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Lotus Charitable Trust AY 2009-10 He further argued that as per section 2(15) of the Act, relief also by alternative method is per se charitable purpose irrespective of the fact that for providing relief the trust charges fee, and there is no condition to hold that to become eligible for charitable purpose in respect of medical relief, the same should be imparted freely or without charging any fee. Mere making of profit would not be ground to cancel registration once the objects of the trust were for charitable purpose and especially where two institutions were being run by the trust which was registered since 22.08.1980 as a Charitable Trust, and solely because the trust was charging fees and was getting surplus, would not be a reason to deny registration.

It is not the case of the revenue that the activity carried out in 'Solace' is not a genuine activity. In any case, the Learned DIT (E) had held that the objects carried out by the assessee trust falls in the fourth limb of the definition of charitable purpose u/s 2(15) of the Act i.e 'advancement of any other object of general public utility'. Hence we find that the Learned DIT(E) had accepted the objects of the assessee to be charitable in nature . Having construed so, there is no need to cancel the registration u/s 12AA(3) of the Act. The revenue, if it is of the opinion that the assessee falls under the fourth limb of the definition u/s 2(15) of 'advancement of any other object of general public utility' and thereby the proviso thereon would become applicable, is at liberty to look into the same in the assessment proceedings for the purpose of granting exemption u/s 11 of the Act , but that does not entitle the Learned DIT(E) to invoke the provisions of section 12AA(3) of the Act for cancellation of registration of the trust. There may be a situation that in one year the gross receipts, if fourth limb is considered as applicable to trust, might exceed Rs 25 lacs and accordingly the objects might not be charitable in nature, whereas in another year, the gross receipts might be less than the permissible limits and accordingly the activities would be construed as charitable in nature. Hence under these circumstances, if the registration u/s 12AA of the Act is cancelled, then the maximum eligible amount prescribed in the proviso to section 2(15) of the Act itself would become redundant and unworkable. In this regard, the reliance placed by the Learned AR on the decision of the Hon'ble Madras High Court in the case of Tamil Nadu Cricket Association vs DIT(E) reported in (2014) 360 ITR 633 (Mad) is directly on the point and is favourable to the assessee, wherein it was held that :-

8.1.1. We find that similar issue was addressed by the Co-ordinate Bench of Mumbai Tribunal in the case of Ghatkopar Jolly Gymkhana vs DIT(E) reported in (2013) 40 taxmann.com 207 (Mumbai-Trib) dated 23.10.2013 wherein the facts before the Mumbai Tribunal are as below:-

"The assessee a club was engaged in encouraging and promoting sports, pastimes and athletics and social contract amongst its member assessee was registered as a charitable trust, falling in the category of 'advancement of any other objects of general public utility' as per the definition of 'charitable purpose' given under section 2(15).

8.1.2. We find that the CBDT had come out with a circular very recently vide Circular No. 21/2016 (F.No. 197/17/2016-ITA-I) dated 27.5.2016 as below:-

"Sections 11 and 12 of the Income-tax Act, 1961 ('Act') exempt income of charitable trusts or institutions, if such income is applied for charitable purpose and such institution is registered under section 12AA of the Act.

2. Section 2(15) of the Act provides definition of "charitable purpose". It includes "advancement of any other object of general public utility" provided it does not involve carrying on of any activity in the nature of trade, commerce or business etc. for financial consideration. The 2nd proviso to said section, introduced w.e.f. 1-4-2009 vide Finance Act 2010, provides that in case where the activities of any trust or institution is of the nature of advancement of any other object of general public utility and it involves carrying on of any activity in the nature of trade, commerce or business; but the aggregate value of receipts from such commercial activities does not exceed Rs. 25,00,000/- in the previous year, the purpose of such trust/institution shall be deemed as "charitable" despite it deriving consideration from such activities. However, if the aggregate value of these receipts exceeds the specified cut-off, the activity would no longer be considered as charitable and the income of the trust/institution would not be eligible for tax exemption in that year. Thus an entity, pursuing advancement of object of general public utility, could be treated as a charitable institution in one year and not a charitable institution in the other year depending on the aggregate value of receipts from commercial activities. The position remains similar when the first and second provisos of section 2(15) get substituted by the new proviso introduced w.e.f. 1-4-2016 vide Finance Act, 2015, changing the cut-off benchmark as 20% of the total receipts instead of the fixed limit of Rs.25,00,000/- as it existed earlier.