TaxTMI 
TaxTMI 
2017 (1) TMI 670
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.... different heads and the excess of income over the expenditure was shown at Rs. 1,76,65,492. From scrutiny of such accounts, the DIT (E) noticed that the assessee is not running for charitable purposes, but has been running for the purpose of profit as no major expenditure was for direct benefit of farmers. He observed that the direct beneficiaries are the traders of quality seeds who entered into contracts with the growers for use of land for the purposes of cultivation and approached the assessee for certification of the same for subsequent trading. He also observed that the objectives of the society did not indicate involving any object of general public utility. Therefore, after referring to the proviso to section 2(15) of the Act inserted by the Finance Act of 2008, the DIT (E) issued a show cause notice dated 30.11.2011 directing the assessee to explain as to why the registration granted earlier u/s 12AA of the Act should not be withdrawn. 4. The assessee, vide its reply dated 22.03.2012, explained that it was established by the Govt. of Andhra Pradesh by issuance of notification through G.O.Ms. No.435 dated 01.06.1977 and that the objectives of the society are indicated in ....
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....aja vs. DIT (2013) reported in 57 SOT 73 (Bangalore). b) Chaturvedi Har Prasad Educational Society vs. CIT reported in 134 TTJ 781. c) ITAT Chandigarh Bench in the case of H.P. Govt. Energy Development Agency vs. CIT (2010) Reported in 135 TTJ(Chd) (UO)33. Further, he has also drawn our attention to the CBDT Circular No.21/2016 (F.No.197/17/2016-ITA-I) dated 27.05.2016 wherein the CBDT has directed the authorities not to cancel the registration of the charitable organization just because the proviso to section u/s 2(15) has come into force. 6. The learned DR, supported the orders of the authorities below and submitted that the assessee was involved in the commercial activities and therefore, the proviso to section 2(15) of the Act is applicable. Further, he also relied upon the fact that the assessee has not been granted further registration u/s 10(23C)(iv) of the Act against which the assessee has carried the appeal before the Hon'ble High Court and the Hon'ble High Court has rejected the assessee's application holding that the assessee is not carrying on any charitable activity. Therefore, according to him, the assessee is not eligible for registration u/s 12AA of t....
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....ble High Court has held that the assessee is not a charitable institution in view of the second limb of the proviso to section 2(15) of the Act. The Hon'ble High Court has held that the assessee is certifying the seeds on the application of a society or an agent with whom the seed growers have entered into an agreement and who, after securing such certification, sells such seeds to farmers at market price determined by them. The Hon'ble High Court has come to the conclusion that this involves commercial activity as it facilitates trade, commerce or business in the certified seeds being sold by the clients of the society and therefore, the provisions of the proviso to section 2(15) of the Act comes into operation. The judgment of the Hon'ble High Court is dated 17.12.2012 i.e. after withdrawal of the registration u/s 12AA(3) of the Act vide orders dated 13.4.2012. For ready reference, the relevant paras of the decision of the Hon'ble High Court are reproduced hereunder: "13. We have noted the contentions of both parties. 14. Before dealing with the respective contentions, we propose to take note of Section 10 (23C) (iv) of the Act and Section 2(15) of the Act. "S....
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....e Seeds Act, 1966 empowers the State Government or the Central Government in consultation with the State Government to establish, by notification in the official gazette, a certification agency for the State to carry out the functions entrusted to the certification agency by or under the Seeds Act. The petitioner was registered under the Andhra Pradesh (Telangana Area) Public Societies Registration Act, 1350 Fasli with registration No. 334/76. By G.O.Ms.No.435 Food and Agriculture (EP-II) Department dated 01-06- 1977, the State Government approved the proposal of the Director of Agriculture and directed that the petitioner shall carry on the functions of the certification agency under the Seeds Act, 1966 in the Andhra Pradesh State with effect from 01-06-1977. The objects of the petitioner have already been set out above. The petitioner thus certifies the Seeds which meet the minimum seeds certification standards as per Indian Minimum Seed Certification Standards, 1988. Seed growers enter into contract with a society/agent, who approaches the petitioner for certification of the seeds and after securing certification, they sell the certified seeds to the farmers at a market price de....
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.... meet the expenditure for providing market facilities. In our view the said decision has no application to the present case and was based upon an interpretation of the various provisions of the Andhra Pradesh (Agricultural Produce and Livestock) Markets Act, 1966 and the attention of the Division Bench does not appear to have been drawn to the proviso to Section 2 (15) of the I.T. Act more particularly the portion "any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration..........". Since agricultural market committees render services "in relation to trade, commerce or business" by facilitating trade in agricultural commodities by farmers/growers of agricultural produce or livestock, we are of the opinion that the activity of agricultural market committee may not come within the ambit of "charitable purpose". 19. The counsel for the petitioner submits that the petitioner is itself not engaging in any activity which is in the nature of trade, commerce or business and therefore it has to be held to be an agency whose activities are for "charitable purpose" under Section 2(15) of the Act and therefore entitled....
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.... on a different pedestal, with regard to the service in relation to the trade, commerce or business mentioned therein. To put it more clear, when the matter comes to the service in relation to the trade, commerce or business, it has to be examined whether the words "any trade, commerce or business" as they appear in the second limb of clause (b) are in connection with the service referred to the trade, commerce or business pursued by the institutions to which the service is given by the assessee. If the said words are actually in respect of the trade commerce or business of the assessee itself, the said clause (second limb of the stipulation under clause (b) is rather otiose. Since the activity of the assessee involving any trade commerce or business, is already excluded from the charitable purpose by virtue of the first limb (clause (a)) itself, there is no necessity to stipulate further, by way of clasue (b), adding the words "or any activity of rendering any service in relation to any trade, commence or business. As it stands so, giving a purposive interpretation to the statute, it may have to be read and understood that the second limb of exclusion under clause (b) in relatio....