9911796707
TMI Blog2015 (5) TMI 919X X X X Extracts X X X X X X X X Extracts X X X X ..... they have focused on areas of education and environment, watershed management, women empowerment through skill development initiatives, provision of drinking water, youth empowerment, medical health camps, environmental conservation program, and promotion of sports and a host of extracurricular activities at local levels aimed towards community sustainability. Hence, the assessee association primary purpose was advancement of objective general public utility and it would remain charitable even if an incidental or ancillary activity or purpose of achieving the main purpose was profitable in nature. Hence the finding of the Director of Income-tax (Exemptions) has mentioned in the object clause 17 under the said incidental objects under Part B of the memorandum of association at paragraph 5 of his order stating it to be non-charitable does not disentitle the assessee for availing of exemption under section 12 of the Income-tax Act. - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... y the said parent company. Funding for the same are also to be made by the said parent company. Bringing awareness on environmental matter and on social issues of the employees of the company through such activity, cannot be said to be of charitable nature. 3. From the incidental objects of the assessee-company, mentioned under Part-B of the memorandum of association, it is noticed that the assessee also intends to let out buildings, houses and infrastructural facility, etc., to different persons. In this context, it is pertinent to refer to the object clause No. 3 under the objects incidental or ancillary as mentioned in that paragraph, which is as under : 'To construct or let out or lease low-cost buildings and houses or any infrastructural facility for the poor, disadvantaged. . .' 3.1 Such activity of letting out houses and infrastructural facilities, etc., as may be noticed, does not come under the purview of charitable purpose having regard to definition of charitable purpose as contained in section 2(15) of the Act. Though, during the proceedings, it was submitted that these activities are meant for the benefit of the poor, such activity of letting out propertie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning of 'charitable purpose' as defined in section 2(15) of the Act. Further, there is no clarity in the other object clause 18 referred to above. As may be seen in that clause there is reference to obtaining of rights, privileges and concessions from the Government or any other authority. However, in absence of any clarification regarding the nature and also purpose of the same, it cannot be said that the same area of charitable. 4.4 From the aforementioned discussion, it is thus evident that, all the objects in the case of the above company are not charitable. It shows the applicant-company has got both charitable and non- charitable objects. Under these circumstances, the income of the assessee would not be eligible for exemptions under section 11 of the Act. Rather, in view of existence of both charitable and non-charitable objects, it cannot be considered as a valid trust and hence would not be eligible for registration under section 12AA of the Act. Reliance in this regard is placed on the decision of the hon'ble Supreme Court in Yogiraj Charity Trust v. CIT [1976] 103 ITR 777 (SC) wherein their lordships made the following observations (page 781) : 'The q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be determined by the members of the company at or before the time of dissolution or in default thereof by the High Court of judicature that has or may acquire jurisdiction in the matter.' 6.1 From the above, it may be noticed that on winding up/disso lution of the applicant-company, the remaining property, i.e., after meeting all the liabilities, shall be transferred to other company having similar objects as that of the applicant-company. However, under article 86 under the head 'winding up' at page 14 of the articles of association of the above company, where also there is reference to such issue, it is further mentioned as under : 'If the company shall be wound-up, the assets available for distribution amongst the members shall (subject to any rights attached to any new class of shares hereafter created) be applied in repayment of the capital paid up on the ordinary shares and any balance shall be distributed amongst the holders thereof in proportion to the number of ordinary shares held by them respectively.' 6.2 From the above, it may be noticed, in case of winding up of the applicant-company, the balance assets of the company, i.e., the property of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even if an incidental or ancillary activity or purpose of achieving the main purpose was profitable in nature. Hence the finding of the Director of Income-tax (Exemptions) has mentioned in the object clause 17 under the said incidental objects under Part B of the memorandum of association at paragraph 5 of his order stating it to be non-charitable does not disentitle the assessee for availing of exemption under section 12 of the Income-tax Act. The relevant portion of the decision of the Kolkata Bench of the Income-tax Appellate Tribunal in the case of Indian Chamber of Commerce [2015] 37 ITR (Trib) 688 (Kol) is reproduced hereunder (page 749) : ". . . The concept behind section 28(iii) is to cut at the mutuality principle being relied on in support of a claim for exemption, when the assessee was actually deriving income or making profits as a result of rendering specific services for its members in a commercial way. The reason for the introduction of section 28(iii) of the Act, is to ignore the principle of mutuality and reach the surplus arising to the mutual association and this is clear from the fact that these provisions are confirmed to services performed by the assoc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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