2017 (3) TMI 1262

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....le purpose" under Section 2(15) of I.T. Act, 1961? 3. The respondent assessee Trust is over 130 years old and registered with the Charity Commissioner since 1953. The respondent assessee was granted Certificate of Registration under Section 12A of the Act on 4th August, 1975. The objects of the Trust as summarized (accepted by both parties) in the impugned order of the Tribunal are as under: "(i) Panjrapole and Gaushalas (ii) Agriculture, rural development and preservation of natural resources. (iii) Scientific Research (iv) Education (v) Medical relief (vi) Relief of poor (vii) General Public Utility" 4. By Finance (No.2) Act, 2009, the definition of "Charitable Purpose" under Section 2(15) of the Act was amended w.e.f. 12th April, 2009 to read as under : "Charitable Purpose" includes relief of the poor, education, medical relief [preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic interest] and the advancement of any other object of general public utility. Provided that the advancement of any other object of general publ....

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....he assessee would cease to be a trust for charitable purpose. The Director of Income Tax (Exemption) further records in his order the fact that the respondent assessee was earning only Rs. 3.76 lakhs from its aforesaid activity of selling milk would not detract from the application of the newly added proviso to Section 2(15) of the Act. This for the reason that the proviso as applicable is receipt based and not profit / income based. 8. Being aggrieved, the respondent assessee filed an appeal to the Tribunal. The impugned order of the Tribunal records the following facts : (a) the fundamental / dominant function of the Trust is to provide asylum to old, maimed, sick, weak, disabled and stray animals and birds particularly cows; (b) that only 25% of the cows being looked after yield milk and it is these milk yielding cows which support the balance 75% of the cows which are nonmilk yielding; (c) that the milk needs to be procured from the cows otherwise it will be detrimental to the health of the cows, if not fatal; (d) the milk so procured is distributed free of charge to children, schools, hospitals etc. and the balance amount of milk remaining after such free distri....

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....estriction on profit making, converting the activity into business, it did not agree with the view in Sole Trustee Lok Shikshana Trust (supra) and after referring to it, observed as under : "But we find it difficult to accept their thesis that whenever an activity is carried on which yields profit, the inference must necessarily be drawn, in the absence of some indication to the contrary, that the activity is for profit and the charitable purpose involves the carrying on of an activity for profit. We do not think the Court would be justified in drawing any such inference merely because the activity results in profit. It is in our opinion not at all necessary that there must be a provision in the constitution of the trust or institution that the activity shall be carried on on no profit no loss basis or that profit shall be proscribed. Even if there is no such express provision, the nature of the charitable purpose, the manner in which the activity for advancing the charitable purpose is being carried on and the surrounding circumstances may clearly indicate that the activity is not propelled by a dominant profit motive. What is necessary to be considered is whether having ....

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.... Act. 13. We are of the view that merely because the impugned order of the Tribunal is a common order disposing of the two appeals emanating from different authorities, would not mean that evidence available before one authority could be used to support an order passed by the another authority, even when the authority whose order is under challenge has not even remotely referred to the ground and / or evidence which is sought to be relied upon by the Revenue to support the order. If this is to be permitted, the order passed on the basis of ground (a) alone, would be upheld in appeal on ground (c) because it was applied in another order. This would lead to a complete chaos as sanctity of giving of reasons in support of the order would be given a go by. In any case, if a party wants to urge a new ground and / or bring on record new evidence, there is a method provided in the Tribunal Rules. That method ought to have been followed with a request to remand the proceedings to pass an order on a fresh ground and / or new evidence now obtained. This itself amounts to implicit acceptance by the Revenue that the order of the Director of Income Tax (Exemption) as passed is suspect. As the....

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....tivity to be considered as trade, commerce or business. Therefore, in the present facts, it is not as though the keeping of the cows and milking them was with a view to carry out activity in the nature of trade, commerce or business to earn profits. The Revenue has not shown how even in the absence of profit motive, the activity of obtaining milk and selling the same would still be an activity of trade, commerce or business. In the alternative, Mr. Malhotra submitted that the proviso to Section 2(15) of the Act would apply even if it is not trade, commerce or business but only in its nature. However, how and why the activity of selling milk obtained incidentally while taking care of the cows, is in the nature of trade, business or commerce is not shown. Admittedly, in the present facts, the dominant activity carried out by the respondent assessee's Trust for over 130 years is to take care of old, sick and disabled cows. In these circumstances, an incidental activity of selling milk which may result in receipt of money, by itself would not make it trade, commerce or business nor an activity in the nature of trade, commerce or business to be hit by the proviso to Section 2(15) of....

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....India & Anr. Vs. Director General of Income Tax (Exemption) and Ors. reported in (2012) 347 ITR 99 (Delhi) considered these very provisions in the context of activities of the Institute of Chartered Accountants holding that the fundamental or dominant function of the Institute was to exercise overall control and regulate the activities of the members / enrolled chartered accountants and merely because the Institute was holding coaching classes which also generate income, the Court held that proviso to Section 2(15) of the Act would not be applicable. It thus held and observed 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 transaction for a fee or money. An activity would be considered "business" if it is undertaken with a profit motive, but in some cases this may not be determinative. Normally, the profit motive test should be....