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2022 (9) TMI 1570 - AT - Income TaxExemption u/s 10(23C) (iv) - Charitable activity u/s 2(15) or not? - Assessment of trust - as per AO receipts from the issuance of certificate of origin be treated as trade, commerce or business - CIT(E) held that assessee is not involved in charitable activities as required by the provisions of section 10(23C)(iv), hence the application filed by the assessee is not fit case of grant of approval - HELD THAT:- Assessee collects fees from members/non-members within the limit prescribed by the DGFT i.e., not more than ₹.100/-. Whether the assessee charges fees for issuing certification is for making profit? - whether the fees collected by the assessee are more than other trade bodies, can this be treated as motive for making profit? - In our considered view assessee has liberty to charge fees for issuing certification within the limit fixed by the DGFT, just because other trade bodies are charging less than the fees collected by the assessee, it does not lead to presumption that assessee might have earned excess profit, it depends upon the setup and their broad objects. We observe that in similar fact on record the Hon'ble Supreme Court reviewed the similar issue in ACIT v. Surat Art Silk Cloth Manufacturers Association [1979 (11) TMI 1 - SUPREME COURT] decided the issue on applicability of the section 2(15) of the Act in favour of the assessee and against the revenue. Thus what is relevant is it is not important how the assessee has charged the fees to the members or non-members, it is relevant to analyse whether these activities are carried with the sole object of making profit or mere these activities are carried to support its objects of charity. Further, it is also relevant that whether these surplus funds earned from these activities are applied for the object of the trust. In the given case there is no finding from the tax authorities that the assessee has not applied for the object of the trust nor it has reported any misuse of the funds of the trust. we further observed that the CIT(E) equated the formal education and the indirect education. The assessee conducts seminars, training courses and commercial examinations for the benefit of its members, it need not be a formal education to be considered as the charitable activity. The courts have held that offering education through formal or informal are part of charitable activities. CIT(E) rejected the application with the observation that in the assessment proceedings in the A.Y. 2010-11 the Ld. AR of the assessee prayed before the AO to exclude the receipts received from non-members as part of profit which should be excluded for the purpose of applying concept of mutuality. In our considered view this is only a proposition submitted during the assessment proceedings only in order to address the proposal to assess the income under concept of mutuality. It does not mean that the assessee is carrying this activity to earn profit or it does not propose the fact that the activities are carried only with the object of making profit. Therefore in our considered view the assessee is eligible for registration u/s. 10(23C)(iv) of the Act since at the time of registration, the CIT(E) is expected to verify the objects for granting registration we observe that the revenue has already granted registration u/s. 12A of the Act. The evaluation process for registration u/s. 12A and u/s. 10(23C)(iv) of the Act are exactly similar, once the 12A registration is granted after due process of verification, we do not see any reason not to grant registration u/s. 10(23C)(iv) of the Act. Grounds raised by the assessee are allowed.
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