When a charitable entity under the 'General Public Utility' (GPU) clause engages in activities in the nature of trade, commerce, or business, it must satisfy the conjunctive conditions of the proviso to Section 2(15) of the Income-tax Act, 1961, based on the Supreme Court's interpretation in AUDA (2022).

PER BENCH :-

These four appeals are filed by the revenue against the orders of the National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] dated 12.11.2024 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Years [A.Ys.] 2013-14, 2015-16, 2016-17 & 2018-19.

The revenue has raised the following identical grounds in these appeals:

“1. Whether on the facts and circumstances of the case and in law, and in the light of Civil Appeal No.21 762 of 2017 in various batch of appeals and SLP's (lead case ACIT (Exemptions) Vs. Ahmedabad Urban Development Authority |2022] 143 taxmann.com 278 (SC)), the Ld. CITA) erred in holding that the activities of the object of 'general utilities carried on by the assessee in the present case are to be covered under residuary part of section 2(15) as "advancement of any other object of general public utility" and the assessee is not entitled to exemption u/s 11 because it is hit by the proviso to section 2(15) as the income of the assessee as spelt out clearly in the judgment of the Hon'ble Supreme Court ?

2. Whether on the facts and circumstances of the case and in law, and in the light of Civil Appeal No.21 762 of 2017 in various batch of appeals and SLP's (lead case ACIT (Exemptions) Vs. Ahmedabad Urban Development Authority (2022) 143 taxmann. com 278 (SC)), the Ld. CIT(A) is justified in allowing the benefit of exemption u/s. 11 of the Income Tax Act, 1961 without appreciating that the income of the assessee consists of interest income, compensation from caterers restaurant, sale of application forms, sponsorship, compensation from decorator etc. arising from regular and systematic activities which are in the nature of trade, commerce or business?

3. Whether on the facts and circumstances of the case and in law, the Ld. CITA) is justified in allowing the benefit of exemption u/s. 11 of the Income Tax Act, 1961 on the interest earned when the assessee is not entitled to exemption u/s 11 because it is hit by the proviso to section 2(15) as the income of the assessee as spelt out clearly in the judgment of the Hon'ble Supreme Court in case ACIT (Exemptions) Vs. Ahmedabad Urban Development Authority (2022] 143 taxmann. com 278 (SC).

4. Whether on the facts and circumstances of the case and in law, the Ld. CITIA) is justified in allowing the claim of the assessee for exemption u/s. 1 l of the Income Tax Act, 1961 ignoring that the assessee is basically a mutual organization with commercial objectives and hence no charitable benefits to the society accrue as such?”

As the grounds of appeal are common and the facts are identical, these are being disposed off by the common order and A.Y. 2013-14 is taken as the lead case.

Brief facts of the case are that the assessee is registered as a public charitable trust since 1975 under the Bombay Public Trust Act, 1950 . The assessee trust is also registered u/s. 12A of the IT Act since 1981. The assessee has been held to be a charitable entity pursuing objects of general public utility and has, therefore, been claiming benefit of sec. 11 of the Act. Specifically, the assessee is providing the general public utility (GPU) services by conducting sports facilities and coaching for various sports on a ground given to it on lease by the government. The assessee is collecting charges at differential rates for these facilities from its members and non-members.

In the past years, the department had been holding the assessee to be a mutual concern not entitled to claim the benefit of section 11 of the Act. However, this issue has been decided by the co-ordinate benches in the earlier years after detailed analysis of the facts and circumstances, whereby it has been consistently held that the assessee is pursuing objects of general public utility (GPU) and hence entitled for benefit of section 11 of the Act.

Ld. AO during the assessment proceedings, held that the assessee had violated the provisions of section 1