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2021 (7) TMI 555 - AT - Income TaxExemptions u/s 11 and 12 - Charitable activity u/s 2(15) - whether the assessee trust (A section 25 company, as per old Companies Act, 1956), is charitable institution or not? - HELD THAT:- We note that assessee trust is a company incorporated u/s 25 of the Companies Act, 1956, as non-profit making organization. The assessee is promoted by Surat Diamond Association, its other members and the Government of Gujarat for development of world class gem and Jewellery Park. The main object of the assessee is to develop the world class gem and jewellery park. The city of Surat had been traditionally the head-quarter of diamond, traded export for Gujarat. We note that in the present case of the assessee, registration u/s 12AA is granted. The assessee trust is carrying out the activities of general utility of development of infrastructure for world class gem and jewellery in Surat. Now, on insertion of First Proviso to section 2(15), the benefit of section 11 cannot be deprived as the assessee is not carrying out any trade, commerce or business and only deals with its members to attain its objects. Therefore, it cannot be considered as an entity carrying out business under the guise of charity, as referred at para 3.2 of aforesaid CBDT Circular. We note that the activities of mutual organizations are to be restricted to contributions from and participation of only their members. In the case of assessee also, it can be seen from the facts discussed by assessing officer as well as assessee that the assessee organization is based on the principle of mutuality. It is clear from the facts that assessee has been allotting the plots and collecting contributions from its members only and there is complete identity between the persons who contribute the amounts to the assessee trust and beneficiaries of assessee`s activities. It is also established from the facts that assessee deals/transacts only with its members strictly for the fulfillment of its objects. The bye laws of assessee`s organization restrict the allotment of plots and receiving contributions from anyone other than members. It is also established that all the contributors as well as beneficiaries of the assessee are its members only and there is complete identity between the contributors and participants. As shown from the records that the assessee trust is not providing any services to the persons other than its registered members. The assessee trust does not distribute its profits among members and it does not pay higher remuneration to its employees. It is abundantly clear that the income of the mutual concern falls outside the ambit of charging section 4 of the Income Tax Act and, therefore, outside the tax net. The net effect of applicability of exemption provision in section 11 is also just the same. The object of the assessee is of general public utility and does not hit by first proviso to section 2(15) of the Act. That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid additions. His order on these addition are, therefore, upheld and the grounds of appeal of the Revenue are dismissed.
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