IN INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC-II NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER I.T.A .No.-4912/Del/2015 (ASSESSMENT YEAR-2011-12) ITO (Exemption), vs Young Womens Christian Association of India, Ward-2(3), Room No.2414, 10, Sansad Marg, New Delhi-110001. E-2 Block, Dr.S.P.Mukherjee Civic PAN-AAATY0787E Centre, New Delhi-110002. (APPELLANT) (RESPONDENT) Appellant by Ms. Anima Baranwal, Sr.DR Respondent by Sh. Salil Agarwal, Adv. & Sh. Shailesh Gupta, Adv. Date of Hearing 04.08.2016 Date of Pronouncement 28 .09.2016 ORDER present appeal has been filed by Revenue assailing correctness of order dated 29.05.2015 of CIT(A)-40 (Exemption), New Delhi pertaining to 2011 -12 assessment year on following grounds:- 1. On facts and in circumstances of case and in law, Ld. CIT(A) has erred in ignoring that assessee was predominantly engaged in activities of running of guest house, hostel and canteen which were clearly in nature of business activity and failed to demonstrate that its object falls under category of relief to poor, education, medical relief and 'Advancement of any other object of general public utility' as per amended provisions of Act. 2. On facts and in circumstances of case and in law, Ld. CIT(A) has erred in ignoring that activities of running of guest house, hostel and canteen were being done by assessee on non-mutuality basis including running of canteen at Medical College Hospital at Vellore where canteen was also open for general public visiting patients in hospital which is clearly in nature of trade, commerce and business. 3. appellant craves leave to add, to alter or amend any ground of appeal raised above at time of hearing." Page 1 of 8 I.T.A .No.-4912/Del/2015 2. Ld. AR inviting attention to impugned order submitted that on behalf of assessee, it had been brought to notice of CIT(A) that in 2009-10 assessment year on identical facts and circumstances exemption under section 11 (1) was denied by AO which was not sustained by CIT(A) vide his order dated 04.02. 2013. It was submitted that department's appeal as per pages 1 to 22 of paper book filed was dismissed by ITAT vide order dated 29.02.2016. Accordingly, it was his prayer that issue is fully covered in favour of assessee. Inviting attention to paper book page 23 and 24, it was submitted that grounds raised were identical by Revenue in 2009-10 assessment year. Considering order of ITAT and impugned order, Ld. Sr.DR did not dispute claim of Ld.AR that issue is covered, however reliance was placed for record upon assessment order. 3. I have heard rival submissions and perused material available on record. It is seen that Assessing Officer has taken note of fact that assessee registered with Registrar of Society under Societies Registration Act, XXI of 1860, (Punjab Amendment) Act, 1957 was registered under section 12 of Income Tax Act, 1961 vide No CIT-II/TE(53)/60/945 dated 12.09.1975 and was notified by DIT(E) u/s 80G of Act. Its objects were culled out by him in para 3 as under:- a) To take over whole or any of assets and liabilities of unincorporated Association known as National Young Women's Christian Association of India, Burma and Ceylon and federation, development, and extension of young Women's Christian Associations in India, and for such purpose making (if necessary) of grants in aid to such Association. b) To consider and discuss all questions affecting interest of Association. c) To provide for delivery of Lectures, formation of classes and to take other suitable means for promotion of Spiritual, Intellectual, Physical and Social Wellbeing of Young Women in India. d) To purchase, hire otherwise acquire for purpose of Association any real or immoveable and personal or moveable property and in particular any lands, buildings, furniture, house hold effects, utensils, books, newspapers, periodicals, musical instruments, fittings, apparatus, appliances conveniences Page 2 of 8 I.T.A .No.-4912/Del/2015 and accommodation, and so far as law or licence of Local Government may from time to time allow to sell, demise, let mortgage or dispose of same. 3.1. Considering fact that assessee was running guesthouses at different locations from which room rent revenue of Rs.1,23,67,931/- had been received from users of guesthouses and considering fact that goods and beverages to customers were also sold at guesthouse and considering fact that there was total receipt of Rs.1,63,17,054/- and assessee was also running at canteen at CMC Hospital at Vellore lead Assessing Officer to issue show cause notice to assessee to explain why first proviso of section 2(15) of Income Tax Act, 1961 should not be invoked as activities of guesthouse, hospitals at different tourist places appears to be of business nature. He noted that guesthouses, hostel or canteen etc. were open for foreign tourist for providing facility of boarding, lodging and food and beverages at cost of charging fee for services paid. Further, canteen at medical college hospital at Vellore was opened for general public visiting patients in hospital also 3.2. Accordingly, after considering explanation of assessee, exemption claimed was denied under section 11(1). 4. issue was challenged in appeal before CIT(A). Considering fact that on identical facts and circumstances on similar activity CIT(A) had granted exemption under section 11 (1) in 2009-10 assessment year, CIT(A) came to following conclusion:- 4.3. I have considered order of AO and submissions of assessee and I find considerable merit in submissions of assessee that assessee is charitable nonprofit institution and mere receipt of fees and rents etc. cannot be said that assessee is involved in any trade, commerce or business. 4.4. Recently Hon'ble Delhi High Court in case of India Trade Promotion Organisation vs. DGIT(E), 53 Taxmann.com 404 (Delhi) 2015 (order dated Page 3 of 8 I.T.A .No.-4912/Del/2015 22/01/2015) has upheld constitution validity of proviso of section 2(15) which was under challenge being discriminatory in view of Article 14 (Equality before law) of Constitution of India but Hon'ble High Court has read down strict and literal interpretation of Proviso of section 2(15) and has held that mere receipt of fee or charge cannot be said that assessee is involved in any trade, commerce or business and has accordingly allowed relief to ITPO case vide Para 58 and 59 of order. 4.5. After considering all facts and circumstances of case, I am of view that assessee is charitable and non-profit organization and I do not find in any of activities of assessee that assessee is involved in any trade, commerce or business to attract mischief of Proviso of section 2(15) and accordingly following earlier year's order on principle of precedence and consistency AO is directed to allow exemption to assessee u/s 11(1) with all consequential benefits. 4.1. record shows that said view of Commissioner has been upheld by ITAT. perusal of said order would show that Co-ordinate Bench dismissed appeal of Revenue on identical facts and circumstances vide order dated 29.02.2016 holding as under:- 11. We have gone through relevant records and have heard rival submissions. term "relief for poor" has assumed importance after recent amendment regarding business activities of charitable organizations. term "relief for poor" has to be understood in wider perspective. For instance, it is not necessary that object should be for betterment of all poor people living in particular country or province. It would be sufficient if objects are for benefits of section of pubic as distinguished from individuals. It may be noted that in order to become charitable, relief should be for section of community which could be well defined and identified by some common quality of public nature. Hon'ble Supreme Court in case of Thiagarajar Charities v. ACIT 225 ITR 1010 (SC) has held that scope of "relief for poor" is very wide and it can even include business carried on for benefit of poor. In this case, objects of Thiagarajar trust were studied and debated whether they could be considered as "relief for poor." objects of 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 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 benefits of students and generally all kinds of educational institutions whether general, technical, vocational, professional, or of other description whatsoever for welfare and upliftment of Page 4 of 8 I.T.A .No.-4912/Del/2015 general Indian public and to institute and award scholarships in India for study, research, apprenticeship for all or any of said purposes. b. To establish, maintain, run, develop, improve, extend, grant donations for and to aid and assist in 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 Indian public. c. To establish, maintain, run, develop, improve, extend, grant, donations for and to aid and assist in establishment, maintenance, running, development, improvement, and extension of hospitals, clinics, dispensaries sanatoria, maternity homes and all similar institutions as will afford treatment, cure, rest, recuperation and other allied advantages in way of alleviating sufferings of humanity. d. To conduct poor feeding and generally to give food and clothing to defectives and to afford relief to people in distress and affected by famine, pestilence and other accidents and conduct or grant donations for inmates of orphanages." 12. Hon'ble Apex Court held that business involving poor and beneficiaries cannot be said to be business or activity for profit. Hon'ble Apex Court provided two reasons (i) business is only means of achieving object of trust; it is medium through which objects are accomplished (ii) business held as corpus property under trust produces or results in income, like any other property. In light of this decision, business activities involving beneficiaries and done only with motive of providing relief to poor, cannot be considered as business. 13. issue of business/commercial activities was also considered by Hon'ble Supreme Court in case of Asstt. CIT v. Thanthi Trust 247 ITR 785. Hon'ble Supreme Court held that even business of weaving cloth and stitching clothing by employing women, carries on business in course of actually accomplishing its primary object of affording relief to poor and it would qualify for exemption under section 11. In this case Hon'ble Apex Court held that, "..as it stands amended in 1992, all that is required under section 11(4A) for business income of trust or institution to be exempt from tax is that business should be incidental to attainment of objectives of trust or institution. business whose income is utilized by trust or Institution for purposes of achieving objectives of trust or institution is business which is incidental to attainment of objectives of trust or institution is, surely, business which is incidental to attainment of objectives of trust. In any event, if there be any ambiguity in language employed, provision must be constructed in manner that benefits assessee. trust is, therefore, entitled to benefits of section 11 for assessment year 1992-93 and thereafter. " 14. In light of above two Supreme Court rulings, it is clear that scope of term relief for poor is very wide and cannot be constricted with limited interpretation of confining it to some relief or emergency support to poor in short run. scope of term relief for poor is wide enough to include any kind of activity which provides support or benefit to poor. In this Page 5 of 8 I.T.A .No.-4912/Del/2015 process, activity shall not be considered as business provided it satisfies condition of being only medium to achieve object of relief to poor. Coming to facts and figures of case, project-wise surplus/deficit for year, as submitted by Ld. AR, is as under: Revenue Generated & Expenditure incurred during 2009-10 Name of Project / Gross Revenue Expenditure Surplus/Deficit 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, Chandigarh 1557327 1159107 398220 Day Care Centre, Dehradun 169064 300366 (131302) Senior Citizens 122550 256338 (133788) Accommodation, Dehradun Totals 53687019 49424940 4262079 Perusal of chart shows that against gross revenue of Rs. 5,36,87,019/-, assessee has expended sum of Rs. 4,942,490/- and net surplus comes to Rs. 42,62,079/- which is only 7.93% of gross receipts. It is also seen that 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 from surplus at other projects. Hence, it can be logically inferred that surplus earned is only incidental to charitable activities. Also, there is no finding by AO about any diversion of funds for individual benefit of any member of association or for benefit of his relative. Also there is no finding by AO regarding any kind of violation of any other conditions by assessee, as laid down in section 13 of Act. Therefore, in view of factual matrix of case as well as judicial precedents as aforesaid, we are of considered opinion that assessee is engaged in providing relief to poor, education as well as medical relief. We have no hesitation in holding that activities of assessee association fall within ambit of first three limbs viz. relief to poor, education or medical relief and it will not be hit by newly inserted proviso to section 2(15). 15. Moreover, CBDT Circular no. 11/2008 dated 19th Dec, 2008 states that commercial activity of any charitable trust will not be subject to tax if along with commercial activities it is engaged in providing relief of poor, education, medical relief. In this context, Para 2.1, 2.2, and 3 of circular being relevant are being reproduced hereunder: 2.1 "The newly inserted proviso to section 2(15) will not apply in respect of first three limbs of section 2(15), i.e., relief of poor, education or medical relief Consequently, where purpose of trust or institution is relief of poor, education or medical relief, it will Page 6 of 8 I.T.A .No.-4912/Del/2015 constitute 'charitable purpose' even if it incidentally involves carrying on of commercial activities." 2.2 "'Relief of poor' encompasses wide range of objects for welfare of economically and socially disadvantaged or needy. It will, therefore, include within its ambit purposes such as relief to destitute, orphans or 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 commercial activity, subject, however, to conditions stipulated under section 11(4A) or seventh proviso to section 10 (23C) which are that (i) business should be incidental to attainment of objectives of 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 commercial activity subject to 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. fourth limb of 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 Act if they carry on commercial activities. Whether such entity is carrying on activity in nature of trade, commerce or business is question of fact which will be decided based on nature, scope, extent and frequency of activity. " 16. It is seen that opening line of Para 3 is clearly stating that Proviso to Section 2 (15) will apply ONLY to entities whose purposes is advancement of any other object of general public utility. We have already held that activities of assessee association fall within ambit of first three limbs viz. relief to poor, education or medical relief and it will not be hit by newly inserted proviso to section 2(15). Accordingly, benefit of this circular should also accrue to assessee and, therefore, benefit of exemption claimed by assessee u/s 11 cannot be rightfully denied. We, accordingly, refuse to interfere with order passed by Ld. CIT (A) and uphold same. 17. In result, appeal of Department is dismissed. 5. Accordingly, in absence of any infirmity having been pointed out by Revenue and finding myself in agreement with conclusions drawn on identical set of facts and circumstances, I find no good reason to come to contrary conclusion. Being satisfied in Page 7 of 8 I.T.A .No.-4912/Del/2015 peculiar facts and circumstances and respectfully following judicial precedent relied upon, impugned order is upheld and departmental appeal is dismissed. 6. In result, appeal of Revenue is dismissed. order is pronounced in open court on 28th September, 2016. Sd/- (DIVA SINGH) JUDICIAL MEMBER Amit Kumar Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI Page 8 of 8 ITO (Exemption), Ward-2(3), New Delhi v. Young Women’s Christian Association of India