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TMI Blog2018 (7) TMI 1478X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, in our considered opinion, there was no material which may suggest that the assessee association was conducting its affairs solely on commercial lines with the motive to earn profit. There is also no material which could suggest that the assessee association has deviated from its objects which it has been pursuing since past many decades. In our humble opinion and understanding of law, proviso to section 2(15) of the Act is not applicable to the facts of the case and the assessee-association deserves benefit u/s 11/12 of the Act. No reason to interfere with the findings of the first appellate authority. Ground No. 1 is accordingly dismissed. Allowance of depreciation - Held that:- This issue is now well settled in favour of the assessee and against the Revenue as relying on the case of Rajasthan and Gujarat Charitable Foundation [2017 (12) TMI 1067 - SUPREME COURT] as held that even though the expenditure incurred for acquisition of capital assets was treated as application of income for charitable purposes u/s 11A(1) of the Act, yet depreciation would be allowed on assets so purchased. Ground No. 2 is, accordingly, dismissed. - ITA No. 1130/DEL/2016 - - - Dated:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sports activities under the aegis of Ministry of Youth Affairs and Sports, Government of India and International Olympic Association. Utilisation certificates were regularly submitted by IOA in connection with such grants. While scrutinising the return of income for the year under consideration, the AO was of the firm belief that there has been significant amendment w.e.f. 1.4.2009 in the definition of charitable purposes laid down in section 2(15) of the Act. The AO was also of the firm belief that promotion of sports per se did not find direct mention in the definition of charitable purposes in section 2(15) of the Act. 5. The AO was of the opinion that the assessee has carried out the activities for the purposes of general public utility in the nature of trade, commerce or business. The basis for this belief is the receipt of income from sponsorship amounting to ₹ 86 lakhs received from M/s Samsung India Electronics Pvt Ltd for 2010 Asian Games and 2010 Youth Olympic Games. 6. The AO further formed a belief that this transaction of the assessee is in the nature of rendering services in relation to business of Samsung in lieu of consideration from Samsung India E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation, medical relief and the advancement of any other object of general public utility not involving the carrying on of any activity of profit. This provision remained unchanged till its amendment by the Finance Act, 1983 and with effect from 1.4.1984 not involving the carrying on of any activity of profit was omitted. The Section remained unchanged till it was amended by the Finance Act, 2008 w.e.f 1.4.2009. This means that till the amendment brought by the Finance Act, 2008 the Revenue was convinced that the assessee-trust was not carrying out any commercial activity in the garb of charitable purpose. The activities of the trust were genuine and were for the charitable purpose. 17. Now let us consider the provisions of Sec. 2(15) as they stand now. charitable purpose includes relief of the poor, education, medical relief, [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 the advancement of any other object of general public utility shall not be a charitable purpose, if it inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act 2008 in his budget speech stated as follows: Charitable purpose includes relief of the poor, education, medical relief and any other objects of general public utility. These activities are tax exempt as they should be. However, some entities carrying on regular trade, commerce or business or providing services in relation to any trade, commerce or business and earning incomes have sought to claim that their purpose would also fall under charitable purpose . Obviously, this was not the intention of the Parliament and hence, I propose to amend the law to exclude the aforesaid cases. Genuine charitable organizations will not in any way be affected. 22. Thus, the intention of the Hon ble Finance Minister was only to exclude from exemption, entities carrying on business and earning incomes for which exemption was claimed on the basis that the purpose would fall under charitable purpose. 23. The CBDT Circular No. 11/2008 dated 19.12.2008 has explained the implications arising from the amendment brought to the provisions of Sec 2(15) of the Act. The CBDT clarifies that the newly inserted proviso to Sec. 2(15) will not apply in respect of the first three limbs of Sec. 2( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income-tax 101 ITR 234, the Hon ble Justice J. Baig speaking for the Apex Court thus said that: If the profits must necessarily feed a charitable purpose, under the terms of the trust, the mere fact that the activities of the trust yield profit will not alter the charitable character of the trust. The test now is, more clearly than in the past, the genuineness of the purpose tested by the obligation created to spend the money exclusively or essentially on charity . 27. The test for carrying on of any activity in the nature of trade, commerce or business as mentioned in the first proviso to Sec. 2(15) would be satisfied if profit making is not the real object. The Hon ble Delhi High Court in the case of ICAI Vs Director General of Income Tax (Exem) 347 ITR 99 had the occasion to consider the grievance of the ICAI which was denied exemption u/s. 10(23C)(iv) of the Act because in the opinion of the DGIT (Exem.) the institute was holding coaching classes and therefore was not an educational institution, consequently the institute was covered under the last limb of charitable purpose i.e. advance of any other object of general public utility in the light of the amendment br ..... X X X X Extracts X X X X X X X X Extracts X X X X
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