TaxTMI 
TaxTMI 
2017 (11) TMI 1663
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....e made with effect from 01/04/2008. Further, AO observed that since by this amendment, the original character of the Trust undergone a distinct change, the trust required fresh registration u/s 12AA, but, assessee did not apply for fresh registration u/s 12AA. According to the AO, the assessee does not have registration for the PY 2011-12 relevant to AY 2012-13 and, therefore, it is not entitled for the benefit of section 11. 2.2 The AO noted that the assessee is maintaining a function hall which was let out on rent for various activities including marriage function , cultural functions etc., and received Rs. 47,45,479/- from the function hall. The AO opined that the nature of activity of letting of the function hall on rent is in the nature of trade, commerce or business within the meaning of the proviso to section 2(15) of the Act and as the receipt from this activity exceeds Rs. 10 lakhs the assessee's activities cannot be termed as charitable activities as per the provisions of section 2(15). Accordingly, he held that the assessee is not entitled for the benefit of section 11 of the Act. 2.3 Further, the AO observed that as the assessee lost the benefit of section 11, the....
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....he rival submissions and perused the material facts on record. We find that similar issue came up for consideration before the Tribunal in assessee's own cases for earlier years. In AY 2011- 12, the Tribunal vide ITA No. 913/Hyd/2015, order dated 04/11/2015 has held as under: "5. Having heard both the parties and having considered the rival contentions in the light of the material on record, we find that the claim of the assessee for exemption under S.11 of the Act has been denied on the ground that the activity of the assessee in running the function hall and deriving rental income is of a commercial nature in terms of proviso to S.2(15) of the Act, and also that constructing and maintaining a temple is not amongst the aims and objects of the society and is not a charitable activity. As can be seen from the facts of the case narrated above, impugned order of the learned CIT(A) in Kalinga Cultural Trust, Hyderabad accepting the claim of the assessee for exemption is based on the consistent view taken by the learned CIT(A) in assessee's own case for earlier years. It has been brought to our notice that the issue relating to assessee's claim for exemption under S.11,....
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....charitable activity. As far as the second reason for denying exemption u/s 11 is concerned, it is the allegation of AO that as assessee was involved in commercial activity by generating income by letting out function hall, selling souvenir, etc, it is not eligible for exemption in view of the proviso to section 2(15) of the Act, we are of the view that the same requires deeper analysis. However, before deciding the issue, it is necessary to observe that there cannot be any dispute to the fact that assessee's objects are charitable in nature, as ld. DIT(E) has granted registration to assessee u/s 12A of the Act since the year 1995 and which is continue till date. 8.1. Further, there is nothing on record to suggest that in the intervening period there is any substantial change in the aims and objects of assessee. Therefore, keeping in view the aforesaid facts, it has to be decided whether the introduction of first proviso to section 2(15) by the Finance Act, 2008 w.e.f. 01/04/09 would automatically disentitle the assessee from being considered as having been established for charitable purpose and thereby depriving it from claiming exemption u/s 11 of the Act. A ....
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....Court observed that merely because assessee derives rental income, income out of sale of tickets and sale of publications and income out of leasing out food and beverages outlets in the exhibition grounds does not, in any way, affect the nature of trust as a charitable institution, if, it otherwise qualifies for such a character. It was further observed by the Hon'ble High Court that if a meaning is given to the expression 'charitable purpose' so as to suggest that in case of an institution having an object of advancement of general public utility if derives income it would be falling within the exception carved out in the first proviso to section 2(15) of the Act, then, there would be no institution whatsoever which would qualify for exemption and the exemption provision would be rendered redundant. The Hon'ble Delhi high Court referred to its own decision in case of Institute of Chartered Accountants of India and another Vs. Director General of Income-tax (E), 358 ITR 91 wherein while interpreting expressions 'trade, commerce and business', as find place in the first proviso to section 2(15), the court held that merely because fees or some other considerat....
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....mmerce or business, then it would not be entitled to claim its object to be a "charitable purpose". On the flip side, where an institution is not driven primarily by a desire or motive to earn profits but to do charity through the advancement of an object of general public utility, it cannot but be regarded as an institution established for charitable purposes." 8.2 If we apply the aforesaid principles to the facts of the present case, it is to be seen that as held by the coordinate bench in assessee's own case in the preceding AYs, assessee is pursuing charitable activity in accordance with its aims and objects while constructing the Jagannadha Temple. In fact, the AO himself in assessment order has admitted that income/fund of assessee is utilized in construction of the temple. Further, the coordinate bench in the said order held, by letting out function hall assessee is not involved in commercial activity so as to disentitle it from claiming exemption u/s 11. Therefore, considered in the aforesaid perspective, there being no dispute to the fact that dominant object of assessee is charitable in nature, proviso to section 2(15) cannot be applied to deny exemp....