TaxTMI 
TaxTMI 
TaxTMI 
2017 (2) TMI 1089
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch trading, it can be established beyond doubt that the motive of the trust is to earn quick and shod term profits." 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO to allow the exemption as claimed u/s .11 of the I.T. Act when the activities are being carried on commercial lines and also not in conformity with the objects of the assessee society." 3. Briefly stated facts are that Seth Maturadas K.Natha Bhatia High school Trust is the Educational institution. It runs High School at Sai Baba Nagar, Borivali-West, Mumbai-400092. It has no other activities. It is registered u/s 12AA (1)(b)(1) of the Income Tax Act, 1961. It has field Form NO. 10B i.e. Audit report under section 12A(b) of the Income tax, 1961. It has also given notice u/s 11(2) of the Income Tax Act, 1961 in form no.10. Both the forms were field along with Return of Income for the year under consideration. The assessee also claimed exemption u/s 10(23C) of the Act being an education institute. The assessee trust is collecting moderate fees from the student and expense of the trust for the school are always more than educational receipts, which are made out ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....itable activity. From the discussion above, it is clear that assessee is not acting as a charitable organization. There is generation of huge profits year after year. From the discussion above it is clear that entire character & focus of assessee has become totally commercial with eye on huge profits and it is no more charitable organization as discussed supra. Therefore, even with registration allowed to assessee u/s 12A of the Act, since its activities are being carried on commercial lines and also not in conformity with the objects of the assessee society, it is not eligible for exemption u/s 11 of the Act. Therefore, the assessee is required to be taxed as AOP without grating exemption u/s 11 of the IT Act. Accordingly, he added back the net profit discloses as per income expenditure account at Rs. 1,18,72,109/- and taxed accordingly. Aggrieved assessee preferred the appeal before CIT(A). 4. The CIT(A) allowed the claim of the assessee by observing that there is no violation of the provision of section 11(5) of the Act for making this investment and moreover profit derived from sale of mutual fund and dividend income, which are shown as surplus and are carried over in the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ns, the denial of exemption u/s 11 of the. I.T. Act by the A.O. is erroneous and contrary to the facts and circumstances of this case. 4.9 It seems that the AO has denied the exemption u/s 11 61 the I.T. Act to the appellant by wrongly interpreting that the' appellant has carried, out business activity during the year for which exemption u/s 11 of the I.T. Act should be forfeited in reference to the proviso to section 2(1) of the J.T. Act, 1961. However, proviso to section 2(15) is not applicable in reference to charitable activity of education as in the case of the appellant as per Circular No. 11/2008 dated 19.12.2008, para 2.1 that 'the newly inserted proviso to section 2(15) will not apply in respect of the first three limbs of section 2(1), relief of the poor, education or medical relief. Consequently, where the purpose of a trust or institution is relief of the poor, education or medical relief, it will constitute charitable purpose even if it incidentally involves the carrying on of commercial activities. In view of the above discussion and of rthe reasons therein, Ground No.1 of appeal is allowed." Aggrieved against the order of CIT(A), Revenue came in second ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the purpose of any benefit or a pecuniary gain to any person specified under sub-sec. 3 of sec. 11 of the Act. Again by doing so, the trust have not violated any stipulation or conditions, as a matter of fact there is no stipulation u/s 11(5) of the Act placing restriction on the reshuffle of specified investment. The assessee trust is being assessed to tax for the several year and enjoying benefit of exemption u/s 11 and 12 of the Act and this position has been continuously accepted by the department in the form of assessments/acceptance of the return of income. Moreover, the facts of the case are exactly identical to the facts of the preceding assessment years, hence, according to us the principle of rules of consistency shall apply as laid down by the Supreme Court of India in the case of Radha Soami Satsang Vs. CIT (1992) 193 ITR 321 (SC). 6. Further, from the facts of the case it is inconceivable that assessee trust is doing the business and therefore the provision of section 1 1(4A) does not come into play. It was again a narrow interpretation by the AO to treat one single transaction of reshuffle of mutual fund as business activities carried on by the trust and not applying....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of investments consisting of purchase and resale, though profitable, are clearly outside the domain of adventure in the nature of trade; that in deciding the character of such transaction, several factors are relevant, such as, whether the procedure was a profit and the purchase of the commodity and its resale were allied to its usual trade or business or incidental to it, the nature and quantity of the commodity purchased and resold, any act subsequent to the purchase to improve the quality of the commodity purchased and thereby make it more readily resalable, any act prior to the purchase showing a design or purpose, the incidents associated with the purchase and resale, the similarity of the transaction to operations usually associated with trade or business, the repetition of the transaction, the element of pride or possession, etc.; that the presence of all these relevant factors may help the Court to draw an inference that the transaction is in the nature of trade; that however, it is not a matter of merely counting the number of facts and circumstances pro and con; that what is important to consider is their distinctive character; and that in each case, it is the total effec....