TaxTMI 
TaxTMI 
2016 (8) TMI 916
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....rity in proviso to section 2(15) of the Act with effect from 01.04.2009. 3. The facts of the case are that the original assessment in this case was framed u/s.143(3) of the Act vide order dated 28.02.2013. The CIT going through the above said order of the A.O, was of the opinion that the AO had not made sufficient enquiry while framing the said assessment order. AO also failed to consider the decision of the Madras High Court in assessee's own case reported in (2011) 330 ITR 0024 wherein held that Commercial activity is being carried on by the assessee by using building a a Kalyanamandapams, Auditoriums and Working Women Hostel and the AO failed to examine the applicability of the first and second proviso to Sec.2(15) of the Act, which was introduced with effect from 01.04.2009. 3.1 Further, according to CIT, the assessee failed to apply the accumulated income of `1.25 crore as mentioned in Form No.10 dated 24.10.2000 within the stipulated period of 10 years u/s. 11 (3)(c) of the Income Tax Act. This proves that there was lack of enquiry on the issue by the AO. As per the provisions of Sec.11(3)(c), if the accumulated amount is not spent within a period of 10 years, or in the....
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....ally to spend amounts for charitable purposes ensuring for the benefit of the public. (vii). To collect and maintain a fund to be contributed by voluntarily donations and subscriptions for the objects and purposes of the trust. (viii). To accept any gifts or property movable or immovable on such terms and conditions as may be agreed to between the donor or donors and the trust but so as not to incur any liability on the part of the trust or members of the trust Board and provided also that the conditions agreed to are of a charitable nature ensuring for the benefit of the public. (ix) To act as trustees and managers of any institution or trust having similar objects in fit and proper cases. (x) To construct and maintain any buildings or works necessary or convenient for the purpose of the trust. (xi). To incorporate with itself any institution, society or association having objects wholly or in part, similar to those of the trust and are of a charitable nature ensuring for the benefit of the public and to cooperate with any person or body of persons in adi of such object, provided such object is of a charitable nature ensuring for the benefit of the public. (xii). To do such ....
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....of section 2(15) with relevant provisos introduced are extracted hereunder for ready reference: "Section 2(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 historic interest, and the advancement of any other object of general public utility ......." Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the Income from such activity Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is ten lakh rupees or less in the previous year." 3.6 Prior to the said amendment there were four limbs of charity and all limbs had equal weightage in the scheme of the Act. They were (i) relief to the p....
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....mmerce or business inspite of application of such income for charitable purpose. Therefore, the claim of the present assessee that a portion of income from kalyanamandapam has been applied for charitable purposes such as donation to other institutions belonging to the same Chettinad group, cannot bring it within the definition of "charitable purpose" as its receipts for the year far exceeded `10 lakhs. 3.9. According to CIT, on consideration of the legal framework which came into effect w.e.f. 01.04.2009, and the Society's activities, it is found that the Society is engaged in commercial activities of running Kalyanamandapams, Auditoriums, Working Women Hostel and Hostel for Girls. Since both its present activities and many of its objects are primarily aimed at "advancement of objects of general public utility", the assessee's case is squarely hit by the amended first proviso to Section 2(15) of the IT. Act. Since its receipts were also more than Rs. 10 lakhs during the year from such activities, which is the thr limit beyond which the entity's income would be taxable, it is also hit by the second proviso. Similarly, the application of the surplus or profit from such commercial ac....
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.... is remanded to the AO to find out the actual entitlement of exemption by considering the materials placed before him, who shall decide as to whether such bas income is used for the attainment of the object and thereafter proceed in accordance with law. Further, ld.A.R submitted that the main object of the assessee is in promoting the charitable object of the Trust and attempt to re-write the object of the assessee is out of the jurisdiction of the CIT(E). The amended proviso below the sec.2(15) of the Act is applicable to the limb of the definition of charitable purpose, namely "advancement of any other object of general public utility and the said proviso is not applicable to other limb including the education object. Therefore, the foundation for invoking the jurisdiction in stating the amended provision is not proper. He submitted that for some assessment year 2010-11, the appeal was pending with CIT(A), the revision u/s.263 is bad in law. According to him, the income generated from the activities listed by the CIT(E) was used for the purpose of charitable activities. Hence, the assessee trust is entitled for exemption u/s.11 of the Act. 6. On the other hand, The Ld.D.R submit....
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....arties and perused the material on record and various case law cited by the parties. Sec. 11 of the Act stipulates that the income from property held for charitable or religious purpose shall not be included in the total income of the previous year of the person in receipt of the income to be given effect in the manner as specified therein. The term 'charitable purpose' has not been defined under the statute; but for the inclusive nature of the term as specified under s. 2(15) of the Act, which as existed before the amendment is as follows : "Sec. 2(15) : "Charitable purpose" includes relief of the poor, education, medical relief and the advancement of any other object of general public utility." As per s. 2 of the Finance Act, 2008, the said provision was amended adding a 'proviso' w.e.f. 1st April, 2009 as follows : "Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business for a cess or fee or any other consideration irrespect....
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.... of taxation. It is also stated that the concept of charity in India is wider, simultaneously adding that, by virtue of the amendment, the position that existed prior to 1st Feb., 1984 has been brought back and that is all. This however will not tilt the balance in any manner in the case of the assessee so as to take the activities outside the charitable purpose, particularly in view of the fact that in publishing of newspaper will not constitute any trade or business. According to the ld. AR, to perform charity, income is inevitable and contended that the activities being pursued by the assessee may constitute a trade or business, if it is not applied for the purposes of charity. Contrary to this, the ld. DR submitted that though the object of the assessee is to carry on charitable activities, but it does not carry those charitable activities, and it was only carrying on publishing of newspaper in a commercial manner, which cannot be construed as charitable activity. In other words, it was contended by the ld. DR that the assessee carried on activities in a business oriented manner, it will definitely come within the fourth limb of the amended sec.2(15) of the Act, where the prohi....
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.... the stipulation under cl. (b)] is rather otiose. Since the activity of the assessee involving any trade, commerce or business, is already excluded from the charitable purpose by virtue of the first limb [cl. (a)] itself, there is no necessity to stipulate further, by way of cl. (b), adding the words "or any activity of rendering any service in relation to any trade, commerce or business ..................". As it stands so, giving a purposive interpretation to the statute, it may have to be read and understood that the second limb of exclusion under cl. (b) in relation to the service rendered by the assessee, the terms "any trade, commerce or business" refers to the trade, commerce or business pursued by the recipient to whom the service is rendered (as there may be a situation involving in publishing of newspaper." 8.1 Being so, in our opinion the activities of the assessee trust is not properly appreciated by the AO. As such, the CIT(E) has rightly invoked the provisions of the section 263 of the Act. 8.2 The other plea of the ld.A.R is that in earlier year i.e.,2009- 10, the above issue was decided by the CIT(A) in favour of the assessee and for assessment year 2010-11....