An amendment has been made in section 2 (15) by the Finance Act, 2008 with effect from 01.04.2009 that advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of 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
As such, the organizations carrying on activities in the nature of trade, commerce, business or any service in relation thereto for a consideration/fee will not be classified as charitable organizations as such activities are proposed to be specifically excluded from the definition of ‘charitable purpose’.
The amendment has an overriding impact of the decision of the Supreme Court in the case of Gujarat Maritime Board, wherein it was held that development and maintenance of ports was an object of general public utility to be entitled for registration as a charitable institution. While the amendment is intended to exclude commercial entities from tax benefits available to charitable institutions, this amendment will affect Chambers of Commerce, trade associations, etc. as they collect fee for their services. The concept of ‘mutuality’ may however apply to such chambers, associations, etc.