The ACIT (Exemptions), Circle-2, Ahmedabad V. M/s. United Way of Baroda, Vadodara

ITA 7/AHD/2020

AI Insights

The case revolves around the appeal by the Assistant Commissioner of Income-tax (Exemptions), Circle-2, Ahmedabad against the order of the CIT(A)-9, Ahmedabad, which favored M/s. United Way of Baroda, a trust registered under Section 12AA of the Income Tax Act. The primary contention was whether the trust's activities, which included organizing events like Garba, fall under the 'advancement of any other object of general public utility' as per the amended Section 2(15) of the Act, thereby disqualifying it from the benefits under Sections 11 and 12. The CIT(A) had previously ruled in favor of the trust, citing that its activities were charitable and not conducted with a profit motive, a decision supported by the Tribunal and the High Court in earlier assessments.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 125033 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 31-07-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 31-12-2019
• Other Referred Cases: ITA No. 772/Ahd/2017 & Ors., Revenue's appeal for A.Y. 2014-15
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution
• Section: 11; 143(3); 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & Ms. MADHUMITA ROY, JUDICIAL MEMBER आयकर अपील सं./ I. T. A. No. 7/Ah d/2020 ( नधा रण वष / A ss es sment Year : 2015-16) A s s t . C om m iss io ne r o f I n co me- t a x ( E x e m pt i o ns ) C ir cl e - 2 , A h me d a b a d बनाम/ Vs . M/ s. U ni t e d W ay o f B a ro d a 9 t h F lo o r , Si dc u p T o w e r , R a e C o u r s e C i r c le , V a do d ar a थायी लेखा सं./जीआइआर सं./P A N/ G I R N o . : A A A T U 0 4 1 4 E (अपीलाथ /Appellant) . . ( यथ / Respondent) अपीलाथ ओर से /Appellant by : Shri Sudhendu Das, CIT. DR यथ क ओर से/Respondent by : Ms. Amrin Pathan, A.R. स ु नवाई क तार ख / D a t e o f H e a r i ng 01/08/2023 घोषणा क तार ख /D a t e o f P ro n o u nc e me n t 04/08/2023 O R D E R PER Ms. MADHUMITA ROY - JM: The instant appeal filed at the behest of the Revenue is directed against the order dated 23.10.2019 passed by the Ld. Commissioner of Income Tax (Appeals)-9, Ahmedabad (in short ‘CIT(A)’) arising out of the order dated 11.12.2017 passed by the DCIT (Exemptions), Circle-2, Ahmedabad under Section 143(3) of the Income Tax Act, 1961, (hereinafter referred to as ‘the Act’) for Assessment Year 2015-16. ITA No. 7/Ahd/2020 (ACIT vs. M/s. United Way of Baroda) A.Y.– 2015-16 - 2 - 2. The brief facts leading to the case is this that the appellant is a trust registered under Section 12AA of the Act by and under order No. BRD/Exemption/110-2-U/98-99, Dated 28.12.1998. It is a religious public trust, registered under Bombay Public Trust Act, by and under registration No. Gujarat/1358/Vadodara, dated 13.07.1998 issued under the signature of the Assistant Charity Commissioner, Baroda Region, Baroda. The assessee declared to have gross total income of Rs.6,33,13,673/-. It has accumulated surplus of Rs.1,08,79,980/- under Section 11(2) of the Act. In the computation of income, the appellant claimed application of fund for charitable purpose of Rs.4,29,36,639/- and claimed set apart under Section 11(1)(a) of the Act to the tune of Rs.94,97,051/-. The Ld. AO held that the activity of the assessee as per amended provision of Section 2(15) of the Act was the advancement of any other object of general public utility and thus not liable for benefit under Section 11 & 12 of the Act in view of Section 13(8) of the Act. The claim of the assessee for certain expenses not incidental to the generation of receipt of Rs.2,33,88,428/-, corpus fund of Rs.1,58,31,976/-, accumulation of Rs.1,08,79,980/- under Section 11(2) of the Act and Rs.94,97,051/- under Section 11(1)(a) of the Act was denied. 3. Relying upon the order passed by the predecessor for A.Y. 2011-12 & 2012-13 in assessee’s own case wherein it was held that the provision of 1 st Proviso of Section 2(15) r.w.s. 13(8) of the Act would not be applicable to the case of the appellant, the assessee was granted relief by the Ld. CIT(A) holding it a charitable trust. In fact, the Ld. CIT(A) held that in the computation of income, the very opening part is the figure of Rs,6,33,13,673/- which is found to be inclusive of accumulated fund of Rs. 1,08,79,980/-. Therefore, the AO has committed a mistake in considering the amount again in making the addition solely for the reason that there was applicability of section 2(15) r. w. s. 13(8) of ITA No. 7/Ahd/2020 (ACIT vs. M/s. United Way of Baroda) A.Y.– 2015-16 - 3 - the Act and treating the assessee as AOP. The assessee trust is held to be a charitable trust to which provisions of section 2(15) r.w.s.13(8) would not be applicable. Accordingly, the Ld. CIT(A) has deleted the addition of Rs. 1,08,89,980/-. 4. At the time of hearing of the appeal, Ld. Counsel appearing for the assessee stated that issue is squarely covered by the order passed in assessee’s own case for A.Ys. 2009-10 to 2014-15 in ITA No. 772/Ahd/2017 & Ors., order dated June 25, 2019. In fact, the copy of the order passed by the Hon’ble Jurisdictional High Court in assessee’s own case for A.Y. 2014-15 in Revenue’s appeal was also submitted before us wherein the Hon’ble High Court has been pleased to uphold the order passed by the Income Tax Appellate Tribunal. The relevant portion whereof is as follows: “13. Prior to the introduction of the Proviso to Section 2(15) of the Act, there was no dispute that the assessee herein was established for charitable purposes and, therefore, its income was not to be included in the total income and was, therefore, granted the benefit of exemption. The income received by the assessee is from organizing the event of Garba by sale of tickets and also leasing out food and beverages outlets at the venue of the event. However, the dominant and main object of the assessee cannot be said to be organizing the event of Garba. The charitable activities which the assessee has been undertaking has been discussed by the Appellate Tribunal. We take notice of the fact that the assessee has been supporting 120 non-government organizations. The assessee is into health and human services for the purpose of improving the quality of life in the society. The objectives of the Society includes mobilizing resources from the local communities. It organizes medical camps for thalassemia affected children. It also provides vocational training to the disabled orphans, undertakes various program for empowering women including providing midday meal to the poor students. The activities like organizing the event of Garba including the sale of tickets and issue of passes etc. cannot be termed as business. The two authorities have taken the view that the profit making is not the driving force or the objective of the assessee. This is indicative of the fact that any income generated by the assessee from events like Garba does not find its way into the pockets of any individual or entities. It is to be utilized fully for the purposes of the objects of the assessee. As held in many pronouncements, the expression “trade”, “commerce' and “business” as occurring in the first Proviso to Section 2(15) of the Act must be read in the context of the intent and purport of section 2(15) of the Act and cannot be interpreted to mean any activity which is carried on in an organized manner. The purpose and the dominant object for which an institution carries on its activities is material to determine whether the same is business or not. The object of introducing the first proviso is to exclude the organizations which are carrying on regular business from the scope of "charitable purpose". An activity would be considered 'business' if it is undertaken with a profit motive, but in some cases, this may not be ITA No. 7/Ahd/2020 (ACIT vs. M/s. United Way of Baroda) A.Y.– 2015-16 - 4 - determinative. Normally, the profit motive test should be satisfied, but in a given case the activity may be regarded as a business even when the profit motive cannot be established/ proved. In such cases, there should be evidence and material to show that the activity has continued on sound and recognized business principles and pursued with reasonable continuity. There should be facts and other circumstances which justify and show that the activity undertaken is in fact in the nature of business. 14. In the overall view of the matter, more particularly, having regard to the concurrent findings recorded by the two authorities, we are of the view that we should not interfere with the order passed by the Appellate Tribunal. 15. In the result, this appeal fails and is hereby dismissed.” 5. Respectfully relying upon the same, we do not find any reason to deviate from the stand taken by the Ld. CIT(A) in holding it a Charitable Trust in the identical facts and circumstances of the matter and further invocation of provision of 1 st Proviso of Section 2(15) of the Act is not sustainable and relief so granted is found to be just and proper so as to warrant interference. The same is, therefore, upheld. The Revenue’s appeal is, thus, found to be devoid of any merit and, thus, dismissed. 6. In the result, the appeal of the Revenue is dismissed. This Order pronounced on 04/08/2023 Sd/- Sd/- (WASEEM AHMED) (MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 04/08/2023 S. K. SINHA True Copy आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं%धत आयकर आय ु 'त / Concerned CIT 4. आयकर आय ु 'त(अपील) / The CIT(A)- 5. *वभागीय -त-न%ध, आयकर अपील य अ%धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड3 फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील$य अ%धकरण, अहमदाबाद / ITAT, Ahmedabad