|Clause 3 of Finance Bill 2015 proposes amendment to section 2(15) of Income-tax Act, 1961 wherein certain proposals are being incorporated to restrict the activities of Charitable Trusts rendering any service in relation to any trade, commerce or business for a cess or fee or any other consideration. What is the impact of such proposal?
|The present definition in section 2(15) was substituted by Finance Act, 2008 and the first proviso was added to state that the advancement of any other object of general public utility will cease to be a “charitable purpose” if it involves any “trade, commerce or business” and aggregate receipts from such activities exceed rupees twenty five lakh. Thus, the proviso is very widely worded and implies that even smallest commercial activity will render the entire organisation not charitable.
Now, to mitigate the impact of the above proviso, the bill proposes that as regards the advancement of any other object of general public utility is concerned, there is a need to ensure appropriate balance being drawn between the object of preventing business activity in the garb of charity and at the same time protecting the activities undertaken by the genuine organisation as part of actual carrying out of the primary purpose of the trust or institution.
It is, therefore, proposed to amend the definition of charitable purpose to provide that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on 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, 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, unless –
(i) Such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and
(ii) The aggregate receipt from such activities, during the previous years, do not exceed twenty per cent of the total receipts of the trust or institution undertaking such activity or activities, for the previous year.
Thus now instead of rupees twenty five lakhs amount, percentage of total receipts to be considered for deciding whether the trust / organisation is non-charitable, provided that the trust or charitable institution carrying on trade, commerce, business or services for cess or fee is undertaken in the course of carrying out such advancement of any other object of general public utility.
|CA. H. N. Motiwalla
|charitable purpose, trade commerce or business
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