INCOME TAX OFFICER, CHENNAI vs. SHRI SHIRDI SAIBABA SPIRITUAL AND CHARITABLE TRUST, CHENNAI

Aforesaid appeal by revenue for Assessment Year (AY) 2013-14 arises out of an order of learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 24-04- 2024 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Act on 11-03-2016. The grounds taken by the revenue read as under: - 1. The Order of the Ld. CIT(A) is contrary to the law and facts of the case.

The Ld. CIT(A) erred in holding that the assessee is eligible for exemption u/s 11 of the Act and the provisions of section 2(15) of the Act are not attracted.

The CIT(A) erred in holding that the assessee is eligible for exemption u/s 11 of the Act and the activities of the assessee are not 'religious' whereas the assessee has applied the money for religious purpose.

The CIT(A) erred in holding that the activity of sale of devotional articles was utilized for carrying out the objects. The CIT(A) ought to have appreciated that 1st proviso to Section 2(15) clearly 5. stipulates that irrespective of 'application' of such income, the income from activities in the nature of trade, commerce or business is liable to tax. 6. The CIT(A) has not taken note of the Hon'ble Supreme Court judgment in the case of Ahmedabad Urban Development Authority in Civil Appeal No. 27162/2017 dated 19.10.2022 in respect of this issue before passing the impugned order. 6.1. The recent decision of Hon'ble Supreme Court in the case of Ahmedabad Urban Development Authority in Civil Appeal No. 27162/2017 dated 19.10.2022 and CBDT guidance note dated 15.12.2022, has laid down as under: "A. General test under Section 2(15) A. 1. It is clarified that an assessee advancing general public utility cannot engage itself in any trade, commerce or business, or provide service in relation thereto for any consideration ("cess, or fee, or any other consideration"); 7. The Ld. CIT(A) ought to have appreciated that the total receipts by way of sale of devotional articles is Rs.1,71,98,375/- which exceeds the threshold limit as envisaged in 2% proviso to section 2(15) of the Act. Further, the commercial element is associated with such sale, as the assessee has made a profit of 32% out of such sale. 8. The Ld. CIT(A) ought to have appreciated that the above receipts of the assessee are in the nature of 'General Public Utility' as per the amended provisions of section 2(15) of the Act. 2. The Ld. Sr. DR advanced arguments supporting the order of Ld. AO whereas Ld. AR referred to the findings of Ld. CIT(A) in the impugned order and also referred to the decision of Tribunal in assessee’s own case for earlier years. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. Assessment Proceedings 3.1 The assessee earned gross total income of Rs.620.30 Lacs and it filed return of income claiming exemption u/s 11 / 12 of the Act. The assessee is a registered public charitable trust u/s 12AA of the act and also approved u/s 80G(5)(vi). Upon perusal of activities of the Trust, Ld. AO noted that the assessee was engaged in religious activities. Since the income of the trust was applied for religious purposes, the surplus so earned by the assessee would not be eligible for exemption u/s 11. The surplus earned by the assessee and corpus donation received by it was computed at Rs.301.47 Lacs which was to be brought to tax. 3.2 In the alternative, it was noted by Ld. AO that the assessee was engaged in selling devotional articles / books and therefore, it was covered under first proviso to Sec.2(15) since it made a profit of 32% on such sales. The sale of articles fit into the category of objects of general public utility and the activities of the trust, being religious in nature, also fall within the ambit of advancement of any other general public utility. The selling of books and articles comes under the purview of first proviso to Sec. 2(15). 3.3 Finally, the assessee was denied exemption u/s 11 and its surplus including corpus donation was brought to tax and depreciation claim was granted against the same. Appellate Proceedings 4.1 The assessee stated that the main charitable activities of the trust were feeding the poor, providing education and medical relief. With a view to get source of income for carrying out such charitable activities, the trust sells devotional articles to people who visit the center. The surplus so derived was not for profit motive but with a view to utilize the surplus as a source of income for the purpose of carrying out objects of providing education and medical relief to the poor. The assessee also referred to the favorable decision of this Tribunal for AYs 2011-12 and 2012-13.