TaxTMI 
TaxTMI 
2016 (9) TMI 846
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....ing training fees directly from various Govt. Departments. During FY 2012-13 the assessee has received Rs. 3,492,584/- as training fees from different departments against which the amount spent for the period 01/04/2013 to 31/12/2013 was Rs. 3,777,952/-. The ld. DIT(E) was of the opinion that since the assessee society was being reimbursed for the training provided by it to the farmers, such training could not be held to be charitable in nature in view of section 2(15) of the Income Tax Act. The ld. DIT(E) further noted that as the various government agencies sponsored the candidates and the assessee was in receipt of fee for such training/services, the same was in the nature of a commercial activity and, therefore, fell under the last limb i.e. advancement of any other object of general public utility. The ld. DIT (E) also noted that the assessee's gross receipt were more than the income as stipulated in the second proviso to sec. 2(15) of the Act. The assessee's application for registration u/s 12AA was accordingly rejected. 3. Aggrieved the assessee is in appeal before the Tribunal and has assailed the action of the ld. DIT (E) in refusing to grant registration to the assesse....
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....es for rural development and trade promotions in the country. 8. To promote Indian languages and their participation in cultural and social activities. 9. To use local dialects and languages for exchange of various developmental information in between the policy maker and rural people. 10. To develop a platform for exchange of ideas, views and technology of rural folks. 11. To transfer the modern technology through seminars, workshops, trainings programme and Nukkar natak in rural community. 12. To promote urban forestry for protection of Environment, health hazards and recreation to maintain equilibrium between flora and fauna. 13. To increase production of fruits, pulses and vegetables and provide healthy and hygienic quality of standard food resources to the countrymen. 14. To provide know-how for the conservation of soil and check further deterioration of soil fertility, to obtain higher productivity. 15. To utilize shade and ornamental trees for the landscape. 16. To use modern technology to raise forests, orchards and new variety of the different crops e.g.by tissue culture and hydroponics etc. ....
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....Retail Management, Fashion & Designing, Insurance, Banking, Accountancy & Auditing, Financial Market Management, Business Management & Administration. 6.1 The Memorandum of the assessee society also mentions that all the income, earnings, movable and immovable properties of the society shall be solely utilized and applied towards the promotion of its aims and objects only as set forth in the memorandum of association and that no profit thereof shall be paid or transferred directly or in any other manner whatsoever to the present for the past members of the society or to any person claiming through any past or present members. It has also been provided that no member of a society shall have any personal claim on any immovable or movable properties of the society or make any profit whatsoever by virtue of his membership. It has been further provided that on winding up or resolution of the society any surplus remaining shall not be distributed amongst the members but shall be dealt with in such manner as the general body may determine. 6.2 A perusal of the objects and other relevant clauses as provided in the Memorandum of the society as reproduced above reveals that the society....
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....c. What has to be seen is whether the primary or the dominant purpose or object of the assessee is to carry out object of general public utility or any other activity with a profit motive. If for achieving its primary or dominant object of education or even advancement of any other object of public utility, the assesee society has earned some income from fee etc., it cannot be said that the assessee has carried on a business activity with a profit motive. Charitable activities also require operational/running expenses as well as capital expense for being able to sustain itself and continue in the long run. There is no such statutory mandate that a charitable institution falling under the residuary clause should be wholly, substantially or in part be funded by voluntary contributions only. The Hon'ble Supreme Court in the case of Addl. CIT v. Surat Art Silk Cloth Manufacturers' Association (1980) 121 ITR 1 (SC) has held as under (page 25): "The test which has, therefore, now to be applied is whether the predominant object of the activity involved in carrying out the object of general public utility is to sub serve the charitable purpose or to earn profit. Where profit-makin....
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....w that the activity undertaken is in fact in the nature of business. The test as prescribed in State of Gujarat v. Raipur Manufacturing Co. Ltd. [1967] 19 STC 1 SC and CST v. Sai Publication Fund [2002] 258 ITR 70 SC ; [2002] 126 STC 288 SC can be applied. The six indicia stipulated in Customs and Excise Commissioners v. Lord Fisher [1981] S. T. C. 238 are also relevant. Each case, therefore, has to be examined on its own facts," 6.4 Thus, the principle of law which emerges from the judicial pronouncements is that if the predominant object of a trust or institution is charitable and in the process of achieving that object some activity of commercial nature generating income is carried out, which again is utilised for the advancement of its charitable objects, it cannot be inferred that the trust or institution is not established for charitable purposes. Moreover, the issue of applicability of the proviso to section 2(15) has to be examined at the stage of assessment while adjudicating the assessee's claim of exemption u/s 11 of the Income Tax Act, 1961 and hence it is not germane at the time of considering the issue of granting registration u/s 12AA. This is so because though th....