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The counsel for the assessee in Shalom Charitable Ministries of India v Assistant CIT (2020) 81ITR (Tri) 20 argued before the Cochin benches that the assessee was already granted approval under section 12AA of the Act after considering the objects clause of the assessee-trust. As such granting of exemption under section 11 is automatic and it cannot be disturbed during assessment. Refuting such argument the Cochin benches held that different consideration prevail at the time of grant of approval u/s 12AA and at the time of grant of exemption u/s 11. So much so that in this case the assessee carrying micro finance activity is found to have charged very high rate of interests from poor borrowers. It therefore lost its shield of charitable concern.

In the other course in 402ITR350 since Assessing Officer did not hold micro finance activities of trust as non-charitable the subsequent act to re-examine said issue is considered as change of opinion by the Court.  In this case the assessee had procured loans from various organizations and financial institutions which in turn were lent to poor women against payment of interest. The assessee had claimed that their micro finance activity is incidental to its main activity of relief to poor and therefore covered under section 11(4A). The Chennai bench in 71taxmann.com 88 however held that the assessee carrying micro finance business has no protection by the provision in section 11(4A).

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