Director General of Income Tax (Exemption) has denied the exemption to Institute of Chartered Accountants of India (ICAI) under Section 10(23C)(iv) of the Income Tax Act, 1961 on the basis of following allegation:

"During the financial year 2003-04, 2004-05, 2005-06 and 2006-07, the Petitioner Foundation has mainly done contract work, for which it has received certain payments. These activities are basically the jobs done for third parties, for consideration received. Therefore, the Petitioner Foundation is providing professional services on regular basis, which amounts to doing business of providing professional services. Since professional services is a commercial activity, it cannot be taken as a 'charitable activity'."

While allowing the exemption u/s 10(23C)(iv) and issuing writ of direction/mandamus, honorable High Court of Delhi has observed the followings:

1.      There is not even an iota of doubt that the Petitioner Foundation is involved in education and, thus, meets the description of „charitable institution.

2.      It clearly follows that even these three projects were the research projects which were given to the Petitioner Foundation having regard to its expertise in this field. Therefore, these activities per se would not bring out the Petitioner Foundation out of the ambit of Section 2(15) of the Act. It can be said that the activities amounted to "Advancement of an object of general public utility" which also appears in the definition of charitable purpose in Section 2(15) of the Act.

3.       In order to have a charity, you must have a source of income. The income may come from gifts, or it may come from running a business.

4.       The circumstances under which the projects were undertaken make it clear that it was at the instance of the Government of India or the State Government for improving the accounting and budgetary systems in these local bodies. The expertise of the Petitioner Foundation in carrying out research in this field was sought to be utilized. Therefore, it cannot constitute "business/commercial activity". Merely because some remuneration was taken by the Petitioner Foundation for undertaking these projects would not alter the character of these projects, which remained research and consultancy work.

5.       The amended definition of charitable purpose would not alter the position

For full text of judgment visit:

ICAI Accounting Research Foundation & Anr. Versus Director General of Income Tax (Exemptions) & Ors. - 2009 -TMI - 34467 - HIGH COURT OF DELHI

Charitable purpose: paid research and consultancy for public bodies can remain charitable when it advances public utility. The High Court held that an educational institution's research and consultancy projects commissioned by government bodies, undertaken due to the institution's expertise to improve public systems, can constitute the advancement of general public utility and remain charitable; receipt of remuneration for such projects does not automatically make them commercial, and a charity may have income from gifts or business without losing charitable character.