2025 (3) TMI 286 - AT - Income Tax

Trust's General Public Utility activities require fresh examination for section 11 exemption under charitable nature guidelines

Income Tax Officer (Exemption), Ward 2 (2) Versus St. John Ambulance Association, New Delhi

ITAT Delhi remanded the matter back to AO regarding exemption under section 11, finding that neither AO nor CIT(A) properly considered whether the ... Exemption u/s 11 - Whether assessee is not covered within the meaning of proviso to section 2(15) as assessee carrying on objects of the, General Public Utility’ (GPU)? - HELD THAT:- We noted that neither the AO nor the CIT(A), in the present case, has not considered the activities of the assessee as elaborated in Ahmedabad Urban Development Authority [2022 (10) TMI 948 - SUPREME COURT], whether aim of the trust or GPU is charitable or not? To consider the principle lay down by Hon’ble Supreme Court in the above case, we set aside the order of CIT(A) and that of the AO, and, remand the matter back to the file of the AO. In terms of the above, the matter is restored back to the file of the AO, and the appeal of the revenue is allowed for statistical purposes. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment are:1. Whether the activities of the assessee, involving the publication of books, training instructions, and voluntary training in first aid, hygiene, sanitation, and disaster management, qualify as 'education' within the meaning of Section 2(15) of the Income Tax Act.2. Whether the activities of the assessee are commercial in nature and fall under the category of 'General Public Utility' (GPU) as per the proviso to Section 2(15) of the Income Tax Act, thereby affecting the eligibility for exemption under Sections 11 and 12 of the Act.ISSUE-WISE DETAILED ANALYSIS1. Qualification of Activities as 'Education' under Section 2(15)Relevant Legal Framework and Precedents: The legal framework revolves around the definition of 'charitable purpose' under Section 2(15) of the Income Tax Act, which includes 'education.' The precedents considered include decisions from various cases where activities related to education and training were examined to determine if they qualify as charitable.Court's Interpretation and Reasoning: The Tribunal examined whether the assessee's activities, such as training in first aid and hygiene, fall under the educational category. The CIT(A) had previously determined that these activities were educational, relying on past decisions where similar activities were deemed educational and thus charitable.Key Evidence and Findings: The assessee provided syllabi for training courses and demonstrated that the activities were conducted by medically qualified staff, issuing certificates upon completion. The CIT(A) noted that the fees charged were not exorbitant, supporting the educational nature of the activities.Application of Law to Facts: The Tribunal applied the definition of 'education' under Section 2(15) and past case law to the facts, concluding that the activities were educational and not commercial.Treatment of Competing Arguments: The Revenue argued that the activities were commercial, but the Tribunal found that the educational nature of the activities was dominant, and the fees charged were reasonable.Conclusions: The Tribunal upheld the CIT(A)'s decision that the activities qualified as 'education' under Section 2(15), allowing exemption under Sections 11 and 12.2. Commercial Nature and General Public Utility (GPU) ClassificationRelevant Legal Framework and Precedents: The proviso to Section 2(15) restricts exemptions for entities engaged in trade, commerce, or business unless the activity is incidental to the main charitable purpose and the receipts do not exceed specified limits. The Supreme Court's decision in ACIT (Exemptions) vs. Ahmedabad Urban Development Authority provided guidance on interpreting these provisions.Court's Interpretation and Reasoning: The Tribunal considered whether the assessee's activities were primarily charitable or commercial. It referred to the Supreme Court's interpretation that activities generating profit should be incidental to the charitable purpose, and profits should not exceed 20% of total receipts.Key Evidence and Findings: The Tribunal noted that the majority of the assessee's income was from fees for certification and protection awards. The Supreme Court's guidelines were used to assess whether these activities were incidental to the charitable purpose.Application of Law to Facts: The Tribunal applied the Supreme Court's interpretation, focusing on whether the fees charged were significantly above cost and whether the activities aligned with the assessee's charitable objectives.Treatment of Competing Arguments: The Tribunal considered the Revenue's argument that the activities were commercial. However, it found that the activities were aligned with the charitable purpose, and the fees were not significantly above cost.Conclusions: The Tribunal remanded the matter to the Assessing Officer (AO) to reconsider whether the activities were charitable or commercial, based on the Supreme Court's guidelines.SIGNIFICANT HOLDINGSThe Tribunal preserved the CIT(A)'s decision allowing exemption under Sections 11 and 12, subject to further examination by the AO. Key principles established include:- The interpretation of 'education' under Section 2(15) includes activities like training in first aid and hygiene, provided they are conducted in a non-commercial manner.- The Supreme Court's guidelines on GPU clarify that activities generating profits must be incidental to the charitable purpose and not exceed 20% of total receipts.- The Tribunal emphasized the need for the AO to reassess the nature of the assessee's activities in light of these principles.The final determination was to remand the case to the AO for further consideration, allowing the appeal for statistical purposes.