23. CIT (Exemption) vs. India Habitat Centre [2020] 114 taxmann.com 84 (Del.) Date of order: 27th November, 2019 A.Y.: 2012-13
Charitable purpose – Section 2(15) r/w sub-sections 11, 12 and 13 of
ITA, 1961 – Where India Habitat Centre, inter alia set up with primary
aim and objective to promote habitat concept, was registered as a charitable
trust, principle of mutuality for computation of its income was not required to
be gone into as income was to be computed as per sections 11, 12 and 13; A.Y.:
2012-13
For the A.Y.
2012-13, the assessee filed its return of income on 28th September,
2012 in the status of ‘Trust’, declaring ‘Nil income’. Its assessment was
framed u/s 143 (3) of the Income-tax Act, 1961, computing total income as Rs.
5,86,85,490 and holding that the activities of the assessee are hybrid in
nature; they were partly covered by provisions of section 11 read with section
2(15), and partly by the principle of mutuality. It was held by the A.O. that
since the assessee is not maintaining separate books of accounts, income cannot
be bifurcated under the principle of mutuality or otherwise. The entire surplus
in I&E account, amounting to Rs. 5,83,92,860, was treated as taxable income
of the assessee.
The CIT(Appeals) allowed the appeal of the assessee by relying upon the
judgment of the Delhi High Court in the assessee’s own case dated 12th
October, 2011 for A.Ys. 1988-89 to 2006-07 and the decision of the Hon’ble
Supreme Court in the case of Radha Soami Satsang vs. CIT [1992] 193 ITR
321/60 Taxman 248. The Tribunal confirmed the decision of the
CIT(Appeals).
On appeal by the Revenue, the Delhi High Court upheld the decision of
the Tribunal and held as under:
‘i) The fundamental question is
that if the assessee has taken the plea of mutuality, whether it could be
deprived of the benefit of section 2(15) of the Act. On this aspect, the A.O.
has proceeded to classify the assessee’s activities as ?hybrid”, holding that
part of the activities are covered by provisions of section 11 r/w section
2(15) and part by principle of mutuality. The CIT(A), after examining the records,
has given a categorical finding that the activities of the centre fall within
the meaning of the definition of ?charitable activities” as provided u/s 2(15)
of the Act.
ii) Applying the test of profit motive, it was
held that the surpluses generated by the assessee are not being appropriated by
any individual or group of individuals. Merely because the assessee is charging
for certain goods and services it does not render such activities as commercial
activities, and the fact that the A.O. has accepted that the assessee is
promoting public interest as provided in the proviso to section 2(15),
there cannot be any doubt that the assessee should be regarded as a charitable
organisation and given the full benefit of exemption provided to such
organisations under the Act. Relying on this premise, it has been held that
since the assessee has not generated any surpluses from anyone, members or
non-members, it was not correct to say that the assessee has claimed relief
partly as charitable organisation and partly as mutual association.
iii) Further, it was rightly
held that the principle of mutuality becomes superfluous in view of the fact
that the activities were held to be charitable. Applying the principle of
consistency, the CIT(A) held that there is no fundamental change in the nature of
activities of the assessee for the period prior to A.Y. 2008-09 and subsequent
years. The ITAT has confirmed the findings of the CIT(A). Though the principles
of res judicata are not applicable to the income tax proceedings,
however, at the same time, one cannot ignore the fact that there is no dispute
with respect to the consistency in the nature of activities of the assessee.
All the income tax authorities have held that the assessee is a charitable
institution and this consistent finding of fact entitles the assessee to have
its income computed under sections 11, 12 and 13 of the Act.
iv) In this background, we find
no ground to disentitle the assessee to the benefits of section 2(15) of the
Act. This being the position, we find no perversity in the impugned decision
and, therefore, no question of law, much less substantial question of law,
arises for consideration. As a result, the appeal of the Revenue is dismissed.’
