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TMI Blog2017 (1) TMI 670X X X X Extracts X X X X X X X X Extracts X X X X ..... rried on by the assessee and held that the activities of the assessee are not for the “advancement of any other object of general public utility” and hence is not for charitable purposes in view of the second limb of the first proviso to section 2(15) of the Act. Respectfully following the decision of the jurisdictional High Court we see no reason to interfere with the order of the DIT (E). - Decided against assessee - ITA No. 869/Hyd/2012 - - - Dated:- 30-9-2016 - Smt. P. Madhavi Devi, Judicial Member And Shri S. Rifaur Rahman, Accountant Member For Assessee: Shri S. Rama Rao For Revenue: Shri V. Srinivas, DR ORDER Per Smt. P. Madhavi Devi, J. M. This is assessee s appeal against the order u/s 12AA(3) of the Act withdrawing the registration granted to the assessee u/s 12AA of the Act, dated 1.1.2004. 2. Brief facts of the case are that the assessee is a society registered u/s 12AA of the Income Tax Act, 1961, vide orders dated 01.01.2004. It was also granted registration u/s 10(23C)(iv) of the Act vide notification dated 11.03.2004. The CBDT recognized the assessee society as notified for the A.Ys 1995-96 to 1997-98 and treated it as a charitable instit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering assessee s contentions and also the objectives of the society has observed that the assessee is not carrying on the activities in accordance with the objectives of the society. He held that the assessee is rendering different services and is collecting various charges from traders/societies and therefore, these activities are in the nature of commercial activities carried out by the society and hence falls within the proviso to section 2(15) of the I.T. Act. Thus, observing that the assessee has lost its character as a charitable organization as it is not carrying out activities in accordance with the objectives of the society, he has withdrawn the registration u/s 12AA (3) of the Act. Aggrieved, the assessee is in appeal before us. 5. The learned Counsel for the assessee while reiterating the assessee s submissions before the authorities below submitted that the assessee is a society established by the Govt. of Andhra Pradesh in accordance with the Seeds Act of 1966 and after verification of charitable nature of its objectives only, it was granted registration u/s 12AA of the I.T. Act. He submitted that unless there is change in the society s objectives or the activities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... poses is exempt from tax u/s 12AA of the Act, the income from a particular source only is exempt from tax u/s 10(23C) of the Act. He submitted that whether the income is exempt u/s 11 needs to be verified annually, even though registration u/s 12AA is granted. 7. Having regard to the rival contentions and the material on record, we find that the assessee society has been granted registration u/s 12AA of the I.T. Act. The DIT (E) has sought to withdraw the registration granted u/s 12AA of the Act on two grounds i.e. (i) in view of the proviso to section 2(15) of the Act, the assessee society has lost its character as a charitable organization; and (ii) the assessee is not carrying on activities in accordance with the objectives of the society. As far as the first condition is concerned, we find that the CBDT circular dated 27.05.2016 has clarified that just because the provisions of section 2(15) comes into play, the registration granted to a charitable institution u/s 12AA of the Act need not be cancelled or withdrawn and the process of cancellation of registration is to be initiated strictly in accordance with the provisions of 12AA(3) and 12AA(4) of the Act and after carefully ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty: Provided that the 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: 16. A reading of the above provisions of the Income Tax Act show that income received by any person on behalf of an institution established for charitable purpose (as defined in Section 2(15) of the Act) which may be approved by the prescribed authority alone would be excluded from the total income of a previous year of such person under Section 10(23C) (iv) of the Act. While under the main part of Section 2(15) activities which involve relief of the poor, education, medical relief, preservation of environment (including water sheds, forests and wild life) and preservation of monuments or places or objects of artistic or historic interests, would automatically come within the purview of charitable purpose , activities which advance an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trade, commerce or business in the certified seeds by the client of the petitioner, the proviso to the said section would come into operation. Thus the petitioner's activity assists the sale of certified seeds and is in relation to any trade, commerce or business and therefore its activity cannot be held to be a charitable purpose . In this view of the matter, we hold that the 1st respondent rightly rejected the application of the petitioner for approval under Section 10 (23C) (iv) of the Act. 18. In the case of Agricultural Market Committee (supra), this Court held that an Agricultural Market Committee established under the Andhra Pradesh (Agricultural Produce and Livestock) Markets Act, 1966 is an institution established for charitable purpose entitled to be registered under Section 12A and 12AA of the I.T.Act and their income from property is not to be included in the total income of the previous year under Section 11 of the Act. After considering the provisions of the Act, the Division Bench of this Court held that the Agricultural Market Committees are constituted under the above Act for the sole purpose of protecting the interest of agriculturists, farmers and g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndum explaining the provisions in the Finance Bill, 2008 and the budget speech of the Minister of Finance for 2008-2009 delivered on 29-02-2008 extracted above clearly indicate that the first proviso to Section 2 (15) as extracted above was introduced by the Finance (No.2) Act, 2009 with effect from 01-04-2009 to exclude entities carrying on regular trade, commerce or business or providing services in relation to any trade, commerce or business and earning incomes from claiming to be engaged in activities for charitable purpose . 21. The Kerala High Court in Info Parks Kerala's case (supra) took note of the above events and held as follows: Yet another important aspect to be noted in this context is that, after the amendment by incorporating a proviso to Section 2(15), the fourth limb as to the advancement of any other object of general public utility will no longer remain as charitable purpose, if it involves carrying on of: (a) any activity in the nature of trade, commerce or business; (b) any activity of rendering any service in relation to any trade, commerce or business for a cess or a fee or any other consideration, irrespective of the nature of us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regulate the profession of chartered accountancy and to consider the application of the proviso of Section 2(15) of the Act introduced with effect from 01-04-2009. Although there is discussion in this case and also the other case (4 supra) on the subject, there is no finality attached to the above issue as in both cases the matter was remitted to the department to consider the application of the said institute for approval under Section 10 (23C) (iv) of the Act. Therefore they are of no assistance to the petitioner. 24. We are also of the view that the decision of this Court in New Noble Education Society's case (supra) is not applicable as the said decision relates to educational institutions claiming exemption under Section 10(23C)(vi) of the Act and the provisions of Section 2(15) of the Act were only referred to incidentally to hold that Section 2(15) is wider in terms than Section 10(23C)(vi) of the Act and that if the assessee's case does not fall within Section 2 (15) of the Act, it is difficult to consider the assessee as coming under Section 10(23C)(vi) of the Act. It is also observed that a certificate signed by the Commissioner of Endowments under Section 43 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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