AI Insights
The case involves the Rasha Welfare Foundation appealing against the rejection of their applications for registration under sections 12AA and 80G of the Income Tax Act, 1961, by the CIT(E). The Foundation argued that their activities, which included promoting the use of electric vehicles and reducing carbon emissions, were charitable and not commercial in nature. The CIT(E) had rejected the applications on the grounds that the Foundation's activities appeared to be commercial. The Tribunal, after considering the arguments and evidence presented, including the nature of the agreements with beneficiaries and the use of CSR funds, concluded that the Foundation's activities were indeed charitable and directed the CIT(E) to grant the requested registrations.
Appeal Details
Counselvise Citation
[2025] 140 COUNSELVISE.COM (IT) 704903 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
04-07-2025
Appeal Filed By
Assessee
Order Result
Allowed
Assessment Year
2024-2025
Judgement Text
" Page 1 of 9 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘F’ BENCH, NEW DELHI BEFORE MS. MADHUMITA ROY, JUDICIAL MEMBER, AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No. 5180/DEL/2024 (A.Y. 2024-25) ITA No. 5191/DEL/2024 (A.Y. 2024-25) Rasha Welfare Foundation Vs. The C.I.T. 333-A, First Floor, [Exemption] Sant Nagar, Delhi Delhi PAN – AADTR 5464 J (Applicant) (Respondent) Assessee By : Shri Sanjeet Paliwal, Adv Shri Anupam, Adv Department By : Shri Monika Singh, CIT-DR Date of Hearing : 26.06.2025 Date of Pronouncement : 04.07.2025 ORDER PER BENCH: The above captioned two appeals by the assessee are directed against two separate orders of the ld. CIT(E), dated 04.11.2024 for A.Y 2024-25 respectively, rejecting application for registration u/s 12AA of the Income- ITA No. 5180/DEL/2024 ITA No. 5191/DEL/2024 Rasha Welfare Foundation Page 2 of 9 tax Act, 1961 [the Act, for short] and approval u/s 80G of the Act respectively. 2. Since both the appeals involve common issues, they were heard together and are disposed of by this common order for the sake of convenience and brevity. 3. Brief facts of the case are that the assessee is a public charitable trust duly registered under the Indian Trusts Act, 1882. The object of the trust was to promote environmental sustainability by encouraging the use of electric vehicles, reducing carbon emissions and supporting scalable and climate resilient transportation solutions as part of the CSR vision. The ld. CIT(E) has denied grant of registration u/s 12AA and 80G of the Income-tax Act, 1961 [the Act, for short] stating that the rental activity of the assessee shows that it is commercial in nature and the assessee is engaged in commercial activities. 4. Aggrieved the assessee is before us. The ld AR of the assessee vehemently argued that the assessee is not engaged in any commercial activities but in activities which are within the scope of charitable objects which is reflected in object no 17 of the Trust Deed objectives. Incidental ITA No. 5180/DEL/2024 ITA No. 5191/DEL/2024 Rasha Welfare Foundation Page 3 of 9 income (e.g., user fee) is reinvested as per Rule 7(2) of the Companies (CSR Policy) Rules, 2014. The project contributes to environmental sustainability and social upliftment. 5. The ld AR submitted that the larger objective of the initiative was also to promote environmental sustainability by encouraging the use of electric vehicles, reducing carbon emissions, and supporting scalable and climate-resilient transportation solutions as part of the CSR vision. The ld AR submitted that despite the above bona fide activities, the provisional registration granted to the Appellant vide order dated 07.04.2022 (valid from A.Y. 2022-23 to A.Y. 2024-25) has been cancelled by the Respondent on the alleged ground of lack of genuineness in the Appellant's activities. 6. The ld AR further submitted that during the validity of the provisional registration, the activities undertaken were strictly in line with the stated charitable objects and in compliance with the applicable provisions of the Income Tax Act, 1961. No part of the funds was utilized in violation of Section 12A(1)(ac)(iii). The ₹5,500 monthly amount is a nominal user fee which covers maintenance cost of vehicle if any and ensures accountability of end user and will help to make the project sustainable. ITA No. 5180/DEL/2024 ITA No. 5191/DEL/2024 Rasha Welfare Foundation Page 4 of 9 7. It was further submitted that while the CSR project undertaken by the assessee may incidentally generate surplus in the form of monthly user fees or other revenue, such income is neither retained as profit nor diverted for personal or commercial use. In accordance with Rule 7(2) of the Companies (CSR Policy) Rules, 2014, any surplus arising out of CSR activities is not treated as business income, but is strictly reinvested into the CSR project itself or utilized towards other eligible CSR activities undertaken by the Appellant. The said surplus is applied solely to enhance, scale, and sustain the CSR initiative, thereby fulfilling both the charitable objectives of the Trust and the statutory intent of Corporate Social Responsibility under the Companies Act, 2013. Accordingly, the generation of such incidental income does not vitiate the charitable nature of the activities carried out, nor does it attract any disqualification under Section 12A(1)(ac) (iii) of the Income Tax Act, 1961. 8. The ld AR relied on the Judgment passed by Hon'ble Supreme Court in Additional Commissioner of Income Tax, Gujarat, Ahmedabad Vs. Surat Art Silk Cloth Manufacturers Association Surat (1980) 2 SCC 31 wherein it held that it is not the activity per se, but the dominant intent that determines whether the trust is charitable. If the dominant object of ITA No. 5180/DEL/2024 ITA No. 5191/DEL/2024 Rasha Welfare Foundation Page 5 of 9 the trust is charitable then mere existence of profit does not necessarily negate charitable status as long as the profits are applied solely for the charitable object, and not distributed among members. 9. Per contra, the ld. DR stated that the entire scheme is devised to earn profit and the entire transactions are purely of commercial nature which is reflected in agreement with the assignee. The ld. DR further stated that there is no detail as to how the assignees are selected. The ld. DR supported the findings of the CIT(E) and stated that the assessee is charging rental for the use of the vehicles showing its commercial leanings. 10. In its rejoinder, the ld. counsel for the assessee stated that from a reading of the MOU and Agreement with assignees, it can be seen that there is no profit motive. The ld. counsel for the assessee submitted that at this juncture, the Revenue is supposed to examine the genuineness of the trust’s activities and if there is any mis-utilization, the Revenue can cancel the registration in a future date. 11. We have heard the rival submissions and have perused the relevant material on record. We find that the assessee has received CSR funds: ₹34,00,000 from Betul Wind Farms Ltd., 1,74,039 from Transmec (India) ITA No. 5180/DEL/2024 ITA No. 5191/DEL/2024 Rasha Welfare Foundation Page 6 of 9 Pvt. Ltd., 20,00,000 from Sab Ka Mangal Ho Foundation. These Funds were used for procurement and assignment of Ather electric vehicles to 10 eligible beneficiaries at a monthly rent of Rs 5500/-. 12. We further find that the assessee has entered an MOU with Betul Wind Farms Ltd wherein Betul Farms has extended CSR funds of Rs 25,00,000/- to the assessee for the purposes of offering sustainable livelihood opportunities to semi-urban youths by granting them access to 2 wheelers through a pay-per-use system. The scope of MOU includes provision for providing access to 2 wheelers to empower youths to engage in income generating activities, enhancing their financial independence and promoting economic resilience in the targeted community. The MoU assigns the role to the assessee to identify the EV provider for the project and design the pay-per-use. On the basis of these MOU, the assessee identified various beneficiaries and entered into an agreement with them to lease the electric vehicle to the assignees for a period of 3 years for the purpose of transportation of goods/people at a monthly fees of Rs 5000/-. We find that post the 3-year term, ownership of vehicles is transferred to beneficiaries. ITA No. 5180/DEL/2024 ITA No. 5191/DEL/2024 Rasha Welfare Foundation Page 7 of 9 13. Considering the MoU and agreements with assignees, we are of the considered view that the projects undertaken by the assessee is of charitable nature and aligns with CSR objectives under Companies Act, 2013. We find that there are no profit motive involved in the projects undertaken by the assessee and activity undertaken by the assessee aligns with the object of the Trust at No. 17 of the Trust Deed which is to ensure empowerment of marginalised sections of society as woman over tribal schedule caste persons etc. We are not inclined to accept the Revenue contention that the assessee’s activities are commercial in nature. 14. We are of the considered opinion that the activities of the assessee trust is charitable in nature and has been undertaken in a professional manner where each activity is governed by agreements entered into with various parties including the beneficiaries to ensure that the desired activities is performed and accomplished, right from raising funds to deployment of funds. Furthermore, at this juncture of grant of registration, the Revenue is only required to examine the genuineness of activities of the Trust and its compliance of any other law. 15. We find that the Hon'ble Apex Court in the case of Surat Art Silk Cloth Manufacturers Association Surat (supra) has held that dominant ITA No. 5180/DEL/2024 ITA No. 5191/DEL/2024 Rasha Welfare Foundation Page 8 of 9 object of the Trust is charitable and mere existence of profit cannot negate charitable status as long as the profits are applied solely for the purpose of the charitable object and not distributed among members. The present case is hand squarely falls within the ambit of the ratio of this judgment. Respectfully following the same, we allow both the appeals of the assessee and direct the CIT(E) to grant registration u/s 12A and 80G. 16. In the result, appeals of assessee in ITA Nos. 5180/DEL/2024 and ITA Nos. 5191/DEL/2024 are allowed. Order pronounced in open court on 04.07.2025. Sd/- Sd/- [MADHUMITA ROY] [NAVEEN CHANDRA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 04th JULY, 2025. VL/ Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) Asst. Registrar, 5. DR ITAT, New Delhi ITA No. 5180/DEL/2024 ITA No. 5191/DEL/2024 Rasha Welfare Foundation Page 9 of 9 Sl No. PARTICULARS DATES 1. Date of dictation of Tribunal Order 2. Date on which the typed draft Tribunal Order is placed before the Dictation Member 3. Date on which the typed draft Tribunal Order is placed before the other Member 4. Date on which the approved draft Tribunal Order comes to the Sr. P.S./P.S. 5. Date on which the fair Tribunal Order is placed before the Dictating Member for pronouncement 6. Date on which the signed order comes back to the Sr. P.S./P.S 7. Date on which the final Tribunal Order is uploaded by the Sr. P.S./P.S. on official website 8. Date on which the file goes to the Bench Clerk alongwith Tribunal Order 9. Date of killing off the disposed of files on the judiSIS portal of ITAT by the Bench Clerks 10. Date on which the file goes to the Supervisor (Judicial) 11. The date on which the file goes for xerox 12. The date on which the file goes for endorsement 13. The date on which the file goes to the Superintendent for checking 14. The date on which the file goes to the Assistant Registrar for signature on the Tribunal order 15. Date on which the file goes to the dispatch section 16. Date of Dispatch of the Order "
Mehul