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ADIT (E) TC-II, New Delhi Versus Eklavya Foundation

2017 (9) TMI 1032 - ITAT DELHI

Exemption u/s 11 eligibility - proof of charitable activities - Held that:- First Appellate Authority has rightly concluded that Eklavya Foundation is engaged in social cause without any profit motive and A.O. alleged that it is not an educational institution and is carrying out business activities and it is not maintaining separate books of accounts, all these allegations are misconceived notions of the A.O. After going through the impugned order we find that the Ld. First Appellate Authority h .....

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/s 12A of the Act vide order no.1696 of DIT(E) dt. 15.12.1984 and notified u/s 80G(5) of the Act dt. 27th August,2007. The society is solely engaged in charitable activities and is not running with any profit motive. - Decided against revenue - ITA No. 4292/Del/2012 And ITA No. 2870/Del/2014 - Dated:- 18-9-2017 - SHRI I.C. SUDHIR, JUDICIAL MEMBER AND AND SHRI L.P. SAHU, ACCOUNTANT MEMBER For The Appellant : Sh. Padma Singh, Sr. DR. For The Respondent : Dr. Rakesh Gupta, Adv. Sh. Somil Aggarwal, .....

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activity. 2. Ld. CIT(A) is also not justified as the activities of the assessee has attributes of business and trade. As the activities of the assessee are not directly relatable to mainstream of education and are of the nature such as publishing of books, executing projects such as Chattisgarh Education Resource Centre and sale of books under the Bihar reading Improvement programme. 3. Ld. CIT(A) ignored that the assessee has accepted that no separate books of accounts have been maintained an .....

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sessee. 2. On the facts and circumstances of the case, the Id. CIT(A) has failed to appreciate the facts that assessee society was involved in publishing and selling of text books which are not in the nature of imparting education and as such, the assessee in neither in the field of education, nor in the field of medical relief or relief of the poor and it can be considered after seeing the activities carried out by the assessee as falling within the scope of general public utility as per s.2(15 .....

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in both the appeals, these appeals have been heard together and are disposed of by this consolidated order. 2. First we take up ITA 4292/Del/2012 for the A.Y. 2009-10. The brief facts of the case are that the assessee filed return of income on 25th September, 2009 declaring nil income. The case was selected for scrutiny and statutory notices were issued to the assessee. The assessee Society submitted reply which has been called for by the Assessing Officer from time to time, and also submitted .....

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ment has decided to provide to young school children to encourage the reading habit and none of them are in the nature of text book. Some of the titles selected include nach chali, khel khel me, khilonon ka khajana, matha pachi, pathe hi pathe etc. The total sale of books under this programme in Bihar and Jharkhand of ₹ 4.55 crores has yielded a surplus of ₹ 1.74 crores after excluding all the related expenses etc.(b) Sale of Eklavya Publishers ₹ 12.74 lakhs; (c ) Educational c .....

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also recommended for withdrawal of registration u/s 12AA of the Act also. 3. Aggrieved by these additions made by the A.O. the assessee carried the matter in appeal before the First Appellate Authority. 4. Ld.D.R. relied on the order of the A.O. and submitted that the assessee is purely engaged in the business of sale of books, substantive part of the revenue of the society is coming from the sale of books and their publications. The Society was not engaged in any charitable activity as defined .....

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rightly made additions on the facts and circumstances of the case. 5. On the other hand Ld.AR relied on the order of the Ld. CIT(A). He submitted paper books containing 1 to 764 pages, case law paper book containing page nos. 1 to 73 along with written submissions. He reiterated the submissions made before the Ld. CIT(A) and filed circular no.11/2008 dated 19.12.2008 issued by CBDT clarifying the definition of charitable purposes u/s 2(15) of the Act, which is reproduced for the sake of conveni .....

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y. An entity with a charitable object of the above nature was eligible for exemption from tax under section 11 or alternatively under section 10(23C) of the Act. However, it was seen that a number of entities who were engaged in commercial activities were also claiming exemption on the ground that such activities were for the advancement of objects of general public utility in terms of the fourth limb of the definition of 'charitable purpose'. Therefore, section 2(15) was amended vide Fi .....

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following implications arise from this amendment - 2.1 The newly inserted proviso to section 2(15) will not apply in respect of the first three limbs of section 2(15), i.e., relief of the poor, education or medical relief. Consequently, 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' encompass .....

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ted under section 11(4A) or the seventh proviso to section 10(23C) which are that - (i) the business should be incidental to the attainment of the objectives of the entity, and (ii) separate books of account should be maintained in respect of such business. Similarly, entities whose object is 'education' or 'medical relief' would also continue to be eligible for exemption as charitable institutions even if they incidentally carry on a commercial activity subject to the conditions .....

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e or business is a question of fact which will be decided based on the nature, scope, extent and frequency of the activity. 3.1. There are industry and trade associations who claim exemption from tax u/s l l on the ground that their objects are for charitable purpose as these are covered under 'any other object of general public utility'. Under the principle of mutuality, if trading takes place between persons who are associated together and contribute to a common fund for the financing .....

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ers, these would not fan under the purview of the proviso to section 2(15) owing to the principle of mutuality. However, if such organizations have dealings with non-members, their claim to be charitable organizations would now be governed by the additional conditions stipulated in the proviso to section 2 (15). 3.2. In the final analysis, however, whether the assessee has for its object 'the advancement of any other object of general public utility' is a question of fact. If such assess .....

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cts and no generalization is possible. Assessees, who claim that their object is 'charitable purpose' within the meaning of Section 2(15), would be well advised to eschew any activity which is in the nature of trade, commerce or business or the rendering of any service in relation to any trade, commerce or business. 5.1. Ld. A.R. also relied on the following case laws. i. Jaypee Institute of Information Technology Society vs. DGIT(E), (2009) 227 CTR 124 (DHC) dt. 21.8.2009. ii. Gujarat S .....

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Authority has adjudicated this issue at page no.13 to 16 of the impugned order which is reproduced hereunder for the sake of convenience. 4.2 I have gone through the findings of the AO in the assessment order and written submission of the Ld.AR as discussed above. In this regard, it is found that AO has relied on the case of Hon'ble Supreme Court in the case of Sole Trustee Lok Shikshan Trust Vs. CIT, 101 ITR 234 (SC) as well as various other case laws. Whereas, Ld.AR of the appellant has re .....

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lhi High Court has distinguished the order of the Hon'ble Supreme Court by observing as under.- 19 For the above reasons, we are satisfied that the petitioner meets the requirements of an educational institution within the meaning of Section 10(23)(c)(vi) of the act. The prescribed authority, in our view, has not taken into consideration the relevant factors in coming to the conclusion that the petitioner is not entitled to the approval as 'educational institution'. His understanding .....

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order of Hon'ble Delhi High Court, it is found that the activities done by Eklavya Foundation comes under the purview of 'education' because appellant society was founded under the aegis of the Planning Commission with the object' to contribute to change in Government school education system by conducting micro I level experiments and collaborating with governments to implements them on a larger scale. Eklavya Foundation has been working in these objectives for the last 25 years .....

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regard to improve educational curriculum and publishing books and other material in collaboration with various State Government as well as with NCERT which is a well known and reputed Organization in the field of education and it is Publishing books for various standards from Class 1 to 12. I have gone through the paper book submitted during the course of appellate proceedings, wherein, audit report has been discussed and share of publications for last 5 years has been discussed as under:- Year .....

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n concluded as under: Of course, Eklavya books carry a price tag, not distributed as freebies but distributed through a mechanism which has it is own rationale. The development and distribution are subsidized through donations and grants so that the unprivileged children have access to books. The argument in Para 'b' that Eklavya sells books for generating surplus is not true. Eklavya's publication programme has relied on grants. It is quite clear that book development costs can' .....

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is happens slowly over time. We often have to carry large stocks since it takes two to three years for these books to be disseminated. It is our social purpose to make available a large collection of low priced books for various educations groups. Thus, adverse observations of Ld.AO are misplaced and it is prayed that the relief prayed for may please be granted. 4.4 From the above reply it is crystal clear that Eklavya Foundation is engaged in social cause without any profit motive. So allegatio .....

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te Authority on the issue involved in the appeal filed by the department, we are of the considered view that the Ld. First Appellate Authority has rightly concluded that Eklavya Foundation is engaged in social cause without any profit motive and A.O. alleged that it is not an educational institution and is carrying out business activities and it is not maintaining separate books of accounts, all these allegations are misconceived notions of the A.O. After going through the impugned order we find .....

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