Rasha Welfare Foundation Vs CIT (Exemption) (ITAT Delhi)
Summary
The issue under the case as to whether the Foundation’s activity—assigning electric vehicles to beneficiaries under a CSR initiative was commercial activity or a charitable activity. The tribunal concluded that the dominant object was charitable. It was not profit-driven. It emphasized that incidental income, when reinvested in charitable projects, does not invalidate the charitable status. The tribunal ordered that registration be granted.
1. Facts of the Case
Rasha Welfare Foundation, a public charitable trust registered under the Indian Trusts Act, 1882, was established to promote environmental sustainability and social upliftment by encouraging the use of electric vehicles. The trust received Corporate Social Responsibility (CSR) funds from entities such as Betul Wind Farms Ltd and Sab Ka Mangal Ho Foundation, amounting to over ₹ 55 lakh. These funds were used to procure and assign Ather electric vehicles to ten eligible beneficiaries on a monthly rental basis (₹ 5,000–₹ 5,500 per vehicle) under a three-year lease model. After this period, the vehicle ownership was to be transferred to the beneficiaries, primarily youths from semi-urban backgrounds, to foster income generation and economic independence.
2. Arguments Made
The assessee’s counsel, contended that the activities were consistent with its charitable objectives—environmental sustainability and empowerment of marginalized youth—highlighting that all funds and incidental revenues were strictly reinvested in CSR projects per Rule 7(2) of the Companies (CSR Policy) Rules, 2014. The counsel cited the Supreme Court judgment in Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [(1980) 2 SCC 31], which held that the dominant purpose test applies: if the trust’s main object is charitable, incidental profit does not disqualify its charitable nature, provided profits are applied solely for charitable objectives and not distributed among members.
