The Chennai Bench of Income Tax Appellate Tribunal (ITAT) directed for re-adjudication as there were no records to prove that the trust charges a nominal fee from the weaker sections to claim the tax exemption under sections 11 and 12 of the Income Tax Act 1961.
Before the bench of Mahavir Singh (Vice President) and Manjunatha (Accountant Member) three appeals filed by the assessee against separate, but identical orders of Commissioner of Income-tax (Appeals) [CIT(A)].
The appellant, Equitas Development InitiativesTrust is a public charitable trust registered under section 12AA of the Income-tax Act. The appellant trust had filed its return of income for the A.Y. 2011-12 & 2013-14, declaring Nil total income after claiming exemption under section 11 & 12 of Income Tax Act.
The appellant trust is created by a deed of trust and as per objects of the trust, the assessee objects which consist of education, relief of the poor, medical and also some objects are in the nature of any other objects of general public utility.
The assessee is running the tuition centres for all these assessment years. Before the Assessing Officer (AO), the assessee claimed that its activities comes under the definition of education and relief to the poor as defined under section 2(15) of Income Tax Act, because it is providing tuition classes to poor students on concessional fees.
According to AO, the objects of the assessee although are mixed in nature, but activities carried out by the assessee in the impugned assessment years are commercial in nature and thus, cannot be considered as charitable purpose.
Further, in appeal before CIT(A) upheld findings of the AO in rejecting exemption claimed under section 11 of Income Tax Act, and according to the CIT(A) the activities carried out by the assessee neither comes under definition of education nor in the nature of relief to the poor.
D. Anand, counsel for appellant stated that the the objects and activities of the trust is in the nature of relief of the poor as defined under section 2(15) of Income Tax Act.
The Tribunal observed that to ascertain whether the assessee falls in any of specific clauses of the term charitable purpose, one has to see the activities conducted by the appellant trust for the relevant assessment years.
Further the bench highlighted that ‘Relief of the poor’ encompasses a wide range of objects for the welfare of the economically and socially disadvantaged or needy.
The appellate tribunal determined that CIT(A) had made a categorical finding that there was insufficient evidence to support the claim that the appellant had admitted destitute students while also charging a minimal tuition.
The bench ordered the AO instructions to find out whether or not impoverished and weaker section students receive admittance and whether or not there is a fee in a commercial sense. Additionally, if the assessee can provide the requisite proof to support their claim, the AO may classify their case as being related to poor relief.
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