J U D G M E N T

MANMOHAN, J (Oral):

1. Present Income Tax Appeal has been filed challenging the Order passed by the Income Tax Appellate Tribunal (‘ITAT’) in ITA No.3662/Del./2015 for the Assessment Year 2011-12.

2. Learned Counsel for the Appellant states that the ITAT has erred in not appreciating the fact that the activities of rendering services etc. by the respondent are in the nature of trade commerce or business which are not charitable in nature and therefore hit by proviso to section 2(15) of the Income Tax Act 1961 (‘the Act’).

3. He also states that the ITAT has erred in directing the Assessing Officer to allow the exemption under Section 11 of the Act without appreciating the fact that the Assessee cannot be treated to be engaged in charitable activities.

4. A perusal of the paper book reveals that the assessee is engaged in activities for upliftment of the poor, providing training and skill development of the poor in the rural areas in the backward districts of the states like, Bihar, Jharkhand, Orissa, Madhya Pradesh, Chhattisgarh and West Bengal etc. The assessee gets grant from Central and State Government and also donation from the various organization like, 'Gate foundation' etc. The assessee has been allowed benefit of exemption under section 11 of the Act continuously up to assessment year 2010-11. However, in the instant assessment year, the assessee has been denied said exemption by the Assessing Officer invoking the proviso to section 2(15) of the Act. On further appeal, the CIT(A) allowed the exemption under section 11 of the Act with all consequential benefits.

5. The Revenue, being aggrieved by the Order of the CIT(A), preferred an appeal before the ITAT. The ITAT upheld the decision of the CIT(A) holding that the assessee is not engaged in any trade, commerce or business and thus proviso of section 2(15) is not attracted to the case of the assessee.

6. The ITAT also noted that the assessing officer has not brought on record any evidences which would suggest that the activities of the assessee had been carried out with profit motive. The Revenue could not controvert the fact that the assessee has not charged any fee from the clients except the cost of project actually incurred. Even in the sanction letter of grant to the assessee, there is mention of supervision or monitoring of activities by the donor, but that in itself is not sufficient to hold that any profit motive is involved. The ITAT further holds that it is quite normal that a donor would want to verify whether the grants have been incurred for the intended purpose which in our opinion, in any manner does not establish that the activities of the assessee is business activity.

7. The ITAT further observed that in the assessment years 2009-10 and 2010-11, the assessing officer has held the assessee is engaged in providing relief to poor within the meaning of Section 2(15) of the Act. The assessee has claimed that its activity during the year under consideration has remained same and there is no change as compared to assessment years 2009-10 and 2010-11. The ITAT following the rule of consistencydismissed the appeal of the Revenue.

8. This Court in the case of Institute of Chartered Accountants of India and Anr. Vs. Director General of Income Tax (Exemptions), Delhi and Ors., (2013) SCC OnLine Del 2401 with reference to State of Andhra Pradesh Vs. H Abdul Barhi & Bros Vs. (1964) 15 STC 644 (SC) has observed that merely because a fee or some other consideration is collected or received by an institution, it would not lose its character of having been established for a charitable purpose. Furthermore, this Court in the case of PCIT vs Servants of People Society [ITA 161/2021] has held as under:

“5. This Court in ITA No.154/2021 titled ‘Commissioner of Income Tax (Exemptions) Delhi vs. Association of State Road Transport Undertakings has held that it is settled law that the first proviso to Section 2(15) of the Act does not exclude entities which are essent