TaxTMI 
TaxTMI 
2011 (9) TMI 78
X X X X Extracts X X X X
X X X X Extracts X X X X
....siness activity and therefore is in violation of the provisions of Income Tax as also supported by Judgment of the Patna High Court cited in 208 ITR 608? C. Whether the impugned order passed by the ITAT is perverse both in law and facts of the present case? 2. The respondent is the Institute of Chartered Accountants of India (Institute, for short), a statutory body established under the Chartered Accountants Act, 1949 (1949 Act, for short), for regulating the profession of Chartered Accountants in India. 3. Central Board for Direct Taxes (CBDT, for short), since the assessment year 1996-97, has been approving the said Institute under sub-clause (iv) of Section 10(23C) of the 1961 Act. Vide order dated 18th October, 2004, approval under Section 10(23C)(iv) was granted for the assessment years 2003-04 to 2005-06. 4. For the assessment year 2005-06, the respondent filed its return declaring its income as NIL, which was accepted by the assessment order dated 21st August, 2007 under Section 143(3) of the 1961 Act. The assessment order records that a notice under Section 142(1) was issued calling for detailed information which was furnished by the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion 263 of the 1961 Act was rightly invoked by the appellant. He relies upon the decision of the Delhi High Court in Gee Vee Enterprises versus ACIT, [1975] 99 ITR 375 (Del). 10. With regard to the coaching activity, the appellant in the show cause notice dated 26th March, 2008, had made the following allegations:- "(a) Assessment has obtained coaching classes income of Rs.237.11 lakh as per schedule XI of the balance sheet. Expenditure of Rs.133.14 lakh as per schedule XII of the balance sheet has been incurred on running these coaching classes. I have examined the Chartered Accountants Act, 1949. Section 15 of the Act provides for the functions of the Council. None of the functions remotely relate to running of coaching classes. Further, running of coaching classes is a business and not a charitable activity. Under these circumstances, assessee ought to have maintained separate books of accounts in respect of the coaching classes. Assessee has not maintained separate books. A proviso below section 10(23C) provides that profits and gains of a business run by the approved institution could be exempt, if business is incidental to the attainment of objectives and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....adjudication on the issue because necessary enquiries had not been made, but the appellant had examined the contentions and decided the question on merits. Specific direction was given to the Assessing Officer to reassess the receipts/profit as income. The appellant has given a finding on merits and it is not the case of mere remittance for consideration on merits. The claim that this income was not chargeable was rejected. In these circumstances, we are required to examine the merits of the decision made by the appellant. 14. What is noticeable and clear from the order dated 29th March 2010 of the appellant is lack of discussion, and examination of the concept/term 'business', the object and role assigned to and performed by the institute. On the other hand, ITAT examined the provisions of 1949 Act and the role assigned to and undertaken by the institute. It was held that the institute has been created to regulate the profession of Chartered Accountancy and for this purpose the institute can and is required to provide education, training and monitor professional skills of the members. It is also required to provide education and training to students/article clerks who ar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ovides computer training to the students registered with it, at a very low fee." 15. Thereafter, the Tribunal has quoted judgment of the Gujarat High Court in Saurashtra Education Foundation vs. CIT, (2005) 273 ITR 139 at page 146, in which it has been observed as under:- "As regards the illustration of the Institute of Chartered Accountants of India, although the institute was earlier not running formal classes and there was no geographical proximity when instructions were being imparted through postal tuitions, the Institute of Chartered Accountants of India has always been an institution set up, inter alia for imparting formal education in accountancy and connected subjects in an organized and systematic manner. The institute is accountable as per the provisions of the Act establishing it and the institute also has disciplinary control over the students who are required to be registered with its in the first place and who appear at the exams being held by the institute....." 16. The aforesaid findings as to the object, purpose and role of the institute cannot be disputed. The appellant has taken a very narrow and myopic view and has not examined the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ess of purchasing or selling of goods within the meaning of the statute." 19. Further in CST v. Sai Publication Fund (2002) 4 SCC 57, the Supreme Court, in the context of statutory provision under consideration, has observed that if the main activity of a person is not business then any ancillary transaction would not amount to business unless an otherwise intention is established. It has also been held that irrespective of the profit motive, determination of the question whether a person's activity as "business" is to be decided on facts and circumstances of each case. It has held:- "11. No doubt, the definition of "business" given in Section 2(5-A) of the Act even without profit motive is wide enough to include any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture and any transaction in connection with or incidental or ancillary to the commencement or closure of such trade, commerce, manufacture, adventure or concern. If the main activity is not business, then any transaction incidental or ancillary would not normally amount to "business" unless an independent intention to carry on "business" in the inci....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ess', yet the person could be doing 'business'. 16. The words 'carrying on business' require something more than merely selling or buying etc. Whether a person 'carries on business' in a particular commodity must depend upon the volume, frequency, continuity and regularity of transactions of purchase and sale in a class of goods and the transactions must ordinarily be entered into with a profit motive (Board of Revenue v. A.M. Ansari (1976) 3 SCC 5 12. Such profit motive may, however, be statutorily excluded from the definition of 'business' but still the person may be 'carrying on business'. 13. Further in para 30 of the same judgment, it is stated thus: (SCC pp. 647-48) "30. In our view, if the main activity was not 'business', then the connected, incidental or ancillary activities of sales would not normally amount to 'business' unless an independent intention to conduct 'business' in these connected, incidental or ancillary activities is established by the Revenue. It will then be necessary to find out whether the transactions which are connected, incidental or ancillary are only an infinitesimal or small part of the main activities. In o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wanlal v. CST (1957) 8 STC 732 (Bom), relied on for the respondent-Port Trust, the Bombay High Court held that an agriculturist did not necessarily fall within the definition of a 'dealer' under Section 2(c) of the C.P. and Berar Sales Tax Act (21 of 1967), merely because he sold or supplied commodities. It must be shown that he was carrying on a business. It was held that it must be established that his primary intention in engaging himself in such activities must be to carry on the business of sale or supply of agricultural produce. This High Court held that there was 'nothing to show that the petitioner acquired these lands with a view to doing "the business of selling or supplying" agricultural produce. According to (the assessee), he (was) principally an agriculturist who also deals in cotton, coal, oilseeds and groundnuts'. (emphasis supplied) He was having agriculture for the purpose of earning income from the fields but there was nothing to show that he acquired the lands with the primary intention of doing business of selling or buying agricultural produce. This decision was approved by this Court in Dy. Commr. of Agricultural Income Tax and Sales Tax v. Travanco....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the research activities, it was held that the Institute was solely and exclusively constituted for the purposes of research and was not carrying on 'business' and these sales and purchases abovementioned could not be subjected to sales tax. Likewise, in State of T.N. v. Cement Research Institute of India (1992) 86 STC 124 (Mad) it was held that the Institute was an organisation, the objects of which were to promote research and other scientific work, that the laboratories and workshops were maintained by the organization for conducting experiments, and that though the cement manufactured as a result of research was sold, it could not be considered to be a trading activity within Section 2(d) of the Tamil Nadu General Sales Tax Act, 1959. Again in Tirumala Tirupati Devasthanam v. State of Madras (1972) 29 STC 266 (Mad) the dispute arose with regard to the sales of silverware etc. which are customarily deposited in the hundis by devotees. It was held by the Madras High Court that the Devasthanam's main activities were religious in nature and these sales were not liable to tax. (No doubt, the case related to a period where the profit motive was not excluded by statute.) We are of the....