INCOME TAX ACT, 1961

Section 2(15), Proviso 11

Charitable trust - Exemption under section 11 - Applicability of proviso to section 2(15) - Generation of incidental surplus - Profit making not being main motive of assessee

Assessee was a trust registered under section 12A having objects to breed the cattle and endeavour to improve quality of cows and oxen in view of need of good oxen and to hold and cultivate or get cultivated agricultural lands, to keep grazing lands, etc. It claimed exemption under section 11. AO denied exemption on the reasoning that object of Trust was for advancement of general public utility and Trust was taking money/consideration for same from State/Central Government and that consideration was not lump-sum or grant was on the basis of proper contract/agreement where everything had been decided specifically in proper business/professional manner. Thus AO held that case of assessee was hit by proviso to section 2(15). Held: As clarified by the CBDT in its Circular No. 11/2008, dated 19-12-2008 proviso to section 2(15) aims to attract those activities which are truly in the nature of trade, commerce or business but are carried out under the guise of activities in the nature of public utility. Profit making was neither the aim nor object of the Trust. It was not the principal activity. Merely because while carrying out activities for the purpose of achieving objects of Trust, certain incidental surpluses were generated, would not render the activity in the nature of trade, commerce or business. Accordingly, denial of exemption under section 11 was not justified.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2014-15

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