TaxTMI 
TaxTMI 
2019 (1) TMI 289
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....heard both the parties on 06.11.2018. ITA No.280/Ind/2014 (A.Y. 2009-10) 2. The assessee has raised following grounds of appeal: "1. That on the facts & in the circumstances of the case and in law, The Ld. CIT(A)/AO erred and not justified in his findings that in the case of assessee, the first proviso to section 2(15) are applicable and, therefore, it is not entitled for the benefits u/s. 11 & 12 of the Act. Such findings of the Ld. CIT(A)/AO are wholly wrong, injudicious & unlawful findings be quashed and it be held that the said proviso is not applicable in the case of assessee and therefore, it is fully eligible for the deduction/exemption claimed in the return u/s 11 & 12 of the I.T. Act hence all such claims as made in the return be allowed. 2. That on the facts & in the circumstances of the case and in law, the learned lower authorities erred and not justified in holding that the assessee is involved in carrying on activities in the nature of trade, commerce or business or nay activity of rendering any service in relation to any trade, commerce or business for a cess or fee or nay other consideration. Such findings of the AO are wholly unjustified and....
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....nd PSUs. The objectives of the assessee are as under: 1. Publication of weekly newspaper under the name of "Rozgar Aur 'Nirnam'. 2. Complementary publication for the publicity of welfare activities of M.P. Govt. and its enterprises and production and distribution of other materials. 3. Making all the efforts, which are needed, necessary and complementary for the fulfillment of above mentioned objectives. The assessee had shown gross receipts of Rs. 7,65,69,670/- and revenue expenditure of Rs. 6,38,75,788/- resulting into a surplus of income over expenditure of Rs. 1,26,93,882/-. However, the assessee had claimed the benefit u/s 11 of the I.T. Act by considering the capital expenditure of Rs. 68,67,284/- as application of funds for charitable purposes. The Assessing Officer noticed that the assessee was considered as charitable institution on account of 'advancement of any other object of General Public Utility'. The Assessing Officer observed that the assessee was engaged in the nature of trade, commerce and business and also rendering the services in relation to its business by charging a fee and other consideration for the services rendered. The asse....
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....aid to be for charitable purposes within the meaning of Section 2(15) of the Act. This fact is evidently clear from the details of operating receipts of Rs. 6,89,35,834/- shown by the appellant during the year under consideration as under: Operating Receipts S.No. Particulars Amount (Rs.) 1 Advertisement (Rozgar Aur Nirman) 23680953 2 Sale of Newpaper (Rozgar Aur Nirman) 15536473 3 Sale of Books: R.K. Laxman Rs.13440 Images of MP Rs. 14175 Corporate Book Rs. 4500 MP Forest Rs. 1440 33555 4 Service charges on advertising 19303750 5 Service charges on printing 4773991 6 Service charges on film 1074082 7 Service charges on project work 4475506 8 Income from DTP & Design 5618 9 Recovery of commercial tax 51906 TOTAL: 68935834 The appellant society is earning income on advertisement as well as sale of news paper "Rozgar Aur Nirman' published by it similar to a business organization engaged in the business of publishing a newspaper. The appellant also charged 15% service charges on the printing wor....
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....the govt. schemes. Assessee's activities have not been changed at all since the date of its inception and the assessee was fully eligible for exemption u/s 11 & 12 of the I.T. Act, therefore, the Revenue Authorities are not justified in holding that the assessee was involved in carrying on the activity in the nature of trade, commerce or business. Ld. Counsel for the assessee drew our attention to bylaws of the assessee society enclosed at paper book. He submitted that the objectives of the assessee society are publication of weekly newspaper namely " Rozgar Aur Nirman" to supply the material related to advertisement of public welfare schemes of Government of Madhya Pradesh and its undertaking and do such all other acts that are necessary for achievement of the objectives of the society. He submitted that on the basis of a miniscule part of income, the exemption cannot be declined. Prior to the introduction of the proviso to section 2(15), there was no dispute that the assessee was established for charitable purposes and, therefore, its income was not to be included in the total income and was, therefore, granted the benefit of exemption. The dominant and main object of the assesse....
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....come Tax (Exemptions) [2015] 53 taxmann.com 404 (Delhi); 2. GS1 India vs. Director General of Income Tax (Exemptions) [2013] 38 taxmann.com 365 (Delhi); 3. National Horticulture Board vs. ACIT [2015] 53 taxmann.com 343 (Delhi Tribunal); 4. Institute for Development & Research in Banking Technology vs. ADIT [2015] 63 taxmann.com 297; and 5. DIT (Exemption) vs. Ahmedabad Management Association [2014] 366 ITR 85 (Guj). Ld. counsel submitted in the light of the above case laws, the disallowance of the exemption by the authorities below cannot be sustained and deserves to be deleted. 7. On the other hand, ld. Sr. DR relied on the orders of the Revenue Authorities and submitted that first proviso to Section 2(15) are applicable in the case of the assessee and as such, it was not entitled for the benefits of Section 11 & 12 of the Act. Therefore, the A.O./ld. CIT(A) had rightly disallowed/confirmed the assessee's claim for deduction u/s 11 & 12 of the Act and assessed the income under the head profits and gains of business or profession. 8. We have considered the rival submissions of both the parties and gone through the material available on t....
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....he Finance Bill 2008. 56. In G.S. 1's case (supra) it was contended by the revenue that GS1 (India) had acquired intellectual property rights from GS1 (Belgium) and thereafter received registration fees from third parties in India. This was sought to be equated to royalty payments. It was also contended that GS1 (India) had huge surpluses of receipts over expenditure and that payments were made to GS1 (Belgium). According to the revenue, all this entailed that GS1 (India) was engaged in 'business, trade or commerce'. The petitioner herein refuted this. In this backdrop, this court asked the question - can it be said that the petitioner is engaged in activities which constitute business, commerce or trade ? While answering the said question, the court held as under:- '21. ... As observed above, legal terms, "trade", "commerce" or "business" in Section 2(15), mean activity undertaken with a view to make or earn profit. Profit motive is determinative and a critical factor to discern whether an activity is business, trade or commerce.' The court further held:- "22. Business activity has an important pervading element of selfintere....
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....ntinue in long run. The petitioner has to be substantially self-sustaining in long-term and should not depend upon government, in other words taxpayers should not subsidize the said activities, which nevertheless are charitable and fall under the residuary clause - general public utility. The impugned order does not refer to any statutory mandate that a charitable institution falling under the last clause should be wholly, substantially or in part must be funded by voluntary contributions. No such requirement has been pointed out or argued. A practical and pragmatic view is required when we examine the data, which should be analyzed objectively and a narrow and coloured view will be counter-productive and contrary to the language of Section 2(15) of the Act." 58. In conclusion, we may say that the expression "charitable purpose", as defined in Section 2(15) cannot be construed literally and in absolute terms. It has to take colour and be considered in the context of Section 10(23C)(iv) of the said Act. It is also clear that if the literal interpretation is given to the proviso to Section 2(15) of the said Act, then the proviso would be at risk of running fowl of the princi....
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....oner is regarded by the revenue as nothing but business, trade or commerce. Money received, of course is used and utilized for the charitable activities. Four reasons are elucidated and propound in the impugned order to state that the petitioner is engaged in business, trade or commerce and aforesaid encapsulated in the impugned order. Petitioner has acquired intellectual property rights, receives fee from third parties, which is nothing but payment of royalty, there is huge surplus of receipts over expenditure (refer table reproduced in paragraph 7 above) and payment is made by the petitioner to GS1 Global Services, Belgium. 21. Can it be said that the petitioner is engaged in activities which constitute business, commerce or trade? As observed above, legal terms -trade, commerce, or business- in Section 2(15), means activity undertaken with a view to make or earn profit. Profit motive is determinative and a critical factor to discern whether an activity is business, trade or commerce. 22. Business activity has an important pervading element of self- interest, though fair dealing should and can be present, whilst charity or charitable activity is anti-thesis of a....
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....the user of the global identification system. 24. The petitioner does not cater to the lowest or marginalized section of the society, but Government, public sector and private sector manufacturers and traders. No fee is charged from users and beneficiaries like stockiest, whole sellers, government department etc. while a nominal fee is only paid by the manufacturer or marketing agencies i.e. the first person who installs the coding system which is not at all exorbitant in view of the benefit and advantage which are overwhelming. Any one from any part of the world can access the database for identification of goods and services using global standard. The fee is fixed and not product specific or quantity related i.e. dependent upon quantum of production. Registration and annual fee entitles the person concerned to use GS1 identification on all their products. Non levy of fee in such cases may have its own disadvantages and problems. Charging a nominal fee to use the coding system and to avail the advantages and benefits therein is neither reflective of business aptitude nor indicative of profit oriented intent. 25. Having applied the test mentioned above, including ....
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....er to any statutory mandate that a charitable institution falling under the last clause should be wholly, substantially or in part must be funded by voluntary contributions. No such requirement has been pointed out or argued. A practical and pragmatic view is required when we examine the data, which should be analyzed objectively and a narrow and coloured view will be counter-productive and contrary to the language of Section 2(15) of the Act. 28. Petitioner has indicated that they have recently purchased office space in HUDCO Complex, Bhikaji Cama Place and they have acquired plot at Noida. They require accumulated funds for running branch offices at Chennai and Mumbai. Office at Chennai is already operational and operations at Mumbai are contemplated shortly for which proposals are under consideration. Accumulation of money/funds over a period of 2-3 years may not be relevant in determining the nature and character of activity and whether the same should be treated as indicative of profit motive i.e. desire or intention to carry on business or commerce. In MCD vs. Children Book Trust's (1992) 3 SCC 390 a decision relating to property tax, the Supreme Court held that ....
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.... GS1 identification system but involved in promoting and spreading awareness about GS1 identification system and making it available to Indians for a small fee. Petitioner has to organize training camps, workshops and seminars all over India and as well as for Government departments/bodies and help them adopt the system. They have to publish material highlighting advantages of GS1 identification and how this can benefit the manufacturers and traders. Maintenance of Books of Accounts 30. The statement and submission of the respondents that the petitioner was not maintaining separate books of account for commercial activity and, therefore, denied registration/ notification, has to be rejected as fallacious and devoid of any merit. Similar allegation is often made in cases of charitable organization/ association without taking into account the activity undertaken by the assessee and the primary objective and purpose i.e. the activity and charity activity are one and the same. The charitable activity undertaken and performed by the petitioner relates to promotion, dissemination of knowledge and issue of unique identification amongst third parties etc. The !business....
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.... income earned from business is no longer relevant and cannot help an assessee. Circular No.11 of 2008 is to the said effect and does not promote contrary interpretation. The said circular clearly stipulates that the object of -general public utility- should not be a mask or a device to hide the true purpose, which is trade, commerce or business or rendering any service in relation to trade, commerce or business. Director General (Exemption) has not interpreted the first proviso in this manner in this case. Even in the case of Bureau of Indian Standards (supra) no such contention was raised. 7th proviso to Section 10(23C) of the Act supports our interpretation and the legislature has not omitted or suitably amended the said proviso to support the contrary interpretation. Even otherwise, the beneficiaries of GS1 system are not confined or restricted to persons from trade, commerce or business. The beneficiaries are present everywhere and the advantages are permeating and universal and would include consumers, government, beneficiaries of PDS etc. 32. The second proviso, which refers to the aggregate value of receipt of activities of Rs. 10 lacs (now enhanced Rs. 25 lacs vid....
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....of the present case and the case-laws relied upon by the parties. We find that assessee's activities have not been changed at all since the date of its inception and the assessee was fully eligible for exemption u/s 11 & 12 of the I.T. Act. The assessee society was constituted by the State Govt. for the benefit of General Public to provide them information regarding employments, education institutions and other information of the govt. schemes. The objectives of the assessee society are publication of weekly newspaper namely "Rozgar Aur Nirman" to supply the material related to advertisement of public welfare schemes of Government of Madhya Pradesh and its undertaking and do such all other acts that are necessary for achievement of the objectives of the society. Therefore, the Revenue Authorities are not justified in holding that the assessee was involved in carrying on the activity in the nature of trade, commerce or business. We find that prior to the introduction of the proviso to section 2(15), there was no dispute that the assessee was established for charitable purposes. The main object of the assessee is for the benefit of General Public to provide them information regarding....
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....t is compensatory and mandatory in nature. The issue regarding charging of interest u/s 220(2) is not appealable. Therefore, this ground is rejected." We do not see any infirmity in the finding of Ld. CIT(A). As per section 246A(1) following orders are appealable before him: (a) an order 77[passed by a Joint Commissioner under clause (ii) of subsection (3) of section 115VP or an order] against the assessee where the assessee denies his liability to be assessed under this Act or an intimation under sub-section (1) or sub-section (1B) of 78[section 143 or sub-section (1) of section 200A, where the assessee or the deductor objects] to the making of adjustments, or any order of assessment under sub-section (3) of section 143 79[[except an order passed in pursuance of directions of the Dispute Resolution Panel 80[***] 81[or an order referred to in sub-section (12) of section 144BA]]] or section 144, to the income assessed, or to the amount of tax determined, or to the amount of loss computed, or to the status under which he is assessed; [(aa) an order of assessment under sub-section (3) of section 115WE or section 115WF, where the assessee, being an employer o....
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....or fee or nay other consideration. Such findings of the AO are wholly unjustified and unlawful and, therefore, be quashed and it be held that the activities of the assessee are for charitable purposes within the meaning of section 2(15) and therefore, it is eligible for assessment of income under the provisions of section 11 of the I.T. Act. 3. That on the facts & in the circumstances of the case and in law, the learned AO erred in law and not justified in their findings that the operating receipts and treating the excess of income over expenditure shown at Rs. 3307877 as the business income. Such injudicious and unlawful findings, therefore, be quashed. 4. That on the facts & in the circumstances of the case and in law, the Ld. AO erred and not justified in not allowing the deduction of Rs. 4942380/- as an application of income. The said deduction as claimed in the return, therefore, be kindly allowed. 5. That on the facts and circumstances of the case and in law, the credit of TDS at Rs. 3604217/- be allowed in full and the AO is not justified in allowing the credit only at Rs. 1858159/- 6. That on the facts & in the circumstances of the case a....