TaxTMI 
TaxTMI 
2015 (1) TMI 957
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....society under the Societies Registration Act 1860. Its objectives include inter alia, (i) promote, encourage and develop horticultural activities in the country; (ii) to stimulate and support the growth of the diverse activities of the horticulture industry; (iii) to advance the economic and social well-being of the farmers or the growers in in need of such advancement; (iv) to assist the establishment and maintenance of the growers and farmers' societies and other similar institutions as part of the development of horticulture industry; (v) to coordinate the activities of different departments and organizations at the Central and the State level, engaged in activities pertaining to horticulture industry. As a part of pursuing these objectives, one of the activities that the assessee is involved in is disbursement of subsidy received from the Ministry of Agriculture in respect of qualified horticulture projects. The assessee had filed its income tax return for the assessment year 2009-10, disclosing no taxable income, on 22.9.2009. In the course of the scrutiny assessment proceedings, in respect of this return, the Assessing Officer noticed that the assessee has received a sum of R....
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....refore, the same are treated as taxable income of the assessee and is added to the income of the assessee. 3. Aggrieved, assessee carried the matter in appeal before the CIT(A) but without any success. Learned CIT(A) observed that as the assessee is registered under section 12A(a), the assessee is eligible to claim exemption under section 11 of the Act but such an exemption is confined to the income derived from the property held in trust and income arising from any charitable activity. It was further observed that the assessee's claim for exemption rests on the claim that the income is derived in the course of pursuing charitable objects, which includes objects of general public utility, but this claim is untenable in law as the case of the assessee is hit by second limb of first proviso to Section 2(15) which provides that even advancement of an object of general public utility shall not be considered to an activity for charitable purposes in a situation in which the assessee is engaged in "any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration". It was a case in which the assessee has rendered a servi....
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.... in "carrying on an activity in the nature of trade, commerce or business" or where the assessee is involved in "rendering any services in relation to any trade, commerce or business, for a cess or a fee or any other consideration, irrespective of the nature or use or application, or retention of the income from such activity", even pursuing an object of general public utility will cease to be for charitable purposes. 9. There is no dispute that the first limb of first proviso is not attracted on the facts of this case, inasmuch as it is not even revenue's case that the assessee is engaged in an activity in the nature of trade commerce or business. However, the stand of the Assessing Officer, which has also found favour with the first appellate authority, is that the assessee has rendered services "in relation to trade, commerce or business" for a consideration, and it is for this reason that the first proviso to Section 2(15) is attracted on the facts of this case. Undoubtedly once an assessee is found to be "rendering any services in relation to any trade, commerce or business, for a cess or a fee or any other consideration", and irrespective of what he does to the income gene....
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....nd universal and would include consumers, government, beneficiaries of PDS etc. 32. The second proviso, which refers to the aggregate value of receipt of activities of Rs. 10 lacs (now enhanced Rs. 25 lacs vide Finance Act 2011 with effect from 1.4.2012) or less in a previous year, cannot be invoked in the present case because the said provision will apply only if the institution covered by the last/residuary clause is involved or carrying on activity of rendering any service in relation to trade, commerce or business. Contention of the respondent, if accepted, would deny charitable status to a faintly moderate size institution under the last/residuary limb, when it charges even a token or insignificant amount from the beneficiaries, who gain significantly from the altruism and benevolence. A small charitable organization that receives token fee of more than Rs. 80,000/- a month or now Rs. 2,00,000/- per month approximately, would disqualify and lose their charitable status. The object of the proviso is to draw a distinction between charitable institutions covered by last limb which conduct business or otherwise business activities are undertaken by them to feed charity. The pro....
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....ven though fees are charged by the petitioner institute for providing coaching classes and for holding interviews with respect to campus placement, the said activities cannot be stated to be rendering service in relation to any trade, commerce or business as such activities are undertaken by the petitioner institute in furtherance of its main object which as held earlier are not trade, commerce or business". In this case also, the rendition of services by the assessee is viewed in conjunction with the overall objectives of the assesse and once it is seen that these services are not in the nature of trade, commerce or business per se, the mere charging of fees for services so rendered, which were held to subservient to the charitable objectives, is held to have no effect on the overall charitable objects of the assessee. 13. Learned Departmental Representative has, however, relied upon Hon'ble Andhra Pradesh High Court in the case of Andhra Pradesh State Seed Certification Agency Vs Chief Commissioner of Income Tax [(2013) 356 ITR 360] and contended that as long as services are rendered to a business, trade or commerce, and irrespective of the motives of the person rendering such....
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.... Court in this case, has taken a contrary view and a view which is in favour of the assessee. 15. In any case, Hon'ble Delhi High Court having taken a view in favour of the assessee on this issue, the views so expressed by Hon'ble Andhra Pradesh High Court and Hon'ble Kerala High Court bind only the benches in the jurisdiction of Hon'ble Kerala and Karnataka High Courts. 16. In view of these discussions, in our considered view, the authorities below were clearly in error in invoking first proviso to Section 2(15), particularly as it has not even been their case that the assessee was carrying out any business activity in charging the processing fees or service fees, even if receipts on account of application forms can be construed as such, from the applicants for the subsidy. 17. We have also noted that the assessee has received grant and subsidies aggregating to Rs. 122,47,00,000 and, as against this amount, the receipts on account of what is said to be service charges and processing fees aggregate to Rs. 2,20,57,529. These figures donot suggest that the service charges or processing fees constitute a source of business activity which is, in the light of law laid down by H....