ITO (E), NEW DELHI vs. M/S NATIONAL FOUNDATION TRUST, NEW DELHI

The facts in brief are that the assessee is a trust which was formed the main object of promoting education in sports and other allied activities. Looking to its charitable activities, the trust was granted registration u/s 12AA ((1) on 29.11.2006. The assessee has filed its return of income declaring NIL income claiming exemption u/s 11 accompanied with audit report in form No. 10B on 27.9.2011. The Ld. AO noted that assessee has shown following receipts in the income and expenditure account :-

In response to the show cause notice as to why above receipts may not be taxed as business income, assessee supplied 2 lists of students from whom fee have been charged, one containing list of participants who attended the value education workshop; and second containing 214 candidates who were given coaching for sports. Ld. AO inferred that aforesaid receipts were in the nature of business / commerce/trade receipts and accordingly, he invoked proviso to section 2(15) and after detailed discussion he held that assessee is not doing any charitable activities and therefore, benefit of section 11 cannot be granted and accordingly, he has treated entire excess of income of expenditure amounting to Rs. 1,72,52,676/- as business income of the assessee. In sums and substance, he has held that the activities undertaken by the assessee include rendering of services in lieu of which it is charging fees and, therefore, the functions of the assessee trust indicate that it is engaged in advancement of any other objects of general utility and hence, benefit cannot be given to the assessee in view of the proviso to section 2 (15).

Before the Ld. CIT(A), assessee strongly relied upon the following judgements of the Hon’ble Delhi High Court in the case of ICAI vs. DGIT (E), 347 ITR 99 (Delhi); and India Trade Promotion Organisation vs. DGIT, 371 ITR 333, (Delhi High Court); and submitted that in view of the principles laid down by the Hon’ble Jurisdictional High Court, any receipt on account of charging of fees does not tantamount that the assessee is involved in promotion of sport, education and other allied activities and therefore such activities is leviable for exemption u/s 11(1). The fact that assessee charges fees from students for the education and sports activity, it that does not mean it is involved in any trade, commerce or business activity. Ld. CIT (A) held that principles laid down by the Hon’ble Jurisdictional High Court in the aforesaid two cases are squarely applicable as receipts from the activity carried out falls within ambit of carrying out charitable activities and hence assessee is eligible for benefit u/s 11.

After considering the rival submissions and on perusal of the relevant facts and material on record, we find that it is an undisputed fact that assessee was granted registration u/s 12AA. The aims and objects of the assessee society are as under: - a) “Promote Educational research and studies for qualitative growth of the Institution and the child. 3