Back
2025 Supreme(Online)(ITAT) 5075
INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH)
MS. MADHUMITA ROY, J, SHRI NAVEEN CHANDRA, ACJ
Rasha Welfare Foundation – Appellant
Versus
The C.I.T. – Respondent
ITA No. 5180/DEL/2024 | ITA No. 5191/DEL/2024
For the Appellants/Petitioners: Shri Sanjeet Paliwal, Adv, Shri Anupam, Adv
For the Respondents: Shri Monika Singh, CIT-DR
The dominant intent of an organization's activities determines its charitable status, with incidental income not negating this if applied solely for charitable purposes.
Headnote:(A) Income Tax Act, 1961 - Sections 12AA and 80G - Denial of registration and approval for a charitable trust - Denial based on allegations of commercial activities despite charitable objectives - Court reiterates the principle that the dominant intent of activities dictates charitable status, as stated in Additional Commissioner of Income Tax, Gujarat, Ahmedabad Vs. Surat Art Silk Cloth Manufacturers Association Surat (1980) 2 SCC 31 - Activities aligned with CSR objectives, promoting sustainability and social upliftment - Appeals allowed. (Paras 8, 15)
(B) Charitable Activities - Distinction between charitable activities and commercial intent - Mere existence of profit does not negate charitable status if profits are directed toward charitable objectives. (Paras 13, 15)
Facts of the case:
The assessee, a public charitable trust, aims to promote environmental sustainability through the use of electric vehicles, although registration u/s 12AA and approval u/s 80G were denied due to claimed commercial nature of activities, with the argument that incidental income does not affect charitable intent.
Findings of Court:
The court held that the trust's activities are charitable and aligned with CSR goals, thus supporting the application for registration and approval.
Issues: The main issues were whether the activities of the trust are genuinely charitable or commercial in nature, and how incidental income affects its status.
Ratio Decidendi: The court clarifies that the dominant purpose of activities dictates their charitable nature, and incidental income must support the charitable objective without being diverted for profit.
Result: Appeals allowed, and registration u/s 12AA and 80G granted.
| Table of Content |
|---|
| 1. facts detailing the nature of the assessee's charitable activities. (Para 3 , 4 , 5 , 6) |
| 2. arguments regarding the nature and genuineness of trust activities. (Para 8 , 9) |
| 3. court observations about the charitable nature of the trust's activities. (Para 11 , 12 , 13 , 14) |
| 4. legal conclusion based on the dominant intent criterion. (Para 15) |
IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘F’ BENCH, NEW DELHI BEFORE MS. MADHUM ITA ROY, JUDICIAL MEMBER, AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No. 5180/DEL/2024 (A.Y. 2024-25) ITA No. 5191/DEL/2024 (A.Y. 2024-25)
Rasha Welfare Foundation Vs. The C.I.T.
333-A, First Floor, [Exemption]
Sant Nagar, Delhi Delhi PAN – AADTR 5464 J (Applicant) (Respondent)
Assessee By : Shri Sanjeet Paliwal, Adv Shri Anupam, Adv Department By : Shri Monika Singh, CIT-DR Date of Hearing : 26.06.2025 Date of Pronouncement : 04.07.2025
ORDER
PER BENCH:
The above captioned two appeals by the assessee are directed against two separate orders of the ld. CIT(E), dated 04.11.2024 for A.Y 2024-25 respectively, rejecting application for registration u/s 12AA of the Income-
tax Act, 1961 [the Act, for short] and approval u/s 80G of the Act respectively.
2. Since both the appeals involve common issues, they were heard together and are disposed of by this common order for the sake of convenience and brevity.
3. Brief facts of the case are that the assessee is a public charitable trust duly registered under the Indian Trusts Act, 1882. The object of the trust was to promote environmental sustainability by encouraging the use of electric vehicles, reducing carbon emissions and supporting scalable and climate resilient transportation solutions as part of the CSR vision. The ld. CIT(E) has denied grant of registration u/s 12AA and 80G of the Income-tax Act, 1961 [the Act, for short] stating that the rental activity of the assessee shows that it is commercial in nature and the assessee is engaged in commercial activities.
4. Aggrieved the assessee is before us. The ld AR of the assessee vehemently argued that the assessee is not engaged in any commercial activities but in activities which are within the scope of charitable objects which is reflected in object no 17 of the Trust Deed objectives. Incidental income (e.g., user fee) is reinvested as per Rule 7(2) of the Companies (CSR Policy) Rules, 2014. The project contributes to environmental sustainability and social upliftment.
5. The ld AR submitted that the larger objective of the initiative was also to promote environmental sustainability by encouraging the use of electric vehicles, reducing carbon emissions, and supporting scalable and climate-resilient transportation solutions as part of the CSR vision. The ld AR submitted that despite the above bona fide activities, the provisional registration granted to the Appellant vide order dated 07.04.2022 (valid from A.Y. 2022-23 to A.Y. 2024-25) has been cancelled by the Respondent on the alleged ground of lack of genuineness in the Appellant's activities.
6. The ld AR further submitted that during the validity of the provisional registration, the activities undertaken were strictly in line with the stated charitable objects and in compliance with the applicable provisions of the Income Tax Act, 1961 . No part of the funds was utilized in violation of Section 12A(1)(ac)(iii). The ₹5,500 monthly amount is a nominal user fee which covers maintenance cost of vehicle if any and ensures accountability of end user and will help to make the project sustainable.
7. It was further submitted that while the CSR project undertaken by the assessee may incidentally generate surplus in the form of monthly user fees or other revenue, such income is neither retained as profit nor diverted for personal or commercial use. In accordance with Rule 7(2) of the Companies (CSR Policy) Rules, 2014, any surplus arising out of CSR activities is not treated as business income, but is strictly reinvested into the CSR project itself or
