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TMI Blog2025 (3) TMI 1213X X X X Extracts X X X X X X X X Extracts X X X X ..... l relief as provided in the form 10AB. 3. The CIT (Exemption) simply presumed that certain revenue receipts of its division converted into donation in order to not attract proviso to sec 2(15) without any facts on record. 4. The CIT (Exemption) simply arrived at ratio of 34% as per provision of section 2(15) based on certain presumptions and surmises. 5. The CIT (Exemption) has not appreciated the theme and jurisprudence of the judgement of Hon'ble Supreme court of India in case of Ahmedabad Urban Development Authority" where in which health is considered as "per se category" and not clearly in general public utility area. 6. The CIT (Exemption) failed to appreciate these settled principles as observed in the case of "M/s. Additional Commissioner Of Income- Tax Vs Surat Art Silk Cloth Manufacturers on 19 November, 1979" by the Hon'ble supreme court of India 7. The CIT (Exemption) failed to appreciate the department circular no. 11 of CBDT dated 19.12.2016 which is categorically observed that in para 3.1 and para 3.2, which clearly says that, the newly inserted proviso Sec 2(15) it applied only to the entity who pursue the advancement of any other public utili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Auditor of the Trust appeared before the CIT(E) along with the authorized representative and made another submission dated 26.08.2024 and explained about the source of income and the activities carried on by the trust and its unit MDTC during the course of personal hearing. 4. The CIT(E) however rejected the application for renewal of registration u/s.12AB of the Act. The CIT(E) held the unit of assessee trust i.e., MDTC is providing treatment to patients who are otherwise financially affluent and affordable to pay for lab testing and consultancy services. The CIT(E) also observed that activity of MDTC as incidental activity that generates revenue on commercial basis, hence, it violates the proviso to section 2(15) of the Act. The CIT(E) also held that receipts generated by MDTC exceeded the permissible limit of 20% as specified in proviso to section 2(15) of the Act. The said conclusion of the CIT(E) is arrived based on the following observation. (i) the CIT(E) noted inconsistency between the amounts declared in the submissions and those reflected in the signed financial statements. These discrepancies led the CIT(E) to conclude that explanation provided by the assessee trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rge, the assessee is entitled to benefit of registration u/s.12AB of the Act. The Ld.AR stressed on the point that proviso to section 2(15) of the Act does not apply to first three limbs namely relief to the poor, medical or education, even if such trust incidentally involves in carrying on the commercial activity subject to the conditions stipulated u/s.11(4A) or seventh proviso to section 10(23c) of the Act. It was further contended by Ld.AR that reliance of CIT(E) judgment of Hon'ble Apex Court in the case of ACIT vs. Ahmedabad Urban Development Authority reported in 143 Taxmann.com 278 is not applicable to the facts of the instant case since the said judgment has been rendered in cases pertaining to the trusts which are rendering services in the field of general public utility, hence, proviso to section 2(15) has got application. The Ld.AR further submitted that the CIT(E) had cancelled the existing registration citing percentage received from commercial activity is determined at 36.94% of the gross receipts on wrong assumption by treating 50% of the voluntary contribution from general public as receipts from MDTC. It was stated that the assessee trust had maintained separate b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or retention of the income from such activity. 2. The following implications arise from this amendment - 2.1 The newly inserted proviso to section 2(15) will not apply in respect of the first three limbs of section 2(15), i.e., relief of the poor, education or medical relief. Consequently, where the purpose of a trust or institution is relief of the poor, education or medical relief, it will constitute 'charitable purpose' even if it incidentally involves the carrying on of commercial activities. 2.2. 'Relief of the poor' encompasses a wide range of objects for the welfare of the economically and socially disadvantaged 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 objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Section 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." 11. From the above circular, it is clear that the proviso to section 2(15) does not apply to the first three limbs i.e relief to the poor, medical or educational relief of section 2(15), which provides the definition of 'Charitable purpose' even if such entity incidentally involves the carrying on of commercial activities, subject to the conditions stipulated under section 11(4A) or the seventh proviso to section 10(23C). 12. In the present case, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of CSR funds for AY 2023-24. However, the assessee trust had filed form 10 on 03.11.2023 and the same is placed on record in the paper book filed. 16. Further, the CIT(E) had rejected the application seeking registration u/s 12AB and cancelled the existing registration citing that the percentage of receipts from commercial activity is determined to 36.94% based on assumption and treating 50% of voluntary contributions from general public as receipts from MDTC and also citing that no separate books of accounts were maintained for MDTC. However, the assessee trust had maintained separate books of account for Trust and MDTC (two separate tally accounts were maintained). 17. Further, we find that the CIT(E) has grossly erred in making presumption that 50% of amount received from general public as receipts from the diabetic clinic without any evidence and arriving at mentioned 36.94%. Moreover, as mentioned the proviso to section 2(15) is applicable only to the entities whose purpose is 'advancement of any other object of general public utility' and as per the circular 11 of 2008 and judicial pronouncements, the said proviso would not applicable to the assessee trust as th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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