DCIT Vs ODIA Samaj (ITAT Delhi)
Odia Samaj is a charitable trust registered u/s 12A & 80G. It organized a cultural event “Odisha Prabha” at India Gate in March 2019. For this event, it received ₹5,97,50,353/- from 11 organizations, which deducted TDS u/s 194C while remitting the amount.
AO held that since TDS was deducted u/s 194C & invoices were issued, the receipts represented commercial activity / professional or contractual services, hit by proviso to section 2(15). He treated the receipts as business income & denied exemption u/s 11. He further added ₹1,04,20,000/- u/s 68 alleging it was received in FY 2019-20 but recorded in the next year.
CIT(A) partly accepted Assessee’s plea & directed AO to recompute exemption as per Supreme Court judgment in Ahmedabad Urban Development Authority by applying the 20% threshold under the second proviso to section 2(15).
Both Revenue & Assessee appealed.
Tribunal’s Key Findings:
- It was undisputed that the event “Odisha Prabha” was fully in line with the charitable objects of the trust.
- All 133(6) replies from donors confirmed the amount as DONATION, even though TDS was deducted.
- Assessee had sent request letters stating donations were eligible u/s 80G.
- Deduction of TDS or issuing invoice does NOT change the character of donation, as held by Delhi High Court in Aroh Foundation (476 ITR 689).
- SLP against Aroh Foundation was dismissed by Supreme Court (476 ITR 504) – making the law final.
- Therefore, Proviso to section 2(15) was wrongly invoked by AO.
- Once receipts are donations for a charitable event, entire amount is exempt u/s 11 & 12.
- The direction of CIT(A) to apply the 20% cap was incorrect, as no commercial activity existed at all.
TDS deduction under section 194C or issuance of an invoice does NOT convert a donation into business income. When the activity is charitable & aligned with trust objects, section 2(15) proviso cannot be invoked. Donations remain exempt u/s 11 & 12.
