SHALIMAR BAGH SAMAJ SEVA SAMITI,DELHI vs. COMMISSIONER OF INCOME TAX(EXEMPTION), DELHI

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ITA 965/DEL/2025Status: DisposedITAT Delhi28 January 20263 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that while the assessee had demonstrated a comparatively low gross profit margin of 6.77% on the sale of medicines, which is significantly lower than typical retail margins, the CIT(E) had raised concerns about the completeness of the documentation provided to establish the genuineness of the charitable activities. The Tribunal observed that the assessee had submitted some bills but not complete details. In the larger interest of justice, the Tribunal decided to remand the matter back to the file of the CIT(E). The CIT(E) is directed to properly verify the genuineness of the assessee's activities. Concurrently, the assessee is directed to furnish all relevant details to justify the charitable nature of its activities. The grounds of appeal are partly allowed for statistical purposes.

What were the facts?

The assessee, Shalimar Bagh Samaj Seva Samiti, a charitable society with Section 12A registration, applied for registration under Section 80G of the Income Tax Act, 1961, before the Commissioner of Income Tax (Exemption) [CIT(E)]. The CIT(E) rejected the application, citing failure to establish the genuineness of its charitable activities. The assessee provided medicines at concessional rates, earning a gross profit of Rs. 27,40,322 on a sale of Rs. 4,04,93,883, which amounted to 6.77%. The CIT(E) considered this margin not nominal and noted the lack of complete details regarding bills to substantiate the charitable nature of activities. The appeal is against the order dated 20.12.2024 passed by the CIT(E). The assessment year is stated as NIL.

What were the issues?

1. Whether the Tribunal had to decide on the genuineness of the charitable activities of the assessee, as per Section 80G(ii)(b)(B) of the Income Tax Act, 1961, based on the gross profit margin on the sale of medicines and the documentation provided. Assessee's contentions: The assessee argued that its activities were charitable, as evidenced by the provision of medicines at concessional rates and a relatively low gross profit margin of 6.77% on medicine sales, which is significantly lower than prevailing retail margins. The assessee also submitted copies of a few bills in support of its activities. Revenue's contentions: The revenue, through the CIT(E), contended that the gross profit margin of 6.77% was not a nominal markup and that the assessee had failed to provide complete details of bills and other documentation to establish the genuineness of its charitable activities.

Which sections of the Income-tax Act were involved?

Section 80G,Section 12A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI “E” BENCH: NEW DELHI

Before: SHRI SATBEER SINGH GODARA & SHRI MANISH AGARWAL

For Appellant: Shri V.K.Sabharwal, Adv, Shri Ashok Babbar, Adv. &, Shri Rajiv Kumar, Adv
For Respondent: Ms. Amish S Gupt, CIT DR
Hearing: 28.01.2026Pronounced: 28.01.2026

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “E” BENCH: NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER & SHRI MANISH AGARWAL, ACCOUNTANT MEMBER [Assessment Year : NIL] Shalimar Bagh Samaj Seva vs CIT(Exemption) Samiti, BR-64A, West Shalimar Delhi Bagh, Delhi-110088 PAN-ABDAS5882R APPELLANT RESPONDENT Appellant by Shri V.K.Sabharwal, Adv. Shri Ashok Babbar, Adv. & Shri Rajiv Kumar, Adv. Respondent by Ms. Amish S Gupt, CIT DR Date of Hearing 28.01.2026 Date of Pronouncement 28.01.2026 ORDER

PER MANISH AGARWAL, AM :

1.

The present appeal is filed by assessee against the order dated 20.12.2024 by Ld. Commissioner of Income Tax (Exemption), Delhi [“Ld.CIT(E)”] passed u/s 80G clause (ii)(b)(B) of the Income Tax Act, 1961 [“the Act”] pertaining to Assessment Year NIL.

2.

Heard the parties and perused the material available on record. The assessee is a charitable society and is having registration u/s 12A of the Act. The assessee applied for the registration u/s 80G of the Act in form 10AC before the ld. CIT(E) who rejected the same on the ground that assessee has failed to satisfy the genuineness of the charitable nature of its activities. Upon perusal of the impugned order, it is observed that assessee was providing medicines at concessional rates to the poor section of the society and gross margin earned from the sale of medicines of Rs.4,04,93,883/- was of Rs. 27,40,322/- which comes to 6.77%. The CIT(E) observed that this margin of profit is not a nominal markup and further observed that assessee has not provided complete details of the bills etc. to establish that the genuineness of charitable activities. Since the assessee has been able to demonstrate that it had earned GP of only 6.77% on the sale of medicines which is comparatively very low as compared to the GP prevailing in the retail trading of medicines. Further, the assessee has also submitted copies of few bills in support however, since complete details were not filed, therefore, in the larger interest of justice, we remand back the matter to the file of ld. CIT(E) with the directions to properly verify the genuineness of the activities of the assessee. At the same time, assessee is also directed to file all the relevant details in order to justify the charitable nature of activities carried out by it. With these directions, all the grounds of appeal of the assessee are partly allowed for statistical purposes.

3.

In the result appeal filed by the assessee is partly allowed.

Order pronounced in the open court on 28.01.2026.

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