2020 (9) TMI 919 - AT - Income Tax

Assessee's Charitable Activities Deemed Exempt under Income Tax Act

DCIT Circle-1 (1) New Delhi Versus Association of State Road Transport Undertaking

DCIT Circle-1 (1) New Delhi Versus Association of State Road Transport Undertaking - TMI Issues Involved:1. Whether the activities of the assessee fall under the definition of 'charitable purpose' as per Section 2(15) of the Income Tax Act.2. Whether the assessee is entitled to exemption under Sections 11 & 12 of the Income Tax Act.Issue-wise Detailed Analysis:1. Definition of Charitable Purpose:The primary issue revolves around whether the activities of the assessee qualify as 'charitable purposes' under Section 2(15) of the Income Tax Act. The Assessing Officer (AO) determined that the assessee's activities were in the nature of trade, commerce, or business, thus not qualifying as charitable. The AO noted that the assessee had revenue from test laboratory and consultancy receipts, which were deemed commercial in nature. The assessee argued that its activities were aimed at improving the public transport system and were conducted without a profit motive. The CIT(A) and the Tribunal in earlier years ruled in favor of the assessee, recognizing its activities as charitable. The Tribunal reiterated that the dominant object of the assessee was charitable and any incidental activity for furtherance of the object would not fall within the expressions 'business', 'trade', or 'commerce'.2. Entitlement to Exemption under Sections 11 & 12:The AO denied the benefit of exemption under Sections 11 & 12, concluding that the assessee failed to qualify as an organization for charitable purposes. The CIT(A) and the Tribunal in earlier years had allowed the exemption, stating that the activities of the laboratory testing and consultancy were in furtherance of the main charitable object of the assessee. The Tribunal noted that the assessee's activities did not have a profit-earning motive and were conducted in line with its charitable objectives. The Tribunal followed its earlier decisions and the principles laid down by higher judicial authorities, including the Hon'ble Delhi High Court, which emphasized that activities carried out in furtherance of charitable objectives should not be considered as trade or business merely because they generate revenue.Conclusion:The Tribunal upheld the CIT(A)'s decision, affirming that the assessee's activities were indeed charitable and not in the nature of trade, commerce, or business. Consequently, the assessee was entitled to the exemption under Sections 11 & 12. The appeals filed by the Revenue were dismissed for both assessment years 2013-14 and 2014-15, as no distinguishing features were presented by the Revenue to differentiate the facts from earlier years. The Tribunal's order was pronounced in the open court on 21.09.2020.