Case Law: Chandigarh Lawn Tennis Association vs. ITO (ITAT Chandigarh)

S.11: Entire law on what constitutes “advancement of objects of general public utility” so as to qualify as “charitable purpose” u/s 2(15) explained. Law also explained on the impact of carrying out incidental activity in the nature of trade, commerce or business in the course of actual carrying out of advancement of object of general public utility explained (All imp judgements referred)

To remove this anomaly, proper construction will be that the institution carrying out the object of advancement of general public utility which involve the incidental or ancillary activity in the nature of trade, commerce or business and generating income therefrom, the income to such an extent as is limited by the second proviso to section 2(15) of the Income Tax Act should be taken as exempt being treated as income from charitable purposes as per the relevant provisions of sections 2(15), section 10, section 11, section 12 or section 13, as the case may be and wherever applied. The other income which is not from the commercial activity, such as, by way of voluntary donations, contributions, grants or nominal registration fee etc. or otherwise will remain to be from charitable ITA No. 1382/Chd/2016- Chandigarh Lawn Tennis Association, Chandigarh 94 purposes and eligible for exemption under the relevant provisions. However, the income from activity in the nature of trade, commerce or business over the above limit prescribed from time to time as per the second proviso to section 2(15) of the Income Tax Act, should be treated as income from the business activity and liable to be included in the total income. In this way, the receipts of incidental business income while carrying out the objects of advancement of general public utility, when these cross the limit prescribed u/s 2(15) of the Act, will not render such institute as non-charitable bringing into taxation its entire income including non-business income or even income from charitable activity itself including voluntary contributions and donations. Only the business income which will be over and above the prescribed limit will be subjected to taxation

Chandigarh Lawn Tennis Association vs. ITO (ITAT Chandigarh)

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