, नागपुर / DR, ITAT, Nagpur. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.