TaxTMI 
TaxTMI 
2018 (5) TMI 134
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....n Act, 1860 on 10/3/2005 and, further, registered u/s. 12AA of the Act on 22/3/2010. The Revenue has denied the same, finding the first proviso to sec. 2(15), which reads as under, as applicable: 'Section 2. Definitions.- (15) "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 or historic interest, and the advancement of any other object of general public utility : Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such 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.'....
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.... of the activities of the present society who vide his reported dated 05.09.2011 has stated that the assessee has failed to produce books of account in the absence of which it is not possible to verify the genuineness of the activities of the society and the AO has not recommended the case of the assessee for registration u/s 12AA of the Act. Even otherwise, the assessee has failed to establish before the ld. CIT(A) that the society is doing any charitable work keeping in view its objects. Merely, mentioning about various objects in the nature of charitable activities in the Memorandum of Association, does not mean that the Society is doing any charitable activities for the general public utility and is entitled for registration under section 12AA of the Act. According to section 12AA of the Act, the Commissioner on receipt of application for registration of a trust or institution has to satisfy himself about the genuineness of activities of the trust or institution. In the present case, the Ld. CIT, Bathinda has made the inquiry from the concerned ITO, who has not recommended the case of the Society for registration. Even otherwise, the assessee has also failed to establish that t....
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....es and functions of the Society: e. To workout and recommend the service fee/ user charges that could be charged from the end customers for the approval of the competent authority and concerned departments/ organizations over and above the prescribed bill amount/ fee/ statutory fee for providing the services through Sukhmani Centres/ Financial institutions or Franchisees. E-Governance Society and concerned Departments and Organizations. h. To chalk out detailed procedures for the collection of revenue for various services provided by the Sukhmani centres and to transfer the revenue in to the accounts of the Punjab E-Governance Society and to the concerned departments and organizations as per the policy guidelines of Punjab E-Governance Society.' '5. The costs of IT resources and management of the district-level Society would be funded through the share of user charges. Initially, the costs for the purpose would be provided by the Government. The income and property of the Society howsoever derived shall be applied towards the promotion of the objects thereof as set-forth in this Memorandum of Association. No part of income and property of the Society shal....
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.... and IT experts, at three each, include persons charged with the administration at the district level. The Board, charged with the general superintendence and control of the affairs of the society, is to function for the improvement in E-Governance in liaison with the State Government (in the Department of Information Technology). Reliance was placed by him on Circular No. 11/2008, dated 19.12.2008 issued by the Board in the context of amendment by way of first proviso to section 2(15) by Finance Act, 2008 w.e.f., 01.04.2009. It is, as clarified, only where the assessee is engaged in any act in the nature of trade, commerce, or business, or renders any service in relation thereto, that the constricted scope of the provision, per first proviso thereto, gets attracted. This is as the object of 'general public utility' is in such a case only a mask to hide the true purpose, which is trade, commerce or business. It is in this context that the Board 'advised' the assessees claiming a 'charitable purpose' to eschew activities which could be considered as commercial activities. In-as-much as it was emphasized that the facilitation charges are revisited time and again, reducing the same, t....
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....380321 13336445 28913776 29906658 Net Surplus / Deficit -834027 2901260 1401968 488329 543839 3611346 6006981 3486615 On that basis, it was submitted by him that but for the sale of statutory forms (in the last two years, i.e., fys. 2014-15 and 2015-16), the society would have incurred a loss; the said sale being at Rs. 129.82 lacs and Rs. 100.19 lacs, as against a net surplus of Rs. 60.07 lacs and Rs. 34.87 lacs respectively. The following decisions are placed on record even as the same were not referred to by him during hearing: DIT(E) v. Sabarmati Gaushala Trust [2014] 362 ITR 539 (Guj); ICAI v. DGIT [2013] 358 ITR 91 (Del); ICAI v. DGIT [2012] 347 ITR 99 (Del); & Pinegrove International Charitable Trust v. Union of India [2010] 327 ITR 73 (P&H). The ld. Departmental Representative (DR) would rely on the order by the tribunal in Sukhmani Society for Citizen Services, Mansa (supra), stating that no contrary decision has been brought on record by the assessee. No doubt the tribunal took note of the fact that the assessee in that case had not proved the genuineness of its activities, but it also categorically held that the objects and the a....
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.... objection is that the decision in Sukhmani Society for Citizens Services, Mansa (supra) is distinguishable. True, the issue in that case was if registration u/s. 12AA stands rightly denied to the appellant-society. However, the decision by the tribunal in that case rested on the true interpretation of the first proviso to section 2(15), i.e., whether the same applies, given the nature of the activities of the appellant, as indeed informs the present case. The findings of the tribunal are already reproduced herein-before. The fact that the appellant in that case did not produce the books of account, so that the genuineness of the activities could also not be verified, obtains. The tribunal, however, duly noted that the society was formed by, and was working under the aegis of the State Government. The same, however, in its view, was not germane; the assessee, maintaining agencies and franchisees, was only conducting business. The Revenue's finding of it pursuing commercial activities (refer para 7.6 of the tribunal's order) was, accordingly, upheld, for which the tribunal also examined the appellants' income and expenditure account and balance-sheets for 3 consecutive years (paras ....
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.... not the extent of operations, which was relevant for the purpose, so that it was immaterial that the business was restricted to an individual or concern (i.e., the company). In CIT v. Lahore Electric Supply Company Ltd. [1996] 60 ITR 1 (SC), it was held that the term 'business' as contemplated under the Indian Income Tax Act, 1922, contemplates activities capable of producing profit which could be taxed. In State of Gujarat v. Raipur Manufacture Company Ltd. [1967] 19 STC 1 (SC), it was held that though the object of business is normally to make profit, the expression 'profit motive' does not postulate that profit must, in fact, be earned. Nor does the expression cover a mere desire to make some monetary gain out of a transaction or a series of transactions. It predicates a motive which pervades the transaction/s effected by a person in the course of his activities. It is not, as explained in CIT v. Gulab Devi Memorial Hospital [2017] 391 ITR 73 (pg. 94), also relied upon by the ld. AR, the existence of profit per se that is detrimental; the Act itself contemplating 'profit' which could be therefore exempt from tax. But, as aforeexplained, the ability to generate the same, and whi....
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....Centres would be a one-stop shop for all Government services in an integrated manner. It is considered expedient to provide the Society a legal entity by getting it registered under The Societies Registration Act, 1860.' We reproduce the preamble instead of all the different objects, as its various objects would only be in fulfillment of the statement of purpose per the preamble. Further, though the object clause (cl. 4) lists as many as 24 objects (a thro' x), the principal object is to establish, manage, operate, maintain and control service centres, namely, the Sukhmani Centres, throughout the district, for providing integrated citizen services to the public in an efficient, transparent, convenient and friendly manner using Information Technology (IT) in all aspects of citizen services so as to maximize speed, accountability, objectivity, affordability and accessibility from the perspective of the citizens (cl. 4(a)). All other objects would be incidental thereto, dove-tailing therewith. Indeed, it is this object that defines the assessee-society, and considered so both by the Revenue as well as by the tribunal in Sukhmani Society for Citizen Services, Mansa (supra).....
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....r the policy guidelines of Punjab E-Governance Society. i. To chalk out, plan and execute the infrastructure requirements for site preparation, IT resources like hardware, software, connectivity, networking, operational & managerial staff, training, stationery items and consumables with associated agencies. To ensure the timelyavailability of the necessary resources for the various activities under the project. j. To liasion with the associated IT companies for the analysis, design, development, testing and the implementation of the application software, networking, connectivity and other solutions necessary for providing Citizen services through the use of information technology. o. To recommend the necessary administrative reforms or processes re-engineering required accomplishing the objectives of e-governance and good governance. To test and recommend modifications to be made in the system or the processes involved. w. To make all other expenditures in connection with providing Citizen services through the Citizen services centre including salaries, connectivity costs, cost of power, cost of maintenance and consumables, cost of upgradation of....
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....' functions, i.e., enabling a state function. True, but then the assessee-society, or other societies of its kind, is not a State (refer Article 12 of the Constitution of India), nor any organ of the State. It is a separate legal entity, mandated to work for the government/state though. The State, which comes into existence through a constitutional mandate, cannot replicate itself, except through legislation (inasmuch as an authority constituted under law is also regarded as a State under Article 12). The same, however, unless exempt, as u/ss. 10(20), 10(20A) (since omitted), 10(46), etc. cannot claim exemption on account of its status. That the society is geared to help the state better perform its' avowed functions (and obligations), as well as, thus, to cut the ordeal for the citizen - the recipient of the services, will not make it any less business. Rather, it makes for a perfect business opportunity - there being a vast scope for improvement in the government functioning by injecting efficiency through induction of IT, for which the citizen - the end-user, presumably, would not mind paying for at the bargain of removing the ordeal which normally attends the delivery of such s....
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....ssure. This is as they are, being outside the market paradigm, not subject to any competition. We are not making any criticism. All we wish to bring home is the fact that the government activities are generally not subject to the competitive pressure of the market, allowing a much larger freedom/field to effect price changes (increase). In sum 5. We have considered the law as explained by the higher courts, principally, the Apex Court, as well as examined the nature and scope of the assessee's activities, i.e., which it is undertaking or may undertake, including the manner thereof. The same, in our view, fall within the ambit of 'business'. The term is not confined to purchase and sale of goods, and can assume varied forms. Being, in the present case - in the main, delivery of services through better coordination and induction of technology; acting as an interface between the Government in the concerned departments and the citizens; and pursuing administrative reforms. That it is formed with a view to promote efficiency, which is its' raison de'tre, defining its rationale, is another matter. That it does so, or is formed by or engages with the Government, facilitating its' wo....