TaxTMI 
TaxTMI 
TaxTMI 
2015 (3) TMI 269
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....appreciate the fact that the claim of 'medical relief' was not taken by the assessee during the course of assessment proceedings and during the appellate proceedings this claim has been taken solely on the ground that the assessee is receiving fin support from Ministry of Health and Family Welfare, which is wholly untenable. 4. On the facts and circumstances of the case, the Id. CIT( A) has failed to address the issue of endorsement money of Rs. 1.7 crores received from 6 corporate entities on the basis of entirely commercial contracts by assessee used by more entities for advertorial purpose. 5. On the facts and circumstances of the case, the Id. CIT(A) has failed to appreciate the fact that the legal position in Asstt. Year 2009-10 is distinguishable from the earlier years in view of the amended provision to section 2( 15) of the Act, w.e.f. 01.04.2009. 6. On the facts and circumstances of the case, the Id. CIT(A) has erred in holding that no action for withdrawal of registration u/s 12AA has been initiated by DIT(E) because Finance Act, 2012 has introduced a retrospective amendment w.e.f. 01.04.2009 which clearly lay down that such cancellation is in no way mandatory for ....
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....Act of 1860. The main object of the society is to promote and advance" medical science and to promote the improvement of public health and medical education in India. It is also registered under Section 12A of the Income Tax Act vide registration No. DLI(C)(I331)/1974-75. 2. It has been engaged in the activities as stated in its object. 3. It is maintaining regular books of account and filing its return regularly. It has been getting exemption under Section 11 read with Section 2(15) of the Act every year. The return for the assessment year 2009-10 was filed on 29th September, 2009. The said return was accompanied by audited Balance Sheet and Profit and Loss Account. A copy of the return filed and the Balance Sheet is placed in the paper book. 4. The case was selected for scrutiny. During the course of the assessment, the Assessing Officer raised the issue that some of the receipts are arising out of commercial transaction with outsiders who are non-member of the society. In this regard he raised the issue of endorsement money of Rs. 1.87 Crores from the various Corporates. On the basis of the analysis carried out of the agreement, the Assessing Officer concluded that various cl....
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....public utility is being provided for a fee or cess It is only when a trust claims that it is engaged in advancement of any other object of public utility and such activity is being provided for a cess or fee then only the proviso will come into operation and that too when such activity is in the nature of a trade, commerce or business. In the case of the assessee it was submitted the facts are entirely different as the object and activity states that it is an institution created for medical services. The object clause it was submitted clearly states that it is engaged in the medical relief. The objective it was claimed is advancement of medical science so as to improve all public health. All the activities it was submitted are being carried out by the institution towards this aim only. The entire expenditure it was submitted is incurred in the cause of medical relief only. 3.2. It was further submitted that if a charitable trust or society is engaged in all these three activities which is the case of the assessee society then it is irrelevant whether the nature of the income is from sponsorship, endorsement, rent or otherwise so long as the same is used for the purpose for which t....
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....g provided on a commercial line for a fee or cess. In this regard we will invite your honour's attention to the proviso to Section 2(15) again whereby it has been categorically stated that object of general public utility shall not be charitable if it involves the carrying on of any activity in the nature of trade, commerce or business. The words used 'if it involves' has a reference to the object of general public utility. So the essence of this is that the object of general public utility per se involves carrying on activity in the nature of trade, commerce or business. if the object of general public utility is independent of the source of income then that source of income whatever nature may be, cannot be considered to be violative of the Section 2(15). In this regard the further words used i the proviso that any activity of rendering any service for a cess or fee or any other consideration also supports the above interpretation. Thus, the correct interpretation of the proviso is that any other object of general public utility should be, it be nature of trade or commerce activity is being carried out for a cess or fee." 3.5. It was reiterated that mobilizing of res....
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.... laws. But after careful consideration of the case laws, it is found that those cases are not applicable on the facts of the case. Furthermore, appellant has been able to demonstrate that it is engaged in promotion and advancement of medical science and improvement of the public health. Hence, its activities falls within the meaning of section 2( 15) of the IT Act. In support of its claim the appellant has produced various details which were perused by me and after careful consideration of the various details filed and placed on record, issue is decided as under:- 4.3 In this regard, vide letter submitted on 26.6.2012 it has been informed by the appellant society that no notice have been received with regard to withdrawal of registration u/s.12AA of the IT Act. So as per finding of the AO in the assessment order that proposal has been moved to DIT(E) for withdrawal of exemption, no action has been initiated by the DIT(E) against the appellant till date. Furthermore, AO has not been able to demonstrate as to why activity of the appellant has become non-charitable in A.Y.2009- 10 only, when in previous three consecutive scrutiny assessments viz, A.Y.2006-07, 2007-08 & 2008-09 the fi....
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....mpanies but the facts remains that their contribution was not made for charitable purposes and was made for specific endorsement which would result in the sale of their products and thus the receipt of money would come in the category of profit motive activity wherein reciprocity is involved. Accordingly in these circumstances, the impugned order on facts it was submitted deserves to be set aside. Inviting attention to the submissions advanced before the CIT(A) in para 9 extracted at page 7 of his order that the assessment is supported by financial support from the Ministry of Health and Family Welfare and consequently the assertion to the extent that the Trust be treated to be engaged in charitable activity it was submitted cannot be accepted as the Government of India grants various financial supports by way of subsidy, donation etc. and all these are not necessarily for charitable purposes only. Thus simply because financial support is provided by the Government or its Ministry it was submitted it cannot be said to be for a charitable activity only. 6. Ld. AR on the other hand inviting attention to the order dated 22.01.2015 in WP(C) 1872/2013 in the case of India Trade Promoti....
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....he case of ICAI vs DGIT (Exemption) 347 ITR 99 (Del); Bureau of India Standards vs. Director General of Income tax (Exemptions) [2013] 212 taxman 210 (Delhi); Institute of Chartered Accountants of India vs DGIT (E) WP (C) 3147/2012 dated 04.07.2013; and M/s. G.S.1 India vs. Director General of Income Tax (Exemption) and Another WP(C) 7797/2009 dated 26.09.2013 [2013] 219 Taxman 205 concluded in paras 42-45 as under :- 42. "It is evident from Section 10(23C)(iv) of the said Act that if any income is received by any person on behalf of any other fund or institution established for "charitable purposes", which may be approved by the prescribed authority, having regard to the objects of the fund or institution and its importance throughout any State or States, such income shall not be included in the total income. Therefore, what is necessary in the first instance is to establish that the income is received on behalf of a fund or institution established for "charitable purposes". The first thing that needs to be satisfied, therefore, is that the institution must be established for 'charitable purposes'. Charitable purpose is defined in Section 2(15) as indicated above. It is a....
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.... fairs and exhibitions. All these activities, including the sale of tickets and sale of publications are an inherent part of the main object of the petitioner. It is clear from the facts of the case that profit making is not the driving force or objective of the petitioner. It is registered under Section2 5 of the Companies Act, 1956, which specifically applies to entities which intend to apply their profits, if any, or other income in promoting their objects and prohibits, the payment of any dividend to its members. This makes it clear that nay income generated by the petitioner does not find its way into the pockets of any individuals or entities. It is to be utilized fully for the purposes of the objects of the petitioner. 44. It is an admitted position that had the proviso not been introduced by virtue of the Finance Act, 2008 with effect from 01.04.2009, the petitioner would have beer] recognized as a charity and would have been recognized as an institution established for the charitable purpose of advancement of an object of general public utility. The difficulty that has arisen for the petitioner is because of the introduction of the proviso to Section 2(15). The said provi....
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....SC), the Supreme Court held that "the word "business" W8S of indefinite import and in a taxing statute, it is used in the sense of an occupation, or profession which occupies time, attention or labour of a person, and is clearly associated with the object of making profit". This court, in ICAI (I) (supra) held that, while construing the term "business" as appearing in the proviso to Section 2(15), the object and purpose of the Section has to be kept in mind. It was observed therein that a very broad and extended definition of the term "business" was not intended for the purpose of interpreting and applying the first proviso to Section 2(15) of the Act so as to include any transaction for a cess, fee or consideration. The Court specifically held that:" "An activity would be considered 'business' if it is undertaken with a profit motive, but in some cases, this may not be determinative. Normally, the profit motive test should be satisfied, but in a given case activity may be regarded as a business even when profit motive cannot be established / proved. In such cases, there should be evidence and material to show that the activity has continued on sound and recognized busines....
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.... and purpose of the institution is charitable, the fact that the institution collects certain charges, does not alter the character of the institution .... " This court in ICAI (11) (supra) held:- "67. The expressions "trade", "commerce" and "business" as occurring in the first proviso to section 2(15) of the Act must be read in the context of the intent and purport of section 2(15) of the Act and cannot be interpreted to mean any activity which is carried on in an organised manner. The purpose and the dominant object for which an institution carries on its activities is material to determine whether the same is business or not. The purport of the first proviso to section 2(15) of the Act is not to exclude entities which are essentially for charitable purpose but are conducting some activities for a consideration or a fee. The object of introducing the first proviso is to exclude organizations which are carrying on regular business from the scope of "charitable purpose". The purpose of introducing the proviso to Section 2(15) of the Act can be understood from the Budget Speech of the Finance Minister while introducing the Finance Bill 2008. The relevant extract to the Speech is as....
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....i and Bros (supra) observed as under:- "71. Although, it is not essential that an activity be carried on for profit motive in order to be considered as business, but existence of profit motive would be a vital indicator in determining whether an organisation is carrying on business or not. In the present case, the petitioner has submitted figures to indicate that expenditure on salaries and depreciation exceeds the surplus as generated from holding coaching classes. In addition, the petitioner institute provides study material and other academic support such as facilities of a library without any material additional costs. The Supreme Court in the case of State of Andhra Pradesh v . H. Abdul Bakhi and Bros. (supra) held as under: 'The expression "business" though extensively used a word of indefinite import, in taxing statutes it is used in the sense of an occupation. or profession which occupies the time, attention and labour of a person, normally with the object of making profit. To regard an activity as business there must be a course of dealings, either actually continued or contemplated to be continued with a profit motive. and not for sport or pleasure." (Underlining ad....
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.... also examine the observations of another Division Bench of this court in G.S.1 (supra). While considering Circular No.11 of 2008 issued by the CBDT, to which a reference has been made earlier in this judgment, the Division Bench held that it was evident from the said circular that the new proviso to Section 2(15) of the said Act was "applicable to assesses, who are engaged in commercial activities, i.e., carrying on business, trade or commerce, in the garb of 'public utilities' to avoid tax liability as it was noticed that the object 'general public utility' was sometimes used as a mask or device to hide the true purpose, which was 'trade, commerce or business'." From this, it is evident that the introduction of the proviso to Section 2(15) by virtue of the Finance Act, 2008 was directed to prevent the unholy practice of pure trade, commerce and business entities from masking their activities and portraying them in the garb of an activity with the object of a general public utility. It was not designed to hit at those institutions, which had the advancement of the objects of general public utility at their hearts and were charity institutions. The attempt w....
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....m of fee charged, economic status of the beneficiaries who pay. commercial value of benefits in comparison to the fee, purpose and object behind the fee etc. are several factors which will decide the seminal question, is it business?" 57. Ultimately, in the context of the factual matrix of that case, this court held that "charging a nominal fee to use the coding system and to avail the advantages and benefits therein is neither reflective of the business aptitude nor indicative of the profit oriented intent". The court further observed:- 'Thus the contention of the revenue that the petitioner charges fee and, therefore, is carrying on business, has to be rejected. The intention behind the entire activity is philanthropic and not to recoup or reimburse in monetary terms what is given to the beneficiaries. Element of give and take is missing, but decisive element of bequeathing is present. In the absence of "profit motive" and charity being the primary and sole purpose behind the activities of the petitioner is perspicuously discernible and perceptible. The court also held:- "27. As observed above, fee charged and quantum of income earned can be indicative of the fact that the....
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....ave been established for charitable purposes, is profit making whether its activities are directly in the nature of trade, commerce or business or indirectly in the rendering of any service in relation to any trade, commerce or business, then it would not be entitled to claim its object to be a 'charitable purpose'. On the flip side, where an institution is not driven primarily by a desire or motive to earn profits, but to do charity through the advancement of an object of general public utility, it cannot but be regarded as an institution established for charitable purposes." 6.2. Accordingly it was his submission that on facts the impugned order deserves to be upheld. Attention was invited to Paper Book page No-46 which contains the copy of Memorandum of Association Rules & Bye Laws of the assessee's society registered under the Societies Act XXI of 1868. Referring to page 53 it was submitted that the objects have been enshrined therein. It was also his submission that in the facts of the present case also the entire proceeds are ploughed back into the activities of the assessee's trust which has been held to be charitable. 7. We have heard the rival submissions and perused the....
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....e needs of the medical profession in India and which shall undertake publicity and propaganda work of the Association through its columns and publish other literature in accordance with the objects of the Association. 4. Maintain a Library and an Association Office. 5. Publish from time to time transactions and other papers embodying medical researches conducted by the members or under the auspices of the Association. 6. Encourage research in medical and allied sciences with grants out of the funds of the Association, by the establishment of scholarships, prizes or rewards and in such other manner as may from time to time be determined upon by the Association. 7. Conduct educational campaign amongst the people of India in the matter of public health and sanitation by cooperating, whenever necessary, with different public bodies working within the same object. 8. Organise medical corps for providing medical relief during epidemics and in times of emergency. 9. Consider and express its views on all questions and the laws of India or proposed legislation affecting public health, the medical profession and medical education and initiate or watch over or take such steps and adopt ....
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....having no health benefits. It is not the case of the Revenue that the endorsement of healthy nutrition is medically/scientifically incorrect. The assessee as per the mandate of its objects and the methods set out in Clause IV(2); (3)(5) (6); (7) and (16) has endorsed products on the claims of health and nutritional benefit the grievance of the Revenue appears to be misplaced. The above is notwithstanding the material fact considering the judicial precedent as laid down by the Jurisdictional High Court in ITPO case (cited supra) namely that the dominant purpose of the activity was to mobilize funds for charitable purposes and not for endorsing the products. In the absence of any adverse finding in regard to the activities of the trust we find that the department's case has no merits. In the course of hearing it was submitted by the Ld. Sr. DR on query that the registration till date has not been withdrawn. The date of the assessment order the record shows is 08.11.2011. The Ld. Sr. DR has also canvassed that the mere fact that the assessee has received financial support from the Ministry of Health and Family Welfare which fact it has been submitted does not mean that it is performin....