Facts
The assessee trust was formed in terms of the Deed of Trust dated 08.07.2004 and Amendment Deed dated 29.11.2004 and is engaged in the charitable activity of providing relief to the poor especially in rural areas. For the year under appeal, the assessee filed its return of income on 30.10.2017 reporting Nil income after claiming exemption u/s. 11 of the act. The assessee computed its income based on the receipts and payments account and arrived at Nil income.
The case was selected for scrutiny and notice u/s. 143(2) of the act along with notice u/s. 142(1) was issued to the assessee calling for various details and particulars. In response, the AR of the assessee appeared and filed the details as called for.
Submissions
AR submitted that all the issues raised are in respect of disallowance of exemption claimed by the assessee u/s. 11 of the Act.
The AR submitted that the assessee is engaged in the charitable activity of relief to the poor by forming Self Help Groups (SHG) of the rural poor and encouraging them to become financially self-sufficient.
Decision
The division bench of Chandra Poojari, Accountant Member And Beena Pillai, Judicial Member noted that there is a broad line of distinction between the micro financing activities being carried out on commercial basis and for charitable purpose. If the micro financing facility is extended by charging exorbitant rate of interest and for a particular group of society which may be affluent and is using micro financing mode to fund their working capital, undoubtedly, the micro financing activity would be commercial in nature.
The Tribunal observed that it is undisputed that the assessee was granted registration under s. 12A w.e.f. 8th July, 2004. The Department also accepted the returns for the last many years allowing exemption under s. 11. It is only for the asst. yr. 2017-18, the Department is taking a different view.
The bench said that the activity being charitable in nature towards general public utility cannot be equated with a money lending activity carried out in a corporate world.
The bench opined that the provisos to section 2(15) shall not be applicable to the present facts of the case. So, the lower authorities are not justified in holding that the assessee is not engaged in charitable activities and denying exemption under section 11 of the Act.
Case title: M/s. Navodaya Grama Vikas Charitable Trust v/s The Deputy Commissioner of Income Tax
Citation: ITA No. 172/Bang/2022
