TaxTMI 
TaxTMI 
2019 (7) TMI 874
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....lation 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. The proviso has two limbs and provide that the advancement of any other object of general public utility shall not be a charitable purpose if it involves the carrying on of: - (i) 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, (ii) irrespective of the nature of use or application, or retention, of the income from such activity. The Finance Act, 2010 added 2nd proviso to provide that 1st proviso shall not apply if the aggregate value of the receipts from the activities referred to therein was below Rs. 10 Lacs in the previous year. The Hon'ble Supreme Court in CIT v. Gujarat Maritime Board [2007 295 ITR 561] observed that the expression 'any other object of general public utility' is of the widest connotation. This expression would prima facie include all objects which promote the welfare of the general public. 1.2 The CBDT, vide Circular No. 11 of 2008 dated 19/12/2008, clarified that ....
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....a Trade Promotion Organization vs. DGIT (Exemption) & Ors., while upholding the constitutional validity of the 1st proviso, has held that in both the activities i.e. (i) activity in the nature of trade, commerce or business or (ii) any activity of rendering any service in relation to any trade, commerce or business, dominant and prime objective is to be seen. If the dominant objective was 'profit motive', the trust would not be entitled to claim its objective to be charitable in nature. On the other hand, if the institution is not driven primarily by a desire or motive to earn profits, but to do charity through the advancement of an object of general public utility, it would be an institution established for charitable purposes. The revenue's Special Leave Petition [SLP] against the same has already been admitted by Hon'ble Supreme Court reported at 84 Taxmann.com 283. 1.5 The Hon'ble Gujarat High Court in the case of Ahmedabad Urban Development Authority V/s ACIT [396 ITR 323 02/05/2017] has observed that the expression trade, commerce and business must be read in the context of the intent and purpose of Section 2(15) of the act and the same was not meant to exclude entities whi....
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....t of Rs. 17.35 Lacs. The exemption u/s 11 was earlier denied to the assessee for AY 2008-09 wherein a view was taken that the assessee was not running a regular educational institute. Keeping in view the same, Ld. AO held that the assessee was not a regular educational institute and therefore, not entitled for exemption u/s 11. 2.2 Another reason to deny the exemption was 1st proviso to Section 2(15). The Ld. AO, invoking 1st proviso to Sec 2(15), observed that the assessee was in receipt of testing fees of Rs. 187.01 Lacs during the year. The assessee elaborated the testing procedure carried out by it, the perusal of which revealed that it offered valuation, certification and testing of diamond, jewellery and gemstones to various persons including retailers, companies dealing in such goods and to general public. The assessee maintain separate premises for Testing Lab and for educational activities. The Ld. AO formed an opinion that the testing activity was independent of the educational facility and a separate business activity of the assessee. Therefore, the rendering of these services against fees, in the opinion of Ld. AO, were hit by the 1st proviso to Section 2(15) and t....
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....egistration u/s 12A would not ipso facto entitle the assessee to claim exemption u/s 11 unless the conditions stipulated by Sec.11 were fulfilled. The Ld. AO was duty bound to look into the facts in each year so as to examine that whether the prescribed conditions to claim the exemption was fulfilled by the assessee or not. Proceeding further, it was noted that there were hardly 10 students in one batch which could not be said to be any educational activity in the structured manner. The course fees received by the assessee was Rs. 37.15 Lacs as against testing fees of Rs. 187 Lacs which was 6 times the course fees received by the assessee during the year. Thus, the dominant activity was activity of rendering of services in relation to the business, trade or commerce. The Ld. first appellate authority, at para (vi) of his order, on sample basis, rebutted assessee's claim that it was providing service at a low cost to the general public. Proceeding further, Ld. first appellate authority, opined that the assessee was hit by 1st proviso to Sec. 2(15) as well as by the provisions of Sec.11(4A). The alternative claim of exemption u/s 11(1)(d) or reduction of specific donations from capit....
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....rned Commissioner [Appeals) erred in not deciding the ground of appeal raised by your appellant regarding the rate of tax levied on your appellant, and in merely directing the Assessing Officer to dispose of the application for rectification. Relief Sought 10. Your appellants pray that the order of the learned Assessing Officer may be modified by: allowing exemption u/s 11 of the Act, and accordingly allowing accumulation of 15% of income, as well as claim of capital expenditure incurred towards the objects of the appellant as an application of income Or alternatively excluding donations received for acquisition of R & D equipment from income, reducing it from the cost of R & D equipment and levying income tax on the income at the slab rates of tax applicable to an Association of Persons. 4.1 We have carefully perused the arguments advanced by both the representatives and deliberated on judicial pronouncements as cited before us. The material facts as enumerated in preceding paragraphs are not in dispute. The plea of Ld. AR primarily revolves around the fact the profit motive would be an essential ingredient so as the adjudge the applicability of 1st proviso to Sec. 2(15).....
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....ental activities and the same were not carried out with any profit motive. Another fact to be noted is that the assessee's receipts from testing fees have increased considerably over the years which is evident upon perusal of orders of lower authorities. 4.4 So far as the object of the assessee are concerned, our attention has been drawn to the fact that the trust was established for charitable purpose of education and for encouraging and promoting theoretical and practical education in gemology and scientific study of precious stones of all types and the assessee was established to impart education. Another plea raised is that the assessee was engaged in carrying out Research & Development Activities during the year and as a part of the same, carried out testing activities with a view to address the problem of imitation being faced by the Gem industry and therefore, the said activities would merely be an incidental activity carried out in furtherance to achieve pre-dominant objective of Research & Development. 4.5 On the facts and circumstances of the case as discussed above, we are of the considered opinion that the issue would require reappreciation by Ld. AO in view of the fa....