ORGANISATION FOR REHABILITATION OF BLIND IN TRICHY,TIRUCHIRAPALLI vs. ITO, EXEMPTIONS WARD, TIRUCHIRAPALLI

The case was selected for scrutiny under CASS and the assessment was completed on 23.04.2021 vide order u/s.143(3) r.w.s 144B of the Act by making an addition of Rs.1,65,03,510/- and a demand of Rs.2,35,86,401/- was raised. The case of the Assessing Officer (AO) is that the assessee would fall under the category of “advancement of any other object of general public utility” in section 2(15) and accordingly proviso to section 2(15) applies, wherein if the charitable purpose is advancement of any other object of general public utility, it ceases to be a charitable purpose if it involves the carrying on of any commercial activity unless the activity is undertaken in the course of carrying out of such advancement of :-3-: object of general public utility and the aggregate receipts from such activity does not exceed 20% of the total receipts. According to the AO, the assessee is engaged in business and its purpose is not charitable and hence the exemption claimed by the assessee to the tune of Rs.1,65,03,510/- (which is the gross receipts of the assessee) was denied. Aggrieved by the order of the AO, the assessee preferred an appeal before the Ld.CIT(A). Before the first appellate authority (FAA), the assessee contended that u/s.2(15) of the Act, it would not fall under the ambit of “advancement of object of general public utility” rather it would fall under the ambit the “relief of poor”. The Ld.CIT(A) rejected the plea of the assessee and confirmed the view taken by the AO. Aggrieved by the order passed by the Ld.CIT(A), the assessee is in appeal before us.

The assessee contends that the assessee would fall within the ambit of “relief of the poor” since the main object of the trust is to provide skill development and gainful employment to visually challenged persons and leprosy-affected persons; otherwise, it is possible that these people, who come from the lower strata of the society, may resort to begging. Hence, the activities would not fall under the ambit of “advancement of object of general public utility” but only under the ambit of “relief of poor”. It was also argued that the term “relief of the poor” should be given a wholistic interpretation and should also include activities where the poor people, who are visually challenged and leprosy-affected, are rehabilitated through skill- development programs and employment opportunities.

Per contra the Ld.DR supported the view taken by the authorities below and contended that the entire gamut of activities carried on by the assessee would fall under the realm of commercial activities and since the assessee-trust exists with the object of “general public utility”, the proviso to section 2(15) would be applicable, thus, disentitling the assessee from the claim of exemption u/s.11.

We have heard the rival contentions perused the grounds of appeal, order of the authorities below and the paper book filed by the assessee. The prime contention between the parties is that whether the activities of the trust would fall under the ambit of “relief of poor” or “advancement of objects of general public utility”. If the activities are to be construed as “advancement of objects of general public utility”, then the proviso to section 2(15) would become applicable, wherein

Further, we find that the assessee trust has been granted registration u/s.12AA of the Act w.e.f. 01.04.1997. On perusal of the audited financials of the assessee as on 31.03.2018, it is found that the entire expenditure of the organization spent towards employees are the beneficiaries of the trust, who are visually challenged and persons affected with leprosy. Therefore, the activities carried out by the assessee is purely to engage the beneficiaries, though these activities are termed as turnover under the provisions of the commercial taxes.

It is seen that the authorities below had taken a view that the activities of the assessee would fall under the ambit of “advancement of objects of general public utility” and accordingly treated the income of the assessee as income from commercial activities and applied the proviso to section 2(15) of the Act. In our view, the decision of the lower authorities in treating the activities as the one promoting the “advancement of object of general public utility” seems misconstrued. The objects of the assessee-trust, as can be deciphered from the trust deed (page 5 and 6 of the paper-book filed by the assessee) point out that the assessee-trust is created with an intention to provide relief to the poor, particularly the visually challenged, among the other objects. It is also seen from the assessment order that the AO does not provide any reason as why the trust must be treated as the one which would fall under the ambit of “advancements of objects of general public utility”. The ld.CIT(A) also holds that the assessee is engaged in the “advancement of object of general public utility”, but does not provide the rationale for holding so. Both the authorities below had ventured out to hold the activities of the assessee- trust as the one with the “advancement of object of general public utility”.

The moment the assessee-trust is treated as the one with the object of “relief of the poor”, proviso to section 2(15) of the Act becomes inapplicable to the assessee. Therefore, in our view, the assessee trust exists with the object of providing “relief to the poor”, thereby, we hold that the proviso to section 2(15) of the Act would not be applicable, even if the nature of activities carried out by the assessee would fall under the realm of trade or commerce or business.

The Hon’ble Supreme Court in the case of Victoria Technical Institute vs Addl. Commissioner Of Income-Tax [1991]188ITR57(SC) has held that: “3. It is contended for the appellants that the objects of the assessee Victoria Technical Institute are "charitable purposes" and the mere fact that under objects Sub-clause (f) 'buying and selling or selling on commission the articles produced by handicraftsmen or otherwise' will not disentitle the assessee from the exemption. The learned Counsel for the revenue submits that it would depend on the scale or magnitude of such operation of buying and selling or selling on commission articles and, therefore, this case is distinguishable. But there is nothing to show that this function is otherwise than in carrying out of the primary purpose. In Addl. Commissioner of Income-tax, Gujarat v. Surat Art Silk Cloth Manufacturers Association (supra), it has been held that the words "not involving the carrying on of any activity for profit" qualify or govern only the last head of charitable purpose and not the earlier three heads. Where, therefore, the purpose of a trust or institution is relief of the poor, education or medical relief, the requirement of the definition of "charitable purpose" would be fully satisfied, even if an activity for profit is carried on in the course of the actual carrying out of the primary purpose of the trust or institution. When the purpose of a trust or institution is the advancement of an object of general public utility, it is that object of general public utility and not its accomplishment or carrying out which must not involve the carrying on of any activity for profit. So long as the purpose does not involve the carrying on of any activity for profit, the requirement of the definition would be met and it is immaterial how the monies for achieving or implementing such purpose are found, whether by carrying on an activity for profit or not. The instant case is accordingly found to be squarely covered by the decision in Addl. Commissioner of Income-tax, Gujarat v. Surat Art Silk Cloth Manufacturers Association (supra) and the questions have to be, and are, answered in favour of the assessee and against the revenue.”

In view of the above discussion and respectfully following the decision of the Hon’ble Supreme Court (supra), we set aside the order of the ld.CIT(A) and allow the appeal of the assessee and direct the AO to allow the assessee’s claim of exemption u/s.11 of the Act.

In the result the appeal of the assessee is allowed.