M/s. Microcredit Foundation of India, CHENNAI V. ADIT, CHENNAI

ITA 410/CHNY/2012

• Counselvise Citation: 41021714 RSA 2012
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 13-11-2013
• Assessment Year: misc
• Appeal Filed On: 27-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH RAI; S DASGUPTA
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Charitable institution; Retrospective amendment; Cancellation of registration
• Section: 143(3); 80G; 12A; 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI (BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI S.S.GODARA, JUDICIAL MEMBER ) .. ITA NO.410/MDS./2012 & I.T.A. NO.075 /MDS/2013 ASSESSMENT YEAR : 2009-10 M/S.MICROCREDIT FOUNDATION OF INDIA, 36,II MAIN ROAD, KASTURBA NAGAR, ADYAR, CHENNAI 600 020. PAN : AAATM 7993 G (APPELLANT) V. THE ASST. COMMISSIONER OF INCOME TAX (EXEMPTIONS)-IV, CHENNAI. (RESPONDENT) APPELLANT BY : SHRI R.VIJAYARAGHAVAN,ADVOCATE RESPONDENT BY : SHRI S.DAS GUPTA, JCIT D.R. & SHRI ANIRUDH RAI, CIT D.R. DATE OF HEARING : 13.11.13 DATE OF PRONOUNCEMENT : 09.01.14 O R D E R PER A.MOHAN ALANKAMONY , ACCOUNTANT MEMBER: THESE TWO APPEALS ARE FILED BY THE ASSESSEE, ONE AGAINST THE ORDER OF THE DIRECTOR OF INCOME-TAX (EXEMPTIONS) DA TED 21.12.2011 IN THE CASE NO. DIT(E) NO.2(594)/12AA(3)/2011-12 PASSED U /S 12AA(3) OF THE 2 M/S.MICROCREDIT FOUNDATION OF INDIA ACT WHEREIN THE LD.DIT(E) HAD CANCELLED THE REGIST RATION INVOKING SEC.12AA(3) OF THE ACT AND THE OTHER AGAINST THE OR DER OF THE LEARNED COMMISSIONER OF INCOME TAX(A) DATED 31.10.2012 IN I TA NO.563/2011- 12 PASSED UNDER SECTION 143(3) READ WITH SECTION 2 50 OF THE ACT. SINCE BOTH THE APPEALS ARE INTERLINKED, THEY ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. SINCE CANCELATION OF THE REGISTRATION UNDER SECTIO N 12AA(3) OF THE ACT BY THE LD. DIT(E) HAS RESULTED IN WITHDRAWING THE BENEFIT UNDER SECTIONS 11 & 12 OF THE ACT BY THE LD. AO, AND REL EVANT TO THE APPELLATE PROCEEDINGS THEREON, THE CASE IN ITA NO.410/MDS./12 RELATED TO THE ISSUE OF CANCELLATION OF REGISTRATION UNDER SECTION 12AA(3) OF THE ACT IS TAKEN UP FIRST FOR ADJUDICATION. 3. THE ASSESSEE AGGRIEVED BY THE ORDER OF THE LD. DIT(E) HAS TAKEN UP SIXTEEN ELABORATE GROUNDS BEFORE US, HOWEVER, TH E CRUX OF THE ISSUE IS THAT THE LD. DIT(E) HAD ERRED BY CANCELLING THE RE GISTRATION GRANTED TO THE ASSESSEE UNDER SECTION 12AA OF THE ACT INVOKIN G THE PROVISIONS OF THE SEC.12AA(3) OF THE ACT, WHICH IS OPPOSED TO THE LAW, FACTS AND CIRCUMSTANCES OF THE CASE. 3 M/S.MICROCREDIT FOUNDATION OF INDIA 4. THE BRIEF FACTS OF THE CASE IS THAT THE ASSESS EE, M/S.MICROCREDIT FOUNDATION OF INDIA, ( IN SHORT MFI) IS A COMP ANY, REGISTERED UNDER SECTION 225 OF THE COMPANIES ACT, AND REGISTRATION UNDER SECTION 12AA OF THE INCOME TAX ACT, 1961 WAS GRANTED BY THE LD. DIT(E) DATED 17.09.2012 VIDE ORDER NO.2(594)/2001-02. 5. THE MAIN OBJECTS OF THE ASSESSEE-COMPANY AS PER CLAUSE III.A. OF THE MEMORANDUM OF ARTICLES ARE AS UNDER:- (I) TO HELP CHANNELIZE FUNDS FROM BANKING AND NON- BANKING SOURCES INCLUDING FROM INDIVIDUALS TO RURAL AREAS AND URBAN POOR. (II) TO ORGANIZE SELF HELP GROUPS (IN SHORT SHG) (III) TO ENCOURAGE VILLAGE DEVELOPMENT WORK INCLUD ING CREATION OF SOCIAL AND PHYSICAL INFRASTRUCTURE. (IV) TO PROVIDE TRAINING AND CONSULTANCY SERVICES I N SELF HELP GROUPS, MICROCREDIT, VILLAGE DEVELOPMENT, MANAGEMENT OF NGO S AND ALLIED AREAS. (V) TO ACCEPT OUTSIDE DONATIONS FROM THE PUBLIC AN D PRIVATE INSTITUTIONS, GOVERNMENT AGENCIES, FINANCIAL BODIES AND COMPANIES AND OTHER ORGANIZATIONS. (VI) TO RECEIVE AND GET REIMBURSEMENT OF OUT OF PO CKET EXPENSES FROM INDIVIDUALS, GROUPS, BANKS AND OTHER INSTITUTI ONS FOR PROVIDING CONSULTANCY TO SELF HELP GROUPS AND OTHER ORGANIZAT IONS. 4 M/S.MICROCREDIT FOUNDATION OF INDIA 6. LD. DIT(E) CONSIDERING THE AMENDED PROVISO TO SEC.215 OF THE ACT INTRODUCED WITH EFFECT FROM 01.04.2009, ANALYZED TH E FOLLOWING ACTIVITIES OF THE COMPANY AND NATURE OF INCOME EARNED:- I) THE NATURE OF INCOME EARNED WHERE FEES RECEIP T FROM ICICI BANK `. 85.64 LAKHS , FEES RECEIPT FROM MADURA MICRO FINANC E LTD `. 3.37 CRORES, INSURANCE COMMISSION RECEIVED FROM ICICI PR UDENTIAL LIFE INSURANCE `. 15.61 LAKHS, INSURANCE COMMISSION RECEIVED FROM BAJAJ ALLIANZ `. 7.27 LAKHS, INTEREST RECEIVED `. 1.81 CRORE AND MISC. INCOME `. 60.13 LAKHS (II) MOU WITH ICICI BANK, MOU WITH MADURA MICRO F INANC LTD., MOU WITH INSURANCE COMPANIES. FROM THE ABOVE ACTIVITIES, LD. DIT(E) OPINED THAT THE ASSESSEE WAS ENGAGED ONLY IN THE BUSINESS OF MICRO-FINANCE, EARN ING PROFESSIONAL FEES BY RENDERING THESE SERVICES. HE FURTHER OPINED THAT ALL THE ACTIVITIES OF THE COMPANY WAS IN THE NATURE OF BUSINESS VENTURE WHICH WAS FURTHER EXPLICIT FROM THE AUDIT REPORT FILED IN FORM NO.3CD AS PER THE PROVISIONS OF SECTION 44AB OF THE ACT. 5 M/S.MICROCREDIT FOUNDATION OF INDIA 7. BEFORE THE LD. DIT(E), THE LD. A.R HAD SUBMITT ED AS FOLLOWS:- I ) THE MAIN ACTIVITY OF THE ASSESSEE I S RELIEF TO THE POOR BY ORGANIZING SELF-HELP GROUPS AND IMPARTING TRAINI NG TO THE MEMBERS OF THE SELF-HELP GROUPS IN VARIOUS VOCATION AL ACTIVITIES. II) THE ASSESSEE COMPANY ACTS AS A CONDUIT B ETWEEN THE BANKS AND FINANCIAL INSTITUTIONS AND THE MEMBERS OF THE SHG BY ASSISTING THE SELF HELP GROUPS FOR OBTAINING FINANC E FROM THESE INSTITUTIONS. (III) THE MEMBERS OF SHG ARE THE RURAL POOR . (IV) THE ASSESSEE COMPANY ALSO GUARANTEES TO REP AY THE LOAN IN CASE OF DEFAULT BY THE MEMBERS OF THE SHG. V) THE ASSESSEE IS NOT CHARGING ANY FEE FROM THE MEMBERS OF SHG BUT THEY WERE RECEIVING SERVICE CHARGES FROM TH E FINANCIAL INSTITUTIONS. VI) THE FEES COLLECTED FROM THE BANK AND FINANCI AL INSTITUTIONS ARE ONLY TO MEET THE EXPENSES OF THE ASSESSEE AND TO ME ET THE REPAYMENT OF THE LOAN IN DEFAULT. 6 M/S.MICROCREDIT FOUNDATION OF INDIA 8. HOWEVER, LD. DIT(E) AFTER EXAMINING THE AGREEM ENTS BETWEEN THE ASSESSEE COMPANY AND THE FINANCIAL INSTITUTIONS AN D THE INSURANCE COMPANIES, ARRIVED AT A CONCLUSION THAT THE INTERE ST CHARGED BY THE FINANCIAL INSTITUTIONS FOR THE LOAN EXTENDED TO THE SHG IS MUCH HIGHER DUE TO WHICH THE FINANCIAL INSTITUTIONS GRANTS THE ASSESSEE FEES. THEREFORE, IT COULD BE EASILY INFERRED THAT THE ASS ESSEE IS CONDUCTING BUSINESS AND SHARING THE PROFITS WITH THE FINANCIAL INSTITUTIONS. FURTHER, THE ASSESSEE COMPANY WAS PROMOTING THE INTEREST OF INSURANCE COMPANIES. FOR THE AFORESAID REASONS IT WAS HELD BY THE LD. DIT(E) THAT THE ACTIVITIES OF THE ASSESSEE COMPANY WERE NOT CHA RITABLE IN NATURE AND THEREFORE INVOKED THE PROVISIONS OF SEC.12AA(3) OF THE ACT AND CANCELLED THE REGISTRATION GRANTED U/S12AA OF THE ACT. 9. BEFORE US, LD.A.R REITERATED THE SUBMISSIONS MA DE BEFORE THE LD. DIT(E) AND FURTHER RELIED ON THE DECISION OF THE FO LLOWING CASES:- (I) CIT VS.SARVODAYA ILAKKIYA PANNAI [2012] 34 3 ITR 300 (MAD.) (II) KURINJI SOCIAL WELFARE SOCIETY VS.ACIT ITA NO.1594/MDS./09 DT.03.12.10 (III) DISHA INDIA MICRO CREDIT MOHALLA, MANDIR JI-VS CIT- 2011- TIOL-119- ITAT-DEL (IV) SELF HELP GROUP WOMEN ENTERPRISES VS. DIREC TOR OF IT ITA NO.1546/MDS./2012 DT.22.02.2013 7 M/S.MICROCREDIT FOUNDATION OF INDIA (V) MADRAS MOTOR SPORTS CLUB VS.DIT(E) [2013] 1 41 ITD 1(CHENNAI) 10. LD.D.R SUPPORTED THE ORDER OF LD. DIT(E) AND P LEADED THAT THE SAME MAY BE CONFIRMED. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREF ULLY PERUSED THE MATERIALS ON RECORD. FROM THE ORDER OF LD. DIT(E), IT APPEARS THAT HE HAS ONLY LOOKED INTO THE AGREEMENTS EXECUTED BETWEEN TH E ASSESSEE COMPANY AND FINANCIAL INSTITUTIONS AND INSURANCE CO MPANIES AND ARRIVED AT A CONCLUSION. HE HAS NOT EXAMINED THE STRUCTURE OF THE SHG AND THE CATEGORY OF MEMBERS INVOLVED IN ORDER TO ASCERTAIN AS TO WHETHER THE POOR WERE ACTUALLY BENEFITTED FROM THE ACTIVITIES C ONDUCTED BY THE ASSESSEE COMPANY. IF THE ASSESSEE COMPANY HAD EXTE NDED ITS SERVICE TO THE POOR, DEFINITELY SUCH ACTIVITIES WILL FALL W ITHIN THE FIRST LIMB OF THE SEC.2 (15) OF THE ACT I.E., RELIEF TO THE POOR, T HEREBY THE FIRST PROVISO TO THE SEC.2 (15) OF THE ACT CANNOT BE INVOKED. HOW EVER IF THE ASSESSEE COMPANY HAS BEEN INDULGING ONLY IN COMMERCIAL ACTIV ITIES ON THE GARB OF RENDERING SERVICES TO POOR, THEN THE ASSESSEE CANNO T DERIVE BENEFIT U/S. 11 & 12 OF THE ACT AND FURTHER DESERVES THE REGISTR ATION GRANTED U/S. 12AA TO BE CANCELLED BY INVOKING THE PROVISIONS U/S . 12AA(3) OF THE ACT. LD. DIT(E) HAS FAILED TO EXAMINE THE ENTIRE FACTS CONSIDERING THESE ASPECTS, THOUGH WE DO NOT FIND ANY INFIRMITY IN TH E FINDINGS OF THE LD. 8 M/S.MICROCREDIT FOUNDATION OF INDIA DIT(E) WITH RESPECT TO THE NATURE OF FEES RECEIVED, AND COMMERCIAL ACTIVITIES EMBEDDED IN THE AGREEMENT EXECUTED BY T HE ASSESSEE COMPANY AND FINANCIAL INSTITUTIONS AND INSURANCE C OMPANIES. 12. ON EXAMINING THE ACTIVITIES OF THE TRUST, IT C AN BE SEEN THAT THE FIRST OBJECT OF THE TRUST CLEARLY PROVIDES FOR CHANNELIZI NG THE FUNDS TO INDIVIDUALS, WHO ARE URBAN POOR. THIS ACTIVITY DEFI NITELY FALLS UNDER THE FIRST LIMB OF SEC.2(15) OF THE ACT I.E. RELIEF TO T HE POOR. ALL THE OTHER OBJECTS STIPULATED IN THE MAIN OBJECTS OF THE ASSES SEE COMPANY, CAN ONLY BE CONSTRUED AS ACTIVITIES FOR THE ADVANCEMENT OF ANY OTHER OBJECTS FOR GENERAL PUBLIC UTILITY AND IF SUCH ACTIVITY INV OLVES ANY ELEMENT IN THE NATURE OF TRADE, COMMERCE OR BUSINESS THEN THE SAME CANNOT BE CONSIDERED AS CHARITABLE ACTIVITY WITHIN THE SCOPE OF SECTION 2(15) OF THE ACT IF THE AGGREGATE RECEIPTS EXCEEDS THE LIMIT PRE SCRIBED IN THE SECOND PROVISO. HOWEVER IF THE ASSESSEE CHARGES EXORBITANT RATE OF INTEREST, OR CALCULATE INTEREST IN A MANNER WHICH RESULTS IN HIG H RATE OF INTEREST OTHER THAN THE NORMAL RATE OF INTEREST CHARGED BY NATIONA LIZED BANKS, THEN THE AFORESAID ACTIVITIES CANNOT BE CONSIDERED AS OBJECT S FOR GENERAL PUBLIC UTILITY. 9 M/S.MICROCREDIT FOUNDATION OF INDIA 13. IN THIS OUTLOOK, IT WOULD BE RELEVANT TO EXAMI NE THE DECISIONS CITED BY THE LD. A.R SUPRA. (I) CIT VS.SARVODAYA ILAKKIYA PANNAI [2012] 343 IT R 300 (MAD.) HELD, THAT UNDER SECTION 12AA, THE COMMISSIONER IS EMPOWERED TO GRANT OR REFUSE THE REGISTRATION AND AFTER GRANTING REGISTRA TION, WOULD BE EMPOWERED TO CANCEL IT, BUT ONLY ON THE TWO CONDITIONS LAID D OWN UNDER SECTION 12AA(3). WHETHER THE INCOME DERIVED FROM SUCH TRANSACTION WO ULD BE ASSESSED TO TAX AND WHETHER THE TRUST WOULD BE ENTITLED TO EXEMPTIO N UNDER SECTION 11 ARE ENTIRELY THE MATTERS LEFT TO THE ASSESSING OFFICER TO DECIDE. THE TRIBUNAL HAD ALLOWED THE CASE OF THE ASSESSEE WITH THE FINDING T HAT NONE OF THE CONDITIONS UNDER SECTION 12AA(3) WERE VIOLATED AND, THEREFORE, THE SATISFACTION WHICH WAS ARRIVED AT BY THE COMMISSIONER WAS NOT JUSTIFIE D. THEREFORE, THERE WAS NO REASON TO INTERFERE WITH THE ORDER OF THE TRIBUN AL IN THIS CASE THE FINDING OF THE TRIBUNAL WAS THAT T HE LD.CIT WAS NOT JUSTIFIED BY CANCELING THE REGISTRATION, SINCE THE POWER TO CANCEL COULD BE ONLY TRACED TO SECTION 12AA(3) OF THE ACT AND IN TH E ABSENCE OF ANY ACTIVITY CARRIED ON BY THE ASSESSEE CONTRARY TO THE OBJECTS, THE REGISTRATION COULD NOT BE REVOKED. THIS FINDING OF THE TRIBUNAL WAS UPHELD BY THE HONBLE HIGH COURT. HOWEVER, THE FINDINGS O F THE LD. DIT(E) IN THIS RELEVANT CASE BEFORE US IS THAT THE ACTIVITIE S OF THE ASSESSEE COMPANY IS NOT IN CONSONANCE WITH THE OBJECTS, SINC E THE MAIN ACTIVITY OF THE ASSESSEE WAS BUSINESS OF MICRO-FINANCING AND T HERE WERE NO OTHER ACTIVITIES CONDUCTED BY THE ASSESSEE IN THE NATURE OF CHARITY. THEREFORE, THE FACTS OF THE CASE BEFORE US ARE NOT SIMILAR TO THE FACTS OF THE ABOVE SAID DECISION RENDERED BY HONBLE HIGH COURT. 10 M/S.MICROCREDIT FOUNDATION OF INDIA (II) KURINJI SOCIAL WELFARE SOCIETY VS.ACIT ITA N O.1594/MDS./09 DT.03.12.10. KEEPING ALL THESE FACTS AND CIRCUMSTANCES OF THE C ASE, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE SOCIETY IS ENG AGED IN EXTENDING FINANCIAL HELP TO WOMEN SELF-HELP GROUPS THROUGH NA TIONALIZED BANKS. THE ASSESSEE IS USING MONEY IN MICOR-CREDIT TO POOR FOR POVERTY ALLEVIATION AND FOR THE BENEFIT OF SOCIO-ECONOMIC W EAKER SECTION OF THE SOCIETY WHICH, IN OUR OPINION, IS A CHARITABLE WORK QUALIFYING FOR EXEMPTION/S 11 OF THE ACT. THERE IS NOTHING ON REC ORD TO SHOW THAT THE INTEREST CHARGED BY THE ASSESSEE SOCIETY IS EXORBIT ANT. WE ARE CONVINCED THAT THE POOR WOMEN IN RURAL AREAS HAVE N O OPTION BUT TO AVAIL CREDIT AT LOWER INTEREST FROM OTHER SOURCES, RATHER IT IS OTHER WAY ROUND. IT GOES WITHOUT SAYING THAT THE ASSESSEE IS RUNNING CAMPUS IN RURAL AREAS TO MAKE THE POOR WOMEN AWARE OF THE SCH EME AND TO ENCOURAGE THEIR PARTICIPATION. THIS ACTIVITY INVOL VES SOME EXPENDITURE. THE OVERALL SITUATION SHOWS THAT THE ASSESSEE SOCIE TY IS NOT DOING ANY COMMERCIAL ACTIVITY OR RUNNING FOR PROFIT. IN SUCH CIRCUMSTANCES, THE OBJECT IN QUESTION CANNOT BE SAID TO BE AS NOT CHAR ITABLE IN NATURE. THE SOLE DECISION MADE AVAILABLE IN THIS REGARD IS THAT OF HONBLE BANGALORE BENCH OF ITAT IN THE CASE OF ADIT(EXEMPTI ON) V. BHARATHA SWAMUKHI SAMSTHE IN ITA NO.1121/BANGALORE/2008 IN W HICH IT HAS BEEN HELD THAT THE ASSESSEE IS ENTITLED TO REGISTRA TION UNDER SECTION 12AA AS WELL AS APPROVAL UNDER SECTION 80G OF THE A CT. IN THIS CASE, THE FINDING OF THETRIBUNAL WAS THAT T HE ASSESSEE WAS UTILIZING ITS RESOURCES TO HELP THE WEAKER SEX, POO R, SOCIALLY AND ECONOMICALLY WEAKER SECTIONS OF THE SOCIETY. FURTH ER, THERE WAS NOTHING 11 M/S.MICROCREDIT FOUNDATION OF INDIA TO SUGGEST THAT THE INTEREST CHARGED BY THE ASSESSE E WAS EXORBITANT. THE FACTS IN THE RELEVANT CASE BEFORE US DO NOT HAV E SUCH FINDINGS. (III) DISHA INDIA MICRO CREDIT MOHALLA, MANDIR J I-VS CIT- 2011- TIOL-119- ITAT-DEL WHETHER THE ACTIVITIES OF PROMOTING MICRO FINANCE SERVICES, AS PERMITTED FROM TIME TO TIME BY THE RESERVE BANK OF INDIA, EXCLUSIV ELY TO LARGE NUMBER OF POOR PERSONS, IN THEIR VILLAGES, TOWN ETC. FOR INCOME-GE NERATION; AND THUS TO HELP THEM AND THEIR FAMILY TO RISE OUT OF POVERTY NOT WI TH THE MOTIVE OF PROFIT, CAN BE CONSIDERED TO BE CHARITABLE PURPOSE WITHIN THE MEAN ING OF SEC 2(15) OF THE ACT. SEC.2(15) OF THE ACT DEFINES CHARITABLE PURPOSE TO INCLUDE THE EXPRESSION RELIEF OF THE POOR AS EXPLAINED BY THE BOARD IN I TS CIRCULAR NO.11 OF 2008 DATED 19 TH DECEMBER, 2008; --- -- ON PERUSAL OF THE MEANING OF RELIEF OF THE POOR, IT IS CLEAR THAT IT ENCOMPASSES A WIDE RANGE OF OBJECTS FOR THE WELFARE OF THE ECONOMICALLY AND SOCIALLY DISADVANTAGED OR NEEDY PEOPLE. IT WOULD I NCLUDE WITHIN ITS AMBIT, PURPOSES SUCH AS RELIEF TO DESTITUTE, ORPHANS OR TH E HANDICAPPED, DISADVANTAGED WOMEN OR CHILDREN, SMALL AND MARGINAL FARMERS, INDIGENT ARTISANS OR SENIOR CITIZENS IN NEED OF AID. ENTITI ES WHICH HAVE THESE OBJECTS WILL CONTINUE TO BE ELIGIBLE FOR EXCEPTION EVEN IF THEY INCIDENTALLY CARRY ON A COMMERCIAL ACTIVITY, SUBJECT, HOWEVER, TO THE CONDI TIONS STIPULATED UNDER SECTION 11(4A) OR THE SEVENTH PROVISO TO SEC.10(23C ) OF THE ACT; ---- ---- IT IS NOT A CASE WHERE THE ASSESSEE HAS BEEN CHARGING EXORBITANT RATE OF INTEREST ALONG WITH PROCESSING AND SERVICE CHARG ES. IN THE PRESENT CASE, THE ASSESSEE HAS BEEN PROVIDING MICRO-FINANCIAL SER VICES AS PER THE GUIDELINES GIVEN BY THE RBI. THE RBI HAS GIVEN GUID ELINES ABOUT THE NATURE OF MICRO CREDITS AND THE INTEREST RATES APPLICABLE THE RETO. IN THE PRESENT CASE, THE ASSESSEE MADE APPLICATION FOR FINANCIAL ASSISTA NCE UNDER MICRO SCHEME TO 12 M/S.MICROCREDIT FOUNDATION OF INDIA SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA, WHO BY ORDER DATED MARCH 2, 2009, WAS PLEASED TO SANCTION TO THE ASSESSEE A LOA N NOT EXCEEDING RS.200 LAKHS ONLY FOR FINANCING THE PROJECT UNDER MICRO CR EDIT SCHEME WITH CERTAIN CONDITIONS AND STIPULATIONS WHICH HAD BEEN DULY COM PLIED WITH BY THE ASSESSEE. AS PER THE CONDITIONS, THE LOAN WAS TO B E DISBURSED IN NEED-BASED INSTALLMENTS AND ON RECOMMENDATION OF PROJECT ADVIS ORY COMMITTEE. THEREFORE, THE FACTS OF THE PRESENT CASE ARE ON QUI TE DIFFERENT FOOTING; IT IS WELL SETTLED THAT WHEN A PROFIT IS USED TOWARDS THE ACHIEVEMENT OF THE CHARITABLE OBJECTS OF THE TRUST, IT WOULD BE CONSID ERED TO BE INCIDENTAL TO THE ACHIEVEMENTS OF THE OBJECTS OF THE TRUST NOTWITHSTA NDING THE PROFIT AND GAIN INVOLVED THEREIN. THUS, MERELY BECAUSE THERE WAS A SURPLUS FROM THE ACTIVITY OF MICOR FINANCING, THAT BY ITSELF, CANNOT BE A GRO UND TO SAY THAT THE ASSESSEE DOES NOT EXIST FOR CHARITABLE PURPOSES PARTICULARL Y WHEN UNDER MEMORANDUM OF ASSOCIATION AND ARTICLES OF ASSOCIATION, IT HAS BEEN CLEARLY PROVIDED THAT THE PROFIT SHALL NOT BE DISTRIBUTED AMONGST THE MEM BERS BUT SHALL BE UTILIZED TOWARDS ITS OBJECTS, AND IN THE CASE OF DISSOLUTION , ANY PROPERTY REMAINING AFTER MEETING OUT THE LIABILITY SHALL BE TRANSFERR ED TO THE ASSOCIATION HAVING SIMILAR OBJECT. THEREFORE, THE REJECTION OF THE REG ISTRATION OF TRUST ON THIS SCORE IS ALSO UNJUSTIFIED. IN THIS CASE ALSO, THERE WAS A SPECIFIC FINDING BY THE TRIBUNAL THAT THE FUNDS WERE UTILIZED TO BENEFIT & UPLIFT THE POOR BY EXTENDING MICRO FINANCE WITHOUT CHARGING EXORBITANT RATES. SUCH FINDING IS ABSENT IN THE RELEVANT CASE BEFORE US. 13 M/S.MICROCREDIT FOUNDATION OF INDIA (IV) SELF HELP GROUP WOMEN ENTERPRISES VS. DIRECTO R OF IT ITA NO.1546/MDS./2012 DT.22.02.2013. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. TH E UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE-TRUST WAS CONSTITUTED B Y A TRUST DEED DATED 18.12.2011 AND APPLIED FOR REGISTRATION IN FORM 10A ON 25.11.2011. THE DIT(E) REFUSED REGISTRATION TO THE ASSESSEE-TRUST ON THE GROUND THAT THE ACTIVITY AND OBJECTS OF THE ASSESSEE-TRUST WERE CO NDUCTING OF MICRO FINANCE BUSINESS WHERE THE FEES TO BE COLLECTED FROM SELF H ELP GROUPS AND ALSO FROM BANKS AND FINANCIAL INSTITUTIONS TO WHOM THE SERVIC ES WILL BE RENDERED AND THUS, THE ACTIVITY OF THE ASSESSEE-TRUST WAS NOT C HARITY AS SUCH. 7. BEFORE US, THE A.R OF THE ASSESSEE HAS RELIED O N THE DECISION OF THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF BHAR ATHA SWAMUKTI SAMSTHE (SUPRA), THE DECISION OF VISAKHAPATNAM BENCH OF THE TRIBUNAL IN THE CASE OF SPANDANA (RURAL & URBAN DEVELOPMENT ORGANISATION) ( SUPRA), THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF DISH A INDIA MICRO CREDIT MOHALL, MANDIR JI (SUPRA) AS WELL AS THE DECISION OF THE HO N'BLE KARNATAKA HIGH COURT IN THE CASE OF DIT(E) VS VENKATESHA EDUCATION SOCIE TY (SUPRA). WE FIND THAT THESE DECISIONS WERE NOT CITED BY THE ASSESSEE BEF ORE THE DIT(E), THEREFORE, HE DID NOT HAVE THE OPPORTUNITY TO CONSIDER THESE D ECISIONS IN THE FACTS OF THE ASSESSEES CASE AND THEREAFTER TO ARRIVE AT THE CON CLUSION THAT THE ASSESSEE, CARRYING ON THE BUSINESS OF MICRO FINANCE, WAS ELIG IBLE FOR REGISTRATION U/S 12AA OR NOT. HENCE, IN OUR CONSIDERED OPINION, IT SHALL BE JUST AND FAIR TO SET ASIDE THE ORDER OF THE DIT(E) AND REMAND THE MATTER BACK TO HIS FILE TO ADJUDICATE THE ISSUE AFRESH AFTER CONSIDERING THE A BOVE CITED DECISIONS RELIED ON BY THE ASSESSEE BEFORE US, AS PER LAW. HE SHA LL ALLOW REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE BEFORE ADJU DICATING THE ISSUE AFRESH. THUS, THE GROUNDS OF APPEAL OF THE ASSESSEE ARE AL LOWED FOR STATISTICAL PURPOSES. 14 M/S.MICROCREDIT FOUNDATION OF INDIA IN THIS CASE THE MATTER IS REMITTED BACK TO THE FIL E OF LD. DIT(E) FOR CONSIDERING CERTAIN DECISIONS RELIED ON BY THE ASS ESSEE, AND THEREFORE, NOT APPLICABLE TO THE FACTS OF THE CASE BEFORE US.- (V) MADRAS MOTOR SPORTS CLUB VS.DIT(E) [2013] 141 ITD 1(CHENNAI) 6 . THE ONLY REASON WHY THE DIT(E) CHOSE TO CANCEL THE REGISTRATION WAS THAT ASSESSEE WAS HIT BY SUBSTITUTED SECTION 2(15) OF THE ACT. BY VIRTUE OF SUBSTITUTION OF SECTION 2(15) BY FINANCE ACT, 2008, WITH EFFECT FROM 01.04.2009, THERE WAS A CHANGE, WHICH PLACED ON AN OBJECT FOR A DVANCEMENT OF GENERAL PUBLIC UTILITY, CERTAIN CONSTRAINTS. THE SAID SECTI ON 2(15) WAS FURTHER AMENDED BY FINANCE ACT, 2010, WITH RETROSPECTIVE EFFECT FRO M 1.4.2009. SECTION 2(15) AS IT STANDS NOW READS AS UNDER:- '2(15) 'CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF, [PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF A RTISTIC OR HISTORIC INTEREST,] AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERA L PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CAR RYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIV ITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY:] [ PROVIDED FURTHER THAT THE FIRST PROVISO SHALL NOT APPLY IF THE AGGREGATE VALUE OF THE RECEIPTS FROM THE ACTIVITIES REFERRED TO THEREI N IS TEN LAKH RUPEES OR LESS IN THE PREVIOUS YEAR;]' BOTH PROVISOS ARE APPLICABLE FROM 01.04.2009. IF WE LOOK AT FIRST PROVISO, NO DOUBT IT CAN BE SAID THAT ADVANCEMENT OF OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT 15 M/S.MICROCREDIT FOUNDATION OF INDIA BE A CHARITABLE PURPOSE, IF IT INVOLVED ACTIVITY OF TRADE, COMMERCE OR BUSINESS OR ANY SERVICE RENDERED IN RELATION TO ANY TRADE, COMM ERCE OR BUSINESS FOR A CONSIDERATION. HOWEVER, THE SECOND PROVISO, WHICH W AS ADDED BY FINANCE ACT, 2010, AGAIN WITH RETROSPECTIVE EFFECT FROM 1.4.2009 , BROUGHT IN CERTAIN LIMITATIONS ON THE APPLICATION OF FIRST PROVISO. FI RST PROVISO, AS IT STOOD INDEPENDENTLY TILL THE LATTER AMENDMENT WAS BROUGHT IN, CLEARLY INDICATED THAT A VIOLATION THEREOF WOULD RESULT IN AN OTHERWISE CHAR ITABLE OBJECT OF GENERAL PUBLIC UTILITY, NOT BECOMING SO. HOWEVER, BY VIRTUE OF SEC OND PROVISO, THE CONSTRAINTS PLACED ON AN OBJECT OF GENERAL PUBLIC UTILITY, WILL COME INTO PLAY ONLY IF THE AGGREGATE VALUE OF THE RECEIPTS OF THE NATURE MENTI ONED THEREIN EXCEEDED RS. 10 LAKHS. IN OTHER WORDS, THE OBJECT CONTINUED TO B E ONE OF GENERAL PUBLIC UTILITY, EVEN IF IT INVOLVED CARRYING ON AN ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS BUT THERE WAS AN UPPER LIMIT SPECIFIED. TH US, EVEN IF WE PRESUME THAT THE SPONSORSHIP FEES AND ENTRY FEES RECEIVED BY THE ASSESSEE WERE CONSIDERATION RECEIVED IN RELATION TO SERVICE RENDE RED BY VIRTUE OF TRADE, COMMERCE OR BUSINESS, IF THE AGGREGATE VALUE OF SUC H RECEIPTS WERE LESS THAN RS. 10 LAKHS, IT WOULD STILL BE CONSIDERED AS CHARI TABLE PURPOSE. A HARMONIOUS READING OF BOTH THE PROVISOS WILL ONLY MEAN IN THE YEARS IN WHICH THE RECEIPTS OF NATURE MENTIONED IN FIRST PROVISO EXCEEDED RS. 10 L AKHS, ASSESSEE WILL NOT BE ELIGIBLE FOR EXEMPTION UNDER SECTIONS 11 AND 12 OF THE ACT. IT WILL NOT MEAN THAT AN OTHERWISE CHARITABLE OBJECT OF GENERAL PUBLIC UT ILITY WILL BECOME A NON- CHARITABLE ONE ONLY FOR A REASON THAT THE AGGREGATE RECEIPTS EXCEEDED RS. 10 LAKHS. 7. AS ALREADY MENTIONED BY US, ORDER OF LD. DIT( E) HAS CLEARLY MENTIONED THAT ASSESSEES OBJECTS WERE IN THE NATURE OF ADVANCEMEN T OF OBJECT OF GENERAL PUBLIC UTILITY COMING WITHIN THE AMBIT OF SEC 2(15) OF THE ACT. HE HAD CANCELLED THE REGISTRATION ONLY FOR THE REASON THAT THE RECEI PTS EXCEEDED RS.10 LAKHS. IF THE RECEIPTS EXCEEDED RS.10 LAKHS AND IF SUCH RECEI PTS WERE OF NATURE MENTIONED IN THE FIRST PROVISO TO SEC 2(15) OF THE ACT, THE ASSESSING OFFICER WOULD, NO DOUBT BE JUSTIFIED IN DENYING EXEMPTION U NDER SECTIONS 11 & 12 OF THE ACT. HOWEVER, THIS WILL NOT BE A SUFFICIENT REASON FOR CANCELLING THE REGISTRATION RANTED TOT EH ASSESSEE UNDER SECTION 12A(A) OF THE ACT. IF IN THE VERY NEXT YEAR, ASSESSEES ,IN OTHER WORDS, NATURE OF OBJECTS OF TH E ASSESSEE CANNOT FLUCTUATE 16 M/S.MICROCREDIT FOUNDATION OF INDIA IN TANDEM WITH THE QUANTUM OF RECEIPTS MENTIONED IN THE FIRST PROVISO. SIMILAR VIEW HAD ALREADY BEEN TAKEN BY THE CO-ORDINATE BENC H OF THIS TRIBUNAL IN THE CASE OF RAJASTHAN HOUSING BOARD(SUPRA) AND GUJARAT CRICKET ASSOCIATION (SUPRA). WE ARE, THEREFORE, OF THE OPINION THAT LD .DIT(E) FELL IN ERROR IN CANCELLING THE REGISTRATION GRANTED TO THE ASSESSEE UNDER SECTION 12A(A) OF THE ACT. IN THE RELEVANT CASE BEFORE US, THE LD. DIT(E) HAD MADE A CATEGORICAL FINDING FROM THE ACTIVITIES OF THE ASSESSEE COMPANY THAT THE ASSESSEE COMPANY HAD NOT CARRIED OUT ANY CHARITABLE ACTIVITY . IT IS APPARENT THAT THE FACT IN THE ABOVE CITED CASE IS NOT IDENTICAL T O THE FACTS OF THE CASE BEFORE US. 14. AT THIS JUNCTURE, WE ARE ALSO REMINDED OF THE DECIS ION RENDERED BY HONBLE BOMBAY HIGH COURT CITED IN 343 ITR 023 IN T HE CASE OF SINHAGAD TECHNICAL EDUCATION SOCIETY VS. COMMISSION ER OF INCOME TAX AND ANOTHER WHEREIN IT WAS HELD THAT THE REVENUE HA S POWERED TO CANCEL THE REGISTRATION IN VIEW OF THE AMENDED PROV ISIONS OF THE ACT INVOKING SEC.12AA(3) OF THE ACT. FURTHER, IT IS PE RTINENT TO MENTION THAT THE DECISION RENDERED BY THE HONBLE UTTARAKHAND HI GH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX V. NATIONAL INSTITUTE OF AERONAUTICAL ENGINEERING EDUCATIONAL SOCIETY [2009] 315 ITR 428 (UTTARAKHAND) WHEREIN IT IS HELD:- 17 M/S.MICROCREDIT FOUNDATION OF INDIA HELD: ALLOWING THE APPEAL, THAT SECTION 12AA OF TH E ACT PROVIDES THE- PROCEDURE FOR REGISTRATION. CLAUSE (A) OF SUB-SECTION (1) OF SECT ION 12AA EMPOWERS THE COMMISSIONER TO CALL FOR SUCH DOCUMENTS OR INFORMAT ION FROM THE TRUST OR INSTITUTION AS HE THINKS NECESSARY IN ORDER TO SATISFY HIMSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTION AND HE MAY A LSO MAKE SUCH INQUIRIES, AS HE MAY DEEM NECESSARY IN THIS BEHALF. THE COMMISSIONER IS NOT SUPPOSED TO ALLOW REGISTRATION WITH BLIND EYES. THE COMMISSIONER HAD CONSIDERED THE RELEVANT PAPERS BEFORE HIM, WHICH INCLUDED THE INCOME AND EXPENDITU RE ACCOUNTS OF THE PREVIOUS YEARS AFTER THE ASSESSEE--SOCIETY GOT REGISTERED WI TH THE ASSISTANT REGISTRAR OF FIRMS, SOCIETIES AND CHITS. THE COMMISSIONER OBSERV ED THAT THE SOCIETY WAS CHARGING SUBSTANTIAL FEES FROM THE STUDENTS AND MAK ING HUGE PROFITS. MERELY IMPARTING EDUCATION FOR THE PRIMARY PURPOSE OF EARN ING PROFITS COULD NOT BE SAID TO BE A CHARITABLE ACTIVITY. IN THE EXPRESSION 'CHARITABL E PURPOSE', 'CHARITY' IS THE SOUL OF THE EXPRESSION. MERE TRADE OR COMMERCE IN THE NAME OF EDUCATION CANNOT BE SAID TO BE A CHARITABLE PURPOSE AND THE COMMISSIONER HAS TO SATISFY ITSELF AS PROVIDED UNDER SECTION 12AA OF THE ACT BEFORE ALLOWING THE REGISTR ATION. THE ORDER OF THE COMMISSIONER WAS JUSTIFIED. 15. WE HAVE ALSO TAKEN INTO ACCOUNT OF THE REPORT OF THE SUB-COMMITTEE OF THE CENTRAL BOARD OF DIRECTORS OF RESERVE BANK OF INDIA ISSUED DURING THE YEAR JANUARY, 2011 PRO DUCED BEFORE US BY THE LD. A.R WHICH IS REPRODUCED HEREIN BELOW:- 2. THE MICRO FINANCE SECTOR 2.1. MICROFINANCE IS AN ECONOMIC DEVELOPMENT TOOL W HOSE OBJECTIVE IS TO ASSIST THE POOR TO WORK THEIR WAY OUT OF POVERTY. IT COVERS A RANGE OF SERVICES WHICH INCLUDE, IN ADDITION TO THE PROVISION OF CREDIT, MANY OTHER SER VICES SUCH AS SAVINGS, INSURANCE, MONEY TRANSFERS, COUNSELLING, ETC. 2.2. FOR THE PURPOSES OF THIS REPORT, THE SUB-COMMI TTEE HAS CONFINED ITSELF TO ONLY ONE ASPECT OF MICROFINANCE, NAMELY, THE PROVISION O F CREDIT TO LOW INCOME GROUPS. 18 M/S.MICROCREDIT FOUNDATION OF INDIA 2.3 THE PROVISION OF CREDIT TO THE MICROFINANCE SE CTOR IS BASED ON THE FOLLOWING POSTULATES: A) IT ADDRESSES THE CONCERNS OF POVERTY ALLEVIATION BY ENCOURAGING THE POOR TO WORK THEIR WAY OUT OF POVERTY. B) IT PROVIDES CREDIT TO THAT SECTION OF SOCIETY TH AT IS UNABLE TO OBTAIN CREDIT AT REASONABLE RATES FROM TRADITIONAL SOURCES. C) IT ENABLES WOMEN'S EMPOWERMENT BY ROUTING CREDIT DIRECTLY TO WOMEN, THEREBY ENHANCING THEIR STATUS WITHIN THEIR FAMILIES, THE C OMMUNITY AND SOCIETY AT LARGE. D) EASY ACCESS TO CREDIT IS MORE IMPORTANT: FOR THE POOR THAN CHEAPER CREDIT WHICH MIGHT INVOLVE LENGTHY BUREAUCRATIC PROCEDURES AND D ELAYS. E) THE POOR ARE OFTEN NOT IN A POSITION TO OFFER CO LLATER(..LL !T~ SECLLRE THE CREDIT. F) GIVEN THE IMPERFECT MARKET IN WHICH THE SECTOR O PERATES AND THE SMALL SIZE OF INDIVIDUAL LOANS, HIGH TRANSNCTION COSTS ARE UNAVOI DABLE. HOWEVER, WHEN COMMUNITIES SET UP THEIR OWN INSTITUTIONS, SUCH AS SHG FEDERATIONS AND COOPERATIVE THE TRANSACTION COSTS ARE LOWER. G) TRANSACTION COSTS, CAN BE REDUCED THROUGH ECONOM IES OF SCALE. HOWEVER, INCREASES IN SCALE CANNOT BE ACHIEVED , BOTH FOR INDIVIDUAL OPERATIONS AND FOR THE SECTOR AS A WHOLE IN THE ABSENCE OF COS T RECOVERY AND PROFIT INCENTIVE. 2.4 GIVEN THE ABOVE CONSIDERATIONS, THE ESSENTIAL FEATURES OF CREDIT FOR MICROFINANCE WHICH HAVE EVOLVED ARE AS UNDER:- A) THE BORROWERS ARE LOW-INCOME GROUPS. B) THE LOANS ARE FOR SMALL AMOUNTS. C) THE LOANS ARE WITHOUT COLLATERAL. D) THE LOANS ARE GENERALLY TAKEN FOR INCOME-GENERA TING ACTIVITIES, ALTHOUGH LOANS ARE ALSO PROVIDED FOR CONSUMPTION, HOUSING AND OTHE R PURPOSES. E) THE TENURE OF THE LOANS IS SHORT. F) THE FREQUENCY OF REPAYMENTS IS GREATER THAN FOR TRADITIONAL COMMERCIAL LOANS. 2.5 THE PLAYERS IN THE MICROFINANCE SECTOR CAN BE CLASSIFIED AS FALLING INTO THREE MAIN GROUPS A) THE SHG-BANK LINKAGE MODEL ACCOUNTING FOR ABOU T 58% OF THE OUTSTANDING LOAN PORTFOLIO 19 M/S.MICROCREDIT FOUNDATION OF INDIA B) NON-BANKING FINANCE COMPANIES ACCOUNTING FOR A BOUT 34% OF THE OUTSTANDING LOAN PORTFOLIO C) OTHERS INCLUDING TRUSTS, SOCIETIES, ETC, ACCOU NTING FOR THE BALANCE 8% OF THE OUTSTANDING LOAN PORTFOLIO. PRIMARY AGRICULTURA L CO OPERATIVE SOCIETIES NUMBERING 95,663, COVERING EVERY VILLAGE IN THE COU NTRY, WITH A COMBINED MEMBERSHIP OF OVER 13 CRORES AND LOANS OUTSTANDING OF OVER RS.64, 044 CRORES AS ON 31.03.09 HAVE A MUCH LONGER HISTORY AN D ARE UNDER A DIFFERENT REGULATORY FRAMEWORK. THRIFT AND CREDIT CO-OPERATIV ES ARE SCATTERED ACROSS THE COUNTRY AND THERE IS NO CENTRALIZED INFORMATION AVAILABLE ABOUT THEM. 16. CONSIDERING THE FACTS AND CIRCUMSTANCES OF TH E CASE AND OUR OBSERVATIONS SUPRA AND IN PARA NOS. 11 & 12, WE AR E OF THE CONSIDERED VIEW THAT THE MATTER HAS TO BE REMITTED BACK TO THE FILE OF LD. DIT(E) WHO SHALL EXAMINE THE CONDUCT OF THE ASSESSEE WITH RESP ECT TO ITS ACTIVITIES PERFORMED DURING THE RELEVANT PREVIOUS YEAR AND IF THEY FALL BEYOND THE SCOPE OF SEC.2(15) AND ITS OBJECTS, IN THIS CASE, O BJECTS BEING RELIEF TO THE POOR, THE LD. DIT(E) MAY PASS APPROPRIATE ORD ER AS PER LAW BY CANCELING THE REGISTRATION INVOKING THE SECTION 12A A(3) OF THE ACT. IN DOING SO, THE LD. DIT(E) SHALL ALSO TAKE NOTE OF REPORT OF THE SUB- COMMITTEE OF THE CENTRAL BOARD OF DIRECTORS OF RES ERVE BANK OF INDIA ISSUED DURING THE YEAR JANUARY, 2011AND THE DECISIO NS OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SINHAGAD TECHNICAL EDUCATION SOCIETY VS. CIT AND UTTARAKHAND HIGH COURT IN THE CASE OF CIT V. NATIONAL INSTITUTE OF AERONAUTICAL ENGINEERING EDUC ATIONAL SOCIETY 20 M/S.MICROCREDIT FOUNDATION OF INDIA REPRODUCED HEREIN ABOVE IN ORDER TO ASSESS WHETHER THE ACTIVITY CONDUCTED BY THE TRUST FALLS UNDER THE FIRST LIMB O F SEC.2(15) OF THE ACT OR ACTIVITIES SUCH AS ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY OR ANY OTHER ACTIVITY WHICH FALLS OUTSIDE THE SCOPE OF THE SEC.2(15) OF THE ACT. NEEDLESS TO MENTION THAT EVEN IF AN AC TIVITY OF THE ASSESSEE COMPANY FALLS IN THE FIELD OF ADVANCEMENT OF ANY OT HER OBJECTS OF GENERAL PUBLIC UTILITY, BY VIRTUE OF THE SECOND PROVISO WHE REIN A CEILING IS FIXED FOR GROSS RECEIPTS, REGISTRATION UNDER SECTION 12AA CAN NOT BE WITHDRAWN EVEN IF SUCH RECEIPTS EXCEEDS THE LIMIT. WE FURTHE R MAKES IT CLEAR THAT IF THE ASSESSEE COMPANY IS ENGAGED IN ANY ACTIVITY PRE DOMINANTLY BEYOND THE SCOPE OF SEC.2(15) OF THE ACT AND INTENTS TO GR AB THE BENEFITS OF THE RELEVANT PROVISIONS OF THE ACT UNDER THE GARB OF C HARITY AS A COLORABLE DEVICE, LD. DIT(E) SHALL BE AT LIBERTY TO INVOKE T HE PROVISIONS OF SEC.12AA(3) OF THE ACT. IT IS ORDERED ACCORDINGLY. 17. SINCE WE HAVE REMITTED BACK THE ISSUE WITH RES PECT TO CANCELLATION OF REGISTRATION UNDER SECTION 12AA OF THE ACT, WE H EREBY REMIT BACK THE CASE IN ITA NO.075/MDS./2013 WITH RESPECT TO THE AS SESSMENT MADE BASED ON THE CANCELLATION OF REGISTRATION U/S.12AA (3) OF THE ACT. LD. ASSESSING OFFICER IS HEREBY DIRECTED TO FINALIZE TH E ASSESSMENT AFRESH AFTER THE OUTCOME OF THE PROCEEDINGS BEFORE THE LD. DIT(E) BY AFFORDING SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES OF BEING HEARD. 21 M/S.MICROCREDIT FOUNDATION OF INDIA 18. IN THE RESULT, BOTH THE APPEALS OF ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 09 TH JANAURY, 2014 AT CHENNAI. SD/- SD/- (S.S.GODARA) (A.MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 09 TH JANAURY, 2014. K S SUNDARAM. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE 22 M/S.MICROCREDIT FOUNDATION OF INDIA