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2015 (11) TMI 1278 - ITAT BANGALORE

2015 (11) TMI 1278 - ITAT BANGALORE - TMI - Registration u/s 12A denied - Held that:- The basic principle underlined the definition of charitable purposes remains unaltered even by amendment to section 2(15) of the Act w.e.f. 1.4.2009, though the restrictive first proviso was inserted therein. In the given facts of the case, the assesseeís associationís primary purpose was to give focus o areas of education, environment and engagement (community and employee). It has through constant and well mo .....

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tive general public utility and it would remain charitable even if an incidental or ancillary activity or purpose of achieving the main purpose was profitable in nature. Hence the finding of the Director of Income-tax (Exemption) has mentioned in the object clause-17 under the said Incidental Objects under Part-B of the MOA at para-5 of his order stating it to be non-charitable does not disentitle the assessee for availing exemption u/s 12 of the IT Act. See India Trade Promotion Organization Vs .....

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t year 2014-15. 2. The facts of the case are that M/s Printech Park Cluster, Bangalore had filed an application in Form No.10A on 24-03-2014 seeking registration u/s 12A of the Act, 1961. The Association of Group of Persons and it has been registered with the Registrar of Societies. The 3. DIT(E) observed as follows; It is clear from the Bye-laws that one has to become member and enroll by paying an admission fee of ₹ 1,000/- and Annual Membership Fee of ₹ 1,000/-. The Membership of .....

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d expenditure has also been seen . 4. The DIT(E) further held that on the prima facie, the assessee does not fit into the frame of Charitable purpose which includes relief of the poor, education, medical relief and preservation of monuments or places or objects of artistic or historic interest and the advancement of any other object of general public utility, as defined in sub-section 15 of sec.(2) of the IT Act, 1961. 5. The DIT(E) also stated that the assessee by letter dated 21-07- 2014 has f .....

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e DIT(E) concluded as follows; From the perusal of the Memorandum of Association and the Byelaws and also considering the explanation of the assessee, the assessee is not a trust/institution and the objects pursued by the assessee are not for charitable purposes, hence registration u/s 12A is rejected. 6. Aggrieved the assessee is in appeal before us. 7. We have perused some of the main objects which are as follows; Clause(1) page: 3 1) Promote and support the Printing and allied Industries, Tra .....

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ciation and to take all steps needed in this regard. The issues before us, to be addressed are the following ; 1) whether in case of the trust/society created for the advance of general public utility it is necessary that objects should be benefit to the public at large or it would be that object beneficial to a section of pubic would be an object of general public utility, as defined u/s 2(15) of the IT Act, 1961. 2) Genuineness of the activities of the trust has been commented upon by the DIT( .....

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n Ahmedabad Rana Caste Association Vs CIT (1971) 82 ITR 704 and CIT Vs Ahmedabad Rana Caste Association (1985) 140 ITR 1(SC) pointed out that the law recognizes no purpose as charitable unless it is for a public charity. That is to say, a purpose must, in order to be charitable, be directed to the benefit of the community or a section of the community. The expression object of general public utility , however, is not restricted to the objects beneficial to the whole of mankind. An object benefic .....

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the section of public who are associated with printing and would be an object of general public utility specified u/s 2(15) of the IT Act, 1961. 8. With respect to the second issue the decision of the jurisdictional High Court in the case of DIT(E) Vs Meenakshi Amma Endowment Trust (2013) 40 Taxmann.com 30(Kar.) is to be followed wherein it has been held that where a trust had approached authority for registration u/s 12A with a span of eight months of its formation. Only objects of trust for w .....

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gistration u/s 12A as the objects are for general public utility as defined u/s 2(15) of the IT Act, 1961. 9. With respect to the third issue, we reproduce Circular No.11 of 2008, dated 19th December, 2008…. Furthermore, in the Memorandum regarding Delegated Legislation - Rationalization and Simplification Measures, it has been noted as under;- Streamlining the definition of charitable purpose Section 2(15) of the Act, defines charitable purpose to include relief of the poor, education, m .....

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Such a claim, when made in respect of an activity carried out on commercial lines, is contrary to the intention of the provision. With a view to limiting the scope of the phrase advancement of any other object of general public utility . It is proposed to amend section 2(15) so as to provide that the advancement of any other object of general public utility shall not be a charitable purpose if it involves the carrying on of- (a) any activity in the nature of trade, commerce or business, or (b) a .....

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ization is carrying on business activity with a profit motive in the garb of charitable purpose. It has been clearly established by various decisions that when the main object of the institution was charitable in nature , then the activities carried out towards the achievement of the said, being incidental or ancillary to the main object, even if resulting in profit and even if it is carried out with non-members, were all held to be charitable in nature . The basic principle underlined the defin .....

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tershed management, women empowerment through skill development initiatives, provision of drinking water, youth empowerment, medical health amps, environmental conservation program and promotion of sports and a host of extracurricular activities at local levels aimed towards community sustainability. Hence, the assessee association primary purpose was advancement of objective general public utility and it would remain charitable even if an incidental or ancillary activity or purpose of achieving .....

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under; The concept behind section 28(iii) is to cut at the mutuality principle being relied on in support of a claim for exemption, when the assessee was actually deriving income or making profit as a result of rendering specific services for its members in a commercial way. The reason for the introduction of section 28(iii) is to ignore the principle of mutuality and reach the surplus arising to the mutual association and this is clear from the ITA No.739 of 2014 IP India Foundation, Hyderabad .....

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tion of charitable purpose simply shows that several mutual associations may also fall within the definition. The receipts derived by a chamber of commerce and industry for performing specific services to its members, though treated as business income under section 28(iii) would still be entitled to the exemption under section 11 read with section 2(15) provided there is no profit motive. Thus, assessee being a charitable institution carrying on the object of promotion and development of trade a .....

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Respectfully following the Co-ordinate Bench decision, we allow the assessee s appeal. 5. In the result, appeal filed by the assessee is allowed . 11. We have heard both parties and have perused the material on record. 12. Again, the Hon ble Delhi High Court in the case of India Trade Promotion Organization Vs Director General of Income-tax (Exptns.) & Others (2015) 371 ITR 333, held vide para-58 as follows; 58. In conclusion, we may say that the expression charitable purpose as defined in .....

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