Registration U/s. 80G(5)(vi) cannot be denied to charitable trust even if it is running some activity that yields profit

RELEVANT PARAGRAPH

5. Considering the rival submissions and after going through the impugned order, we are of the view that appeal by the assessee is to be allowed. The assessee’s counsel produced the deed of declaration of trust dated 4.11.82 by Brahmachari Nitya Chaitanya in paper book page 1 to 9, deed of rectification dated 10.11.82 in paper book page No. 10 and 11, Supplementary Deed of Trust vide pages 12 to 29, further supplementary deed of trust’ Prasanna Trust dated 25-8-2002 at page No. 30-32. The objects of the trust are mentioned at page 3 and 4 of the deed from a) to j). Item c) to promote education, f) to extend relief to the poor and needy in cash or in kind and g) to provide free medical relief and aid and to start, or take over and run hospitals and dispensaries for the above purposes. Supplementary deed evidenced by paper book page 12 to 29 explains objects of the trust.

5.1 We find considerable force in the argument of the learned counsel in the case reported in 101 ITR 234, which is relied by the leaned DR. The case does not support the stand of the revenue. One of the contention taken by the assessee’s counsel Shri Nani Palkhivala in that case was that words of definition in sec. 2(15) of the Act ‘not involving the carrying on of any activity for profit’ do not qualify the first three categories of object i.e., relief of the poor, education or medical relief but qualify only the fourth category i.e ‘advancement of any other general public utility’. In that case, it was further contended by the learned counsel that once object of the appellant trust is held to be education, the trust should be held to be for a public purpose as defined in sec. 2(15) of the Income-tax Act. It was further contended that in such an event, it would be immaterial whether the object of the trust involves or does not involve the carrying on of any activity for profit. Though the counsel advanced the above argument their lordship did not express any opinion on the point of the argument in holding as under: It is, in our opinion, not necessary to express an opinion in this case on the question as to whether the word “not involving the carrying on of any activity for profit” qualify the fourth object. The definition of ‘any other object of general public utility’, or whether they also qualify the other three objects of relief of the poor, education, and medical relief because we are of the view that the object of the appellant trust was not education but any other object of general public utility. Therefore, we are of the view that the decision relied on by the learned DR does not fully fit in to the facts in the instant case of the assessee.

6.1 The Board Circular No. 11/2008 mentioned above dated 19-12-2008, in fact accept the contention of the counsel that for the assessee in the case reported in 101 ITR 234 that was advanced before their lordships of the Honourable Supreme Court but their lordships refrained from answering, as it was not necessary for their lordships to go into that question, as their lordship held that the object of that assessee in that case was not ‘education’ as such. In this Circular vide para 2 and 3, Board explained the implication arise from the present amendment. It reads as under.

“The newly inserted proviso to section 2(15) will not apply in respect of the first three limbs of section 2(15), i.e relief of the poor, education or medial relief. Consequently, where the purpose of a trust or institution is relief of the poor, education or medical relief, it will constitute ‘charitable purpose’ even if it incidentally involves the carrying on of commercial activities.

Please become a Premium member. If you are already a Premium member, login here to access the full content.