TMI Blog2012 (11) TMI 990X X X X Extracts X X X X X X X X Extracts X X X X ..... [DIT(E) for short], Hyderabad dated 30.4.2012. 2. The assessee's raised the following grounds of appeal: (a) The DIT(E) erred in law and facts of the case in not granting the approval under section 12A of the Income-tax Act, 1961. (b) Your appellant submits that having accepted that the Society activities are fully in the nature of 'advancement of any other object of general public utility', wrongly applied the proviso to section 2(15), as this activity of running does not fall under "carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business", DIT(E) ought to have granted approval. (c) DIT(E) ought to have appreciated the fact that there are no sales and the collection is only by way of participation fee only by Members of the Society and public at large, erred in rejecting the application. (d) Your appellant object for the denial of the approval on the ground that wrong address was given without affording an opportunity to explain the same or gather the correct particulars. Your appellant submits that the present address as on the date of application was given. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011-12 determining first-of-all gross profit at Rs. 27,53,538/- and net profit at Rs. 3,69,648.60. Such account up to the point of determination of gross profit as furnished in that statement, is as under: Gross Profit c/o. Sales Account 27,53,538 Direct incomes Closing Stock (T-Shirts) PL 5,850 Collection- Auroville marathon 2012 2,44,425 Collection for Hyd Runners Evening 90,002 Collection for T-Shirts (Reliance) 41,420 Collection for weekend Run 2,520 Collection - Jan 26 Club Run 45,815 Donation received 16,000 Membership fee 27,000 Participant fee-receipt Hyd Marathon 2011 22,80,506 27,53,538 27,53,538 27,53,538 Gross Profit b/f. 27,53,538 6. From the above financial statement for the financial year 2011-12, it is seen that under direct income a sum of Rs. 2,4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is registered as a Society under the Andhra Pradesh Societies Registration Act, 2001 on 23.10.2010 and the copy of the bye laws of the society and the registration certificate have been submitted to the DIT(E) along with the application. The assessee is engaged in the promotion of running as the most preferred form of fitness activity in the twin cities and also help runners attempt endurance running or sport as part of healthy lifestyle. The assessee, Hyderabad Runners is not profit oriented society and is a group of passionate runners with regular running activities in the city. Members of the Society have been actively participating in marathon events across India and overseas with over 170 full marathon and 600+ half marathon participations since its inception. Its members have participated in events all over the country and across 60 cities spanning five continents and sometimes its members have gone on to do a podium finish. The assessee operates through an online group with 1100+ runners and growing each day with the aim of making running as the most preferred form of fitness activity in the twin cities. The society has been bringing out to the general public at larg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning sessions, runs, motivational talks and also other running related activities which have all been conducted free of cost since its inception. This entire expenditure has been met out of the members' contribution and out of the Hyderabad Marathon conducted in August, 2011. 10. The AR submitted that the DIT(E) ought to have appreciated the above and granted approval. On the contrary merely because the head sales account has been used, without any finding, brushed aside the real activity and denied the approval, which is not correct. As regards the fee and Membership it was explained that they are categorized as: (1) Core Members - It consists of the founding members of the society which currently constitutes seven members and it is proposed to increase it to a total of 11 members. The membership fee has been fixed at Rs. 5000 per head apart from the criterion of completing a full marathon once in years and also a half marathon in every calendar year. (2) Associate Members - It consists of online members of the group who have been active and do plan to take part in the regular offline weekly and other activities. There is no criterion for it apart from paying an annual fee w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,000. A participation fees for corporate employees will be charged at approximately Rs. 300 per annum which entitles them to participate in all the events conducted by the group. In case of Associate Members Rs. 750/- per annum and they can participate in all events. The Society will provide during each event water, energy drinks, medical aid, and advice and facilitate availability of equipments for weekly runs conducted. In addition to this, the entry fee to the members for annual full marathon and half yearly half marathons will be at concessional rates. The primary and dominant objective is to promote Running as a medium of fitness, good health amongst the citizens and particularly the youth through our training programmes and events. 12. The learned AR submitted that this is not disputed by the DIT(E) on one hand and on the other hand says this is commercial without there being an iota commercial activity. Any surplus from the activities also would be applied only for development of popularity of endurance running as a daily exercise. The membership is open to members of general public who are interested in participating in the activities, without any restrictions. Even on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d may also make such inquiries as he may deem necessary in this behalf; and (b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he - (i) shall pass an order in writing registering the trust or institution; (ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant: Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard. (1A) All applications, pending before the Chief Commissioner on which no order has been passed under clause (b) of sub-section (1) before the 1st day of June, 1999, shall stand transferred on that day to the Commissioner and the Commissioner may proceed with such applications under that sub-section from the stage at which they were on that day. (2) Every order granting or refusing registration under clause (b) of sub-section (1) shall be passed before the expiry of six months from the end of the month in which the application was received under clause (a) section 12A. (3) Where a trust or an institutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the financial year 2008-09 onward, is as under : "(15) 'charitable purpose' includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility : Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention of the income from such activity." 19. In the Notes on Clauses to the Finance Bill, 2008, it is clearly mentioned that cl. 3 of the Finance Bill, which seeks amendment to s. 2 of the IT Act relating to definition of charitable purpose will take effect from 1st April, 2009 and will accordingly apply in relation to the asst. yr. 2009-10 and subsequent assessment years. In the memorandum explaining the provisions of the Finance Bill, it has been mentioned as under for bringing the amendment to the definition of the charitable purpose : "Sec. 2(15) of the Act defines 'charitable purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble purposes. One has to go through the object clause of the trust deed and to see whether the activities carried on by the assessee are in the nature of charitable or not. As per the proviso to section 2(15) of the Act an object of general public utility will not be a charitable purpose if it is involved carrying on of any activity in the nature of trade, commerce or business or any activity rendering any service in relation to any trade, commerce, business for a cess or fee or any other consideration, irrespective of nature of use or application of retention of the income from such activities. If the assessee carried on any activity in the nature of trade, commerce or business, the assessee cannot be termed as existing for the purpose of charitable or religious activities. As per proviso to section 2(15) if the object of the trust is advancement of any other object of general public utility then the activity of rendering any service in relation to trade, commerce or business will make such an object of general public utility as not qualifying for charitable purpose. If the assessee conducts marathon in a commercial manner, then the trust cannot be said to be existing only for cha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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