ITAT upheld that business was incidental to attainment of trust's objectives

1. The assessee trust was registered u/s 12A (of Income Tax Act, 1961) and also approved u/s 80G(5)(vi) (of Income Tax Act, 1961). It filed the return of income declaring total income at Nil after claiming application of income as per the provisions of s 11. The return was processed u/s 143(1) (of Income Tax Act, 1961). Later on, the case was selected for scrutiny. The AO during the course of assessment proceedings noticed that the assessee had declared a total sale of Rs.6.71 crores at its Cafeteria.Assessee was asked to justify its activities as charitable in nature. The AO held that the activities of the assessee were no longer charitable activities within the amended provisions to Section 2(15) (of Income Tax Act, 1961). Hence, the benefit of s 11/12 was not allowed to the assessee. The AO assessed the income of the assessee at Rs.46,43,003/- which was the surplus declared during the year on running the restaurant.

2 CIT(A) deleted the addition made by the AO. 3 On Revenue's appeal, the ITAT held as under:

"3. From the combined reading of the above said provisions, it is clear that the property held under trust includes business undertaking, so held, and if the business is incidental to the attainment of the objectives of the trust and separate books of accounts are maintained by such trust or institution in respect of such business then also the income is exempt so long as the business carried on by the trust; is incidental to the attainment of main object which is charitable in nature. In the present case also nowhere it is established that the income earned by the assessee trust was not used for attainment of the main object or it was used elsewhere. Therefore, the addition made by the AO was not justified and the ld. CIT(A) rightly deleted the same. For the aforesaid view we are also fortified by the decision of the co-ordinate bench in the aforesaid case of Divya Yog Mandir Trust Vs JCIT (supra)... …

4. We, therefore, considering the totality of the facts as discussed hereinabove and respectfully following the aforesaid decision of the Co-ordinate Bench in the case of Divya Yog Mandir Trust Vs JCIT, Hardwar, are of the view that the ld. CIT(A) rightly deleted the addition made by the AO. In that view of the matter, we do not see any merit in this appeal of the department."

Case Reference - Income Tax Officer(E), Vs Suvasini Charitable Trust.

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH 'G', NEW DELHI

Before Sh. N. K. Saini, AM And Sh. A. T. Varkey, JM

ITA No. 4330/Del/2012

(Asstt. Year : 2009-10)