Proviso to s. 2(15) which denies exemption to a charitable institution carrying on commercial activities does not apply to institutions carrying out relief to the poor, education or medical relief but applies only to those carrying out “advancement of any other object of general public utility”

DIT (E) vs. Ahmedabad Management Association (Gujarat High Court)

(iii) On the issue of the Proviso to s. 2(15), the same has been explained in Circular No.11/2008 dated 19/12/2008. From the said Circular it appears that the newly inserted proviso to s. 2(15) of the Act will apply to entities whose purpose is advancement of any other object of general public utility i.e. fourth limb of definition of ‘charitable purpose’ contained in s. 2(15) and hence such entities will not be eligible for exemption u/s 11 or u/s 10(23C) of the Act if they carry on commercial activities. The Proviso will not apply in respect of the first three limbs of s. 2(15) i.e. relief to the poor; education or medical relief. Thus, where the purpose of a trust or institution is relief of the poor; education or medical relief, it will constitute ‘charitable purpose’ even if it incidentally involves the carrying on of the commercial activities.