TaxTMI 
TaxTMI 
2025 (5) TMI 1879
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....and had thereby allowed I.T.A.No.0097/2011-2012 of the Appellant vide order dated 02.12.2014. 4. The Assessing Officer had earlier passed an adverse Assessment Order dated 30.12.2011 for the Assessment Year 2009-2010 wherein the benefit of exemption under Section 11(4A) of the Income Tax Act, 1961 (hereinafter referred to as "IT Act") was denied to the Appellant which decision now stands affirmed by the Appellate Tribunal vide the impugned Order dated 07.08.2015. 5. At the time of admission on 30.09.2015, following substantial questions of law were framed for being answered in this appeal:- i. Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that microfinance would fall under "any other object of general public utility" and not "relief of the poor", even after giving a factual finding that the activities of the assessee take care of the poor? ii. Whether on the facts and circumstances of the case, the Tribunal was right in holding that since interest was not subsidies, microfinance would amount to a business transaction? and iii. Whether on the facts and circumstances of the case, the Tribunal wa....
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....ide Section 6 of the Finance (No.2) Act, 1991 (49 of 1991) with effect from 01.04.1992. Prior to the above amendment, sub-section (4A) to Section 11 of the IT Act read as under:- "(4A) Sub-section (1) or sub-section (2) or sub-section (3) or sub-section (3A) shall not apply in relation to any income, being profits and gains of business, unless- (a) The business is carried on by a trust wholly for public religious purposes and the business consists of printing and publication of books or publication of books or is of a kind notified by the Central Government in this behalf in the Official Gazette; or (b)The business is carried on by an institution wholly for charitable purposes and the work in connection with the business is mainly carried on by the beneficiaries of the institution, and separate books of account are maintained by the trust or institution in respect of such business." 14. We are not concerned with the sub-section (4A) to Section 11 of the IT Act as it stood prior to the amendment. The language in sub-section (4A) to Section 11of the IT Act as it read as above in Paragraph 12 makes it clear that it is an exception to the sub-sections (1),....
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....d in either case that it shall not be included in the total income of the person in receipt of such income. income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution, subject to the condition that such voluntary contributions are invested or deposited in one or more of the forms or modes specified in sub- section (5) maintained specifically for such corpus. 18. For the sake of clarity, sub-section (1) to Section 11 of the IT Act is reproduced below:- "11. Income from property held for charitable or religious purposes.- (1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income- (a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of fifteen per cent of the income fro....
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.... in computing the fifteen per cent of the income which may be accumulated or set apart, any such voluntary contributions as are referred to in section 12 shall be deemed to be part of the income; (2) if, in the previous year, the income applied to charitable or religious purposes in India falls short of eighty-five per cent of the income derived during that year from property held under trust, or, as the case may be, held under trust in part, by any amount- (i) for the reason that the whole or any part of the income has not been received during that year, or (ii) for any other reason, then- (a) in the case referred to in subclause (i), so much of the income applied to such purposes in India during the previous year in which the income is received or during the previous year immediately following as does not exceed the said amount, and (b) in the case referred to in subclause (ii), so much of the income applied to such purposes in India during the previous year immediately following the previous year in which the income was derived as does not exceed the said amount, may, at the option of the person in receipt of the income (such option to be exercised at least two mo....
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.... (b) does not apply such corpus for making contribution or donation to any person; (c) maintains such corpus as separately identifiable; and (d) invests or deposits such corpus in the forms and modes specified under sub-section (5) of section 11. Explanation 3B. -For the purposes of Explanation 3A, where any trust or institution has treated any sum received by it as forming part of the corpus, and subsequently any of the conditions specified in clause (a) or clause (b) or clause (c) or clause (d) of the said Explanation is violated, such sum shall be deemed to be the income of such trust or institution of the previous year during which the violation takes place. Explanation 4.- For the purposes of determining the amount of application under clause (a) or clause (b),- (i) application for charitable or religious purposes from the corpus as referred to in clause (d) of this sub-section, shall not be treated as application of income for charitable or religious purposes: (ii) application for charitable or religious purposes, from any loan or borrowing, shall not be treated as application of income for charitable or religious purposes: Explanation 5.- For the purp....
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....tion established wholly for such purposes is deemed to be income derived from property held under trust wholly for charitable or religious purposes for the purpose of Section 11 of the IT Act. 27. Therefore, to claim the benefit of sub-section (4A) to Section 11 or 12 of the IT Act, the endeavor of the Appellant should be show that the income from its lending business or income from contribution was "Income derived from property held under Trust" within the meaning of sub-section (4) to Section 11 of the IT Act. 28. For the aforesaid purpose, the provisions of that Sections and Section 13 shall apply accordingly. For clarity, Section 12 of the IT Act is reproduced below:- "Section 12.- Income of Trust or Institution from Contributions. (1)Any voluntary contributions received by a trust created wholly for charitable or religious purposes or by an institution established wholly for such purposes (not being contributions made with a specific direction that they shall form part of the corpus of the trust or institution) shall for the purposes of Section 11 be deemed to be income derived from property held under trust wholly for charitable or religious purposes a....
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.... the donations made to a "Charitable Institution". 31. To avail the benefit under Section 11 and Section 12 of the IT Act, the Appellant/Assessee shall comply with the requirements of Section 12A of the IT Act by following the procedure under Section 12AA of the IT Act. 32. To claim the benefit of exemption under Section 11 of the IT Act, an Assessee shall satisfy that income was: from property held by it as a "Charitable Trust"; or under Section 11(1)(a) to (c) of the IT Act from voluntary contributions made with a specific direction that they shall form part of the corpus of the Trust or Institution, subject to the condition that such "voluntary contributions" are invested or deposited in one more of the forms or modes specified in sub-section (5) of Section 12 of the IT Act maintained specifically for such corpus; or under Section 11(1)(d) of the IT Act from business of the Trust which was incidental to the attainment of the objectives of the Trust or Institution, provided separate books of account were maintained by such Trust or Institution in respect of such business; or under Section 11(4A) of the IT Act from voluntary contributions received by a T....
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....ertains to the income of the Appellant/Assessee between 01.04.2008 and 31.03.2009 which was assessable during the Assessment Year 2009-2010 between 01.04.2009 and 31.03.2010 as per the limitation prescribed under Section 153 of the IT Act as it prevailed then. 37. The definition of "Charitable Purpose" as in Section 2(15) of the IT Act is relevant for the grant of Certificate under Section 12A of the IT Act following the procedure under Section 12AA of the IT Act. During the period in dispute, the expression, "Charitable Purpose" was defined in Section 2(15) of the IT Act as follows:- "2(15). "charitable purpose" includes relief of the poor, education, medical relief and the advancement of any other object of general public utility." 38. However, by an amendment to the above definition vide clause (15) of Section 2 by the Finance Act, 2008 with effect from 01.04.2009, the above definition was altered to read as under:- "2(15). "charitable purpose" includes relief of the poor, education, medical relief and the advancement of any other object of general public utility. Provided that the advancement of any other object of general public utility shall n....
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.... IT Act is misplaced. The cardinal principle of law is that any amendment to any Act or provision is prospective unless it is made applicable retrospectively. 43. The above amendment which came into force with effect from 01.04.2009 vide clause (15) of Section 2 by the Finance Act, 2008 is relevant only for the income earned during the Previous Assessment Year 2009-2010 assessable during the Assessment Year 2010-2011. Therefore, reference to the above amendment vide Finance Act, 2008 with effect from 01.04.2009 is misplaced and is of no relevance to the facts of the case. 44. The question to be answered is whether the exceptions provided in sub-section (4A) to Section 11 of the IT Act is attracted or not?. As mentioned above, to claim exemption under sub-section (1) only if income is derived from the property held in Trust or income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the Trust or institution, subject to the condition that such voluntary contributions are invested or deposited in one or more of the forms or modes specified in sub-section (5) maintained specifically for such corpus or the business is ....