Case Law Details
Telangana State Seed Certification Agency Vs. CIT (Exemptions) (ITAT Hyderabad)
Hon’ble High Court has held that the assessee is rendering services in relation to trade commerce or business and since its income exceeded Rs. 25.00 lakhs, it cannot be treated as a charitable institution. This decision of the Hon’ble High Court is dated 17.12.2012. We find that there are amendments to section 2(15) subsequent to this date. Vide Finance Act of 2015 w.e.f. 1.4.2016, the cut off benchmark has been changed to 20% of the total receipts instead of the fixed limit of Rs. 25.00 lakhs as it existed earlier. Further, we also observe that vide Finance Act of 2012, a new sub-section 8 has been inserted u/s 13 to provide that such organization would not get the benefit of tax exemption in the particular year in which its receipts from the commerce activities exceeds the threshold limit whether or not the registration granted is cancelled and the amendment has been made retrospectively from 1.4.2009 and therefore, it applies to A.Ys 2009-10 on wards. The CBDT has also clarified that in view of this position, it shall not be mandatory, for the registration granted u/s 12AA of the Act to a charitable institution, to be cancelled merely on the ground that the cut off specified in the proviso to section 2(15) of the Act is exceeded in a particular year without there being any change in the nature of the activities of the institution and that, if in any particular year, the specified limit exceeds, the tax exemption would be denied to the institution in that year and cancellation of the registration would not be mandatory unless such cancellation become necessary on the ground(s) prescribed under the Act. Thus, it can be seen that the assessee is carrying on activity for advancement of any other object or general public utility, falling within the definition of “charitable purpose” as defined u/s 2(15) of the Act and may be eligible for exemption u/s 2(15) of the Act, in a year where it does not cross the cut-off percentage and may not be eligible for exemption in the year, in which it crosses the cut-off mark. Therefore, it cannot be made to seek registration u/s 12AA of the Act in each of the year where it shall become eligible to claim exemption. The Hon’ble High Court was considering the application u/s 10(23)(C) of the Act which would ultimately take the assessee out of the tax ambit, unless it violates the terms & conditions of such exemption.
The CIT (E) is supposed to consider the aims and objects of the society for grant of registration u/s 12AA of the Act. The Hon’ble High Court has held that the assessee’s activities falls under the activity of advancement of any general public utility and we are of the opinion that the registration u/s 12AA of the Act should be considered on its own merits. If the assessee is carrying on or is rendering any services with respect to any trade, commerce or business and crosses the threshold limit provided u/s 2(15) of the Act, then its income shall not be exempt from tax u/s 11 of the Act in the relevant A.Y. Therefore, we direct the CIT (E) to consider the aims and objects of the society and grant registration u/s 12AA of the Act if the assessee’s activities falls under the definition of charitable purpose u/s 2(15) of the Act without reference to the proviso there under. Therefore, assessee’s appeal is treated as allowed for statistical purposes.
RELEVANT EXTRACT OF ITAT JUDGMENT
This is assessee’s appeal against the order of the Commissioner of Income Tax (Exemptions), dated 29.04.20 16 rejecting the assessee’s application for grant of registration u/s 12AA of the Act.
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