TaxTMI 
TaxTMI 
2013 (11) TMI 54
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....ly proviso to Section 2(15) is not applicable to its case. It is therefore entitled to benefit tinder Section II or the Act. It is submitted that it be so held now. 3. The learned CIT(A) has erred on facts by holding that the activities of the appellant trust are commercial in nature. It is submitted that the activities of the trust are in the nature of 'relief to the poor' and are carried on, on non-commercial principles. It is submitted it he so held now. 4. The learned CIT(A) has erred in not directing the AO to exclude capital grants of Rs.1,08,60,086/- from total income when capital expenditure was not allowed since benefit of section 11 has been denied. 5. The learned CIT(A) has erred in not directing the AO to grant depreciation as per the Act on capital expenditure of Rs.1,66,30,885 incurred during the year under consideration when deduction of such expenditure was not granted in view of denial of benefit under section 11 of the Act. 6. The learned CIT(A) has erred in not appreciating the tact that the appellant is a trust created before commencement of Income Tax....
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....likewise, other objects. He referred to the order of the Joint Commissioner of Sales-Tax (Legal), Gujarat State, Ahmedabad wherein the assessee-trust was not considered as "trader" for the sales-tax purpose, and it was specifically mentioned that the activities are also not business like but are allied activities to meet the objectives of the Trust. This order of the Joint Commissioner of Sales-Tax (Legal) has been filed as additional evidence before the Tribunal. He submitted that the issue is covered in favour of the assessee with the decisions of the Hon'ble Delhi High Court in the case of Institute of Chartered Accountants of India v. DGIT, 13 Taxmann.com 175 dated 19-9-2011 and the case of ICAI Accounting Research Foundation v. DIT(Exemption), 183 Taxmann 462, and that of ITAT, Chandigarh in the case of Himachal Pradesh Environment Protection and Pollution Control Board v. CIT [2010] 42 SOT 343 and decision of the ITAT, Nagpur in the case of Sevagram Ashram Pratishthan v. CIT [2010] 129 TTJ 506. He also referred to the article on the effect of proviso to section 2(15) of Shri V.P. Gupta, Advocate in 3 Taxman.com 421 (Article). The learned counsel for the assessee further submi....
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.... nature of use or application, or retention of the income from such activity. The second proviso to section 2(15) provides that aforesaid first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is Rs.10 lakhs (Rs.25 lakhs from 1.4.2012) or less in the previous year. We find that whether a charitable trust is carrying an activity in the nature of trade, commerce or business is question of fact, which will be decided based on the nature, scope, extent and frequency of the activity, and also after considering overall facts and circumstances of the case in its entirety. The proviso is applicable only in relation to last limb of the definition of charitable purpose i.e. "advancement of any other object of general public utility" which means the activities which promote the welfare of the general public and not the individual interest of some person or persons or private profit and private gain. To understand the true meaning of proviso to section 2(15), the speech of the Hon'ble Finance Minister while piloting the Finance Bill, 2008 is also relevant, which is reproduced hereinunder. "I once again assure the....
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....ust, the same shall not be construed to be activity in the nature of trade, commerce or business of the assessee. We find that the present trust before us was in a way founded by the Father of the Nation, late Mahatma Gandhi. On page no.1 of the trust-deed, it is mentioned that after returning from South Africa to India in the year 1915, Mahatma Gandhi acquired some land in Ranip, Wadaj villages of Daskroi, District Ahmedabad and have established an institution named "Satyagrah Ashram" and started Gaushala as one of the part of the constructive activities. However, its administration and property were kept separately as a separate department i.e. Trust from the beginning. Some eminent personalities of the country were its trustees. The objects of the trusts are reproduced hereunder: 1. To breed the cattle and endeavor to improve the quality of the cows and oxen in view of the need of good oxen as India is prominent agricultural country and the cow milk as food is both conducive to and requisite for good health and longevity of human life. In order to improve the quality of the cattle, it is very essential to use a high quality bul....
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....on securities of the trust properties or obtain in any other way as deemed fit by the trustees. 11. To undertake such other activities from time to time for achieving or helping the trust objects as deemed fit by the trustees. 7. We find that the assessee trust was registered with Charity Commissioner and the copy of the certificate issued by the Charity Commissioner has been filed in the compilation before us. The Commissioner of Income-tax, Gujarat has registered the assessee-trust under Section 12A. The Joint Commissioner of Sales-Tax (Legal) vide its order dated 2.9.2006 has noted that the activities of the assessee-trust are also not business like, but are allied activities to meet the objectives of the trust, and hence as per the exception in notification (notification section 2(10)), the applicant cannot be considered as trader. We find that for the applicability of proviso to section 2(15), the activities of the trust should be carried out on commercial lines with intention to make profit. Where the trust is carrying out its activities on non-commercial lines with no motive to earn profits, for fulfillment of its aims a....
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....e manner in which the activities of the charitable trust/institution are undertaken are highly relevant to decide the issue of applicability of proviso to section 2(15) of the Act. The Hon'ble Delhi High Court in Institute of Chartered Accountants of India (supra) has considered this controversy. The facts of the case were that DCIT(Exemption) passed an order under Section 263 of the Act, taking a view that ICAI was running a coaching class and it was a business activity, and therefore it has violated the provision of Income Tax Act. The Tribunal held that the order passed by the DIT(Exemption) was not correct in the facts of the case. The Hon'ble High Court after going through the facts and discussing the legal position, held that in the case of the institute, it cannot be said that it was carrying on business and has observed as under:- "20. The purpose and object to do business is normally to earn and is carried out with a profit motive; in some cases the absence of profit motive may not be determinative. The appellant has given no such finding as far as the activities of the institute are concerned. The appellant without e....
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....'. The question then arises whether on the present set of facts it can be said that the assessee was engaged in trade, commerce or business or in rendering of a service to trade, commerce or business. As far as assessee being engaged in trade, commerce or business is concerned, it is not even learned Commissioner's case that running a organization, set up under the statute law, for controlling, preventing and abating pollution, is pursuing trade, commerce or business. Obviously, a trade, commerce or business implies an activity with profit motive even though public good may be a secondary benefit from such an activity. This is not the case before us. The legal framework under which the assessee is set up is quite clear and unambiguous and it reflects will of the lawmakers in no uncertain terms, which is to prevent pollution.' 8. These decisions of the Hon'ble Courts/Tribunal make the scope of applicability of proviso to section 2(15) of the Act clear that to decide the applicability of the said proviso, the entirety of the facts and circumstances of the case, and in particular the fact that the activities of the trust/institution whether are carried out with a motive to earn pro....