TaxTMI 
TaxTMI 
2026 (3) TMI 636
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.... a appellant was charitable institution duly registered u/s 12AA working in the area of education, medical relief and relief to poor. (2) Whether in the facts and circumstances of the case the Income Tax Appellate Tribunal was right in law in holding that the Appellant was engaged in the "advancement of object of general public utility" but was covered by the proviso to clause (15) of section 2 of the Income Tax Act, 1961, and therefore not entitled to exemption under section 11 and 12 of the Act?" 2 At the outset, learned advocate for both the sides submitted that the issue of granting exemption under Sec.11 of the Income Tax Act, 1961, (hereinafter referred to as 'the Act' for short) to the appellant-assessee is now decided by the Hon'ble Apex Court in the case of Assistant Commissioner of Income- Tax (Exemptions) vs. Ahmedabad Urban Development Authority., reported in [2022] 143 taxmann.com 278 (SC). 3 It was submitted that the Income Tax Appellate Tribunal (for short 'the Tribunal') for the subsequent Assessment Years from 2010-11 to 2015-16, relying upon the decision of the Hon'ble Apex Court in the case of Ahmedabad Urban Development Authority (supra), remanded....
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.... charitable institution. However, the Assessing Officer by the Assessment Order passed under Sec.143(3) of the Act determined the income of the appellant at Rs. 48,61,533/- by order dated 30.12.2011 by disallowing the deduction claimed under the provision of Sec.11 and capital expenditure to the extent of Rs. 13,47,700/- and gratuity under Sec.40(a)(ia) of the Act. 4.5 Being aggrieved, the appellant preferred an appeal before the CIT(Appeals) who, partly allowed the appeal filed by the appellant by upholding that the conclusion arrived at by the Assessing Officer that the appellant is not entitled to exemption under Sec.11 of the Act as the activity carried out by the appellant cannot be considered as a charitable work under Sec.2(15) of the Act being advancement of general public utility. However, the CIT (Appeals) granted deduction to the appellant regarding the depreciation computed under the provisions of the Act. 4.6 Being aggrieved, the appellant preferred an appeal before the Tribunal. The Tribunal, by the impugned order partly allowed the appeal filed by the appellant denying exemption under Sec.11 of the Act, but permitted the appellant to claim the depreciation on s....
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....f imparting education. This aspect is important, because the aim of the trust was a per se charitable object, not a GPU object. The observations were therefore made, having regard to the fact that the profits of the news-paper business were utilized by the trust for achieving the object of education. In the light of such facts, the carrying on of newspaper business, could be incidental to the object of education- a per se category. The Thanthi Trust (supra) ratio therefore, cannot be extended to cases where the trust carries on business which is not held under trust and whose income is utilized to feed the charitable objects of the trust. 166 What then is the interpretation of the expression "incidental" profits, from "business" being "incidental to the attainment of the objectives" of the GPU charity (which occurs in section 11(4A)) ? As stated earlier, the interpretation of that expression in Thanthi Trust (supra) was in the con-text of a per se charity, i. e, where the trust's object was education. How-ever, the restrictive or negative terms enjoining GPU charities from carrying on profitable activity had been deleted in 1983 (with effect from April 1 1984). In Sura....
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....at the reference to "income being profits and gains of business with a further reference to its being incidental to the objects of the trust, cannot and does not mean proceeds of activities incidental to the main object, incidental objects or income derived from incidental activities. The proper way of reading reference to the term "incidental" in section 11(4A) is to interpret it in the light of the sub-clause (1) of proviso to section 2(15), i e, that the activity in the nature of business, trade, commerce or service in relation to such activities should be conducted actually in the course of achieving the GPU object, and the income, profits or surplus or gains can then, be logically incidental. The amendment of 2016, inserting sub-clause (1) to proviso to section 2(15) was therefore clarificatory. Thus interpreted, there is no conflict between the definition of charitable pur pose and the machinery part of section 11(4A) Further, the obligation under section 11(4A) to maintain separate books of account in respect of such receipts is to ensure that the quantitative limit imposed by sub-clause (ii) to section 2(15) can be computed and ascertained in an objective manner. 1....
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....t in the decision of Ahmedabad Urban Development Authority (supra), and thereafter to decide whether looking into the assessee's facts, as to whether the assessee is engaged primarily in rendering of service for consideration (retained earnings) or whether looking into totality of the facts of the case it could be inferred that such retained earnings are only kept by the assessee to the extent of facilitating such activities. 5.2 The Tribunal has further observed in the order passed in ITA No. 965 and 966/Ahd/2017 and other allied matters in the case of the appellant-assessee by directing the Assessing Officer to analyze the impacts of the order passed by the Tribunal in the year under consideration, wherein, it is held that the appellant - assessee had acted as a bridge between donor and recipient. Even then, looking into the particular facts of the case, whether it may be inferred that the appellant - assessee is carrying out charitable activities within the meaning of Sec.2(15) of the Act. 5.3 In view of such findings, the issue with regard to the claim of depreciation and claim of the corpus donation were also remanded by the Tribunal to the file of the Assessing Officer ....