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TMI Blog2013 (4) TMI 397X X X X Extracts X X X X X X X X Extracts X X X X ..... he Union of India and only on objects of public charity, which satisfy the following two cumulative tests: (a) They must be objects of public charity for the benefit of all persons irrespective of caste, colour or creed, such as relief of the poor, education, medical relief and the advancement of any other object of general public utility not involving the carrying on of any activity of profit, and (b) They must be consistent with the principles of the true teachings of Islam. Provided, however, that in spending the income on objects of public charity, priority shall be given to the collective needs of the country or to such needs as may benefit the largest number of persons or their generations. 45. Priority may be given to the following: (1) To establish and run an Institute for the promotion of medical education and research with emphasis on indigenous systems of medicine. (2) To establish and successfully conduct a Tibbia College in conformity with the recognized standards. (3) To establish and run charitable hospitals and clinics where poor patients are given free treatment. 46. Qaumi Income may also be spent on the following: (1) To establish and run educational insti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The petitioner No.1 is not engaged in any charitable activities set out in Section 2(15) but donates a part of its surplus to Hamdard National Foundation („HNA‟ for short). This does not meet the requirements of Section 2(15). (3) The petitioner No.1 does not maintain proper books of accounts for charitable activities and business activities and therefore, there is violation of Clause (c) of the notification under Section 10(23C)(iv) dated 28.12.2007 and Section 11(4A) of the Act. 8. The petitioner No.1 has impugned the said order/the aforesaid reasons on the following grounds:- (i) Section 2(15) does not prohibit a charitable institution from undertaking business or commercial activities but the income generated or the surplus earned should be used for charitable purpose. Business held under trust can fund and provide finance for conducting and doing charity. [see Additional CIT Vs. Surat Art Silk Cloth Manufacturers Association (1980) 121 ITR 1 (SC)] (ii) Amendment made to Section 2(15) of the Act w.e.f. assessment year 2009-10 is applicable only to the last limb i.e. when an assessee carries on activities under the clause „advancement of any other object o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is ten lakh rupees or less in the previous year;]" 10. We may note here that the first proviso to sub Section was amended by Finance (No.2) Act, 2009 with retrospective effect from 01.04.2009. The said proviso is applicable in cases where an assessee claims that it is carrying on charitable purpose covered by the residuary clause i.e. "advancement of any other object of public utility". The proviso is not applicable in case an assessee or institution claims that it is carrying on charitable purpose like relief to poor, education, medical relief etc., i.e. purposes which have been specifically enumerated and stated in the earlier part of Section 2(15). 11. We have gone through the impugned order dated 22.02.2012, but do not find any specific finding or statement in the said order that the charitable activities or purposes in the case of the petitioner No.1 fall under the residuary head and not under the enumerated heads mentioned in Section 2(15) of the Act. The impugned order in this regard is completely silent On the said aspect, we may record that the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e author of the order reach the conclusion that financial aid was being given to already well of Hakims and Vaids is not indicated or averred to. 14. The petitioner No.1 has referred to decisions of this Court and other High Courts in CIT vs. Sarladevi Sarabhai Trust, (1988) 172 ITR 698 (Guj.), CIT vs. Nirmala Bakubhai Foundation, (1997) 226 ITR 394 (Guj.), CIT vs. Hindustan Charity Trust, (1983) 139 ITR 913 (Cal.), CIT vs. M. Ct. Muthian Chettiar Family Trust & Ors., (2000) 245 ITR 400 (Mad.), CIT vs. Trustees of the Jadi Trust, (1982) 133 ITR 393 (Bom.), CIT vs. Shri Ram Memorial Foundation, (2004) 269 ITR 35 (Del.). It is submitted that these decisions have accepted the view that application of income for charitable purposes includes transfer of funds to a third person for the said purposes. Decision in Inland Revenue Commissioner vs. Helen Slater Charitable Trust Ltd., (1980) 83 WLR 157 has been referred to. It is accordingly submitted that application of money for charitable purposes takes place when the petitioner No.1 transfers his surplus or the entire income or substantial portion thereof, i.e. 85% or more, to a third person who is also using the funds for charitable purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .01.2012 reversing the findings of the Assessing Officer. 16. On the question of surplus, application of income and accumulation, our attention was drawn to the chart mentioned in Paragraph 8.3 of the impugned order. It is pointed out that the gross surplus is mentioned in the first column. The second column refers to 15% of the general reserve and the last column mentions the accumulative reserve. Petitioner No.1 submits that the amount mentioned in last column accumulation is less than 15% of the general reserve and therefore, the petitioner meets the prescribed parameters. This aspect has been ignored in the impugned order by recording that the surplus has been given to HNF or surplus/income has been passed on and given to HNF. The effect thereof and whether objects/use of funds by HNF can be determinative and relevant for deciding the applicable head u/s 2(15) in the case of the petitioner No.1 is an aspect which requires examination/consideration. 17. On the question of books of accounts, we have already noticed the contention of petitioner No.1 relying upon the decision of Delhi High Court in Mehta Charitable Prajnalay Trust (supra). 18. Looking at the aforesaid situation, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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