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TMI Blog2014 (1) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... stay there for more than seven days - Even if the activities of the assessee trust are considered to be falling in the definition or within the scope of 'an activity for advancement of any other object of general public utility', still the case of the assessee trust is hit by the second proviso to section 2(15) of the act being its total receipts much more than the prescribed limit of Rs.10 lakhs for the year under consideration - Activities of the institution were not motivated by a spirit of genuine charity but in fact were business or commercial activities - Decided against assessee. - ITA No. 267/M/2013 - - - Dated:- 31-12-2013 - Shri D. Karunakara Rao And Shri Sanjay Garg,JJ. For the Petitioner : Shri A. H. Dalal, A. R. For the Respondent : Shri Girija Dayal, D. R. Shri P. K. Sahu, D. R. ORDER Per Sanjay Garg, Judicial Member: The present appeal has been filed by the Assessee-trust against the order dated 29.11.2012 of the Director of Income tax (Exemp.), Mumbai (here in after referred to as DIT(E) ), passed u/s.12AA of the Income Tax Act, 1961 read with rule 17 A of the Income Tax Rules, rejecting the application of the assessee for registration as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the charity commissioner. He has further brought out our attention to the revised objects of the trust copy of which has been placed at page 7 of the paper book filed by the assessee. The relevant portion/objects clause is extracted as under: "4. Objects: a) The expression "chartable proposes" in this Constitution shall always be construed as excluding any purpose of a religious nature and it is intended and declared that the words "charitable purposes" or "charitable objects" in this Constitution shall be construed and shall mean as not including any purposes of a religious nature. Provided that the income as well as the capital shall be applied only towards public charitable purposes as aforesaid and any accumulation of income shall also be made and deemed to be made for application to such public charitable as aforesaid. b) Provided Further that notwithstanding anything hereinbefore or hereinafter contained income as also the corpus of the trust fund shall be applied and be applicable only to or for such public charitable purposes only and within such territories only and subject to such condition or limitation if any as may from time to time be laid down in the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply of or support to gardens, gymnasiums, physical culture centers and other means of advancement of health and hygiene. m) At the time of Natural Calamity in the country or any state of the country like Earth Quakes, Draught or medical Necessity of any Disease, to collect funds or material from the people to help the affected people. n) Advancement of any other object or general public utility, not involving the carrying on of any activity for profit, as the said members may think fit and in such manner and for one or more of such objects or purposes to the exclusion of other or others as the said members may think fit. If any of the above objects is found to be inconsistent with the objects of a public charitable institution under section 11 of any other section of the Income -tax Act, 1961 or any other direct tax law or any other law applicable to such trusts as now enacted or as may be enacted or amended at a future date, the objects stated above will be treated as so modified to accord with such law or amended law so that any concessions, privileges, conditions or regulations available and applicable to such public educational charitable institutions will be available or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ys and further mentioning of the word "Atithi Griha" on the booking deposit receipts which in English means "Guest House" proves that the assessee in fact was running a Guest House. 5. We have considered the submissions of the learned representatives of the parties and have also gone through the record. The ld. DIT(E) had rejected the registration to the assessee-trust mainly on the ground that the activities of the institution were not motivated by a spirit of genuine charity but in fact were business or commercial activities. While holding so, he noticed that the assessee trust received substantial income from the various activities carried out by it. Even the alleged 'Sanatorium' at Lonawala in fact was run as a Guest House for commercial purpose. On the other hand the contention of the ld. AR has been that even if it is considered so, still the registration can not be refused to the assessee in the light of the proposition of law laid down by the co-ordinate benches of the Tribunal in the cases of "Ghatkpar Jolly Gymkhana'(Supra) and "Khar Gymkhana"(supra). 6. The income tax exemption under section 12 of the Income Tax Act is available to trust created wholly for charitab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A careful reading of the above section further reveals that the exclusion clause in the shape of first proviso providing for exclusion from the definition of 'Charitable Purposes' in case of the trust/institution carrying out any activity in the nature of any trade, commerce or business for a cess or if for any other consideration irrespective of the nature of use or application of such money retained from such activity is applicable in the case of 'an activity for advancement of any other object of general public utility'. However the same has no application or effect in case of activities of the trust carried for the purpose of 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. Further, vide newly inserted proviso w.e.f. 01.04.2009, the rigor of the first proviso has been diluted. As per the said proviso the first proviso, shall not apply if the aggregate value of the receipts from the activities as mentioned in the first proviso is Rs.10 lakhs or less in the previous year which, as observed above, is attracted in case of char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by small families during the year 2012- 13 aggregating 1300 persons. All these facts reveal that the complex at Lonawala has been used as a Guest House and the same does not fall in any manner in the definition of Sanatorium. Even if the activities of the assessee trust, as pointed out by the DIT(E) in his order, are considered to be falling in the definition or within the scope of 'an activity for advancement of any other object of general public utility', still the case of the assessee trust is hit by the second proviso to section 2(15) of the act being its total receipts much more than the prescribed limit of Rs.10 lakhs for the year under consideration. 9. Now coming to the case of "Ghatkopar Jolly Gymkhana"(Supra) relied upon by the assessee, the question before the Tribunal in the said case was relating to the cancellation of the registration which was already granted to the said trust for the reasons that its total receipts for the previous year had crossed the prescribed limit. It was under those circumstances it was observed by the co-ordinate bench of the Tribunal (incidentally constituted by both of us) that the tax exemption or benefits are granted to a trust or i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en diluted and has been made wide enough to include related business activities of the trust/institution, as described the first proviso to section 2(15) of the Act, also within the scope of definition of charitable purposes. The limit of receipt up to Rs.10.00 lacs during the 'previous year' as mentioned in the second proviso, has made the section further liberal mandating to observe the charitable character of the concerned trust/ institution from year to year basis. For the previous year, during which the gross receipt income crosses limit of Rs.10.00 lacs, the trust will not get exemption or benefit of its being charitable in nature despite its carrying out charitable activities. However, it will get such benefit if it is registered as charitable institution and income from business activities, as mentioned in first proviso to section 2(15), does not cross limit of Rs.10.00 lacs. Our view in this respect is fortified from the judgment of the co-ordinate Bench decision of the Tribunal in the case of Rajasthan Housing Board vs. CIT (2012)21 Taxmann.com77(Jp)." 10. The case of the assessee is not that of a trust which has already been registered as a charitable trust after satis ..... 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