CCPPEE 88 HHOOUURRSSTWO DAYS RESIDENTIAL REFRESHER COURSE ON

CO-OPERATIVES & NPO SECTORSDATE: MAY 3RD& 4TH, 2013

VENUE: COMBERMERE HOTEL, THE MALL, SHIMLA

ORGANIZED BY: COMMITTEE FOR COOPERATIVES & NPO SECTORS OF ICAI HOSTED BY: HIMACHAL PRADESH BRANCH OF NIRC OF ICAI AT SHIMLA

Day: 1 Friday, May 3rd, 2013

Inauguration Session(10:00 A.M – 11:00 A.M)

TEA (11:00 A.M – 11:15 A.M)

Technical Session I (11:15 A.M – 01:15 P.M)

Issues relating to FCRA, 2010Speaker: CA Rajesh Sethi, New Delhi

LUNCH BREAK (01:15 P.M – 02:00 P.M)

Technical Session II (02:00 P.M – 03:00 P.M)

Discussion on the recent issues on FCRASpeaker: CA Rajesh Sethi, New Delhi

TEA (03:00 P.M – 03:15 P.M)

Sight Seeing

Day: 2 Saturday, May 4th, 2013

Technical Session IV(09:00 A.M – 11:00 A.M)

Recent Controversies in Charitable Trust Taxation and Allied IssuesSpeaker: CA. Kapil Goel, New Delhi

TEA (11:00 A.M – 11:30 A.M)

Technical Session V(11:30 A.M – 01:00 P.M)

Discussion on Taxation of NPO SectorsSpeaker: CA. Kapil Goel, New Delhi

LUNCH BREAK (01:00 P.M – 02:00 P.M)

Technical Session VI(02:00 P.M – 3:30 P.M)

Professional Opportunity in Cooperatives & NPO SectorsSpeaker: CA C.J.S Nanda, CCM

Valedictory Session(03:30 P.M – 04:00 P.M)

RRC Chairman

CA. Anuj Goyal,

Chairman

Committee for Cooperatives & NPO Sectors, ICAI

RRC Director

CA. Charanjot Singh Nanda

Central Council Member, ICAI

CA. Atul Kumar Agrawal

Central Council Member, ICAI

Participation Fee: 1.For Participants ( NOT AVAILING ACCOMODATION)

Registration Fee

Members - Rs. 1000 per Member

Spouse - Rs. 750 per day

Per Children (above 12 years of age) - Rs.750 per day

Per Children (above 2 years upto 12 years of age) - Rs.750 per day

Per Children (upto 2 years of age) - NIL.

2.For Participants (AVAILING ACCOMODATION)

Rs. 2000 per participant per day on twin sharing basis in addition to the registration fees mentioned above.

Delegate fee by way of Cheque / DD drawn in favour of H.P. Branch of NIRC of ICAI Shall be sent to Chairman, Himachal Pradesh Branch of NIRC of ICAI, ICAI Bhawan,1st Floor, SidhhiVinayak Apartment, Near Petrol Pump, Vikas Nagar, Shimla-171009, Contact No. 09418016250, Email ID idhawan@yahoo.co.in)

Limited Seats, Registration on First Come First Serve Basis.

For Registration & further details, please contact

CA. I. J. Dhawan (Convener)

Chairman, Himachal Pradesh Branch of NIRC of ICAI

+91 94180 16250 / idhawan@yahoo.co.in

or

CA. Ravi Awasthi (Co-convener)

Secretary, Himachal Pradesh Branch of NIRC of ICAI

+91 93188 10630

at

ICAI Bhawan, 1st Floor, ShidhiVinayak Apartment

Near Petrol Pump, Vikash Nagar

SHIMLA – 171 099 (H.P.)

Ph. (+91) (177) 2808 461, 2652 285, 2627 120

Email – himachal_pradesh@icai.org

Fax- (+91) (177) 2629 100

About the Committee for Co-Operatives & NPO Sectors

The Committee for Co-operatives and NPO Sectors is a non-standing Committee of the Institute of Chartered Accountants of India formed under the regulatory provisions of the Chartered Accountants Act, 1949. The Committee has been constituted to identify issues and opportunities in the Co-operatives and NPO sectors and equip members and other stakeholders to find a new niche for themselves and as well as maintaining and developing the core competencies in the Co-operatives and NPO sectors.

Thrust areas of the Committee is to suggest suitable reforms in the statutes regarding cooperatives and NPOs, promote uniform accounting framework for Cooperatives and NPOs and to promote good governance, best practices and prudent financial management in the Cooperatives and NPOs.

The Committee for Co-operatives and NPO Sectors adopt effective tools for building credibility, transparency, accountability and ultimately trust within the organization like Awareness and Capacity Building Programs, Interacting with other organizations/groups, Nationwide networking through State Task Forces.

The Committee is working under the able Chairmanship of CA. Anuj Goyal, M.Com: LL.B; FCA; FCS; FICWA; DISA (ICAI); DIRM (ICAI). He is a Central Council Member of the Institute of Chartered Accountants of India since 2004 and presently, serving as Chairman, Committee for Co-operatives and NPO Sectors, Committee on Management Accounting and Committee on Public Finance, ICAI. Also was the Chairman of Professional Development Committee, Committee on Trade Laws and WTO of the Institute of Chartered Accountants of India. Also served as Chairman of various other Committees of the ICAI since 2004 viz, Expert Advisory Committee, Research Committee, Committee on Insurance and Pension and Committee on Public Finance & Government Accounting. His more than 20 years post qualification experience is valuable for the committee. He has also presented papers and presentations on various topics of contemporary interest at various Seminars, Conferences and Workshops across the country and worked as editor-in-chief & editor of various publications of professional interest. He is specialized in handling multidiscipline practice in taxation matters at all levels, company law matters, BIFR matters, central statutory audit, branch statutory audit, concurrent audit, revenue audit, information system audit, internal audits, network audits, audits of Government Companies and PSUs, audits of insurance sector etc.

Members of the Committee for Co-Operatives & NPO Sectors Committee Members

CA. Anuj Goyal, Chairman

CA. Tarun Jamnadas Ghia, Vice Chairman

CA. Subodh Kumar Agrawal, President (Ex-Officio)

CA. K. Raghu, Vice-President (Ex-Officio)

CA. Nihar Niranjan Jambusaria

CA. Shiwaji Bhikaji Zaware

CA. G. Sekar

CA. Shyam Lal Agarwal

CA. Vijay Kumar Garg

CA. Atul Kumar Gupta

CA. Charanjot Singh Nanda

Shri Bhaskar Chatterjee

Shri Salil Singhal

Shri Sidharth K. Birla

Shri Sunil Kanoria

Co-opted Members

CA. Madhu Sudan Sawdia

CA. Kamlesh J Rathod

CA. Santosh Kumar Muchhal

CA. Suresh Kejriwal

CA. Aghor Kumar Dudhwewala

Terms of Reference of the Committee for Co-Operatives and NPO Sectors

1. To suggest suitable reforms in the statutes regarding Co-operatives and NPOs. 2. To promote uniform accounting framework for Co-operatives and NPOs.3. To formulate guidelines for state-wise auditors empanelment to interact with the concerned

authorities.4. To promote good governance, best practices and prudent financial management in the Co-

operatives and NPO sectors/ mutually aided Co-operative Societies [MACS]/ Self help groups/clusters and federations.

5. To promote social audit concept in the NPO and Co-operative Sectors and conduct awareness programmes for the benefit of the stakeholders.

6. To provide technical and governance inputs through training, workshops, resource materials, publications to the management personnel and members of Governance of Co-operatives and NPO Sectors.

7. To constitute an award/recognition for corporate social responsibility initiative by any NPO/Co-operatives/Corporates.

8. To support the initiatives of the State and Central government and corporations in this sector. 9. To develop necessary technical guides and publications for the benefit of Co-operative banks, Co-

thrifts and credit societies and other Co-operatives as a national movement. 10. To develop a knowledge portal providing information regarding subsidies and other support

received by the NPOs from the State and the Central Government and to promote various government initiatives to implement social welfare schemes of the NPO Sector and facilitate sharing of knowledge regarding Governance, legal compliance and best practices in financial management.

11. To help the government in monitoring financial discipline in the NPO sector by prescribing transparent guidelines and procedures including documentation and evidence of actual work done and to advise the government on limitations to be imposed on administrative and other expenditures of the NPOs specially those incurred out of government grants.

12. To suggest recommendation on issues related to the Foreign Contributions Regulation Act, 2010, Rules , regulations and guidelines framed there-under and any other laws affecting this sector with a view to ensure smooth flow of funds on one hand and national security and national interest on the other.

13. To conduct Certificate Courses on Regulatory and Accounting aspects of NPO Sectors.

About the Himachal Pradesh Branch of NIRC of ICAI

The idea of establishing branch of NIRC of ICAI at Shimla was converted into reality when “HP Branch of NIRC of ICAI” was formally inaugurated on 14th April 1990. This was a historic moment for the members of HP Branch; a souvenir was also brought out on the occasion. The messages giving best wishes from many dignitaries including Hon’ble Governor of HP, Chief Minister of HP Sh. Shanta Kumar & other Ministers, Chairman CBDT, Joint Secretary, Dept. of Company affairs Govt. of India, President & Vice President of ICAI and Chairman & Secretary NIRC were published in the Souvenir. The first Managing Committee of the branch comprised of the following members

1. CA S.K. Soni Secretary & Treasurer 2. CA Ashok Vij Vice Chairman 3. CA Harish Kumar Member 4. CA J. Shrinivasan Member 5. CA Rajiv Ahuja Member 6. CA Vijay Kumar Jain Nominated (Member NIRC of ICAI) 7. Late CA S. C Butail Chairman

HP Branch of NIRC of Institute of Chartered Accountants of India is among few branches serving to the members of geographically scattered area of Himachal Pradesh comprising 12 districts.

HP Branch of NIRC of ICAI was initially established as Shimla Association of Chartered Accountants in a rented premises, (later shifted to owned premises in the year 1996), and the same was converted into Branch in the year 1990. The strength of members in practice gradually increased with the opening of new opportunities such as Tax Audit / Service Tax etc. The number of members in practice in HP has now grown many folds since inception of Branch.

Now against the 63 years of existence of the ICAI, the branch is in existence for over 22 years. Like other organisations, the Branch has seen many ups and downs but made steady development with the sincere, focused and dedicated efforts of the members who were given the responsibility to serve & lead the organisation from time to time.

Branch has conducted numerous workshops / Seminars on various topics of interest of the members during the last over 22 years, apart from teleconferences being conducted by the Institute on regular basis.

HP Branch has organized an Exclusive workshop for Himachal Pradesh PSU’s on Revised schedule VI of Companies Act.

Branch is also working in close association with HP State Cooperative department, and facilitated them with the finalization of panel of firm of Chartered Accountants for allotment of Audit of Cooperative Societies and Cooperative Banks. Even the Branch has played a vital role in fixation of reasonable Audit fees

During the last over 22 years numerous eminent personalities have visited our Branch on various occasions, prominent among them is CA. Amarjeet Chopra ji during the year 2009 & 2010 in the capacity as Vice-President and President respectively

Setting up of examination centre in Shimla for aspiring CA students was among major development in the history of Branch.

ITT lab in the Branch was established in the year Jan 2009, since than 36 batches comprising of 150 students have successfully completed IT training, which includes students from Nepal as well.

Orientation Programme was also started in Aug 2009 and successfully organised 12 programmes comprising of 118 students.

HP Branch also conducted GMCS Programme for CA Final Students in Feb 2012 having 10 students.

HP Branch has also been conferred with various awards including Best Chairman award for the year 2004-05 (under the Chairmanship of CA. R.P.Chaudhary) & 2007-08( under the Chairmanship of CA. Rakesh Kaushal) and also Best commendable Branch (small) for the year 2012 (under the Chairmanship of CA. Sachin Doger) In recent Branch election held in February 2013, following office bearers were unanimously elected for the term 2013-16

1. CA. Homi Chatterji Treasurer 2. CA. I.J.Dhawan Chairman 3. CA. Ravi Awasthi Secretary 4. CA. Rohit Karol Vice Chairman 5. CA. Shiv Kumar Garg Executive Member 6. CA. Yogesh Verma Executive Member

Faculty Profile

CA. CHARANJOT SINGH NANDA

CA. C.S.J Nanda is a Central Council Member of ICAI. He is graduate from Kurukshetra University and was placed in Merit List in all three years. He has done his CA in 1991. He was in the merit list with 35th rank in CA Intermediate exam. He is a practicing Chartered Accountant since 1991 and his expertise areas include Capital Market, Banking, Human Relation Management, Corporate Laws, Taxation, Audit and Management Consultancy. He served in various committee of ICAI in various capacities and now he is Chairman of Continuing Professional Education Committee and Research Committee of ICAI. CA C.S.J Nanda also served various Governmental and non-governmental organizations in various capacities. These organizations include Securities and Exchange Board of India, Ministry of Corporate Affairs, South Asian Federation of Accountants Committee on Professional Accountants in Business, and of course the Institute of Chartered Accountants of India and its regional councils.

He is and has been the member of various non-standing committees of ICAI. He is the author of “Apractical guide on Audit Documentation for Statutory Bank Branch Audit”.

He contributed as a Guest Faculty and Program Coordinator at various Seminars and Conferences organized by International Bodies and Northern India Regional Council of ICAI, WIRC, CIRC, EIRC, SIRC and Branches and Study Circles of ICAI.

He has made presentations on various topics a few are, Overview of the proposed GST Regime in India and its comparative analyses, Overview of IAS 12 on Income Taxes and IAS 18 on Revenue, Overview of Financial Accounting and Auditing Standards : IFRS , ICAI, INTOSAI & IPSAS , The Business World of The 21st Century and its Demands On Education” for DPS Society, Accounting Standard - 11 : The Way Forward, Overview of IFRS, WTO & Trade Laws, Capital Markets in India, Derivatives: Future & Options, Financial Frauds and Means to Combat them, Professional Opportunities for Members and many more.

Faculty Profile

CA. RAJESH SETHICA. Rajesh Sethi, a graduate from Delhi University, has had over 25 years of experience in professional service. A Chartered Accountant of 1987 batch has been associated with JC Bhalla and Company as partner. His area of expertise includes financial audits, business and corporate law and income tax consulting and business valuations. He has been involved with a number of CAG audits including BSNL, BHEL, Engineering Projects India, Delhi State Civil Supply Corporation, National Small Industries Corporation etc. He has rich experience in Bank and Insurance audits having conducted Central statutory audits of Indian Bank, Andhra Bank, United Bank of India, Central Bank of India, Bank of Maharashtra and Insurance audits of Aviva Life Insurance, DLF Pramerica Life and Bharti Axa General Insurance. He has extensive experience in Cooperative and NPO sectors having worked for Indian Farmers Fertiliser Cooperative Limited (IFFCO), Indian Farm Forestry Development Cooperative Limited (IFFDC), The Dalai Lama Charitable Trust, The Leprosy Mission Trust, Bharti Foundation, Indian Society of Soil Science (ISSS) and Indian Association of Parliamentarians on Population and Development (IAPPD). He is thoroughly conversant with the new FCRA 2010. He is a member of the Institute of Internal Auditors and All India Management Association. He is ICAI Certified Valuer. He is holding Diploma in Information Systems Audit awarded by ICAI. Besides, he is also on the panel of the Peer Review Board of the Institute of Chartered Accountants of India. He has been a prolific speaker on a variety of topics concerning the CA profession at various seminars organised by CIRC and NIRC and their branches/study circles. He also acts as a faculty for ICAI’s post qualification Valuation course. He is a widely travelled person. As part of the ICAI’s overseas study tour in the year 2008, he visited various South Asian countries and gave a presentation to the Institute of Certified Public Accountants of Singapore on Indian Tax and Corporate Laws. He has also been conferred with the Best Speaker Award in Banking and Finance by NIRC of ICAI for the year 2009-10.

Faculty Profile

CA. KAPIL GOEL

Mr. Kapil Goel, B. Com. from Delhi University (2003), LLB. from Meerut University (2006) and Fellow member of ICAI (Nov 2004) is a practicing Advocate at Delhi High Court. His expertise lies in Direct Tax litigation and prompt in-depth analysis of latest Case Laws. He is a member of Direct Tax Representation committee in All India Federation of Direct Tax Practitioners for interaction with CBDT and Ministry of Finance and was awarded as best speaker emerging talent (Direct taxes) by NIRC-ICAI (2011) addressed more than 450 seminars in Bar Associations and Training in Corporate and ICAI branches/ Study Circles/ Regional Councils/Direct tax Committee etc. He has addressed trainings of Sr. IRS officers (CIT’s/Add CIT’s/ Asst CIT’s etc) in the northern region & has addressed more than 600 sr. officers in income tax department in northern region incl. Intl tax division.

He has represented more than 500 cases at appellate authorities’ incl. ITAT and High Court level. Mr. Goel has been in service with M/s T.R.Chadha & Co., KPMG (Corporate Direct Taxation) and PwC (Direct Tax Litigation). During his service tenure, he has extensively worked on both domestic and international (Treaty) Direct Taxation issues, relating to various industries. Presently, Mr Goel is actively practicing at High Court; ITAT and CIT-A level on various direct tax issues. His articles on tax related issues have been published in reputed magazine/newsletter etc. such as PHD Chamber of Commerce, TIOL, Taxmann, NIRC - Newsletter, Mum ITAT Bar Website (ITATONLINE), CAPJ, TIOL, Indian Express etc.

Introduction to Co-operatives & NPOs

1. COOPERATIVE

Cooperative Society means an institution registered with Indian Co-operative Societies Act, 1912 or Relevant acts of states.INDIAN CO-OPERATIVE SOCIETIES ACT, 1912 defines a cooperative "as a society which has its objective the promotion of economic interest of its members in accordance with co-operative principles".

Basic Principles of Cooperatives

1) Voluntary and Open Membership

2) Democratic member Control

3) Member Economic Participation

4) Autonomy and Independence

5) Education, Training and Information

6) Co-operation among Co-operatives

2. NON PROFIT ORGANIZATIONS (NPOs)

(a.) SEC 25 COMPANY: As per COMPANIES ACT, 1956, Section 25 companies are those companies which are formed for the sole purpose of promoting commerce, art, science, religion, charity or any other useful object and have been granted a license by the Central Government recognizing them as such. Such companies should intend to apply its profits, if any or other income only in promoting its objects and must also prohibit payment of dividend to its members. Thus there are three criteria for determining whether a particular company is section 25 company or not:

Its objects should be only to promote commerce, art, science, religion, charity or any other useful object.

It should intend to apply its profits or other incomes only in promoting its objects; and

“Central government should have granted a license to such a company recognizing them as such".

(b.) TRUST: Trust means an institution register with Indian Trusts Act 1882 or Relevant acts of states.According to INDIAN TRUSTS ACT 1882: A trust is an obligation annexed to the ownership of property and arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of another, or of another and the owner. The subject matter of trust is called 'trust property' or ‘trust-money. The ‘beneficial interest’ or ‘interest of the beneficiary’ is his right against the trustee as the owner of trust-property. The instrument by which trust is declared is called as ‘instrument of trust’.

(c.) SOCIETY: Society means an institution registered with Indian Societies Registration Act 1860. As per SOCIETIES REGISTRATION ACT 1860, societies can be registered for the following objective:

1. For Charitable.

2. For Military orphan

3. For promotion of science, literature, or the fine arts.

4. For the diffusion of useful knowledge, the diffusion of political education.

5. For foundation or maintenance of libraries or reading rooms.

6. For other works of art, collection of natural history, mechanical and philosophical inventions, instruments or designs.

Basic Principles of NPOs

1) Voluntary and Open membership

2) Democratic member Control

3) No Profit Object

4) Autonomy and independence

5) For social/charitable purpose

6) Service to the society at large

Comparison between Co-operatives & NPOs

S.No. COOPERATIVE SOCIETY NPO

SEC.25COMPANIES

SOCIETY TRUST

(i.) STATUTE Co-Operative Societies Act, 1912 Companies Act, 1956

SocietiesRegistrationAct 1860

IndianTrusts Act 1882

(ii.) JURISDICTION Registrar of Co- operative Societies for the State or, and may appoint persons to assist such Registrar.

Registrar of companies

Registrar of societies

Charitycommissioner

(iii.) OBJECTS Promotion of the economic interests of its members in accordance with co- operative principles, creation of funds to be lent to its members.

Non profit activities

literacy,scientific and charitable

Charitable,sociallybeneficial

(iv.) MAIN DOCUMENTS

By laws Memorandum and articles of association

Memorandumof association and articles, rules and regulations (by laws)

Trust deed

(v.) NUMBER OF MEMBERS

Minimum ten above the age of eighteen years

Minimum two and no upper limit

Minimumseven and no upper limit

Minimumtwo and no statutorylimit

Registration Procedure of Cooperatives & NPOs

1. COOPERATIVE SOCIETIES

Procedure for registration of a Multi-state Cooperative Society:

The co-operative societies, with objects not confined to one state and serving the interests of members in more than one state for social and economic betterment of its members through self-help and mutual aid in accordance with the co-operative principles are considered Multi State Cooperative Society.

An application for registration shall be made to the Central Registrar of co-operative Societies which shall be accompanied by:

Four copies of the proposed Bye-laws of the Multi state cooperative society duly signed by each of the persons who sign the application. Name of the proposed multi state cooperative society.Head Quarters and address to be registered.A list of persons who have contributed to the share capital, together with the amount contributed by each of them, and the admission fee paid by them. Area of operation. Main objectives A certificate from the Bank or banks stating the credit balance in favour of the proposed multi state cooperative society. A scheme showing the details explaining how the working of the multi state cooperative society will be economically sound and the registration of such multi state cooperative society will be beneficial for social and economic betterment of its members through self-help and mutual aid in accordance with the co-operative principles. Certified copy of the resolution of the promoters which shall specify the name and address of one of the applicants to whom the Central Registrar may address correspondence under the rules before registration and dispatch or hand over registration documents. The application shall be signed by in the Form 1:a. In the case of a multi state cooperative society of which all the members are individuals, by at

least fifty persons from each of the states concerned. b. In case the members are Cooperative Societies, by duly authorised representatives on behalf

of at least five such societies as are not registered in the same state; c. In case the members are other Multi-State Cooperative Societies and other Cooperative

Societies, by duly authorised representatives of each of such societies; however, not less than two of the co-operative societies referred to in this clause, shall be such as are not registered in the same State.

d. If the members are cooperative societies or multi-state Cooperative societies and individuals, by at least (i) fifty persons, being individuals from each of the two states or more and; (ii) one Cooperative society each from two states or more or one Multi-state Cooperative society.

Registration Procedure of a State Co-operative Society

A joint application along with the bye laws of the society containing the details about the society and its members has to be submitted to the registrar of cooperative societies of the concerned state and shall be accompanied by -

a) Application with the signature of all members. b) By laws of the society containing Name, address and aims and objective of the society. c) Names addresses and occupations of members mode of admitting new membersd) Share capital and its division.

2. NON PROFIT ORGANIZATIONS

Formation of Society under The Societies Registration Act, 1860:

Under section 1 of the Societies Registration Act, 1860, any seven or more persons associated for any literary, scientific, or charitable purpose, or for any such purpose as is described in section 20 of this Act, may, by subscribing their names to a memorandum of association, and filing the same with Registrar of Joint-stock Companies form themselves into a society under this Act.

The memorandum of association shall contain the following –the name of the society; the object of the society;the names, addresses, and occupations of the governors, council, directors, committee, or other governing body of the society (Section 2).

A copy of the rules and regulations of the society, certified to be a correct copy by not less than three of the members of the governing body, shall be filed with the memorandum of association (Section 3).

Creation of Trust

A public charitable trust is usually floated when there is property involved, especially in terms of land and building.

Legislation : Different states in India have different Trusts Acts in force, which govern the trusts in the state; in the absence of a Trusts Act in any particular state or territory the general principles of the Indian Trusts Act 1882 are applied.

Main Instrument : The main instrument of any public charitable trust is the trust deed, wherein the aims and objects and mode of management (of the trust) should be enshrined. In every trust deed, the minimum and maximum number of trustees has to be specified. The trust deed should clearly spell out the aims and objects of the trust, how the trust should be managed, how other trustees may be appointed or removed, etc. The trust deed should be signed by both the settlor/s and trustee/s in the presence of two witnesses. The trust deed should be executed on non-judicial stamp paper, the value of which would depend on the valuation of the trust property.

Trustees: A trust needs a minimum of two trustees; there is no upper limit to the number of trustees. The Board of Management comprises the trustees.

Application for Registration: The application for registration should be made to the official having jurisdiction over the region in which the trust is sought to be registered.

After providing details (in the form) regarding designation by which the public trust shall be known, names of trustees, mode of succession, etc., the applicant has to affix a court fee stamp of Rs.2/- to the form and pay a very nominal registration fee which may range from Rs.3/- to Rs.25/-, depending on the value of the trust property.

The application form should be signed by the applicant before the regional officer or superintendent of the regional office of the charity commissioner or a notary. The application form should be submitted, together with a copy of the trust deed.

Two other documents which should be submitted at the time of making an application for registration are affidavit and consent letter.

Registration of Companies registered u/s 25 of Companies Act, 1956

1. Apply for Name approval in Form 1A in particular manner. 2. Draft memorandum and article of association have to be filed with Regional Director for approval.

3. The institution/associations should apply in Form No-1 to Regional Director or Registrar of Companies of the region by a letter along with following documents:

1. Three typewritten copies of draft Memorandum and Articles of Association of the proposed company. No stamp duty is payable.

2. List of names, addresses, description and occupation of the promoters in triplicate. 3. List of companies, associations and other institutions in which promoters are directors or

hold responsible positions, with description of positions held. 4. List of members of the proposed board of Directors. 5. Declaration in the prescribed form by an Advocate, Attorney, Pleader, Chartered

Accountant or a whole time practising Company Secretary, on a non-judicial stamp paper of appropriate value.

6. Copies of accounts, balance sheet and reports on working of association for last two financial years (for one year only if the association has functioned for less than two years), in triplicate.

7. Statement of assets and liabilities. 8. Sources of income and estimate of annual income and expenditure. 9. A note on work already done and proposed to be done by the association. 10. Grounds in brief for making application u/s. 25. 11. Declaration signed by each of the applicant. 12. Certified copy of notice published in newspaper. 13. A Bank Draft or paid treasury challan for requisite fees for registration according to

authorized capital in case having share capital.

Professional Opportunities for Chartered Accountants in Cooperatives & NPOs

1. Consultancy – A Chartered Accountant has many professional opportunities in consultancy related to formation of Cooperative Societies and NPO. He can give advice on various national/international grants & subsidies received, government schemes, maintenance of accounts projects, etc. The auditor has great opportunities to advise the organisation regarding review of financial statements, application of income, accumulation of income, investments of funds, filing application for accumulation and such other requirements to obtain the necessary exemption under the Income-tax Act 1961.

2. Audits – Audit under various statues: Cooperatives and NPOs have to get its accounts audited by Chartered Accountants as per their statues under which they are registered.Audit U/s 12A(b) of the Income Tax Act: As per section 12A(b) of the Income Tax Act 1961,when the total income of the organization (NPO, Cooperative Society, etc.) exceeds the basic exemption limit in any previous year, the accounts of the organisation have to be compulsorily audited.Audit under Foreign Contribution (Regulation) Act, 2010: Every organisation in receipt of foreign contribution must get its accounts audited by a Chartered Accountant under Rule 17(1) of the Foreign Contribution Rules 2010. In the case of a registered organisation, audit is compulsory even though no funds are received during the year. Audit on behalf of Donors and Funding Agencies: Most donors require an audit report so as to ensure that project has been implemented as per the agreement.

3. Employment Opportunities: Large NPOs employ and trained qualified accountants and Finance Managers on a regular basis on attractive pay packages. Chartered Accountants are also doing good work as CFOs and Finance Managers in many medium and large NPOs.

4. Advocacy/Lobbying for Accounting Standards, Laws etc: The sector faces many challenges due to new laws, rules and regulations. There is a great need to lobby with the respective authority or the Government Agency to amend the respective legislation or the regulation.

5. Member in Governing Board of NPO/NGO: Chartered Accountants are financial experts, hence they could be appointed in the Boards, Governing Bodies and Committees of NPO sector organisations.

6. Member of Advisory Board: There is a good scope for Chartered Accountants to become members of Advisory Board like Finance Advisory Committee and play a useful role.

7. Others:• Reviewer of the financial management system • Trainers and resource persons• Team Member of Senior Management and CEOs

This list is not exhaustive but illustrative only. There may become other professional opportunities in this field.

Provisions Related to Foreign Contribution (Regulation) Act, 2010 & Rules 2011 applicable to Cooperatives and NPO Sectors

The prime objective of the Act is to regulate the acceptance and utilization of foreign contributions. Any Association/NGO wishing to receive foreign contribution (FC) must have a definite cultural, economic, educational, religious or social programme.

(i.) APPLICABLE FORMS

PARTICULARS FORM NO. For Intimation to the Central Government of receipt of foreign contribution by way of gift from relative.

FC-1

Application for seeking prior permission of the Central Government to accept foreign hospitality.

FC-2

For obtaining Permanent Registration. FC-3

Application for ‘prior permission’ for the acceptance of foreign contribution.

FC-4

For Application for seeking renewal of ‘registration certificate. (Every certificate of registration issued to a organization shall be liable to be renewed after the expiry of five years from the date of its issue on proper application.)

FC-5

For Yearly account of Foreign Contribution received and utilised.

FC-6

For recording the receipt as well as the utilization of contribution received in kind

FC-7

For intimation about foreign contribution (securities) Account.

FC-8

For Application for seeking permission for transfer of foreign contribution to other registered/un-registered persons.

FC-10

(ii.) AUTHORITY

AUTHORITY UNDER FCRA Secretary,Government of India, Ministryof Home Affairs, Internal Security Wing FCRA, 4thFloor, Lok Nayak Bhawan, Near Khan Market, New Delhi–110003

(iii) IMPORTANT PROVISIONS AND PROCEDURE

(a.) Application for permanent registration under FCRA.Following documents must be filed.

Form FC-3duly filled up in triplicate. DD or Cheque for payment of fees Rs. 2000 . Audited statement of accounts of the past three years.Certified copy of the Registration Certificate. Certified copy of the Bye-laws and Memorandum and Articles of Association. A copy of the PAN, if issued by Income Tax authorities.

(b.) Obtaining Prior Permission For Receiving Foreign ContributionFollowing documents must be filed.

Form FC4, duly filled up in triplicate. DD or Cheque for payment of fees. Copy of the project report for which foreign Contribution is solicited/being offered; Certified copy of the Bye-laws and Memorandum and Articles of Association Certified copy of the registration certificate under the Societies Act/ Companies Act. The resolution of governing body by which

the Chief Functionary is authorized to submit FC4. A copy of the PAN, if issued by Income Tax

authorities.

(c.) Transfer of funds to another unregistered organization.Foreign contribution can also be transferred to non FC organization with prior approval. Any person intending to transfer the foreign contribution may make an application to the Central Government in Form FC-10

(d.) Bank interest earned on foreign funds part of foreign contribution

The normal practice is to consider interest earned on FCRA funds as foreign contribution only. Any interest earned should be disclosed in FC6 and also the FCRA receipt and payment account.

(e.) Accounting method for foreign contribution received in kind.

Form FC7 provides the format for recording the receipt as well as the utilization of contributions received in kind.

The entries made in FC7 should correspond with entries made in Form FC6.

(f.) Intimation of receiving foreign contribution from relatives to be submitted

Any person receiving foreign contribution in excess of one lakh rupees or equivalent there to in a financial year. From any of his relatives shall inform the Central Government in FormFC-1 within thirty days from the date of receipt of such contribution

(iv.) KEY POINTS FOR REGISTRATION

The hard copy of the on-line application of FCRA must reach the Central Government within thirty days of the submission of the on-line application, failing which the request of the organization shall be deemed to have ceased.

Any organisation whose request has ceased may make a fresh on-line application with the Central Government only after six months from the date of cessation of the previous application.

An organisation seeking registration shall be required to open an exclusive bank account to receive the foreign contribution.

The organisation may open one or more accounts in one or more banks for the purpose of utilising the foreign contribution after it has been received and, in all such cases, intimation on plain paper shall be furnished to the Secretary, Ministry of Home Affairs New Delhi, within fifteen days of the opening of any account.

The fee shall be remitted by demand draft or banker’s cheque in favour of the “Pay and Accounts Officer, Ministry of Home Affairs”, payable at New Delhi.

Normally FCRA is granted after 3 years of active existence, therefore, the application should be made after three years, though nothing in the Act prevents from making such application earlier, further in FCRA application 3 years audited accounts are required.

Time Limit For Granting Registration: After making inquiry, the Central Government may register such organization and grant him a certificate, ordinarily within ninety days from the date of receipt of application.

In case the Central Government does not grant permission, within the said period of ninety days a certificate, it shall communicate the reasons there for to the applicant.

Recent Key Developments on Charitable Trust Taxation

Section 2(15) Proviso : Alleged Commercial Activity (The proviso is applicable w.e.f 1st April, 2009. The Ld. Commissioner has erred in withdrawing the registration w.e.f. 1st April, 2008. The proviso for that period is not applicable Held in Meerut Development Authority, by Delhi ITAT I.T.A No. 2783/Del/09 )

250 CTR 70: The Chartered Accountant Study Circle Tax Case (Appeal) No.593 of 2011 13.2.2012 (Madras High Court) Issue for consideration before Madras High Court

"Whether on the facts and circumstances of the case, the Tribunal was right in directing to grant the assessee the renewal of its approval u/s.80G of the Act without considering the material fact that the activities of the assessee are not as per Section 2(15) of the Act?"

Aims and Objects of Assessee/Petitioner Society

2. The assessee-trust is a Society known as "The Chartered Accountants Study Circle". The aims and objects of the Society among other things are as follows:

"a. To conduct periodical meetings on professional subjects;

b. To publish books, booklets, etc. on professional subjects;

c. To organise Seminars, Conventions, Conferences, etc., as may be deemed fit from time to time;

DIT(E) Rejection order : Section 2(15) amended proviso: Commercial activity test applied

3. The assessee-trust filed an application in Form 10G to the Director of Income-tax (Exemptions), Chennai for grant of renewal under Section 80G of the Income-tax Act. The said request was rejected on the ground that the assessee was publishing and selling books of professional interest to be used as a reference material by the general public as well as the professionals in respect of Bank Audit, Tax Audit, etc. and its activities are commercial in nature and will fall within the amended provision of Section 2(15) of the Income-tax Act. Being aggrieved by the said order, the assessee preferred an appeal to the Income-tax Appellate Tribunal.

Revenue’s Plea before Madras High Court challenging ITAT order

On a challenge to the said order, Mr.T.Ravikumar, learned standing counsel for the Revenue, would submit that in terms of first proviso to Section 2(15) of the Income-tax Act, in the event the activities of the trust involve 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, it shall not be construed to be a charitable purpose. Hence, the assessee in question shall not fall within the definition of Section 2(15) of the Act.

Madras High Court Order on aforesaid factual background

6. We have considered the above submission. The question, therefore, is whether the publication of books of professional interest to be used as a reference material by the general public including the professionals in respect of Bank Audit, Tax Audit, etc. would be construed to be a charitable purpose.

Therefore, it cannot be held that the activities of the assessee-trust in publishing and selling books of professional interest, which are meant to be used as a reference material even by the general public as well as the professionals in respect of Bank Audit, Tax Audit, etc., cannot be construed to be one of commerce in nature. The finding of the Tribunal in this regard requires no interference.

10. That apart, under Section 12AA of the Income-tax Act, while considering the application, the Officer has to satisfy about the genuineness of activities of the trust or the institution and for that reason, he may also make such enquiries as he deem it necessary in that behalf. In the given case, there is nothing to doubt about the genuineness of the activities of the assessee-trust in question.

Delhi High Court order in ICAI case on section 2(15) charity vs. business ITA 274/2012 11.05.2012 (refer 202 Taxman 138)

The impugned order passed by the Income Tax Appellate Tribunal (Tribunal, for short) dated 16.6.2011 in the case of the Institute of Chartered Accountants of India pertains to the assessment year 2007-08. The first proviso to Section 2(15) of the Income Tax Act, 1961 (Act, for short) is applicable w.e.f. 1.4.2009 and its scope and ambit is not required to be examined and considered in the present appeal.

As far as the legal issue in this appeal is concerned, it will be governed by the decision of the Supreme Court in the case of Additional CIT v. Surat Art Silk cloth Manufacturers Association, (1980) 121 ITR 1 (SC). In the said decision it has been held that the primary or dominant purpose of the trust or institution has to be examined to determine whether the said trust/institution was involved in carrying out any activity for profit. If the ?object? of the trust or institution was to carry out an object of general public utility and this was the primary or dominant purpose and not the carrying on of any activity for profit, then the same would satisfy the requirements of Section 2(15) of the Act as it existed at the relevant time. It is immaterial whether the members are incidentally benefited from some of the activities

Sec. 12AA & Sec. 80G Charity JITO CHENNAI CHAPTERR Tax Case Appeal Nos.337 & 338 of 2011 IN THE HIGH COURT OF JUDICATURE AT MADRAS

2. A reference to the order of the Director of Income Tax (Exemptions) shows that the application filed by the assessee under Section 12AA of the Income Tax Act for registration of the Society, has been rejected at the threshold holding that in the object clause of the deed, particularly, in clause 3(a) and 3(f), there is a provision for domestic and overseas markets and also settlement of disputes by arbitration and therefore, the Director of Income Tax(Exemptions) has come to a conclusion that the object is not charitable in accordance with Section 2(15) of the Act and is commercial in nature.

3. The Tribunal has considered the same and found that the object cannot be said to be not charitable. When a contention was raised before the Tribunal that the contents of Section 12AA are different, the Tribunal, in our view, has correctly held that it is only a procedural difference. 4. A reference to Section 12AA of the Act would show that at the initial stage, there is an obligation on the part of the authority to find out and give his opinion about the genuineness of the activity of the Society/Trust. Inasmuch as the order of the Director of Income Tax (Exemptions) has not spoken anything about the genuineness of the Society, the rejection of the application, in our view, is not in accordance with law. 5. Section 2(15) of the Act, which has been referred to by the authority below, explains about the charitable purpose and the same has not been properly construed by the Director of Income Tax (Exemptions). 6. We have gone through the object clauses, namely, 3(a) and 3(f), referred to by the Director of Income Tax(Exemptions), which are as follows: "3(a). To be and act and serve as an Association of Persons who adopt Tenets of Truth, Non violence and Compassion towards all living beings as a way of life to serve the Society, our Nation and the World wherein Truth and Justice pervade all walks of life social, commercial and personal and wherein people of different cultures live in peace and harmony with one another and by bringing them together with a view to increase gainful employment of all through expansion of production of goods and services for domestics and overseas markets thereby raising living standard of society at large. (f) To provide for arbitration in respect of settlement of disputes arising in the course of trade, services, vacations, industry or other business matters of the community and to secure the services of experts if found necessary or desirable." 7. We have also gone through the other clauses of the deed and it is very clear that the object of the Society is to propagate Non-violence and Tenets of Truth and to encourage universal spiritual uplifment as preached by the Tirthankar Bhagwants. What is stated about the settlement of dispute is only incidental thereto and cannot be stated to be commercial in nature.

Same effect is Baun Foundation Trust order in WRIT PETITION NO.1206 OF 2010 IN THE HIGH COURT OF JUDICATURE AT BOMBAY 27 March 2012

Section 12AA read with Section 2(15) Charitable purpose: Delhi High Court STORAGE NETWORKING INDUSTRY ASSOCIATION OF INDIA ITA 452/2012 28.08.2012

“The Tribunal stated that the main objects were clearly not driven by profit motive and ancillary objects which had the potentiality including some elements of commercial activities could not be taken into account for rejection of the application seeking registration under Section 12AA of the Act. Consequently, the assessee?s appeal was allowed. It is urged by the revenue that the Tribunal overlooked the fact that the assessee company was functioning for a considerable period of time and that details of its previous years? had to be taken into account. It was also urged that the membership of the assessee company extended to huge profit making multinational entities and that having regard to these facts to the objects could hardly be determined as chargeable.

3. As is evident from the objects and a reading of the Tribunal?s order, what is relevant while considering an application under Section 12A of the Act is whether the objects of the trust, society and other entity claiming registration are chargeable in nature. In this case there was no material on the file of the DIT(Exemption) to conclude that activities of the commercial flavor was conducted nor was there any evidence to show that amounts received by the assessee was used for non- charitable purpose. The main objects ? as noted by the Tribunal ? were charitable”.

4. In these circumstances, this Court does not find any reason to interfere with the order of the Tribunal. No substantial question of law arises. Appeal is dismissed.”

Bombay High Court in The Rotary Club of Karad Charitable Trust INCOME TAX APPEAL NO.4723 OF 2010 (charity scope of enquiry u/s 12AA) 3. In our opinion, no fault cannot be found with the decision of the ITAT, because, if an assessee fulfills the criteria laid down under Section 12AA, then registration cannot be denied to the assessee merely because a clause in the trust deed could be misused by the trustees of the trust. If the trust is otherwise genuinely established, then, the registration cannot be denied merely on the presumption that there is a possibility of trustees misusing the trust funds by taking undue advantage of the clause in the trust deed

Section 12AA read with Section 2(15) Charitable purpose: Delhi High Court FOUNDATION OF OPHTHALMIC & OPTOMETRY RESEARCH EDUCATION CENTRE

5. Learned counsel for the Revenue faulted the Tribunal’s order saying that in the absence of actual functioning, without any activity, it is not open for a Society or any Organization to claim to be charitable. Thus, the organization in this case as a society could not have claimed the benefit of Section-12AA from inception itself.

6. Learned counsel for the assessee, on the other hand, submitted that in the absence of any bar in the statute denying the benefit, the Court or the tax authority ought not to impose restrictions. It was also submitted that this issue was considered in recent decision of the Karnataka High Court reported as Director of Income Tax (Exemptions) v. Meenakshi Amma Endowment Trust, (2011) 50 DTR (Kar) 243. In that case, the Trust was formed on 23.01.2008 and had applied for approval within nine months of its registration. Like in the present case the tax administrators refused to register it as a charitable trust.

HELD In other words, the statute does not prohibit or enjoin the Commissioner from registering Trust solely based on its objects, without any activity, in the case of a newly registered Trust. The statute does not prescribe a waiting period, for a trust to qualify itself for registration.

11. If the Revenue’s contentions are correct then, necessarily, a condition would have to be read in to the provision that the Commissioner should be satisfied that the Trust is in fact engaged in charitable activities which would in turn inject considerable deal of subjectivity. It is quite possible that if such flexibility is introduced, it would be susceptible to varied interpretation by the different authorities, in that some would be satisfied with activity of few months, while others may wish to examine the activities of the organization for longer time.

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 918 of 2011 KUTCHI DASA OSWAL MOTO PARIWAR AMBAMA TRUST 10th December 2012 However, this does not mean that if the activities of the trust have not commenced, the Commissioner has authority to reject its application for registration on the ground that the Trust failed to convince him about the genuineness of the activities. That is what unfortunately the Commissioner did in the present case. In that view of the matter, we see no error in the Tribunal’s impugned order reversing the order of the Commissioner. It is of course true that even if the activities of the trust have not commenced, if the Commissioner has sufficient material in his command, he may still come to the conclusion that he is not satisfied about the objectives of the Trust or the genuineness of its activities. We understand the decision of the Tribunal accordingly. 6. In the present case, however, merely on the ground that the activities of the Trust had not commenced, the Commissioner was persuaded to reject its application for registration, which in our opinion, was not appropriate and therefore, rightly interfered by the Tribunal… 6. In the present case, however, merely on the ground that the activities of the Trust had not commenced, the Commissioner was persuaded to reject its application for registration, which in our opinion, was not appropriate and therefore, rightly interfered by the Tribunal

Charitable trust taxation Section 12AA: HIGH COURT OF JUDICATURE AT ALLAHABAD AFR Judgment reserved on 20.02.2013 Judgment delivered on 15.03.2013 Income Tax Appeal No.(107) of 2012 Hardayal Charitable & Educational Trust . Commissioner of Income Tax-II, Agra. The preponderance of the judicial opinion of all the High Court including this Court is that at the time of registration under Section 12AA of the Income Tax Act, which is necessary for claiming exemption under Section 11 and 12 of the Act, the Commissioner of Income Tax is not required to look into the activities, where such activities have not or are in the process of its initiation. Where a trust, set up to achieve its objects of establishing educational institution, is in the process of establishing such institutions, and receives donations, the registration under Section 12AA cannot be refused, on the ground that the Trust has not yet commenced the charitable or religious activity. Any enquiry of the nature would amount to putting the cart before the horse. At this stage only the genuineness of the objects has to be tasted and not the activities, which have not commenced. The enquiry of the Commissioner of Income Tax at such preliminary stage should be restricted to genuineness of the objects and not the activities unless such activities have commenced. The Trust or society cannot claim exemption, unless it is registered under Section 12AA of the Act and thus at that such initial stage the test of the genuineness of the activity cannot be a ground on which the registration may be refused .

Karnataka High Court in Venkatesha Educational Society : in context of registration u/s 12AA (charitable organization) : difference between shortcoming in society’s functioning versus genuineness of activities to be noted; former irrelevant for section12AA purposes (that is what matters for denial of 12AA registration is illegality in applicant’s activities not irregularity)

DIT vs Commerce Teachers Association High Court of Delhi 203 Taxman 171

The Director of Income Tax(Exemption) analysed the activities of the Assessee and was satisfied that the Assessee was deserved to be granted registration under Section 12AA of the Act. Accordingly, Order dated 28th September, 2010 was issued by the Director of Income Tax(Exemption) granting such a registration. However, certain conditions were imposed in the said registration. The Respondent-Assessee did not call in question any conditions except Condition No.11 which reads as under:

"The society should not charge any fee/amount from the beneficiaries. Also shall not collect any fees on account of talent exam

HELD: 5. After reading the Order of the Tribunal we are of the opinion that the Tribunal has nowhere said that conditions cannot be imposed at all. The only dispute was about the nature of Condition No.11 and entire observations of the Tribunal are qua that condition holding it to be unwarranted. We are in agreement with the view taken by the Tribunal. No question of law arises. The Appeal is accordingly dismissed.

(Refer Delhi High Court ICAI Accounting Research Foundation Vs. Director General of Income Tax (Exemption), 321 ITR 73)

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “C” NEW DELHI Heart Care Management ITA Nos. 5241 & 55242/Del/11 /s 12AA(1)(b) & 80-G of the I.T. Act. 31-5-2012.

5.1. A plain reading of the objects does not reflect that any object is noncharitable in nature. The main issue raised by the DIT(E) is in respect of holding of conference of doctors at a five star hotel and the fact that the donors are pharmaceutical companies and some of them have deducted TDS. Adverse inference has also been drawn from extravagance of expenses the fact that the conference was of doctors and there is no benefit to the common public. Except holding of this conference and corresponding donation, the charitable objects, as per the trust deed, have not been challenged by the DIT(E). If the objects of the trust are duly incorporated and charitable in nature and conform to the various rules and regulations; the assessee trust maintains its books of account and the genuineness of the account is established by the society, in normal circumstances the registration should be granted to the Trust u/s 12AA and 80-G of the I.T. Act. The scheme of the Income-tax Act provides – (i) procedure at the time of registration and thereafter (ii) rules for assessment of trusts. Since at the time of registration assessee trust is newly formed, therefore, only the objects of the trust and the accounts of the trust and activities of the trust till registration are to be inquired into. In the given facts and circumstances the conference organized by the assessee is authorized by the objects of the Trust; there is no ban or embargo whether conference can be held in five star hotel or not.

Therefore, the adverse inference drawn by the DIT(E) is not proper inasmuch as the trustees will have a discretion to organize the conference at a place and in the manner which is befitting into the participants and objects. Consequently, we are unable to draw any adverse inference only because the conference was organized in a five star hotel.

5.2. Coming to the issue about some of the donors being pharmaceutical companies and having deducted TDS. In our view while accepting donation, a donee has limitations and if the donor offers the donation in cash kind or in a manner which it thinks legal, generally the donee would not refuse the donation. This is so because TDS can be claimed by trust towards the tax paid. It has not been disputed that for these amounts only donation receipts were issued. There was no loss to trust as on application of income i.e. utilization of donation, the TDS becomes refundable to it. Only because donors are pharmaceutical companies and they deducted TDS, will not convert a donation into a commercial receipt on the basis of presumptive inferences. As long as the assessee has credited the amount as donations and issued donation receipts, in our view, the same cannot be held to be commercial receipt.

5.3. Assessee has demonstrated that no cess or fee was charged from the participants of conference, therefore, there is no contravention of sec. 2(15). Besides, even if the delegates are charged with some fee it goes to the defraying of the expenses on conference, thus, on this issue also nothing turns against the assessee.

5.4. DIT(E)’s apprehension that the donors may claim it as the business expenditure in their assessment, is premature and do not concern the assessee and will be decided by their AO. In any case, if there is any issue about application of expenses, the same can be verified by the AO while framing the regular assessment on the trust.

Abul Kalam Azad Islamic Awakening Center, IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “A” NEW DELHI ITA No. 386/Del/2012 U/s 12AA of the I.T. Act, 1961 3.3. DIT(E), however, did not agree with the same and observed that:

(i) The earning of rental income was not object of the Society. The property purchased was shopping Arcade cum-office complex, which indicated the intention of indulging in commercial activities.

(ii) The commercial property has not at all been used for any of its objectives i.e. spreading education, as claimed to be the object of the assessee Society.

(iii) The purchase of commercial property was not incidental to attainment of any objective. The property being commercial,without any use for its aims and objectives, the investment was for on-charitable purposes.

3.4. On these observations, DIT(E) withdrew the registration u/s 12A. 7.1. Plain reading of provisions of sec. 11 (2)(b)lay down that 85% of the income is to be applied to charitable purposes or set apart and the moneys accumulated or set apart can be invested or deposited in the forms or modes specified in sub-sec.(5).

7.2. Clause (x) of Sub sec. (5) to sec. 11 prescribes one of the modes of investment as “investment in immovable property”. Thus, the surplus income can be applied to investment in immovable property. The charitable purposes will include the educational activities and acquiring the income yielding assets to promote the educational objects of the Society. Consequently, combined reading of these provisions makes it clear that the assessee can set apart or invest its income in an “immovable property”. The word “immovable property” by natural reading will include any type of land, residential or commercial property or any other form of property, which can be termed as immovable property as defined in the Transfer of Property Act. Thus, the society/ management is allowed to invest its surplus in immovable property, including commercial property. Thus, there cannot be a bar on management of Society to invest its surplus funds in acquisition of a commercial property as the law does not mandate any extra bar. 7.3. Coming to the other aspect that because the assessee is not carrying out any educational activity in this commercial property, therefore, the investment becomes for non-charitable purposes and the assessee has endeavored to enter into business operations. In our view the assessee’s charitable objects include spreading education and opening of schools; investment even in commercial property assets remains charitable purposes so long as the income generated by it is applied to charitable objects. It has not been demonstrated that the assessee applied rent received from these properties to any non-charitable purposes. Besides, it has not been demonstrated that the assessee’s intention was to enter in business of purchase and sale of commercial property inasmuch as we are in year 2012, the property was purchased in FY 2004-05 and the Trust still retains this property. In these circumstances, we are unable to hold that the assessee’s investment can be held non-charitable in nature.

ABUL KALAM AZAD ISLAMIC AWAKENING THE HIGH COURT OF DELHI AT NEWDELHI %Judgment delivered on: 26.02.2013 + ITA 80/2013 1. This appeal by the revenue is directed against the order dated 30.03.2012 passed by the Income Tax Appellate Tribunal in ITA 386/Del/2012 pertaining to the cancellation of registration under Section 12AA(3) of the Income Tax Act, 1961(hereinafter referred to as the ‘said Act’). The respondent assessee had filed an appeal before the Tribunal being aggrieved by the order of the Director of Income Tax (E) passed under Section 12AA (3) read with Section 12 of the Income Tax Act cancelling the registration granted to the assessee under Section 12(A). The entire case of the revenue was that since the assessee, in the assessment year 2005-2006, had invested in commercial property at Bangalore and it was not for a charitable purpose and further that in the said property no educational activity was carried out which was the object of the assessee. The respondent/assessee had contended that it was permissible for it to invest in immovable property in terms of section 11(5) of the said Act. It was also contended that though the investment was in commercial property, the income generated from it was applied for charitable purposes. Therefore, the registration under section 12A of the said Act could not have been cancelled The Tribunal accepted the pleas raised by the assessee and allowed its appeal We are of the view that the Tribunal had correctly appreciated the law and has come to the conclusion that the respondent assessee was entitled under Section 11(5)(x) to invest in immovable property out of the funds which were surplus with it. The Tribunal has also concluded that there was no evidence on the part of the department that the assessee had applied the rent received from the commercial property for non-charitable purpose. That being the case, the registration under Section 12 A could not have been cancelled. We do not find any substantial question of law which arises for our consideration

FREQUENT ASKED ISSUES

1. Repayment of loan out of income of a trust amounts to application of income Mumbai bench ITAT G.K.R Charities 10.08.2012 order

2. Donation of income from one trust to other (Inter trust donation) current year profits/surplus (eg: from 15% portion ) Bagri Foundation 192 Taxman 309 (same in 242 ITR 20) (Para 13 Hyd bench ITAT in Dharnavana case 27.07.2012 ORDER)

9. What follows is that the amount accumulated cannot be donated to another trust. However, the said explanation does not place a total embargo on donations by one trust to another. It does not prohibit the trust from donating its entire income in a relevant year to another trust, as is the law as noticed in the Division Bench judgment in Shri Ram Memorial Foundation (supra). The embargo is only on the income of the trust not applied in the relevant year but accumulated or set apart being donated to another trust.

Other Important decisions tabulated below (Section 12AA(3); Section 115BBC; 10(23C) Educational institution)

Case Law/Subject Gist Brief Mumbai Cricket Association, Cricket Centre I.T.A. NO. 1700/Mum/2011 08-08-2012. (ITAT.NIC.IN)

After noting 229 ITR 23 (All); 256 ITR 471 (Cal), The only thing now left is whether the registration can be revoked/cancelled retrospectively, for this, we are in agreement with the AR, that registration cannot be cancelled retrospectively.

Orissa High Court in Kalinga Institute 336 ITR 389

We make it clear that the power under section 12AA(3) of the Income-tax Act may be exercisable by the Commissioner only on recording his satisfaction of the circumstances that may warrant the exercise of such power and to record in the notice and the basis, if at all for the initiation of such proceeding

343 ITR 300 CIT vs Sarvodaya Ilakkiya Pannai

6. In order to apply the above provision (Sec.12AA(3)), there must be a specific finding by the Commissioner that the activities of the trust or institution are not genuine or not being carried out in accordance with the objects of the trust or institution as the case may be. The question is, whether the order of the Commissioner of Income Tax could fall under the powers conferred on him under section12AA(3) of the Act. The only reason given by the Commissioner of Income Tax to cancel the registration is that the activities of the trust were not charitable and therefore, the trust is not entitled to exemption under section 11 and consequently, cancelled the registration granted under section 12AA.

7. It is not as if that the registration was granted without considering the objects of the trust in question…

JAI KAUR CHARITABLE TRUST ITA 923/2011 Delhi High Court 03/08/2011

The respondent/assessee has been granted registration under Section 12A of the Income Tax Act which would amply demonstrate that even as per the Income Tax Department it was treated as a ?Trust? for charitable purposes. However, within one month from the date of granting registration under Section 12A of the Act, the assessee/trust was denied registration under Section 80G of the Act on the ground that

it is not a charitable organization. In these circumstances the order of the Directorate of Income Tax (Exemptions) refusing explanation of the trust has rightly been set aside

P&h High Court Gaur Brahmin Vidya Pracharini Sabha, Gaukaran Road, Rohtak Charity Sec. 12AA vs 80G 203 Taxman 226

Whether mere making of profit would be ground to deny registration once the objects of the society are for charitable purpose and especially in the present case where five educational institutions are being run by the respondent which is registered since 29.9.1980 under the Societies Registration Act, 1860, and solely because the respondent was charging fees and was getting surplus would not be a reason to deny registration in view of the binding precedent in Pinegrove International Charitable Trust Vs. Union of India (UOI) and others (2010) 327 ITR 73 (P&H) Merely, because there are some surplus with the respondent, this should not be a ground to deny the registration under Section 80G (5)(vi) of the Act.

DIT v. Raghuvanshi Charitable Trust {2011] 197 taxman 170/{2010) 8 taxmann.com142 (delhi).

Adjustment of deficit of current year against income of subsequent year would amount to application of income of trust for charitable purposes in subsequent year with in meaning of section 11 (1) (a). A trust can be allowed to carry forward deficit of current year and to set off same against income of subsequent years in favour of assessee.

Section 115 BBC Anonymous Donations

Hans Raj Samarak Society vs ADIT 145 TTJ 250

(APPLIED in Gugan Solanki case Delhi ITAT order dated 30.03.2012 ITA 1495/2011)

“….we find that the definition of the expression "anonymous donation" requires proper interpretation. This expression has been defined in an exhaustive manner and, therefore, no other word can be read in s. 115BBC(3) other than the words finding place therein. The definition is that it means a voluntary contribution referred to in s. 2(24}(iia), where a person receiving such contribution does not maintain a record of the identity indicating the name and address of the contributor and such other particulars as may be prescribed. No other particular has been prescribed under this provision. Therefore, the receiver has the obligation to maintain the identity indicating the name and address only and nothing more. The learned counsel has clearly brought out that

both the details are mentioned in the donation receipts. These receipts are still in the custody of the Department as the receipt books were impounded in the course of survey. This fact has not been rebutted by the learned Departmental Representative. The AO has taxed the amount by mentioning that confirmation letters from the donors have not been filed. Such confirmations are not required to be filed for coming to the conclusion as to whether the donation was anonymous or not…. “

Alleged bogus donations

CIT vs Vimal Chawla Charitable Trust I.T.A. No. 94 of 2010 19 May 2010 Alleged Bogus Donations P&H High Court

5. Having heard learned counsel for the revenue on the aforesaid question Nos. 1 and 2, we are of the considered view that no exception is provided to entertain the appeal because once additional evidence of unimpeachable character has been lawfully entertained by the CIT(A) by confronting it to the Assessing Officer and the donors have come forward by confirming the donations by disclosing their Permanent Account Numbers and balance sheets etc. then doubts entertained by the Assessing Officer with regard to donations are rendered merely conjectures. If there was any suspicion then the Assessing Officer could have opened the assessment of the donors and not that of the assessee-respondent.

Unregistered trust taxation

(ITAT, Chennai Pentafour Software Employees vs ACIT: As regards the nature of income there is no dispute. The assessee did receive donation towards corpus funds. Whether such receipts could be construed to be income? The term 'income' is a dark cat in the bag of the income-tax code. There is no exhaustive definition of the word 'income'. All receipts of an assessee cannot be deemed to be income of the assessee for the purpose of income-tax. Only those receipts

PER HYD BENCH of ITAT IN SIDUR 90 ITD 493: in context of section 11/12 etc "28. As argued by the Revenue, though by virtue of section2(24)(iia) voluntary contributions are income, to our mind this byitself does not entitle the tax gatherer to ignore all otherwell-settled principles of taxation and general law and levy lax ongross receipts without considering the claim for deductions.Principles such as capital versus revenue, doctrines of overridingtitle, form versus substance, interpretation of "deeming"provisions etc., have to be applied wherever necessary. Only thesurplus or profit can be brought to tax and the same has to becomputed in the manner laid down in the Act applying the normalprinciples of

which bears the nature of income can be made exigible to tax.Thedefinition of the word 'income' as given under section 2(24) is inclusive. It is not exhaustive. Donations towards corpus are not falling within the ambit of the definition of income..)

accountancy and taxation laws.." SIMILAR in Pune Bench of ITAT in 77 ITD 500

In the case of CIT vs. SRMT Staff Association, 221 ITR 234 (A.P) the registered society of employees got voluntary contributions. It was not a charitable institution. The Hon'ble High Court has held that voluntary contributions received by the society of employees cannot be treated as income or trading receipt within the meaning of section 2(24) of the Income- tax Act.

Corpus Donations

Sri Ramakrishna Seva Ashrama 205 Taxman 26 Karnataka High Court

The word 'Corpus' is used in the context of Income Tax Act. We have to understand the same in the context of a capital, opposed to an expenditure. It is a capital of an assessee; a capital of an estate; capital of a trust; a capital of an institution. Therefore, if any voluntary contribution is made with a specific direction, then it shall be treated as the capital of the trust for carrying on its charitable or religious activities. Then such an income falls under Section 11(d) of the I.T. Act and is not liable to tax. Therefore, it is not necessary that a voluntary contribution should be made with a specific direction to treat it as 'corpus', If the intention of the donor is to give that money to a trust which they will keep it in trust account in deposit and the income from the same is utilised for carrying on a particular activity, it satisfies the definition part, of the corpus. The assessee would be entitled to the benefit of exemptions from payment of tax levied.

Grants

M/s State Urban Development Society Date of Decision: 19.10.2011

ITA No. 210 of 2011 P&H High Courtorder

Learned counsel for the appellant vehemently argued that the Society itself has reflected the grants received from Central and State Governments as income. Therefore, it is not open to the assessee to take a stand that such grants are not the income. The said aspect has been considered by the Tribunal, wherein, it has been held that reflection in the profit and loss account towards the income is not determinative. The entries in the books of account do not decide the nature of receipts. Since, the grants have been received by the

Section 10(23C)

Lucknow ITAT 10(23C) order reported at:121 TTJ 829 & OTHER jaipur ITAT in 115 TTJ 351

Delhi High Court Moti Bagh Case 298 ITR 190 (Para 13)

Some of the expenses incurred in running the School were not verifiable and could be inflated. In absence of any evidence it could not be held that any amount went to the founder of trust when organisation is run by several employees. A mere disallowance of part of expenses could not be the reason for disallowing exemption under s.10(22) or 10(23C)(iiiad) even if some benefit accrued to founder.

The exemption could not be denied either on the ground that there was some surplus or on account of minor violations of s.11 or s.13. Providing of car and telephone to chairperson, who devoted full time to 'samitis' work was not unreasonable. The salary and rent paid to persons covered under s.13(3) was reasonable. The prescribed authority had granted exemption for earlier years as well as for the year under appeal. The assessee was entitled to exemption from tax

Jat Education Society vs DCIT 141TTJ 316 ITAT, Delhi

The amount of 1 crore has been prescribed as per rule 2(BC). As per the provisions of this sub-clause (iiiad) of clause (23C) of section 10, we are of the considered opinion that the term "aggregate annual receipts" of each educational

assessee for disbursement and keeping in view the fact that the same cannot be utilized for any other purpose such as distribution for the poverty in furtherance to the object of the Schemes, it cannot be treated as income of the assessee. As per the finding of fact recorded by the Tribunal, no substantial question of law arises in the present petition.

Rajasthan High Court in SukhdeoCharity Estate Vs. CIT (1984) 149 ITR 470 (Raj). Delhi High Court in Societyfor Development Alternatives13.01.2012 order

institution is relevant and if any assessee is having more than one educational institution then the aggregate annual receipt of each of such educational institution has to be considered separately because this sub-clause (iiiad) of clause (23C) of section 10 does not say that if an assessee is having more than one educational institution then the gross annual receipt of all of them should be considered together.

Param Hans Swami Uma Bharti ACIT, Mission, IT 4154 / DEL-2011 Delhi ITAT

Section 10(23C)(iiiad). The said section reads as under:-

“Any university or other educational institute existing solely for

educational purposes and not for purposes of profit, if the

aggregate annual receipts of such university or educational

institution do not exceed the amount of annual receipts as may

be prescribed.”

The prescribed limit of annual receipts is `. One crore. The present case is of a society running a school. The society besides income from running of a school is having other sources of income also. In the present case, the income from interest on FDRs is an additional income of society and it cannot be considered to be part of annual receipts of the school.

AP & Delhi high Court ancillary object: to education no adverse view permissible u/s 10(23C)(vi) etc

Citations: 334 ITR 303; 196 CTR 582

Delhi High Court ST.LAWRENCE EDUCATIONAL SOCIEITY (REGD.)& ANOTHER

W.P.(C) 1254/2010 10(23C) vi case197 Taxman 504

The Chief Commissioner has erred in assuming that for exemption there should not be any surplus, otherwise the institution society exists for profit and not charity i.e. education in the present case. In view of the aforesaid judgments of the Supreme Court, Bombay High Court and Punjab and Haryana High Court, reasoning inscribed by the competent authority

solely on the foundation that there has been some surplus profit is unjustified.

Vanita Vishram Trust Vs. Chief Commissioner of Income-Tax and Another (2010) 327 ITR 121(Bom) Himachal Pradesh High Court in Maa Saraswati Trust Vs. Union of India (2010) 194 Taxman 84 (HP)

Tax Audit vs Exempt income (Business Head applicability to Section 10 items) N THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 494 of 2005 Date of Decision: 17.7.2012 Market Committee, Sirsa

Chapter IV of the Act provides for 'computation of total income'. Section 44AB of the Act is one of the sections enacted under Chapter IV-D dealing with computation of profits and gains of business or profession. Section 44AB of the Act becomes operative where there is computation of profits and gains of business or profession as a part of total income. In other words, it has no applicability where the assessee is not involved in or has no income from profits and gains from business or profession. In the present case, it was not disputed that the income of the assessee was exempted under Section 10 (20) of the Act which falls in Chapter III of the Act. There was no income of the assessee which would fall under heading “profits and gains of business or profession”. Once that was so, it could not be said that the provisions of Section 44AB were applicable and as a sequel thereto, penalty under Section 271B of the Act was not leviable

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 918 of 2011 KUTCHI DASA OSWAL MOTO PARIWAR AMBAMA TRUST 10th December 2012

However, this does not mean that if the activities of the trust have not commenced, the Commissioner has authority to reject its application for registration on the ground that the Trust failed to convince him about the genuineness of the activities. That is what unfortunately the Commissioner did in the present case.In that view of the matter, we see no error in the Tribunal’s impugned order reversing the order of the Commissioner. It is of course true that even if the activities of the trust have not commenced, if the Commissioner has sufficient material in his command, he may still come to the conclusion that he is not satisfied about the objectives of the Trust or the genuineness of its activities. We understand the decision of the Tribunal accordingly. 6. In the present case, however, merely on the ground that the activities of the Trust had not commenced, the Commissioner was persuaded to reject its application for registration, which in our opinion, was not appropriate and therefore, rightly interfered by the Tribunal… 6. In the present case, however, merely on the ground that the activities of the Trust had not commenced, the Commissioner was persuaded to reject its application for registration, which in our opinion, was not appropriate and therefore, rightly interfered by the Tribunal

In Chandra Charitable Trust [294 ITR 86 (SC)] the Supreme Court has observed as under:-

“If Jainism is accepted to be a religion and from the covenants of the trustdeed it can be spelt out that not only to propagate Jainism or help and assist maintenance of the temple, sadhus, sadhvis, shraviks and shravaks, yet other goals are set in the trust deed, then the trust would become a

charitable trust, so also a religious trust or it can be addressed as a charitable religious trust, and, if that be so, section 13(1)(b) would not be applicable.”

IN THE HIGH COURT OF DELHI AT NEW DELHI Reserved on: 6th September, 2012 % Date of Decision: 20th November, 2012

MEHTA CHARITABLE PRAJNALAY TRUST

“(a) Whether the Tribunal was correct in law in confirming the order of CIT (A) and thereby holding that the assessee is entitled to exemption under Section 11 of the Income Tax Act (b) Whether the Tribunal was justified in law in relying on its earlier order for A.Y. 1992-93 and thereby holding that the business activities carried on by the assessee were incidental to the main aims and objects of the Trust which are of Charitable nature?” Generally a person has to get rid of the asset itself before ceasing to be assessable in respect of the income from that asset. A mere direction that the income from the business shall be applied to the charitable objects of a trust, without there being a settlement of the business itself upon trust, does not result in any trust or legal obligation. 22. We now proceed to consider the question whether the carrying on of the business in Katha was incidental to the attainment of the objects of the trust. We fail to see any connection between the carrying on of the Katha business and the attainment of the objects of the trust, which are basically for the advancement of education, inculcation of patriotism, Indian culture, running of dispensaries hospitals, etc. The mere fact that whole or some part of the income from Katha business is ear-marked for application to the charitable objects would not render the business itself being considered as incidental to the attainment of the objects. We are in agreement with the view taken by the CIT (Appeals) in his order for the assessment year 1992-93 that the application of the income generated by the business is not the relevant consideration and what is relevant is whether the activity is so inextricably connected or linked with the objects of the trust that it could be considered as incidental to those objectives. The examples, appositely given by the CIT (Appeals) in his order, clarify the position: the instance of a charitable trust established for providing medical relief running a nursing home in the process, or a trust for advancement of education running a publishing house or a newspaper 26. It was contended on behalf of the assessee that in case we hold that the assessee-trust is not eligible for exemption because the Katha business was itself not held under trust, it would produce an anomalous or discriminatory result inasmuch as all that is required is for the settler of the trust to declare that the Katha business itself would be held in trust. It is not for us to comment on the contention; we cannot question the legislative wisdom and if there is really an anomalous or discriminatory resultant position, it is for the legislature to take care of it. It is not for us to enter “such a complex arena in which no perfect alternatives exist” as observed by Justice Stewart of the Supreme Court of the USA in Sam Antonio School District Vs. Rodrigous (1973) 411 US 1. 27. For the reasons given above we answer the substantial questions of law in all the appeals against the assessee and in favour of the Revenue. The appeals of the Revenue are accordingly allowed with no order as to costs

IN THE INCOME TAX APPELLATE TRIBNAL BANGALORE BENCH ‘B’, BANGALORE ITA No.86(BNG.)/2012 (Assessment year : NA ) M/s Krupanidhi Educational Trust Date of pronouncement : 14-09-2012 14.

As rightly pointed out by the learned counsel for the assessee, eleemosynary element is not essential element of charity. It is also not a necessary element in a charitable purpose that it hould provide something for nothing or for less than it costs or for less than the ordinary price. The surplus generated, if it is held for charitable purpose and applied for charitable purpose of the assesse, and then the Assessee has to be considered as existing for a charitable purpose.

We have considered the rival submissions. The power to cancel registration already granted u/s.12AA of the Act is contained in Sec.12AA (3) of the Act and it reads as follows:

“(3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) 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.”

15. A perusal of the above provisions shows that the power to cancel registration already granted can be done in two situations;

(a) satisfaction of the Commissioner that the activities of the trust or institution are not genuine

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

16. In the impugned order there is no finding on the satisfaction of any of the above two conditions. The objects of the appellant are charitable and on this aspect there is no dispute or doubt. There is no finding that the objects of the trust after the amendment of the trust deed are not charitable. We have perused the amendment to the trust deed and are of the view that the charitable nature of the trust remains intact. Amere finding that the objects of the appellant have been altered without the consent of the department would not be sufficient to exercise the power u/s.12AA (3) of the Act without giving a finding that the appellant’s objects are no longer charitable. On this score the impugned order is liable to set aside

17. Apart from the above, we also agree with the submission on behalf of the Appellant that the objects of the appellant even after the amendment of the trust deed continue to be charitable. The amendment is a mere power conferred on the Trust or other institution. It has to be shown on facts that any amendment to the objects clause has resulted in the trust or institution becoming non charitable in character. There is no such finding in the impugned order and even on this ground the impugned order is liable to be set aside.

18. We are also of the view that none of the reasons given by the DIT(E) in the order u/s 12AA(3) can be the basis to cancel the registration already granted to the assessee. In this regard, we are of the view that the assessee was already granted registration u/s 12A of the Act, 1961 We are also of the view that the complaint with regard to violation of sec.13(1)(c ) of the Act are not relevant for the purpose of the proceedings u/s 12AA(3) of the Act and as rightly submitted by the learned counsel for the Assessee before us, it was open to the AO to examine any such violation in the assessment proceedings for the relevant assessment year of the assessee.

19. We are also of the view that the other reasons given by the DIT(E) in the order u/s 12AA(3) of the Act, do not make out any case, which can show the activities of the assessee are not genuine or that the activities of the assessee are not being carried out in accordance with the objects of the trust or institution. The fact that the Assessee was paying commission to persons who solicit students for studying in the Assessee’s institution cannot lead to the conclusion that the Assessee is not imparting education. Similarly purchase of a BMW car, borrowing of loans from Sindhi Financiers, non maintenance of regular books of accounts, violations of provisions of Sec.13(1)( c) of the Act in as much as the trustees were paid enormous salary are all by way of passing reference having no relevance to whether or not the Assessee was pursuing education as its main object. There are no facts brought out in the impugned order regarding the genuineness of the activities of the trust or as to whether the object of education was not pursued by the Assessee as its main and predominant activity. The complaint of the revenue seems to be that education is being imparted but on commercial lines. The definition of Charitable Purpose is given in Sec.2(15) of the Act. The same refers to “relief to poor, medical relief, education and the advancement of any other object of general public utility”. The proviso to Sec.2(15) of the Act introduced by the Finance Act, 2008 w.e.f. 1.4.2008 regarding excluding organizations where there is profit motive from the definition of charitable purpose applies only to the category of trusts which has as its object, the object of “advancement of any other object of general public utility”. It does not apply to the other categories of charitable purpose viz., “relief to poor, education and medical relief”.

20. For the reasons given above, we quash the impugned order u/s 12AA(3) of the Act and allow the appeal.

Chennai bench 12AA and charitable organization concept not available to SERVICE PROVIDERS in case of Tamil Nadu Industrial Guidance & Export Promotion Bureau: The assessee is said to be an extended arm of the State Government for setting up of industry. It is the duty of the State to provide certain basic amenities for setting up industry or trade or business. If the argument of the A.R. is to be accepted that activities of the assessee contribute in collection of direct and direct taxes for the nation and is providing employment opportunities to the people in the State thereby serving as relief for the poor, then it would not be wrong to say that all industrial houses set up in the State are doing charitable activities by providing employment and generating revenue for the nation in the form of excise, income-tax, customs duty etc. As has been rightly pointed out by the CIT(A) that the assessee is rendering services to its clients (investors/entrepreneurs) which in turn engage in manufacturing or other business activities against the fee termed as single window fee. 10. The fee collected by the assessee is in lieu of services rendered to the big business houses which by no stretch of imagination can be termed as charitable activity especially after the insertion of proviso to section 2(15) of the Act with effect from 1.4.2009. The assessee facilitates in providing licence, approval and permission from various Government agencies for setting up of industry in the State, for which it is charging fee. The fee charged by the assessee is not remitted to the Government treasury or exchequer. After insertion of proviso to section 2(15) of the Act, the assessee has lost its character of charitable organization.

IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ Bench Chennai M/s. T. Neeraj Trust ITA No. 1466/Mds/2012 Assessment year : 2007-08 7. From the sub-section (1) to section 164, it is empathetically clear that such income or such part thereof is receivable or indeterminate or unknown. Tax shall be charged on the relevant income or part of the relevant income at the maximum marginal rate in the hands of the representative assessee. Therefore, section 164 applies in the case where any income is assessable in the hands of the representative assessee but such income or part thereof is not determinate or known. In the case in hand, when the beneficiaries are identifiable and their share of income of the Trust is determinate, then for charging tax, the provisions of section 164 cannot be invoked. 8. Now, the question remains whether the income is assessable in the hands of the representative assessee under the provisions of section 161. Sub-section (1) of section 161 stipulates that the assessment shall be deemed to be made upon the representative assessee and the tax shall be levied upon and recovered from him in like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him.

Thus, the liability of the representative assessee for levy and recovery of tax is not more than the levy and recovery of· the tax of the person represented by the representative assessee. 10. Therefore, what can be taxed in the hands of the Trustee in the capacity of representative assessee is only the income which the minor beneficiary has received or deemed to have received or the income which accrued or deemed to have accrued during the period relevant to the assessment year under consideration. In the case in hand, the minor beneficiary's share in the income is accumulated in the corpus of the Trust, which is to be invested further and the assessee can receive the accumulated income only after attaining majority. Therefore, when the minor cannot receive any income before attaining the age of majority, he cannot be taxed for the said income which is not receivable or said to have not been accrued to the assessee during the relevant period then the Trust cannot be assessed in the status of representative assessee because the liability of the Trust cannot be more than the liability of the beneficiary.

IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI I.T.A. Nos. 1149 to 1152/Mds/2010) Assessment years : 2003-04, 2004-05, 2006-07 & 2008-09 The Madras Medical Mission income”. Even if the additions made by the Assessing Officer under sec.68 are upheld, those amounts always do form part of income in the hands of the assessee society. Those additional income added by the Assessing Officer under sec.68 will be liable for taxation, only if those amounts are not applied for charitable purposes. In this case, the assessee has applied its entire funds in running the Hospital, Medical College and other Educational Institutions Therefore, even if, for the sake of argument, the additional amounts covered by sec.68 are treated as part of assessee’s income, still the amounts cannot be brought to tax, as those amounts have been applied for charitable purposes. 39. In fact, it is always to be seen that where a charitable society has applied all the funds available at its disposal for charitable purposes, the addition even made under sec.68 cannot form part of an independent segment of taxable income. In that way, the concept of taxable income under sec.68 in the case of a charitable society is almost a mirage.

_______________