Kalanjiam Development Financial Services Vs ITO (Exemptions) (Madras High Court)
Madras High Court held that main object of the Charitable Trust being microfinance is not eligible which is not charitable in nature cannot claim the benefit of exemption either under Section 11(1) or under Section 11(4A) of the Income Tax Act.
Facts- The Appellant is a “Charitable Trust” engaged in lending money to self-help groups, claimed exemption u/s. 11(4A) of the IT Act. The said activity of lending money carried out by the Appellant is recognized as a microfinance by the Finance Ministry. The Appellant charged processing fees ranging between 2% to 2.5% on the amount lent to such borrowers who approached the Appellant through self-help groups. On the aforesaid income from processing fees collected, the Appellant claimed exemption u/s. 11(4A) of the IT Act, which has been denied.
Conclusion- Held that the main objective of the Appellant/Assessee itself is microfinance i.e., to do lending operation in the microfinance sector to earn commission ranging from 2% to 2.5%. It is not charitable in nature. The business carried on by the Appellant/Assessee by lending operation is not incidental to the attainment of the objectives of the Appellant/Assessee as a “Charitable Institution”. Rather, it is main business object. Therefore, the Appellant/Assessee cannot claim the benefit of exemption either under Section 11(1) or under Section 11(4A) of the IT Act
