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2013 (6) TMI 253 - HC - Income TaxCharitable Activity - Section 2(15) - value specified in first and second proviso - Sale of blood - medical relief - recognition under section 80G(5) - held that - the activity carried on by the respondent-trust is a charitable purpose. Further, the second proviso to section 2(15) of the Act specifies that the aggregated value of the receipts from the activities referred to there is Rs. 25,00,000 or less in the previous assessment years then the first proviso is not applicable. The receipts are less than the amount specified in the second proviso to section 2(15) of the Act. Secondly, the receipts are less than the expenditure incurred during the relevant assessment year. From any angle, it cannot be said that the respondent-trust is not covered under section 2(15) of the Act. - Decided in favor of assessee. No notice was issued by the Commissioner to the respondent calling upon them to show cause with regard to the violation committed by them to cancel the exemption certificate granted under section 80G. In the absence of any such notice, the Commissioner committed an illegality in cancelling the exemption certificate granted in favour of the respondent. - it cannot be said that the activity of the respondent-trust is not charitable purpose and on the other hand it was commercial. - Decided in favor of assessee.
Issues involved:
1. Interpretation of section 2(15) of the Income-tax Act, 1961 regarding the classification of activities as charitable purposes. 2. Consideration of the Commissioner's authority to withdraw recognition under section 80G(5) based on an application for renewal. Issue 1: Interpretation of section 2(15) of the Income-tax Act, 1961 The case involved a registered trust engaged in charitable activities seeking renewal of exemption certificate under section 80G of the Income-tax Act. The Commissioner, while rejecting the renewal application, also withdrew the exemption granted to the trust under section 80G, stating that the activities did not fall under section 2(15) of the Act. The trust's activities included running a blood bank, providing medical help to the poor, and other charitable endeavors. The Tribunal noted that the trust's audited accounts showed that its receipts were below the threshold specified in the Act and that its expenses exceeded the receipts, indicating a lack of profit motive. Consequently, the Tribunal held that the trust's activities qualified as charitable purposes under section 2(15). The High Court upheld this decision, ruling in favor of the trust and against the Revenue. Issue 2: Commissioner's authority to withdraw recognition under section 80G(5) The Commissioner had canceled the trust's exemption certificate under section 80G based on the belief that the trust's activities were not charitable in nature. However, it was found that the Commissioner did not issue a notice to the trust regarding the alleged violation before canceling the exemption certificate. Additionally, the trust's audited accounts demonstrated that its receipts were below the specified threshold and its expenses exceeded the receipts, indicating a lack of profit-making intention. The Tribunal, considering these factors, set aside the Commissioner's decision. The High Court agreed with the Tribunal's reasoning, holding that the Commissioner's action was unlawful and that the trust's activities indeed qualified as charitable purposes under the Income-tax Act. Consequently, the second question of law was decided in favor of the trust and against the Revenue. In conclusion, the High Court's judgment clarified the interpretation of section 2(15) of the Income-tax Act, emphasizing that activities conducted for charitable purposes must meet specific criteria outlined in the Act. The Court also underscored the importance of procedural fairness in administrative decisions, highlighting the need for proper notice and consideration of relevant financial information.
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