Big Relief for Non-Profits: Event Income Within 20% Limit, Not Commercial

The assessee, The Indus Entrepreneurs (TiE), is a registered society and part of TiE Global, functioning as a non-profit platform promoting entrepreneurship through education, mentoring, and networking programs. It is registered under Section 12A and filed a NIL return for AY 2018-19 after claiming exemption under Section 11. During scrutiny, the Assessing Officer took the view that TiE was not a charitable organisation but a commercial body engaged in trade, commerce, or business falling under “General Public Utility” (GPU). The AO relied on the fee-based nature of certain activities to conclude that the exemption must be denied.

The AO assessed the surplus of Rs. 33.80 lakh as business income. On appeal, the NFAC upheld the denial of exemption, but on non-filing of Form 10 despite the assessee’s contention that Form 10 had been duly filed along with the return. Aggrieved, the assessee approached the ITAT.

Issue Raised: Whether the assessee is eligible for exemption under Section 11, considering its objects, nature of activities, Section 2(15) proviso, and the AO’s allegation of commercial receipts exceeding limits.

ITAT Decided: The Tribunal held that the assessee’s activities do not fall under the purview of “education” but fall under “advancement of any other object of general public utility.” Once categorised as a GPU, the key is to check compliance with the proviso to Section 2(15), i.e., whether receipts from trade, commerce, or business exceed 20% of total receipts. The tribunal found that TiE’s event-related income of Rs. 20.60 lakh was within the 20% threshold of total receipts of Rs. 1.53 crore. Membership fees, which the AO wrongly treated as commercial receipts, were held to be part of GPU activities and not commercial in nature. Profit generation, even if present, does not disqualify an entity from exemption when the dominant purpose remains charitable.

The Tribunal held that the company met the statutory tests for charitable status under GPU and satisfied the 20% threshold for incidental commercial receipts; the ITAT directed the AO to grant full exemption under Section 11.

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