AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2024 (6) TMI 566
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.... mainly engaged in earning rental income and more than 85% of receipts of the assessee were from rent and hence the same is hit by the proviso to section 2(15) as the activities of the assessee are in the nature of trade, commerce or business. 2) On the facts and the circumstances of the case and in law the Ld. CIT(A) has erred in allowing claim of capital expenditure of Rs. 5,61,09,633/- to the assessee society without appreciating the fact that the activities of the assessee society cannot be treated as charitable activities and accordingly provisions of section 11 &12 of the Income Tax Act were not applicable in assessee's case. 3) On the facts and the circumstances of the case and in law the Ld. CIT(A) has erred in allowing Rs. 4,31,35,150/- as corpus fund ignoring the fact that the assessed society could not produce list of donors with specific directions made by the donors that it shall form part of the corpus fund of the trust, as required u/s 11(1)(d) of the Income Tax Act, 1961. 4) The appellant craves the right to add, amend or modify any ground of appeal." 3. Succinctly, the fact as culled out from the records is that the assessee filed its return of incom....
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....ssessee trust furnished copy of its trust deed wherein at section 3 it has described the objectives of the trust for which it has been established. On perusal of the object the ld. AO noted that the assessee trust is mainly indulge in arrangement, management and enhancement of immovable property in order to earn rent, to earn profit after sell, to earn donation etc., Therefore, the trust falls under category of general public utility (GPU). The assessee was granted registration, as claimed by assessee in its return of income, on account of carrying out work of "charitable purpose" by way of advancement of any other object of general public utility as per prevailing provisions However, in view of the amendment in section. 2(15) of the 1.T. Act, 1961 by Finance Act. 2008 w.e.f. 01.04.2009, the advancement of any other object of general public utility shall not be a charitable purpose in certain circumstances. As the object of the assessee society are well covered under the meaning of advancement of other General Public Utility and the receipt of such activity are of Rs. 92,49,114 which is higher than the prescribed limit of Rs. 25 lacs Therefore, the assessee vide query letter dated ....
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....section 2(15), the advancement of any other object of general public utility shall not be a charitable purpose if it involves the carrying on of any activity in the nature of trade, commerce or business, for a cess or fee or any other consideration, irrespective or the nature of use or application, or retention of the income from such activity, if such receipts exceed Rs. 10/25 Lacs. 3.3 The only contention offered by the assessee is on account of so called intention behind such activity. The main submission of assessee is that there is no profit motive behind such activities therefore the same cannot be held as business activity and cannot be said on commercial line. Thus, it was held that being completely covered under the proviso to section 2(15) assessee trust having object of General Public Utility is not anyway charitable in nature. Therefore, considering the facts and in view of the above discussion the claim of the assessee u/s 11 of the Act is hereby denied and the case is assessed as an AOP. 3.4 The ld. AO on perusal of Audit report and return of income filed by the assessee it has observed that assessee has shown total receipt/income of Rs. 5,37,75,026/- including corp....
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....ment order, facts of the case and the appellant's submissions and it is noted that the assessee society has indulged mainly in arrangement, management and enhancement of immovable property and renting these properties on nominal charges for various activates as per the aims of the trust. The appellant society is registered under Rajasthan Societies Registration Act, 1958 vide registration no. 55/2011-12 w.e.f. 26/07/2011. It is also registered under section 12AA of the Income Tax Act, 1961 by the Commissioner of Income tax, Jaipur & Jodhpur vide order No. CIT/RAJ 12A(a)/Instt/27 dated 21/06/1974 and also approved u/s 80G of the Income Tax Act, 1961 by the CIT-II, Jodhpur vide order dated 03/01/2018. The Assessing Officer disallowed the claim of exemption u/s 11 and 12 on the ground that the rent receipt of the society is Rs. 92,49,114/- which is more than 25 lacs and also that that the appellant had been carrying out activities which were commercial therefore the same was not charitable. Accordingly. Assessing Officer held that the appellant was not entitled to exemption u/s 11 & 12 of the Act. Considering the facts of the case. It is noted that, on enquiry by the inspector, he....
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....ssessee would be entitled to the benefit u/s 11 and 12 of the Act. The relevant portion is reproduced here in under:-..................... 5.2 Further, I find that the similar case of ICAI vs. DGIT (Exemptions) 90 DTR 161/358 ITR 91 (Del.) (HC) (2013) it was held that,....................... 5.3 Further to above, as per CBDT in circular NO. 11/2008, Dated 19-12- 2008 is also relevant in this regard which reads as under: "In the final analysis, however, whether the assessee has for its object the advancement of any other object of general public utility is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled to claim that its object is charitable purpose. In such a case, the object of general public utility will be only a mask or a device to hide the true purpose which is trade, commerce or business or the rendering of any service in relation to trade, commerce or business. Each case would, therefore, be decided on its own facts and no generalization is possible. Assessee, who claim that their object is charitable purpose within th....
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....ee and would be liable to include in the total income of the assessee. 5.5 In view of the above facts of the case, CBDT circular and judicial pronouncements the appellant's claim appears to be correct. The appellant claimed exemption u/s. 11 and 12 of the Act. Thus, rent are charged by the institute for providing rent and other facilities in trust, the said activities cannot be stated to be rendering service in relation to trade, commerce or business. Therefore, when a consideration is charged in fulfillment of the charitable object of the trust, the same cannot be said to be carrying on any activity in the nature of trade, commerce or business or for rendering any service in relation thereto provided it does not involve profit motive. Accordingly it is directed to allow the benefit of sec. 11 & 12 of the appellant society. The appellant is eligible for benefit of exemption u/s 11 & 12 of the Act. The ground of appeal is allowed." 6.2 I have considered the assessment order, facts of the case and submissions of the appellant and I find that the appellant trust has shown receipts of Rs. 4,31,35,150/- as corpus fund. The AO treated it as general revenue receipts of appellant s....
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....since, I have already allowed ground No. 1 (st) and held that the appellant is eligible for exemption u/s 11 of the IT Act therefore, this ground becomes infructuous. It is held that the AO was not justified in disallowed of capital expenditure of Rs. 5,61,09,633/- Hence, these issues are decided in favour of the appellant. The grounds raised regarding these issued are allowed. 8. Last ground of appeal is general in nature and does not require any specific adjudication thus the same is being treated as duly disposed off hereby. 9. In the result, the appeal is allowed." 5. Before us the ld. DR in support of the grounds so raised by the revenue supported the detailed finding recorded in the order of the assessment. The ld. DR also filed the copy of the judgment of the apex court in the ACIT Vs. Ahmedabad Urban Development Authority 143 taxmann.com 278 (SC) in support of the ground taken for General Public Utility and same being in the nature of commercial activity. 6. The ld. AR of the assessee in addition to the detailed finding recorded in the order of the ld. CIT(A) also relied upon the written submission filed before the ld. CIT(A) to support the finding of the ld. CI....
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.... trust commercially and in preview of section 2(15) of the Act assessee was show caused to deny the exemption claimed u/s 11 of the Act. In response to the said show cause the assessee submitted its reply at para 3 of its submission dated 26.11.2018. The reply of the assessee considered by the ld. AO but not found convincing as per provision contained in section 2(15) and he hold that it is clearly applicable in this case. Further, from the income & Expenditure account of the assessee it has been noted by the ld. AO that assessee has shown total revenue from operation at Rs. 5,37,75,026/- which includes 4,31,35,150/- as corpus donation which has been claimed exempted u/s 11(1)(d) of the I.T. Act. Thus, actual receipt of the trust during the year under consideration for application was Rs. 1,06,39,876/- which includes rent of Rs. 92,49,114/- and other income viz interest and others of Rs. 13,90,762/-. Thus, out of income available for application major source of fund i.e. more then 85% is arranged by earning rent from property available with trust/society. To verify the genuineness of the activity of the trust the Inspector was deputed to make an enquiry to find out the activity of ....
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....ction 2(15) and granting the benefit of section 11 & 12 of the Act to the assessee. Apropos to these grounds the raised by the revenue the relevant facts emerges that the assessee has constructed Janpyogi Bhawan. This property is used by the public at large for organising various events having the social, cultural, charitable and religious ceremonies. For conducting these activity the assessee is recovering the nominal cost and the same is not disputed. The recovery of rent or charges is based on the pre-set standard and the same is recovered based on these events conducted by the general public. These facility created by the assessee plays pivotal role in maintaining the social standard and for betterment of public at large and the same is used for various purpose of having charitable purpose. The assessee society's income from rent, interest, donation and other receipt has been applied by the assessee for its object. The bench noted that the assessment for the year 2011-12 was framed u/s 143(3) allowing the exemption u/s. section 11 having same set of income and facts assessing the income of the assessee at Rs. Nil. As we note from the records that there is no change in the o....
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....utility is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled to claim that its object is charitable purpose. In such a case, the object of general public utility will be only a mask or a device to hide the true purpose which is trade, commerce or business or the rendering of any service in relation to trade, commerce or business. Each case would, therefore, be decided on its own facts and no generalization is possible. Assessee, who claim that their object is charitable purpose within the meaning of Section 2(15), would be well advised to eschew any activity which is in the nature of trade, commerce or business or the rendering of any service in relation to any trade, commerce or business." Merely the receipt would not fall the character as commercial income of the assessee. Not only that the apex case in the case of AUDA (supra) held that the word is 'total receipts', thus it appears to be farfetched an argument that certain receipts shall be deducted to arrive at for the purpose of prescribed percentage, especially when the....