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Charitable Institution Can't Be Denied Income Tax Exemption For Collecting Service Charges From Its Donors To Defray Administrative Cost: Delhi High Court

Mariya Paliwala
8 April 2022 2:48 PM GMT
Charitable Institution Cant Be Denied Income Tax Exemption For Collecting Service Charges From Its Donors To Defray Administrative Cost: Delhi High Court
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The Delhi High Court bench of Justice Manmohan and Justice Dinesh Kumar Sharma has held that charitable institutions cannot be denied income tax exemption for collecting service charges from their donors to defray administrative costs.The appellant/ department has challenged the orders passed by the Income Tax Appellate Tribunal in which exemption under Sections 11 and 12 of the Income...

The Delhi High Court bench of Justice Manmohan and Justice Dinesh Kumar Sharma has held that charitable institutions cannot be denied income tax exemption for collecting service charges from their donors to defray administrative costs.

The appellant/ department has challenged the orders passed by the Income Tax Appellate Tribunal in which exemption under Sections 11 and 12 of the Income Tax Act, 1961 was allowed to the assessee, India HIV Aids Alliance, when the actual work of the assessee was to receive and simply transfer grants to other NGOs and the assessee was found to be charging service charges from its donors in various forms, like management fees, etc., for the execution of projects.

The department stated that the ITAT was not justified in holding that the activity of the assessee was charitable in nature when the activity carried out by the assessee yielded income that was commercial in nature.

The court has relied on the decision passed by the Division Bench in the assessee's own case for the Assessment Year 2010-11 in CIT (Exemption), Delhi vs. M/s India HIV/AIDS Alliance in which it was held that merely because the assessee charges management fees to defray the administrative costs, it would not make its essential activity a business activity.

The court dismissed the appeal filed by the department.

Case Title: CIT (E) Versus India HIV Aids Alliance

Citation: Citation: 2022 LiveLaw (Del) 294

Dated: 01.04.2022

Counsel For Appellant: Advocate Abhishek Maratha

Counsel For Respondent: Advocates Uddyam Mukherjee and Swapnil Pattanayak

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