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TMI Blog2011 (6) TMI 333X X X X Extracts X X X X X X X X Extracts X X X X ..... s directed against the order of the DIT(E), Chennai, dated 29-1-2010, denying renewal of exemption under section 80G of the Income-tax Act, 1961. 2. The assessee-society has filed an application in Form No. 10G on 29-7-2009 for grant of renewal of exemption under section 80G of the Act. The DDIT(E)-IV, vide his report dated 21-1-2010 did not recommend for renewal of exemption because he found that the receipts of the assessee-society are in the nature of trade/commerce/business which were evidenced from the accounts statement submitted before him. In support of its case, the assessee-society filed a letter dated 28-1-2010 in the Office of the DIT(E), a copy of which was filed before us during hearing of the case. Before us, following grounds have been raised: "1. The order of rejection of the application seeking approval under section 80G of the Income-tax Act in respect of donations to be received by the appellant-Trust passed by the Director of Income-tax (Exemptions), Chennai is arbitrary and erroneous and have been based on wrong interpretation and classification of the activities of the Trust. 2. The Learned Director of Income-tax (Exemptions) has erred in refusing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. The appellant trust as its object providing education for which is running a school which is approved under section 10(23C)(vi) by the Chief Commissioner. 8. The Learned Director of Income-tax (Exemptions) has particularly failed to follow the pronouncement of the Board in the said circular in para 3.2 wherein it has been stated that each case would be decided on its own acts and no generalization is possible. 9. The Learned Director of Income-tax (Exemptions) has grossly erred in treating the activities of the Trust as in the nature of trade and not charitable because the appellant-trust had been running a school out of the funds collected from the activities in so many years which is approved under section 10(23C)(vi) of the Income-tax Act and he failed to appreciate that any charitable purpose cannot be carried out without finding some means of funds other than donations which cannot always be ensured and the appellant has to find some on regular income for carrying out the objects of the Trust. For these grounds and any other ground that may be adduced during the appeal proceedings, it is prayed that the impugned order rejecting the renewal of approval of donat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure; (v) the institution or fund is either constituted as a public charitable trust or is registered under the Societies Registration Act, 1860 (21 of 1860), or under any law corresponding to that Act in force in any part of India or under section 25 of the Companies Act, 1956 (1 of 1956), or is a University established by law, or is any other educational institution recognised by the Government or by a University established by law, or affiliated to any University established by law, or is an institution financed wholly or in part by the Government or a local authority; (vi) in relation to donations made after the 31st day of March, 1992, the institution or fund is for the time being approved by the Commissioner in accordance with the rules15 made in this behalf; and (vii) where any institution or fund had been approved under clause (vi) for the previous year beginning on the 1st day of April, 2007 and ending on the 31st day of March, 2008, such institution or fund shall, for the purposes of this section and notwithstanding anything contained in the proviso to clause (15) of section 2, be deemed to have been, (a) established for charitable purposes for the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ol which is providing education. The society does not receive any cess or fees or any consideration in relation to the trade or commerce of the members but simply provides accommodation to the public and necessarily not to the members of the society. The definition of 'charitable purpose' given under section 2(15) is an inclusive definition and is not exhaustive one. So, what is 'charitable purpose' is always a question which is open to interpretation. The charitable purpose has to be construed in the common parlance by applying common sense alone. It was stated that the society did not sell any flowers but the word 'flowers' used in the statement of accounts relates to the Golden Jubilee Souvenir which in Tamil is called "Malar" which means flower also. All these things have not been discussed by the DIT(E) in his order. Before us, reliance was placed on the Circular No.11 of 2008, dated 19-12-2008 in which 'charitable purposes' are enlisted. "Section 2(15) of the Act defines "charitable purpose" to include the following: (i) Relief of the poor (ii) Education (iii) Medical relief, and (iv) The advancement of any other object of general public utility. An entity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... identally carryon a commercial activity subject to the conditions mentioned above. 3. The newly inserted proviso to section 2(15) will apply only to entities whose purpose is 'advancement of any other object of general public utility' i.e. the fourth limb of the definition of 'charitable purpose' contained in section 2(15). Hence, such entities will not be eligible for exemption under section 11 or under section 10 (23C) of the Act if they carryon commercial activities. Whether such an entity is carrying on an activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of the activity. 3.1. There are industry and trade associations who claim exemption from tax under section 11 on the ground that their objects are for charitable purpose as these are covered under 'any other object of general public utility'. Under the principle of mutuality, if trading takes place between persons who are associated together and contribute to a common fund for the financing of some venture or object and in this respect have no dealings or relations with any outside body, then any surplus returned to the persons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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