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TMI Blog2015 (6) TMI 318X X X X Extracts X X X X X X X X Extracts X X X X ..... ammes. The nutritious food produced by the assessee is not sold in the commercial market nor it is supplied to the parties other than the beneficiaries under the schemes referred to above. It cannot be referred to as a contractor to the Government of Andhra Pradesh as it is involved in manufacture and supply of the food to the beneficiaries. Only, the supervisory activities are carried on by the Government of Andhra Pradesh, in bringing out schemes for the benefit of the beneficiaries and fixing a suitable price to meet the cost of manufacturing and other overheads. Thus, there is no prohibition in the Act that a charitable institution should not indulge in any business activity. The only restriction is that it should conform to the provisions of subsections 4 & 4A of section 11 of the I.T. Act and the activity should come within the provisions of section 2(15) defining the charitable purposes.For the reason given above, we set aside the impugned order of the ld DIT (E) - Decided in favour of assessee. - ITA No.1759/Hyd/2014 - - - Dated:- 15-5-2015 - Shri P.M. Jagtap and Smt.Asha Vijayaraghavan,JJ. For the Petitioner: Shri B. Satyanarayana Murty For the Respondent: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it is carrying on business. He referred to assessment records for 2006-07, 2007-08 with similar facts. According to the DIT (E) the assessee by carrying on the business, forfeits the exemption in section 11 of the Income Tax Act. 6. The ld AR of the assessee explained that business is incidental to attaining the objects of the Trust and is permissible u/s 11(4A). 7. The ld AR also explained that the object of the institution is relief of poor and medical relief and that the amendment to section 2(15) w.e.f. 1.4.2009 does not disentitle the exemption u/s 11. 8. The ld AR also referred to the order of the CIT (A) for AY 2005-06, 2006-07, 2007-08 and 2010-11 wherein 12A registration has been granted. 9. The DIT (E) further held as follows: 3. Further it was noticed from a brief note filed on Andhra Pradesh Foods (Annexure-A), during the assessment proceedings for A.Y 2007-08, under Col. No.11 pertaining to budget/grant, it is mentioned, A.P. Foods does not receive any budget provision directly from the Govt. The nutrition budget is being provided to the Govt. Departments such as Directorate of Women Child Welfare, Directorate of Municipal Administration of A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arties other than the beneficiaries under the schemes referred to above. It cannot be referred to as a contractor to the Govt. of A.P as it is involved in manufacture and supply of the food to the beneficiaries. Only, the supervisory activities is carried on by the Govt. of A.P. in bringing out schemes for the benefit of the beneficiaries and fixing a suitable price to meet the cost of manufacturing and other overheads. 13. It was also submitted that the assessee is promoted mainly for the purpose of tackling malnutrition among the pregnant women, under-nourished children and lactating mothers. Therefore, it is an organization producing nutritious food and supplying it to the beneficiaries. It was argued that simply because these activities are supervised and supported by the Govt. the DIT (E) cannot term the assessee as a contractor. 14. The ld DIT (E) pointed out in the show cause notice that the assessee is paying the taxes such as sales tax, service tax and VAT etc., as any other commercial organization. The ld AR reiterated that u/s 11(4A) the assessee will not be denied exemption u/s 12A in paying the other taxes. 15. The ld AR also submitted before the DIT (E) the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elief, [preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest.] and the advancement of any other object of general public utility: Provided that tile advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity 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:] [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;] The Finance Act 2008 brought an amendment in the definition of Charitable Purpose in Section 2( 15) to include the First Proviso as detailed above. The definition of Charitable Purpose prior to the proposed amendment is as under: Charitable purpose includes relief of the poor, education, medical relief and the advancement of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lief to the poor, that consequently, the first provisio to Section 2(15) did not apply to the appellant, and that the appellant had satisfied the conditions of Section 11 (4A) for AY 2010- 11. The appellant is, therefore, eligible for exemption U/s 11 for A Y 2010-11 . 20. It was submitted that the since the issues raised by the DIT (E) have already been decided by an officer of the rank of the CIT (A), the DIT (E) has no jurisdiction to decide on the same issues. 21 The ld DR relied on the order of the DIT (E). 22. We heard both the parties. We find that circular dated 6.4.2011 clearly states that Sec. 12AA (3) is only operative w.e.f. A.Y 2011-12 onwards. In the case of DIT (E) vs. Moolchand Khairati Ram Trust (339 ITR 622) it has been held as follows: In sub-section (1) clause (b) and sub-section (3) of section 12AA of the Income Tax Act, 1961, cancellation of registration was provided where the registration was granted under clause (b) of sub-section (1). Further, cancellation under sub-section (3) was also provided where the registration was obtained at any time u/s 12A (whether under clause (a) or clause (aa) of sub-section (1) of section 12A). But this pow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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