9911796707
TMI BlogCHARITABLE PURPOSEX X X X Extracts X X X X X X X X Extracts X X X X ..... CHARITABLE PURPOSE - By: - Mr. M. GOVINDARAJAN - Income Tax - Dated:- 7-8-2024 - Section 2(15) of the Income Tax Act, 1961 ( Act for short) defines the expression Charitable purpose as including relief of the poor, education, yoga, 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. The advancement of any other object of general public utility ( GPU for short) 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, co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmerce 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, unless- such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and the aggregate receipts from such activity or activities during the previous year, do not exceed 20% of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year. Case laws Activities incidental to main object In M/S. A.V.M. CHARITIES VERSUS THE INCOME TAX OFFICER, EXEMPTIONS WARD-1, CHENNAI. - 2024 (4) TMI 835 - ITAT CHENNAI , the Tribunal held that the activity of running Kalyanamandap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am by the assessee is incidental to the attainment of main objects, and is covered by provisions of Sec. 11(4) of the Act. Since, the assessee Trust is maintaining separate books of accounts for the activity of running of Kalyanamandapam and said activity is in the nature of attainment of main objects, in the view of the Tribunal the provisions of Sec. 11(4A) of the Act, is not applicable to the assessee, and thus, the Assessing Officer and the Commissioner of Income Tax (Appeals) erred in rejecting exemption under section 11 of the Act. Thus, the Tribunal reversed the findings of the Commissioner of Income Tax (Appeals) on this issue and direct the Assessing Officer to allow the benefit of exemption under section 11 of the Act, to the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee for the assessment years 2012-13 to 2018-19. Not carrying charitable activities In M/S. CREDIT GUARANTEE FUND TRUST FOR MICRO AND SMALL ENTERPRISES, SIDBI VERSUS INCOME TAX OFFICER, DCIT (E) -1, MUMBAI - 2023 (11) TMI 1107 - ITAT MUMBAI , the ITAT held that mere charging of guarantee fees for services by the assessee trust ipso facto is not sufficient to invoke the proviso to section 2(15) of the Act, that too without establishing that the object and purpose of the assessee is profit motive. Had it been so the assessee trust would not have been running into deficit of about Rs. 400 crores every year. So, in these circumstances the impugned findings returned by the Commissioner of Income Tax (Appeals) that since the assessee is charging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guarantee fee on substantial scale, it is not carrying out any charitable activities, hence not entitled for benefit of section 11 and 12 of the Act are not sustainable, hence set aside. General Public Utility In COMMISSIONER OF INCOME TAX (EXEMPTIONS) VERSUS AHMEDABAD URBAN DEVELOPMENT AUTHORITY - 2023 (9) TMI 986 - GUJARAT HIGH COURT , the High Court held that as per revenue, the assessee is involved in widespread commercial activities in nature of business and the activity of the assessee is covered under proviso to section 2(15). Statutory Corporations, Boards, Authorities, Commissions, etc. (by whatsoever names called) in the housing development, town planning, industrial development sectors are involved in the advancement of objects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of general public utility, therefore are entitled to be considered as charities in the GPU categories. The determinative tests to consider when determining whether such statutory bodies, boards, authorities, corporations, autonomous or self-governing government sponsored bodies, are GPU category charities. As long as the concerned statutory body, corporation, authority, etc., while actually furthering a GPU object, carries out activities that entail some trade, commerce or business, which generates profit (i.e., amounts that are significantly higher than the cost), and the quantum of such receipts are within the prescribed limit [20% as mandated by the second proviso to Section 2(15) ] the concerned statutory or government organizations can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be characterized as GPU charities. It goes without saying that the other conditions imposed by the seventh proviso to Section 10(23C) and by Section 11 have to necessarily be fulfilled. In the course of its functioning, it collects fees, or any consideration that merely cover its expenditure (including administrative and other costs plus a small proportion for provision) - such amounts are not consideration towards trade, commerce or business, or service in relation thereto. However, amounts which are significantly higher than recovery of costs, have to be treated as receipts from trade, commerce or business. It is for those amounts, that the quantitative limit in proviso (ii) to Section 2(15) applies, and for which separate books of accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt will have to be maintained under other provisions of the IT Act. It is now concluded that the respondent is an authority involved in the advancement of objects of general public utility, and therefore, is not precluded from claiming exemption. The appeal is, accordingly, dismissed. In M/S. SAE INDIA VERSUS THE INCOME TAX OFFICER- (EXEMPTIONS) , WARD-4, CHENNAI - 2024 (1) TMI 149 - ITAT CHENNAI , the Tribunal held that as per proviso to Sec. 2(15) of the Act, the advancement of any other object of General Public Utility shall not be a charitable purpose , if it involves carrying on 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 fees or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cess and further, the aggregate receipt from such activity during the previous year, exceeds 20% of the total receipt of the Trust or Institution. In the present case, undoubtedly, the objects and activities of the Trust are in the nature of trade, commerce or business and hit by proviso to Sec. 2(15) of the Act. Therefore, the assessee entitlement for exemption needs to be examined in light of gross-receipts and receipts from the activity of trade, commerce or business. General Test In ASSISTANT COMMISSIONER OF INCOME TAX (EXEMPTIONS) VERSUS AHMEDABAD URBAN DEVELOPMENT AUTHORITY - 2022 (10) TMI 948 - SUPREME COURT the Supreme Court held that pure charity in the sense that the performance of an activity without any consideration is not env ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isioned under the Act. If one keeps this in mind, what Section 2(15) emphasizes is that so long as a GPU s charity s object involves activities which also generates profits (incidental, or in other words, while actually carrying out the objectives of GPU, if some profit is generated), it can be granted exemption provided the quantitative limit (of not exceeding 20%) under second proviso to Section 2(15) for receipts from such profits, is adhered to. An assessee advancing general public utility cannot engage itself in any trade, commerce or business, or provide service in relation thereto for any consideration ( chess, or fee, or any other consideration ). - Scholarly articles for knowledge sharing authors experts professionals Tax Manage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
