Trust having ‘medical relief’ object eligble for exemption even if they incidentally carry on a commercial activity

IN THE ITAT AGRA BENCH

Samarpan Samiti

V/s.

Commissioner of Income tax-II, Agra

IT Appeal Nos. 427 (Agr) of 2011 &

36 (Agr) of 2012

JUNE 22, 2012

 ORDER

A.L. Gehlot, Accountant Member 

These are two appeals filed by the assessee against two different orders dated 21.09.2011 and 19.12.2011 passed by the ld. CIT-II, Agra under sections 80G and 12AA of the Income Tax Act, 1961 (‘the Act’ hereinafter) respectively.

2. In these appeals, one issue is against refusing to grant exemption under section 80G(5) of the Act and another issue is in respect of withdrawal of the registration granted to the assessee society under section 12AA of the Act.

3. As stated above, the effective ground raised in both the appeals pertain to withdrawal of registration granted to the assessee society under section 12A of the Act and refusing renewal of exemption under section 80G(5) of the Act. Both the grounds of appeal are on identical set of facts and, therefore, these are decided as under :-

4. The brief facts of the case are that the assessee Samiti is a registered Society with Registrar of Society U.P. The assessee Samiti granted registration under section 12A/12AA of the Act since 01.04.1993 vide order dated 05.04.1994. Exemption under section 80G was also granted upto 2011. The CIT noticed that the assessee Samiti carries on business of running a Blood Bank, X-ray Centre, Physiotherapy Centre, Homoeopathic Dispensaries etc. The CIT found that the services provided by the Society/Samiti are of commercial nature. The CIT also gone through the objects of the Samiti and found that the objects of the Samiti are not for medical relief but are for general public utility. The CIT rejected the assessee’s contention observing that section 2(15) are very clear and unambiguous stating that if the Samiti or Society involves to carry out any activities in the nature of trading, 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, irrespective of the nature of use or application, or retention, of the income from such Society. The CIT also examined the books of account of the society and noticed that every year the Samiti has substantial surpluses which shows that the work carried on by the Samiti has resulted in profits because of the fee charged by the Samiti, irrespective of nature of use of application of the income from such activity. The CIT withdrawn the registration under section 12A/12AA of the Act vide order dated 19.12.2011.

5. The assessee filed application for renewal of exemption under section 80G of the Act on 29.03.2011 as the original exemption granted under section 80G to the assessee was from 01.04.2008 to 31.03.2011. The CIT noted that the assessee has generated surplus income from its activities as under :-

6. The CIT found that the above income of the assessee is chargeable to tax as income from business and the activities of the assessee cannot be termed as being charitable purpose as defined under section 2(15) of the Act. The CIT held that the assessee is not entitled for grant of exemption under section 80G(5) of the Act.

7. The ld. Authorised Representative submitted that there is no change or deviation in basic activities of the society i.e. medical relief which is very much covered by “charitable purpose” as enumerated in section 2(15) of the Act. The Ld. Authorised Representative submitted that the society has been formed by seven individuals from different sections, having no relation or connection amongst them, not controlled by any particular family or section of society. No particular individual or member has any vested interest. It is also submission of the Ld. Authorised Representative that no asset or income of the society was available for the benefit of the members of the society. Ld. Authorised Representative submitted that the society was registered as charitable society under Societies Registration Act, 1860, since 17.02.1992. He further submitted that since its formation, the society is carrying on various activities which are in the nature of medical relief. Ld. Authorised Representative submitted that the society is running “Samarpan Blood Bank” with the object of providing blood after proper examination, to the needy patients, on exchange basis. Ld. Authorised Representative submitted that in due course of time, the Society enlarged its activities to following medical services:

  •  Providing blood, blood components, packed cells, FFP and platelets.

  •  Providing free blood, on regular basis, to the patients of Thalisemia and Hemophilia.

  •  Running X-ray centre where X-ray services are provided at substantially low rates.

  •  Running of Physiotherapy centre, providing various services to the patients at substantially low rates.

  •  Running 3 Homeopathic dispensaries where medicine is provided at Rs. 2/-per day only.

  •  Providing free medical Oxygen to the needy patients

  •  Running of medical health care centre where services of expert Orthopedic, Gynecology and ENT doctors are provided only at Rs. 30/-.

  •  Conducting free medical checkup and operation camps for the patients of Eye, Hernia, Gall Stone, and Breast Cancer etc.

8. Ld. Authorised Representative pointed out the statistics of medical relief/services provided by the society which is appearing at page no.2 of assessee’s Paper Book as under :-

9. In respect of activities of the society the Ld. Authorised Representative drew our attention to page 47 to 56 where copies of brochures in respect of medical camps and others have been placed.

10. Ld. Authorised Representative submitted that after formation of the society, the society started a Blood bank under the name and style of “Samarpan Blood Bank” with the object of providing blood after proper examination to the needy patients on exchange basis. Ld. Authorised Representative submitted that the blood bank was inaugurated by the then Hon’ble Governor of U.P. Ld. Authorised Representative drew our attention in respect of activities of the society which are stated at page no.176 of the Paper Book as under:-

  •  Providing blood, blood components, packed cells, FFP and platelets.

  •  Providing free blood, on regular basis, to the patients of Thalisemia and Hemophilia.

  •  Running X-ray centre where X-ray services are provided at substantially low rates.

  •  Running of Physiotherapy centre, providing various services to the patients at substantially low rates.

  •  Running 3 Homeopathic dispensaries where medicine is provided at Rs.2/-per day only.

  •  Providing free medical Oxygen to the needy patients

  •  Running of medical health care centre where services of expert Orthopedic, Gynecology and ENT doctors are provided only at Rs.30/-.

  •  Conducting free medical checkup and operation camps for the patients of Eye, Hernia, Gall Stone, and Breast Cancer etc.

11. Ld. Authorised Representative submitted that the amended section 2(15) of the Act defines the expression ‘charitable purpose’ to include relief of the poor, education, medical relief and the advancement of any other object of general public utility. Ld. Authorised Representative submitted that the said amendment to section 2(15) by the Finance Act, 2008 restricted the scope of the definition, by inserting a proviso effective from A.Y. 2009-10, providing that the ‘advancement of any other object of general public utility’ shall not be treated as ‘charitable purpose’ 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, irrespective of the nature of use or application, or retention, of the income from such activity. Authorised Representative submitted that the objective behind this amendment was explained by the Finance Minister in paragraph no.180 of his Budget speech on 29.02.2008.

12. Ld. Authorised Representative has also drew our attention to C.B.D.T. Circular No.11/2008 dated 19.12.2008 wherein the applicability of the commercial activities in respect of charitable purpose has been clarified.

13. Ld. Authorised Representative submitted that in the Circular it is clearly pointed out that the amendment to section 2(15) is applicable only to the fourth limb of the definition i.e. ‘advancement of any other object of general public utility’ and not to other activities in the field of relief to the poor, education or medical relief.

14. Ld. Authorised Representative submitted that prior to Assessment Year 1984-85, the words ‘advancement of any other object of general public utility’ were qualified by the words ‘not involving the carrying on of any activity for profit’. The Hon’ble Supreme Court of India in the case of Addl. CIT v. Surat Art Silk Cloth Manufactures Association [1980] 121 ITR 1 observed that where the purpose of a trust or institution is relief to poor, education or medical relief, the requirement of definition ‘charitable purpose’ would be fully satisfied. Ld. Authorised Representative submitted that the medical relief under section 2(15) does not stipulate that there should be actual facility for physical treatment of patients. Term “medical relief” has a wide meaning and covers all activities viz., diagnostic, pathological, curative, rehabilitation and all supportive services that may alleviate the sufferings of a patient or an ill person. Ld. Authorised Representative submitted that proving blood, medical oxygen, physiotherapy, X-ray facility, medical check up, operation camps and running of Homeopathic dispensaries are all fully covered under the scope of “medical relief”.

15. In respect of surplus fund, Ld. Authorised Representative submitted that the Act no where provides that the activities carried out for charitable purposes should not generate any surplus. No charitable organization can manage its affairs in such a way that the activities terminate at zero figure or expenses should be equal to the receipts. The law, while providing for accumulation of surplus to the extent of 15% of the gross receipts, also recognizes his fact.

16. Ld. Authorised Representative relied upon the order of I.T.A.T., Lucknow Bench in the case of Chaturvedi Har Prasad Educational Society v. CIT [2010] 134 TTJ 781/[2011] 45 SOT 108 (URO) and submitted that in the said order the I.T.A.T. has clearly stated that a registration granted to any trust or society under section 12A/12AA can be cancelled under section 12AA (3) only on condition that the CIT is satisfied that the activities of such trust or institution are not genuine or not being carried out in accordance with the objects thereof. Ld. Authorised Representative submitted that in the case of assessee’s society, neither the activities have been changed nor objects have been changed since the registration has been granted under section 12A/12AA of the Act. Ld. Authorised Representative also relied upon the judgement of the Apex Court in the case of Surat Art Silk Cloth Manufactures Association (supra), and the Hon’ble Mysore High Court in the case of CIT v. Sole Trustee, Loka Shikshana Trust [1970] 77 ITR 61.

17. Ld. Authorised Representative also relied upon the following decisions:-

(i)  CIT v. Sarvodaya Ilakkiya Pannai [2012] 206 Taxman 115/20 taxmann.com 546 (Mad.) (Mag.)

(ii)  ABC Trust v. ITO [1977] 4 TTJ 1391 (JP)

(iii)  DIT v. Maruti Center for Excellence [2012] 21 taxmann.com 474 (Delhi).

(iv)  Chaturvedi Har Prasad Educational Society (supra)

(v)  Baba Gandha Singh Education Trust v. CIT [2012] 20 taxmann.com 111 (Chd.)

(vi)  H.P. Government Energy Development Agency v. CIT [2010] 7 taxmann.com 69 (Chd.)

(vii)  Rajasthan Housing Board v. CIT [2012] 51 SOT 383/21 taxmann.com 77 (JP).

(viii)  Harnam Singh Harbans Kaur Charitable Trust v. DIT (Exemption) [2012] 49 SOT 387/17 taxmann.com 103 (Delhi)

(ix)  CIT v. Red Rose School [2007] 163 Taxman 19 (All.)

(x)  Tishir Shiksha Prasar Samiti v. CIT [2012] 21 taxmann. com 525 (Agra)

18. Ld. Departmental Representative submitted that the CIT has power to withdraw the registration granted under section 12A/12AA of the Act if the CIT finds that the trust is not carrying out charitable activities. He further submitted that the CIT has also power to refuse renewal of exemption under scion 80G of the Act. Ld. Departmental Representative while referring the order of CIT submitted that after grant of registration under section 12A/12AA, the CIT found that the assessee is not carrying out charitable activities in accordance with the amendment under section 2(15) of the Act. The CIT found that the assessee trust was carrying on activities which are business/trade in nature. Ld. Departmental Representative relied upon the order of CIT.

19. We have heard the ld. Representatives of the parties and records perused. The issue is to be examined in the case under consideration whether under the facts and circumstances the CIT was having power under section 12AA(3) for cancellation of registration of the trust, institution or Samiti granted under section 12A/12AA of the Act. To examine the relevant scheme of the act, we would like to refer section 12A and 12AA of the Act and relevant CBDT Circulars which are as follows:-

“12A. Conditions for applicability of sections 11 and 12.

12A (1) The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely :

(a)  the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the Commissioner before the 1st day of July, 1973, or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution, whichever is later and such trust or institution is registered under section 12AA.

        **                                        **                                         **”

Procedure for registration.

12AA. (1) The [***] Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) [or clause (aa) of sub-section (1)] of section 12A, shall –

(a)  call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and

(b)  after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he-

(i)  shall pass an order in writing registering the trust or institution;

(ii)  shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant :

Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard.

[(1A) All applications, pending before the Chief Commissioner on which no order has been passed under clause (b) of sub-section (1) before the 1st day of June, 1999, shall stand transferred on that day to the Commissioner and the Commissioner may proceed with such applications under that sub-section from the stage at which they were on that day.]

(2) Every order granting or refusing registration under clause (b) of sub-section (1) shall be passed before the expiry of six months from the end of the month in which the application was received under clause (a) [or clause (aa) of sub-section (1)] of section 12A.]

[(3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) [or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)]] and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution:

Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.]

FINANCE (NO. 2) ACT, 1996 – CIRCULAR NO. 762, DATED 18.2.1998-

“Registration of charitable and religious trusts-

19.1 Under the existing provisions of the Income-tax Act, exemption from income-tax in respect of the income of a charitable or religious trust or institution is available only if the conditions specified in that section are satisfied. One of these conditions if that the person in receipt of the income shall make an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the Chief Commissioner or Commissioner of Income-tax within the specified time. However, there was no provision in the Income-tax for processing of such an application and granting or refusal of registration to the concerned trust or institution.

Finance (No. 2), Act, 1996

19.2 Hence the Act now provides for a procedure to be followed for grant of registration to a trust or institution. According to this procedure, the Chief Commissioner or Commissioner shall call for documents and information and conduct enquiries to satisfy about the genuineness of the trust or institution. After he is satisfied about the charitable or religious nature of the objects and genuineness of the activities of the trust or institution, he will pass an order granting registration. If he is not so satisfied, he will pass an order refusing registration. However, an opportunity of being heard shall have to be provided to the applicant before an order of refusal to grant registration is passed by the Chief Commissioner or Commissioner. The reason for refusal of registration shall also have to be mentioned in that order. The order granting or refusing registration has to be passed within six months from the end of the month in which the application for registration is received by the Chief Commissioner or Commissioner and a copy of such order shall be sent to the applicant.”

20. Sub-section (3) of section 12AA provides that if subsequently the Commissioner is satisfied that the activities of such trust/Samiti are not genuine, or are not being carried out in accordance with the objects of the trust/Samiti, the sub-clause (3) of section 12AA inserted w.e.f. 1st October 2005 gave power of cancellation of registration to the CIT. This power has been conferred to the CIT(A) to save the misuse of exemption provision. Thus for exercising power of cancellation of registration under section 12A/12AA on the following conditions:-

(i)  That the trust or society has already been granted registration under section 12A/12AA of the Act.

(ii)  The CIT subsequently found and satisfied that :-

(a)  activities of such trust or institution are not genuine, or

(b)  are not being carried out in accordance with the objects of the trust or institution.

21. As regards the genuineness of the activities of the trust or institution whose objects do not run contrary to the public policy and are, in fact, related to charitable purposes, the CIT is empowered to make enquiry as he thinks fit. In case the activities are not genuine and they are not being carried out in accordance with the object of the trust or society or Samiti, of course, the registration can be cancelled but on mere presumption and on surmises that income derived by the trust is a surplus income cannot be the basis for cancellation of the registration granted under section 12A/12AA of the Act. As regards the application of income and surplus of the income, sufficient safe-guards having been given under sections 11, 12 & 13 of the Act assessing the income which has not been applied to the purpose of trust or institution, insertion of the law and maker and the scope and purport of provisions is apparent while considering the question of registration and cancellation of the registration.

22. In the case under consideration, the objects of the Samiti remain same since grant of registration under section 12A/12AA of the Act. The original trust deed is in Hindi of which copy has been placed at page nos. 9 to 28 of the assessee’s Paper Book. The English translation of the same has been filed which is placed at page nos.186 to 195 of the Paper Book. For the purpose of ready reference the object of the Samiti is reproduced from memorandum of article of the Samiti from page 187 of the assessee’s Paper Book is as under :-

 1.  Service to Humanity

 2.  Free help of poor/destitute

 3.  To create an atmosphere of brotherhood and harmony.

 4.  Intellectual development

 5.  Any other activity to achieve the above objects.

23. The relevant dissolution clause 16 at page no 195 reads as under:-

“16. Dissolution and disbursement of asset of Samiti after dissolution

In case of financial crisis, improper conduct, non-compliances of objects or any legal hurdles, the could be Samiti dissolved the information of which will be given to Asstt. Registrar and all other members and the proceedings will be conducted as per the provisions of section 13 and 14 of The Societies Registration Act.

All the assets of Samiti (cash, movable and immovable) will be vested in any other registered charitable trust with prior consent of the members in general meeting. No member will have any personal rights on the Samiti’s assets.”

24. The assessee furnished English translation of activities of the Samity in brief for different years of which copy has been placed at page 201 and 202 of the assessee’s Paper Book. For the purpose of ready reference the same is reproduced as below :-

“1. Samarpan Blood Bank

It was inaugurated by Hon’ble Governor Shri Ramesh Bhandari Ji on 27 July, 1996. Initially, the license for only whole blood supply was received. Then in year 2002 blood bank received the license for extracting & supply of various blood components i.e. packed cells, platelets and F.F.P, and in June 2007 received the license for platelets aferisis. Blood is provided only on exchange basis but in certain emergency cases it can be given without any exchange. Blood received in exchange or donation, after finding for blood group, is diagnosed for Hepatitis B, C, A.I.D.S., V.D.R.L., Malaria parasite and Hemoglobin etc. and for this purpose hi-tech computerized diagnostic machine ‘E.C.I’ is used.

For supply of blood components, Samiti uses world renowned machines. Currently in Agra region, Samarpan Samiti is the only Samiti which started using component G-4 machine of Fresenius Co. of Germany. With the help of this machine extracted blood components are free of white blood cells that help in prevention from reaction during transfusion. We have four imported machines for preparing jumbo packs from word renowned companies i.e. two of Fanwall Co., one of Fresenius and one of Himonatics, which can be used for preparing jumbo pack for 4 patients at the same time.

2. Samarpan Thalassemia & Hemophilia Relief Society

Thalessemia is genetic blood disease which a child inherits from its parents. In Thalassemia, the child lacks normal Hemoglobin count due to which it needs regular blood transfusion during whole life. There is no successful cure of this decease. A child’s death is certain if blood is not transfused regularly.

Samiti has registration of 65 children suffering from this decease and provides blood to them free of cost and without condition of exchange. Samarpan Blood Bank provides around 90 to 100 units of blood to these children per month.

3. Samarpan X-Ray Center

Samarpan X-Ray Center was inaugurated in Dec., 2006. X-Ray service is provided at approximately 50% cost that of market rate i.e. Rs. 80/- and Rs. 90/- along with Doctor’s report. About 5371 patents have already benefited from this service.

4. Samarpan Physiotherapy Center

It was inaugurated in Dec., 2008 physiotherapy service is provided under the guidance of qualified doctors at a well equipped and mechanized center at very concessional rates (only Rs. 150/- per week). Services are provided for Short wave diathermy 500W, Gout, Back-pain, Knee-pain, Arthritis; Paraffin wax bath for frozen shoulders, joint pains, frozen joints after operation; ultrasonic tennis-elbow, muscle stimulator for frozen & weak muscles; traction machine with table for spondolitis; Inter Ferentian (IFT) for paralysis; parallel walking bars and for improving walking style.

Till now, 600 patients have benefited from these services.

5. Samarpan Homeopathy Dispensary (Khandari, Delhi Gate and Karmyogi Enclave, Kamla Nagar)

Samarpan Samiti is managing homeopathy dispensary for last so many years quite successfully. Medicines are provided by well qualified Doctors only for Rs. 2/- per day. At present 3 such Homeopathy Dispensaries are managed at Agra – 1. Khadari 2. Delhi Gate and 3. at Karmyogewar Mandir, Kamla Nagar, Agra.

6. Samarpan Free Medical Oxygen Supply

Under this service, patients are provided with free medical oxygen as per their needs. The service is totally free of cost.

7. Samarpan Health Care Center

It was inaugurated on 16 Jan. 2011, at which Specialized Doctors can be consulted at only Rs. 30/-. At the center service is provided by Dr. Yogesh Bindal, in orthopedics, Dr. Alka Bindal in gynecology and Dr. Vikrant Singhal in ENT.

Apart from this, Samiti conduct operations for female patients (stone in gallbladder, hernia, breast cancer, uterus) free of cost with full facility. In the same manner, eye checkup, providing spectacles and operation of cataract are conducted by senior surgeons.

Samiti has been honoured by various organizations for its noble activities as under:

 (a)  Achal Trust, Agra – 05/05/2002

 (b)  Agrawal Sangathan, Kamla Nagar, Agra – 2003-04

 (c)  Moon TV Network – 17/11/2007

 (d)  Kalyan Karoti Sanstha, Mathura – 03/12/2009

 (e)  Sarrafa Panchayat, Agra – 13/03/2011

 (f)  Bharat Vikas Parishad ‘Sankalp’ – 27/09/2011″

25. The main objection/reason for cancellation of registration granted under section 12A/12AA of the CIT was that the assessee was charging fee and the assessee has surplus in activities. The activities of the assessee Samiti was in the nature of trade, commercial or business. Therefore, according to CIT the activities of the trust is charitable as defined in amended to section 2(15) of the Act. In this regard, we would like to refer object behind the amendment in section 2(15) of the Act which has been explained by the Finance Minister in paragraph no.180 of his Budget speech on 29.02.2008. The relevant portion of speech pointed out by the Ld. Authorised Representative is reproduced as below from page nos.178 to 179 of assessee’s Paper Book:-

“180. ‘Charitable purpose’ includes relief of the poor, education, medical relief and any other object of general public utility. These activities are tax exempt, as they should be. However, some entities carrying on regular trade, commerce or business or providing services in relation to any trade, commerce or business and earning incomes have sought to claim that their purposes would also fall under ‘charitable purpose’. Obviously, this was not the intention of Parliament and, hence, I propose to amend the law to exclude the aforesaid cases. Genuine charitable organisations will not in any way be affected.”

While replying to the debate on the Finance Bill, 2008 on 29th April 2008, the Finance Minister again clarified the position about this amendment as under:-

“Clause 3 of the Finance Bill, 2008 seeks to amend the definition of ‘charitable purpose’, so as to exclude 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, irrespective of the nature or use of application, or retention, of the income from such activity. The intention is to limit the benefit to entities which are engaged in activities such as relief of the poor, education, medical relief and any other genuine charitable purpose, and to deny it to purely commercial and business entities which wear the mask of a charity.”

“I once again assure the House that genuine charitable organisations will not in any way be affected. The CBDT will, following the usual practice, issue an explanatory circular containing guidelines for determining whether an entity is carrying on 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. 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 and their activities would continue to be regarded as ‘advancement of any other object of general public utility.'”

26. We may also refer a C.B.D.T. Circular No.11/2008 dated 19.12.2008 wherein the applicability of the commercial activities in respect of charitable purpose has been clarified. The said circular is reproduced as below:-

“2.2. ‘Relief of the poor’ encompasses a wide range of objects for the welfare of the economically and socially disadvantaged or needy. It will, therefore, include within its ambit purposes such as relief to destitute, orphans or the handicapped, disadvantaged women or children, small and marginal farmers, indigent artisans or senior citizens in need of aid. Entities who have these objects will continue to be eligible for exemption even if they incidentally carry on a commercial activity, subject, however, to the conditions stipulated under section 11(4A) or the seventh proviso to section 10(23C) which are that –

 (i)  the business should be incidental to the attainment of the objectives of the entity, and

(ii)  separate books of account should be maintained in respect of such business.

Similarly, entities whose object is ‘education’ or ‘medical relief’ would also continue to be eligible for exemption as charitable institutions even if they incidentally carry on a commercial activity subject to the conditions mentioned above.

3. The newly inserted proviso to section 2(15) will apply only to entities whose purpose is ‘advancement of any other object of general public utility’ i.e. the fourth limb of the definition of ‘charitable purpose’ contained in section 2(15). Hence, such entities will not be eligible for exemption under section 11 or under section 10(23C) of the Act if they carry on commercial activities. Whether such an entity is carrying on an activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of the activity.”

27. After examination of the activities of the assessee, Samiti and after considering above C.B.D.T. Circular, we find that the admitted facts of the case under consideration are that the assessee, Samiti is carrying on the activities in respect of medical relief. We find that Samiti/ institution/entities whose object is ‘education’ or ‘medical relief’ would continue to be eligible for exemption as charitable institutions even if they incidentally carry on a commercial activity. The newly inserted proviso to section 2(15) will apply only to entities whose purpose is ‘advancement of any other object of general public utility’ i.e. the fourth limb of the definition of ‘charitable purpose’ contained in section 2(15). Thus, there is no basis for satisfying the CIT that the activities of the trust are not genuine and they are not being carried out in accordance with the object of the trust/society. Since the conditions laid down for cancellation of registration under section 12AA (3) are not satisfied, therefore, we are of the considered view that the CIT is not empowered for cancellation of registration under section 12A/12AA of the Act of the assessee, Samiti.

28. In the light of the above discussions, we hold that the CIT has wrongly cancelled the registration granted to the Samiti under section 12A/12AA of the Act. We, therefore, set aside the order of CIT on the issue. Following the above discussions, we also find that the CIT has wrongly refused to renew exemption under section 80G of the Act to the assessee. The CIT is therefore, directed to allow continuation of registration under section 12A/12AA and also allow renewal of the exemption under section 80G of the Act to the assessee in the light of the above discussions.

29.In the result, both the appeals of the assessee are allowed.