TMI Blog2008 (12) TMI 310X X X X Extracts X X X X X X X X Extracts X X X X ..... e surplus is with the assessee-trust. The facts and circumstances shows that the assessee is carrying out its charitable activities and the surplus fund are used for charitable purposes. So, the CIT(A) was justified in holding that the assessee is engaged in charitable activities and qualifies for exemption u/s 11. We uphold the same. As a result, the appeal filed by the Revenue is dismissed. Renewal of registration u/s 80G rejected - micro credit facilities - Charitable activity u/s 2(15) or not? - The object of the trust is mainly to constitute alleviation of bottom line poor rural and urban women and their families by means of micro credit facilities. The programme is known as BSS Micro Loan Project which is presently extending its help to all poor women. The assessee-trust has found that the rural and urban poor women have benefited from the trust's funding activities and were about to come out of the depths of their poverty to a great extent to be able to lead a normal life like any other citizen. This goes to show that the relief to the poor has been aimed at by the trust's micro loan and this is clearly a charitable purpose conforming to the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in poverty alleviation programme with all sincerity and was inspired by the work of Prof. Muhammed Yunus and Grameen Bank of Bangladesh involving himself mainly by observing the day-to-day activities of the trust. Therefore, it is not justified to hold that the assessee-trust is financially exploiting the poor women, but in fact the trust is rendering great service to the society by the abovesaid poverty alleviation programme. Hence, we hold that the assessee should be granted renewal of recognition u/s 80G. The AO directed accordingly. In the result, the appeal filed by the Revenue is dismissed and that of the assessee is allowed. - Member(s) : SHAILENDER K. YADAV., A. MOHAN ALANKAMONY. ORDER SHAILENDRA KUMAR YADAV (Judicial Member).-Both these appeals one by the Revenue and other by the assessee pertain to same assessee. So these are being disposed of by a common order for the sake of convenience. In I.T.A. No. 1121 (Bang) 108, the Revenue has raised the following grounds: "1. The Commissioner of Income-tax (Appeals)-V has not appreciated the fact that, the assessee has not done any charitable work during the previous year relevant to the assessment year 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 and raised a demand of Rs. 72,84,379. While computing the income, the Assessing Officer has added the amounts to the total income after denying exemption under section 11 of the Act. The matter was carried before the first appellate authority, wherein various submissions were made, which are detailed in paragraph 5 of the order of the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) called for a remand report in respect of the submissions made on behalf of the assessee. In response to the remand report the assessee furnished a rejoinder on May 21, 2008, as detailed in paragraph 5.18 of the order of the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) after taking into consideration the submissions made on behalf of the assessee and the remand report of the Assessing Officer and the rejoinder to the remand report held as under: "6.1 I have carefully considered the submissions of the appellant and the assessment order passed by the Assessing Officer. It is a fact that the appellant-trust was granted registration under section 12A of the Act. The Department also accepted the returns for the last many years allowing exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possible for accumulating funds for future activity. This shows that the assessee's intention is to earn profit and not to do any social service. 6.3 After considering the facts of the case, I am of the opinion that the Assessing Officer was not correct in assuming that the appellant-trust has not done any charitable activity and does not qualify for exemption under section 11 of the Act. There is no cogent and valid reason for the Assessing Officer to mention that the trust is exploiting the poor people of rural area by lending money at exorbitant rate of interest which amounts to carrying on business activity for profit. In the instance case, the Assessing Officer himself should satisfy by making an enquiry on the spot and also gather information from the concerned beneficiaries to ascertain whether the claim of the appellant-trust is correct or not. The Assessing Officer probably does not understand properly the methods of micro credit programme, which is a powerful tool for poverty alleviation in the world and especially in India. The programme helps the poorer section of the public at large and in particular, women section. 6.4 In view of the above discussion, I am of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they were free to avail the same. There was no compulsion over parties to avail credit at higher rate of interest, in case they have option to avail loan at lower rate of interest. The assessee can carry out its activity only after charging marginal higher rate of interest to run its activities. The assessee is organising seminar in rural area to make the poor ladies aware of the scheme and to encourage their participation. All these things need some expenditure. Initially, the assessee was in loss and it is only in the year under consideration some surplus is with the assessee-trust. The facts and circumstances shows that the assessee is carrying out its charitable activities and the surplus fund are used for charitable purposes. So, the Commissioner of Income-tax (Appeals) was justified in holding that the assessee is engaged in charitable activities and qualifies for exemption under section 11 of the Income-tax Act. We uphold the same. As a result, the appeal filed by the Revenue is dismissed. I.T.A. No. 1092(Bang)/2008 This appeal has been filed by the assessee against the order of the Director of Income-tax (Exemptions), who has not granted renewal of recognition, of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich appear to be of lesser burden to the borrower, but actually the burden on the borrower is higher. 2. It is a fact that in the prevailing situation the interest rates across all segments of banking activity have been reduced drastically and are in the range of 10 to 12 per cent. even to the normally perceived commercial activity. The trust out of its lending operations for the year ending March 31, 2005 has generated a surplus of Rs. 63,47,281 after making provisions for loan loss of Rs. 8,17,818 adjusting of deferred revenue expenditure for the financial year 2002-03 at Rs. 2,61,720 and for the financial year 2003-04 at Rs. 1,88,274. How this cannot be called as benefit accrued to the trust as per the assessee's submission is wrong. It is deliberately silent at what rate the loans are disbursed to the so called target group. The trust is clearly guided by the commercial principles and motive of profit, rather than charity. 3. The trust is taking shelter in claiming that its activities are charitable on the ground that the trust's micro loan scheme is directed at poverty alleviation. But at what cost to the borrower, this is achieved has not been mentioned at all in its sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The only change that the assessee-trust has effected is reduction in the upfront fees from 15 per cent. to zero per cent. The change is only cosmetic in nature, since the crux of the issue is incidence of high rate of interest charged to the poor borrowers. So, the following findings of earlier rejection order which were the basis for rejection in earlier order dated June 28, 2006, as stated above for recognition under section 80G was rejected vide letter dated June 5, 2008, which was communicated to the assessee on June 28, 2008. Practically order of rejection dated June 28, 2006, merged into the second rejection order dated June 28, 2008, which is the subject-matter of appeal before us. Before us, the learned authorised representative submitted that the Director of Income-tax (Exemptions), Bangalore, has erred in rejecting the application for renewal for recognition under section 80G preferred by the assessee-appellant, by wrongly concluding that the assessee's activity is not a charitable activity. On the other hand, the learned Departmental representative supported the order of the authorities below. After going through the rival submissions and material on record, we find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning centres and institutions for providing formal and informal education benefit of the poorer and disadvantaged sections of the community. h. To organize lectures/seminars/demonstrations/exhibitions/sympsia etc., to disseminate useful information to the public. i. To establish, maintain, manage or finance the establishment and maintenance of libraries for the use of the public. j. To establish, maintain, manage or finance separate funds like emergency fund, calamity fund etc., to help poor families at the time of distress. k. To publish or to finance the publication of books, pamphlets, tracts, magazines etc., for dissemination of useful knowledge amongst the public. l. To undertake and carry out research in social sciences or statistical research. m. To undertake and carry out programmes of conservation of natural resources or of aforestation. n. To conduct, perform or carry on any of the above activities or any activity in pursuance of the above object either jointly or in collaboration with any other trust or institution. o. To design, formulate, execute or carry out any scheme for the furtherance or attainment of any of the above objects. p. To do all such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble purposes" as under: "Charitable purpose includes relief of the poor, education, medical relief and the advancement of any other object of general public utility." Thus the object of the trust is mainly to constitute alleviation of bottom line poor rural and urban women and their families by means of micro credit facilities. The programme is known as "BSS Micro Loan Project" which is presently extending its help to all poor women. The assessee-trust has found that the rural and urban poor women have benefited from the trust's funding activities and were about to come out of the depths of their poverty to a great extent to be able to lead a normal life like any other citizen. This goes to show that the relief to the poor has been aimed at by the trust's micro loan and this is clearly a charitable purpose conforming to the provisions of section 2(15) of the Income-tax Act, 1961, both as relief to the poor as well as the object of general public utility. The micro credit is now recognised as one of the most powerful, effective and one of the most sustainable tools to achieve the goal of poverty alleviation. This fact is now widely recognized not only in India, but through out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest from the poor women mentioned above. There is nothing on record to suggest that these poor women are capable of receiving loan at lesser interest than offered by the assessee. In case, there is availability of funds/loans at lower rate of interest, nobody including the assessee can force these poor women for such alleged higher rate of interest on the loans. There is nothing on record to suggest that the funds of the trust are used or misused for personal benefit of the trustees or their relatives or near and dear ones. The Revenue has brought nothing on record that surplus generated in the abovesaid activities are not ploughed back into the organisation for the benefit of poor. The financial sustainability as a method of achieving our ultimate objectives, should not be termed as "profit motive", because the organisation aims and works to alleviate poverty of poor women. It is not out of context to mention here that Dr. Ramesh Bellam Konda, trustee and project director, is a medical doctor by background and was in medical practice abroad till March, 1997. He has left his practice in foreign to serve his Mother Land and is engaged in poverty alleviation programme with all ..... X X X X Extracts X X X X X X X X Extracts X X X X
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