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TMI Blog2014 (4) TMI 201X X X X Extracts X X X X X X X X Extracts X X X X ..... n newly inserted proviso from 01.04.2009 in cancelling registration of trust, is not correct or justified - Cancellation of registration granted to Assessee u/s. 12A is hereby set aside – Decided in favor of Assessee. - ITA No.882/Mum/2012 - - - Dated:- 23-10-2013 - D. Karunakara Rao And Sanjay Garg , JJ. For the Appellant : A.H. Dalal For the Respondent : Santosh Kumar ORDER:- PER : Sanjay Garg The present appeal has been filed by the Assessee against the order dated 14.12.2011 of the Director of Income tax (Exemp.), Mumbai u/s. 12AA(3) of the Income tax Act cancelling the registration granted to the Assessee u/s. 12A of the Act. 2. The Assessee is a club which has been granted registration u/s. 12A of the Act as a charitable trust with the following principle aims and objects: 1. To encourage and prompt sports, pastimes and athletics. 2. To equip and maintain Gymnasiums for physical welfare and athletics 3. To prompt social contact amongst its member 4. To raise the standard and to further the cause the Physical Education by affording facilities for training on sound and scientific lines 5. To organize educative propagan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act reveals that apart from charitable activities like relief to the poor, education, medical relief etc. if the activities of a trust are for advancement of any other object of general public utility the same will be included in the definition of charitable purposes. However, the first proviso to the said section provides that if the trust/institution carries 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 will not be an activity for advancement of any other object of general public utility as such will be excluded from the definition of charitable purposes. However, vide newly inserted proviso w.e.f. 01.04.2009 the rigour 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.10.00 lacs or less in the previous year. The ld. DIT(E) while cancelling the registration of the Assessee observed that the Assessee received huge amounts on account of royalty from decorators amounting to Rs.7,26 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very rigorous provision which excludes the institution or trust from the definition of charitable trust, if such trust carries activities in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity. So before the insertion of the second proviso from 01.04.2009, the definition of charitable purpose when read with first proviso was very restrictive. However, by the insertion of the second proviso w.e.f. 01.04.2009 the rigour of the first proviso has been diluted and the first proviso has not been made applicable even if the trust carries on business activities and the gross receipts from such activities is Rs.10.00 lacs or less than Rs.10.00 lacs in the previous year. Hence, from 01.04.2009 the carrying out of the activities of trade, commerce or business even by charitable trust is not barred so as to exclude its activities from the definition of charitable purposes. However, a limitation has been imposed to the effect that the gross receipts from such activities shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of such trust are not genuine or the same are not carried out in accordance with objects of the trust. There is no case of the Revenue that the trust has not been carrying out activities in accordance with its objects. Though, the contention of the ld. Authorized Representative has been that even in case of the total receipts from royalty, rental income etc. have exceeded the limit of Rs.10.00 lacs, still, it can not be said that the said trust has become non-genuine. On the other hand the contention of the Revenue is that once the activities of the trust do not fall within the definition of charitable purpose it becomes a non-genuine charitable trust. The activities of the trust in such an event will be non-genuine charitable activities. 5.2 We may observe that the tax exemption or benefits are granted to a trust or institution because its activities fall within the definition of charitable purposes as defined u/s. 2(15) of the Act. Under section 12AA(3) the registration of such trust/institution can be cancelled if its activities have become non genuine or it is not carrying out activities as per objects of the institution. Once the activities of a registered charitable inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncerned 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 (supra). 5.4 Thus, the action of the CIT(A) relying upon the newly inserted proviso from 01.04.2009 in cancelling the registration of the trust, in our view, is not correct or justified. The only effect will be that the Assessee will not be entitled for exemption or tax benefits which otherwise would have been available to it being registered as charitable institution, for the relevant year during which its income has crossed the limit of Rs.10.00 lacs. Subject to our above observations cancellation of registration granted to Assessee u/s. 12A is hereby set aside and same ..... X X X X Extracts X X X X X X X X Extracts X X X X
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