TaxTMI 
TaxTMI 
2020 (10) TMI 516
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....ssment as provided under section 143(3) of the Act came to the conclusion that the respondent -assessee is a company registered under section 25 of the Companies Act, 1996 and is inter alia engaged in the activity of management of liquid and solid wastes in Naroda Industrial Area and thereby earned profit. The AO also came to the conclusion that the respondent -assessee was engaged in the activities which are not in the nature of charity but were of business as per proviso 1 and 2 of Section 2(15) r/w Section 13(8) of the Act. According to the AO, the exemption as provided under sections 11 and 12 were not available to the respondent -assessee and accordingly the AO made addition of Rs. 3,43,02,447 under section 11(1)(a) and Rs. 4,16,24,503/- under section 11(2) of the Act and assessing the income of the respondent -assessee in aggregate at Rs. 7,59,26,949/-. 3.2 Being aggrieved by such assessment order, respondent -assessee filed an appeal before the CIT(A). The CIT(A) considering the case of the respondent -assessee for the AY 2010-11, 2011-12, 2012-13 and 2013-14 relying upon the decision of the Tribunal in case of the respondent -assessee itself in ITA No. 546/AHD/2013 dated 2....
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....issed the appeal filed by the Revenue. The said judgment has become final. 6. In the appeal filed by the Revenue for the AY 2009-10 in the case of Commissioner of Income-tax v. Naroda Enviro Projects Ltd, the Division Bench has extensively considered the proviso of Section 2(15), legislative amendment thereunder and has also considered the purpose of proviso to clause 15 of Section 2. The Division Bench has also considered the Memorandum of Association of the assessee company and has observed thus: 43. The first and the foremost question, therefore, we need to consider is whether having regard to the activities undertaken by the Company, could it be said that the Company is into "preservation of environment". The assertion on the part of the assessee company is that it takes care of the liquid and solid industrial waste generated by the polluting industries by treating the same in the Common Effluent Treatment Plant, situated at Naroda and also the Total Suspended Disposal Facility at Odhav, Ahmedabad (TSDF) and other anciliary activities for the purpose of curbing the menace of pollution thereby preserving the environment. Whether by establishment or running of the Common Efflu....
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.... 2(15) of the Act, i.e., "the advancement of any other object of general public utility". 60. The provision as it existed under the Act of 1922 was that once the purpose of the trust was relief of the poor, education, medical relief or advancement of any other object of general public utility, the trust was considered to be for a charitable purpose. As a result of the addition of the words "not involving the carrying on of any activity for profit" at the end of the definition in section 2(15) of the Act even if the purpose of the trust is "advancement of any other object of general public utility", it would not be considered to be "charitable purpose" unless it is shown that the above purpose does not involve the carrying of any activity for profit. The result, thus, of the change in the definition is that in order to bring a case within the fourth category of charitable purpose, it would be necessary to show that : (i) the purpose of the trust is advancement of any other object of general public utility, and (ii) the above purpose does not involve the carrying on of any activity for profit. 61. Both the above conditions must be satisfied before the purpose of the trust can....
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....ust or institution for a charitable purpose to invest or deposit the money only in the manner provided therein inter alia investment in Savings Certificates as defined in Government Savings Certificates Act, 1959, deposit with the Post Office Savings Bank, deposit in any account with the scheduled bank i.e., Reserve Bank of India or its subsidiary bank or any scheduled bank under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 or any other bank being a bank included in Second Schedule to Reserve Bank of India Act, 1934 and the like. The breach of Section 11(5) would attract Section 13(1)(d) of the IT Act and the benefit under sections 11 and 12 would not be available if funds are deposited or invested contrary to Section 11(5) or in breach of Section 13(1) generally and Section 13(1)(d) specifically. 87. The words 'public utility' or 'general public utility' are not capable of a precise meaning. The question whether service is public utility or not has to be discharged in the context of different situations but it is, as considered infra, well settled that public utility means public purpose depending upon the context in whi....
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....y in the nature of trade, commerce or business is always carried on with the prior object of earning income. What is relevant is the intention of the person before undertaking such activity. A line of distinction needs to be drawn between the activities undertaken by a society, otherwise satisfying the prescription .of section 2(15) 'prior to the insertion of proviso, which are aimed at earning income divorced from the objects for which it is charitable por una parte and the activities which are aimed at the attainment of the objects for which It was set up por otra parte. Whereas the former fall within the mandate of the proviso to section 2(15), the latter do not. The obvious reason is that the latter activities are in furtherance of the charitable objects of such society and income, if any, resulting from such activities and does not convert the otherwise charitable activity [within the definition of section 2(15)] into carrying on of a business, trade or commerce. It can be understood with the help of a simple illustration. Supposing an association set up for the promotion of a particular trade, has its own premises' from which it carries out the activities for the prom....
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....urpose of campus placements of its students does not amount to carrying on a business so as to deny exemption u/s 11 of the Act. It further observed that if the object or purpose of an institution is charitable, the fact that the institution collects certain charges does not alter the character of the institution. The Delhi High Court further observed in para 67 that "the purport of the first proviso to section 2(15) of the Act is not to exclude the entities which are essentially for charitable purpose, but are conducting some activities for a consideration or a fee. The object of introducing the first proviso is to exclude the organizations which are carrying on regular business from the scope of "charitable purpose'". The High Court also noticed the purpose of introducing the proviso to section 2(15) of the Act from the Budget Speech of the Finance Minister while introducing the Finance Bill 2008 and reproduced the relevant extract to the Speech as under:' "..................... Charitable purpose" includes relief of the poor, education, medical relief and any other object of general public utility. These activities are tax exempt, as they should be. However, some entit....