ITAT confirms charitable trust's general public utility activities qualify under section 2(15) but requires commercial nature assessment (15)

ITAT Ahmedabad upheld CIT(A)'s determination that assessee's activities qualify as general public utility activities under section 2(15) for charitable trust exemption under section 11. Following its own precedent from earlier years and Supreme Court guidance in Ahmedabad Urban Development Authority case, ITAT restored the matter to AO to determine whether these general public utility activities are commercial in nature. The appeal was partly allowed for statistical purposes, with the commercial nature assessment pending AO's determination per established judicial directions.

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Issues Involved:
1. Delay in filing the appeal.
2. Denial of exemption under Section 11 of the Income Tax Act, 1961.
3. Determination of whether the activities qualify as "charitable" under Section 2(15) of the Act.
4. Determination of whether the activities are commercial in nature.

Detailed Analysis:

1. Delay in Filing the Appeal:
The appeal filed by the assessee was time-barred by 178 days. The assessee explained the delay was due to bureaucratic issues, such as frequent changes/transfers of officers and staff, and changes in counsel. The Tribunal found these reasons justifiable and not indicative of gross negligence or deliberate inaction. The Tribunal cited several precedents from the Hon'ble Apex Court, recognizing the slow manner of functioning of government departments plagued by red tape. Thus, the delay was condoned in the interest of justice.

2. Denial of Exemption under Section 11:
The primary issue in the appeal was the denial of exemption of income claimed by the assessee under Section 11 of the Act. The denial resulted in an income of Rs. 9,95,43,470/- being subjected to tax. The Tribunal noted that similar issues arose in the assessee's case for the assessment years 2013-14 to 2015-16, where the ITAT had restored the matter back to the AO to determine whether the activities qualified as commercially carried out general public utility activities, following the directions laid down by the Hon'ble Apex Court in ACIT vs Ahmedabad Urban Development Authority (2022) 449 ITR 1(SC).

3. Determination of Whether the Activities Qualify as "Charitable":
The Tribunal examined whether the assessee is a "charitable" trust within the meaning of Section 2(15) of the Act to claim exemption of its income under Sections 11/12. The AO and CIT(A) had held that the activities were in the nature of "advancement of any other object of general public utility" and not "charitable," as they were found to be commercial in nature. The Tribunal referred to the ITAT's decision in the assessee's case for earlier years, which held that the activities were general public utility activities. The Tribunal applied the same decision, holding that the activities qualify as general public utility activities.

4. Determination of Whether the Activities Are Commercial in Nature:
The Tribunal restored the issue back to the AO to determine whether the general public utility activities are commercial in nature, following the guidelines laid down by the Hon'ble Apex Court in the case of ACIT vs Ahmedabad Urban Development Authority (2022) 449 ITR 1(SC). The Tribunal noted that the AO had not determined the commercial nature of the activities in light of these guidelines. Therefore, the matter was sent back to the AO for reconsideration.

Conclusion:
The Tribunal upheld the CIT(A)'s order holding the activities as general public utility activities and restored the issue of their commercial nature back to the AO for reconsideration. The appeal of the assessee was partly allowed for statistical purposes. The order was pronounced in open court on 13th September 2023 at Ahmedabad.

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