TaxTMI 
TaxTMI 
TaxTMI 
2019 (11) TMI 644
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....en the following grounds of appeal as under:- "1. On the facts and in the circumstances of the case Ld. DCIT Circle-05, Jaipur as well as Ld. CIT(A) erred in holding that the activities of appellant is not covered under the general public utility and relief to poor without appreciating the entire activities and object and accordingly, withdrawal of exemption u/s 11 may kindly be quashed. 2. On the facts and in the circumstances of the case, Ld. DCIT Circle-05 Jaipur as well as Ld. CIT(A) erred in holding that the activities of appellant is covered under business in spite of carrying activity on nominal price to assisting general public without any profit motive, and hence the withdrawal of exemption u/s 11 of the I.T. Act, 1961 is unjustified and may kindly be quashed." 4. Briefly stated, the facts of the case are that the assessee corporation provides road transportation services in the State of Rajasthan and in other states. During the year under consideration, its total Revenue receipts were of Rs. 11,53,06,03,093/- and after claiming various expenditure, it has shown net loss of Rs. 80,01,94,490/-. The Assessing officer observed that the corporation is registered as a char....
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....d AO withdrawn the exemption u/s 11 after holding that assesee is not entitled to be registered in view of amended provision u/s 2(15) of the IT Act 1961. The ld AR drawn our reference to the provision u/s 2(15) of the I.T. Act, 1961 (amended w.e.f 01.04.2009) which reads as under: 'charitable purpose" includes relief of the poor, education, yoga, 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, unless- (i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and (ii) the agg....
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....f fare are fixed only for the purpose of continuity of its operation and for the purpose of making corporation going concern. The assessee is incurring losses as its recovery of operation cost is less than 100% from passenger fare. 3. Commercial activity for fee or cess means the business for money making. Corporation is the state government undertaking. It is a service organ of the state and it functions in public interest for relief to poor and to provide transportation facility in distant interior after providing all amenities even after bearing losses. 4. The assessee corporation filed return of income of the year under consideration by declaring loss of Rs. 80 crore and it's accumulated losses are now more than Rs. 2000 crores. From the yearly data of losses, it may be noted that Corporation is not running with the objective of profit making actually corporation loss is basically a relief to majority of people of Rajasthan and also the other states by providing services in very low or free fare and this loss is increasing day by day. 5. The State Government principally decides the routes facilities, fare, concessions, amenities and all such decides after taking care ....
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....itation to hold that the activities of the corporation do not constitute "business" within the meaning of section 2(1)(bbb) of the Andhra Pradesh General Sales Tax Act and, therefore, it cannot be said to be a "dealer" within the meaning of section 2(1)(e) of the Act". 13. It was further submitted that the issue has also been covered by Jurisdictional High Court decision in case of CIT Jodhpur vs. Jodhpur Development Authority and CIT Bikaner vs. Urban Improvement Trust Bikaner, it was held that when the object of institution to provide facility which involves the advancement of any other object for general public utility and for that purpose, the settled position of law emerged that if the primary or predominant object of an institution is charitable any other object which might not charitable but which is ancillary or incidental to the dominant purpose may be involving element of profit would not prevent the institution from being a valid charitable trust. 14. It was further submitted by the ld AR that the predominant object for which the corporation has been established by the state is to provide efficient transport services to the people in public interest and even after suff....
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.... value. The objects of assesee are charitable in nature and as such it had been claiming its income if any as exempt u/s 11 of IT Act 1961 and the order of the lower authorities should accordingly be set-aside. 18. Per contra, the ld. DR is heard who has relied on the findings of the AO and the ld. CIT(A) and our reference was drawn to the findings of ld CIT(A) which reads as under:- "7. I have considered the facts of the case and appellant's submissions and I find that the issue to be decided in the instant appeal is that whether the appellant's activities i.e. running /plying of buses fall under the definition of charitable purpose or whether these activities are commercial in nature. The AO specifically held that the objects of the corporation are definitely charitable as they are of general public utility and there may not be any profit motive, however, the activities being carried out were not charitable as it runs buses and for its services it received fare from the passenger and as per amended provisions of section 2(15) these activities do not fall covered by definition of charitable purpose. The appellant submitted before me that its case is not hit by proviso....
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....proviso to section 2(15) added by Finance Act 2010 with effect from 1-4-2009 provides an exception to the application of first proviso if the turnover from the activity of trade, commerce or business does not exceed Rs. 10 lakh in the previous year. The limit of Rs. 10 Lakh was increased to Rs. 25 lakh by the Finance Act 2011 with effect from 1.4.2012. 7.2.3. The Finance Minister in his Budget speech of 2008 had stated that the CBDT would issue guide lines to determine whether an entity is carrying on any activity in the nature of trade commerce or business and that Chamber of commerce and similar organizations would not be affected by the amendment. However no such guide lines were issued. 7.2.4. The Hon'ble Delhi High Court in the case of Institute of Chartered Accountants of India and Another v. Director General of Income-tax (Exemptions) and Others. [2012] 347 ITR 99 (Del.) held that "The first proviso to section 2(15) introduced with effect from April 1, 2009 applies only if an institution is engaged in advancement of any other object of general public utility and postulates that such an institute is not "charitable" if it is involved in carrying on any activity in t....
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....ich claims to have been established for charitable purposes, is profit making, whether its activities are directly in the nature of trade, commerce or business or indirectly in the rendering of any service in relation to any trade, commerce or business, then it would not be entitled to claim its object to be a 'charitable purpose'. On the flip side, where an 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 cannot but be regarded as an institution established for charitable purposes (Info Parks Kerala v. Deputy Commissioner of Income-tax (2010) 329 ITR 404 (Ker) and Andhra Pradesh State Seed Certification Agency v. Chief Commissioner of Income-tax-Ill, Hyderabad 256 CTR 380 (AP) dissented from) Finance Bill, 2015 proposes to amend section 2(15) as under:- In section 2 of the Income-tax Act, with effect from the 1st day of April, 2016,- (a) (b) in clause (15),- (i) after the word "education,", the word "yoga," shall be inserted; (ii) for the first and the second provisos, the following proviso shall be substituted, namely:- "Provided that the advancement ....
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.... section 2(15) and hence, the AO rightly computed the assessee's activity on the principle of commercial expediency and taxed accordingly. The grounds raised by the appellant regarding this issue are dismissed. " 19. We have heard the rival contentions and pursued the material available on record. The assessee corporation is registered under section 12A(a) of the Act. The limited issue under consideration is whether the assessee corporation is entitled for exemption u/s 11 for the year under consideration in view of amended provisions of section 2(15) of the Act. 20. The assessee corporation is engaged in providing transportation services in the state of Rajasthan. Provision of transportation services through running of buses is clearly an activity of "general public utility" as the said services are meant and availed by the public at large and therefore, it would fall in the last limb of definition of charitable purpose as so defined in section 2(15) of the Act. The argument of the ld AR that the assessee corporation provides various concessions and relief in fare to poor, students, senior citizens, women, etc doesn't take away the inherent and fundamental aspect of providing a....