DCIT(E) vs Aroh Foundation [ITA No. 1841/Del/2024]
Income Tax Appellate Tribunal (ITAT), Delhi Bench, in the case of DCIT(E) vs Aroh Foundation [ITA No. 1841/Del/2024] for AY 2020–21, has ruled in favour of the assessee by upholding the exemption under Sections 11 and 12 of the Income Tax Act.
The Revenue had alleged that receipts of over ₹3.95 crore were in the nature of consultancy and contractual income, and therefore, the assessee’s activities fell within the mischief of Section 2(15) proviso — effectively denying charitable status. However, ITAT held that the issue had already been decided in the assessee’s favour by the Delhi High Court in AY 2017–18, and thus no deviation was warranted.
Background
- Assessee: Aroh Foundation – a registered charitable society.
- Year in Dispute: AY 2020–21
- AO’s Observation: Claimed that over 20% of the gross receipts were consultancy/contractual in nature.
- AO’s Action: Denied exemption under Sections 11 and 12, assessing income at ₹13.15 crore.
- CIT(A)’s Ruling: Deleted the addition, relying on the Delhi High Court ruling in assessee’s own case for AY 2017–18.
Key Legal Issues
- Whether receipts with TDS deductions under Sections 194J/194C automatically constitute business income?
- Can a charitable institution lose Section 11/12 exemption due to contracts for government-funded skill development?
ITAT’s Ruling
The Tribunal noted:
- The Delhi High Court, in W.P.(C) 4365/2021 dated 05.02.2024, had already held that deduction of TDS under certain heads (like consultancy/contract) cannot by itself lead to the conclusion that the entity is engaged in trade, commerce, or business.
- The Foundation was implementing government-oriented skill development projects, clearly falling under “advancement of any other object of general public utility.”
- As per the settled principle of consistency, since the Revenue had accepted the exemption in earlier and later years, they could not deviate for the year under appeal without fresh reasoning.
- ITAT upheld the CIT(A)’s decision which followed the binding precedent from Delhi High Court.
Key Excerpts from Delhi High Court Ruling (AY 2017–18)
Deduction of TDS by donor would not be the determinative factor for denial of benefits under Sections 11 and 12… Receipts cannot be called consultancy fees or contractual income without cogent reasons.
The Proviso to Section 2(15) cannot be attracted merely on the basis of deduction of TDS by the donor under a particular head.
Conclusion
This ruling reaffirms that:
- Exemption under Sections 11 and 12 cannot be denied merely because of TDS deductions under business-related heads.
- Charitable trusts implementing government projects aimed at public benefit do not lose their status under the guise of consultancy or commercial activity.
- Consistency in tax treatment across years matters; unless material facts change, the Department cannot adopt a different stance arbitrarily.
The ITAT rightly dismissed the Revenue’s appeal.