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2016 (1) TMI 316 - AT - Income TaxEntitlement to exemption u/s 11 & 12 - activity of running a Dharamshala and receipt of rent - whether assessee trust is involved in commercial activities, hit by first proviso to section 2(15) r.w.s. 13(8)? - Held that:- There does not appear to be any profit motive in the case of the assessee as the excess of income over expenditure cannot be distributed amongst its members either in the course of its activity or in the event of its dissolution. Therefore, one of the important ingredients for treating the activity of the appellant as business i.e., profit motive is missing in this case. Since there is no profit motive involve, the activities carried out by the appellant cannot be described as business. In such a situation, as explained by CBDT vide its Circular no. 11 of 2008 dated 19.12.2008 there would be no application of proviso to section 2(15). Moreover, as held by the Apex Court in the case of Surat Arts Silk (1979 (11) TMI 1 - SUPREME Court ), what is important in the case of trust or institution is the primary or dominant purpose. If the dominant purpose is charitable, another object which by itself may not be charitable, would not prevent the trust or institution from being a valid charity. It is noted in this case that the charges for the room are very nominal, starting from a mere ₹ 40/-. This also indicates that there is no profit motive involved in this case. Considering all the legal and factual position, it is apparent that the dominant motive in this case is not earning profit but to do charity in the form of public service by providing accommodation to the common man at affordable rates. The activities of the assessee, therefore, cannot be characterized as business activities. Hence, proviso to section 2(15) is not attracted in this case and, therefore, the disallowance of exemption u/s 11 & 12 is unjustified. The AO is, accordingly, directed to assess the society as per the provisions of section 11 & 12, and grant the requisite exemption - Decided in favour of assessee
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