ACIT, TRICHY vs. PEOPLE ACTION FOR TRANSFORMATION (PAT) TRUST, TRICHY
What did the Tribunal hold?
The Tribunal found that the actual charitable activities of the assessee needed to be examined, especially since micro-financing was not explicitly stated as an object in the trust deed. The matter was remitted back to the Assessing Officer for re-examination.
What were the facts?
The assessee, a charitable institution registered under Section 12A, engaged in micro-financing activities. The revenue argued that micro-financing is not a stated object of the trust and falls under the proviso to Section 2(15), thus disentitling it to exemption.
What were the issues?
Whether the micro-financing activity of a charitable trust constitutes a business activity that disentitles it to exemption under Section 11, and whether the trust deed amendment requires prior approval.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI A. MOHAN ALANKAMONY
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
This appeal of the revenue is directed against the order of CIT(A), Tiruchirapalli dated 29.01.2014 and pertains to assessment year 2010-11.
Shri. N.Madhavan, the learned department representative submitted that the assessee is a charitable institution registered under Section 12A of the Act. Micro-financing is not one of the objects of the assessee trust. The learned department representative submitted that the assessee trust amended its trust deed without the approval of the director of income tax. Therefore, the assessee society has to lose its exemption under Section 11 of the Income Tax Act. Moreover, micro- financing is nothing but the bunnies of the assessee. Therefore, it would definitely fall under provision to Section 2(15) of the Act. Hence, the Commissioner has rightly confirmed the order of the assessing officer.
On the contrary, Shri S.Sridhar, the learned counsel for the assessee submitted that the object of the society is relief to the poor. In the course of carrying out the charitable activity, the assessee advanced money to the poor people for their upliftment. The assessing officer found that the activity of micro finance is in the nature of trade, commerce or business. Therefore, it cannot be considered to be a charitable activity. On appeal by the assessee, the CIT(A) confirmed the order of the assessing officer. According to the learned counsel, the activity of the assessee in advancing money to poor people will fall under the category of general public utility. Therefore, the assessee is liable for exemption under Section 11 of the Income Tax Act. Placing reliance of the decision of the Tribunal in ACIT Vs. M/s.Nanaya Surabhi Development Financial Services in ITA 2050/Mds/2014 and 393/Mds/2015 dated 24.08.2016, the learned counsel submitted that on identical circumstances, this Tribunal remanded back the matter to the file of the assessing officer to re-examine the matter.
We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, the assessee claims that the money was advanced to poor people for their upliftment. Therefore, it would fall under the category of ‘general public utility’. The fact that the trust deed was amended was not brought to the notice of the assessing officer or CIT(A). It is also not known what are the charitable activities carried on by the assessee. A bare reading of the copy of the trust deed filed by the assessee shows that micro finance is not the object of the trust. Therefore, it has to examine the actual charitable activity carried on by the assessee. In the absence of any material before this Tribunal, this Tribunal is of the considered opinion that the matter needs to be reconsidered by the assessing officer.
Accordingly, the orders of the lower authorities are set aside and the entire issue is remitted back to the file of the assessing officer for re- examination in the light of the material that may be filed by the assessee and bring on record the actual activities carried on by the assessee apart from micro finance and thereafter decide the same in accordance with law after giving an opportunity to the assessee.
In the result, the appeal of the revenue stands allowed for statistical purposes.
Order pronounced on 30th November, 2016 at Chennai.
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