Calcutta High Court
M/S Pranab Micro Services Federation vs Principal Chief Commissioner Of Income … on 25 March, 2026
Author: Kausik Chanda
Bench: Kausik Chanda
OD-4
ORDER SHEET
IN THE HIGH COURT AT CALCUTTA
Constitutional Writ Jurisdiction
ORIGINAL SIDE
WPO/1070/2024
M/S PRANAB MICRO SERVICES FEDERATION
VS
PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX AND ORS
BEFORE:
The Hon'ble JUSTICE KAUSIK CHANDA
Date : March 25, 2026.
Appearance:
Mr. Anirban Banerjee, Adv.
Mr. Bikash Halder, Adv.
Ms. Shreshtha Gupta, Adv.
Mr. Sayantan Banerjee, Adv.
Ms. Arpita Chatterjee, Adv.
... for the petitioner.
Mr. Aryak Dutt, Adv.
Mr. Prithu Dudhoria, Adv.
... for the respondent.
The Court: The petitioner has been duly registered as a
charitable institution under Section 12AA of the Income Tax Act,
1961. Subsequently, the petitioner applied for provisional approval
under Clause (iv) of the First Proviso to Section 80G(5) of the Act.
Such provisional approval was granted in Form 10AC, vide order
dated 28 May 2021, for the period commencing from 28 May 2021
up to Assessment Year 2024-25.
Thereafter, the petitioner applied for final approval under
Clause (iii) of the First Proviso to Section 80G(5) of the Act. However,
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the Commissioner of Income Tax (Exemption) rejected the said
application on the ground that the statutory time limit for filing
such an application had not been adhered to. It was observed that
the application for final approval under Section 80G was required to
be made at least six months prior to the expiry of the provisional
approval period, or within six months from the commencement of
activities, whichever was earlier. The authority further noted that
the petitioner had commenced its activities well before the grant of
provisional registration; consequently, the prescribed time limit had
expired, rendering the petitioner ineligible for final approval under
Aggrieved by the aforesaid order, the petitioner preferred an
appeal before the Income Tax Appellate Tribunal, ‘C’ Bench,
Kolkata. By its order dated 11 March 2024, the Tribunal disposed of
the appeal, inter alia, observing as follows:
“Since, the facts and issues involved in this case in hand
are identical to that of the above referred decision,
the appeal of the assessee is allowed accordingly
and the ld. CIT(Exemption) is directed to grant
provisional approval to the assessee under Clause
(iii) to First Proviso to section 80G(5) of the Act, if the
assessee is otherwise found eligible. The ld. CIT(A)
will decide the application for final registration
within three months of the receipt of copy of this
order.”
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Pursuant to the said order, the matter was reconsidered on
merits by the Commissioner of Income Tax (Exemption), Kolkata. By
an order dated 11 July 2024, the petitioner’s application for
registration under Section 12A(1)(ac)(iii) of the Income Tax Act, 1961
was rejected. Being aggrieved, the petitioner has instituted the
present writ petition.
Learned counsel appearing on behalf of the Revenue has
relied upon the decisions in Shalom Charitable Ministries of India v.
Assistant Commissioner of Income Tax ([2020] 81 ITR (Trib) 20
(Cochin)) and Income Tax Officer (Exemptions) v. Kalanjlam
Development Financial Services ([2016] 6 ITR (Trib) OL 226
(Chennai)) to contend that microfinance activities do not constitute
charitable purposes and are therefore not entitled to exemption
under the Act.
It appears that the petitioner is incorporated as a non-profit
organization under Section 8 of the Companies Act, 2013. The
Memorandum of Association of the petitioner, inter alia, sets out the
following objects:-
“3 (A) 4. To provide technical, managerial and human
resource training and to assist in getting finances from
venture capitalists, Angel Funding and other financial
Government/Non-Government and international
institutions.
3 (A) 5. To reduce poverty in India by carrying on the
business of providing microfinance and providing credit,
4to the poor section of the population for their socio-
economic development in sustainable manner and
providing credit to persons belonging to poorer sections
either individually or joined together as self-help groups,
not with the motive of profit.”
Section 2(15) of the Income Tax Act, 1961 defines the term
“charitable purpose” as follows:-
“(15) Charitable purpose includes relief of the
poor, education [yoga] medical relief, [preservation of
environment (including water-sheds, forests and wildlife) and
preservation of monuments or places or objects of artistic or
historic interest,] and the advancement of any other object of
general public utility;
[Provided that the 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, unless-
(i) Such activity is undertaken in
the course of actual carrying out of such
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advancement of any other object of general public
utility and
(ii) the aggregate receipts from such
activity or activities during the previous year, do
not exceed twenty percent of the total receipts, of
the trust or institution undertaking such activity or
activities, of that previous year;]]”
It is well settled in law that the provision of microfinance and
credit facilities, even if aimed at economic upliftment, may not
qualify as a charitable activity where such operations involve
commercial elements, including the charging of interest or other
profit-oriented considerations. The determinative criterion for an
activity to be regarded as charitable is the absence of a profit
motive. Where income is generated in the form of interest or the
activity is conducted on commercial terms, it assumes the character
of a business activity.
In this context, the Commissioner of Income Tax (Exemption)
recorded, inter alia, the following findings:
“9. The assessee has failed to commit itself to the
version submitted by it. The assessee has failed
to explain the modus operandi to be utilized, for
the purpose of providing the microfinance to the
poor.
10. The assessee has even not committed itself to
furnish the rate of interest, to be charged from its
lending and to be paid for borrowing/capital. The
assessee stated that the micro finance is made
6available to small business vendors, the sellers
etc. rate of interest will be as per RBI norms.
RBI norms are open market norms and the
assessee has failed to establish how charging of
interest as per RBI can be held as charitable
activities.
With regard to its aforesaid clause also the
assessee has simply stated that they have not yet
started any activities as per its MOA, except some
food distribution etc.
11. Therefore, considering the discussion as above
it is held that the objectives of micro finance,
contained in the MOA of the assessee can not be
held as charitable activity and therefore, not
eligible for exemption under section 12AB of the
Act, accordingly the application of the assessee
filed in form 10AB is hereby rejected. The
Provisional Certificate issued to the assessee is
hereby cancelled w.e.f. the date of its issue.”
Upon consideration, no perversity or illegality is found in the
order passed by the Commissioner of Income Tax (Exemption),
Kolkata, warranting interference with the impugned decision.
Accordingly, the writ petition is liable to be dismissed.
However, learned counsel for the petitioner submits that the
petitioner has since amended its Memorandum of Association to
exclude microfinance activities.
In view of this submission, it is observed that the petitioner
shall be at liberty to apply afresh for exemption, subject to such
amendments being duly effected in accordance with law.
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Accordingly, WPO/1070/2024 stands dismissed.
(KAUSIK CHANDA, J.)
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