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M/s. Aiema Technology Centre Versus The Director of Income Tax, [Exemptions]

2016 (7) TMI 520 - ITAT CHENNAI

Continuance of registration under section 12AA denied - commercial v/s charitable activity - Held that:- By introduction of proviso to section 2(15) of the Act with effect from 01.04.2009, the “Charitable purpose” has been well defined and includes relief of the poor, education, medical relief, preservation of environment including water sheds, forests and wildlife and preservation of monuments or places or objects of artistic or historic interest and the advancement of any other object of gener .....

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onsored persons. Before the ld. DIT(E), the ld. AR of the applicant has also accepted that there is no question of continuance of registration under section 12AA of the Act since the beneficiaries are only the members and benefit is not passed on to the public at large in any way. Therefore, the objects and activities of the applicant cannot be called as “charitable” within the definition of main provision of section 2(15) of the Act. - Also in the written submissions before the ld. DIT(E), .....

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the character of charitable purposes. - Decided against assessee. - I.T.A. No. 403/Mds/2012 - Dated:- 15-6-2016 - Shri Chandra Poojari, Accountant Member And Shri Duvvuru RL Reddy, Judicial Member For the Appellant : Shri V.S. Jayakumar, Advocate For the Respondent : Shri Sundar Rao, CIT ORDER Per Duvvuru RL Reddy, Judicial Member This appeal filed by the assessee is directed against the order of the ld. Director of Income Tax [Exemptions], Chennai, dated 09.12.2011 relevant to the assessment ye .....

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icultural implements, electrical house hold appliances, automobile equipments, machine tools & accessories, jigs & fixtures and PVC cables and other items manufactured by the Members of the Company. 2. To provide facilities to members for conducting meeting and conferences to promote the market for the goods manufactured by the members. 3. To pen and run technical libraries. 4. To provide for sports & competition and catering facility to members. 3. The applicant institution was sele .....

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eceipts apart from others. Catering Receipts ₹ 1,58,411 Hall Charges received ₹ 3,36,803 Membership fees ₹ 1,51,236 Rent Restaurant ₹ 1,55,000 Hire Charges income ₹ 2,34,000 HRD & EDP Income ₹ 6,86,712 5. The ld. DIT(E) has observed that the receipts were prima facie found as commercial receipts or fees in the nature of first proviso to clause (15) of Section 2 of the Act. Accordingly, the ld. DIT(E) has issued a show cause notice under section 12AA(3) of .....

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of members and therefore covered under the concept of mutuality. A special training programme is conducted for enhancing the knowledge of the members and the employees by inviting experts in various fields like production, quality, measurement, methods, etc. 2. Catering charges and all charges are receipts from the members who had utilized the space in the centre for conducting the meetings, etc. for their staff or customers. Catering facilities are also used by members for providing food for t .....

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the nature of trade, commerce or business or any activity or rendering any service in relation to any trade, commerce or business. Whether the purpose is a charitable purpose will depend on the totality of the facts of the case. Ordinarily, Chambers of Commerce and similar organizations rendering services to their members would not be affected by the amendment and their activities would continue to be regarded as "advancement of any other object of general public utility". 6. After con .....

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question of continuance of registration u/s 12AA. Issue has been examined. As accepted by the learned A.R., the beneficiaries are only the members and benefit is not passed to public at large in anyway. Therefore the object and activities of the assessee cannot be called charitable within the definition of main provision of Sec.2(15) of the Act. b. Without prejudice to the above finding, even if suppose the activities are held to be charitable, the assessee has not raised objections to the natur .....

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's case is covered under said proviso and loses the character charitable purposes. c. Once the institution loses its character, the question of continuance of registration is no way affected by the speech of Hon'ble Finance Minister who has said that genuine charitable institution is not hit by the proviso to Sec.2(15). The Hon'ble Finance Minister has mentioned in his speech that attraction of the amendment will depend on entire facts and circumstances of particular case. d. The lea .....

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not a formal education. In view of the above facts and circumstances, the ld. DIT(E) has withdrawn the registration of the company with effect from 01.04.2009 i.e., the applicable date of amendment under section 2(15) of the Act. 8. On being aggrieved, the applicant is in appeal before the Tribunal and contended that once Registration is granted, the same cannot be withdrawn without proper reasoning as to how the activity now carried on is against the objects for which the original registration .....

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eproduced hereinabove. From the above, it is clear that the objects of the applicant are to propagate equipments by way of organizing seminars, exhibitions, etc. by the members of the company and also provide facilities to members for conducting meetings and conference to promote the market for the goods manufactured by the Members. By and large, the objects revolve only for the benefit of members of the company and not general public utility. 11. With effect from 1.4.2009 proviso to Sec. 2(15) .....

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f 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. Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is ten lakh rupees or less in the previous year. 11.1 By introduction o .....

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table in nature nor advancement of any general public utility but for the only benefit of the members of the company. 11.2 With regard to principles of mutuality, the AR of the applicant has very well accepted in person before the ld. DIT(E) and also in the written submissions that the activities of the applicant was primarily aimed at benefitting the members and their sponsored persons. Before the ld. DIT(E), the ld. AR of the applicant has also accepted that there is no question of continuance .....

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