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TMI Blog2012 (5) TMI 478X X X X Extracts X X X X X X X X Extracts X X X X ..... out of commercial activity are utilized for the charitable objects of the Trust/Society and not for personal use of settlers/beneficiaries - 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 - Under these circumstances, we are also satisfied that the Society has ceased to be a genuine Society to be eligible for registration u/s 12AA - Decided against the assessee - ITA No. 1228/Mds/2011 - - - Dated:- 13-10-2011 - Hari Om Maratha, N.S. Saini, JJ. S. Sridhar, Adv., for the Appellant K.E.B. Rengarajan, Jr. Standing Counsel for the Respondent ORDER Hari Om Maratha: This appeal of the Assessee-Society, is directed against the order of the ld. CIT, Madurai, dated 16.5.2011, vide which he has refused to grant registration u/s 12AA of the Act. 2. The Assessee-Society had earlier been granted registration u/s 12AA by the then CIT, Madurai, vide his order in C.No.464/24/07- 08/CIT-I dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rafts manufactured by the rural artisans are being marketed by it. The statements of accounts for the years ending 31.3.2007, 31.3.2008, 31.3.2009 and 31.3.2010 reveal the following position: Sl. No. Contents Years ending 31.3.2007 31.3.2008 31.3.2009 31.3.2010 1. Balance Sheet Assets: Rs. Rs. Rs. Rs. Micro Finance Loan to SHG 1459800 4118506 1769181 2091563 Liabilities Micro Finance Loan from Bank 1456870 4116560 1810905 2819158 4. It was found that the Society was receiving income from laces and embroidery articles, income from coconut shell, SHG contribution, own contribution, grants received, donations received, interest received etc. The surplus for these years were Rs. 64,618/-, Rs. 4,10,916/-, Rs. 2,78,148/- and Rs. 1,70,476/-, respectively. From these, the ld. CIT concluded that the Society is engaged in micro finance activities on commercial basis under the guise of charity by way of receipt of interest and service charges. Afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms of Section 12AA of the Act is contrary to law, facts, and in the circumstances of the case. 2. The CIT erred in withdrawing/canceling the registration granted earlier on 12.10.2007 in terms of Section 12AA of the Act on the facts and in the circumstances of the case without assigning proper reasons and justification. 3. The CIT failed to appreciate that the provisions of Section 12AA(3) of the Act had no application to the facts of the case inasmuch as the circumstances enumerated in the said sub section vesting such powers for withdrawal of registration granted earlier were not pointed out with reference to the facts of the case to justify passing of the impugned order. 4. The CIT failed to appreciate that the registration granted earlier was correct and proper on the scope of the provisions governing thereto and the order of withdrawal under consideration was erroneous and invalid. 5. The CIT failed to appreciate that the order of withdrawal/cancellation was passed out of time, invalid, passed without jurisdiction and not sustainable both on facts and in law. 6. The CIT failed to appreciate that the micro finance activities should not be construed as co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to withdraw the registration granted earlier or not. Before we examine the facts and figures let us read the relevant provision envisaged in this regard. Section 12AA(3) of the Act reads as under: "[(3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution: Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.]" 8. The macroscopic analysis of the above provision, it is clear that the ld. CIT has been empowered to either continue registration, once granted u/s 12A(a) or else, he can cancel the same if the requisite conditions are no longer found to be fulfilled. Admittedly, before taking action under clause (3), the ld. CIT has gave opportunity of being heard to the Society in relation to the proposed cancellation of registr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st/Society and not for personal use of settlers/beneficiaries. The income of the public charitable trust can be from assets held by the Trust and can also include voluntary contributions from public including the founders of the Trust/Society or the Trustees; capital gain arising out of the sale of assets held by the Trust and any profits of any business/commercial activity carried out by the Trust which is incidental to the objects of the Trust/Society and for which separate books of account are maintained. Nevertheless, such activities of giving micro-finance and earning interest can be okayed in the case of Companies registered u/s 25 of the Companies Act, 1956, because in that case, the company intends to apply its profit in promoting charity. This analogy cannot be extended to such Societies. Thus, in the Income and Expenditure Statement of the public charitable trust, the income shall include any or all those three sources of receipt. But 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 Act subject to satisfaction of the sta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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