DEPUTY COMMISSIONER OF INCOME TAX, NEW DELHI vs. ODIA SAMAJ, NEW DELHI

3. That on facts and circumstances of the case and in law the AO/CIT(A) erred in not appreciating that the application of receipts from donors was towards charitable purpose.

4. That on facts and circumstances of the case and in law the AO/CIT(A) erred in not appreciating that no such disallowance have been made in the previous assessment years.”

5 Brief relevant facts leading to the instant appeals are that the assessee trust is a registered trust under Section 12A and 80G of the Act and for the year under consideration has filed return of income on 21.11.2020 declaring returned income of Rs. Nil claiming refund of Rs. 18,56,596/-. During the year under consideration the assessee trust has organized an event in the name ‘Odisha Prabha’ from 15th to 17th March 2019 at India Gate Lawn No. 5 and 6 New Delhi. In context to said event assessee has received certain sums aggregating to Rs. 5,97,50,353/- from 11 different entities, after deduction of tax at source amounting to Rs. 11,95,008/- under Section 194C of the Act. Thus, to ascertain the nature of aforesaid sum Section 133(6) of the Act to those payers. According to Assessment Unit, out of 11 entities, 6 entities replied in similar lines, by stating that they have been sponsored for the event organized by the assessee trust and paid donation after deducting TDS u/s 194C of the Act. It is pertinent to consider that even as per Assessment Unit, replies received in response to notices issued under Section 133(6) of the Act states and confirms that the sum received by assessee trust was on account of donation, though tax at source has been deducted under Section 194C of the Act. Further Assessment unit states that the other entities explained the specific reason for deducting TDS u/s 194C of the Act. Assessment Unit in order of assessment noted that the according to the Income Tax Act’ 1961, there is no mandatory provision for TDS while granting donations. Assessee Trust, in this context, submits that it has made request to various organisations for financial support to carry out its activities. In request letters it was specifically mentioned that “all contributions/donations/financial assistance are eligible for 50% deduction u/s 80G of the Act.” Request letters filed before the lower authorities are placed on record before us. However, Learned Assessment Unit, being not convinced with the replies of trust, has added the sum of Rs. 5,97,50,353/- to the total income of the assessee trust under head Income from business by invocation of Proviso to section 2(15) of the Act. Apart thereof an addition of Rs. 1,04,20,000/, as per order of to Assessment Year 2020-21 though accounted for in books of accounts during financial year 2020-21 relevant to assessment year 2021-22 and thus added as income u/s 68 of the Act under the head ‘Income from other sources’.

6 Being aggrieved assessee has raised the appeal before First Appellate Authority, wherein and whereby NFAC vide impugned order dated 08.10.2024 has directed the Learned Assessing Officer to recompute to what extent exemption can be awarded. Finding of NFAC is as under:

“Decision : I have carefully considered the facts of the case , submission of the appellant as above as well as gone through the observation and findings of the AO ‘s assessment order . I find from the assessment order vis-à-vis appeal memo that main disputes of the appellant are against the addition made by the AO of aggregate amount , available in 26AS of the appellant’s accounts u/s 194C of Rs. 5,97,50,353/- treating this as taxable income under the head business invoking provision of section 2(15) of the Act.

In Ahmedabad Urban Development Authority, it was held by the Hon’ble Supreme Court

Section 2(15) - in the wake of its several amendments between 2008 and 2015 - can be juxtaposed with the interpretation of the unamended section 2(15) by this Court. In Asstt. CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1/[1980] 2 SCC 31, the principle enunciated was that so long as the predominant object of GPU category charity is charitable, its engagement in a non-charitable object resulting in profits that are incidental, is permissible. The court also declared that profits and gains from such activities which were non-charitable had to be deployed or "fed" back to achieve the dominant charitable object. [Para 152] CO 89/Del/2025 The paradigm change achieved by section 2(15) after its amendment in 2008 and as it stands today, is that firstly a general public utility (GPU) charity cannot engage in any activity in the nature of trade, commerce, business or any service in relation to such activities for any consideration (including a statutory fee etc.). This is emphasized in the negative language employed by the main part of section 2(15). Therefore, the idea of a predominant object among several other objects, is discarded. The prohibition is relieved to a limited extent, by the proviso which carves out the condition by which otherwise prohibited activities can be engaged in by GPU charities. The conditions are:

(a) That such activities in the nature of trade, commerce, business or service (in relation to trade, commerce or business for consideration) should be in the course of "actual carrying on" of the GPU object, and (b) The quantum of receipts from such activities should not exceed 20 per cent of the total receipts.

(c) Both parts of the proviso: (i) and (ii) (to section 2(15)) have to be read conjunctively given the conscious use of "or" connecting the two of them. This means that if a charitable trust carries on any activity in the nature of business, trade or commerce, in the actual course of fulfilling its objectives, the income from such business, should not exceed the limit defined in sub- clause (ii) to the proviso. [Para 153]

It was also held by the Hon’ble Supreme Court that in clause (b) of Section 10(46) of the IT Act, "Commercial" has the same meaning as "trade, commerce, business" in Section 2(15) of the IT Act. Therefore, sums charged by such notified body, authority, board, trust or commission (by whatever name called) will require similar consideration i.e. whether it is at cost with a nominal markup or significantly higher, to determine such notified bodies, there is no quantified limit in Section 10(46). Therefore, the Central Government would have to decide on a case-by-case basis whether and to what extent, exemption can be awarded to bodies that are notified under Section 10(46). It is pertinent to mention that -5.2 With a view to limiting the scope of the phrase "advancement of any other object of general public utility", sub-section (15) of section 2 has been amended to provide that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature CO 89/Del/2025 of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity." Respectfully following the above order of Hon’ble Apex Court the AO is directed to recompute to what extent exemption can be awarded [ so long as a GPU's charity's object involves activities which also generates profits (incidental), it can be granted exemption provided quantitative limit (of not exceeding 20 per cent) under second proviso to section 2(15) for receipts from such profits] to bodies that are notified under section 10(46) as per guidelines given in the said order and the balance extent is taxable under second proviso to section 2(15) of the I.T Act . In view of above discussion the ground relating to business income u/s 2(15) stand partly allowed for statistical purpose .”

7 Being aggrieved both revenue and assessee has raised appeal and cross objections before us. We have heard the rival submissions made by the respected parties and we have also perused the available materials available including written synopsis and paper book filed by assessee and judicial pronouncements relied upon by both the parties. 8 On perusal of orders of lower authorities and material placed on record, what is not in dispute is that, there was an event organized by the assessee trust from 15th to 17th March 2019 at India Gate Lawn No. 5 and 6 New Delhi. No adverse finding in respect of event itself that it is not in accordance with the objects of the assessee trust for which revenue has granted registration under Section 12A of the Act or was involving any activity or any activity of rendering any service in relation to Section 133(6) of the Act to third party entities who has remitted the sum under consideration to assessee, as per order of assessment itself as observed supra, confirms that sum received by assessee trust was on account of donation.

Assessee’s request letters to these entities specifically states that the amount remitted would be eligible for exemption under Section 80G of the Act. The case of the Assessment Unit is that the TDS is not required on donations as per Income Tax Act, assessee trust issues invoices to payers. It is relevant to note that once basic nature of receipts that it was in the context of an event which is admittedly in concurrence with the objects of the assessee’s trust for which it has received registration under Section 12A of the Act, then mere fact that the tax has been deducted by the payers or invoice has been issued by the trust cannot be made as basis to invoke Proviso to section 2(15) of the Act to hold that assessee has undertaken any activity in the nature of trade, commerce or business. In identical fact, Hon’ble Jurisdictional High Court in case of Aroh Foundation vs. CIT Exemptions, reported in 476 ITR 689 (Del) has held that the deduction of TDS by donor would not be the determinative factor for denial of benefits under sections 11 and 12 of the Act. SLP raised by revenue in reference to said order is also dismissed by Hon’ble Apex Court in SLP (CIVIL) Diary No. 12843 of 2025, †APRIL 4, 2025, reported in 476 ITR 504(SC). Having regard to the facts of the Section 2(15) is not applicable to assessee for year under consideration and thus, the contribution of Rs. 5,97,50,353/- is held as donations eligible for exemption under Section 11 and 12 of the Act.

Order pronounced in open court on 15.10.2025.