TMI Blog2023 (2) TMI 525X X X X Extracts X X X X X X X X Extracts X X X X ..... utilized for the said purposes. Also 15% of such income is allowed to be set apart or accumulated for the said purpose and treated as deemed application/utilization for charitable purposes. We uphold order of the ld.CIT(A) holding that it is the only profits and gains derived from the incidental business of the assessee charitable-trust i.e. its pharmacy business, which would qualify as income for the purpose of computing the statutorily allowed accumulation at the rate of 15% in terms of section 11(1)(a) of the Act. Decided against assessee. - ITA No.369/Ahd/2020 - - - Dated:- 13-2-2023 - Smt.Annapurna Gupta, Accountant Member And Smt. Madhumita Roy, Judicial Member, Judicial Member For the Assessee : Shri Hardik Vora, AR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itable income, as per section 11(1)(a) of the Act, on the income from the pharmacy business of the assessee trust, whether to be calculated on its gross receipts or on the net profits gains of the business . 4. Brief background of the case being that the assessee is a registered charitable trust, both under the Income Tax Act and with the Charity Commissioner, providing services to the public at large. During the impugned year it had shown gross receipts of Rs.23,90,62,222/- including receipt of Rs.7,40,55,485/- from its pharmacy business. Finding the pharmacy business to be incidental to the charitable activities of the assessee-trust, the AO held that in terms of the provisions of section 11(1)(a) of the Act it was only profits and g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for the purpose for which the exemption is granted. Thus, there is no prohibition on a charitable trust carrying on a business. A charitable trust can be settled in relation to any property including a business undertaking. The income from such business shall also qualify for exemption provided the other conditions of sections 11 and 12 are fulfilled. However, the income of such business shall be determined in accordance with the provisions of the Act. i.e Section 28 to 44 as per sec 11 (4) income of any business held in trust for charitable purpose shall be eligible for exemption. This contention has been affirmed by the Supreme Court in the case of Asst. CIT vs. Thanthi Trust (2001) 247 ITR 785 (SC) that has held that all that is requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the decision of the Hon ble Apex Court in the case of Programme for Community Organization, (2001) 248 ITR 1 (SC) and in the case of ACIT Vs. ALN Rao Charitable Trust (1995) 216 ITR 697 (SC) in support of his contention that the accumulation is to be calculated on the gross receipts and not profits and gains of business. He also relied on various decisions of the ITAT which have followed the decision of Hon ble Apex Court in the case of Programme for Community Organization (supra) as under: i) Society of the Servant of the Holy Spirit Vs. DCIT (Exp), ITA No.975/Bang/2015 ii) Public Education Society Vs. DCIT, ITA No.664/Bang/2015 dated 25.8.2015 7. On the other hand, the ld.DR relied on the order of the ld.CIT(A). 8. We ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Sub section 4A of section 11 deals with exemptions to such businesses and is relevant for interpreting the said term. The said section 11(4A) is reproduced hereunder: (4A) Sub-section (1) or sub-section (2) or sub-section (3) or sub-section (3A) shall not apply in relation to any income of a trust or an institution, being profits and gains of business, unless the business is incidental to the attainment of the objectives of the trust or, as the case may be, institution, and separate books of account are maintained by such trust or institution in respect of such business. A bare perusal of the same leaves no scope for any doubt about the scope of the term income of businesses qualifying for charitable purposes, as referring to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Hon ble Apex Court in the case of Programme for Community Organization (supra) and held that it would be gross-receipts viz. donation and income from charitable activities, which would qualify as income for the said purpose. The decision clearly did not address as to what would constitute income of business incidental to charitable activities for the purpose of accumulation/setting apart. Therefore, the said decision does not apply to the case before us. 11. The reliance placed on the decision of the Hon ble Apex Court in the case of ALN Rao Charitable Trust (supra) also we find is of no assistance to the assessee, wherein the Hon ble Apex Court had interpreted the provision of law relating to exemption provided to charitable enti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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