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2018 (2) TMI 769 - HC - Income TaxApplication u/s 12-AA denied - proof of charitable activities - society is getting preparation and distribution charges per child per month from the state govt., the activity in this field cannot be treated as charitable in nature - Held that:- Merely because the State had itself not been able to cook and supply cooked food by way of mid-day-meals at it's schools and further because it out-sourced that part of the work, against consideration, it cannot be said that it transformed the activity into one in the nature of trade, commerce or business etc. Execution of a contract between two parties, in these facts cannot be decisive whether the activity itself was one purely in the nature of trade, commerce or business. What was more important is to examine whether assessee had engaged in an activity that was inseparably linked to and performed in continuation of the charitable scheme of the government. The fact that some money had been paid by the State to the assessee was only a necessary expense at the hands of the State. Looking at the nature of expenses met by the assessee one cannot escape the conclusion that similar expenses would have been incurred by the State, had it performed that work itself or though it's own agencies. The payments received were utilized to defray the expenses met to perform the task of cooking and supplying the meals as directed by the State government. It is also not the case of the revenue that the assessee was in any manner free to utilize either the materials supplied to it or food cooked by it, as per it's own wish/discretion. The assessee appears to have acted merely as an agent of the State. Therefore it would be wrong to conclude that because there existed a contract between the assessee & the government therefore the assessee was not pursuing a "charitable purpose". On the other hand the activity performed by the assessee clearly appears to be inseparably linked to the 'charitable purpose' of providing mid-day meals at village schools. Also, admittedly, the total receipts of the assessee were below the limit of ₹ 10,00,000/- as stipulated under the second proviso to Section 2(15) of the Act. Tribunal has rightly concluded that the restriction created by the first proviso to Section 2(15) of the Act did not operate against the assessee and therefore the activity of the assessee, even though it may have involved an activity in the nature of trade, commerce or business, etc., it would fall within the ambit of general public utility and therefore be a charitable purpose under Section 2(15) of the Act. Alternatively, if it be assumed that in that process the assessee engaged in an activity in the nature of trade, commerce or business, etc, then, because the receipts from such activity were below ₹ 10,00,000/-, the assessee was still entitled to registration under Section 12AA(1)(b)(ii) of the Act. - Decided in favour of assessee
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