DCIT Circle 1(1) Exemption vs India Habitat Centre – Assessment Year 2016-17 – Analysis of Charitable Status and Mutuality

DCIT Circle 1(1) Exemption vs India Habitat Centre – Assessment Year 2016-17

Case Overview

Case Number: ITA 5740/DEL/2019

Appellant: DCIT, Circle 1(1) Exemption, New Delhi

Respondent: India Habitat Centre, New Delhi

Assessment Year: 2016-17

Case Filed On: 2019-07-01

Order Type: Final Tribunal Order

Date of Order: 2022-06-17

Pronounced On: 2022-06-17

Case Background

The appeal by the Revenue, represented by the DCIT, Circle 1(1) Exemption, New Delhi, challenges the order of the Ld. CIT(A)-40, New Delhi, dated 16.04.2019, pertaining to the assessment year 2016-17. The central issue revolves around the determination of whether the India Habitat Centre (IHC) qualifies as a charitable organization and whether it operates under the principle of mutuality.

Key Points of Dispute

The Revenue’s primary contention is that the IHC is engaged in business activities, which fall within the purview of the amended provisions of section 2(15) of the Income Tax Act, 1961. Consequently, the Revenue argues that IHC does not qualify as a charitable organization. Additionally, the Revenue disputes the application of the principle of mutuality to the IHC’s activities.

Assessment Officer’s Findings

The Assessing Officer (AO) observed that the IHC is registered under section 12A and approved for section 80G benefits. The AO examined the IHC’s activities and found them to be hybrid in nature, partly charitable and partly mutual. The AO contended that the IHC’s activities could not be compartmentalized, and its income should be evaluated in totality. Furthermore, the AO held that the IHC’s activities, such as providing accommodation, food, and beverages for payment, constituted business activities.

Appeal to CIT(A)

The IHC appealed against the AO’s findings to the CIT(A). The CIT(A) referred to previous orders and judgments, including the Delhi High Court’s decision, which had consistently recognized the IHC as a charitable organization. The CIT(A) upheld the IHC’s status as a charitable organization and also accepted the application of the principle of mutuality to its activities.

Key Arguments Presented

The IHC presented extensive documentation of its activities, highlighting their alignment with the definition of charitable purposes under section 2(15) of the Act. These activities included environmental initiatives, educational programs, health-related projects, preservation of artistic and historic objects, and relief to the poor. The CIT(A) acknowledged these activities as charitable in nature and noted that the IHC’s surpluses were used to maintain and improve infrastructure or undertake further charitable activities.

ITAT’s Decision

The Income Tax Appellate Tribunal (ITAT) reviewed the case and noted that the issue had been previously decided in favor of the IHC by both the ITAT and the Hon’ble Delhi High Court. The ITAT emphasized the principle of consistency, as there had been no fundamental change in the IHC’s activities over the years. The ITAT upheld the CIT(A)’s order, confirming the IHC’s status as a charitable organization and the applicability of the principle of mutuality.

Conclusion

The ITAT dismissed the Revenue’s appeal, affirming the CIT(A)’s decision to recognize the India Habitat Centre as a charitable organization and to apply the principle of mutuality to its activities. This decision reinforces the importance of consistency in tax assessments and the recognition of genuine charitable activities.

Final Judgment

Order: The appeal of the Revenue is dismissed.

Order pronounced in the open court on: 17.06.2022

Members: [ASTHA CHANDRA] (Judicial Member) and [SHAMIM YAHYA] (Accountant Member)

Copy forwarded to:

• Appellant
• Respondent
• CIT
• CIT(A)
• DR

Asst. Registrar, ITAT, New Delhi

DCIT Circle 1(1) Exemption vs India Habitat Centre – Assessment Year 2016-17 – Analysis of Charitable Status and Mutuality