TaxTMI 
TaxTMI 
2024 (7) TMI 1646
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....mercial activities due to the higher interest rate charged compared to its borrowing rates thereby disallowing / withdrawing the claim of exemption u/s. 11 of the Act. For this, assessee has raised various grounds numbering 1 to 18, which are argumentative, factual and case law citations and hence, need not be reproduced. 3. Brief facts are that the assessee filed return of income for the relevant assessment year 2013-14 claiming exemption u/s. 11 of the Act at Rs. 76,36,477/- declaring 'nil' total income. Assessment was completed u/s. 143(3) of the Act after examining the aims and objects of the assessee and also examining the claim of assessee with regard to charitable activities, held that the assessee is carrying on micro-finance business in a commercial manner so as to earn profit and there is no iota of charity carried out by the assessee so as to continue enjoying exemption u/s. 11 of the Act. Therefore, the AO vide para 9 to 11 denied exemption u/s. 11 of the Act as under:- "9. The assessee is providing loans by association with various commercial banks by raising loans from them. Such kind of micro finance activity cannot be termed as charitable activity rather....
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....y of Section 2(15) of the Act, CBDT's Circular No.11 of 2008, dated 19.12.2008 as also the Memorandum regarding Delegated Legislation - Rationalisation and Simplication Measures and a reference of extract from the Speech of the Minister of Finance on 29.02.2008 and reply of the Hon'ble Finance Minister to the Debate in the Lok Sabha on the Finance Bill, 2008, Circular issued by RBI for Section 25 companies engaged in Micro Finance Activities and also applicability of Sec. 13(8) of the Act. However, it is found from the perusal of the submission of the appellant that the appellant has failed to provide any specific counter comments on the main observation of the AO that it charged higher interest than the market rates which cannot be considered as an activity carried on by the assessee as charitable and for the benefit of the public. In the absence of any reasonable, cogent and valid arguments/contentions advanced by the appellant, I am unable to accept the grounds of appeal raised by the appellant and have no other option but to concur with the findings of the Assessing officer that the appellant has carried on its micro finance activity in a commercial line and it is not a cha....
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....unsel for the assessee filed copy of Memorandum of Association and argued that the assessee before AO as well as before CIT(A) has brought out how the assessee is doing charity. The ld.counsel pointed out the following charities carried out: i. Provides self-employment opportunities for women by providing them access to credit; ii. Reduces migration and poverty by providing them employment opportunities; iii. Provides capital for small entrepreneurs; iv. improves the well being of children as the families have income generation; v. Provides100% of its loan ONLY for Income generation activities; vi. Targets the scheduled castes, Schedule tribes, landless small and marginal farmers; vii. Offers dignity of life by freeing people from the clutches of moneylenders. viii. Does not charge any processing fees, Documentation charges and does not collect any collateral from the poor and provides loan at the door step of the borrower. ix. Does not offer multiple loans to the poor who borrow from us and helps prevents over indebtedness. x. Does not compound the interest or charge overdue interest or penal....
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....All these activities are carried on by assessee for the members of Self Help Group (SHG) was through self help group for people who approach for financial assistances. On analysis of the balance sheet and accounts of the assessee for the year under consideration, it is found that the corpus fund for the year under consideration carry forwarded is Rs. 50,000/- at page 37 in the balance sheet. General fund that has been carried forwarded from the preceding assessment year is approximately Rs. 23.02 crores and the current year balance after adding the excess income over expenditure amounting to Rs. 5.74 crores approximately totals to Rs. 28.76 crores approximately. The assessee has been accumulating the income year by year by providing financial assistance to the beneficiaries of the self help group. Further from the balance sheet it is noted that assessee has obtained loans and advances from SDCC bank amounting to Rs. 15.51 crores approximately and the loans advanced to SHG is Rs. 38.60 crores approximately. This itself reveals that the entire money is sourced from corpus fund, general fund and loans and advances received by assessee during the year. 35. Coming to the object....
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....the general public utility. It was also held if the primary or dominant purpose of an institution is charitable, another object which by it may not be charitable but which is merely ancillary or incidental to the dominant purpose would not prevent the institution from being a charitable institution. It was further held that if the purpose of an institution is the advancement of an object of general public utility, it is that object and not its accomplishment which must not involve the carrying on of any activity for profit. So long as the dominant purpose of the institution does not involve the carrying on of any activity for profit, it is immaterial how the money for achieving that purpose is found, whether by carrying on an activity for profit or not. The Hon'ble Supreme Court has emphatically clarified that the primary activity cannot be run for profit, once the primary activity is not run with profit motive the organization can have other activities which may generate profit. There is a fundamental difference between running the primary activity for profit and having incidental profitmaking activities. 38. To sum up, in our opinion, it is undisputed that the assess....
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.... expenditure. The facts and circumstances show that the assessee is carrying out its charitable activities and the surplus funds are used for charitable purposes. 39. Therefore the argument advanced by the Ld. DR that micro financing activity is merely a money lending activity without any charitable object cannot be accepted. There is nothing on record brought by the Ld. DR or the authorities below that the objects of the assessee is not towards advancement of any other object of general public utility. As considered hereinabove, the various activities carried on by assessee by providing finances to the members of self help group reveals that it is working towards the alleviation of economically backward section more importantly the rural women folk who do not have any security to offer for availing loan. These women folk belong to low income households and the finances provided to such groups help them to provide education to their children, improve the household condition etc. In our considered opinion, the activity being charitable in nature towards general public utility cannot be equated with a money lending activity carried out in a corporate world. Therefore the dec....
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....eld that the assessee is engaged in charitable activities and allowed exemption u/s. 11 of the Act. 7.1 We noted that the there is a categorical finding by the AO and CIT(A) that the assessee is providing loans by associating with various commercial banks and by raising loans from them. The assessee is obtaining loan from various commercial banks at the rate of 12% to 14% and advancing loan to its customer or the so called power beneficiaries at 25.13% which is exorbitant rate. The AO noted that the rate charged by assessee from its poor customers or board beneficiaries, allegedly at 25.13% cannot be compared with m market rate and once it cannot be compared with market rate which is almost 12 to 14% or 15%, assessee's activity cannot be called charitable or for the benefit of poor. We noted that exactly identical issue was considered by Co-ordinate Bench of ITAT, Bangalore in the case of Sanghamitra Rural Financial Services, supra, wherein considering various case laws exactly on identical facts denied exemption u/s. 11 of the Act by observing in para 6.7 to 6.28 as under:- 6.7 In the present case, from the details given in the assessment order, it is seen that the ass....
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....ns that even there is a gap of 6 to 8% between borrowing and lending the amount to the public. 6.10 According to the Ld. AR, it was recommended by the various committees to charge interest from the public at 24% per annum since there was administrative expenditure incurred by the micro finance institutions. Even going by the Malegam Committee Report of the RBI, the interest charged by the assessee is 18% to 20% which is very high. Hence, the activity carried on by the assessee cannot be considered as charitable so as to grant exemption u/s. 11 of the Act. 6.11 The Ld. AR relied on various judgments of Tribunals and Supreme Court. The Ld AR relied on the decision of the ITAT, Visakhapatnam in the case of Spandana (Rural & Urban Development Organisation) vs. ACIT in ITA No. 364/Vizag/2009 dated 17/02/2019 which is related to grant of approval u/s. 12AA of the Act. In this order, the Tribunal considered the micro finance activities as charitable activities as the assessee was charging interest at 15% per annum. In the order of the ITAT, Delhi Benches in the case of Disha India Micro Credit vs. CIT in ITA No. 1374/Del/2010 dated 28/01/2011, the issue was related to ap....
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....f interest to run its activities. The assessee is running seminar in rural area to make the poor ladies aware of the scheme and to encourage their participation. All these things need some expenditure. Initially, the assessee was in loss and it is only in the year under consideration some surplus is with the assessee trust. The facts and circumstances show that the assessee is carrying out its charitable activities and the surplus funds are used for charitable purposes. So, the CIT (A) was justified in holding that the assessee is engaged in charitable activities and qualify for exemption under section 11." (B) Further, the ld. A.R. relied on the decision of the Delhi Bench of the Tribunal in the case of Disha India Micro Credit v. CIT 120111 Tax Pub (DT) 873 (Del- Trib)/38(II) ITCL 301, where the assessee was a micro finance company registered under section 25 of the Companies Act, 1956. It had applied for registration under section 12A in Form No. 10A. The assessee's application for registration under section 12A was rejected by the CIT. The CIT had observed that the various clauses of the Memorandum of the company would clearly show that the assessee had a motive of....
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.... to derive a trading or commercial activity therein. We find merit in the contention of the learned Counsel for the assessee that having received various grants for the charitable purposes from the Government and semi Government concerns, the interest received is not beyond the permissible market rates in order to render surplus to the assessee to hold a view that the assessee is conducting the business of earning Interest." It was again noted that the Hon'ble ITAT, Cuttack Bench, Cuttack again has been consistent with the various other rulings, in both the above cases the facts and circumstances did not reflect surpluses made from MFI activity to justify profit intent. The observation, "the interest received is not beyond the permissible market rates in order to render surplus to the assessee to hold a view that the assessee is conducting the business of earning interest" The Judgment of the Hon'ble ITAT, Cuttack in these two cases makes it clear that two conditions should be complied with; firstly, the rate should be comparable with the market and secondly, it should not be such that it generates profit at the cost of the beneficiaries. "'] The appellant has cited the Sup....
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....inding that assessee has charged exorbitant rate of interest and the resource has been used to help the weaker sex, poor socially and weaker sections of society and the activities of those assessee companies are in consonance with the objects. However, in the present case, the activity carried on by the assessee is of microfinance activity with the predominant intention of making profit and no activity other than microfinance activity was conducted by the assessee in the nature of charity. Therefore, the facts of that case is not similar to the facts of the present case before us. (E) Hon'ble Supreme Court in the case of Surat Art Silk Cloth Mfrs. Association cited (supra) has held that main test to find out whether an institution is run for charitable purpose is to find out what is the dominant or primary purpose of the assessee. It was observed by Hon'ble Supreme Court that it is necessary to analyse whether the purpose was to promote commerce and trade in Art Silk etc. or the advancement of the object of the general public utility. It was also held if the primary or dominant purpose of an institution is charitable, another object which by it may not be charitable but wh....
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....m of exemption u/s 11 of the Act. The first reason given is that the assessee is charging exorbitant interest rates on the loan given to the women. The AO has observed that the assessee has availed loans from banks, financial institutions etc at interest rate ranging from 9.5% to 11.50% and it has charged interest on the loans given by it @ 14%. The AO has also observed that the assessee has charged Rs. 200/- - Rs. 300/- over and above the interest rate of 14%. Accordingly he has held that the effective rate of interest would work out to 17% to 18%. As contended by Ld A.R, the AO has not given the basis for observing that the effective rate of interest would work out to 17% to 18%. Hence, we are of the view that it is merely a surmise entertained by the AO. The question is whether the rate of interest of 14% charged by the assessee is an exorbitant rate?. The Ld A.R submitted that the assessee is constrained to charge interest at a higher rate than the cost of borrowing, so that it can absorb administrative and allied expenses and also possible defaults by the borrowers, which is an inherent risk in the financing activities. The Ld A.R submitted that the assessee has charged intere....
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....ted that the activities carried on by the assessee would fall under the category of "relief to poor" and hence the proviso to sec,2(15) would not be applicable. In view of the above, this reasoning would also fail." As seen from the above judgement, ld. AO has not given basis for observing that the rate of interest would work out to 17 to 18% and it was only surmise. It was also noted by the Tribunal that assessee has been utilizing income derived from property held under the trust for its charitable activities, as such exemption u/s 11 of the Act cannot be denied. It was also noted by the Tribunal that profit motive was absent and the activities of that assessee cannot be considered as involving trade, commerce or business. But in the case of present assessee, the ld. AO clearly brought on assessee is charging interest at 18 to 20% after borrowing the same @ 10 to 11.75% and made huge profit from year to year, after analyzing the facts of the assessee's case and his finding is not surmice or conjecture. (H) The ld. A.R. placed further reliance on the decision of the Visakhapatnam Tribunal in the case of SPANDANA (Rural and Urban Development Organisation) in ITA N....
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....ivity requires an organised sector for procuring a loan from the banks or other financial institutions for its disbursement/advancement of loan to poor or weaker sections of the society in which the assessee has to incur a lot of expenditure. Moreover, when a loan was given to the poor women, they do not have any surety or guarantee to stand and most of the times the loan could not be recovered from them and that aspect Is also to be taken into account by the assessee while granting a loan to the poor woman. Suppose a loan was given to some of the poor women and they would not be in a position to repay the loans what the assessee will do. He cannot enforce the recovery of the loan by other means and ultimately he has to write off the loan. Meaning hereby, in these types of micro finance activities most of the times the assessee could not recover the loans granted to the poor women as no one stood as the guarantor for them at the time of advancement of the loan. No doubt assessee is that charging higher rate of interest from the poor women or the downtrodden or socio-economically weaker section of the society. The reason behind is that most of the time the assessee could not recover....
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....work of the trust is not charitable and the interest charged by the assessee is exorbitant. The ld. AO placed nothing on record to show that the assessee is charging exorbitant interest. Further, the assessee was also running a seminar in rural area to make the poor ladies aware of the scheme and to encourage their participation. It was noted that in the above case the assessee was sustaining losses in all the previous years and therefore the, Hon'ble ITAT rightly upheld the charitable character of the assessee as there was no reason to believe that the assessee was benefiting at the cost of the beneficiaries and there was profit intent. Again, the fact and circumstances of this case do not provide any credible support to the claim of the assessee regarding the charitable character of activities due to its high profit margin maintained consistently for several years. 6.12 Further, specifically in the case of Navodaya Grama Vikas Charitable Trust cited (supra) relied by the assessee counsel, there was a specific finding by the Tribunal that funds are utilized to the benefit of the poor and also carrying out various charitable activities and assessee was running various ....
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....e rate of interest offered by the assessee. The assessee can carry out its activity only after charging marginal higher rate of interest to run its activities. This perse cannot be the basis to come to the conclusion that the assessee is in money lending acitivty. The assessee is running various activities like Animator activities, Donations, Health Insurance premiums, Santhwana, Training, Uniform, SHG Formation, Sahayadhana, Insurance Premium & Scholarship for students in rural area to make the poor ladies aware of the scheme and to encourage their participation as the principle objects of the trust. All these things need some expenditure. The facts and circumstances show that the assessee is carrying out its charitable activities and the surplus funds are used for charitable purposes." 6.13 However, in the present case, surplus funds are not at all used for charitable purpose and used for carrying out further microfinance activities as such ratio of that order cannot be applied. 6.14 Further, the High Court of Bombay ruling in the case of Commissioner of Income-tax v. Agricultural Produce and Market Committee [2007] TAXMAN 359 (BOM.). In this ruling, it was held....
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....vity of the assessee was not business, then any incidental or ancillary activity would also not fall within the definition of business." 6.16 The above ruling again re-affirms the law that a charitable organization cannot be allowed to run its primary activity on commercial principles with profit intent. The incidental activity may generate income and feed the primary activity but if the primary activity is with profit intent then there will be no primary purpose left for the organization. The primary activity may have profit but cannot have profit intent to benefit out of the beneficiaries. 6.17 In the case of ITO (Exemption), Madurai Vrs. Kalanjiam Development Financial Services reported in [2015] 64 taxmann.com 255, the assessee is a micro finance company registered u/s. 25 of Company Act and also u/s. l2AA of IT. Act, 1961 operating as a financial Intermediary between the banks and SHGs. The main objective of the company Is to bridge the gap in microfinance to SHGs. The A.O. observed that the assesses company took credit facilities from different banks at interest rate up to 11% and charged interest from SHGs at much higher rate so much so that net profit out ....
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....of micro finance business and will not take it outside the purview of charity and hence, that the "proviso" added to sec 2(15) of the Act, is not at attracted to the case in hand. He also submitted that the statute, as it stood earlier, had clarified the charitable purpose mentioned in sec.2(15) of the Act, had clarified the charitable purpose mentioned in s. 2(15) by the words "not involving the carrying on of any activity for profit". By virtue of the existence of these clarifying words, if there was any element of profit it was enough liable to be reckoned as charitable purpose right from the inception of the Act in 1961 till 1st April, 1984, when the words "not involving the carrying on of any activity for profit" were deleted. Thus the contention is that after 1st April, 1984, there is no allergy to profit and if the profit feeds charity, it stands cleared for exemption under s. 11 of the Act. 8.2 To analyse the scope and object of the amendment, we have gone through the "Budget Speech" of the Minister for Finance in the Finance Bill 2008, reported in (298 ITR (St.) 33 at page 65 "180 'Charitable purpose' includes relief of the poor, education, medica....
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....of that activities carried on by the assessee, cannot be oust the involvement of "trade, commerce or business" or "any service in connection with trade, commerce or business" as contemplated under the statute. Further, we note that there is substantial variation in the statutory position as it existed earlier to 1st April, 2009, where the assessee has been given exemption under section 11 of the Act and the position available after amendment to section 2(15) of the Act, brought into effect from 1st April, 2009. Yet another important aspect to be noted in this context is that, after the amendment by incorporating proviso to section 2(15), the 4th limb as to the advancement of "any other object of general public utility" will no longer remain as charitable purpose, if it involves carrying on of: (a) any activity in the nature of trade, commerce or business, (b) any activity of rendering any service in relation to any trade, commerce or business for a cess or a fee or any other consideration, irrespective of the nature of use or application or retention of the income from such activity. 8.5 The first limb of exclusion from charitable purpose under cl. (a) wi....
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....public utility' shall not be a charitable purpose, if it involves carrying on 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 consideration, irrespective of the application of the money. Therefore, the case of the assessee is hit by proviso to section 2(15) and the assessee is not entitled for the benefit of section 11 for that part of income generated in the hands of the assessee Running its micro finance business. Alternatively, one has to look into section 11(4A).. Sub-section (4A) provides that exemption shall not apply in relation to any income of a trust or an institution, being profits and gains of business, unless the business is incidental to the attainment of the objectives of the assessee and separate books of account are maintained by such trust or institution in respect of such business. In the present case, there is no dispute on the fact that the assessee is carrying on the business of micro finance. The assessee is maintaining separate accounts for the above business activities. But, the crucial question is whether running of micro finance is a business inciden....
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....business by contracting weaker section of the public and it does not involve any charitable activity. Therefore, looking into the activities carried on by the assessee, we fully agree with the findings of the AO and this view of ours is squarely covered by the decision of the Tribunal in the case of Janalakshmi Social Services (supra). The assessee relied on various Judgments, which cannot be applied to the facts of the present case, as the assessee is carrying on micro finance business in a commercial manner so as to earn profit and there is no iota of charity carried on by the assessee so as to grant exemption under sec.11 of the Act. Accordingly, we are inclined to uphold the order of the AO and reverse the order of the CIT(A). 9. In the result, the appeal of the revenue is allowed." 6.18 Further, same view was taken by Cochin Bench of Tribunal in the case of Shalom Charitable Ministries of India Vs. ACIT in ITA Nos.79 & 80/coch/2017 & SP Nos.17 & 18/Coch/2017 dated 25.4.2018. 6.19 Further, in the case of Sreema Mahila Samity Vs. DCIT reported 167 ITD 420, wherein held as under: "Amendment came into force by the Finance Act 2008, wherein proviso was ad....
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....ould not interfere with the fundamental aspect permitting through the difference assessment years. In Tribunal opinion that prior to adding proviso to section 2(15), the entities which got registration u/s. 12AA engaged in commercial activity claimed exemption on the ground that such activities were for advancement of objects of general public utility in terms of 4th limb of definition to section 2(15) of the Act. Tribunal find that the said benefit was taken away by adding proviso to section 2(15) of the Act, wherein it explains that the advancement of any other object, general public utility shall not be charitable purpose. In Tribunal opinion that the AO and the CIT-A opined that the assessee conducted its activities on commercial line in the nature of trade, -commerce or business. Therefore, they rightly denied the exemption by following statutory provisions. Tribunal do not find any infirmity in the impugned order of the CIT-A. Tribunal find that the ratio laid down by the decisions as relied upon by the Id.AR are not applicable to the facts of this case. Tribunal uphold the same. This issue of the assessee is dismissed. (Para 23) Conclusion: Where assessee conducted ....
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.... reported in 88 ITR 192 (SC). As we noted earlier, the assessee is not at all carried on any charitable activities and carried the microfinance activities with the sole motive of earning profit. There is no question of following the ratio laid down by judgements, which are in favour of the assessee as the facts are not similar to the assessee's case. In our opinion, when the facts considered by the Courts are similar to assessee's case the ratio of that judgements could be applied to the assessee. However, in the present case, it is not the case. 6.23 It has been observed that the proviso to section 2(15) which restricts incidental business activities to Rs. 25 lakh per year, in Asst. Year 2011-12, gets attracted if the organisation is engaged in business activities or the charitable activities are masked commercial activities. The explanatory Circular No. 11/2008 [F.No.l34/34//2008-TPL on proviso to Section 2(15) has provided the clarification regarding its applicability. It provides that the entities which run commercial activities under the mask of charitable activities are also covered. However, it was seen that a number of entities who were engaged in commercial activ....
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....mercial activity carried on with the intention of making maximum profit. If we consider the plea of the assessee, then the exemption u/s 11 of the Act could also be claimed by the Co-operative Societies, Regional Rural Banks and Commercial banks also as the activity of these banks are similar to the assessee's case. 6.26 We have also taken into account of the 'Report of the Subcommittee of the Central Board of Directors of Reserve Bank of India' issued during the year January, 2011 produced before us by the Ld. A.R, which is reproduced herein below:- "2. The Micro finance sector 2.1. Microfinance is an economic development tool whose objective is to assist the poor to work their way out of poverty. It covers a range of services which include, in addition to the provision of credit, many other services such as savings, insurance, money transfers, counselling, etc. 2.2. For the purposes of this report, the Sub-Committee has confined itself to only one aspect of Microfinance, namely, the provision of credit to low income groups. 2.3 The provision of credit to the Microfinance sector is based on the following postulates: a) It addresses the ....
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.... different regulatory framework. Thrift and credit co-operatives are scattered across the country and there is no centralized information available about them." 6.27 If we examine the activities of the present assessee in the light of above report of Sub-committee of the Central Board of Directors of Reserve Bank of India, the assessee is only doing the microfinancing activities by charging exorbitant interest, which does not commensurate with the prevailing rate. It is also noted that the activity is not also in lieu of any benefit to low-income group who are very vulnerable and are not in a position to cope up with such financial burdens. In order to consider the activity to be charitable in nature, the services rendered must commensurate with the benefit that may arise to such low-income group. The facts of the case relied by the ld. A.R. is quite opposite to the facts of the present case, which has been brought out in the earlier paragraphs of this order. It is also noted that nothing has been spent by the assessee, which could be considered in the nature of charity and therefore, the benefit under the proviso to section 2(15) of the Act is not available to the assesse....
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....ideration is not envisioned under the Act. If one keeps this in mind, what Section 2(15) emphasizes is that so long as a GPU's charity's object involves activities which also generates profits (incidental, or in other words, while actually carrying out the objectives of GPU, if some profit is generated), it can be granted exemption provided the quantitative limit (of not exceeding 20%) under second proviso to Section 2(15) for receipts from such profits, is adhered to. 172. Yet another manner of looking at the definition together with Sections 10(23) and 11 is that for achieving a general public utility object, if the charity involves itself in activities, that entail charging amounts only at cost or marginal mark up over cost, and also derive some profit, the prohibition against carrying on business or service relating to business is not attracted - if the quantum of such profits do not exceed 20% of its overall receipts. ............... ............... ............... 253. In view of the foregoing discussion and analysis, the following conclusions are recorded regarding the interpretation of the changed definition of "charitable purpos....
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....on 2(15), has not been breached. Similarly, the insertion of Section 13(8), seventeenth proviso to Section 10(23C) and third proviso to Section 143(3) (all w.r.e.f. 01.04.2009), reaffirm this interpretation and bring uniformity across the statutory provisions. B. Authorities, corporations, or bodies established by statute B.1. The amounts or any money whatsoever charged by a statutory corporation, board or any other body set up by the state government or central governments, for achieving what are essentially 'public functions/services' (such as housing, industrial development, supply of water, sewage management, supply of food grain, development and town planning, etc.) may resemble trade, commercial, or business activities. However, since their objects are essential for advancement of public purposes/functions (and are accordingly restrained by way of statutory provisions), such receipts are prima facie to be excluded from the mischief of business or commercial receipts. This is in line with the larger bench judgments of this court in Ramtanu Cooperative Housing Society and NDMC (supra). B.2. However, at the same time, in every case, the assessing authorities wo....
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....er prices, those would constitute commercial or business receipts. In that event, the overall quantitative limit prescribed in the proviso to Section 2(15) (as amended from time to time) has to be complied with, if the regulatory body is to be considered as one with 'charitable purpose' eligible for exemption under the IT Act. C.2. Like statutory authorities which regulate professions, statutory bodies which certify products (such as seeds) based on standards for qualification, etc. will also be treated similarly. D. Trade promotion bodies Bodies involved in trade promotion (such as AEPC), or set up with the objects of purely advocating for, coordinating and assisting trading organisations, can be said to be involved in advancement of objects of general public utility. However, if such organisations provide additional services such as courses meant to skill personnel, providing private rental spaces in fairs or trade shows, consulting services, etc. then income or receipts from such activities, would be business or commercial in nature. In that event, the claim for tax exemption would have to be again subjected to the rigors of the proviso to Section 2(15) of the ....
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....ed to for the Trust's claim of being as a charity eligible for exemption, to succeed. Therefore, despite differing reasoning, this court has held that the impugned judgment of the High Court does not call for interference. H. Application of interpretation H. At the cost of repetition, it may be noted that the conclusions arrived at by way of this judgment, neither precludes any of the assessee's (whether statutory, or non-statutory) advancing objects of general public utility, from claiming exemption, nor the taxing authorities from denying exemption, in the future, if the receipts of the relevant year exceed the quantitative limit. The assessing authorities must on a yearly basis, scrutinize the record to discern whether the nature of the assessee's activities amount to "trade, commerce or business" based on its receipts and income (i.e., whether the amounts charged are on cost-basis, or significantly higher). If it is found that they are in the nature of "trade, commerce or business", then it must be examined whether the quantified limit (as amended from time to time) in proviso to Section 2(15), has been breached, thus disentitling them to exemption. 7.3 We ....