TaxTMI 
TaxTMI 
2016 (6) TMI 377
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....o the assessee from time to time and last of such approval was granted vide proceedings dated 20.5.2011 in perpetuity. The main objects for which the assessee trust was created are as follows:- "i) To assist, finance, support, found establish and maintain any trust, society or institution meant for the relief of the poor, advancement of education, medical relief or advancement of any other object of general public utility. ii) To open , found, establish or finance, assist and contribute to the maintenance of hospitals and/or institutions for promotion of research and education in medical science including surgery. iii) To open, found, establish, maintain and assist leper asylums or other institutions for the treatment of leprosy. iv) To open, found, established assist and maintain schools, colleges and boarding houses. v) To open, found, establish and assist schools, colleges hostels for the blind, the deaf and the dumb. vi) To open, found, establish or contribute to the maintenance of orphanages, widow homes, lunatic, asylums, poor houses etc. vii) To distribute dhotis, blankets, rugs, woolen clothing, quilts or cotton, woolen, silken or other variations of clo....
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....ee as charitable in nature and granted exemption u/s 11 of the Act. 5. The Learned DIT stated that on perusal of the Income and Expenditure Account, a sum of Rs. 77.90 lacs was realized from membership fees alone out of the gross receipts of Rs. 130.35 lacs. Hence it is quite apparent that the major source of income for the trust is derived from running the centre for physical fitness named 'solace'. He held that 'Solace' provides a multi-facility health unit which is not restricted to Pranic Healing alone. The term medical relief in common parlance means provision of facility for diagnosis of ailments through modern scientific methods and treatment of diseases through medication or surgery for achieving recovery and cure. Hence 'medical relief' cannot be stretched to include provision of facilities for maintaining or promoting general fitness. He further observed that the activities of the trust do not benefit the public at large. He noted that a perusal of the membership profile would indicate that it is affordable to only well to do sections of the society. Hence he concluded that 'Solace' is nothing but a 'health club' and does not fall under 'medical relief' within the meanin....
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....not only comprises of membership fees but also fees from patients and realization from treatment, therapies & others. 5) a) For that the Ld. Director of Income Tax (Exemption) failed to appreciate the fact that there is no change in the activities of the Trust and it has been availing benefit of Section 12AA of the Income Tax Act, 1961 since inception. b) For that the Ld. Director of Income Tax (Exemption) also failed to appreciate the fact that the Trust has been allowed the benefit of Section 11 of the Act in all its completed Tax Assessments till the Assessment Year 2008-09." 6. The Learned AR stated that the show cause notice issued u/s 263 of the Act is as below:- "OFFICE OF THE DIRECTOR OF INCOME TAX (EXEMPTION) 10B, Middleton Row, 6th floor, Kolkata-700 001 No. DIT(E)/12AA/Cancellation/2011-12/2906 date 30.12.2011/02.01.2012 To The Trustee, Lotus Charitable Trust 4, Sunny Park Kolkata-700 019. Subject : Show Cause notice for cancellation of registration u/s. 12AA(3) of the I. Tax Act, 1961 - regarding. Sir, I am directed to state that you are inter alia, operating a Spa and a club. The activities in which you are engaged in is in the natu....
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....ted people to turn towards such alternate systems of medicine. Patients who benefited from our system of medicine are t he best ambassadors of the technique. Thus, this activity of the trust in no circumstances can be equated with any activity other than medical relief. He further argued that as per section 2(15) of the Act, relief also by alternative method is per se charitable purpose irrespective of the fact that for providing relief the trust charges fee, and there is no condition to hold that to become eligible for charitable purpose in respect of medical relief, the same should be imparted freely or without charging any fee. Mere making of profit would not be ground to cancel registration once the objects of the trust were for charitable purpose and especially where two institutions were being run by the trust which was registered since 22.08.1980 as a Charitable Trust, and solely because the trust was charging fees and was getting surplus, would not be a reason to deny registration. The unit "Solace" have variety of members (old and young, men and women, rural and metropolitan, corporate and non-corporate, public servants and private, permanent and temporary, service membe....
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.... ambit of 'medical relief' , then even the departmental stores selling organic food items also would be beneficial to the health of the consumers and they would also fall under the ambit of charitable purpose which is the not the intention of the legislature. He stated that the activities carried out in 'Solace' is purely commercial in nature and is not at all affordable to the poor. 8. We have heard the rival submissions. We find from the aforesaid facts that the assessee trust has been carrying on this fitness centre from Asst Year 2002-03 onwards and the same has been accepted as genuine charitable activity in the scrutiny proceedings completed u/s 143(3) of the Act dated 29.12.2006 for the Asst Year 2004- 05. The Learned AR argued that the assessee has been regularly filing its returns of income for all the earlier years. He argued that even up to Asst Year 2008-09, this activity of the assessee trust has been accepted by the revenue as genuine charitable activity. We find that from Asst Year 2002-03 to Asst Year 2008-09, the only year which underwent scrutiny was Asst Year 2004-05 and other assessment years were presumed to be completed u/s 143(1) of the Act and no contrary e....
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....re the grant of registration requires satisfaction about the objects of the trust as well as the genuineness of the activities, for the cancellation of the registration under section 12AA(3), all that it is insisted upon is the satisfaction as to whether the activities of the trust or institution are genuine or not and whether the activities are being carried on in accordance with the objects of the trust. Thus, even if the trust is a genuine one, i.e., the objects are genuine, if the activities are not genuine and the same not being carried on in accordance with the objects of the trust, this will offer a good ground for cancellation. Thus, in every case, grant of registration as well as cancellation of registration rests on the satisfaction of the Commissioner on findings given on the parameters given in section 12AA(1) and section 12AA(3) of the Act, as the case may be. 33. Registration of the trust under the Act confers certain benefits from taxation under the provisions of the Act. The conditions under which the income of the trust would be exempted under the provisions of the Act are clearly laid down under section 11 as well as in section 12 of the Act. Section 11 of the ....
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....er held that once a trust lose its identity or character or charitable trust, it became a non-genuine charitable trust. On appeal, the assessee submitted that registration once granted to the assessee being a charitable institution could not be cancelled or taken away because of the newly inserted proviso to section 2(15) which defines charitable purposes." The decision of the Mumbai Tribunal on the said case is as under: 5.4 Thus, the action of the CIT(A) relying upon the newly inserted proviso from 01.04.2009 in cancelling the registration of the trust, in our view, is not correct or justified. The only effect will be that the Assessee will not be entitled for exemption or tax benefits which otherwise would have been available to it being registered as charitable institution, for the relevant year during which its income has crossed the limit of Rs. 10.00 lacs. Subject to our above observations cancellation of registration ITA No.882/M/12 A.Y.09-10 9 granted to Assessee u/s. 12A is hereby set aside and same is hereby ordered to be restored." 8.1.2. We find that the CBDT had come out with a circular very recently vide Circular No. 21/2016 (F.No. 197/17/2016-ITA-I) dated 2....
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....om commercial activities exceed the threshold whether or not the registration granted is cancelled. This amendment has taken effect retrospectively from 1st April, 2009 and accordingly applies in relation to the assessment year 2009-10 onwards. 4. In view of the aforesaid position, it is clarified that it shall not be mandatory to cancel the registration already granted u/s 12AA to a charitable institution merely on the ground that the cut-off specified in the proviso to section 2(15) of the Act is exceeded in a particular year without there being any change in the nature of activities of the institution. If in any particular year, the specified cut-off is exceeded, the tax exemption would be denied to the institution in that year and cancellation of registration would not be mandatory unless such cancellation becomes necessary on the ground(s) prescribed under the Act. 5. With the introduction of Chapter XII-EB in the Act vide Finance Act, 2016, prescribing special provisions relating to tax on accreted income of certain trusts and institutions, cancellation of registration granted u/s 12AA may lead to a charitable institution getting hit by sub-section (3) of section 115TD ....