9911796707
TMI Blog2012 (5) TMI 478X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld. CIT found that the Society was engaged in 'business activities'. The main objects for which the Society was established are as under: "(1) To plan and work with the downtrodden community for their economic development and to create social conscience in them. (2) To create a sense of social awareness and thus make them aware of the need for liberation from oppression of any kinds. (3) To communicate new ideas and concepts about social transformation about the people. 12 (a) Charity: To perform works of charity for those in need, irrespective of race caste, community or creed (b) Social Service. (c) For the betterment of the Villagers and downtrodden poor people and unemployed youth society. 13. To recruit, train and employ workers for the running of the society. 14. To raise necessary funds by fees, subscriptions, acceptance of gifts from within and outside India and loans whether secured or unsecured or in such other manner as the society may think fit." 3. The case of the Society is that it is engaged only in charitable activities and no business activity whatsoever has been done on by it. A perusal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he object of the trust and for which, separate books of account are maintained - Section 11 (4)/11(4A) In other words, in the Income and Expenditure statement of the public charitable trust, the Income side shall include any or all these three sources of receipt. However Corpus Donation, which is Included in the definition of 'income' u/s,2(24), but excluded from the Income of the trust u/s, 12(1) will, however, be considered for the purpose of exemption u/s, 11(1)(d) of the I. T. Act subject to satisfaction of statutory conditions mentioned in Section 11,12 and 13 of the I.T. Act On the Expenditure side, the minimum statutory requirement is Indicated In section 11(1)(a) of the I.T,Act i,e at least 85% of such income should be utilized for the purpose of 'charity'. Here 'income' is of course used In a commercial sense - Implying thereby the Net Income available for charity i,e, Gross Receipts less reasonable administrative expenses, Therefore at least 85% of such available surplus should be utilized for charitable activities as mentioned in section 2(15) of the I.TAct, and the bottom line is that such activity should be charitable i.e, provided free of cost, coverin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tration under consideration was erroneous and invalid. 9. The CIT failed to appreciate that the Written Submissions filed on 10.3.2011 were not taken into consideration in proper perspective. 10. The CIT failed to appreciate that there was no proper opportunity given before passing the impugned order and any order passed in violation of the principles of natural justice is nullity in law. 11. The Appellant craves leave to file additional grounds/arguments at the time of hearing." 6. We have considered the rival submissions and have perused the entire material available on record. Originally, registration u/s 12AA of the Act was granted to the assessee on the basis of objects of the Society, as disclosed in its Memorandum of Association and its Byelaws, before the Registrar of Societies under the Tamil Nadu Societies Registration Act, 1975, which were treated as charitable in nature solely by following the factum of its registration under the Societies Act. Later on, when it was found that the activities of the Society are not genuine and its objects are not being pursued for charitable activities, the CIT refused to renew approval u/s 80G(5). The Soc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, but his satisfaction cannot be merely subjective, but it has to be tested with respect to objective material/proof on the basis of which any ordinary prudent man come to this only conclusion. Admittedly, in this case, the CIT called for the statements of accounts for the years ending 31.3.2007, 31.3.2008, 21.3.2009 and 31.3.2010, the results of which have been incorporated in the earlier part of this order. From the Income and Expenditure Account of these years, it is clearly seen that the Society was receiving income from laces and embroidery articles, income from coconut shell, SHGs contribution, own contribution, grants received, donations received, interest received, etc. The financing activities undertaken by the Society is clearly evidenced from these facts. The receipt of SGHs contribution is towards financing activity of the Society. So, definitely, the Society is engaged in micro financing activities on commercial basis under the guise of 'charity' by way of receipt of interest and service charges. Although the provisions of sections 11 to 13 are a complete code in itself which deal with the concept of income and concept of exemption when certain conditions are satisfie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated above. The activities should be solely 'charitable' which should further up the objects of the Trust and should benefit large section of Society without any discrimination. Any public charitable trust carrying on any commercial/business activity, generates profits, has to utilize the same for 'charitable purposes' only. For that purpose, separate books of account u/s 11(4)/11(4A) has to be maintained and profits thereof have to be calculated in accordance with the provisions of sections 28 to 44 of the Act. Such profits should be reflected in the credit side in the 'Income and Expenditure Account' of the Trust/Society as one of the sources of income to be utilized for charitable purposes. In short, commercial activity in such cases is permissible as per the requirement of section 11(4)/11(4A) and not as per the provisions of section 11(1)(a) of the Act. The commercial activity should aim at achieving end of the trust which is furtherance of its objects and it should not be the motive of the Trust to work for profit. A 'Charitable Trust' carrying on commercial activities should satisfy the provisions of section 11(1)(a) and for that matter, its Income and Expenditure Stateme ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
