VANITA SAMAJ,MUMBAI vs. JURISDICTIONAL AO EXEM WARD 2(4), MUMBAI, MUMBAI

The relevant particulars are tabulated below: Particulars ITA No. ITA No. ITA No. 7793/Mum/2025, 8115/Mum/2025, 8116/Mum/2025, A.Y. 2013-14 A.Y. 2016-17 A.Y. 2017-18 Return and Return filed on Return filed on Original return filed scrutiny 27.09.2013 30.09.2016 on 31.10.2017 proceedings declaring nil declaring income of declaring nil income income. Rs.2,77,540/-. and revised return filed on 25.03.2019. Assessment Order dated Order dated Order dated order 29.03.2016 passed 27.12.2018 passed 30.11.2019 passed under section under section under section 143(3), assessing 143(3), assessing 143(3), assessing total income at total income at total income at Rs.59,53,440/-. Rs.52,47,730/-. Rs.28,57,550/-.

Brief facts are such that the assessee is a trust registered with the Charity Commissioner and was granted registration under section 12A vide Registration No. TR/10465 dated 22.12.1976. The assessment orders record that the registration was subsequently cancelled by the DIT(E), Mumbai. The said cancellation was set aside by the Tribunal in ITA No. 1034/Mum/2012 vide order dated

The objects of the assessee, as noticed in the assessment orders, broadly include organising and promoting the welfare and development of women and children; encouraging their physical, mental and intellectual development; running reading rooms and libraries; organising discourses, outings, competitions, sports, medical assistance, arts, cooking and household education; undertaking activities to make women financially self-reliant; and coordinating with other institutions having similar objects. The activities noticed by the Assessing Officer included letting out two halls, running a flour mill, conducting badminton, aerobics, dance and other sports activities, running a library, conducting social programmes and giving donations to other institutions.

The grounds raised in ITA No. 7793/Mum/2025 for A.Y. 2013- 14 are:

The learned Commissioner of Income Tax (Appeals) erred in confirming the order of the learned AO denying exemption u/s 11 of the Act to the appellant applying the proviso to section 2(15) and section 13(8) of the Act.

The grounds raised in ITA No. 8115/Mum/2025 for A.Y. 2016- 17 read as under: 1. The learned Commissioner of Income Tax (Appeals) erred in confirming the order of the learned AO denying exemption u/s 11 of the Act to the appellant applying the proviso to section 2(15) and section 13(8) of the Act. 2. The learned Commissioner of Income Tax (Appeals) erred in confirming the order of the learned AO disallowing expenses on objects of the appellant of Rs.11,70,925/-. 3. The learned Commissioner of Income Tax (Appeals) erred in confirming the order of the learned AO denying claim of the appellant that income to the extent of Rs. 6,57,859/- is exempt u/s 11(1)(a) of the Act. 4. The learned Commissioner of Income Tax (Appeals) erred in confirming the order of the learned AO denying claim of the appellant that income to the extent of Rs. 8,62,000/- is exempt u/s 11(1)(d) of the Act.

The grounds raised in ITA No. 8116/Mum/2025 for A.Y. 2017- 18 read as follows: 1. The learned Commissioner of Income Tax (Appeals) erred in confirming the order of the learned AO denying exemption u/s 11 of the Act to the appellant applying the proviso to section 2(15) and section 13(8) of the Act. 2. The learned Commissioner of Income Tax (Appeals) erred in confirming the order of the learned AO by not appreciating that letting out premises for recompense is merely a passive use or exploitation of the property held under trust and does not amount to carrying on a business. 3. Without prejudice to above and strictly in alternative, the learned Commissioner of Income Tax (Appeals) erred in confirming the order of the learned AO by not appreciating that the corpus donations is a capital receipt and thus not chargeable to tax. 4. The appellant previously to add alter or amend any of the grounds of appeal prior to or at the time of hearing.

The common basis adopted by the Assessing Officer in all the three assessment years was that the assessee was covered by the sixth limb of section 2(15), namely, “advancement of any other object of general public utility”. According to the Assessing Officer, the receipts from letting of halls, royalty, sports activities, flour mill, coaching, reservation, admission, locker and other charges represented regular and systematic activities carried on for consideration. The Assessing Officer accordingly held that the proviso to section 2(15) was attracted

The material year-specific receipts, claims and assessed income were recorded as under: Particulars A.Y. 2013-14 A.Y. 2016-17 A.Y. 2017-18 Hall rent and Rs.62,28,000/- Rs.57,79,500/- Rs.61,01,000/- royalty or hall rent noticed by the AO Receipts treated Rs.75,33,936/- Rs.62,31,850/- in Rs.1,16,94,450/- as being paragraph 4.2; connected with Rs.73,68,611/- in commercial paragraphs 4.5 and activities 4.9 Statutory Rs.25,00,000/- 20 per cent of total 20 per cent of threshold receipts total receipts referred to by the AO Income assessed Rs.59,53,440/- Rs.52,47,730/- Rs.28,57,550/- under section 143(3)

For A.Y. 2013-14, the Assessing Officer found that the receipts of Rs.75,33,936/- comprised hall rent, royalty from decorators, other receipts and surplus from Krida Vibhag. The Assessing Officer further noted royalty of Rs.32,51,000/- and hall rent of Rs.29,77,000/-, aggregating to Rs.62,28,000/-. According to him, the assessee was commercially exploiting its property by letting the hall for marriages and other functions and was also regularly carrying on sports, flour mill and other fee-based activities. He held that the assessee was a mutual association predominantly providing benefits and facilities to

The Assessing Officer concluded that the objects and activities of the assessee fell under the general public utility limb, that the receipts from the identified activities exceeded Rs.25,00,000/- and that the assessee was, therefore, hit by the proviso to section 2(15). Consequently, by applying section 13(8), he denied exemption under section 11 in its entirety and treated the assessee as a non-charitable entity in the status of an association of persons.

In computing the income for A.Y. 2013-14, the Assessing Officer determined income from house property at Rs.28,88,044/-. Income from other sources included life membership fees of Rs.2,52,000/-, corpus receipts of Rs.12,22,000/-, receipts for specific objects of Rs.79,090/-, interest income of Rs.28,79,602/- and other receipts. Against gross total income of Rs.85,86,351/-, only the administrative expenses specified in the computation were allowed, resulting in total income of Rs.59,53,440/-. The claims under sections 11(1)(a) and 11(2), and the expenses on repairs and maintenance and on the objects of the trust, were consequently not allowed in the manner claimed by the assessee. The assessee was assessed under section 143(3) at Rs.59,53,440/-.

For A.Y. 2016-17, the Assessing Officer initially referred to receipts of Rs.62,31,850/- in paragraph 4.2 of the assessment order. In paragraphs 4.5 and 4.9, however, the aggregate receipts from the identified activities were stated to be Rs.73,68,611/-. Hall rent was separately stated to be Rs.57,79,500/-. The Assessing Officer held that the assessee was engaged in managing and letting out halls on a commercial basis and that its other activities, including sports, flour mill and miscellaneous fee-based activities, were also carried on regularly for consideration. According to him, the commercial activities were the principal activities and the charitable activities were only incidental thereto.

The Assessing Officer held that the receipts from the identified activities exceeded 20 per cent of the total receipts. He accordingly invoked the proviso to section 2(15), read with section 13(8), denied exemption under section 11 and treated the income as business income in the hands of a non-charitable association of persons.

The Assessing Officer also examined the claim of accumulation under section 11(2) separately and without prejudice to the principal conclusion. He recorded that Form No. 10 was filed belatedly on 30.04.2018 and stated accumulation of Rs.6,57,859/-, whereas the computation contained a claim of Rs.25,56,941/-. He further held that the purpose stated as “for the objects of the trust” was general and did not specify any definite or individual purpose of accumulation. The claim under section 11(2) was, therefore, denied both on account of delayed filing of Form No. 10 and absence of a specific purpose. The

For A.Y. 2017-18, the Assessing Officer noticed hall rent of Rs.61,01,000/- and aggregate receipts from the identified activities of Rs.1,16,94,450/-. He held that the assessee’s activities of letting halls, operating the flour mill and receiving charges for sports, coaching, admission, reservation, lockers and other services constituted organised and recurring activities carried on for consideration. According to him, the assessee was covered by the general public utility limb and the receipts from the fee-based activities exceeded 20 per cent of its total receipts.

The Assessing Officer rejected the contention that the predominant objects fell under relief of the poor, education or medical relief. He held that the actual activities undertaken during the relevant year were principally the commercial letting of halls and other fee- based activities. He further held that the use of income for the stated objects did not prevent the proviso to section 2(15) from being attracted. Exemption under section 11 was accordingly denied by applying section 13(8), and the assessee was assessed as a non- charitable entity. In the computation, corpus donations of Rs.7,05,000/- were included in income without any separate discussion on their character as a capital receipt. The total income was computed at Rs.28,57,545/- and rounded off to Rs.28,57,550/-.

The assessee preferred appeals before CIT(A).

For A.Y. 2013-14, the CIT(A) noticed gross receipts of Rs.75,33,936/- and held that a substantial part thereof arose from hall rent, royalty from decorators, flour mill and miscellaneous activities carried on systematically and for consideration. The CIT(A) held that the assessee fell under the general public utility limb of section 2(15), that the receipts disclosed systematic commercial exploitation of the trust’s assets and that section 13(8) denied exemption under section 11 notwithstanding the subsistence of registration under section 12A or section 12AA.

The CIT(A) rejected the claim under section 11(1)(a) on the ground that once the proviso to section 2(15) was attracted, section 13(8) barred exemption. As regards voluntary corpus donations claimed under section 11(1)(d), paragraph 6.2.3 of the appellate order records that the Assessing Officer had not brought any contrary evidence to show that the donations were not corpus donations. The CIT(A) directed limited verification of donor confirmations or receipts containing a specific direction and stated that the ground was conditionally allowed. The claim under section 11(2) was rejected on the ground that section 11 was unavailable once the assessee was hit by section 2(15) and section 13(8).

The CIT(A) upheld the disallowance of repairs and maintenance of Rs.3,55,556/- and expenditure on the objects of the trust of Rs.18,31,665/-, observing that sufficient evidence establishing a nexus with charitable purposes had not been furnished and that, after

It is, however, noticed from the appellate order for A.Y. 2013-14 that, notwithstanding the direction in paragraph 6.2.3 conditionally allowing the corpus donation ground subject to verification, the concluding paragraph states that Grounds 1 to 5 were rejected and that the appeal was dismissed. The present grounds before the Tribunal do not contain a separate ground relating to the claim under section 11(1)(d).

For A.Y. 2016-17, the CIT(A) proceeded on the figure of gross receipts of Rs.62,31,850/- and held that substantial receipts arose from hall rent, royalty, flour mill and miscellaneous activities undertaken systematically for consideration. The CIT(A) held that the assessee fell under the general public utility limb and that the activities were organised and commercial in character. The denial of exemption under section 11, by applying the proviso to section 2(15), read with section 13(8), was accordingly upheld.

The CIT(A) rejected the claims of Rs.6,57,859/- under section 11(1)(a), Rs.8,62,000/- under section 11(1)(d) and Rs.25,56,941/- under section 11(2), holding that none of the exemptions under section 11 survived once section 13(8) became applicable. The alternative reasoning of the Assessing Officer concerning delayed filing

While dealing with the expenditure on the objects of the trust of Rs.11,70,925/-, the CIT(A) recorded that the Assessing Officer’s disallowance was upheld. The immediately succeeding sentence, however, states that the ground of the assessee was allowed. The concluding portion of the appellate order states that the appeal filed by the assessee was rejected. The order, therefore, contains an internal inconsistency regarding the disposal of the expenditure ground.

For A.Y. 2017-18, the CIT(A) clubbed the grounds relating to denial of exemption under sections 11 and 12, application of the proviso to section 2(15), characterisation of the receipts as business receipts and the judicial precedents relied upon by the assessee. The CIT(A) held that registration under section 12A or section 12AA did not confer automatic exemption for every assessment year and that the eligibility was required to be tested annually with reference to sections 11 to 13.

The CIT(A) noticed hall rent of approximately Rs.61,01,000/- and aggregate receipts of approximately Rs.1,16,94,450/- from hall letting and other fee-based activities. It was held that the receipts were principally derived from fee-based services and letting, rather than from formal education, medical relief or relief of the poor. The activities were found to possess a quid pro quo character and to be organised, repeated and structured. As the receipts materially exceeded 20 per

The CIT(A) rejected the plea that letting of the premises was merely passive exploitation of property. It was held that the proviso to section 2(15) examined the nature of the activity and not the head under which the receipt was computed. The plea based on the dominant object test was rejected by distinguishing the authorities relied upon on the basis that, in those cases, the core charitable activity remained dominant and letting was merely sporadic. The CIT(A) also rejected the plea that the assessee fell within the relief of the poor limb, observing that no material or quantification had been furnished to establish that the predominant receipts or activities during the year related to relief of the poor. The argument based on consistency and past acceptance was also rejected on the ground that each assessment year had to be examined separately.

The CIT(A) consequently confirmed the denial of exemption under section 11 by applying section 13(8). As regards the alternative claim concerning receipts aggregating to Rs.10,36,000/-, the CIT(A) held that life membership fees and amounts credited to specific funds did not automatically acquire the character of corpus receipts. It was held that there was no donor-wise primary evidence containing a clear and contemporaneous direction that the contribution should form part of the corpus. The CIT(A) further held that, once section 11 was denied by reason of section 13(8), the benefit under section 11(1)(d) was unavailable and the receipts were liable to be considered under

The appellate order for A.Y. 2017-18 first records the year- specific aggregate receipts at Rs.1,16,94,450/-. In a subsequent part of the same adjudication, however, it reproduces reasoning referring to gross receipts of Rs.62,31,850/-, which is the figure used in the appellate order for A.Y. 2016-17. Notwithstanding this discrepancy, the operative conclusion of the appellate order is that all the grounds were rejected and the assessment was confirmed.

It may also be noticed that the particulars appearing in the appellate orders contain certain differences from the primary assessment records. In the appellate order for A.Y. 2013-14, the header displays the assessed income as nil, whereas the assessment order determines income at Rs.59,53,440/-. For A.Y. 2016-17, the assessment order records returned income of Rs.2,77,540/-, whereas the statement of facts reproduced by the CIT(A) describes the returned income as nil. In the appellate order for A.Y. 2017-18, one field in the header mentions the assessment order date as 30.11.2015, although the remaining part of the appellate order and the assessment order itself correctly record the date as 30.11.2019. The primary assessment orders have accordingly been followed while narrating the return and assessment particulars.

During the course of hearing before us the Authorised Representative (AR) of the assessee, reiterated the facts and submitted that the issues arising in the present appeals are squarely covered by the order dated 07.04.2026 passed by the co-ordinate Bench in the

Per contra, the learned Departmental Representative (DR) submitted that, although the issue is covered by the aforesaid order of the co-ordinate Bench, the activities carried on by the assessee during the years under consideration are factually different and, therefore, the said decision is not applicable.

The learned AR further invited our attention to the income and expenditure accounts and supporting schedules placed in the respective paper books for the years ended 31.03.2013, 31.03.2016 and 31.03.2017. He pointed out that the financial statements for all these years disclose substantially the same activity heads, namely, letting of halls, royalty, Krida Vibhag, Vanita Flour Mill, Jeevan Vikas, Imarat Khate and Khajindar Khate. It was submitted that only the quantum of receipts, expenditure and resultant surplus or deficit varied from year to year, whereas the nature and manner of the activities remained unchanged.

In respect of Ground No. 5 for A.Y. 2016-17, the learned AR submitted that the assessee had claimed accumulation of Rs.25,56,941/- under section 11(2) in the computation of income filed on 30.09.2016. Although Form No. 10 was not filed within the prescribed time, it was electronically filed on 30.04.2018, before completion of the assessment proceedings. The acknowledgement of filing and Form No. 10 were placed on record. The Form specified accumulation of Rs.6,57,859/- “for the objects of the trust” up to 31.03.2021. The learned AR further submitted that, out of the

For the aforesaid proposition, the learned AR relied upon the decisions of the Hon’ble Gujarat High Court in CIT(E) v. Bochasanwasi Shri Akshar Purshottam Public Charitable Trust [2019] 102 taxmann.com 122 and the Hon’ble Karnataka High Court in CIT(E) v. Gokula Education Foundation [2017] 77 taxmann.com 38, concerning specification of the purpose of accumulation in Form No. 10. Reliance was also placed on the decision of the co-ordinate Bench in ITO(E) v. Seth Damji Laxmichand Jain Dharma Sthanak [2025] 179 taxmann.com 574 (Mumbai-Trib.), concerning delayed filing of Form No. 10 before completion of the assessment.

Per contra, the learned DR submitted that Form No. 10 filed by the assessee did not specify any particular purpose for which the income was sought to be accumulated and, therefore, the statutory requirements of section 11(2) were not satisfied.

In rejoinder, the learned AR submitted that it was not necessary to particularise each object for which accumulation was sought and that specification of the purpose as “for the objects of the trust”

We have carefully considered the rival submissions, the orders of the authorities below and the material placed on record. The controversy falls for determination under two distinct heads. The first is the common issue concerning applicability of the proviso to section 2(15), read with section 13(8), to the activities of the assessee. The second, confined to A.Y. 2016-17, concerns the assessee’s claim for accumulation of Rs.25,56,941/- under section 11(2).

The Assessing Officer denied exemption under section 11 principally on the ground that receipts from letting of halls, royalty from decorators, the flour mill, sports activities and other sources represented systematic commercial activities. The learned CIT(A) affirmed this conclusion. Before us, the learned DR fairly accepted that the issue stood covered by the order of the co-ordinate Bench for A.Ys. 2014-15 and 2015-16, but sought to distinguish that decision on the ground that the activities undertaken during the present assessment years were different.

The co-ordinate Bench, in the assessee’s own case in ITA Nos. 7794 and 7795/Mum/2025 for A.Ys. 2014-15 and 2015-16, vide order dated 07.04.2026, considered the same activities and recorded the following findings:

In order to examine the factual distinction sought to be drawn by the learned DR, we have perused the income and expenditure accounts placed in the respective paper books. The following comparable entries emerge:

The accounts also disclose the continued operation of the same divisions and activities, namely, letting of halls, Vanita Flour Mill, Krida Vibhag, Jeevan Vikas, library and community welfare programmes. The nature of the receipts and the institutional framework are materially identical to those considered by the co- ordinate Bench for A.Ys. 2014-15 and 2015-16. No material change in the objects of the trust or in the manner of carrying on its activities has been demonstrated by the Revenue.

The financial statements further show that the flour mill incurred deficits, while the receipts from sports and allied activities were applied in furtherance of the objects of the assessee. There is no finding that the expenditure recorded under the charitable objects was either non-genuine or diverted for any non-charitable purpose. Mere existence of receipts or recovery of charges does not, by itself, establish that the underlying activity is in the nature of trade, commerce or business.

We, therefore, find no factual foundation for the distinction sought to be made by the learned DR. Respectfully following the decision of the co-ordinate Bench in the assessee’s own case and having independently examined the accounts for the years under consideration, we hold that the receipts from the property held under trust and the incidental activities do not attract the proviso to section 2(15). Consequently, section 13(8) has no application and the assessee is entitled to exemption under section 11 for all the three assessment years.

The claims under sections 11(1)(a), 11(1)(d) and 11(2), the expenditure incurred on the objects of the trust, repairs and maintenance and the alternative claim regarding corpus donations were rejected by the authorities below primarily as a consequence of the denial of exemption under section 11.

Once the principal conclusion under section 2(15), read with section 13(8), is reversed and the charitable character of the assessee is restored for the relevant assessment years, these consequential disallowances cannot survive. The Assessing Officer is accordingly

The direction to charge tax at a flat rate of 30 per cent in A.Y. 2013-14 also cannot survive. The levy of interest under section 234C shall be recomputed consequentially while giving effect to this order.

Ground No. 5 in ITA No. 8115/Mum/2025 requires separate adjudication. The Assessing Officer denied the claim for accumulation of Rs.25,56,941/- for three reasons: i. Form No. 10 was not filed within the prescribed time; ii. the form mentioned Rs.6,57,859/-, whereas the computation claimed Rs.25,56,941/-; and iii. the purpose was stated broadly as “for the objects of the trust.”

It is undisputed that Form No. 10 was electronically filed on 30.04.2018 and that the assessment under section 143(3) was completed subsequently on 27.12.2018. Thus, Form No. 10 was available with the Assessing Officer before completion of the assessment.

In ITO(E) v. Seth Damji Laxmichand Jain Dharma Sthanak [2025] 179 taxmann.com 574 (Mumbai-Trib.), the co-ordinate Bench considered a corresponding objection for A.Y. 2017-18 and held as under in paragraph 5: “5. We have carefully considered the rival submissions, the findings of the revenue authorities and the judicial precedents relied upon by both sides. The undisputed fact remains that although Form No. 10 was filed belatedly, it was duly submitted before the completion of the assessment proceedings. Consistent with the ratio laid down by

The aforesaid decision concerns a post-amendment assessment year and, therefore, squarely answers the objection raised with reference to the amended provisions. Respectfully following the same, we hold that the claim under section 11(2) cannot be rejected merely because Form No. 10 was filed belatedly when it was admittedly available before the Assessing Officer during the assessment proceedings.

The learned DR contended that the expression “for the objects of the trust” did not identify any specific purpose. The learned AR, in rejoinder, relied upon the decision of the Hon’ble Delhi High Court in Bharat Krishak Samaj v. DDIT(E) [2008] 306 ITR 153 (Delhi). Paragraphs 11 and 13 of the decision read as under:

The Hon’ble Karnataka High Court in CIT(E) v. Gokula Education Foundation [2017] 394 ITR 236 (Karnataka) recorded the following principle in paragraphs 17 and 22:

In CIT(E) v. Bochasanwasi Shri Akshar Purshottam Public Charitable Trust [2018] 409 ITR 591 (Gujarat), the Hon’ble Gujarat High Court held in paragraph 8:

The computation of income filed by the assessee contained a claim for accumulation of Rs.25,56,941/-. Although one portion of Form No. 10 mentions Rs.6,57,859/-, the same form also records Rs.25,56,941/- in the column relating to the amount accumulated and the amount remaining for application. Therefore, the Assessing Officer was aware, before completing the assessment, of the precise amount claimed in the computation. The assessee has further placed on record a reconciliation stating that, out of Rs.25,56,941/-, the following amounts were applied towards charitable or religious purposes:

The balance of Rs.11,55,572/- was stated to have been offered to tax under section 11(3) in A.Y. 2022-23. The aggregate of Rs.14,01,369/- and Rs.11,55,572/- is exactly Rs.25,56,941/-. This subsequent conduct corroborates the amount disclosed in the computation and the bona fide character of the accumulation.

The Hon’ble Gujarat High Court in Bochasanwasi Shri Akshar Purshottam Public Charitable Trust has expressly held that an

We, therefore, hold that the assessee is entitled to accumulation of Rs.25,56,941/- under section 11(2) for A.Y. 2016-17. The Assessing Officer is directed to allow the claim. Ground No. 5 in ITA No. 8115/Mum/2025 is accordingly allowed.

The ground-wise disposal of appeals is tabulated below: Appeal Grounds Adjudication ITA No. Grounds Nos. 1 Allowed 7793/Mum/2025, to 5 A.Y. 2013-14 Ground No. 6 Allowed for statistical concerning purposes, with a direction to section 234C recompute interest consequentially Ground No. 7 General and requires no separate adjudication ITA No. Grounds Nos. 1 Allowed 8115/Mum/2025, to 5 A.Y. 2016-17 Ground No. 6 General and requires no separate adjudication

In the result, all three appeals filed by the assessee are allowed in the terms indicated above.