Charitable Entity can’t be Taxed because some element of its income is exempt from Principles of Mutuality: ITAT [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) has held that a charitable entity cannot be denied the tax benefits merely because some element of its income is exempt from the Principles of Mutuality.

The objects of the assessee are for promoting and safeguarding rubber industry in India. The Assessee is also registered u/s 12AA of the Act with the Commissioner. For Assessment Year 2012-13, it filed its return of income declaring NIL income, which was subject to scrutiny assessment. The Assessing Officer noted the objects of the assessee and was of the view that it was an association of members existing for its members only and, therefore, it was a mutual association. The Assessing Officer also noted that assessee was carrying out activities in the nature of trade, business or commerce and/or providing services in relation to trade, business or commerce and, therefore, it was hit by the proviso to Sec. 2(15) of the Act which was inserted w.e.f. 01.04.2009.

The Tribunal relied on the Delhi High Court decision wherein it was specifically considered the receipts derived by a Chamber of Commerce and Industry for performing specific services to its members. It was held that such income was found to be entitled to benefits of Sec. 2(15) r.w.s. 11 of the Act provided, of course, there was no profit element in such services

Relying on the above decision, the Tribunal held that “Therefore, so far as the Principle of Mutuality is concerned, the same is with reference to the services vis-a-vis the members and qua the income received by the assessee from non-members, the other provisions of the Act would govern. In any case, an entity cannot be denied charitable character merely because some element of its income is exempt from the Principles of Mutuality. Thus, in this aspect also, we find no reason to uphold the stand of the Revenue.”