TaxTMI 
TaxTMI 
2016 (8) TMI 865
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....ner of Income Tax (Appeals) has failed to appreciate that the assessee society is a charitable institution and is existing for charitable purpose within the meaning of section 2(15) of the I.T. Act. 4. That the finding of the Commissioner of Income Tax (Appeals) that the assessee is engaged in commercial activity is perverse. In fact, such a finding has been reached on a mere fact that in respect of such receipts which was for providing educational activities, the payees had deducted the tax at source and despite the fact that the activities so conducted by the assessee were not in the nature of commercial activity. The CIT (A) has overlooked that merely because the payees deducted the tax cannot be regarded as any basis, since the assessee is only engaged in providing training, arranging capacity building programmes, vocational studies and imparting education etc. 5. That the learned Commissioner of Income Tax (Appeals) has failed to comprehend that, there is neither any basis nor there is any material, on the basis whereof, any such finding could be arrived. 6. That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that the interest of Rs. 1,36,03,94....
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....s out of total receipts of Rs. 21.46 crores. He further held that meaning of education under section 2(15) of the Act is basically imparting of training and developing the knowledge, skill, mind and character of students by normal schoolings. He also made a reference to the judgment in the case of ICAI vs. DDIT (Delhi) to hold that the merely because one part of the activities of the assessee is an educational institute, it does not mean that the appellant is an educational institute or is predominantly or exclusively engaged in the activity of education. He further held that most of the income of the assessee is from short term projects and recovery of professional services on which, TDS was also deducted which are clearly of commercial in nature. He also noted that during the year, the assessee has also shown surplus of Rs. 1,09,99,469/- which also established the profit motive behind the activities carried out by the appellant society. He also held that nomenclature of the transaction is not relevant and all what is relevant is that assessee is providing certain services and charges which is clearly of commercial in nature. Thereafter, after referring to various case laws, he co....
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....t in the case of Bangalore Club vs. CIT, wherein, Hon'ble Supreme Court has upheld the judgment of Hon'ble Karnataka High Court, ITA No. 115/1999 4 by observing that, "amount of interest earned by the assessee from the banks will not fall within the ambit of mutuality principle and will therefore, be eligible to income tax in the hands of the assessee (order dated 14.1.13 )". So, this is a latest judgment of Hon'ble Supreme Court on the similar issues. 3.2 In the instant case appellant has earned interest of Rs. 1,36,03,945/- which cannot be exempt from tax in view of the decision of Hon'ble Supreme Court as discussed above. Furthermore, it is found that activities of the appellant are not falling under the first three limbs of section 2(15) of the IT Act which are, relief to the poor, education, and medical relief and it is very clear that activities are in the nature of advancement of general public utility which is the last limb. Now only question is to be decided whether activities are in the nature of trade, commerce or business or not. For the same AO has very categorically discussed the instances in the body of order by mentioning the name of the parties wh....
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..... DDIT (Exemptions) 4.4 Furthermore, it was contended that the receipts of the society have been applied towards the objects of the appellant society and the surplus has been carried forward to be applied to attain the objects of the society in the subsequent years. It was contended that no portion of the surplus has been utilized for any personal gain or benefit of the members of the society in any manner whatsoever. It was thus contended that mere fact that there was a surplus could not be a basis to conclude that activities of the society were in the nature of trade, commerce or business or any activities rendered in connection with service or business for any other consideration. It was submitted that the receipt of the society is by way of aids and grants which grants had been made by government and other N.G.O's and were made in order to enable the assessee to carry out the educational activities and therefore, the appellant cannot be held to be engaged in surplus activities. Reference was made to the judgment of the Hon'ble High Court of Delhi in the case of PHD Chamber of Commerce & Industry v. DIT(E) 357 ITR 296. It was submitted that contributions on account of short ter....
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....h activity; Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is ten lakh rupees or less in the previous year;" 5.1 Charitable purpose as indicated above is an inclusive definition and includes relief of the poor, education, medical relief, advancement of any other object of general public utility and "preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest. As regards, the proviso inserted by Circular No. 11 of 2008 dated 19.12.2008 provides as under: "1. Section 2(15) of the Income-tax Act, 1961 ('Act') defines "charitable purpose" to include the following :- i) Relief of the poor ii) Education iii) Medical relief, and iv) The advancement of any other object of general public utility. An entity with a charitable object of the above nature was eligible for exemption from tax under section 11 or alternatively under section 10(23C) of the Act. However, it was seen that a number of entities who were engaged in commercial activities were also claiming exemption on the ground that such ac....
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....ined in section 2(15). Hence, such entities will not be eligible for exemption under section 11 or under section 10(23C) of the Act if they carry on commercial activities. Whether such an entity is carrying on an activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of the activity." 5.2 Thus the amended provision of section 2(15) of the Act will have no application viz-a-viz the clauses other than object of general public utility. The Hon'ble Court further in the case of Indian Trade Promotion Organization v. DGIT(E) 371 ITR 333 (Del) on examination of the proviso, has held that the proviso has two parts. The first part has reference to the carrying on of any activity in the nature of trade, commerce or business. The second part has reference to any activity of rendering any service "in relation to" any trade, commerce or business. Both these parts are further subject to the condition that the activities so carried out are for a cess or fee or any other consideration, irrespective of the nature or use or application or retention of the income from such activities. However, it was noted s....
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....with profit motive or activity undertaken on sound or recognized business principles. Charity is driven by altruism and desire to serve others, though element of self-preservation may be present. For charity, benevolence should be omnipresent and demonstrable but it is not equivalent to self-sacrifice and abnegation. The antiquated definition of charity, which entails giving and receiving nothing in return is outdated. A mandatory feature would be; charitable activity should be devoid of selfishness or illiberal spirit. Enrichment of oneself or self-gain should be missing and the predominant purpose of the activity should be to serve and benefit others. A small contribution by way of fee that the beneficiary pays would not convert charitable activity into business, commerce or trade in the absence of contrary evidence. Quantum 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?" 5.4 It was further held as under: "On the flip side, where an institution is not driven primarily by a desire or motive to ea....
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...., oral or electronic; viii. To establish and maintain libraries, documentation and resource centers; ix. To develop and distribute learning, public education and advocacy materials in print, audio-visual and software modes and to create facilities for the acquisition, production, storage and dissemination of the same; x. To organize seminars, workshops, conferences, exchange visits, study tours etc. on all subjects of interest in the context hereof for the time being; xi. To promote continuing and liberating education of adults in particularly the under privileged and disempowered citizens of different societies; xii. To sponsor and support training programs on participatory research and its related aspects; xiii. To publish books, papers, monographs and other educational material for furtherance of the objectives of PRIA; xiv. To conduct projects on Participatory Research and related subjects both on its own and on behalf of others; xv. To support, fund and collaborate with similar projects being conducted by like-minded institutions; xvi. To promote new organizations in furtherance of the objectives hereof; xvii. To offer fellowships, scholarships, prizes, sti....
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....activities is only Rs. 20.65 lacs out of total receipts of Rs. 21.46 crores declared during the year, therefore activities of the appellant cannot be considered to be education. The learned counsel for the assessee however has assailed the above conclusion by pointing out that consistently that the revenue itself has accepted that the appellant is engaged in education. 6.3 We find that in the year 1984-85, in the case of the appellant society in ITA No. 4791/Del/86, the claim of the appellant under section 10(22) of the Act was denied and the matter travelled to the Tribunal. On appeal by the Revenue, claim of exemption stood accepted by Tribunal. The Tribunal in an order dated 30.7.1987 has held as under: "4. After taking into consideration of the rival submissions and looking to the facts to and going through sec.10(22) as per which any income of society or other educational institutions existing solely for educational purposes and not for purposes of profit will not form part of the total income. We are unable to interfere in the finding of the AAC. The assessee society has been pursuing some activities as in the past which comprised of educational workshop and training progra....
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....ator, health care workers, social workers etc. in training them to use participatory research methodology in their work. The appellant produces own educational materials for use in educational programmes and for wider dissemination. 6.6 Similar view has also been expressed in the case of Praxis Institute of Participatory Practices v. DIT(E) 154 ITD 10 (Del) wherein it has been held as under: "Having gone through the activities of the assessee made available at page Nos. 101, 113, 130, 141, 151, 156 etc. of the paper book filed on behalf of the assessee about the activities of the assessee, we find that for Care India, the task involves on the part of the assessee is planning and conducting capacity building program for state lead and implementing partners, field visits and facilitation of reflection process of the organization development etc. mainly in respect of HIV and Sex Workers. At page Nos. 8 & 9 of the annual report relevant activities and photograph study for community mobilization have been provided. For the Leprosy Mission Trust India (TLM) the role of the assessee is to focus its approach to work with people and communities effected leprosy and disability and to addre....
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....ulating an educational model for promoting and protecting the rights of children of indigenous community through a right based approach in the area of root causes of violation of rights of children, nature and impact of such violation etc. 18. We find that during the year, the assessee undertook 25 such projects, the details of which were submitted before the authorities below but the Learned CIT(Appeals) or the Assessing Officer did not determine the nature of the activities for the very purpose of the objects. The Assessing Officer was of the view that the assessee involves in carrying on the activities in the nature of rendering services in relation to trade, commerce or business as assessee is providing consultancy, workshop, training program, conducting research on behalf of other agencies. Thus, we find that the above view of the Assessing Officer was based upon the fact that assessee is providing consultancy, workshop and training program etc. We are of the view that the activities of the assessee can in no way be covered in trade, commerce etc. as it is not charging any fee from the beneficiaries who are poor communities. It is also worth noting that the NGOs who have eng....
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.... to the poor or medical relief or education, it could be safely presumed that they fall under the category of general public utility", that for such activities, the assessee was receiving contractual income, irrespective of whether it resulted in profit or loss and that as such, the assessee had violation of the provisions of section 2(15) of the Act, that since the assessee did not fall within the scope "charitable purpose", as defined in sec. 2(15) of the Act, the benefit of sec. 11/12 of the Act was being disallowed to the assessee for the year under consideration. The Assessing Officer also sent a proposal for withdrawal of registration to the assessee under sec. 12AA of the Act to the DIT(E), separately. The grievance of the revenue before the ITAT was that the Learned CIT(Appeals) has erroneously held the activities of the assessee society to be falling under "advancement of any other object of general public utility" as defined therein. The ITAT held that the aims and objects of the assessee society, as per its Memorandum of Association includes medical research and informal education and communication activities of health and nutritional issue for urban slum and rural commu....
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....ss or fee or any other consideration. Respectfully following the above referred decisions on identical issues on almost similar facts as of the present assessee before us, we hold that the activities as discussed hereinabove of the present assessee cannot be held to be engaged in the activity of advancement of any other object of general public utility. The activities carried on by the assessee cannot be said to be beyond its main aims and objects and it is also an undisputed fact that the assessee society continued to enjoy registration under sec. 12A of the Act as a charitable trust and that the charitable purpose for which the assessee society was established remained unchanged. Under the circumstances, we while setting aside the first appellate order as well as order of the learned DIT(E) direct the Assessing Officer to allow the assessee the claimed exemption under sec. 11(12) of the Act and the ld. DIT(E) is directed to allow the application of the assessee for continuance of the approval granted under sec. 80G(5)(vi) of the Income-tax Act, 1961. The grounds of the appeals are thus allowed in favour of the assessee." 6.7 Also Hon'ble Delhi High Court in the case of CIT v. P....