The Income Tax Appellate Tribunal (ITAT), Cochin bench has held that the Micro Finance Activity cannot be treated as charitable in nature for the purpose of allowing tax exemptions to a Trust under the Income Tax Act, 1961.
The assessee-Trust was registered under section 12AA of the Income Tax Act, 1961 and was enjoying tax benefits under the Act. For the relevant assessment year, the assessee filed its income tax return declaring nil income. The return was rejected by the Assessing Officer on the ground that the assessee was engaged in micro finance activities, wherein it was charging exorbitant interest from its beneficiaries and there was no charitable activities involved in micro finance activities.
The assessee could not secure relief from the lower authorities including the first appellate authorities and therefore, approached the Tribunal on second appeal.
After hearing both the sides, the Tribunal noticed that the Tribunal, in an earlier case of the assessee, denied the claim of exemption under section 11 of the Income Tax Act by finding that the assessee’s activities of micro finance was not charitable in nature and was not entitled to the claim of benefit under section 11 of the Income Tax Act.
While dismissing the appeal filed by the assessee on the basis of the above order, the Tribunal observed that, “Since the co-ordinate Bench of the Tribunal in assessee’s own case held that the micro finance conducted by the assessee is not a charitable activity, for identical facts, these appeals filed by the assessee are rejected.”
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