9911796707
TMI Blog2014 (1) TMI 1539X X X X Extracts X X X X X X X X Extracts X X X X ..... g milk cattle; to improve the quality of cows and oxen and other related activities. The question raised by the Assessing Officer was with respect to granting exemption to the Trust under section 11 of the Income Tax Act, 1961 ["Act" for short]. The Assessing Officer pressed in service newly added proviso to Section 2 (15) of the Act introduced w.e.f 1st April 2009 by the Finance Act of 2010 to hold that the Trust cannot be considered as one created for charitable purposes. The Assessing Officer analyzed the accounts of the respondent assessee and came to the conclusion that considerable income was generated from the activity of milk production and sale. He, therefore, passed an order dated 21st December 2011 framing assessment for A.Y 2009-2010 denying benefit of Sections 11 & 12 to the assessee. Assessee carried the mater in appeal. CIT [A] rejected the appeal and confirmed the order of the Assessing Officer. The assessee, therefore, approached the Tribunal in second appeal. Tribunal, by the impugned judgment, reversed the decision of the revenue authorities holding that the assessee is a charitable trust and proviso to section 2 (15) of the Act will not apply. The Tribunal reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round the first proviso. In the plain terms, the proviso provides for exclusion from the main object of the definition of the term "Charitable purposes" and applies only to cases of advancement of any other object of general public utility. If the conditions provided under the proviso are satisfied, any entity, even if involved in advancement of any other object of general public utility by virtue to proviso, would be excluded from the definition of "charitable trust". However, for the application of the proviso, what is necessary is that the entity should be involved in carrying on activities in the nature of trade, commerce or business, or any activity of rendering services in relation to any trade, commerce or business, for a cess or fee or any other consideration. In such a situation, the nature, use or application, or retention of income from such activities would not be relevant. Under the circumstances, the important elements of application of proviso are that the entity should be involved in carrying on the activities of any trade, commerce or business or any activities of rendering service in relation to any trade, commerce or business, for a cess or fee or any other consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, where industry or trade associations claim both to be charitable institutions as well as mutual organizations and their activities are restricted to contributions from and participation of only their members, these would not fall under the purview of the proviso to section 2 (15) owing to the principle of mutuality. However, if such organizations have dealings with non-members, their claim to be chargeable organizations would now be governed by the additional conditions stipulated in the proviso to section 2 (15). 3.2 In the final analysis, however, whether the assessee has for its object 'the advancement of any other object of general public utility' is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled to claim that its object is charitable purpose. In such a case, the object of 'general public utility' will be only a mask or a device to hide the true purpose which is trade, commerce or business or the rendering of any service in relation to trade, commerce or business. Each case would, therefore, be decided on its own facts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various preparations so as to popularize the use of cow milk and do all other works for the same. 3. To hold and cultivate or get cultivated agricultural lands, to keep grazing lands etc necessary or desirable for cattle keeping and breeding or to rehabilitate and assist Rabaris and Bharwads. 4. To hold and cultivate other land also in order to experiment in the improvement in agriculture and obtain finance support in all the activities of the institution. 5. To make necessary arrangements for getting informatics and scientific knowledge and to do scientific research with regard to keeping and breeding of the cattle, agriculture, use of milk and its various preparations etc and to establish scientific laboratories, libraries, reading rooms relating to the keeping of the cattle, improvement of agriculture etc and recognize or assist such institutions. 6. To establish other allied institutions like leather work etc and to recognize and help them in order to make the cow keeping economically viable successfully. 7. To publish books, periodicals, monthlies, advertisements, pamphlets, statements etc from time to time and for that matter to arrange for printing press, building etc i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the Trust, certain incidental surpluses were generated, would not render the activity in the nature of trade, commerce or business. As clarified by the CBDT in its Circular No. 11/2008 dated 19th December 2008 the proviso aims to attract those activities which are truly in the nature of trade, commerce or business but are carried out under the guise of activities in the nature of 'public utility'. Delhi High Court in case of Institute of Chartered Accountants of India & Anr. vs. Director General of Income Tax [Exemption] & Ors., reported in [2012] 347 ITR 99 (Delhi) considered these very provisions in the context of activities of the Institute of Chartered Accountants holding that the fundamental or dominant function of the Institute was to exercise overall control and regulate the activities of the members/enrolled chartered accountants and merely because the Institute was holding coaching classes which also generate income, the Court held that proviso to Section 2 (15) of the Act would not be applicable. It thus held and observed as under :" Section 2 (15) defines the term "charitable purpose". Therefore, while construing the term "business" for the said section, the obj ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
