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TMI Blog2017 (1) TMI 887X X X X Extracts X X X X X X X X Extracts X X X X ..... room are very nominal. This also indicates that there is no profit motive involved in this case. Thus it is apparent that the dominant motive in this case is not earning profit but to do charity in the form of public service by providing accommodation to the common man at affordable rates. The activities of the assessee, therefore, cannot be characterized as business activities. Hence, proviso to section 2(15) is not attracted in this case and, therefore, the disallowance of exemption u/s 11 & 12 is unjustified. The AO is, accordingly, directed to assess the society as per the provisions of section 11 & 12, and grant the requisite exemption. - Decided in favour of assessee. - ITA Nos. 901 & 902/JP/2016 - - - Dated:- 11-1-2017 - Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 20/03/2015. While framing the assessment, the Assessing Officer rejected the claim of the assessee for exemption U/s 11 12 of the Act thereby the surplus generated was added back to the income of the assessee. 4. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld. CIT(A), who after considering the submissions, partly allowed the appeal. Thereby, the ld CIT(A) allowed exemption U/s 11 and directed the Assessing Officer to assess the assessee society in accordance with the provisions of Section 11 and 12 of the Act. 5. Now the revenue is in appeal before us. The ld. Sr. DR has vehemently argued that the ld. CIT(A) was not justified in allowing the exemption and he supported the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cord. The assessee society being registered is governed by the provisions of Societies Registration Act, 1860 and now the Rajasthan Societies Registration Act, 1958 regulates the affairs of the societies established for charitable purposes. The AO noted that the activities of the assessee trust, its charitable purpose is that of advancement of general public utility. The AO placing reliance on the decision of Hon ble Jurisdictional High Court in the case of CIT vs. Paramhans Ashram Trust (2009) 184 Taxman 204 (Raj.) observed that the charitable purpose of the assessee society is that of advancement of general public utility. Thus, the assessee was required to explain as to why in view of the amended provisions of section 2(15), appropriate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of charitable purpose contained in section 2(15). Hence, such entities will not be eligible for exemption under section 11 or under section 10(23C) of the Act if they carry on commercial activities. Whether such an entity is carrying on an activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of the activity. There are industry and trade associations who claim exemption from tax u/s 11 on the ground that their objects are for charitable purpose as these are covered under any other object of general public utility . Under the principle of mutuality, if trading takes place between persons who are associated together and contribute to a common ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on its own facts and no generalization is possible. Assessees, who claim that their object is charitable purpose within the meaning of Section 2(15), would be well advised 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. It is, thus, clear from this Circular that exemption shall not be available to the entities who are engaged in commercial activities in the garb of charity. The issue, therefore, is as to whether the appellant is engaged in commercial activities or not. 4.2. As explained by Delhi High Court (133 ITR 470), for any activity to be defined as business , profit motive is an important factor. Profit motive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.3. Moreover, as held by the Apex Court in the case of Surat Arts Silk (121 ITR 1), what is important in the case of trust or institution is the primary or dominant purpose. If the dominant purpose is charitable, another object which by itself may not be charitable, would not prevent the trust or institution from being a valid charity. It is noted in this case that the charges for the room are very nominal, starting from a mere ₹ 40/-. This also indicates that there is no profit motive involved in this case. Considering all the legal and factual position, it is apparent that the dominant motive in this case is not earning profit but to do charity in the form of public service by providing accommodation to the common man at aff ..... X X X X Extracts X X X X X X X X Extracts X X X X
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