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TMI Blog2016 (4) TMI 708X X X X Extracts X X X X X X X X Extracts X X X X ..... al precedents as aforesaid, we are of the considered opinion that the assessee is engaged in providing relief to the poor, education as well as medical relief. We have no hesitation in holding that the activities of the assessee association fall within the ambit of the first three limbs viz. relief to the poor, education or medical relief and it will not be hit by the newly inserted proviso to section 2(15). Moreover, CBDT Circular no. 11/2008 dated 19th Dec, 2008 states that the commercial activity of any charitable trust will not be subject to tax if along with commercial activities it is engaged in providing relief of the poor, education, medical relief. Proviso to Section 2(15) will apply ONLY to entities whose purposes is advancement of any other object of general public utility. We have already held that the activities of the assessee association fall within the ambit of the first three limbs viz. relief to the poor, education or medical relief and it will not be hit by the newly inserted proviso to section 2(15). Accordingly, the benefit of this circular should also accrue to the assessee and, therefore, the benefit of exemption claimed by the assessee u/s 11 cannot be right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to conclude that charitable trusts with the general object of public utility are required to eschew any activity which is in the nature of trade, commerce or business or the rendering of any service in relation to any trade, commerce or business to remain charitable to continue registration u/s 12A of the Act. As per the Assessing Officer, the effect of the amendment to section 2(15) of the Act w.e.f. 01.04.2009 was that the trusts having object of advancement of any other object of general public utility could not do business even if they complied with the provisions of section 11(4A) beyond the gross revenue prescribed. The Assessing Officer also observed that the assessee had not maintained separate books of account for the business of running guest houses and canteens and hence the provisions of section 11(4A) were violated. He finalised the assessment at ₹ 42,62,080/- by treating the net surplus as business profits to be taxed at the Maximum Marginal Rate. 5. On an appeal before the Ld. First Appellate Authority, the assessee argued that the Assessing Officer was wrong in concluding that the assessee association was engaged in the 'advancement of any other object of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;>To take over the whole or any of the assets and liabilities of the unincorporated Association known as the National Young Women's Christian Association of India, Burma and Ceylon and the federation, development, and extension of Young Women's Christian Associations in India, and for such purpose the making (if necessary) of grants in aid to such Association. >To consider and discuss all questions affecting the interest of the Association. >To provide for the delivery of Lectures, the formation of classes and to take other suitable means for the promotion of the Spiritual, Intellectual, Physical and Social Well being of Young Women in India. >To purchase, hire or otherwise acquire for the purpose of the Association any real or immoveable and personal or moveable property and in particular any lands, buildings, furniture, house hold effects, utensils, books, news papers, periodicals, musical instruments, fittings, apparatus, appliances conveniences and accommodation, and so far as the law or the licence of the Local Government may from time to time allow to sell, demise, let mortgage or dispose of the same." 8. The Ld. AR submitted that YWCA of India is committed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. On an average, on daily basis, free food to about 100 poor patients and to 100 poor and marginalized hospital staff is being supplied. In addition, the canteen provides food at subsidized rates (50 - 40 percent below the normal rates) to about 200 hospital staff in the category of nursing staff, medical students and doctors. Not only this, food to patients' care-takers and visitors is also provided below the normal rates. It was further submitted that during the year from canteen accounts, sum of ₹ 1,00,000/- was donated to Salem YWCA for HIV/AID patients. Since the canteen is being run on charitable lines, it has the exemption from levy of VAT as per notification issued under Tamil Nadu General Sales Tax 1959. It was further submitted that apart from running the above canteen, the association also has commercial activity in the shape of running of guest houses in Delhi, Anandgiri and Wyoming. This commercial activity in the shape of running guest houses has been there for the last 50 years and never ever, excepting the year under consideration, this activity been disputed as not being charitable. In support, the Ld. AR drew our attention to the photocopies of assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was further submitted that the assessing officer side- stepping the charitable features has most arbitrarily concluded that the activities are wholly commercial and as a result has brought to tax the entire surplus of the association. He has also overlooked the clarifications provided by CBDT in its circular no. 11/2008 dated 19th Dec, 2008 which states that the commercial activity of any NGO will not be subject to tax if along with commercial activities it is engaged in providing relief of the poor, education, medical relief. He submitted that the newly inserted proviso to section 2(15) will apply only to entities whose purpose is 'advancement of any other object of general public utility' i.e. the fourth limb of the definition of 'charitable purpose' contained in section 2(15). He drew our attention to objects 4, 7 and 8 of the objects clause of the Memorandum which provide that the income and property of the shall be applied solely towards the promotion of the objects of the association as set forth in this memorandum and that no portion thereof shall be paid or transferred directly or indirectly by way of dividend, bonus or otherwise howsoever by way of profit to the members of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l submissions. The term "relief for poor" has assumed importance after the recent amendment regarding business activities of charitable organizations. The term "relief for poor" has to be understood in a wider perspective. For instance, it is not necessary that the object should be for the betterment of all the poor people living in a particular country or province. It would be sufficient if the objects are for the benefits of a section of the pubic as distinguished from individuals. It may be noted that in order to become charitable, the relief should be for a section of the community which could be well defined and identified by some common quality of public nature. The Hon'ble Supreme Court in the case of Thiagarajar Charities v. ACIT 225 ITR 1010 (SC) has held that the scope of "relief for poor" is very wide and it can even include business carried on for the benefit of the poor. In this case, the objects of the Thiagarajar trust were studied and debated whether they could be considered as "relief for poor." The objects of the trust which were held to be towards "relief for poor" were as under:- " a. To establish, maintain, run, develop, improve, extend, grant, dona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court in the case of Asstt. CIT v. Thanthi Trust 247 ITR 785. The Hon'ble Supreme Court held that even the business of weaving cloth and stitching clothing by employing women, carries on the business in the course of actually accomplishing its primary object of affording relief to the poor and it would qualify for the exemption under section 11. In this case the Hon'ble Apex Court held that, "..as it stands amended in 1992, all that is required under section 11(4A) for the business income of a trust or institution to be exempt from tax is that the business should be incidental to the attainment of the objectives of the trust or institution. A business whose income is utilized by the trust or Institution for the purposes of achieving the objectives of the trust or institution is a business which is incidental to the attainment of the objectives of the trust or institution is, surely, a business which is incidental to the attainment of the objectives of the trust. In any event, if there be any ambiguity in the language employed, the provision must be constructed in a manner that benefits the assessee. The trust is, therefore, entitled to the benefits of section 11 for the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s medical relief. We have no hesitation in holding that the activities of the assessee association fall within the ambit of the first three limbs viz. relief to the poor, education or medical relief and it will not be hit by the newly inserted proviso to section 2(15). 15. Moreover, CBDT Circular no. 11/2008 dated 19th Dec, 2008 states that the commercial activity of any charitable trust will not be subject to tax if along with commercial activities it is engaged in providing relief of the poor, education, medical relief. In this context, Para 2.1, 2.2, and 3 of the circular being relevant are being reproduced hereunder: 2.1 "The newly inserted proviso to section 2(15) will not apply in respect of the first three limbs of section 2(15), i.e., relief of the poor, education or medical relief Consequently, where the purpose of a trust or institution is relief of the poor, education or medical relief, it will constitute 'charitable purpose' even if it incidentally involves the carrying on of commercial activities." 2.2 "'Relief of the poor' encompasses a wide range of objects for the welfare of the economically and socially disadvantaged or needy. It will, therefore, include with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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