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2015 (7) TMI 531 - AT - Income TaxEntitlement for registration u/s 12AA - DIT(E) observed that a trust or society having both charitable and non-charitable objects is not eligible for exemption of its income, is, not entitled for registration u/s 12A of the Act - Held that:- If the predominant object of a trust or institution is charitable and in the process of achieving that object some activity of commercial nature generating income is carried out, which again is utilized for charitable object, it cannot be said that the trust or institution is not established for charitable purpose. Moreover, the application of proviso to section 2(15), as rightly pointed out by ld. AR, has to be looked into at the stage of assessment while examining assessee’s claim of exemption u/s 11 of the Act and not at the time granting registration u/s 12AA. This is because, though, the first proviso to section 2(15) of the Act excludes any activity of the nature of trade, commerce or business from being considered to be a charitable purpose, but, the second proviso to section 2(15) restricts the application of first proviso only to such trusts and institutions having receipts from commercial activity exceeding a prescribed limit in a particular previous year. Therefore, application of proviso to section 2(15) has to be looked into in every assessment year. Further, ld. AR has demonstrated before us, receipts from sales of finished goods and royalty forms only a small percentage of total receipts of the assessee. Therefore, it cannot be said that assessee is mainly engaged in commercial activity. Another important aspect worth mentioning is, in course of hearing ld. AR brought to our notice, that similar institutions established in other parts of the country have been granted registration u/s 12AA of the Act. To substantiate such claim, he submitted registration certificates granted to similar institutions at Bhubaneswar, Indore and Aurangabad. Though, ld. AR submitted that this fact was also placed before ld. DIT(E), but, the order of ld. DIT(E) is totally silent on the issue. Be that as it may, if similar institutions established by central govt. in other states having similar object have been granted registration u/s 12AA, as is the case in Bhubaneswar, Indore and Aurangabad, we do not find any justifiable reason why assessee should be deprived from availing such benefit. In the aforesaid facts and circumstances, we set aside the impugned order of ld. DIT(E) and remit the matter back to him to verify this aspect and if it is found that institutions in other places having similar object have been granted registration u/s 12AA, he may consider granting registration u/s 12AA of the Act to assessee. - Decided in favour of assessee for statistical purposes.
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