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Income Tax Appellate Tribunal, RAIPUR BENCH “SMC”, RAIPUR
Before: SHRI RAVISH SOOD
आदेश / ORDER
PER RAVISH SOOD, JM:
The present appeal filed by the assesse trust is directed against the order passed by the CIT(Appeals)-1, Raipur, dated 11.07.2017, which in turn arises from the order passed by the A.O under Sec.143(3) of the Income Tax Act, 1961 (for short ‘the Act’) dated 30.03.2014 for the assessment year 2011-12. Before me, the assessee has assailed the impugned order on the following grounds of appeal:
“1. The Ld. Commissioner of Income Tax (Appeals) erred in upholding the order passed by the Ld. AO u/s 143(3) of the IT Act with Demand Notice, which was null and void as the service of notice u/s 143(2) was after 30.09.2011.
2. The Ld. CIT (Appeal) erred in upholding the Assessment Order passed by the Ld. AO by assuming jurisdiction due to invalid service of notice renders no jurisdiction to assess the total income.
3. The Ld. CIT (Appeal) erred in not accepting that the trust has carried on charitable activities.
4. The Ld. CIT (Appeal) erred in upholding the Assessment Order though the reasons for selection of the case for scrutiny was not conveyed to assessee.
5. The Ld. CIT (Appeal) erred in upholding the Assessment Order passed by the AO determining the total income at Rs. 2,20,250/-.
6. The order passed by the Ld. CIT (Appeal) is arbitrary, perverse and bad in law.
7. The Appellant reserves the right to add, amend, alter or withdraw any of the grounds of appeal at the time of hearing.”
3 Ramswaroop Das Niranjanlal Charitable Trust Vs. DCIT-1(1)
Also, the assessee has raised an additional ground in the form of “revised ground No.1,” which reads as under:
“1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in identify the exemption claimed u/s.11(2) of Rs.2,20,247/-by applying first proviso to section 2(1%) on the premise that the assessee trust had involved in commercial activities (i.e. nature of trade, commerce/business) while, the assessee trust is engaged in running Dharmashala for general public utilities not for profit motive, more so, on the same activities the revenue has allowed the exemption u/s.11(2) in assessment completed u/s.143(3) for A.Y.2013-14, A.Y.2015-16 and AY 2016-17. Hence exemption u/s.11(2) for the alleged A.Y.2011-12 would also be allowed.”
Succinctly stated, the assessee, a charitable trust running a “Dharamshala” and formed on 23.11.1995, is registered u/s.12A of the Act with the CIT, Raipur. The assessee trust had filed its return of income for the assessment year 2011-12 on 30.09.2011, wherein after claiming exemption u/ss. 11/12 of the Act, it had declared its income at Rs. Nil. Return of income filed by the assessee trust was processed u/s.143(1) of the Act. Subsequently, the assessee's case was selected for scrutiny assessment u/s.143(2) of the Act.
During the assessment proceedings, it was observed by the A.O. that the assessee trust had received an amount of Rs.15,89,163/- from the business of running a Dharamshala. The A.O was of the view that as the assessee, which was registered as a charitable trust, was carrying out
4 Ramswaroop Das Niranjanlal Charitable Trust Vs. DCIT-1(1) activities that were in the nature of “advancement of any other object of general public utility,” had garnered business receipts of Rs.15,89,163/- which was more than threshold amount of Rs.10 lacs (as was applicable during the year under consideration) as contemplated in “2nd proviso” to Section 2(15) of the Act; therefore, its activities mentioned above were not to be held as having been carried out for charitable purposes. Accordingly, the A.O. referred to the provisions of Section 2(15) r.w.s. 13(8) of the Act, and declined the assessee’s claim for exemption u/s.11 of the Act and brought its surplus of Rs.2,20,247/- to tax.
Aggrieved the assessee carried the matter in appeal before the CIT(Appeals) but without success. Rebutting the claim of the assessee that it had provided “Dharmashala” Bhawan to needy persons free of charge and was only in receipt of charges like cleaning, electricity, damages to property, etc., it was observed by the CIT(Appeals) that the assessee had failed to substantiate its said claim based on documentary evidence. Referring to the list of persons who had booked “Dharmashala” during the year, it was observed by the CIT(Appeals) that the same revealed a list of 170 persons, which comprised government agencies, business concerns, and shops. He further observed that many persons who had booked “Dharmashala” were well-to-do persons of the society. Because no material on record would
5 Ramswaroop Das Niranjanlal Charitable Trust Vs. DCIT-1(1) suggest that any of those persons were in the category of a poor or needy person; therefore, the A.O. was of the view that it could safely be concluded that the activities of the assessee trust were being carried on commercial lines. Accordingly, the CIT(Appeals), based on his observations mentioned above, finding no infirmity in the view taken by the A.O., upheld the same. For the sake of clarity, the relevant observations of the CIT(Appeals) are culled out as under: “2.3 Facts being as above, the benefit of section 11 has been withdrawn in view of the proviso to section 2(15) as per which if the trust undertakes activities of "advancement of any other object of general public utility" and its receipt during the year are more than Rs. 10 lakhs, then the activities will not be treated for charitable purposes for that year. As seen in para 2.2 the appellant trust has claimed that it has provided dhramshala bhawan to needy persons free of charge. It is only receiving charges like cleaning, electricity, damages to property etc. It has contended that dharamshala has been provided free of charge for medical help, educational activities, workshops, marriages etc. No evidence has been furnished to establish that-the dharamshala was provided to needy persons. No evidence has been also furnished to establish that it is being provided free of charge and only costs of cleaning, electricity etc. are recovered. A list of persons who had booked the dharamshala-during the year 2010-11 has been_ furnished. It contains names of 170 persons. Several of these names are of government agencies, business concerns and shops. These are (2) Balaji Sales Corporations, (5) Mission Director Rajiv Gandhi Siksha Mission, (6) Special Projects (7) Sindhu Cultural Firms (8) Asha Ventures (32) Jai Enterprises (36) National Steel Sales Corp (50)Jyoti Roadlines (51)Sunderlal & sons (63) SVS Pharmaceutical Distributors (67) Ashok Jewellers (72) Nandan Steel & Power Lt (79) Joint Director Dist Office Panchayat & Social 'Welfare (85) Bank of India (87) Jagdamba steel & tubes (97) Jai enterprises (105), Jyoti Roadlines (121) Moti logistics (122) Manoharlal Suryavanshi & sons (123) Mahaveer Sarees (127) Jagdish Prasad Gajanand & Co (135) Arland Agencies (146) Iron Junction (160) MAT University (169) Chhattisgarh Prantiya Yuva Agrawal Sammelan. Out of the remaining
6 Ramswaroop Das Niranjanlal Charitable Trust Vs. DCIT-1(1) names, many are prima facie identified as well to do persons of the society. There is no material to suggest that any of these persons is in the category of poor or needy person. Therefore the arguments of the appellant are not established. Since the trust's activities are being conducted on commercial lines and receipt during the year has exceeded Rs 10 lakhs therefore I find the action of the AO as justified. The assessment order is upheld and grounds of the appellant assessee trust are rejected. 3.0 Appeal is dismissed.”
The assessee, being aggrieved with the order of the CIT(Appeals), has carried the matter in appeal before me.
I have heard the ld. Authorized Representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions.
Admittedly, it is a matter of fact that the assessee is registered as a charitable trust u/s.12A of the Act dated 31.03.1998 with the Commissioner of Income Tax, Raipur. The objects of the assessee trust are culled out as under (Pages 72 to 74 of the APB):
“Objects of Trust are :- To establish, maintain, Dharamshalas, Temples, homes orphanages or other establishments for relief of and to give help to poor and destitute people, orphans, widows, cripples and old aged persons and otherwise provide them, rehabilitation aid for self earnings.
7 Ramswaroop Das Niranjanlal Charitable Trust Vs. DCIT-1(1)
(b) To establish maintain and grant aid or other financial assistance to hospitals, nursing homes, Maternity Homes, clinics, charitable dispensaries sanitoriums and health camps, other establishments for giving medical relief to the poor, sick and infirm persons, also to give financial or other aid to sick and needy persons. (c) To grant relief during natural calamities, such as earthquake, cyclone, flood, fire, draught, pestilence and other occasions of calamities of similar nature and to give donations, subscriptions or contributions to institutions, establishments or persons doing such relief works. (d) To establish, support, maintain and grant in aid in kind and cash or other financial assistance to school, Balmandirs, colleges, Libraries, reading rooms, lecture hall, hostels, museum and other establishments and institutions for the development of education and diffusion of knowledge to encourage sports and cultural activities. (e) To grant scholarships, stipends, prizes, rewards, loans and allowances or other financial assistance to students and players. (f) To establish maintain and grant in aid or other financial assistance for construction of building, halls for the utility of social and religious purposes and for running social and religious schools and colleges. (g) To establish, run and/or support the institutions or funds for providing employment opportunity with an orientation towards self help and dignity of labour. (h) To promote, sponsor, undertake and assist rural development activities in any manner what so ever in any area or field selected for the purpose. (i) To organizes sponsor, promote, establish, conduct, undertake and or support scientific, industrial and /or social research in any manner what so ever in any field. (j) To give awards and assistance by way of cash or otherwise to individuals, institutions or companies for the promotion and advancement of the objects of the trust. (k) To conduct or assist research in and promotion of medical science in its various branches viz. Ayurved, Unani, Homeopathy, Allopathy, Naturopathy and other similar and allied lines. (l) To arrange, organize or hold, conduct and/or assist in organizing or conducting or holding exhibitions, entertainment shows,
8 Ramswaroop Das Niranjanlal Charitable Trust Vs. DCIT-1(1) conferences, seminars, lectures and meeting for the furtherance, promotion and advancement of the objects of the trust, (m) To give donations, subscriptions or contributions to any public charitable, trust, institutions of fund. (n) To establish and support professorships, fellowships, lectureships, scholarships and prices at any universities, colleges, schools or other educational institutions or otherwise in any other manner what so ever. (o) To accept and administer general or earmarked donations of trusts or conditions not inconsistent with the principal purposes and objects of this trust. (p) To assist and/or work in co-operation with any public charitable trust or other institution or organization for the purpose of carrying out and furthering any of the objects of this trust. (q) Any generally advancement of any other object of general public utility as the law any regard as public charitable purposes as the trustees may think fit and in such manner as the trustees may think and for one or more of such charitable purpose to the exclusion of other or others as the trustees may think fit.”
Although the assessee trust was, inter alia, set up with the objects of establishing/managing “Dharamshala” to facilitate relief to poor people, orphans, widows, and old aged persons and otherwise provide them rehabilitation, it was observed by the lower authorities, that the assesse trust had by renting the “Dharmashala” to the public at large, had ventured into commercial activities. I, say so, for the reason that a perusal of the assessment records as produced in the course of hearing of the appeal reveals that the assessee vide its reply dated 05.12.2013 had categorically admitted that the assessee had rented the aforesaid “Dharmashala”/premises
9 Ramswaroop Das Niranjanlal Charitable Trust Vs. DCIT-1(1) to 170 persons for multi-facet purposes (Page 47 of APB), i.e. marriage function, political, religious and other social functions, etc. The assessee further stated that receipts were generated from booking and cancellation charges, repairing charges, electricity charges, etc., which were collected/deducted from security deposits from the persons who booked the “Dharmashala” for the abovementioned activities.
Before proceeding any further, I deem it fit to cull out the provisions of Section 2(15) of the Act as was available on the statute for the year under consideration, as under:
“(15) "charitable purpose" includes relief of the poor, education, yoga, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility: Provided 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 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: Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is ten lakhs rupees or less in the previous year.”
On a perusal of the aforesaid statutory provisions, it transpires that the legislature, in all its wisdom, had provided that advancement of any other object of general public utility shall not be a charitable purpose if it involves the carrying on of any activity like trade, commerce or business, or any activity
10 Ramswaroop Das Niranjanlal Charitable Trust Vs. DCIT-1(1) 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. At the same time, the “Second proviso” to Section 2(15) of the Act carves out an exception wherein the “First proviso” would get triggered only if the aggregate value of the receipts from the activities therein referred were more than Rs.10 lacs (as was applicable during the year under consideration). In our considered view, as observed by the lower authorities, and rightly so, as the assessee was carrying out commercial activities of letting out “Dharmashala” to the public at large for multi-facet purposes, i.e., marriage functions, political, religious, and other social functions, etc., therefore, it was in substance carrying on a business. As the gross receipts of the assessee trust during the year under consideration amounted to Rs.15,89,163/- which was more than the threshold amount of Rs.10 lacs as contemplated in the “Second Proviso” to Section 2(15) of the Act, therefore, the activities of the assessee and surplus therein generated were hit by the provisions of Section 2(15) of the Act.
As regards the reliance laced by the Ld. AR on the judgment of the Hon’ble Supreme Court in the case of Pr. Commissioner of Income Tax (Exemptions) Vs. Servants of People Society (2023) 330 CTR (SC) 617, we find that the same being distinguishable on facts would not assist the case
11 Ramswaroop Das Niranjanlal Charitable Trust Vs. DCIT-1(1) of the assessee trust before us. The Hon’ble Apex Court observed that in a case where charging of any amount towards consideration for such an activity (advancing general public utility) which is on a cost-basis or nominally above cost, then the same cannot be considered to be ‘trade, commerce, or business’ or any services in relation to it. The Hon’ble Apex Court further observed that only when the charges are markedly or significantly above the cost incurred by the assesse, it would be “cess” or “fee” or any other consideration towards ‘trade, commerce or business.’
In my considered view, as in the case before me, the assessee had garnered a substantial amount by commercially exploiting the “Dharmashala” for multi-facet purposes by giving diversified nomenclature to the receipts, i.e., booking/cancellation charges, repairing and maintenance expenses, cleaning charges, receipts towards fines imposed, electricity charges, etc., of Rs.15.89 lacs (approx.), which as claimed by the Ld. AR was on a cost basis or nominally above cost because after being set off against the actual expenditure/notional expenditure in the profit and loss account, the assessee trust was left with a minuscule surplus of Rs.2,20,247/-, I cannot find favor with the said claim. Nothing is discernible, much less evidenced based on supporting material which would reveal that the booking/ancillary receipts collected by the assessee from the aforesaid commercial activities were 12 Ramswaroop Das Niranjanlal Charitable Trust Vs. DCIT-1(1)
nominally above cost. On the contrary, if the notional expenditure of depreciation of Rs.8.55 lacs is ignored, then the fact that the assessee was carrying out purely commercial activities is proved to the hilt. Also, drawing support from the judgment of the Hon’ble Supreme Court in the case of ACIT (E) Vs. Ahmedabad Urban Development Authority, (2022) 329 CTR 297 (SC), I may herein observe that as the letting of “Dharmashala” for commercial activities by the assessee, as claimed by the Ld. AR was its lifeblood for sustaining its activities of running the “Dharmashala,” but the same being in the nature of business or services in relation to a business, for cess or fee/charges; therefore, the receipts garnered from such activities would be hit by Section 2(15) of the Act.
Thus, in terms of my observations above, finding no infirmity in the view taken by the lower authorities who had rightly declined the assessee’s claim for exemption u/s.11 of the Act, I uphold the same. Thus, the Grounds of appeal No. 1 to 6 a/w. Additional grounds raised by the assessee are dismissed in terms of my observations above.
Ground of appeal No.7, being general, is dismissed as not pressed.
13 Ramswaroop Das Niranjanlal Charitable Trust Vs. DCIT-1(1)
In the result, the appeal of the assessee trust being devoid and bereft of any merit is dismissed in terms of my observations above. Order pronounced in open court on 21st day of August, 2023.