AI Drafter 
TaxTMI 
TaxTMI 
2009 (9) TMI 876
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....ght to have held the assessee as a charitable trust and consequently allowed the registration u/s 12A of the Act; & (3) the DIT(E) ought to have allowed recognition u/s 80G(5)(vi) of the Act. 3. Similarly, [in ITA No: 302], the assessee has raised three grounds. However, on a perusal, it is emerged that the essence and crux of the grievance of the assessee is revolved around the 'DIT (E)'s refusal to grant registration u/s 12A of the Act and recognition for exemption u/s 80G of the Act.' 4. As the issues raised are inter-linked, for the sake of convenience, both of these appeals are considered together and adjudicated in this common order. 5. On receipt of application for registration u/s 12A of the Act, the Ld. DIT (E) had examined the activities of the assessee with reference to objects and made the following observations: "It is evident from the activities and accounts of the trust that the trust works for the welfare of members who subscribe to the trust. Any trust wherein the benefits do not enure (sic) ensure for the general public cannot be considered as a 'Public Charitable Trust'. The trust exists not for the benefit of the general public or a section of the....
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....nce of drinking water projects in rural areas and in urban slums, including installation of pump-sets, digging of wells, tube-wells and laying of pipes for supply of drinking water; b) Construction of dwelling units for the economically weaker sections; c) Construction of school buildings primarily for children belonging to the economically weaker sections of the society; d) Establishment and running of non-conventional and renewal sources of energy systems; e) Any other programme for uplift of the rural poor or the urban slum dwellers, as the National Committee may consider fit for support; f) Promotion of sports; g) Establishment and running of educational institutions in rural areas, exclusively for and children up to 12 years of age; h) Establishment and running of hospitals and medical facilities in rural areas, exclusives women and children up to 12 years of age; i) Encouraging the production of bacteria induced fertilizers; j) Construction of hostel accommodation for woman or handicapped individuals or individual who are of the age of 65 years or more; k) Establishment and running of Institutions imparting education in the field of engineering, ....
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....purpose if it involves the carrying on of (a) any activity in the nature of trade, commerce or business; or (b) any activity of rendering any service in relation to any trade, commerce or business. 7.2.1. 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. The newly inserted proviso to section 2(15) will apply only to entities whose purpose is advancement of any other object of general public utility i.e. the fourth limb of the definition of charitable purpose contained in section 2(15). Hence, such entities will not be eligible for exemption under section 11 or under section 10(23C) of the Act if they carry on commercial activities. 8. On a careful reading of the main objectives of the assessee, we find that no thrust was given for the relief of the poor, education or medical relief to the general public. The sole purpose of the trust was intended to for mutual interests of its members [milk producers' societies] who are the subscribers of the assessee and their family members under the guise of pretending to serve the general public. Even the proposed establis....
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....he Milk Producers, has come forward to constitute this Trust to safeguard, the interests and to promote the health and education of the Member Milk Producers, their families/dependant children and the employees working in the Milk Producers Co-operative and their families/dependant children. Societies within the limits of Bangalore Urban and Rural Districts; AND WHEREAS, in the meeting of the Executive Committee of the Bangalore Urban and Rural Districts Cooperative Milk Producers Union held on 8.12.2006, it has been unanimously resolved to form a Trust for the upliftment and prosperity and to safe guard the interests of the Members of the Milk Producers Societies and their family members as also, the employees of the Societies of both the Districts of the Union; AND WHEREAS, the EXECUTOR has decided to donate the Trust Rs.1,001/- as per the funds available under law and this amount would continue to be the corpus of Trust Fund and the Trustees have agreed and joined their hands with the EXECUTOR to formulate the following regulations for the better administration of the Trust." The letter filed by the assessee dated 7.7.2008 addressed to the Assistant Commissioner of I....
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....roviding compensation to the members of the Primary Milk Co-Operative Society on accidental death of local cows and buffalos, which is their sole bread earner apart from this Trust is also planning to set up medical relief centers. We shall be glad to furnish any further details sought for." 8.2.2. Moreover the funds (applied) utilized by the assessee hitherto will also give credence to the above view as the assessee has not given any substantial evidence for spending the trust's funds for general public cause: (i) Members' death relief Rs.3,75,000 (ii) Cattle death relief Rs.2,20,000 8.3. It is also worth-mentioning the Hon'ble Finance Minister's Budget speech which was delivered on 29.02.2008 during the course of Budget 2008-2009 presentation which is extracted here-below: "Charitable purpose includes relief of the poor, education, medical relief and any other object of general public utility. These activities are tax exempt, as they should be. However, some entities carrying on regular trade, commerce or business and earning incomes have sought to claim that their purposes would also fall under "charitable purpose". Obviously, this was not the intention of Parl....
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.... due regards, we would like to enlighten further that the issue before the Hon'ble High Court was that the manner of application of funds and as to whether the applicant-assessee can claim the benefit of exemption in terms of s.11 and 12 is a question which has to be examined by the assessing officer and not by the Commissioner and that the case (M/s. Garden City Educational Trust) before the Hon'ble High Court was running educational institutions whereas the present assessee - Co-operative Milk Producers Societies - is NOT running any educational institution as such. 8.4.3. In the case of Sanjeevamma Hanumanthe Gowda Charitable Trust v. DIT (E) reported in (2006) 285 ITR 327, the Hon'ble High Court of Karnataka had an occasion to deal with a similar issue. After deliberating the issue at length, the Hon'ble Court was pleased to observe thus - "Section 11 of the Act deal with exemptions available to income from property held for charitable or religious purposes. Exemption from tax will be allowed only in respect of the income actually applied to the purposes of the trust. Income derived for trust property must be determined on commercial principles. In order to be eligible fo....
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....ed to the trust." 8.4.5. In conformity with the findings of the Hon'ble High Court referred supra, the Ld. DIT(E) had indeed verified to get himself satisfied as to the genuineness of the activities of the trust and how the income derived from the trust property was applied to charitable or religious purpose and not the nature of the activity by which the income was derived to the trust and found that the present trust was formed with an intention for the up-liftment and to safeguard the interests of the members of the Milk Producers Societies and their family members and also the employees of the Societies. Thus, he had come to a conclusion that the trust had worked for the welfare of its members by way of utilizing the funds for members' death relief, cattle death relief etc. which do not fall within the ambit of relief to the poor, education or medical relief to the general public. 8.4.6. On a careful reading of the main objectives of the trust deed of the assessee, it emerges that this trust was formed for the up-liftment and to safeguard the interests of the members of the Milk producers' societies and their family members, besides the employees of the societies/union. T....
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....ersons in a country or state, but it is sufficient if the intention is to benefit a section of the public. 8.4.10 While as in the present case (Bangalore Urban and Rural District Co-operative Milk Producers Societies Members and Employees Welfare Trust) is a trust formed for the upliftment and prosperity of the members of the milk producers societies and their family members and in order to safeguard the interest of the members of such societies. Therefore it goes without saying that the assessee trust emerges out from the members involved in a particular commercial activity and exists mainly for the purpose of the well being of the members of a particular trade/occupation on a mutuality concept. 9. In overall facts and circumstances of the issue, we are of the unanimous view that - (i) The Legislature's main intent was to provide succours to the poor in the filed of education, health relief and not to circumvent such a legislation to the benefit of the affluent in the name of poor; (ii) The intention of the present assessee was to avail such benefits as provided under the provisions of s.12 of the Act in the guise of extending relief to the economically weaker section;....