TMI Blog2014 (6) TMI 1025X X X X Extracts X X X X X X X X Extracts X X X X ..... elete the tax imposed on the assessee by withdrawing the benefit U/s. 11 12 - Decided in favour of assessee. - I.T.A.No. 1751/Mds/2013 - - - Dated:- 6-6-2014 - SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER For The Appellant : Shri M Balaganesh C.A For The Respondent : Shri Shaji P Jacob, Additional.CIT D.R ORDER PER A.MOHAN ALANKAMONY , ACCOUNTANT MEMBER: This appeal is filed by the assessee, against the order of the Ld.CIT (A)-VII, Chennai dated 21.08.2013 in ITA No.634/11-12 passed U/s. 143(3) read with sections 147 250 of the Act. 2. The assessee aggrieved by the order of the Ld. CIT (A) has taken up six elaborate grounds before us; however, the crux of the issue is that, the Ld. CIT (A) had erred by holding the activities of the society are in the nature of general public utility generating profit without taking into consideration of the fact that the society is a mutual organization as well as charitable institution registered U/s. 12AA of the Act and by virtue of Circular No.11/2008 dated 19.12.2008 issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 64 Taxman 433 (Patna-Full Bench), Devi Ahilya New Cloth Market Co. Ltd. Vs. CIT [2009] 222 CTR 583 (MP), CIT Vs. Bombay Oilseeds Oil Exchange Ltd. [1993] 71 Taxman 351(Bom.) Haryana State Co-op Labour Construction Federation Ltd Vs. Ld. CIT [2002] 122 Taxman 408(P H) vii) With the insertion of the second proviso to Sec.2 (15) of the Act, the aggregate value of the receipt from the activities in the nature of trade, commerce or business or any activity of rendering any service in relation to trade, commerce or business exceeding the specified limit would be brought under the net of tax as in the assessee s case. 4. Aggrieved by the order of the Ld. Assessing Officer, the assessee went on appeal before the Ld. CIT (A), however the Ld. CIT (A) held the contentions of the assessee society to be devoid of merit and not tenable in law. The Ld. CIT (A) observed by subscribing the view of the Ld. Assessing Officer that the Circular No.11/2008, dated19.12.2008 does not apply to the case of the assessee for the following reasons:- i) The objects of the assessee society establish that the society was constituted for the purpose of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be remitted back to the Ld. Assessing Officer. 7. We have heard both the parties and carefully perused the materials available on record. From the order of the Ld. Assessing Officer, it is evident that the trading activities of the assessee society with its members during the assessment years 2008-09 2009-10 generated the following financial results:- A.Y. Sales Profit % of net profit 2008-09 6,40,80,198 49,56,056 7.74% 2009-10 7,27,60,326 43,78,226 6.02% From the above it is obvious that the assessee society had retained only minimum margin from its activity of import of materials and distribution of the same among its members. Retaining of a minimum amount of surplus is essential for attending the day to day activities of the assessee s so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rganizations have dealings with non-members, their claim to be charitable organizations would now be governed by the additional conditions stipulated in the proviso to sec 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 and no generalization is possible. Assessees, who claim that their object is charitable purpose within the meaning of sec.2(15), would be well advised to eschew any activity which is in the nature of trade, commerce or business or the rendering of any service in relation to any trade, commerce or business. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e claiming exemption under Section 11 of the Act. 24. There is no finding by the Assessing Officer that the amounts utilized by the assessee or the work done by the assessee was in violation of any objects of the assessee enumerated at para 17 above. The competent authority never cancelled or attempted to cancel the registration granted under Section 12A(a) of the Act. The said registration remains intact from the date of grant, namely, 4.7.1983. Admittedly, there has been no amendment to the objects of the Trust. No doubt, as pointed out by the learned D.R., objects of the assessee, namely, those mentioned in clauses 6, 11, 13, 14, 15 and 16 do enable it to give certain services only to its members. In our opinion, what is to be considered is the predominant object of the assessee and the predominant nature of the objects does show charity, as already mentioned by us at paras 17 18 above. As held by Hon'ble Apex Court in the case of Addl. CIT v. Surat Art Silk Cloth Manufacturers Association (121 ITR 1), definition of charitable purpose would still be satisfied even if an activity for profit is carried on in the course of actually ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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