TaxTMI 
TaxTMI 
2014 (6) TMI 1004
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....ious error by invoking the amended section 2 (15) of the Act which was not in existence in the year under consideration in which the appellant has filed the application or for the period for which the appellant has filed the application for grant of registration u/s 12AA of the Act in Form No-10A read with Rule 17A of the I.T. Rules and for that matter the order of the learned Commissioner of Income-tax is liable to be quashed. 4. That, the learned Commissioner of Income-tax has committed serious error by examining the matters subsequent to filing of the application and thereby refused to grant the registration which is contrary to the order of Hon'ble High Court of Orissa in the case of Srikhetra A.C. Bhakti Vedant Swamy Charitable Trust vrs ACIT and another [2006 (2) OLR 75] and for that matter the order of refusal to grant the registration u/s 12AA of the Act by the Commissioner of Income-tax is liable to be quashed. 5. That, the learned Commissioner of Income-tax has used the materials behind the back of the appellant without giving opportunity of being heard and for that matter the order of refusal to grant the registration u/s 12AA of the Act by the Commissioner of Income....
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....s committed serious error both in law as well as in facts by applying the provision of section 13(1)(c)(ii) of the Act for refusing to grant the registration u/s 12AA of the Act and for that matter the order of refusal by the learned Commissioner of Income-tax is liable to be quashed and/or annulled. 12. That, the learned Commissioner of Income-tax has committed serious error both in law and in facts by coming to an irrelevant conclusion that the current activity of the appellant is promotion of entertainment and not charitable which is per se illegal and without jurisdiction and for that matter the order of refusal based on such premises is liable to be quashed and/or annulled. 13. That, the learned Commissioner of Income-tax has committed serious error by considering the sports activity especially cricket activity of the appellant as a business risk for the purpose of commercial game and for that matter the refusal on the basis of such observation is liable to be quashed and/or annulled. 14. That, the learned Commissioner of Income-tax has committed serious error both in facts as well as in law by refusing the grant of registration u/s 12AA of the Act for the financial year....
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.... the Income Tax Act, 1961 and as interpreted by the various courts of law. Also the accounts of the association for the Financial Years 2002-2003 to 2008-2009 are quite questionable since the Honorary Secretary is found to have been managing the financial affairs of the association for various years involving substantial irregularities in financial and accounts matter and indirectly had facilitated substantial financial gain to the Honorary Secretary and his relatives. For such reasons for the Financial Years 2002-2003 to 2008-2009 registration u/s 12A is not entertained and hence the application for such years is dismissed. PARA - 55 In respect of the financial year 2008-2009 onwards the amended provision of section 2(15) of the Income Tax Act, 1961 would clearly be applicable to the association. The activities carried out by the cricket association involving providing of services, facilities and amenities to the general public for a fee or service charges at the time of conducting various cricket matches at different places of the State, specially after the introduction of the Indian Premier League format, Indian cricket have been more commercialized com....
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....arrange international matches in order to facilitate its local sportsmen to get knowledge, strength and basically to encourage them to possess the quality to play the international standard matches, promotion and development of Cricket and to provide international standard of training and to produce large number of international cricketers from the State of Odisha. Since from its inception, the Assessee is involved in the above mentioned activities. Since the Assessee's activities are coming well within the ambit of Charitable Activity, in order to avail exemption, it has filed an application for grant of Registration w.e.f from 01.04.1997 U/s.12A of the Act before the learned Commissioners of Income Tax, Cuttack on 31.03.2003 in the prescribed Form No.10A read with Rule 17 of the Income Tax Rules, 1962 (herein after referred as ‗the Rules' ) along with an application for condonation of delay and for grant of Registration w.e.f 01.04.1997. Copy of Registration certificate, bye-laws and copy of Application U/s.12A dated 31.03.2003 have already been filed with the paper book, which may kindly be perused. 2. That, the Commissioner of Income Tax, Cuttack after receipt of the ....
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....the assessee are not charitable. Hence denied to grant registration. Since the Ld. Commissioner has not applied his judicial bent of mind in its proper prospective and denied the legitimate claim of the assessee, being aggrieved the assessee knocked the door of this Hon'ble Tribunal for justice and equity. 4. THE ORDER OF REJECTION PASSED BY THE LEARNED COMMISSIONER IS ILLEGAL: 1. For that, the learned Commissioner of Income Tax has committed gross error of law in denying grant of registration u/s.12AA of the Act, particularly when, no dispute has been raised by him either as to the genuineness of the trust or as to the activities of the trust not being in accordance with the objects of the trust. Since, these facts are undisputed, the question of denial of grant of registration does not arise at all. While considering the application for grant of registration, what the Commissioner is required under the law, is to see that the objects of the institution fitting in with the definition of the charitable purpose defined u/s.2(15) of the Act. 2. For that, it may be relevant to mention here that, the language used in the definition ―....
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...., publication of periodicals in the interest of the sportsmen and diffuse knowledge of cricket and its ideals of sportsmanship. That apart the society is providing social security, safe guards for the players, officials such as managers, coaches, umpires, selectors and other who are directly connected with the game. The intention of the society is to create large number of international cricketers from the State of Orissa for which it is organizing proper coaching scheme for the benefit of young and promising cricketers within the State, it also provides the scheme of net practice, whether free of charges or on payment for members of affiliated clubs, District Associations and for players selected to represent the association in various competition within or outside of the State, it also makes arrangements for group coaching, lectures, exhibition of cricket for the purpose of educating the promising cricketers. It also invites the professional cricketers to provide proper training to the players. Its sponsors charity or benefit matches and/or to subscribe to funds for the benefit of the cricketers, coaches, umpires, staff of the association and their family. All these above activit....
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....ing right and advertisement sales income and thus he is of the opinion that, it had carried out the activities in the nature of trade ,commerce or business in view of the first proviso of Section 2(15) of the Act, the Commissioner held that the objects of the assessee trust was no longer of charitable in nature. In response to the above allegation it is respectfully submitted that, all the receipts arising or accruing to the assessee trust are accounted for and the activities carried out to meet the object of the assessee trust i.e.to promote and to encourage the game of cricket in Orissa by organizing coaching schemes, tournaments, exhibition matches and other matches etc, and they are not with the intention to carry out any trade, commerce or business with profit motive. Such receipts are strictly confined to the attainment of the objects of the assessee trust and there is absolutely no intention to carry out any trade, commerce or business profit, which can be well verified from the income and expenditure statement appended to the Audit report. On perusal of the details of the expenditure, it can be well said that, your assessee has not spent a single pie in any field which are ....
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....he purpose of securing the fulfilment of dominant object would not militate against its charitable character and the purpose would not be any less charitable. 8. For that, the learned Commissioner for denying the grant of exemption u/s.12AA has taken help of the proviso to section 2(15) of the Act but ignored the clarification issued by the CBDT on this purpose. The CBDT in paragraph No.3.2 has clarified that, each case would therefore be decided on its own facts and, no generalisation would be possible. The assessee, who claim that, their activities are 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 the any service in relation to any trade, commerce or business. Thus the anxiety of the Parliament in introducing the proviso 2(15) of the Act is only to check those institution who attempts the gain exemption under the cloak of the trust and not to all. The learned Commissioner while disposing of the application should not have generalised the definition which has been barred by the legislature. That apart, in the impugned order the commissioner has failed ....
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....50 of 2013. Therefore the same cnno tbe applied in the instant case. So far as the judgment of ITAT (Panaji Bench) is concerned, it is respectfully submitted that, the same stands on a different footing. In that case the assessee society was established to hold international film festivals issued relating to establishment of entertainment industries and to create an entertainment hub which are completely different from the activities undertaken by the assessee. Therefore the same cannot be applied against the assessee. So far as the judgment in respect of ITAT (Mumbai) is concerned, it is respectfully submitted that, the issues involved in that case, have already been decided by the Hon'ble Madras High Court in a similar set of facts in favour of the assessee and your assessee also refers and relies on the judicial pronouncements of the Hon'ble Madras High Court. 12. That, the learned Commissioner of income tax has committed gross error of fact as well as in law by observing the fact of financial irregularity. This is so because, the learned Commissioner failed to point out the fact that, which part of the receipts have been utilised not to achieve the purpose of the ....
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....214; is the fundamental prerequisite for the purposes of Income Tax registration and availing of the exemptions u/s 11 of the Income tax Act.1961. The grounds of appeal of the appellant are dealt as under: 1. The first Ground of appeal is that, the order of the learned Commissioner of Income Tax, Cuttack is illegal, arbitrary without jurisdiction and for that matter the order of the learned Commissioner of Income Tax is liable to be quashed and/or annulled. It is submitted that, this is a general ground and no reason whatsoever is given why and how the order of CIT, Cuttack is illegal, arbitrary and without jurisdiction. 2. The second ground is that, the Ld. Commissioner of Income-tax has exceeded in his jurisdiction by examining the accounts of the appellant for the financial year 2002-03 to 2008-09 and coming into an irrelevant and absurd conclusion by refusing to grant the registration to the appellant and for that matter the order of the learned CIT being illegal is liable to be quashed. It is submitted that, It is clear from the order of the CIT Cuttack dated. 22.03.2010 that the assessee for the first time had filed an application for registration u/s12AA of the Incom....
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....ose‖. Such a claim when made in respect of an activity carried out on commercial lines is contrary to the intention of the provision. With a view to limiting the scope of the phrase ―advancement of any other object of general public utility‖, it is proposed to amend section 2(15) so as to provide that ―the advancement of any other object of general public utility‖ shall not be a charitable purpose if it involves the carrying on of following activities (a) any activity in the nature of trade, commerce or business or, (b) any activity of rendering of any service in relation to any trade, commerce or business, for a fee or cess or any other consideration, irrespective of the nature of use or application of the income from such activity, or the retention of such income, by the concerned entity‖. it has been stated in the CBDT's Circular No. 11 of 2008, dated 19th December, 2008 (reported in 308 ITR (St.5) that an entity with a charitable object, inter alia, consisting of advancement of any object of general public was eligible for exemption under section 11 of the Act. ―However, it was seen that a number of entities who were engaged in comm....
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....in order. 4. The fourth ground is that, the Ld. Commissioner of Income-tax has committed serious error by examining the matters subsequent to filling of the application and thereby refused to grant the registration which is contrary to the order of Hon'ble High Court of Orissa in the case of Srikhetra A.C. Bhakti Vedanta Swamy Charitable Trust Vrs. ACIT and another [2006 (2) OLR 75] and for that matter the order of refusal to grant the registration u/s 12AA of the Act by the Commissioner of Income-tax is Liable to be quashed. It is submitted that, the reply to this ground is already stated in the reply to ground two. The decision of the Hon'ble Orissa High Court in the case M/s Srikhetra,A.C. Bhakti Vedanta Swamy Charitable Trust Vs. ACIT and another 2006(11) OLR -75 w.p.(C) No. 12437 of 2005 does not say that matters subsequent to filing of the application can not be examined. Therefore, CIT, Cuttack committed no error in examining the matters subsequent to filing of application for registration U/s 12AA of the Act. 5. The fifth ground is that, the learned Commissioner of Income-tax has used the materials behind the back of the appellant without giving opportunity of being h....
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....relating to the period for which the application for registration is filed. It is submitted that, the Hon'ble High Court of Odisha in the case of M/s Srikhetra, A.C, Shakti-Vedanta Vs. ACIT and another [2006 (II) OLR-75 w.p.(c) No. 12437 of 2005] where in the Hon'ble jurisdictional High Court answering the contention of the Learned Counsel for the petitioner that once the period of six months expires, the authority looses its right to refuse registration of trust the court held that they are unable to uphold such contention and held at para-5 as under: ―In our view the period of six months as provided in Sub-section (2) of Section 12AA is not mandatory. Though the word ‗shall' has been used but it is well known that to ascertain whether a provision is mandatory or not, the expression ‗shall' is not always decisive. It is also well known that whether a statutory provision is mandatory or directory has to be ascertained not only from the wording of the statute but also from nature and design of the statute and the purpose which it seeks to achieve. Herein the time frame under Sub-section (2) of Section 12AA of the Act has been so provided to exclude any delay or....
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....he Honorary Secretary and his relatives. For such reasons for the Financial Years 2002-03 to 2008-09 registration u/s 12A is not entertained and hence the application for such years is dismissed. Para-55: In respect of the financial year 2008-09 onwards the amended provision of section 2(15) of the Income-tax Act, 1961 would clearly be applicable to the association. The activities carried out by the cricket association involving providing of services, facilities and amenities to the general public for a fee or service charges at the time of conducting various cricket matches at different places of the State, specially after the introduction of the Indian Premier League format, Indian cricket have been more commercialized comprising of cricketing activities with high dose of packaged entertainment for the public at substantial higher cost for the viewers. As such on factual grounds the activities of the association for financial year 2008-09 would not be considered as involving any activities of genuine charity. Hence, for such financial year 2008-09 onwards the association is not eligible for registration u/s 12A of the Income-tax Act, 1961. The net result of the application cl....
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....whole course of scholastic institution.‖ Therefore, the sense in which ‗education' is used in section 2(15) is different from what is referred to by the appellant. 9. The nineth ground of appeal is that the Ld. Commissioner of Income-tax has committed serious error by discussing the matter relating to Indian Premier League which neither existed during the period for which the application is made nor the appellant is any way related with the functioning of the Indian Premier League and for that matter the said observation is liable to be expunged as well as the order of the refusal to grant registration on such extraneous reasons is Liable to be quashed. It is submitted that, there is nothing wrong with the discussion of Indian Premier League by the CIT, Cuttack. All the Stadiums in different parts of India are used by IPL including Barabati Stadium at Cuttack, which is under the control of Cuttack Cricket Association, Orissa. 10. The tenth ground of appeal is that the Ld. Commissioner of Income-tax has committed serious error by coming to a conclusion that the amendment of section 2(15) of the Act may be deemed to be retrospective in its application and on the bas....
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....M/s. Incon Associates/payment to Srikanta Kumar Sahoo, caterer Rs. 48,08,911=00. As per the audit observations for the accounting year 2004-2005 it is seen that the Honorary Secretary had incurred expenditure beyond budgetary provisions and had deposited a sum of Rs. 10 lakhs with the National Credit Cooperative Society Limited, Cuttack which was irregular so far as the by-laws and rules a regulations of the association is concerned. The auditor had also observed that the Honorary Secretary had incurred Rs. 11,31,850=00 as nor-recurring expenditure without obtaining prior approval of the council. Similarly although several dues were shown outstanding for the financial year 2004-2005 as under : Sl. No. Name Amount shown outstanding as on 31.03.2005 (Rs.) 1 Sarojin Sahoo Caterer 22,69,967 2 Sabitarani Sahoo Caterer 6,78,060 3 Srikanta Sahoo Caterer 3,48,543 4 Hotel Mahavir Serator 26,617 5 Barabati Guest House 1,17,800 6 Suppliers 1,55,966 7 Spring Board International 7,59,955 8 Soils and Grains 3,68,000 9 Coaching grant payable to district associations 3,10,000 Such dues for different....
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....nable and had not been supported by the proper bills and vouchers. The entire financial transactions had been managed and controlled by the Honorary Secretary for his apparent personal gain through commission payment from persons who had raised bogus inflated bills for various expenses. Such findings would indicate that in reality the financial transactions of the association were so managed that substantial financial gain accrued to the Honorary Secretary and his family members/relatives. As such in accordance with the provision of section 13(1)(c)(ii) the exemption contemplated in section 11 would not be applicable in respect of receipts and expenses of the association for these financial years under law. Hence, as could be seen from the above the Commissioner of Income-tax, Cuttack has committed no error both in law as well as in facts by applying the provision of section 13(1) (c) (ii) of the Act for refusing to grant the registration u/s 12AA of the Act to the applicant. 12. The twelfth ground is that the Ld. Commissioner of Income-tax has committed serious error both in law and in facts by coming to an irrelevant conclusion that the current activity of the appellant is pr....
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....s risk, planning, decision making are involved and the entire cricket activities in the field in the premises of cricket association have become more of a composite presentation of glamour, fashion, music, celebrities, catwalks and all kind of modern entertainment options involving huge financial transactions. It would be accordingly a misnomer to still consider the activities of the cricket association to be involving any charity at all. Hence, the Commissioner of Income-tax, Cuttack has not committed any error both in law and in facts by coming to the conclusion that the current activity of the appellant is promotion of entertainment and not charitable. 13. The thirteenth ground is that the Ld. Commissioner of Income-tax has committed serious error by considering the sports activity especially cricket activity of the appellant as a business risk for the purpose of commercial game and for that matter the refusal on the basis of such observation is liable to be quashed and/or annulled. It is submitted that, the CIT, Cuttack has rightly understood the sports activities of the appellant. It is not out of place to quote the observation of the Hon'ble ITAT in the case of Tamilnad....
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....97 and for that matter the order passed by the Ld. Assessing Officer is liable to be quashed and/or annulled. It is submitted that, the CIT, Cuttack in his order u/s 12AA dated 22.03.2010 clearly stated in first Para as under: ―Para-01: Orissa Cricket Association stated to be an Association registered under the Society Registration Act, 1860 claims to have been allowed exemption u/s 10 of the Income-Tax Act, 1961 up to the Assessment Year 1993-94 for the period starting from the Assessment Year 1994-95 till the Assessment year 2003-04 the Orissa Cricket Association has neither been allowed any exemption u/s 10 of the Income Tax Act, 1961 nor any registration has been granted in accordance with the provision of section 12AA of the Income Tax Act, 1961. For the first time the Orissa Cricket Association apparently had filed an application for registration u/s 12AA of the Income Tax Act, 1961 claiming the status of a charitable institution with the Commissioner of Income Tax, Cuttack Charge, Cuttack on 31.03.2003. A subsequent petition was filed on 25.03.2008 before the Commissioner of Income Tax, Cuttack charge, Cuttack claiming inter alia that the assessee's petition u/s 10....
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....ee's case registration has not been granted. Similarly, Hon'ble ITAT Panaji Bench in the case of Entertainment Society of Goa Vs. CIT in ITA No. 90/PNJ/2012 dated 05.04.2013 reported in (2013) 23 ITR (Trib) 635(Panaji), also upheld cancellation of registration by the CIT u/s 12AA(3) . The Hon'ble Bench at Para-20 held as under: ―The case of the assessee is different. The CIT issued notice to the assessee as the definition of ―charitable purpose‖ undergoes a change by the Finance Act, 2008. We have already held that it is a case where the eligibility of the assessee to get the registration undergoes a change due to the fact that the assessee no more remains being established for charitable purpose after the amendment being made in the definition of charitable purpose given u/s 2(15) of the Income-tax Act. The assessee when applied for registration was very much a charitable institution as per the definition of the charitable purpose given u/s 2(15) at that time, therefore entitled for the registration u/s 12A. Once, in our opinion, the assessee no more remains being established for charitable purpose after the insertion of proviso in section 2(15), the eligibilit....
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....r the certificate issued by the Registrar of Societies, Mr. B. Sivaraman, copy of which is placed at pg. 1 of the paper book with the following aims and objects : ―3. The Objects of the Association are a. Diffusion of useful knowledge of sports of all kinds, particularly, the game of Cricket. b. Fostering and development of knowledge of Sports and Health. c. Establishment of libraries and reading rooms/gymnasium where one can read books, journals and papers on sports and health. d. To control the game of cricket in and throughout the State of Orissa. e. To advance and safeguard the interest of game of Cricket in accordance with the Law and Regulations of the M.C.C. f. To hold and maintain the laws of Cricket and Rules and Regulations of the Board of Control for Cricket in India. g. To promote, encourage and improve the game of Cricket in the State of Orissa. h. To procure from the government of Orissa, the Orissa Council of Sports and other institutions and/or persons, facilities as may be necessary for the achievement of its objects. i. To arrange and regulate ‗Representative Matches' in Orissa and out side, by teams representing the Associati....
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.... work in time of flood, famine, epidemic or disaster of any kind or on any other occasion independently of or in collaboration with other individuals, societies or associations and organisations. i. Invest any part of such funds as shall not be required immediately for the same purpose and objects in such manner as may be considered advisable from time to time and to charge all or any of such investments to secure the repayment of any temporary advance of money made to the Association for such purposes and objects and also to make donations for any charitable cause. j. Acquire movable or immovable properties on behalf of the Association and sale, lease, exchange, dispose of or otherwise deal with all or any part of such properties. k. Organise a proper coaching scheme for the benefit of all cricketeers of the State of Orissa and to give training in the game of cricket and no improve physical education. l. Generally do all such things as may be lawful, incidental or conducive to the attainment of the foregoing objects or any of them. 5. The income and property of the Association shall be applied solely towards the promotion of its objects as setforth in this Memorandum o....
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.... A The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:- (a) the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the Commissioner before the 1st day of July, 1973, or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution is registered under section 12AA] : Provided that where an application for registration of the trust or institution is made after the expiry of the period aforesaid, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution, - (i) From the date of the creation of the trust or the establishment of the institution if the Commissioner is, for reasons to be recorded in writing, satisfied that the person in receipt of the income was prevented from making the application before the expiry of the period aforesaid for sufficient reasons; (ii) From the first day of the financial year in which the applicat....
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....nding before the Chief Commissioner on which no order has been passed under clause (b) of sub-section (1) before the 1st day of June, 1999, shall stand transferred on that day to the Commissioner and the Commissioner may proceed with such applications under that sub-section from the stage at which they were on that day.] (2) Every order granting or refusing registration under clause (b) of sub-section (1) shall be passed before the expiry of six months from the end of the month in which the application was received under clause (a) [or clause (aa) of sub-section (1)] of section 12A.] [(3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) [or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)]] and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution: Provided that no order under this sub-section....
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....out considering the provision Section 11 & 12 exceeds the maximum amount not chargeable to tax in any previous year. Such Trust or institution was bound to furnish such audit report in the prescribed form duly signed and verified by such accountant. Explanation to section 288 (2) defines accountant to mean a Chartered Accountant and who is competent to act as an auditor u/s 226 (2) of the Company‟s Act. 5.3 The provisions of section 11 are applicable only to the persons deriving income from property held under Trust for charitable or religious purposes. They are not applicable if the person is not in receipt of the income derived from property held for charitable or religious purposes. Section 12 AA lays down the procedure for the registration of such Trust or institution. Rule 17A of the IT Act lays down how an application for registration of charitable or religious Trust is to be made. It also prescribes form No. 10A and also requires that the application for registration can be made only by a charitable or religious Trust or institution. This rule also prescribes the various documents which are to be enclosed along with the application. The copy of the instrument by....
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....t of general public utility." We have gone through the decision of the Hon'ble Madras High Court in the case of CIT vs. Soft Beverages P. Ltd., 272 ITR 270. We are of the view that this decision will not assist the DR because in this case, we noted, that the Eleventh Schedule to the Income Tax Act contains a list of articles and things for the manufacture or production of which machinery is installed which would not be eligible for grant of Investment Allowance. Item no. 5 in that Eleventh Schedule reads as under - ―Aerated waters in the manufacture of which blended flavouring concentrates in any form are used. The explanation was added therein by the Finance Act, 1987, which came into force from April 1, 1988. This explanation reads as under: ―Blended flavouring concentrates shall include, and shall be deemed always to have included, synthetic essences in any form. The amendment that was effected in the year 1988 for the purpose of introducing an explanation under entry No. 5, was introduced, as set out in the memorandum explaining the provisions of the Finance Bill 1987 in the following manner: ―It has been found that certain ....
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....on of the income from such activity. In the proposal it is clearly mentioned that the amendment will take effect from 1.4.2009 and will accordingly apply in relation to A.Y 2009-10 and subsequent assessment years. The memorandum explaining the provision in the Finance Bill, 2008 explains that the amendment has been proposed in the following manner : ―Section 2(15) of the Act defines "charitable purpose" to include relief of the poor, education, medical relief, and the advancement of any other object of general public utility. It has been noticed that a number of entities operating on commercial lines are claiming exemption on their income either under section 10(23C) or section 11 of the Act on the ground that they are charitable institutions. This is based on the argument that they are engaged in the "advancement of an object of general public utility" as is included in the fourth limb of the current definition of "charitable purpose". Such a claim, when made in respect of an activity carried out on commercial lines, is contrary to the intention of the provision. With a view to limiting the scope of the phrase "advancement of any other object of general public u....
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....is applicable, in our opinion, w.e.f. 1.4.2009 and not prior to that. In fact, this proviso puts an embargo on the institution that in case the institution falls within the proviso, it will no longer be regarded to have been engaged for charitable purpose even if it is engaged in the advancement of any other object of general public utility. The embargo states that if the institution is engaged in carrying on of any activity in the nature of trade, commerce or business or any activity or rendering any service in relation to any trade, commerce or business for cess or fee or any other consideration, the institution shall not be regarded to have been involved in carrying on charitable purpose. This proviso in the last sentence further states that nature of use or application or retention of the income by the institution from such activity will not be a relevant consideration. In view of this specific provision, we are not concerned to look into how an institution has used, applied or retained its income, if the income has been received by the institution from any activity carried out in the nature of trade, commerce or business or from any activity of renderin....
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....3 when the words „not involving any activity for profit‟ were there under Section 2(15) after the words „advancement of any other objects of general public utility‟. In this decision, the Hon‟ble Supreme Court approving the finding of Justice Beg in the case of Sole Trustee, Loka Sikhshana Trust‟s case [1975] 101 ITR 234, 256 (SC) held as under : ―The test which has, therefore, now to be applied is whether the predominant object of the activity involved in carrying out the object of general public utility is to subserve the charitable purpose or to earn profit. Where profit making is the predominant object of the activity, the purpose, though an object of general public utility would cease to be a charitable purpose. But where the predominant object of the activity is to carry out the charitable purpose and not to earn profit, it would not lose its character of a charitable purpose merely because some profit arises from the activity. The exclusionary clause does not require that the activity must be carried on in such a manner that it does not result in any profit. It would indeed be difficult for persons in charge of a trust or ins....
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.... on by ordinary people for gain? Is there a built-in prescription in the Constitution against making a profit? Has there been, in practice, profit from this venture? Although the last is a weak test, the mere fact that a service is rendered is no answer to chargeability because all income is often derived by rendering some service or other. ―A pragmatic condition, written or unwritten, proved by a prescription of profits or by long years of invariable practice or spelt from strong surrounding circumstances indicative of anti-profit motivation-such a condition will qualify for ―charitable purpose‖ and legitimately get round the fiscal hook. Short of it, the tax tackle holds you fast. A word about the burden of proof is necessary here. Income, ordinarily chargeable, can be free from exigibility only if the assessee discharges the onus of bringing himself within Section 2 (15). In so doing, he has to attract and repel-attract the condition that his objects are of ―general public utility‖ and repel the charge that he is advancing these objects by involvement in activities for profit. Once this broad dual basis is made out, the revenue will not go i....
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....s such a limitation was introduced, the fourth and last category would become too wide to prevent its abuse. This decision does not define the words „carrying on of any activity in the nature of trade, commerce or business or any activity or rendering any services in relation to any trade, commerce or business‟. 5.8 The words "not involving carrying on of any activity for profit" appearing at the end were omitted by the Finance Act, 1983 w.e.f. 1.4.1984. The scope of amendment has been explained by the CBDT Circular no. 372 dt. 8.12.1983, 146 ITR (St.) 9B as under : ―Under section 2(15) of the Income-tax Act, ‗charitable purpose' includes relief of the poor, education, medical relief and the advancement of any other object of general public utility not involving the carrying on of any activity for profit. Section 3(a) of the Finance Act has omitted the words ‗not involving the carrying on of any activity for profit' from the definition. This amendment is consequential to the amendment made in section 11 of the Income-tax Act by section 6(b) of the Finance Act, whereunder profits and gains of business in the case of charitable or re....
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....u/s 11 or whether there is default of Sec. 13 has to be looked into at the time of framing assessment. The CIT, for satisfying himself about the genuineness of the activities of the trust/institution can make such inquiry as he may deem fit and can also ask for the evidence as he desires. In view of this, we do not agree with the plea of the ld. AR that the CIT has exceeded his jurisdiction by examining the accounts of the Assessee for F.Ys 2002-03 to 2008-09. The genuineness of the activities of the trust/institution has to be ascertained on the basis of the evidence placed by the Assessee. The Assessee, in our opinion, is duty bound to comply with and submit the necessary documents and papers as are required. No doubt, applicability of the provisions of Sec. 13(1)(c) cannot be looked into at the time of registration but CIT is bound to look into whether the objects of the trust/institution are charitable/religious or not. We do not find any irregularity or infirmity so far as jurisdiction of CIT is concerned in ascertaining the purpose of the object for which the institution has been established. We have also examined the submission of th....