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Recently, many industry organisations in the country have received notices from the Income-tax department asking them to pay advance tax because the amendment to Section 2(15) in the last Budget made them ineligible for the exemption meant for entities working for “charitable purpose.” As per the new definition of charitable purpose in Finance Act 2008, advancement of any object of public utility, which was earlier considered to be “charitable purpose,” is now not so 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, commerce or business, for a cess or fee or any other consideration…”
The industry bodies are however contesting the notices citing the remarks made by finance minister P Chidambaram while replying to the debate on Finance Bill 2008 in parliament. He assured the House that “genuine charitable organisations will not in any way be affected” by the amendment and that the CBDT would issue an explanatory circular containing guideline for determining whether an entity is a genuine charitable organisation. He had further said, “Whether the purpose is a charitable purpose will depend on the totality of the facts of the case. Ordinarily, chambers of commerce and similar organisations rendering services to their members would not be affected by the amendment…“ However, the CBDT has since not issued any explanatory circular to clarify the matter. And the chambers and industry bodies who received notices from the I-T department are a worried lot.
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