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2016 (4) TMI 708 - ITAT DELHI

2016 (4) TMI 708 - ITAT DELHI - TMI - Entitlement to exemption u/s 11(4A) - Held that:- A perusal of the chart shows that against a gross revenue of ₹ 5,36,87,019/-, the assessee has expended a sum of ₹ 4,942,490/- and the net surplus comes to ₹ 42,62,079/- which is only 7.93% of the gross receipts. It is also seen that the assessee has incurred deficits in its Guest House at Delhi, Day Care Centre at Dehradun and Senior Citizens Accommodation at Dehradun which had to be funded .....

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e case as well as the judicial precedents as aforesaid, we are of the considered opinion that the assessee is engaged in providing relief to the poor, education as well as medical relief. We have no hesitation in holding that the activities of the assessee association fall within the ambit of the first three limbs viz. relief to the poor, education or medical relief and it will not be hit by the newly inserted proviso to section 2(15).

Moreover, CBDT Circular no. 11/2008 dated 19th De .....

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medical relief and it will not be hit by the newly inserted proviso to section 2(15). Accordingly, the benefit of this circular should also accrue to the assessee and, therefore, the benefit of exemption claimed by the assessee u/s 11 cannot be rightfully denied - Decided in favour of assessee - ITA No. 2408/Del/2013 - Dated:- 29-2-2016 - SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SH. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER For The Appellant : Shri O.P.Meena, Sr. DR For The Respondent : Shri S .....

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Act which has been renewed from time to time. The assessee is also registered with the Registrar of Societies. 3. The return for the year under consideration was filed at NIL income. During the course of scrutiny assessment proceedings, the Assessing Officer observed that the assessee was running guest houses at different locations and was earning revenues from customers who were utilizing the guest houses. The Assessing Officer found that the assessee had earned the following revenues from the .....

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table organisation within the definition of section 2(15) of the Act with the objective of promoting education, health, leadership and skills training of the empowerment of women. However, the Assessing Officer was of the opinion that the assessee could not prove that its objects fall under the category of relief to the poor, education, medical relief, [preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or histo .....

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he Assessing Officer, the effect of the amendment to section 2(15) of the Act w.e.f. 01.04.2009 was that the trusts having object of advancement of any other object of general public utility could not do business even if they complied with the provisions of section 11(4A) beyond the gross revenue prescribed. The Assessing Officer also observed that the assessee had not maintained separate books of account for the business of running guest houses and canteens and hence the provisions of section 1 .....

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f the Assessing Officer that separate books of accounts have not been maintained by the assessee. On a consideration of the facts of the case, the Ld. CIT(A), while allowing the appeal of the assessee, gave a finding that the assessee s activities fall under the first three limbs viz. relief to the poor, education or medical relief and hence will not be hit by the newly inserted proviso to section 2(15). 6. Aggrieved, the Department is now in appeal before us. The Learned Departmental Representa .....

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nd preservation of monuments or places or objects of artistic or historic interest ]. He submitted that the onus is on the assessee to prove the charitable purpose. Therefore, in absence of a valid proof, the activity of the assessee is to be treated under the object of general public utility. It was further submitted that from the amendment it emerges that charitable trusts falling within the classification of object of general public utility are required to refrain from any activity which is i .....

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of no relevance due to the amendment in section 2(15). He submitted that, therefore, the profits earned from guest houses/canteens etc. will not get exemption u/s 11(4A). 7. In response, the Ld. AR submitted that the main objects of the Association are as under:- ">To take over the whole or any of the assets and liabilities of the unincorporated Association known as the National Young Women s Christian Association of India, Burma and Ceylon and the federation, development, and extension .....

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ciation any real or immoveable and personal or moveable property and in particular any lands, buildings, furniture, house hold effects, utensils, books, news papers, periodicals, musical instruments, fittings, apparatus, appliances conveniences and accommodation, and so far as the law or the licence of the Local Government may from time to time allow to sell, demise, let mortgage or dispose of the same." 8. The Ld. AR submitted that YWCA of India is committed to empowering women, irrespecti .....

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r activities for the empowerment of women, and the afore mentioned activities are to be treated as charitable activities falling within the ambit of Section 2(15) of the Income Tax Act, 1961, Section 11 and Section 12 of the Income Tax Act, 1961. It was submitted that the association is over 150 years old and widely known for its social and economic work in India. The association being affiliated to World YWCA is also known overseas for its work in providing relief to the poor and the marginaliz .....

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on to victims of natural calamities, etc.. It was submitted that the aforesaid activities are carried on by the association at different places and for which it maintains separate books of accounts which are separately audited at the year end and ultimately consolidated for purposes of filing of return. As far as running of canteens is concerned, the Ld.AR submitted that since July 1998, YWCA of India is running a canteen in the Christian Medical College Hospital campus at Vellore to provide foo .....

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upplied. In addition, the canteen provides food at subsidized rates (50 - 40 percent below the normal rates) to about 200 hospital staff in the category of nursing staff, medical students and doctors. Not only this, food to patients care-takers and visitors is also provided below the normal rates. It was further submitted that during the year from canteen accounts, sum of ₹ 1,00,000/- was donated to Salem YWCA for HIV/AID patients. Since the canteen is being run on charitable lines, it has .....

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port, the Ld. AR drew our attention to the photocopies of assessment orders for the last three assessment years i.e. 2008-09, 2007-08 and 2006-07. He submitted that the charitable character of the association has always remained intact and never ever, the charitable status of the association has been dismantled. As regards other charitable activities, it was submitted that the central office which has affiliation to 84 local YWCAs across India and is itself affiliated to worldwide YWCA organizat .....

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men against sexual harassment and domestic violence. The head office is mainly focused on capacity building and training of women with a focus on women empowerment, healthcare, hygiene, HIV awareness programmes and many other charitable activities. 9. Regarding YWCA Guest Houses/ Hostels in Delhi, Anandgiri, Chandigarh and Wyoming, the Ld. AR submitted that the basic purpose of these Guest Houses/Hostels is to provide accommodation to needy/poor women free of cost or at subsidized rates along wi .....

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people. They are made to engage in small activities so as to keep them busy and free from depression and family sickness. They do activities like Lifafa making, Namkeen making, chair caning and earn some money in order to live a happy and prosperous life. YWCA also provides food, clothing and general items for the upkeep of the Day Care Centre and Old Age homes and for the same, funds are either arranged internally or are transferred from other units of YWCA. It was further submitted that the a .....

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He submitted that the newly inserted proviso to section 2(15) will apply only to entities whose purpose is advancement of any other object of general public utility i.e. the fourth limb of the definition of charitable purpose contained in section 2(15). He drew our attention to objects 4, 7 and 8 of the objects clause of the Memorandum which provide that the income and property of the shall be applied solely towards the promotion of the objects of the association as set forth in this memorandum .....

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time at which he ceases to be a member and of the costs, charges and expenses of winding up the same and for the adjustment of the rights of the contributories amongst themselves. He submitted that the objects clause also provides that if upon the winding up or dissolution of the association there remains after the satisfaction all its debts and liabilities any property whatsoever, the same shall not be paid to or distributed among the members of the association, but shall be given or transferr .....

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elief to the poor, Education, Medical relief to simultaneously carry on commercial activity also and is not debarred from the benefits of Section 11. He submitted that the assessing officer has paid no heed to these facts and has brought the assessee association under the tax net on the misconceived plea that the assessee association is engaged in business activity and hence, should be taxed at the maximum marginal rate and on this notion has brought the entire surplus for the year to tax. It wa .....

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have gone through the relevant records and have heard the rival submissions. The term relief for poor has assumed importance after the recent amendment regarding business activities of charitable organizations. The term relief for poor has to be understood in a wider perspective. For instance, it is not necessary that the object should be for the betterment of all the poor people living in a particular country or province. It would be sufficient if the objects are for the benefits of a section .....

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ajar trust were studied and debated whether they could be considered as relief for poor. The objects of the trust which were held to be towards relief for poor were as under:- " a. To establish, maintain, run, develop, improve, extend, grant, donations for and to aid and assist in the establishment, maintenance, running, development, improvement, and extension of Elementary Schools, Secondary Schools. High Schools, Colleges, Universities, Workshops, Weaving Industrial Technological and othe .....

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e, extend, grant donations for and to aid and assist in the establishment, maintenance, running, development, improvement and extension of libraries, reading rooms, recreation centers and all other facilities as are calculated to be of use in imparting education to the Indian public. c. To establish, maintain, run, develop, improve, extend, grant, donations for and to aid and assist in the establishment, maintenance, running, development, improvement, and extension of hospitals, clinics, dispens .....

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lving the poor and beneficiaries cannot be said to be business or activity for profit. The Hon'ble Apex Court provided two reasons (i) the business is only a means of achieving the object of the trust; it is a medium through which the objects are accomplished (ii) the business held as corpus property under trust produces or results in income, like any other property. In the light of this decision, business activities involving the beneficiaries and done only with the motive of providing reli .....

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case the Hon'ble Apex Court held that, ..as it stands amended in 1992, all that is required under section 11(4A) for the business income of a trust or institution to be exempt from tax is that the business should be incidental to the attainment of the objectives of the trust or institution. A business whose income is utilized by the trust or Institution for the purposes of achieving the objectives of the trust or institution is a business which is incidental to the attainment of the objecti .....

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e and cannot be constricted with limited interpretation of confining it to some relief or emergency support to the poor in the short run. The scope of the term relief for poor is wide enough to include any kind of activity which provides support or benefit to the poor. In this process, an activity shall not be considered as business provided it satisfies the condition of being only a medium to achieve the object of relief to the poor. Coming to the facts and the figures of the case, the project- .....

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064 300366 (131302) Senior Citizens Accommodation, Dehradun 122550 256338 (133788) Totals 53687019 49424940 4262079 A perusal of the chart shows that against a gross revenue of ₹ 5,36,87,019/-, the assessee has expended a sum of ₹ 4,942,490/- and the net surplus comes to ₹ 42,62,079/- which is only 7.93% of the gross receipts. It is also seen that the assessee has incurred deficits in its Guest House at Delhi, Day Care Centre at Dehradun and Senior Citizens Accommodation at Deh .....

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of the factual matrix of the case as well as the judicial precedents as aforesaid, we are of the considered opinion that the assessee is engaged in providing relief to the poor, education as well as medical relief. We have no hesitation in holding that the activities of the assessee association fall within the ambit of the first three limbs viz. relief to the poor, education or medical relief and it will not be hit by the newly inserted proviso to section 2(15). 15. Moreover, CBDT Circular no. .....

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nsequently, where the purpose of a trust or institution is relief of the poor, education or medical relief, it will constitute charitable purpose even if it incidentally involves the carrying on of commercial activities. 2.2 Relief of the poor encompasses a wide range of objects for the welfare of the economically and socially disadvantaged or needy. It will, therefore, include within its ambit purposes such as relief to destitute, orphans or the handicapped, disadvantaged women or children, sma .....

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