Law:

Section:

Section 2(15), read with section 10(23C) of the Income-tax Act, 1961 - Charitable purpose (Education) - Assessment year 2009-10 - Assessee 'H' was a registered trust engaged in activity of production, sale and marketing of unani and ayurvedic medicines, proceeds of which were applied for charitable purposes - DGIT(E) passed an order withdrawing exemption granted to 'H' under section 10(23C)(iv) on ground that its business was not incidental to attainment of its objects and it had applied as well as accumulated its income towards its business activities, which were not its object, and in view of amendment to section 2(15) with effect from 1-4-2009, 'H' could not be held to be existing for 'charitable purpose' - However, a look at H's Trust Deed and its activities unequivocally established that they were not guided by profit motive - It was found that DGIT(E) itself had held that 36 per cent of H's direct charity fell within first three heads of 'charitable purpose' and as regards balance 64 per cent, DGIT(E) had erroneously classified scholarship schemes under head 'object of general public utility', however, since scholarship schemes were directed towards encouraging students to pursue education, they fell under category of 'education' as opposed to residual category - Whether this determination sufficiently established that H's objects fell within head of 'education', 'medical relief' and 'relief of poor', and not residual category under section 2(15) - Held, yes - Whether since H's objects were charitable in nature, and its activities relating to manufacture and sale of unani medicines and other allied businesses were only meant to act as a source of funds for its charitable activities, it was undisputedly a case of a business held in trust, and H had been consistently applying proceeds of its activities for charitable purposes - Held, yes - Whether therefore, order passed by DGIT(E) withdrawing exemption under section 10(23C)(iv) was to be quashed and set aside - Held, yes [Paras 58, 97, 98 & 100] [In favour of assessee] FACTS â–  The assessee 'H' claimed that it was involved in various secular, charitable, nation-building activities and…