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2018 (2) TMI 600

Held that:- The activities of the authority were carried out with profit motive but not with the pre-dominant object of welfare of the people at large within the meaning of newly introduced proviso to section 2(15) hence not applicable to the present case i.e. the assessee authority. - We hold that the assessee authority has been created with the object of general public utility which is a charitable object within the meaning of Section 2(15) and the proviso to Section 2(15) is not applicable because assessee authority is not carrying out activities with any profit motive but the pre-dominant object is welfare of the people at large. Therefore, the CIT is directed to grant registration u/s 12AA of the Act to the assessee authority. - Decided in favour of assessee - ITA Nos. 55/Agra/2015 - Dated:- 7-2-2018 - Shri A.D. Jain, Judicial Member And Shri Dr. Mitha Lal Meena, Accountant Member Appellant by Shri Inderjeet Singh, CIT. DR Respondent by Shri Alok Farsaiya, CA ORDER Per, Dr Mitha Lal Meena, AM This appeal by the assessee is directed against the order of CIT-II, Agra dated 29.09.2014, rejecting application for registration u/s 12A of the Income Tax Act, 1961. 2. At the outse .....

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ng and oilier operations, to execute works in connection with the supply of water and electricity, to dispose of sewage and to provide and maintain other services and amenities and generally to do anything necessary or expedient for purposes of such development and for purposes incidental thereto: 6. The CIT(A) has rejected the application u/s 12A on the basis of proviso inserted to Section 2(15) w.e.f. 01.04.2009 by observing as under: 6. The position of law on definition of charitable purpose has changed considerably by insertion of the proviso to Section 2(15) by Finance Act. 2008 which has significantly restricted and limited the areas for exemption. The assessee has unsuccessfully claimed that advancement of any other object of general public utility tantamount to charitable purposes without any conditions. The assessee's objects include acquisition, development and auction of lands, charging development levies of various kind with definite motive of profit and there is no charitable purpose or any activity for public utility. Further, profit making by the assessee is not merely incidental or by-product of the activity of the assessee. There is no escape from conclusion th .....

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mmerce or business. Thus, as clarified by the CBDT merely by charging the fees or other consideration the Proviso to Sec 2(15) are not invoked. Same become applicable only when there is activity in nature of Trade & Commerce. Similar view is also confirmed by Honbe'l Delhi High Court in case of India Trade Promotion V/S Dir. General of Income Tax (2015) 374 ITR 0333 (Del). In Para 57 & 58 57. Ultimately, in the context of the factual matrix of that case, this court held that "charging a nominal fee to use the coding system and to avail the advantages and benefits therein is neither reflective of the business aptitude nor indicative of the profit-oriented intent". The court further observed: - "Thus, the contention of the revenue that the petitioner charges fee and, therefore, is carrying on business, has to be rejected. The intention behind the entire activity is philanthropic and not to recoup or reimburse in monetary terms what is given to the beneficiaries. Element of give and take is missing, but decisive element of bequeathing is present. In the absence of profit motive and charity being the primary and sole purpose behind the activities of the petit .....

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tion or for the purpose of planning development or improvement of cities, town and villages or for both as was exempted for tax u/s 10(20A) of the Act. The said section 10(20A) has been omitted by Finance Act, 2002 w.e.f. 01.04.2003. However, that fact is not relevant to answer the question for registration u/s 12A. 11. Registration under Section 12A is permissible to a Trust or an institution so as to exclude provisions of Section 11 and 12 of Act, 1961. Section 11 and 12 talks of a Trust or Institution created wholly for charitable or religious purpose. We have to examine whether assessee authority can be said to be an Institution created wholly for charitable purpose. 12. The term Charitable purpose is defined in Section 2(15) of Act, 1961 and before Finance Act, 2008 whereby it was substituted with effect from 01.04.2009 and has been made much detailed, it read as under: "(15) "charitable purpose" includes relief of the poor, education, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historical interest and the advancement of any other object of general publ .....

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assessee was enjoying exemption under Section 10(20A) and Section 10(29). When these provisions were amended w.e.f. 1st April, 2003, then the necessity arose to register these institutions under Section 12A, in view of the objects, there is no good reason for holding that statutory bodies could not be treated as "charitable" within the meaning of Section 2(15). The object of the "Authority" is to provide shelter to the homeless people, therefore, there is no objectionable material to treat these institutions as non-charitable. The registration under Section 12A is mandatory to claim exemption under Sections 11 & 13, but registration alone cannot be treated as conclusive. It is always open to Revenue Authorities, while processing return of income of these assessees, to examine the claim of the assessees under Sections 11 & 13 and give such treatment to these institutions as is warranted by the facts of the case. Revenue Authorities are always at liberty to cancel the registration under Section 12AA(3). Moreover, it may be mentioned that the benefit of Section 11 is not absolute or conclusive. It is subject to control of Sections 60 to 63. If it is found .....

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ects for the welfare of the economically and socially dis advantaged or needy. It will, therefore, include within its ambit purposes such as relief to destitute, orphans or the handicapped, disadvantaged women or children, small and marginal farmers, indigent artisans or senior citizens in need of aid. Entities who have these objects will continue to be eligible for exemption even if they incidentally carry on a commercial activity, subject, however, to the conditions stipulated under Section 11 (4A) or the seventh proviso to Section 10(23C), which are that- (i) the business should be incidental to the attainment of the objectives of the entity, and (ii). separate books of accounts should be maintained in respect of such business." 29. For the applicability of proviso to Section 2(15), the activities of the trust should be carried out on commercial lines with intention to make profit. Where the trust is carrying out its activities on non-commercial lines with no motive to earn profits, for fulfillment of its aims and objectives, which are charitable in nature and in the process earn some profits, the same would not be hit by proviso to sect/on 2(15). The aims and objects of th .....

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