2021 (10) TMI 179 - HC - Income Tax

Court affirms association's charitable activities as per Section 2(15) of Act.

Commissioner Of Income Tax (Exemptions) Delhi Versus Association Of State Road Transport Undertakings

Commissioner Of Income Tax (Exemptions) Delhi Versus Association Of State Road Transport Undertakings - [2022] 447 ITR 95 (Del) Issues:Challenge to ITAT order upholding CIT(A) decision on charitable activities exclusion under Section 2(15) of the Act.Analysis:In this case, the appellant challenged the order of the Income Tax Appellate Tribunal (ITAT) dated 25th February, 2020, which dismissed the appellant's appeal. The main issue raised was whether the activities of the respondent-assessee fell under charitable purposes as per Section 2(15) of the Act. The Commissioner, Income Tax (Exemption), Delhi, questioned the correctness of ITAT's decision in upholding the order of CIT(A) concerning the nature of the assessee's activities and their revenue sources exceeding Rs. 10 lakhs. The appellant argued that the ITAT overlooked that the assessee had commercial activities like 'revenue from test laboratory' and 'consultancy receipts,' which were not charitable in nature. Additionally, the appellant contended that the ITAT's reliance on a previous decision for the assessment year 2009-10 was erroneous as an appeal against that decision was pending.The High Court examined the nature of the assessee-association, an apex coordinating body of nationalized State Road Transport Corporations, operating under the Ministry of Road Transport and Highways, Govt. of India. The association aimed to improve the public transport system and assist members by providing automobile parts at competitive rates. The Court noted that the first proviso to Section 2(15) of the Act does not exclude entities conducting charitable activities for a fee, intending to exclude profit-oriented organizations. The association had been granted registration under Section 12A and recognized under Section 10(23C)(vi) of the Act, indicating its charitable nature.Although the Assessing Officer identified commercial income sources for the association, the Appellate Authorities found that the association did not operate for profit but to enhance public transport and road safety standards. The revenue from laboratory testing and consultancy did not aim to generate profits for shareholders. The Court concurred with the CIT(A) and ITAT findings that the association did not engage in business activities for profit motives.The Court cited precedents emphasizing that High Courts should intervene only on substantial questions of law, not factual findings. It highlighted that if two factual inferences are possible, the lower appellate court's decision should not be interfered with. The Court found no perversity in the CIT(A) and ITAT's conclusions, leading to the dismissal of the appeal.Therefore, the High Court dismissed the appeal, concluding that the association's activities were charitable, and the decision of the CIT(A) and ITAT was upheld due to the absence of merit in the appeal.