Organizing Garba event was not business within the meaning of section 2(15) to deny the benefit of exemption u/s 11 and 12 of the Income Tax Act, 1961 – SLP dismissed
Organizing the event like Graba event cannot be termed as a business or trade within the meaning of section 2(15) to deny the benefit of exemption u/s 11 and 12 – SLP dismissed by Supreme Court.
ABCAUS Case Law Citation:
4636 (2025) (07) abcaus.in SC
The respondent was a trust registered under Section 12AA of the Income Tax Act, 1961 (the Act). It was a religious public trust, registered under Bombay Public Trust Act. The asseseee was engaged in carrying out the activity of organizing the Garba event during the Navratri in a highly professional manner. The assessee was also earning income from the various food stalls which were arranged for refreshment.
The assessee Trust filed its return of income for the relevant Assessment Year declaring its income at Rs. NIL. In the computation of income, the appellant claimed application of fund for charitable purpose. However, Assessing Officer denied the exemption claimed by the assessee under Sections 11 and 12 of the Act, holding, inter-alia, that the assessee Trust was carrying business activity and fall under the ambit of provisio 1 and 2 of Section 2(15) of the Act. The AO held that the activity of the assessee as per amended provision of Section 2(15) of the Act was the advancement of any other object of general public utility and thus not liable for benefit under Section 11 & 12 of the Act in view of Section 13(8) of the Act.
Accordingly, the assessee was though allowed the expenditure incidental to business income and after disallowances of accumulated surplus, corpus fund, disallowance of deduction under Section 11(1)(a) of the Act, the total income was assessed.
Being aggrieved by the aforesaid assessment order, the assessee filed an Appeal before the Commissioner of Income Tax, who, partly allowed the Appeal of the assessee.
Being aggrieved by the aforesaid, the Revenue preferred Appeal before the Tribunal but the said Appeal was dismissed by the Tribunal. Still aggrieved, the Revenue challenged the order of the Tribunal before the Hon’ble High Court.
However, it was brought to the notice of the High Court that in case of the same assessee for a preceding Assessment Year identical questions of law, came to be disposed of by the Coordinate Bench of the High Court.
The Co-ordinate Bench had observed that prior to the introduction of the Proviso to Section 2(15) of the Act, there was no dispute that the assessee was established for charitable purposes and, therefore, its income was not to be included in the total income and was, therefore, granted the benefit of exemption. The income received by the assessee was from organizing the event of Garba by sale of tickets and also leasing out food and beverages outlets at the venue of the event. However, the dominant and main object of the assessee cannot be said to be organizing the event of Garba.
The Co-ordinate Bench observed that assessee had been supporting hundreds of non-government organizations. The assessee was into health and human services for the purpose of improving the quality of life in the society. The objectives of the Society included mobilizing resources from the local communities. It organized medical camps for thalassemia affected children. It also provided vocational training to the disabled orphans, undertakes various program for empowering women including providing midday meal to the poor students.
The Co-ordinate Bench further observed that the two authorities have taken the view that the profit making is not the driving force or the objective of the assessee. This is indicative of the fact that any income generated by the assessee from events like Garba does not find its way into the pockets of any individual or entities. It is to be utilized fully for the purposes of the objects of the assessee. As held in many pronouncements, the expression “trade”, “commerce’ and “business” as occurring in the first Proviso to Section 2(15) of the Act must be read in the context of the intent and purport of section 2(15) of the Act and cannot be interpreted to mean any activity which is carried on in an organized manner. In view of the above, the Co-ordinate Bench had dismissed the appeal of the Revenue.
The Hon’ble High Court noted the aforesaid decision of the Co-ordinate Bench and the fact that the facts were identical and more particularly the Revenue could not point out any distinguishing facts to take a different view.
Accordingly, the Hon’ble High Court dismissed the Tax Appeal being bereft of any substantial question of law.
Still not satisfied, the Revenue challenged the order of the Hon’ble High Court before the Hon’ble Supreme Court by filing a Special Leave Petition (SLP).
However, the Apex Court dismissed the SLP by observing as under,
“Heard learned counsel for the petitioner. We see absolutely no reason to interfere with the order of the High Court, in exercise of our jurisdiction under Article 136 of the Constitution of India.”
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