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2015 (8) TMI 609 - AT - Income TaxEntitlement to exemption u/s.11 and 12 - CIT(Appeals) observed that the assessee is a company without profit motive and the micro finance business carried on by the assessee falls under the category of ‘relief to poor’ and hence, it is carrying on charitable activity u/s.2(15) of the Act, so as to grant exemption u/s.11 and 12 of the Act - Held that:- In the present case, the assessee is having reserves and surplus at ₹ 50,89,576/-. Contrary to this, the assessee is having revolving fund at ₹ 66,33,800/-, which was availed by hypothecation of their debt to various necessary banks. Further, the assessee raised secured loans and unsecured loans @ 11% totalling to ₹ 16,35,54,090/-. Thus, it means that it has raised loans to advance to the customers by paying interest and the assessee is not having own corpus in a formal capital so as to advance the loan. The assessee is providing loans by association with various commercial banks by raising loans from them. Such kind of micro finance activity cannot be termed as charitable activity rather than it is a business activity. In order to become a charitable activity, the institution must have advance loans at a subsidised rate of interest. The assessee is availing loans from banks and advance the same and admitted that it has advanced the loans to the customers at 13%. It is a commercial rate prevailing in the market. By advancing loans at that rate of interest cannot be considered as an activity carried on by the assessee as charitable and for the benefit of the public. When the assessee carried on micro finance activity in a commercial line, then it is not a charitable activity but an activity to expand the finance business by contracting weaker section of the public and it does not involve any charitable activity. Therefore, looking into the activities carried on by the assessee, we fully agree with the findings of the AO and this view of ours is squarely covered by the decision of the Tribunal in the case of Janalakshmi Social Services (2008 (8) TMI 606 - ITAT BANGALORE ). The assessee relied on various judgments, which cannot be applied to the facts of the present case, as the assessee is carrying on micro finance business in a commercial manner so as to earn profit and there is no iota of charity carried on by the assessee so as to grant exemption under sec.11 of the Act. Accordingly, we are inclined to uphold the order of the AO and reverse the order of the CIT(Appeals). - Decided in favour of revenue.
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