Taxmann's Yearly Tax Digest & Referencer (Set of 2 Vols.)

Chapter-heads

DIGEST OF JUDGMENTS OF SUPREME COURT & HIGH COURTS

Contents I-3-I-20

List of Cases Digested I-21-I-75

List of Cases Af rmed/Reversed/Overruled/Approved/ Disapproved I-77-I-81

List of Cases against which SLP Dismissed/Granted/ Notice issued by Supreme Court I-83-I-91

List of Circulars & Noti cations Judicially Analysed by Supreme Court/High Courts I-93-I-101

Digest of Judgments of Supreme Court/High Courts 1-845 Subject Index 847-871

PAGE NO.

v

Chapter-heads

PAGE NO.

CONTENTS I-7-I-22

LIST OF CASES DIGESTED I-23-I-95

LIST OF CIRCULARS & NOTIFICATIONS JUDICIALLY ANALYSED BY TRIBUNAL I-97-I-102

DIGEST OF ORDERS OF INCOME-TAX APPELLATE TRIBUNAL 1-1032 SUBJECT INDEX 1033-1057

I-5

The assessee was a society running educational Institutes, medical colleges and charitable hospitals. Income from charitable activities declared by the assessee was Nil. The assessee earned gross receipt of Rs. 61.63 crores on account of educational activity and assessee was also running hostels for students as per UGC Guidelines which was an ancillary activity. According to the revenue the hostel being run by the assessee could not be treated as charitable activity and it was not necessary for functionality of the educational institution and, therefore, income from this hostel and other activities was not exempted. Held that in absence of any evidence to show that hostel facilities were provided to anybody other than students and staff of trust, hostel facilities provided by educational institution would be construed to be incidental to providing education as per object of trust and, hence, come under charitable purpose.

88. Where assessee, a non-profit entity, established by the National Council of Science Museum, was awarded by RBI a contract of construction of a museum and was also awarded task of establishing five galleries on textiles, astronomy, space, etc., as assessee had disseminated knowledge

65

S. 2(15)

66

in process of establishing facilities for RBI and SMC, activities of assessee amounted to education within meaning of section 2( 15) [Assessment years 2013-14 to 2014-15] [In favour of assessee]

Creative Museum Designers v. ITO, Exemptions [2022] 139 taxmann. com 451/443 ITR 173 (Cal.)

The assessee-company was a non-profit entity established by the National Council of Science Museum. It was engaged in taking up all kinds of museum/science centre projects on turnkey basis. During year, it became a successful bidder in an open tender floated by the RBI for setting up a museum project and was also awarded task of establishing five galleries on textiles, astronomy, space, etc., by SMC and received certain consideration. The Assessing Officer held that surplus generated by the assessee was on account of an activity which was commercial in nature and that the assessee was performing charitable activity only in form of general public utility and surplus was accordingly disallowed under section 13(8) read with proviso to section 2(15).

Held that to state that the assessee was only a contractor was to belittle its status and the purpose for which it was established by the Ministry of Culture, Government of India. The authorities as well as the Tribunal were of the view that it is the RBI which is engaged in the educational activities and not the assessee. This finding was also erroneous as the museum was conceptualised by the assessee and all necessary inputs including training of personnel who were to man the museum or to function as a curator were all the tasks assigned to the assessee. All these would clearly fall within the objects of the assessee company. Thus, the message and information which would be disseminated through the museum which would be in the nature of a non-formal education was based upon the material which had been evolved by the assessee and implemented for and on behalf of the Reserve Bank of India.

Therefore, the role of the assessee could not be divested from the project rather it was the project of the assessee which was being manned by the recipient, namely, RBI and SMC. This would be the proper manner in which the work assigned to the assessee and completed by them had to be interpreted. Hence, the assessee had disseminated knowledge in the process of establishing the facilities for the RBI and the SMC.

The next aspect was as to whether the assessee-company was engaged in educational activities. If the term ‘education’ as occurring in section 2(15) cannot be restricted to formal school or college education, then dissemination of knowledge through a museum or a science park would undoubtedly fall within the meaning of ‘education’ as occurring in section 2(15). Merely because a certain amount had been generated as surplus could not take

CHARITABLE/RELIGIOUS TRUST

CHARITABLE PURPOSE

S. 2(15)

away the activities of the assessee as not being charitable for the purpose of imparting education or for general public utility. As could be seen from the memorandum of association, the incumbent profit of the assessee had to be utilised for the promotion of the objects which had been set forth in the memorandum. No portion of the income or property would be paid or transferred directly or indirectly by way of dividend, bonus etc. Therefore, the finding of the Tribunal on this aspect was also not tenable. Thus, when the assessee had not been established for the purpose of earning profit and the income it generated had to be applied for promoting the objects as spelt out in the memorandum and no portion of the income could be directly or indirectly paid by way of dividend or bonus etc., it had to be necessarily held that the assessee was a not for profit organisation but public utility company and the activities of the company for which it had been established would undoubtedly show that the company by establishing knowledge parks was engaged in imparting education and also undertook advancement of other aspects of general public utility to fall within the definition of ‘charitable purpose’ as defined under section 2(15).

MEDICAL RELIEF

89. Where petitioner-society, engaged in running a hospital, gave free treatment to few poor/needy and collected fee from patients who could afford it, same would indicate that petitioner was not a charitable hospital [In favour of revenue]

Institute of Franciscan Missionaries of Mary v. Commissioner, Coimbatore City Municipal Corporation [2022] 137 taxmann.com 378/445 ITR 152 (Mad.)

The petitioner-society was engaged in running a hospital. The petitioner claimed that hospital was run with object of doing charity and was entitled for exemption from payment of property tax under section 123(e) of the Coimbatore City Municipal Corporation Act, 1981. The Commissioner rejected the request of the petitioner. Held that in case of a charitable institution, there is an absence of quid pro quo for services. The charitable institutions largely depend on the charity and donations from public to achieve their objects as per the trust deed in case of a charitable institution or memorandum of association in case of a society. The charitable institutions are ordinarily not expected to involve themselves in the generation of income and the economic activities unless such activity itself is meant for rehabiting its beneficiaries. Such institutions sometimes employ physically handicapped persons or mentally challenged persons and destitute and/or other physically challenged persons, etc., for the generation of income. Generation of income in such case is incidental to the main activity. Generation of income can be a by-product of the charitable

67

S. 2(15) CHARITABLE/RELIGIOUS TRUST 68

activity. Therefore, there is no merit in the contention of the assessee that it was a charitable hospital. If the objects are distributive, each and every one of the objects must be charitable in order to conclude that the trust was engaged in valid charity. Same principle is applicable in the case of a building in which medical hospital is being run with a charitable object. Merely because a portion of service is charitable would not clothe such hospital with a tag of a charitable hospital to claim exemption. If such hospital is collecting money for the services rendered, it is not entitled to be called as charitable hospital. Merely because the petitioner was having certain out reach programmes which might be charitable in nature or a section of patients were given free treatment it would not automatically render the petitioner a charitable hospital. It would not mean that an exemption from payment of property tax can allowed to the petitioner.

OBJECT OF GENERAL PUBLIC UTILITY

Proviso to section 2(15)

90. So long as a GPU’s charity’s object involves activities which also generates profits it can be granted exemption provided the quantitative limit (of not exceeding 20 per cent) under second proviso to section 2(15) for receipts from such profits, is adhered to [In favour of assessee]

Asstt. CIT (Exemptions) v. Ahmedabad Urban Development Authority [2022] 143 taxmann.com 278/449 ITR 1 (SC)

The proper way of reading reference to the term “incidental” in section 11(4A) is to interpret it in the light of the sub-clause (i) of proviso to section 2(15), i.e., that the activity in the nature of business, trade, commerce or service in relation to such activities should be conducted actually in the course of achieving the GPU object, and the income, profit or surplus or gains can then, be logically incidental. The amendment of 2016, inserting sub-clause (i) to proviso to section 2(15) was therefore clarificatory. Thus, interpreted, there is no conflict between the definition of charitable purpose and the machinery part of section 11(4A). Further, the obligation under section 11(4A) to maintain separate books of account in respect of such receipts is to ensure that the quantitative limit imposed by sub-clause (ii) to section 2(15) can be computed and ascertained in an objective manner.

The conclusion recorded above is also supported by the language of seventh proviso to section 10(23C). Whereas section 2(15) is the definition clause, section 10 lists out what is not income. Section 10(23C) by sub-clauses (iv) and (v) exempt incomes of charitable organisations. Such organisations and institutions are not limited to GPU category charities but rather extend to other types of charities (i.e. the per se kind

CHARITABLE PURPOSE

S. 2(15)

as well). The controlling part of section 10(23C) along with the relevant clauses (iv) and (v) seek to exclude income received by the concerned charities. However, the provisos hedge such exemption with conditions. The seventh proviso - much like section 11(4A) and the definitioncarve out an exception, to the exemptions such that income derived by charities from business, are not exempt. The seventh proviso virtually echoes section 11(4A) in that business income derived by a charity (in the present case, the GPU charities) which arises from an activity incidental to the attainment of its objective is not per se excluded. Therefore, pure charity in the sense that the performance of an activity without any consideration is not envisioned under the Act. If one keeps this in mind, what section 2(15) emphasizes is that so long as a GPU’s charity’s object involves activities which also generates profits (incidental, or in other words, while actually carrying out the objectives of GPU, if some profit is generated), it can be granted exemption provided the quantitative limit (of not exceeding 20 per cent) under second proviso to section 2(15) for receipts from such profits, is adhered to.

Case review : Ahmedabad Urban Development Authority v. CIT (Exemption) v. [2017] 83 taxmann.com 78/396 ITR 323 (Guj.), CIT v. Yamuna Expressway Industrial Development Authority [2017] 81 taxmann.com 208/395 ITR 18/298 CTR 127 (All.), Greater Noida Industrial Development Authority v. Union of India [2018] 91 taxmann.com 352/254 Taxman 289/406 ITR 418/303 CTR 512 (Delhi)/2018 SCC Online Delhi 7536, CIT v. Gujarat Maritime Board [2021] 123 taxmann.com 35/277 Taxman 376/[2020] 428 ITR 152 (Guj.), DIT v. Apparel Export Promotion Council [2000] 112 Taxman 433/244 ITR 736/163 CTR 133 (Delhi), CIT v. Ernet India [2019] 101 taxmann.com 59 (Delhi), CIT (Exemption) v. National Internet Exchange of India [2021] 133 taxmann.com 376 (Delhi), Tribune Trust v. CIT [2016] 76 taxmann.com 363/[2017] 247 Taxman 36/390 ITR 547 (Punj. Har.), CIT v. Shri Balaji Samaj Vikas Samiti [2018] 91 taxmann.com 26/254 Taxman 93/403 ITR 398/302 CTR 397 (All.) affirmed.

GS1 India v. DGIT (Exemptions) [2013] 38 taxmann.com 364/219 Taxman 205/ [2014] 360 ITR 138/[2013] 262 CTR 585 (Delhi), DIT (Exemption) v. Gujarat Cricket Association [2020] 120 taxmann.com 50/[2019] 419 ITR 561 (Guj.), CIT v. Rajasthan Cricket Association [2018] 98 taxmann.com 425/[2019] 260 Taxman 149/414 ITR 452 (Raj.) set aside.

91. Where main object of assessee-society was running a printing press and publishing a newspaper and profit so generated was being ploughed back for charitable activities, mischief of proviso to section 2(15) was not attracted and, thus, assessee was entitled to exemption under section 11(1)[Assessment year 2011-12] [In favour of assessee]

Principal CIT v. Servants of People Society [2021] 133 taxmann.com 244/[2022] 284 Taxman 461 (Delhi)

The assessee-society was running a printing press and publishing a newspaper. Profit so generated was used for charitable purposes and apparently

69

S. 2(15)

there was no profit motive in activities of the assessee. The Tribunal allowed the assessee the benefit of exemption under section 11. Held that it could not be said that the assessee was involved in any trade, commerce or business. Therefore, mischief of proviso to section 2(15) was not attracted and it could be said that the activity of assessee-society was charitable in nature as profit, if any, made by the assessee-society was being ploughed back for charitable activities. Further, the Commissioner itself having granted registration to the assessee under section 12A, recognition under section 10(23C)(vi) and exemption under section 80G, the findings of the Commissioner (Appeals) and Tribunal that the assessee-society did not carry on any business, trade or commerce with intent of earning/distributing profit and was, thus, entitled to exemption under section 11(1) was agreeable.

92. Where assessee-society, registered under section 12A, undertook construction activities under State PWD department in lieu of 2.5 per cent supervision charges, purpose of such construction work could not be accepted as an activity coming within meaning of advancement of other object of general public utility and would rather be in nature of trade, commerce or business; therefore, proviso to section 2(15) would be attracted and assessee would not be entitled to benefit under section 11 [Assessment years 2009-10 and 2013-14] [In favour of revenue]

Nirmithi Kendra v. Dy. CIT (Exemptions) [2022] 141 taxmann.com 495 (Ker.)

The assessee-society was registered under section 12A with main objective to take up construction work of any nature to establish a chain of retail outlets. It undertook construction activities under State PWD department in lieu of 2.5 per cent supervision charges and accordingly claimed certain amount as applied for charitable purposes. The Assessing Officer was of view that construction work was an activity of trade, commerce or business for consideration and assessee could not claim status under section 12A since activities carried on by it did not fall within meaning of charitable purpose warranting exemption from income tax.

Held that where assessee executed construction work for benefit of the Government and received certain amount from the Government from same, purpose of such construction work could not be accepted as an activity coming within meaning of advancement of other object of general public utility. Since assessee was involved in carrying on of any activity in nature of trade, commerce or business, proviso to section 2(15) would be attracted and assessee would not be entitled to benefit under section 11.

CHARITABLE/RELIGIOUS

TRUST 70

S. 2(15)

Case review : Notice issued in SLP in Nirmithi Kendra v. Dy. CIT (Exemptions) [2022] 141 taxmann.com 496/288 Taxman 663 (SC).

93. Where assessee, a charitable trust, was engaged in activities for upliftment of poor, providing training and skill development to poor in rural areas and Assessing Officer had not brought on record any evidences which would suggest that activities of assessee were carried out with profit motive, proviso of section 2(15) was not applicable and, thus, assessee could not be denied exemption under section 11 during year [Assessment year 2011-12] [In favour of assessee]

CIT v. Professional Assistance For Development Action [2022] 143 taxmann.com 328/447 ITR 103 (Delhi)

The assessee charitable trust was engaged in activities for upliftment of poor, providing training and skill development of poor in rural areas in backward districts of States. The assessee had been allowed benefit of exemption under section 11 continuously upto assessment year 2010-11. However, in instant assessment year, the Assessing Officer denied exemption to the assessee by invoking proviso to section 2(15). It was noted that the Assessing Officer had not brought on record any evidences which would suggest that activities of the assessee had been carried out with profit motive. The revenue could not controvert fact that the assessee had not charged any fee from clients except cost of project actually incurred. Further, the Tribunal observed that in previous assessment years, the Assessing Officer held that the assessee was engaged in providing relief to poor within meaning of section 2(15) and assessee had claimed that its activity during year under consideration had remained same and there was no change as compared to earlier assessment years.

Held that proviso of section 2( 15) was not applicable and, thus, impugned denial of exemption by the Assessing Officer was unjustified.

ILLUSTRATIONS

BAR CODES DEVELOPER

94. Though GS1 India involved in issuing bar codes was in fact, involved in advancement of general public utility, since its services were for benefit of trade and business, from which it received significantly high receipts, its claim for exemption could not succeed having regard to amended section 2(15)

Asstt. CIT (Exemptions) v. Ahmedabad Urban Development Authority [2022] 143 taxmann.com 278/449 ITR 1 (SC)

The GS1 India was involved in issuing bar codes. GS1 codes were developed and created by GS1 International, Belgium (an international

71

ILLUSTRATIONS

YEARLY TAX DIGEST & REFERENCER (SET OF 2 VOLS.)

AUTHOR : TAXMANN'S

PUBLISHER : TAXMANN

EDITORIAL BOARD

DATE OF PUBLICATION : JANUARY 2023

EDITION : Vol I : 52nd Edition; Vol II : 28th Edition ISBN NO : 9789356224797 NO.OF PAGES : 2140 BINDING TYPE : HARDBOUND

DESCRIPTION

Taxmann's Yearly Publication, 'YTD' as we call it, provides professionally drafted section-wise digests of all case laws reported at taxmann.com during the calendar year, i.e., from January to December from the following Courts:

• Supreme Court

• High Courts

• Income-tax Appellate Tribunal

It also includes information about the Circulars and Notifications issued by the Department during the year, along with 'words and phrases' taken from the reported case laws.

The Present Publication is the 52nd Edition, edited by Taxmann's Editorial Board. It incorporates all Case Laws, Circulars and Notifications for the year 2022. The key features of the book are as follows:

• [Section-wise] Case Law digests, and Circulars & Notifications are arranged section-wise

• [Judicial Analysis] of the case laws that include the following:

• Affirmed Cases

• Reversed/Overruled Cases

• Approved/Disapproved Cases

• Cases against which SLP was Dismissed/Granted or Notices were issued by the Supreme Court

• [Subject Index] will help you to find the required Case Law quickly

• [Digest Drafted by the Professionals] which provides a quick glimpse of the ratio laid down in the Case

• [Circulars & Notifications] issued during the year

• [Words & Phrases] which are Judicially defined by the Supreme Court, High Courts & Tribunals, are covered in this book

This book is divided into two volumes:

• Volume 1

• A Section-wise Digest of Income-tax Judgments of the Supreme Court/High Courts reported in the year 2022

• Volume 2

• A Section-wise Digest of Orders of the Income-tax Appellate Tribunal reported in the year 2022 ORDER NOW

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Taxmann's Yearly Tax Digest & Referencer (Set of 2 Vols.)

Chapter-heads

DIGEST OF JUDGMENTS OF SUPREME COURT & HIGH COURTS

Contents

SECTION 2

Definitions

SECTION 4

SECTION 5

SECTION 9

Exemptions

SECTIONS 11 TO 13

Charitable/religious trust

CONTENTS

SECTION 14A

SECTION 17

Salaries

SECTIONS 22 TO 27

SECTION 28

SECTION 32

Depreciation

CONTENTS

Interest on borrowed capital

SECTIONS 40, 40A & 43B

Business disallowance

SECTION 41(1)

SECTION 44

SECTION 44AB

SECTION 44BB

SECTIONS 45 TO 55A

SECTIONS 56 & 57

Cash Credits

SECTION 68

SECTION 69

SECTION 69A

CONTENTS

SECTION 69B

SECTION 69C

SECTIONS 70 TO 80

Losses

SECTIONS 80AC TO 80P

Deductions

SECTIONS 92A TO 92F

Transfer Pricing

SECTION 115A

SECTION 115-O

CONTENTS

SECTIONS 119, 120, 124, 127 & 131

Income-tax authorities

SECTIONS 132 TO 133A

Search & Seizure

SECTION 138

SECTION 142

SECTIONS 143 & 144

SECTION 144A

SECTIONS 145 & 145A

SECTIONS 147 TO 153

CONTENTS

SECTIONS 153A TO 153C

SECTION 156

SECTIONS 158B TO 158BG

SECTIONS 159 TO 179

Liability in special cases

SECTION 184

SECTIONS 191 TO 206C & 234E

Deduction/Collection of tax at source

SECTIONS 220 TO 226

Collection and recovery of tax

SECTIONS 234A TO 234D

SECTIONS 245AA, 245C TO 245-I

SECTIONS 246 TO 251

SECTIONS 252 TO 255

SECTION 260A

SECTION 261

SECTIONS 263 & 264

SECTION 268A

SECTION 269SS

SECTION 269UD

CONTENTS

SECTIONS 275A TO 279 AND 292

Offences & prosecution