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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGHAND SHRI MANOJ KUMAR AGGARWAL
आदेश /O R D E R PER MAHAVIR SINGH, VP:
These 3 appeal by the assessee are arising out of the common order of the Commissioner of Income Tax (Appeals)-17, Chennai in ITA No.206/13-14, 91/14-15 & 79/15-16/CIT(A)-17 dated 12.02.2018. The Assessments were framed by the JCIT (Exemptions), DCIT (Exemptions)-1 & ITO, Exemptions Ward-I,
I.T.A. Nos.930 to 932/Chny/2018 2 Chennai for the assessment years 2010-11, 2011-12 & 2012-13, all U/s 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’) vide orders dated 20.03.2012, 24.03.2014 & 16.03.2015 respectively.
The only issue in these three appeals of assessee is as regards to the order of CIT(A) confirming the action of AO in applying proviso to section 2(15) of the Act. For this issue, facts and circumstances in all the three years are exactly identical and assessee has raised exactly identical and identically worded grounds. This was admitted by the ld.counsel for the assessee before us. Hence, will take the facts from assessment year 2010- 11 and reproduced the grounds raised which reads as under:- 1. The Order of the Learned CIT Appeals for the assessment year 2010-11 is erroneous and opposed to Law and the facts and the circumstances of the case.
The Learned CIT Appeals failed to appreciate that, first of all, the Appellant Trust’s activities would fall strictly only under the first three limbs of Section 2(15), viz., Relief of the poor, Education and Medical relief and will not come under the limb, “advancement of any other object or general public utility”. Secondly, the appellant trust is not carrying on any trade, commerce or business. The running of Women’s hostels, renting of halls to other NGO and canteen etc., were only for the benefit of the beneficiaries and was incidental to the Objects under the first three limbs of Section 2(15).
The Learned CIT Appeals erred in holding that the activities of the appellant trust are in the nature of advancement o1 any other object of
I.T.A. Nos.930 to 932/Chny/2018 3 public utility and outside the purview of the meaning of ‘relief of the poor’ used in Section 2(l5) of the Act on the ground that the main activity of the Trust was running of Working Women Hostel and Working Women Centre.
The learned CIT Appeals erred in not appreciating that the activities or the appellant trust since inception had been only the upliftment of poor and destitute women anal welfare of poor and orphaned children and also taking care of their education and health needs.
The Learned CIT Appeals ought to have observed that right from the inception the appellant trust was only striving to help children in distress, child workers, children in Slums and also women affected by exploitation and violence and who had nobody to take care of them.
The Learned CIT Appeals erred in not appreciating the purport of the Board’s Circular No.11/2005 dated 19.12.2008 wherein it has been clarified that the amendment would apply only in respect o1 the purpose of advancement of any other objects of general public utility and the entities pursuing the said objects will not be eligible for exemption in respect of any activity in the nature of trade, commerce of business.
The Learned CIT Appeals has based his decision on certain receipts rather than going into the purpose for which it has been spent and benefits derived by the poor and downtrodden.
The Learned CI T Appeals failed to take notice of the fact that the appellant trust had received grants-in aid from the Central Social Welfare Board in earlier years.
The order of the Income Tax Appellate Tribunal relied on the Learned CIT (Appeals) has been appealed against u/s section 260A before the Hon’ble High Court of Madras. The said appeal TCA no.867/2015 for AY 2006-07 and TCA No.868/2015 for AY 2009-10 has been admitted by the Hon’ble High Court and stay has been granted vide order dated 08.09.2015 in M.P. 1of 2015 in TCA No.867/2015.
I.T.A. Nos.930 to 932/Chny/2018 4 3. Briefly stated facts are that the assessee’s trust is a registered trust u/s.12AA of the Act vide order in C.No.1212(62)/77 dated 19.05.1977. The assessee’s trust apparently works for welfare of women and children living in slum are of the society. According to the assessee’s trust, it is carrying on the charitable activity and claiming exemption u/s.11 of the Act up to assessment year 2008-09. But consequent to the amendment and provision inserted to section 2(15) of the Act w.e.f. 01.04.2009 and applicable for and from assessment year 2009-10, the AO disallowed the claim of exemption even in assessment year 2009- 10. The AO denied exemption claimed by assessee u/s.11 of the Act invoking provisions of section 2(15) & 13(8) of the Act and taxed the entire surplus declared by the assessee as per income and expenditure account treating the assessee as AOP. Aggrieved, assessee preferred appeal before CIT(A).
The CIT(A) relying on Tribunal’s decision in assessee’s own case in ITA Nos.1373 & 1734/Mds/2013 order dated 17.07.2015 for the assessment years 2006-07 & 2009-10, dismissed the appeal of assessee. For this, the CIT(A) relied on Tribunal decision for the assessment years 2006-07 & 2008-09 and held vide para 4.4 & 4.5 as under:-
I.T.A. Nos.930 to 932/Chny/2018 5 “4.4. The Chennai ‘A’ Bench of the ITAT in the appellant’s own case for the A.Ys. 2006-07 & 2007-08, observed as under:-
8.4. To analyse the activities carried on by the assessee, we have to go through the nature of activities pursued by the assessee as enumerated in earlier para 3 and perusal of that activities carried on by the assessee, cannot be oust the involvement of “trade, commerce or business” or “any service in connection with trade, commerce or business” as contemplated under the statute. Further, we note that there is substantial variation in the statutory position as it existed earlier to 1st April, 2009, where the assessee has been given exemption u/s.11 of the Act. and the position available after amendment to sec.2(15) brought into effect from 1st April, 2009. Yet another important aspect to be noted in this context is that, after the amendment by incorporating proviso to s. 2(15), the 4th limb as to the advancement of "any other object of general public utility" will no longer remain as charitable purpose, if it involves carrying on of : (a) any activity in the nature of trade, commerce or business, (b) any activity of rendering any service in relation to any trade, commerce or business for a cess or a fee or any other consideration, irrespective of the nature of use or application or retention of the income from such activity.
8.5. The first limb of exclusion from charitable purpose under cl. (a) will be attracted, if the activity pursued by the institution involves any trade, commerce or business. But the situation contemplated under the second limb [cl. (b)] stands entirely on a different pedestal, with regard to the service in relation to the trade, commerce or business mentioned therein. To put it more clear, when the matter comes to the service in relation to the trade, commerce or business, it has to be examined whether the words "any trade, commerce or business" as they appear in the second limb of cl. (b) are in connection with the service referred to the trade, commerce or business pursued by the institutions to which the service is given by the assessee. If the said words are actually in respect of the trade, commerce or business of the assessee itself, the said clause [second limb of the stipulation under cl. (b)] is rather otiose. Since the activity of the assessee involving any trade, commerce or business, is already excluded from the charitable purpose by virtue of the first limb [cl. (a)] itself, there is no necessity to stipulate further, by way of cl. (b), adding the words "or any activity of rendering any service in relation to any trade, commerce or business ..................". As it stands so, giving a purposive interpretation to the statute, it may have to be read and understood that the second limb of exclusion under cl. (b) in relation to the service rendered by the assessee, the terms "any trade, commerce or business" refers to the trade, commerce or business pursued by the recipient to whom the service is
I.T.A. Nos.930 to 932/Chny/2018 6 rendered (as there may be a situation involving in running of working womens hostel, womens service center and canteen.
8.6. Further, in similar circumstances, the co-ordinate Bench of the Tribunal in the case of Young Women’s Christian Association of Madras v. JDIT in ITA No.823/Mds/2013 dated October 30, 2013 (62 SOT 65) has held as under :
• “Generally speaking, the activities carried on by the assessee such as running orphanages, old age homes, rehabilitation centres, day care centres for elderly, vocational training to girls from slums, etc. cannot be considered as activities of medical relief or education or relief of the poor. • It is true that the activities carried on by the assessee take care of the poor people also. But those activities cannot be classified under any of the specific activities of relief of the poor; education or medical relief. • The correct way to express the nature of the activities carried on by the assessee is to say that the assessee is carrying on 'advancement of any other object of general public utility'. When that is the case, the assessee is hit by the proviso given under section 2(15). • The proviso reads that 'advancement of any other object of general public utility' shall not be a charitable purpose, if it involves carrying on any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business for consideration, irrespective of the application of the money. •Therefore, the case of the assessee is hit by proviso to section 2(15) and the assessee is not entitled for the benefit of section 11 for that part of income generated in the hands of the assessee from running its International Guest House and Working Women's Hostel. • Alternatively, one has to look into section 11 (4A). Subsection (4A) provides that exemption shall not apply in relation to any income of a trust or an institution, being profits and gains of business, unless the business is incidental to the attainment of the objectives of the assessee and separate books of account are maintained by such trust or institution in respect of such business. • In the present case, there is no dispute on the fact that the assessee is carrying on the business of running an International Guest House (IGH) and Working Women's Hostel (WWH). The assessee is maintaining separate accounts for the above business activities. But, the crucial question is whether running of IGH and WWH is a business incidental to the attainment of the objectives of the trust or not. • By any stretch of imagination, it is not possible to hold that the business of running IGH and WWH are incidental to the above stated objectives
I.T.A. Nos.930 to 932/Chny/2018 7 of the assessee-trust. "Incidental" means offshoot of the main activities; inherent by-product of principal activities. • Activities to compliment and support the main objectives are not in the nature of incidental to the business. They are supporting activities, at the maximum. The genesis of incidental activities must be from the principal activities themselves. There cannot be one source for the principal activities and another source for incidental activities. • In the present case, even if activities of the assessee were stated to be relief of poor, medical relief and education, it was not possible to conclude that running of business in the form of IGH and WWH were business incidental to the carrying on of main objective of the assessee- trust. Therefore, the assessee is not protected by the provision stated in section 11 (4A), either.”
8.7. Thus, as observed earlier, running of working womens hostel, womens service center and canteen is a commercial line which cannot be considered as charitable activity, so as to grant exemption u/s.11 of the Act. Accordingly, we are in agreement with the lower authorities and we deny the exemption under sec.11 of the Act.”
4.5 Respectfully following the above decision of the ITAT, I hold that the appellant is not entitled for the benefit of exemption u/s 11 of the Act. The appellant fails on this ground.”
Now, before us the ld.counsel for the assessee stated that the issues are covered against the assessee but he want to carry the matter further, as the assessee’s appeals are already pending before the Hon’ble High Court. But, ld.counsel admitted that the facts and circumstances are exactly identical to what was in assessment years 2006-07 & 2009-10. As the CIT(A) has extensively reproduced the findings of the Tribunal and facts being identical we confirm the order of CIT(A) and dismiss this appeal of the assessee in order to maintain consistency. Similar
I.T.A. Nos.930 to 932/Chny/2018 8 are the fact in assessment years 11-12 & 2012-13. Therefore taking a consistent view, we confirm the order of CIT(A) for the assessment years 2011-12 & 2012-13 also. Hence, the appeals of the assessee for all the three assessment years 2010-11, 2011- 12 & 2012-13 are dismissed.
In the result, the appeals filed by the assessee are dismissed.
Order pronounced in the court on 25th February, 2022 at Chennai.
Sd/- Sd/- (महावीर �सह ) (मनोज कुमार अ�वाल) (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) उपा�य� /VICE PRESIDENT लेखा सद�य /ACCOUNTANT MEMBER चे�ई/Chennai, �दनांक/Dated, the 25th February, 2022
RSR आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु� (अपील)/CIT(A) 4. आयकर आयु� /CIT 5. िवभागीय �ितिनिध/DR 6. गाड� फाईल/GF.