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TMI Blog2025 (1) TMI 1413X X X X Extracts X X X X X X X X Extracts X X X X ..... d of "relief of the poor" for the purposes of the definition of "charitable purpose" u/s 2 (15) and for the purposes of computation of income and grant of exemption u/s 11 of the I.T. Act. That said, we do find force in the submission of Department that there was no enquiry by the authority below, with reference to the accounts and documents produced by the appellant/assessee, on the aspect of whether the appellant had in fact satisfied the requirement of application of income in terms of Section 11 for claiming the exemption. We feel that the assessment of the appellant/company under the I.T. Act for the assessment years 2017-18 and 2018-19 would not be complete unless the above exercise is also completed by the Assessing Officer. While allowing the I.T. Appeals therefore, by finding that the appellant would be entitled to the exemption u/s 11 as an entity providing relief of the poor, we remand the matter to the Assessing Authority to determine whether or not the appellant actually satisfied the requirement of application of income u/s 11 of the I.T. Act during the assessment years in question for the purposes of obtaining the benefit of exemption. Decided in favour of assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ganic farming Sector to ensure consistency and acceptability of standards with approval of appropriate authorities. 3. To buy, sell, resell, import, export, transport, store, develop, promote, market or supply, trade, deal in any manner whatsoever in all type of agro-products and related goods on retain as well as on wholesale basis in India or elsewhere." 3. The appellant filed Nil returns during the assessment years 2017-18 and 2018-19 respectively. The case of the appellant was however selected for scrutiny under Section 143 (2) of the I.T. Act, and after hearing the appellant, the assessment was completed for the said years by disallowing the claim for exemption under Section 11 of the I.T. Act and demanding substantial amounts towards tax, cess and interest. Penalty proceedings under Section 270A were also separately initiated. 4. Essentially, the Assessing Officer found that the appellant company had earned a net profit from its business activities and had declared Nil taxable income after application of its income under Section 11 of the I.T. Act. However, the Assessing Officer also found that the appellant did not satisfy the requirement of application of income for " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner or tenant or share proper. "Marginal farmer" refers to a farmer whose agricultural tract is upto 1 hectare for peasant farming. It is the case of the appellant that the small and marginal farmers residing in Wayanad, Kerala had obtained registration under the Organic Certification Standards implemented through the Agricultural and Processed Food Products Export Development Authority [APEDA], which is a body under the Ministry of Commerce and Industry, Government of India, and the said farmers were engaged in organic farming in accordance with the said Certification Program. Inasmuch as these small and marginal farmers found it almost impossible to sell their products as organic certified products in the national and international market, and they could not obtain organic certification on account of the stringent standards that were expensive to attain, they were being deprived of their rightful share in the national and international markets. It was in order to alleviate the hardship of such small and marginal farmers that the appellant sourced products from them by offering premium prices and marketing their products in India and abroad. After initially paying a base price for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there never was an application of income by the appellant/company to the extent envisaged under Section 11 of the I.T. Act and no proof was produced before the Tribunal to substantiate the said fact. It is pointed out that in the absence of any discussion by the Assessing Authority, the Appellate Authority or the Appellate Tribunal on the merits of the claim for exemption, the impugned orders did not require to be interfered with. 10. We have considered the rival submissions and also perused the pleadings in the appeals and the documents and precedents made available before us at the time of hearing. It is clear from the pleadings before us that the appellant/company is engaged in the activity of procuring agricultural produce at premium price and reselling the same in the domestic and international market. In tune with the main objects in the Memorandum of Association of the appellant/company it effectively prevents the exploitation of farmers by middleman. There is also sufficient indication that the appellant provides assistance in the form of crop saplings, manure, awareness programs related to organic farming and sustainable farming methods designed to preserve the ecolo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of actual carrying out of such advancement of any other object of general public utility; and (ii) the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year;" It is apparent from a reading of the definition of 'charitable purpose' that while it specifically includes "relief of the poor", it also includes as a residual category the "advancement of any other object of general public utility". In our view, a correct understanding of the scope of the definition would be to treat the first limb of the definition as referring to specific instances of charitable purpose and the last limb as a residual category encompassing therewith charitable purposes other than those that are specifically mentioned in the first limb. Accordingly, if we find that the activities of the appellant can be appropriately categorised under any of the categories falling in the first limb of the definition, then there is no occasion to look to the second limb of the definition. A reading of the definition, in its entirety also i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eived by it was given to poor and marginal farmers from whom they had sourced organic agricultural produce. In our view, the payment of such amounts to the poor and marginal farmers, if proved, would have led the authorities below to conclude that the activities of the appellant were carried on with the object of providing relief of the poor. They would have arrived at such a conclusion by looking at the activities of the appellant company in a holistic manner and against the backdrop of its stated objects in its Memorandum of Association. 12. The impugned order of the Appellate Tribunal that upholds the finding of the authorities below is therefore set aside and the appeals allowed to the extent of holding that the activities of the appellant/assessee have to be seen as falling under the head of "relief of the poor" for the purposes of the definition of "charitable purpose" under Section 2 (15) of the I.T. Act and for the purposes of computation of income and grant of exemption under Section 11 of the I.T. Act. 13. That said, we do find force in the submission of the learned counsel for the Department that there was no enquiry by the authority below, with reference to the accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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