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TMI Blog2014 (8) TMI 832X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot step into the shoes of the AO to examine whether the assessee has carried out any activity with profit motive or there is violation of conditions laid down u/s 11 of the Act - DIT(E) has not found any adverse material to show that the main objects of the assessee are not of charitable nature or its activities are not genuine - the question of exemptions under section 11 and 12 would only come at the time when the trust/institution is assessed to tax –thus, DIT(E) was not correct in rejecting assessee’s application u/s 12A of the Act - DIT(E) is directed to grant registration u/s 12A of the Act to the appellant institution and also consider granting approval u/s 80G(5) of the Act subject to fulfillment of conditions laid down under clause (i) to (v) of section 80G(5) of the Act – Decided in favour of Assessee. - ITA No. 1773/Hyd/2012 - - - Dated:- 23-7-2014 - Shri B. Ramakotaiah And Shri Saktijit Dey,JJ. For the Petitioner : Shri Gautam Jain For the Respondent : Shri P. Soma Sekhar Reddy ORDER Per Saktijit Dey, J.M.: This appeal of the assessee is directed against the order dated 27/09/2012 of the DIT(E), Hyderabad rejecting assessee s applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecting the application for grant of registration on extraneous considerations when there is no allegation with regard to charitable object of the assessee or genuineness of its activities. It was contended that the object of the company being to improve public health, it clearly comes within the meaning of charitable purpose as provided u/s 2(15) of the Act. Contesting the finding of the DIT(E) that appellant company has been created with a commercial intention, it was submitted that there cannot be any assumption with regard to commercial intention as the assessee is a section 25 company, which indicates that it is not for profit. Therefore, the conclusion reached by the DIT(E) on presumptions and surmises cannot be a ground to deny registration. It was submitted that in absence of any profit motive or personal gain there can be no valid reason to conclude that assessee has commercial intention. In support of such contention, the learned AR relied on the decision of ICAI Accounting Research Foundation Vs. DIT, 321 ITR 73 wherein it is held that there is no business unless there is profit motive. Further, referring to the decision of the Hon ble Allahabad High Court in case of CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the Hon ble Delhi High Court in case of ICAI Accounting Research Foundation Vs. DCIT (supra). The learned AR further submitted when the assessee has submitted all documents and informations called for in course of the proceeding, the DIT(E) without seeking clarification on the doubts entertained by him should not have rejected the application for registration. The learned AR submitted that so far as the objects of the assessee are concerned, there cannot be any doubt with regard to charitable nature as it caters to the needs of 54 villages in the rural Andhra Pradesh so far as health is concerned. It was, therefore, submitted that the order of the DIT(E) being contrary to the statutory provisions should be vacated. 4. The learned DR, on the other hand, relied upon the orders of the DIT(E). 5. We have heard the parties and perused the impugned order of the DIT(E). Undisputedly, assessee is a company incorporated on 09/08/2007 in terms with section 25 of the Companies Act, 1956. In other words, it is a non-profit making company. The main objects of the company as per the Memorandum of Articles of Association, a copy of which is placed at page 112 of the paper book broadly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the nature of use or application, or retention, of the income from such activity:] [Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is [twenty-five lakh rupees] or less in the previous year;] 5.2 On plain reading of the aforesaid definition, it becomes clear that medical relief, education, relief to the poor and advancement of any other object of general public utility will come within the ambit of charitable purpose . On a reading of the main objects of the assessee company, in the context of the definition of charitable purpose referred to above, it will be clear that the assessee s objects are within the definition of charitable purpose as envisaged u/s 2(15) of the Act. In the aforesaid factual backdrop, it has to be examined whether the DIT(E) was correct in holding that assessee s activities are not coming within the purview of charitable purposes as defined u/s 2(15) of the Act and as such it is not eligible for registration u/s 12A of the Act. On a perusal of the order of the DIT(E), it will be evident that he has rejected assessee s application for registration u/s 12A of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee would be utilizing the surplus funds for activities outside India in violation of the provisions contained u/s 11 of the Act. However, such finding of the DIT(E) is totally irrelevant in absence of any material on record to show that assessee has actually carried out any activity outside India or utilized any surplus funds outside India. That being the case, the DIT(E) cannot come to a conclusion merely on assumptions and presumptions that the assessee has violated or will violate the provisions contained in section 11 of the Act. 5.5 So far as the allegation of the DIT(E) that the assessee has not conducted any charitable activity of its own is concerned, we find that such finding of the DIT(E) is without any basis. The material placed on record clearly indicate that the assessee has undertaken activities in furtherance of its object as per the Memorandum of Association. Furthermore, at the stage of granting registration u/s 12A of the Act, the DIT(E) has to satisfy himself about the objects of the institution and genuineness of the activities. He is not required to look into the utilization of fund, commercial nature of activity etc. at this stage. These aspects can be lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e4 with the objects of the trust/institution, and are not mere camouflage but are real, pure and sincere, nor against the proposed objects. The profit earning or misuse of the income derived by charitable institution from its charitable activities, may be a ground for refusing exemption only with respect to that part of the income but cannot be taken to be a synonym to the genuineness of the activities of the trust or the institution. 5.6 In case of ICAI Accounting Research Foundation (supra), the Hon ble Delhi High Court has held as under: 18. In our view, the entire point is now covered by the Supreme Court s judgment in Addl. CIT Vs. Surat Art Silk Cloth Manufacturers Association (1980) 121 ITR 1. The Court pointed out in that case that when the object of a trust was the carrying on of an object of general public utility, it is that object of general public utility which must not involve the carrying on of an activity for profit. It was pointed out that it was immaterial how the money for achieving or implementing such purpose was found. Whether that money was obtained by the running of an activity for profit or not, did not make the charity not charitable. Thus, in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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