Income Tax Appellate Tribunal - Delhi
The Young Women'S Christian ... vs Department Of Income Tax on 29 February, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'H' NEW DELHI
BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER
AND SH. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER
ITA No. 2408/Del/2013
AY: 2009-10
Dy. Director of Income Tax (E), vs The Young Women's Christian
Trust Circle-IV, New Delhi. Association of India, 10,
Sansad Marg, New Delhi-110001
(PAN: AAATY0787 E)
(Appellant) (Respondent)
Appellant by: Shri O.P.Meena, Sr. DR
Respondent by: Shri Salil Agarwal, Adv.
Shri Shailesh Gupta, Adv.
ORDER
PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER
The present appeal is filed by the Department and is directed against the order dated 4.2.2013 passed by the Ld. CIT (A)-XXI, New Delhi for assessment year 2009-10.
2. The assessee, The Young Women's Christian Association of India (YWCA), is registered u/s 12A of the Income Tax Act, 1961 (hereinafter called 'the Act') since 12.09.1975. The assessee has also been given approval for exemption u/s 80G of the Act which has been renewed from time to time. The assessee is also registered with the Registrar of Societies.
I.T.A. No. 2408/Del/2013 Assessment year 2009-10
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 guest houses -
(1) Revenue from rooms - Rs. 1,26,78,329/-
(2) Revenue from food & beverages - Rs. 2,99,40,474/- (3) Revenue from service charges - Rs. 12,16,146/-
4. The assessee was issued a show cause to explain its stand with reference to the provisions of section 2(15) of the Act. The assessee took the plea that all the activities/earnings were covered under the principle of mutuality and hence the surplus generated was exempt. The assessee also submitted that it was a charitable 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 2 I.T.A. No. 2408/Del/2013 Assessment year 2009-10 environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest]. Hence, as per the Assessing Officer, the objects of the assessee would fall under the general object of 'public utility'. Thereafter, the Assessing Officer proceeded to conclude that charitable trusts with the general object of public utility are required 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 to remain charitable to continue registration u/s 12A of the Act. As per the 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 11(4A) were violated. He finalised the assessment at Rs.42,62,080/- by treating the net surplus as business profits to be taxed at the Maximum Marginal Rate.
3 I.T.A. No. 2408/Del/2013 Assessment year 2009-10
5. On an appeal before the Ld. First Appellate Authority, the assessee argued that the Assessing Officer was wrong in concluding that the assessee association was engaged in the 'advancement of any other object of general public utility' so as to attract the proviso to section 2(15) of the Act. The assessee also contested the allegation of 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 Representative, while supporting the order of the Assessing Officer, submitted that the assessee has claimed that it is a charitable organization as defined in Sec. 2(15) but the activity of running of guest houses cannot be incidental to the charitable objects of the association. He submitted that nowhere has the assessee shown that its objects can be classified under the category of relief of the poor, education, medical relief, [preservation of environment (including watersheds, forests and 4 I.T.A. No. 2408/Del/2013 Assessment year 2009-10 wildlife) and 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 in the nature of trade, commerce or business or the rendering of any service in relation to any trade, commerce or business to remain charitable and to continue with registration u/s 12A of the Act. It was further submitted that trusts carrying out activities under the residuary limb of advancement of any other object of general public utility cannot do business even if they comply with provisions of section 11(4 A). It was submitted that the end use of business profits for charitable purposes is 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:-
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I.T.A. No. 2408/Del/2013 Assessment year 2009-10 ">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 of Young Women's Christian Associations in India, and for such purpose the making (if necessary) of grants in aid to such Association.
>To consider and discuss all questions affecting the interest of the Association.
>To provide for the delivery of Lectures, the formation of classes and to take other suitable means for the promotion of the Spiritual, Intellectual, Physical and Social Well being of Young Women in India.
>To purchase, hire or otherwise acquire for the purpose of the Association 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, irrespective of caste, creed, class or religion, 6 I.T.A. No. 2408/Del/2013 Assessment year 2009-10 through development programmes that are responsive to the changing needs of a changing society. The focus of the programmes and projects has particularly targeted women in the marginalized communities through community based programmes. The work of YWCA of India is present in over 80 local branches spread across the country. It was submitted that vision and mission of the YWCA of India is to promote education, health, leadership and skills training and other 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 marginalized. It was submitted that the assessing officer has labelled the activities of the association as being in the nature of business activities overlooking the following activities of the association which it carries and which are duly permitted u/s 2(15) of the Act viz. providing relief to the poor, education, awareness - AIDS / 7 I.T.A. No. 2408/Del/2013 Assessment year 2009-10 treatment or rehabilitation of affected patients, providing support to neglected old and infirm senior citizens under Adopt a Granny Project, providing relief/rehabilitation 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 food to the patients of the hospital, nursing staff, poor hospital staff (such as poor and marginalized watchmen, washer men, security staff, gardeners and other menial staff), hospital students and doctors and also care takers of the patients. The canteen is being run by YWCA with the sole aim to provide free food to the general ward patients who are poor and marginalized. On an average, on daily basis, free food to about 100 poor patients and to 100 poor and marginalized hospital staff is being supplied. 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, 8 I.T.A. No. 2408/Del/2013 Assessment year 2009-10 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 Rs. 1,00,000/- was donated to Salem YWCA for HIV/AID patients. Since the canteen is being run on charitable lines, it has the exemption from levy of VAT as per notification issued under Tamil Nadu General Sales Tax 1959. It was further submitted that apart from running the above canteen, the association also has commercial activity in the shape of running of guest houses in Delhi, Anandgiri and Wyoming. This commercial activity in the shape of running guest houses has been there for the last 50 years and never ever, excepting the year under consideration, this activity been disputed as not being charitable. In support, 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 9 I.T.A. No. 2408/Del/2013 Assessment year 2009-10 organization. This office administers and monitors the interest of local YWCAs and also helps in arranging funds for doing activities for betterment/upliftment of needy women at various units of YWCA of India and also in providing free food to poor people at various units of YWCA of India and also to provide accommodation at nominal rates to old age people. The head office is also partnering with the Government of India in giving suggestions for creation of laws for welfare of women viz. protection of women 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 with providing free vocational training in the streams of fashion designing, beautician, English speaking, computer training and teacher training. He submitted that these 10 I.T.A. No. 2408/Del/2013 Assessment year 2009-10 guest houses/hostels also provide rooms to the general public for the purpose of self sustenance.
10. YWCA Day Care Centre for Old Age people at Dehradun and YWCA Old age Home (Spreadacres) at Dehradun is for the benefit of senior citizens and women empowerment. It is a centre to help and provide accommodation to elderly homeless 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 assessing officer side- stepping the charitable features has most arbitrarily concluded that the activities are wholly commercial and as a result has brought to tax the entire surplus of the association. He has also overlooked the clarifications provided by CBDT in its circular no. 11/2008 dated 19th Dec, 2008 which states that the commercial activity of any NGO will not be subject to tax if along with commercial activities it is engaged in providing relief of the poor, 11 I.T.A. No. 2408/Del/2013 Assessment year 2009-10 education, medical relief. 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 and that no portion thereof shall be paid or transferred directly or indirectly by way of dividend, bonus or otherwise howsoever by way of profit to the members of the association. He submitted that as per the objects every member of the association undertakes to contribute to the assets of the association in the event of the same being wound up during the time that he is a member or within one year afterwards for the payment of the debts and liabilities of the association contracted before the 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 12 I.T.A. No. 2408/Del/2013 Assessment year 2009-10 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 transferred to some other institution or institutions having objects similar to the objects of this association. Thus, the activities of the association are purely charitable and the carrying on of some commercial activities does not disentitle the association from the benefits conferred by section 11 of the Income tax Act. He further submitted that Section 2 (15) read with CBDT circular no 11 dated 19lh Dec, 2008 clearly permits any association which is carrying on all or any one of these activities:- Relief 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 was also submitted that the AO has failed to realise that the provisions of this section get attracted only on that part of 13 I.T.A. No. 2408/Del/2013 Assessment year 2009-10 income which has violated section 13 (1) ( c) and 1 3 ( 1 ) (d) and the assessee association has not violated any of these sections. He also submitted a project-wise chart showing the revenue generated and the expenditure incurred for the various charitable projects during the assessment year under consideration and a brief note on each charitable activity of the assessee.
11. We 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 of the pubic as distinguished from individuals. It may be noted that in order to become charitable, the relief should be for a section of the community which could be well defined and identified by some common quality of public nature. The Hon'ble Supreme Court in the case of Thiagarajar Charities v. ACIT 225 ITR 1010 (SC) has held that the scope of "relief for poor" is very wide and it can even include business carried on for the benefit of 14 I.T.A. No. 2408/Del/2013 Assessment year 2009-10 the poor. In this case, the objects of the Thiagarajar 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 other Art, Craft and Science Institutes, Schools and Institutions of Tamil or Sanskrit Learning, Hostels for the benefits of students and generally all kinds of educational institutions whether general, technical, vocational, professional, or of other description whatsoever for the welfare and upliftment of the general Indian public and to institute and award scholarships in India for study, research, apprenticeship for all or any of the said purposes.
b. 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 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, dispensaries sanatoria, maternity homes and all similar institutions as will afford treatment, cure, 15 I.T.A. No. 2408/Del/2013 Assessment year 2009-10 rest, recuperation and other allied advantages in the way of alleviating the sufferings of humanity.
d. To conduct poor feeding and generally to give food and clothing to the defectives and to afford relief to people in distress and affected by famine, pestilence and other accidents and conduct or grant donations for the inmates of orphanages."
12. The Hon'ble Apex Court held that business involving 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 relief to the poor, cannot be considered as business.
13. The issue of business/commercial activities was also considered by the Hon'ble Supreme Court in the case of Asstt. CIT v. Thanthi Trust 247 ITR 785. The Hon'ble Supreme Court held that even the business of weaving cloth and stitching clothing by employing women, carries on the business in the course of actually accomplishing its primary object of affording 16 I.T.A. No. 2408/Del/2013 Assessment year 2009-10 relief to the poor and it would qualify for the exemption under section 11. In this 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 objectives of the trust or institution is, surely, a business which is incidental to the attainment of the objectives of the trust. In any event, if there be any ambiguity in the language employed, the provision must be constructed in a manner that benefits the assessee. The trust is, therefore, entitled to the benefits of section 11 for the assessment year 1992-93 and thereafter. "
14. In the light of the above two Supreme Court rulings, it is clear that the scope of the term relief for poor is very wide 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 17 I.T.A. No. 2408/Del/2013 Assessment year 2009-10 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-wise surplus/deficit for the year, as submitted by the Ld. AR, is as under:
Revenue Generated & Expenditure incurred during 2009-10 Name of the Gross Revenue Expenditure Surplus/Deficit Project/Activity Headquarters, Delhi 6862042 3866075 2995967 Guest House, Delhi 9231652 10171397 (939746) Hostel, Anandgiri 6354021 5467121 886901 YWCA Canteen, Vellore 28495989 27404043 1091946 Hostel, Wyoming 894374 800493 93881 Women's Hostel, 1557327 1159107 398220 Chandigarh Day Care Centre, 169064 300366 (131302) Dehradun Senior Citizens 122550 256338 (133788) Accommodation, Dehradun Totals 53687019 49424940 4262079 A perusal of the chart shows that against a gross revenue of Rs.
5,36,87,019/-, the assessee has expended a sum of Rs.
4,942,490/- and the net surplus comes to Rs. 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 18 I.T.A. No. 2408/Del/2013 Assessment year 2009-10 Dehradun which had to be funded from the surplus at other projects. Hence, it can be logically inferred that the surplus earned is only incidental to the charitable activities. Also, there is no finding by the AO about any diversion of funds for the individual benefit of any member of the association or for the benefit of his relative. Also there is no finding by the AO regarding any kind of violation of any other conditions by the assessee, as laid down in section 13 of the Act. Therefore, in view 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. 11/2008 dated 19th Dec, 2008 states that the commercial activity of any charitable trust will not be subject to tax if along with commercial activities it is engaged in providing relief of the poor, education, medical relief. 19 I.T.A. No. 2408/Del/2013 Assessment year 2009-10 In this context, Para 2.1, 2.2, and 3 of the circular being relevant are being reproduced hereunder:
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' 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, small and marginal farmers, indigent artisans or senior citizens in need of aid. Entities who have these objects will continue to be eligible for exemption even if they incidentally carry on a commercial activity, subject, however, to the conditions stipulated 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 20 I.T.A. No. 2408/Del/2013 Assessment year 2009-10 charitable institutions even if they incidentally carry on commercial activity subject to the conditions mentioned above. "
3. "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). Hence, such entities will not be eligible for exemption under section 11 or under section 10(23C) of the Act if they carry on commercial activities. Whether such an entity is carrying on an activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of the activity. "
16. It is seen that the opening line of Para 3 is clearly stating that Proviso to Section 2 ( 1 5 ) will apply ONLY to entities whose purposes is advancement of any other object of general public utility. We have already held 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). 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. We, accordingly, refuse to 21 I.T.A. No. 2408/Del/2013 Assessment year 2009-10 interfere with the order passed by the Ld. CIT (A) and uphold the same.
17. In the result, the appeal of the Department is dismissed.
The order is pronounced in the open court on 29/2/2016.
Sd/- Sd/-
(J. SUDHAKAR REDDY) (SUDHANSHU SRIVASTAVA )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: the 29th of February, 2016
'GS'
Copy of the Order forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR By order
Asstt. Registrar
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