Saturday, April 26, 2014

No IT relief to trust if its business receipts exceeded threshold; yet its registration couldn't be revoked

Where gross receipts of a charitable institution from its business exceeds prescribed limit, it will not be entitled for exemption or other admissible tax benefits for relevant year only; however its registration as charitable institution will continue.
a)  The assessee, a textile promotion council, was registered as a charitable trust. Its activities were falling under the category of 'advancement of any other objects of general public utility' as per definition of 'charitable purpose' given under section 2(15);
b)  The Director (Exemption) had cancelled the registration of assessee as he noticed that the assessee was carrying out activities in the nature of trade, commerce or business, etc., and its gross receipts therefrom were in excess of prescribed limit.
c)  The aggrieved-assessee filed the instant appeal.
The Tribunal held in favour of assessee as under:
1)  Merely because income of a registered charitable trust from ancillary activities of business crosses prescribed limit, that by itself cannot be a ground for cancellation of its registration invoking section 12AA(3);
2)  If income arising out of the activities is not in accordance with the objects of the trust, the assessee may not get the exemption under section 11.
3)  Thus, for the previous year, during which the gross receipt of income of trust crossed the prescribed limit, it would not get exemption or benefit of its being charitable in nature despite its charitable activities;

4)  Therefore, the impugned order of the Director (Exemptions) was to be set aside and the registration granted to assessee under section 12A was to be restored.- Cotton Textiles Exports Promotion Council v. DIT (Exemption) [2014] 44 168 (Mumbai - Trib.)