ITO Vs Suvasini Charitable Trust (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has affirmed the decision of the Commissioner of Income Tax (Appeals) [CIT(A)], upholding the tax exemption for Suvasini Charitable Trust. The dispute centered on the taxability of surplus generated from the trust’s “Premwati Cafeteria,” which the Assessing Officer (AO) had deemed a commercial activity, thus disallowing the exemption under the amended provisions of Section 2(15) of the Income Tax Act, 1961. The ITAT’s ruling on May 17, 2012, effectively concluded that the cafeteria’s operations were incidental to the trust’s primary charitable objects of providing medical relief to the poor.
Background of the Case
Suvasini Charitable Trust, registered under Section 12A of the Income Tax Act since July 28, 2006, and approved under Section 80G(5)(vi) since September 27, 2006, filed its return of income for the assessment year 2009-10 declaring Nil income, claiming application of income under Section 11. During scrutiny, the AO noted that the trust had declared total sales of Rs. 6.71 crores from its “Premwati Cafeteria” located at Swaminarayan Akshardham Complex in Delhi. This cafeteria was established as per Rule 18 of the trust’s rules, a condition specifically introduced at the Income Tax Department’s insistence during its initial registration under Section 12AA. Rule 18 explicitly stated that the cafeteria would “provide hygienic vegetarian dishes… to thousands of people/tourists visiting the Akshardham everyday and the surplus generated from the activities will be utilized to fulfill and achieve the objects of the Trust only.”
