2015 (7) TMI 531

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....y not get registration u/s 12AA of the Act, appeal against the order of ld. DIT(E) was not filed. However, subsequently, the central auditors of the institution during the course of statutory audit of the society in July'14 observed that assessee is entitled for registration u/s 12AA of the Act keeping in view the fact that similar societies of the central govt. functioning in other parts of the country spread over 10 states have been granted registration u/s 12AA of the Act. It was stated in the petition that after receiving the audit report in the month of August, 14, assessee society reviewed the entire issue and after discussions in the meeting of governing council of the institution at New Delhi on 27/08/14 decision was taken to engage services of tax expert for filing appeal before ITAT. Due to holidays and leave of the staff on account of Dasara and other festivals in the first week of October'14, appeal was prepared and filed finally on 19/10/14. Thus, it was submitted that the delay being unintentional and beyond the control of assessee, the same is to be condoned. 3. Ld. DR, though, opposed condonation of delay, finally, he expressed that he has no objection if the app....

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....al accounts, it was found that assessee has shown various amounts towards stock-in-trade, finished goods, workin- progress and raw materials. He also noted that sales tax assessments have been completed in case of assessee up to AY 2003-04 and assessments for AY 2004-05 & 2005-06 are pending. He also observed that apart from receipts from sales assessee has also income from royalty as found from income and expenditure account in different assessment years. Ld. DIT(E) observed that, though as per the objects of assessee, it is not supposed to indulge in commercial activities, but, assessee in fact has undertaken commercial activities generating receipts therefrom. He, therefore, held that activity of assessee cannot be considered to be charitable as it is engaged in commercial activity. Ld. DIT(E) referring to a decision of Hon'ble Supreme Court in case of East India Industries (Madras) Pvt. Ltd. Vs. CIT [1967], 65 ITR 611, observed that a trust or society having both charitable and non-charitable objects is not eligible for exemption of its income, is, not entitled for registration u/s 12A of the Act. Accordingly, he rejected assessee's application for registration. Being aggrieved....

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....aid proviso is applicable residuary clause, 'advancement of any other object of general public utility' whereas assessee is basically engaged in providing education. Ld. AR submitted, since the so called commercial activity is inextricably linked with the training activity of assessee, it cannot be said that assessee is a non-charitable institution. Ld. AR submitted, society is running on no profit no loss basis and the fee structure is always based on the nature of training provided. Therefore, uniform rate of fee is not fixed for course organized. In this context, it was submitted, since society is engaged in providing technical education in manufacture of tools and dyes moulds, etc., it has to establish necessary infrastructure like class rooms and other facilities besides providing technical training on the machinery used in the manufacture of dyes, etc. For this purpose, it has incurred substantial expenditure, which has to be reimbursed by the trainees, who undergoes training programme conducted by assessee. Therefore, considered in the aforesaid perspective, it cannot be said that assessee is engaged in commercial activity. As far as allegation of ld. DIT(E) that it has earn....

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.... ITR 73 (Del.) 3. Institute of Chartered Accountants of India and another Vs. DGIT, 358 ITR 91 (Del.) 4. Himachal Pradesh Environment Protection and Pollution Control Board Vs. CIT, 125 JJF 98 (Chandigarh Bench) 5. Sikkim Manipal University of Health, Medical and Technological Sciences Vs. CIT, 43 SOT 206 (Cal.) 6. St. Don Bosco Educational Society Vs. CIT, 90 ITD 477 (Lucknow). 7.1 Ld. AR submitted, while granting registration u/s 12A of the Act, ld. DIT(E) cannot consider the aspects which are to be examined at the time of grant of exemption u/s 11. In this context, he relied upon the following decisions: 1. CIT Vs. Surya Educational and Charitable Trust and Bahara Educational and Charitable Society, 355 ITR 280 (P&H). 2. Hardayal Charitable and Educational Trust Vs. CIT, 355 ITR 534 (All.) 3. DIT (E) Vs. Chartered Accountants Study Circle, 347 ITR 321 (Mad.) 7.2 As far as the decision relied upon by ld. DIT(E), ld. AR submitted, the facts involved in the said decision being totally different, ratio laid down in that case, will not apply to assessee's case. 8. Ld. DR, on the other hand, supporting the order of ld. DIT(E), submitted, perusal of object....

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....primary object of the assessee is to impart training in various courses of preparing and designing tools, moulds, dyes etc., which is an activity in the field of education and all other objects are ancillary and incidental to the said main object. A plain reading of definition of 'charitable purpose' as provided u/s 2(15) of the Act would make it clear that the restriction imposed under the proviso to the said section applies to only the last limb, advancement of any other object of general public utility'. There is no express provision u/s 2(15) of the Act, which restricts a trust or institution from undertaking any business or commercial activity if it comes under any other limb of 'charitable purpose'. Only requirement perhaps is, the assessee must not have profit motive and the income generated from commercial activity is utilized for achieving the charitable object. On going through the order of ld. DIT(E) it is clear that he has not expressed any opinion under which limb of 'charitable purpose' assessee's activity can be classified. Only observation made by him is assessee is involved in both charitable and non-charitable activities. Even, ld. DIT(E) has not specifically refe....

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.... to so carry on the activity that the expenditure balances the income and there is no resulting I profit. That would not only be difficult of practical realization but would also reflect unsound principle of management." 9.2 Aforesaid principle laid down by the Hon'ble Apex Court still hold good even after introduction of proviso to section 2(15) by Finance Act, 2008 w.e.f. 01/04/2009. The words 'any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration' was considered and interpreted by Hon'ble Delhi High Court in case of Institute of Chartered Accountants of India Vs. Director General of Income-tax (Exemptions), 347 ITR 99, as under: "Section 2(15) defines the term 'charitable purpose'. Therefore, while construing the term 'business' for the said section, the object and purpose of the section has to be kept in mind. We do not think that a very broad and extended definition of the term 'business' is intended for the purpose of interpreting and applying the first proviso to section 2(15) of the Act to include any transac....