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TMI Blog2011 (5) TMI 1143X X X X Extracts X X X X X X X X Extracts X X X X ..... .f. Assessment Year 2005-06 was held to be carrying out the activities for charitable purposes which was sought to be reviewed the learned CIT in his order under the provisions of Section 12AA(3) vide his order dt.1.2.2011 that in view of the amended provisions of Section 2(15), the assessee Society carrying microfinance business could no more be considered elligible for exemption u /s.11 of the Act. He thereafter concluded that the object of the society can no more be treated as charitable in nature against which no finding has been noted by the learned CIT in his order. However, cancelling the registration w.e.f. 1.4.2009, the learned CIT has held that the assessee shall not be entitled for exemption from the charge of income tax in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not the intention of the Legislature in creating the proviso to establish that the assessee had suddenly started carrying on commercial activities. The learned Counsel for the assessee perused the order of the learned CIT wherein on page 7 of his order he has tabulated the amount of interest received for the Assessment Year 2005-06 to 2009-10 and the interest paid and the financial cost for the said years leaving a balance in excess of Rs.10 lakhs which being income over expenditure was to be considered not as a trading activity insofar as these activities have been carried out in the past years as well. In support of his contention, the learned Counsel for the assessee has submitted a compilation of the decisions when microfinance act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f registration/s.12AA of the Act, what the authorities have to be satisfied is the genuineness of the activities of the trust or institution and how the income derived from the trust property is applied to charitable or religious purpose and not the nature of the activities by which the income was derived by the trust. The learned Counsel for the assessee therefore vehemently argued that hitherto microfinancing carried out by the assessee trust was borrowing from banks at a certain percentage of interest and giving by way of loan to destitute women and other general public who would require to stand on their own feet by making them responsible for the money so advanced to them by charging token interest was purely a charitable activity and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furtherance of the activity of advancing loans on interest which alone interest could be considered as not pertaining to the charitable activities. Under the provisions of Section 11 no controverting material has been brought on record by the CIT that such surplus exceeded the permissible limit as provided in law. Therefore, linking the surplus to the non-charitable activities in planning out the charitable one by the learned CIT was considered in his detailed order refusing registration u/s.12AA on the basis of amendment of the proviso to the said Section defining "charitable purposes" [Sec.2(15) ] w.e.f. Assessment Year 2009-2010. He prayed that the order of the learned CIT be cancelled. 4. The learned DR supported the order of the learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on-charitable on the basis of surplus identifiable as interest only. Obviously the assessee is said to have borrowed the amounts from banks and gives to the ultimate borrower by becoming a co-borrower, stands guarantee, surety by paying certain charges to that effect. Insofar as the lenders are concerned they have not given money for charitable purpose which the assessee has identified itself of carrying out the charitable activities. Earning of interest becomes incidental for governing and controlling all the funds as utilized cannot be isolated to derive a trading or commercial activity therein. We find merit in the contention of the learned Counsel for the assessee that having received various grants for the charitable purposes from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntinue the same in view of the fact finding by the learned CIT on page 8 of his order when the excess of income over expenditure does not indicate that it was the surplus from a non-charitable activity. The funds created for the purpose of utilization thereof has already been approved by the Assessing Officer under the separate provisions of the Section 11 against which no controverting material has been brought on record by the learned CIT. The amounts received from the financial institutions and the amounts distributed as loan to carry out its activities therefore falls in balance to commensurate to the main object of the assessee trust which has not been disturbed or pointed any fault with by the learned CIT in his order. We fully endors ..... X X X X Extracts X X X X X X X X Extracts X X X X
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