AI Drafter 
TaxTMI 
TaxTMI 
2020 (1) TMI 1356
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....assessment order dated 30.01.2013 passed by the respondent under Section 143 r/w. Section 147 of the Act, 1961, during the pendency of the petition before this Court. 4. The Coordinate Bench of this Court passed the common order dated 17.02.2014 in both the petitions, which read thus: 1. Heard, Mr. Mihir Joshi, learned Sr. Advocate with Mr. Tushar P. Hemani, learned Advocate for the appellant. 2. Learned Sr. Advocate moves a Draft Amendment, same is allowed. The amendment shall be carried out during the course of the day. 3. The learned Sr. Advocate invited the attention of this Court to the averments made in Paragraph2.10, which reads as under; 2.10 However, the Respondent, vide order dated 16.04.2013 disposed off the objections raised by the Petitioner and inter alia held that when the original assessment order is framed due to oversight and inadvertence or a mistake, the reopening is valid. A copy of the order dated 16.04.2013 passed by the Respondent is annexed herewith and marked hereto as Annexure K to this petition. 4. The learned Sr. Advocate, then, invited the attention of this Court to Paragraph3.10, which reads as under; ....
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....ts laid down in the provisions are satisfied, empowers the Commissioner to take such an order in revision. However, the succeeding Assessing Officer cannot doubt the legality of a conclusion recorded by the earlier Assessing Officer in his assessment order, which was framed after scrutiny. In same what similar circumstance, we had in our judgment dated 16.4.2013 passed in S.C.A. No. 357 of 2013 in case of Transwind Infrastructure Pvt. Lid. Vs. Income Tax Officer, made following observations : 10. From the above, it can be seen that the Assessing Officer was acutely conscious about the petitioner not having deducted tax on labour payment charges of Rs. 3.05 crores and the petitioners contention that it was so done because provision for TDS was not applicable. He was not convinced by such explanation. He, however, for some strange reasons did not apply the provision of Section 40(a)(ia) of the Act instead made adhoc disallowance of Rs. 25,60,000/@ 8% of the total labour payment charges. 11.Whatever be the legality of such assessment, fact remains that, in the scrutiny assessment, the Assessing Officer had thoroughly and fully scrutinized the assessees claim of deduc....
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.... hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words reason to believe but also inserted the word opinion in Section 147 of the Act. However, on receipt of representations from the Companies against omission of the words reason to believe, Parliament reintroduced the said expression and deleted the word opinion on the ground that it would vest arbitrary powers in the Assessing Officer. 12. If the Revenue was of the opinion that the Assessing Officer erroneously and to the prejudice of the interest of the Revenue allowed certain claim, in a given situation, it would have been open for the appropriate authority to exercise revisional powers. However, once the claim was fully examined, power of reopening was simply not available. 12. Such observations would apply in the present case also. We make it clear that it is not a case where the Assessing Officer, while framing original scrutiny assessment, did not examine the petitioners claim of deduction. He was acutely conscious of such a claim and was also of the opinion that the entire claim was not required to be granted. He called for explanation of the....
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....ertisement during the year. 4. The above activity of the assessee is very much clear that the assessee had been carrying out the activity in the nature of trade, commerce or business, the activity by the assessee was not to be treated as "charitable purpose" in view of amended provision of Section 2(15). 5. I have, therefore, reason to believe that in this case income claimed as exempt is requires to be taxed. Thus, there is under assessment of income for A.Y. 2010-11. Accordingly, this is a fit case for reopening of the assessment u/s. 147 of the I.T. Act." 6. It appears that the Assessing Officer has issued notice under Section 148 in view of the amended provision of Section 2(15) of the Act, 1961 and the sole objection for reopening is such amendment. 7. In view of the above, it is not necessary to advert to the facts of the case, as similar issue is considered by the Coordinate Bench including in case of the petitioner in Tax Appeal No. 268 of 2012 and other allied matters and has held in favour of the assessee, as under: "163. We sum up our final conclusions as under; (i) In carrying on the charitable activities, certain surpl....
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....Association was not formed for advancement of object of general public utility within the meaning of Section 2(15) of the Act. The Tribunal allowed the assessee's appeal and directed the Commissioner to grant the registration under Section12AA to the assessee-Society. The Revenue went in appeal before the High Court of Punjab & Haryana. The High Court thought fit to allow the appeal, observing as under; "9. On examination of the objects and the purpose of the Association in the present case, it emerges that the respondent-Association is union of Truck Operators constituted for facilitating its members to carry on the trade of transportation and not to allow the outsider or non-member to undertake any business activity within the precincts of Hansi Town/village. The Association charges fees from its members before the transportation on the basis of the distance involved. The membership and payment of fees are mandatory and the element of voluntary contribution is missing. The association is vigorously pursuing transportation business by receiving freight charges on behalf of its members. The welfare activities adopted for the truck drivers, cleaners and mechani....
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....(1) of Section 12AA empowers the CIT to call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of the activities of the trust or institution and may also make such inquiries, as he may deem necessary in this behalf. Said provision in Section 12AA makes it clear that CIT is not supposed to allow registration with blind eyes. In the present case, CIT has considered the relevant papers before him, which included the income and expenditure accounts of the previous years after the society got registered with the Assistant Registrar Firms, Societies and Chits. The CIT, after considering the record before him, has observed that the society (present respondent) is charging substantial fees from the students and making huge profits. 11. After considering the submissions of the learned Counsel for the parties, we are of the view that mere imparting education for primary purpose of earning profits cannot be said to be a charitable activity. We are of the firm view that, in the expression 'charitable purpose', 'charity' is the soul of the expression. Mere trade or commerce in the nam....
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.... specified as incidental or ancillary objects, and this classification for the limited purpose of the Companies Act should not, according to the learned counsel, be confused with the real object for which the assessee-company was established. According to the learned counsel, the basic or dominant object for which the assessee was established, whether as a society prior to April, 1971, or as a company from April, 1971, was to encourage and promote the scientific breeding and training of horses and to impart instructions in and to diffuse useful and scientific knowledge of horse breeding and to encourage horse breeding in all its aspects which, according to the learned counsel, are objects of general public utility. The other objects specified, whether in the memorandum of association relating to the assessee as a society or in the memorandum of association relating to the assessee as a company, are all subservient to the main object of "scientific horse breeding". Consequently, the doctrine of dominant or primary object should be invoked in the present case in order to examine whether the dominant or primary object for which the assessee is established, is charitable in ch....
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....rpose of the I.T. Act is the scientific breeding of horses. We must reject the contention that the main objects for which the assessee was established should be regarded differently for the purpose of the companies Act and the I.T. Act. The provision contained in the memorandum of association is unlearned counsel. We have, therefore, no difficulty in coming to the conclusion that the main object for which the assessee was established whether as a society or as a company, was to carry on the business of a race club and all other objects are either incidental or ancillary to the above main object. Thus, even invoking the doctrine of dominant or primary object, we must hold that the assessee was established with the dominant or primary object of carrying on the business of a race club by conducting a races which, on the own admission of the learned counsel, is not charitable in character. This itself is sufficient to demolish the assessee's claim that it must be regarded as having been established for charitable purposes by invoking the doctrine of dominant or primary object." 170. Thus, on the facts of that case, the Full Bench, ultimately, held that the assessee was est....
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....n, industries, etc. and public good". Can all the purposes mentioned in subclause (b) be described as charitable purposes ? Section 2(15) of the Act defines the expression "charitable purpose" as including "relief of the poor, education, medical relief and the advancement of any other object of general public utility not involving the carrying on of any activity for profit." Two objects in subclause (b) of clause (3) of the Memorandum need to be considered, "industries" and "public good". As regards the latter, the decision on what should be the "purposes of common good" was left to the general meeting by Article 58 of the Articles of Association. Having regard to the context in which these words appear in the Memorandum and the Articles, they must evidently be referred to the residue general head in the definition in section 2(15) of the Act, that is to say, "the advancement of any other object of general public utility............ But this head is qualified by the restrictive words "not involving the carrying on of any activity for profit." The operation of an industry ordinarily envisages a profit making activity, and so far as the advancement of public good is concerne....
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....ome-Tax, Kerala v. Cochin Chamber of Commerce and Industry, (1975) 101 ITR 796 (SC), this Court extended the test to income derived from activities carried on in aid of, and incidental to, the primary object of the trust. We may note that no attempt has been made by the appellant before us to cast doubt on the validity of the observations made in those two cases, and we proceed on the footing that they convey the true content of the law. It is, therefore, apparent that among the objects contained in the original unamended subclause (b) of clause (3) of the Memorandum are objects which, while referable to the residual general head in the definition of "charitable purpose" in section 2(15) of the Act, nonetheless do not satisfy the condition that they should not involve "the carrying on of any activity for profit." The result is that the objects "industries" and "common good" cannot be described as "charitable purposes". What follows then is this, that the said subclause (b) can be said to contain some objects which are charitable and others which are non-charitable. They are all objects which appear to enjoy an equal status. It is open to the appellant, in....
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....ptions for the trust. he had all the powers which the sole manager of a business may have in order to carry it on profitably. He had the power of transferring trust properties and funds if he thought "it expedient in the interest of the objects of the Trust, to transfer the assests and liabilities of this Trust to any other Charitable Trust or institution conducted by such Trust which in the opinion of the original Trustee or the Board of Trustee has objects similar to the objects of this Trust and is capable of carrying out the objects and purposes of this Trust either fully or partially" (Paragraph 17 of the Trust deed). Although, the "original trustee" was not "to take any remuneration" for discharging his duties as a trustee, yet, he was not precluded "from being paid out of the Trust fund such remuneration as may be deemed propellor carrying out any work and duty in connection with the conduct or management of institutions of the Trust, or with the business of printing, publishing or other activities carried on by the Trust". He was to be paid expenses incurred in travelling or otherwise in connection with his duties as a trustee (paragraph 16 of the Trust deed). The ....
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....able purpose or not. The trustees is given the power of deciding what 485 purpose is allowed to or like an object covered by the trust and how it is to be served by a diversion of trust properties and funds. If the trustee is given the power to determine the proportion of such diversion, as he is given here, the trust could not be said to be wholly charitable. He could divert as much as to make the charitable part or aspect, if any, purely illusory. Indeed, this was the law even before the qualifying words introduced by the 1961 Act. [See: East India Industries (Madras) Pvt. Ltd. v. Commissioner of Income-tax, Madras, (1967) 65 ITR 611 (SC), Commissioner of Income-tax, Madras v. Andhra Chamber of Commerce, (1965) 55 ITR 722 (SC) and Md. Ibrahim Riza v. Commissioner of Income-tax, Nagpur, AIR 1930 PC 226. Such a "trust" would be of doubtful validity, but I refrain from further comment or any pronouncement upon the validity of such a trust as that was neither a question referred to the High Court in this case nor argued anywhere. " 174. Thus, it appears that the Supreme Court looked into the trust deed of the trust in details and noticed that the sole trustee had not only wi....
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....er to the case of In re, Mariette : Mariette v. Governing Body of Aldenham School, (1915) 2 Ch. 284, where a bequest was made to the Governing Body of a school for the purpose of building some squash racket courts and a further bequest was made to the Head Master for the time being upon trust to use the interest for providing a prize for some event in the school athletic sports every year. This bequest was upheld as charitable, because it was considered essential in a school of learning that there should be organised games as a part of the daily routine in order that the boys might not be left to themselves and that their bodily welfare might be promoted. Another instance is the case of Dupree's Deed Trusts, In re, Daley v. Lloyds Bank, Ltd., (1945) 114 LJ Ch L where a deed of gift, expressed to be for the encouragement of chess playing by holding an annual chess tournament limited to boys and, young-men under the age of 21 years resident in a particular area, was held to be a good gift for a charitable purpose. It appears that Vaisey, J. who decided the case had to struggle a good deal against his own inclinations in order to arrive at the conclusion which he ultimately reache....
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....have not expressed any dissent from the view taken in the Nottage case(1895-2 Ch. 649). It has often been cited and very recently it was cited in the case of Baddeley v. Inland Revenue Commissioners, (1953) 1 Ch 504 in the Court of Appeal and in the same case, Baddeley v. Inland Revenue Commra., (1955) AC 572 in the House of Lords. "In re Nottage, 1895-2 Ch 649 was cited for the proposition" observed Jenkins L. J. in the Court of Appeal. "that the encouragement of mere sport is not a charitable purpose. With regard to this authority, I need only say that in my view, neither of the trust here in question is a trust for the encouragement of mere sport". It is noticeable that the learned Lord Justice did not dissent from the decision cited before him. A more elaborate reference to the case was made in the House of Lords and among the other Lords, Lord Reid made comments on it. Referring to the view taken in the Court of Appeal of the Nottage case, 1895-2 Ch 649, Lord Reid observed as follows : "In re Nottage, 1895-2 Ch 649 is clearly distinguishable : money was bequeathed to provide annually a cup for yacht racing, so the only possible beneficiaries were yac....
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....nk I should multiply citations in order to illustrate the point that a gift or bequest merely for the promotion of a game has never been considered charitable : Clifford, In re : Mallam v. McFie, (1911) 81 LJ Ch 220 was a case of angling; Trustees of Warnher's Charitable Trust v. Commissioners of Inland Revenue, (1937) 21 Tax Cas 137, a case of playing fields. Scottish Flying Club, Ltd. v. Commissioners of Inland Revenue, (1936) 20 Tax. Cas 1, a case of an Aviation Club which held aerial pageants and charged fees for admission to the display and Inland Revenue Commissioners v. City of Glasgow Police Athletic Association, 1953 AC 380, a case of athletic sports of a police club. It is true that some of the decisions ultimately turned on the point that the beneficiary was not the public or a section of it, as understood in law, but incidentally observations were made in all of them as regards when promotion of a game can be a charitable purpose and when it cannot be. 14. The facts of the present case are that the assessee Association merely held certain demonstration or exhibition matches. It does not provide any training in the game of cricket to novices or any advanced ....
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....matches arranged by the Association, for they are members of the visiting teams or it might be local teams, but so far as the Association is concerned they are mostly outsiders. The Association is claiming to be advancing a charitable purpose only by providing an opportunity to the public to witness the games arranged by it. It can by no means be said that any spirit of fairness and honour is inculcated in the spectators of a game of cricket or perhaps any other game, played not by individuals but by teams. Indeed, there is a school of opinion, now growing in volume, which thinks that games played by rival teams drawn from different parts of the country or different countries and witnessed by multitudes do not serve any beneficial purpose, but, on the other hand cause a deterioration of the mind by fostering fanatical partisanships or generating mass hatreds. This, however, is a matter of opinion. Whether this extreme view is right or wrong, I find it impossible to hold that any benefit of a public character is conferred on the society or a section of it merely by the arrangement of exhibition games of cricket or tournaments and the admission of the public thereto for a fee, on the....