Trust Not Entitled to Tax Exemption in the year in which its Receipts from the Commercial Activities exceed the Threshold Limit: ITAT [Read Order]

The Hyderabad bench of Tribunal said that a charitable trust would not get the benefit of tax exemption in the particular year in which its receipts from the commerce activities exceeds the threshold limit whether or not the registration granted is cancelled and the amendment to section 13 has been made retrospectively from 1.4.2009 and therefore, it applies to A.Ys 2009-10 onwards.

This was held so in the case of Telangana State Seed Certification Agency vs. Commissioner of Income Tax (Exemptions) wherein CIT (E) rejected the assessee’s application for grant of registration u/s 12AA of the Act.

In instant appeal, the assessee is a society registered as the A.P. State Seed Certification Agency filed form 10Afor grant of registration under 12AA along with certificates. On failure to produce the Trust Deed/MOU for verification, CIT (E) rejected the assessee’s application, against which the assessee is in appeal before the ITAT.

The counsel for the assessee, Advocate S. Rama Rao contended that the issue before the A.P. High Court is different from the issue of registration u/s 12AA of the Act before the CIT (E) and also added that the decision of the High Court with respect to allowability of section 10(23)(C) cannot be applied to a case of rejection of registration u/s 12AA of the Act.

The advocate also brought the notice regarding the object of appellant was for benefit of the farmers of the State and therefore, the work involves advancement of general public utility.

After hearing both the parties, the Tribunal held that the CIT (E), without verifying the aims and objects of the assessee society, has rejected the same by following the decision of the A.P. High Court in the case of A.P. State Seed Certification Agency vs. Chief Commissioner of Income Tax & Others, reported in (2013) 356 ITR 0360 (A.P).

The Tribunal observed that “the registration u/s 12AA of the Act should be considered on its own merits. If the assessee is carrying on or is rendering any services with respect to any trade, commerce or business and crosses the threshold limit provided u/s 2(15) of the Act, then its income shall not be exempt from tax u/s 11 of the Act in the relevant A.Y.”

Finally, the bench directed CIT (E) to consider the aims and objects of the society and grant registration u/s 12AA of the Act if the assessee’s activities fall under the definition of charitable purpose u/s 2(15) of the Act.