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TMI Blog2010 (8) TMI 357X X X X Extracts X X X X X X X X Extracts X X X X ..... and the objects incidentally or ancillary to the attaintment of the above mains objects. Referring to the three objects in the main object and 28 objects in sub-clause B, Ld. Commissioner of Income-tax held that there was nothing to deter the assessee company from applying of its funds from any of these 31 objects. Assessee explained that sub-clauses B-1 to B-28 are not objects of the applicant but are inserted just to enable the assessee company to deal with surplus fund and are powers rather than objects in the hands of the company. However, Ld. Commissioner of Income-tax did not accept these contentions. He held that when the memorandum of association itself specifies something as an object, the assessee cannot be permitted to deduce the status of an object to that of an enabling power rather than the literal meaning. Ld. Commissioner of Income-tax concluded as under :- "Since in the present case, the objectives are distributive and some are in the nature of 'General Public Utility', then no business activity in the nature of Trade, commerce or business etc. is charitable under the proviso to sub-section (15) of section 2 of the Income-tax Act as there is nothing to hinder the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said company whensoever derived, shall be applied solely for the promotion of the objects as set forth in its memorandum of association and that no portion thereof shall be paid or transferred, directly or indirectly by way of dividend, bonus or otherwise by way of profit, to persons who at any time are or have been members of the said company or to any of them or to any persons claiming through any one or more of them; (3) that no remuneration or other benefit in money or money's worth shall be given by the company to any of its members whether officers or servants of the company or not except payment of out of pocket expenses, reasonable and proper interest on money lent, or reasonable and proper rent on premises let to the company. (4) that no member shall be appointed to any office under the company which is remunerated by salary, fees or in any other manner not excepted by clause (3); (5) that nothing in this clause shall prevent the payment by the company in good faith of reasonable and proper remuneration to any of its officer or servants (not being members) or to nay other person (not being a member), in return for any services actually rendered to the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 12A/12AA in order to claim exemption under section 11 of the Act. Following conditions have to be specified (a) the assessee must be a person holding property under trust; and (b) such property must be held wholly for charitable or religious purposes; (c) income derived from such property must be applied for charitable purposes. 6.3 The expression 'charitable purpose' has been defined in section 2(15) of the Act, which reads as under :- "(15) "Charitable purpose" includes relief of the poor, education, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility...." [Emphasis supplied] 6.4 From the perusal of the above, it is clear that education per se is one of the charitable purpose has specifically defined in section 2(15) for the purpose of act. Under the present case, it is evident from the licence granted under section 25 of the Companies Act as well as perusal of the main objects of the company mentioned above that the company is perfectly constituted to advance charitable activity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplied] 6.5 From the above discussion, it is evident that sole objects of the assessee is education. This is also supported by the licence granted under section 25 of the Companies Act, which stipulates ample safe guards for assessee to not deviate from the charitable objective. The memorandum of association of the assessee clearly mandates that the entire income/funds/property of the assessee can only be utilized for the attainment of the said sole object. The object incidental and ancillary to the attainment of the main object are not object in itself but inserted to enable the assessee company to do activities which may be necessary for the attainment of main objects. Furthermore, there are specific restriction in the Memorandum of association prohibiting the distribution of any amount to the members and/or any other person by way of dividend or otherwise. There are also specific restrictions/prohibitions in the memorandum of association read with section 25 licence conditions for any direct/indirect benefit flowing the members and/or any other person. The decision of the Hon'ble Apex Court in the case of Yogi Raj Charity Trust v. CIT [1976] 103 ITR 777, relied upon by the CIT, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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