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TMI Blog2014 (5) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 (15). As such no notice of withdrawal of exemption under section 11 & 12 of the Income Tax Act, 1961 was served. 4. That the Director of Income Tax (Exemption) never provided an opportunity of hearing except the ITO (E), and passed the order with predetermined opinion that it is not covered under Section 2 (15) without considering the facts and figures of the case and prime objective of the assessee for which it was established and covering provisions of Sect 2 (15), 11, 12 of the Income Tax Act, 1961. 5. That the DIT (E) did not review and evaluated the activities of the assessee neither the figures in the Statement of accounts with his wrong perception and pre-determined opinion. In the FY 2006-07, DIT (E) had wrongly mentioned in his order Rs.5.63 Crores as total income instead of correct total income of Rs.7.55 Crores, in case of expenditure Rs.4.21 crores & Rs.1.47 crores instead of correct total expenditure of Rs.13.67 crores which is resulting in Excess of expenditure over income of Rs.(-) 4.86 Crores. Whereas in the FY 2005- 06 DIT (E) had mentioned in order income as Rs.5.74 crores instead of Rs.8.81 crores, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee is a commercial activity wherein it is getting payment from third parties for the sales made by it. It is earning income from sale of condoms and claiming expenditure pertaining to sales. Even though the activity of distribution of condoms can be said to be an advancement of an object of general public utility, however, if the same activity is done for a consideration, it loses the character of the charitable activity and becomes a commercial activity. Proviso below section 2 (15) has also been introduced with effect from Assessment Year 2009-10 to clarify the intent of legislature that any activity of trade commerce or business or any rendering of service in relation to trade, commerce or business for a fee or consideration, will not be taken as charitable activity if the other activities of a charitable institution are categorized as advancement of any other object of general public utility. The activities of the applicant do not fall under the head relief of poor, medical relief or education and accordingly can only be categorized as advancement of any other object of general public utility. Thus, in view of the proviso to section 2 (15), activities of the assessee are no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al areas of India. 8. While rejecting the application filed by the assessee for grant of exemption u/s 80G of the Act, the ld. DIT (E) observed, inter alia, that the assessee's activity of sale and purchase of condoms was a systematic commercial activity, wherein, the assessee was getting payment from third parties for the sales made by it; that the assessee was earning income from sale of condoms and claiming expenditure pertaining to sales; that even though the activity of distribution of condoms could be said to be an advancement of an object of general public utility, since it was being done by the assessee on a commercial basis, it could not be said to be a charitable activity; and that the activities of the assessee did not fall under the head of relief to the poor, medical relief, or education and could only be categorized as advancement of education. 9. Challenging the impugned order, the ld. Counsel for the assessee has contended before us that the ld. DIT (E) has erred in rejecting the application filed by the assessee for exemption u/s 80G of the Act; that while doing so, the ld. DIT (E) has failed to appreciate that the activities undertaken by the assessee as its pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee Company also stands granted registration u/s 12A of the IT Act. It was granted certificate u/s 80G of the IT Act on 31.03.2001. As per the Memorandum of Association of the assessee Company, the main objects of the Company are the following:- "III. The objects for which the Company is established are:- (A) Main Objects to be pursued by the Company on its incorporation are, subject to all the approvals required from various statutory bodies/Government Departments, as the case may be:- 1. To establish, run and operate on non-profit basis education, research agency (ies) clinics, centres and dispensaries of all types including hospitals connected with or in relation to and/or otherwise to regulate and/or to solve and remove all or any problems of population control, growth of human fertility and particularly about family welfare, Family Planning, Birth Control and contraception with a view to preventing poverty, hardship and distress specially caused to weaker and poor sections of the Indian population or people of India. 2. To promote, distribute and sell contraceptives, family welfare an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act and was granted approval u/s 80G (5) of the Act, refusal of renewal of such approval was not justified on the ground that the income of the applicant Trust was likely to be included in the taxable income for not complying with the requirement of Section 11. 15. In 'Sonepat Hindu Educational Charitable Trust vs. CIT' (supra), it has been held that while dealing with an application u/s 80G (5) of the Act, the scope of inquiry extends to eligibility to exemption and that registration u/s 12AA of the Act by itself is sufficient proof that the institution is created or established for charitable purposes. 16. In 'Gaur Brahmin Vidya Pracharini Sabha vs. CIT' (supra), it was held that grant of registration u/s 12AA of the Act was testimony to the fact that the Trust was established for charitable purposes and that scope of inquiry u/s 80G of the Act extends to eligibility of income and not actual computation of income under the IT Act. 17. In 'Sewagram Ashram Prasthan vs. CIT' (supra), it has been held that where the purpose of the institution was a charitable purpose, the institution was entitled to approval u/s 80G (5) of the Act. 18. In 'CIT Rohtak vs. Gaur Brahmin Vidya Pra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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