TaxTMI 
TaxTMI 
2021 (1) TMI 176
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.... exceeded the limit provided in proviso to section 2(15), ignoring the detailed discussion made in assessment order in Para B & C of 6.3". 2. "Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) is right in allowing the exemption u/s 11 of the I.T. Act in view of proviso to section 2(15) of the I.T. Act, by holding that the assessee is a Government organization especially formed to implement Rail components of MUTP and has taken projects funded fully by the Government and using all its funds without any profit markup, ignoring the fact that not only the nature of activities of assessee such as that of consultancy and of implementing projects for the government, are in the nature of business but also that substantial surplus is being generated from the same,'' 3. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is right in directing the AO to allow exemption u/s 11 of the I.T. Act to the assessee ignoring the decisions of various Judicial Authorities in following cases relied upon by the A.O. while applying the amended proviso to section 2(25) of the I.T. Act:- (a) Decision of Hon'ble ITAT,....
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....company registered under section 617, and not as a not for profit company under section 25, of the Companies Act; and that (b) the registration under section 12 AA was cancelled by the learned Director of Exemptions, the Assessing Officer declined benefit of exemption under section 11 of the Act. The Assessing Officer further noted that in view of proviso to Section 2(15), the nature of activity of the assessee and the receipts of the assessee being more than Rs. 25 lakhs, the assessee is not entitled to the benefit of section 11. He further noted that in the light of the provisions of Section 13(8), even if the assessee was to be granted registration under section 12AA, he will not be eligible to the benefit of Section 11. He thus declined to treat the excess of income over expenditure as exempt under section 11, and proceeded to bring this amount of Rs. 22,82,23,850 to tax. Aggrieved, assessee carried the matter in appeal before the CIT(A). Learned CIT(A), in a detailed order, reversed the action of the Assessing Officer and observed as follows: 10. Having considered the assessment order of the AO, written submissions and case laws submitted by the assessee, I find....
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....sible for protection of Railway's right of way and urban development for purposeful resolution of allied issues and problems, and discharge its liabilities arising due to such projects and action." Before us, it has been elaborately brought out that under the first phase of MUTP (at cost of Rs. 4501 crores) 101 EMU rakes have been procured, which have made 418 additional train services possible-and generated an additional 33% carrying capacity in local trains in Mumbai. It has also been pointed out that a state of the art EMU maintenance car shed has been set up at Virar and additional 93 track kilometres have been added, which has facilitated segregating mainline operations from suburban operations. It was extended further to network expansion, service efficiency improvement, rolling stock procurement, institutional strengthening and R&R is under progress under MUTP-II at approximate cost of Rs. 7000 crore. Although detailed written submissions have been filed pointing out various activities undertaken, but we do not dilate further on it:, it would suffice to notice that the projects which are being undertaken by the assessee company are in public interest with the ul....
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....ctivities carried on by the assessee are not in accordance with the objects because - (i) assessee is only leveraging its funds to earn interest income and the same is not applied for its object; and (ii) the expenses are incurred for establishment, administrative functions and not for any charitable or general public utility purpose. On both the aspects, ld. Representative for the assessee pointed out that the activities of assessee are totally controlled/managed by Government of India and subject to review by the Comptroller and Auditor General of India. It has also been pointed out that the activities of the assessee have been scrutinized by the Assessing Officer in the course of scrutiny assessments made under section 143(3) of the Act for various assessment years starting from 2003-04 to 2010-11 without any adverse findings and copies of such assessment orders have been placed in the Paper Book at pages 399 to 472. Id. Representative for the assessee explained that no profits are earned from the activity of executing projects, of MUTP and the inflow by way of D&G charges is an inter-departmental allocation to meet the administrative costs. It was pointed out that such charges ....
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.... entrusted to the assessee and, the activity of executing the railway component of the MUTP. The administrative set-up and its functions cannot be viewed in isolation to say that assessee company is not carrying out the activities in accordance with its objectives, which in the present case is quite clearly being undertaken by the assessee by executing the railway component of the project under MUTP----------- " (emphasis supplied) 10.1 In the back drop of the above findings of the hon'ble ITAT, perusal of the aforesaid assessment order of the AO is made and I find that the AO, vide para 4 of his assessment order has denied the exemption u/s.11 of the Act to the assessee on the strength of the following two reasons: i) Assessee is a company incorporated under section 617 of the Companies Act, 1956 and not a non-profit organization under section 25 of the Companies Act, 1956 or a Trust. ii) Registration u/s.12AA of the Income Tax Act, 1961 has been, cancelled by the Ld. DIT(E), Mumbai vide order bearing No.DIT(E)/Registration 12AA/2013-14/2 dated 10.01.2014. 10.1.1 The above stated first reason for denial of exemption u/s 11 of the Act by the ....
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....ssee for the whole of the previous year relevant to the assessment year 1974-75 is entitled to exemption under section 11. We accordingly answer the question referrer in the affirmative, i.e., in favour of the assessee and against revenue. There will, however, be no order as to costs." 10.1.1.1 Similar ruling has been made by Hon'ble High Court of Rajasthan in the case of Commissioner of Income-tax, Jaipur II v. Jaipur Stock Exchange Ltd. [2017] 79 taxmann.com 388 (Rajasthan). The Jaipur Stock Exchange limited was registered as Public Limited Company under the Companies Act 1956 and was also registered as a Charitable Institution u/s.12A of the Hon'ble High Court of Rajasthan has ruled as: "We have gone through the objects of the Jaipur Stock Exchange Limited in the Memorandum of Association. The Jaipur Stock Exchange Limited is a Company, registered by the Income Tax Department is Charitable Trust under Section 12A of the Income Tax Act. The object of the stock exchange is not only to further the interests both of the brokers and dealers, but also the public interested in securities, to assist, regulate and control the trade or business in securities, to ....
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....urposes" as defined under s. 2(15) of the 1961 Act. 10. We have perused number of decisions of this Court which have interpreted the words, in s. 2(15), namely, "any other object of generally public utility". From, the said decisions it emerges that the said expression is of the widest connotation. The word "general" in the said expression means pertaining to a whole class. Therefore, advancement of any object of benefit to the public or a section of the public as distinguished from benefit to an individual or a group of individuals would be a charitable purpose [CIT vs. Ahmedabad Rana Caste Association (1993) 140 ITR 1 (SC) The said expression would prima facie include all objects which promote the welfare of the general public. It cannot be said that a purpose would cease to be charitable even if public welfare is intended to be served. If the primary purpose and the predominant object are to promote the welfare of the general public the purpose would be charitable purpose. When an object is to promote or protect the interest of a particular trade industry that object becomes an object of public utility, but not s if it seeks to promote the interest of those who conduct ....
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....l precedents, I am of the view that the assessee, MRVC, cannot be denied exemption U/s.11 of the Act merely on the ground that the assessee is not a Trust or a Company incorporated U/s.25 of the Companies Act, 1956. 10.1.2 The second reason for denial of the exemption is the cancellation of registration U/S.12A of the Act by the DIT (E) vide order dated 10.01.2014. This ground does not exist as on date as the registration u/s. 12A has been restored by the Hon'ble Mumbai ITAT in ITA No. 105?'/Mum/2014 & ITA No.2626/Mum/2014, dated 03.08.2016, supra while holding as under: "6.3 Be that as it may, in the background of the aforesaid features of assessee company, we now refer to the specific points raised by the Director to say that activities of the assessee are not being carried out in accordance with its objects in order to justify his invoking of section 12AA(3) of the Act. ...........in our considered opinion, the Director erred in not appreciating the difference between the functioning of administrative set-up, which is essential to execute the object entrusted to the assessee and, the activity, of executing the railway component of the MUTP. The administ....
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.... is that whether the activities of the assessee constitute 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. For the sake of convenience, the provisions of section 2(15) "(15) "charitable purpose" includes relief of the poor, education, 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 business56, 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:] ....
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....cost of Rs. 7000 crore. It leaves no doubt in my mind that the projects which are being undertaken by the -assessee company are in public interest with the ultimate aim of improving transportation infrastructure in MMR. It is also clear that the funds for projects are disbursed to the assessee out of budgetary allocation of Indian Railways and Government of Maharashtra, including-the specific funds received from the World Bank. It has been assessee's uncontroverted submission that all operating assets created under MUTP, through assessee are transferred to / retained by the railways for operations, maintenance and replacement. In addition to funds that the assessee receives from the Indian Railways and the' Government of Maharashtra, the assessee receives the Direction & General (D&G) charges which are nothing but interdepartmental allocations to cover administrative overheads. It has been explained that the D&G charges for work under MUTP is based on the quantum of work to be carried out by the assessee and are determined in terms of a standard policy of the Railways. It is also clear that assessee company functions under complete superintendence and control of Government ....
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....at all its activities are for the purpose for which assessee was set-up. In this context, the contention of the AO made in his the assessment order that the assessee is carrying on commercial activities with profit motive are only a bald assertions, devoid of any factual support. In fact, the main object of the assessee, as reproduced earlier, is to develop coordinated plans and the railway infrastructure projects, integrate urban development plan for Mumbai with rail capacity, etc. In order to achieve the aforesaid, assessee company is an SPY tasked to execute the Sub-urban rail projects identified under MUTP. The various projects being undertaken by the assessee have been completely lost sight of by the AO and rather much has been made of the items of receipts by way of D&G charges, interest incomes etc. Quite clearly, any organization would require to spend on administrative overheads in order to carry out its objectives. So however, the function of maintaining an administrative set-up cannot be confused with the objects for which the assessee company has been set up and which it has been undertaking ever since namely, the execution of the railway component of the MUTP. The AO h....
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....rat High court in Ahmedabad Urban Development Authority v/s, Assist. Comm. of IT, (E) [2017] 83 taxmann.com 78 (Gujarat) where the hon'ble High Court has considered the various case laws relied upon by the AO in the present case and also various decisions of the Supreme court and the High courts on issues of definition of trade and business, interpretation of section 2(15) and its provisio, CBDT Circular No. 11 of 2008 dated 19th December 2008 explaining the purpose of introduction of provisio to section 2(15) and the Finance Minister's speech. While reversing the decisions of the1 1TAT and deciding the issue in favour of the appellant, the Hon'ble High court has held as under: "12.2 Whether the activities of the appellant AUDA can be said to be in the nature of trade, commerce or business as occurring in the first proviso to Section 2(15) of the Act, few decisions of the Hon'ble Supreme Court as well as other High Courts are required to be referred to at this stage. 12.3 In the case of Khoday Distilleries Ltd. v. State of Karnataka [1995] 1 SCC 574, the Hon'ble Supreme Court had an occasion to consider the word "trade". In the said decision, the H....
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....ecessary that a person should give something for free on at a concessional rate to qualify as being established for a charitable purpose. If the object and purpose of the institution is charitable, the fact that the institution collects certain charges, does not alter the character of the institution. 67. The. expressions trade, commerce and -business as occurring in the first proviso to section 2(15) of the Act must be read in the context of the intent and purport of section 2(15) of the Act and cannot be interpreted to mean any activity which is carried on in an organized manner. The purpose and the dominant object for which an institution carries on its activities is material to determine whether the scone is business or not. The purport of the first proviso to section 2(15) of me Act is not to exclude entities which are essentially for charitable purpose but are conducting some activities for a consideration or a fee. The object of introducing the first vroviso is to exclude organizations which are carrying on regular business from the scove of charitable purpose. The purpose of introducing the proviso to Section 2(15) of the Act lean be understood from the Budget Spee....
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....table purposes. WP(C) 1872/13 Page 48 of 55 Finally in ICAI(II) (supra), this court, with reference to H. Abdul Bakhi and Bros (supra) observed as under:- 71. Although, it is not essential that an activity be carried on for profit motive in order to be considered as business, but existence of profit motive would be a vital indicator in determining whether an organization is carrying on business or not. In the present case, the petitioner has submitted figures to indicate that expenditure on salaries and depreciation exceeds the surplus as generated from holding coaching classes. In addition, the petitioner institute provides study material and other academic support such as facilities of a library without any material additional costs. The Supreme Court in the case of State of Andhra Pradesh v. H. Abdul Balkhi and Bros, (supra) held as under: The expression "business" though extensively used a word of indefinite import, in taxing statutes it is used in the sense of an occupation, or profession which occupies the time, attention and labour of a person, normally with the object of making profit. To regard an activity as business there must be a course of dealings, e....
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....mercial activities i.e. carrying on business, trade or commerce, in the garb of 'public utilities' to avoid tax liability as it was noticed that the object 'general public utility' was sometimes used as a mask or device to hide the true purpose, which was 'trade, commerce or business1. Thus, it is evident that introduction of proviso to Section 2(15) by virtue of the Finance Act, 2008 was directed to prevent the unholy practice of pure trade, commerce and business entities from masking their activities and portraying them in the garb of an activity with the object of a general public utility. It is not designed to hit at those institutions, which had the advancement of the objects of general public utility at their hearts and were charity institutions, The attempt was to remove the masks from the entities, which were purely trade, commerce or business entities, and to expose their true identities. In the case of G.S.I India (supra), in paras 21, 22 and 27, the Delhi High Court has observed and 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 ear....
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.... 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 " 12.9 While, upholding the constitutional validity of the proviso to Section 2(15) of the Act, the Division Bench of the Delhi High Court in the case of Indian Trade Promotion Organization (supra) has observed in para 58 as under: "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 principle of equality enshrined in Article 14 of the Constitution India. In order to save the Constitutional validity of the proviso, the same would have to be read down and interpreted in the context of Section 10(23C)(iv) because, in our view, the context requires such an interpretation. The correct interpretation of the proviso to Section 2(15) of the said Act would be that it carves out an exception from the charitable purpose ....
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....e, proviso to Section 2(15) of the Act shall not be applicable. 13.2 Similar, view has been expressed by the Rajasthan High Court in the case of Commissioner of Income Tax-I, Jodhpur vs. Jodhpur Development Authority, Jodhpur -Tax Appeal No. 63 of 2012 decide on 5.7.2016. 14. Considering the aforesaid facts and circumstances and more particularly, considering the fact that the assessee is a statutory body - Urban Development Authority constituted under the provisions of the Act, constituted to carry out the object and purpose of Town Planning Act and collects regulatory fees for the object of the Acts; no services are rendered to any particular trade, commerce or business; whatever me income is earned/received by the assessee even while selling the plots to the extent of 15% of the total area covered under the Town Planning Scheme) is required to be used only for the purpose to carry out the object and purpose of Town Planning Act and to meet with expenditure while providing general utility service to the public such as electrical road, drainage, water etc. and even the entire control is no element of profiteering at all, the activities of the assessee cannot be s....
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....cement of any other object of general public utility by virtue to proviso, would be excluded from the definition of charitable trust. However, for the application of the proviso, what is necessary is that the entity should be involved in carrying on activities in the nature of trade, commerce or business, or any activity of rendering services in relation to any trade, commerce or business, for a cess or fee or any other consideration. In such a situation, the nature, use or application, or retention of income from such activities would not be relevant. Under the circumstances, the important elements of application of proviso are that the entity should be involved in carrying on the activities of any trade, commerce or business or any activities of rendering service in relation to any trade, commerce or business, for a cess or fee or any other consideration. Such statutory amendment was explained by the Finance Ministers speech in the Parliament. Relevant portion of which reads as under: I once again assure the House that genuine charitable organizations will not in any way be affected. The CBDT will, following the usual practice, issue an explanatory circular containing gu....
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....alings 'with non-members, their claim to be chargeable organizations would now be governed by the additional conditions stipulated in the proviso to section 2 (15). 3.2 In the final analysis, however, whether the assessee has for its object the advancement of any other object of general public utility is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled to claim that its object is charitable purpose. In such a case, the object of general public utility will be only a mask or a device to hide the true purpose which is trade, commerce or business or the rendering of any service in relation to trade, commerce or business. Each case would, therefore, be decided on its own facts and no generalization is possible. Assessees, who claim that their object is charitable purpose within the meaning of section 2(15), would be well advised to eschew any activity which is in the nature of trade, commerce or business or the rendering of any. service in relation to any trade, commerce or business. A 8. What thus emerges from the....
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....venue. 16. In view of the above and for the reasons stated above, the impugned order passed order passed by the learned Tribunal in respective appeal for different assessment year are hereby quashed and set-aside. Accordingly, all these appeals are allowed and questions in favour of assessee and against the replied) 10.2.4 The Hon'ble Mumbai Tribunal has followed the Ahmedabad Urban Development Authority, (supra) in its recent decision in the case of Shanmukhananda Fine Arts &.. Vs. DDIT (E) 1(2), ITA No.l975/Mum./2Q16, dated:02-03-2018. In this case during the assessment proceedings, the AO observed that the objective of the assessee were primarily in the nature of advancement of any other object of general public utility. He issued a notice to the assessee mentioning that majority of the receipts were from renting of auditorium for various programmes, that receipts from auditorium worked out to 87.90 percent of gross receipts, that the hall maintained by the assessee trust i.e. Shanmukhananda Hall (SH)was primarily used for ticketing shows and was given to various event managers, that it made commercial exploitation o the hall for 245 days in the year under ....
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....on unless the conditions stipulated therein are fulfilled. Thus, granting of registration under section 12AA denotes that the conditions laid down in section 12A stand fulfilled. The effect of such a certificate of registration under section 12AA , therefore, cannot be ignored or wished away by the Assessing Officer by adopting a stand that the trust or institution is not fulfilling the conditions for applicability of sections 11 and 12." We find that the main objection of the departmental authorities was that the SH was rented out most of the time and that it was a commercial activity. In our opinion, act of letting out of hall cannot be and should not be considered in isolation. Eligibility or otherwise of benefit u/s. 11 of the Act cannot depend solely on one factor. What has to be seen is as to whether the trust is incurring the expenditure for the objects and purposes for which it was established. We find that the issue of letting out of a hall by a charitable institute was deliberated upon by the Hon'ble Madras High Court in the case of Madras Stock Exchange Ltd(supra) and Women's India Trust (supra).We would like to reproduce the relevant portion of the judg....
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....utility but that would not cease to be charitable purposes because the activities in which the trust was involved could not be termed as carrying on of trade, commerce or business, that the activity undertaken did not partake of the character of trade, commerce or business nor of rendering of any service in relation thereto but was only to teach or impart skills and to instill confidence that the produced goods or articles were sold. To that extent also deficit had occurred. The Tribunal took a view that occasional sales or the trust's own fund generation were for furthering the objects but not indicative of trade, commerce or business. The proviso did not apply. ...... considering the fact that the trust had been set up and was functional for the past several decades and it had not deviated or departed from any of its stated objects and purpose, utilisation of the income, if at all generated, did not indicate the carrying on of any trade, commerce or business. The Tribunal's view was to be upheld. It was a possible view and could not be termed perverse. The view was taken on an overall consideration and bearing in mind the functions and activities of the trust. In such cir....
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....AA cannot be endorsed on this count. 6.3. We also find that one of the object of the assessee was to impart training in music and that training of music has been considered education by the Hon'ble Court. In that regard we would like to rely upon the cases of Delhi Music Society(supra) Jeevan Vidya Mission(supra) and hold that imparting training of music was an educational activity. 6.4. Finally, we would like to address the argument of the FAA about applicability of proviso to section 2(15) of the Act. We find that the AO as well as the FAA has empasised the fact that the provisions of the proviso to the section 2(15)the assessee was not entitled to claim the benefit of section 11 of the Act. We would like to reproduce the proviso and it reads as under: (15) "charitable purpose" includes relief of the poor, education, 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 chari....
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....bove, we hold that the assessee is running music school and providing medical services and it is utilising SH for augmenting its funds. In these circumstances in our opinion, it cannot be held that the it is carrying out business activities and the charitable activities are by product, as alleged by the departmental authorities. What has to seen in such cases is a holistic view of the things and not a narrower view. We would like to refer to the matter of Institute of Chartered Accountants of lndia (358 ITR 91),wherein the Hon'ble Delhi High Court has held as under: "A plain reading of section 2(15) of the Income-tax Act, 1961, indicates that the expression "charitable purpose" has been divided into six categories, namely, (i) relief to poor, (ii) education, (Hi) medical relief, (iv) preservation of environment including watersheds (forest and wildlife), (v) preservation of monuments and places or objects of artistic or historical importance, and (vi)advancement of any other object of general public utility. The first proviso to section 2(15) of the Act carves out an exception which excludes advancement of any other object of general public utility from the scope of ch....
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....viso to section 2(15) could not have been invoked to decline benefit of sections 11. The A.O. is therefore, directed to allow the assessee exemption u/s. 11 of the Act. 4. The Assessing Officer is not satisfied and is in appeal before us. 5. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 6. We find that, in the meantime, the action of the learned Director of Exemptions, in cancellation of registration under section 12 AA, has been reversed by a coordinate bench of this Tribunal. Learned representatives have fairly agreed that the core issue in this appeal is covered, by a coordinate bench decision dated 8th August 2019, in assessee's own case, wherein the coordinate bench has, inter alia, observed as follows: 29. We have carefully considered the submissions and perused the records. As noted above the assessee is a State Corporation engaged in the business of public transportation. The objects of the corporation are development and growth of public, trade and industry of the development of road transport, facilities of road transport in any area and providing a....
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....ttracted, if the activity pursued by the institution involves any trade, commerce or business. But the situation contemplated under the second Limb [clause (b)l stands entirely on a different pedestal, with regard to the service in relation to the trade, commerce or business mentioned therein. To out it more clear, when the matter comes to the service in relation to the trade, commerce or business, it has to be examined whether the words "any trade, commerce or business" as they appear in the second limb of clause (b) are in connection with the service referred to the trade, commerce or business pursued by the institutions to which the service is given by the assessee. If the said words are actually in respect of the trade, commerce or business of the assessee itself, the said clause (second limb of the stipulation under clause (b) is rather otiose. Since the activity of the assessee involving any trade, commerce or business, is already excluded from the charitable purpose by virtue of the first limb [clause (a) itself, there is no necessity to stipulate further, by way of clause (b), adding the words 'or any activity of rendering any service in relation to any trade, commerce ....
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....cation'. Further, the expression 'charitable purpose' also includes the activity of 'advancement of any other object of general public utility'. According to the Revenue, even if the activities are to be considered as falling within the scope of Sec. 2(15) of the Act, it fits into the said expression 'advancement of any other object of general public utility'. The proviso to Sec. 2(15) of the Act was added w.e.f. 01.04.2009, which 9 National Institute of Bank Management ITA Nos. 2913 to 2915/M/16, 2506/M/14 & CO 182/M/15 prescribes that the activity of 'advancement of any other object of general public utility' shall not be construed to be for 'charitable purpose' if it involves 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. By relying on such proviso, the Revenue contends that since assessee is carrying out its programme of training, etc. against charging of fee, therefore, its activitie....
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.... 10. Before us, it was argued by the ld. DR that fee is being charged and subscriptions are received from the member-banks which generates surplus in the course of activities, and thus, the activities are not for education. It is well understood that educational institutions are also required to generate funds for carrying out its activities, and the fact that assessee is collecting fees, by itself, will not make it a non-educational activity so as to go out of the definition of 'education' contained in Sec. 2(15) of the Act. In this context, we may refer to the judgment of the Hon'ble Supreme Court in the case of T.M.A. Pai Foundation vs State of Karnataka, (2002) 8 SCC 481, wherein the Hon'ble Supreme Court has also recognised the necessity for the educational institution to generate funds for its betterment and growth. In the case of American Hotel & Lodging Association, 301 ITR 86 (SC), the Hon'ble Supreme Court was dealing with an entity engaged in providing worldrecognised curriculum for all hospitality education programs in India by making them available through text, course material and other software programmes in India. Apart from accepting th....
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....ng higher education training, coaching and research in the field of banking and finance, and the ratio of the judgment of the Hon'ble Gujarat High Court certainly goes to show that its activities are in the field of 'education' for the purposes of Sec. 2(15) of the Act. 12. Similarly, the decision of the Mumbai Bench of the Tribunal in the case of Indian Institute of Bankers vs DCIT (Exemption), (2002) 74 TTJ 523 (Mum) was also relied upon. The assessee before the Mumbai Bench of the Tribunal, i.e. Indian Institute of Bankers, was engaged in the activity of promoting the study of theory of banking and, for that purpose, it was conducting exams, lectures, etc. Notably, the activities of the assessee before us are also on the same lines and the Tribunal in the case of Indian Institute of Bankers (supra) accepted those activities to be in the nature of 'education'. 13. In view of our aforesaid discussion, we do not find any merit in the stand of the Assessing Officer that the activities of the assessee are not in the field of 'education'. What has been emphasised by the Assessing Officer is that the assessee is conducting coaching classes ....
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....case. Firstly, the CBDT in its Circular no. 11/2008 dated 19.12.2008 clarified that the proviso would apply only in situations where there is a profit motive in the activities undertaken. Secondly, the phraseology of the proviso itself lends credence to a premise that it comes into operation only in situations where profit is the motive in the activities undertaken. Pertinently, the proviso applies in a situation "if it involves carrying on of any activity in the nature of trade, commerce or business or any activity of rendering any services in relation to any trade, commerce or business..........". Ostensibly, the three expressions used therein, i.e., 'trade', 'commerce' or 'business' are to be understood as activities which are undertaken with a motive of earning profits. Therefore, the moot question to be examined is as to whether or not the activities of the assessee can be construed to be intended for a profit motive or for a commercial intent, as sought to be made out by the Assessing Officer. In order to address the said point, we may touch upon the manner and purport for which assessee has been set- up. As noted by us briefly in the earlier part of t....
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....commercial intent behind setting-up of the assessee. In fact, the Assessing Officer has sought to draw a parallel with the case before the Hon'ble Patna High Court in Bihar Institute of Mining & Mine surveying (supra) which, in our view, is wholly inappropriate. The Hon'ble Patna High Court was dealing with the claim of an entity for registration u/s 12A of the Act on the ground that its activity of coaching of students for particular examinations was to be viewed as imparting education. The Hon'ble Court noted that "the running of a private coaching institute for the purpose of training the students to appear at some specified examinations upon taking specified sum from the trainees would not bring the petitioner within the provisions of section 2(15) of the Act." The aforesaid observation of the Hon'ble Court clearly bring out the distinction between the entity before us and that was before the Hon'ble Patna High Court, which was a case of a private coaching institute whereas, as we have seen earlier, the complexion of the entity before us is on a completely different footing; the entity before us has been established by the Government of India through RBI as ....
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....ake away the benefits of Sections 11 & 12 of the Act from the assessee inasmuch as the proviso does not disentitle the assessee's activities from being considered as for charitable purpose because of the above discussion. Thus, on this aspect also, we uphold the stand of the assessee. The above precedent and case law are fully applicable in the present case. Upto A.Y. 2011-12, there was no dispute that the assessee was entitled to exemption u/s. 11 of the Act. The dispute has only arisen pursuant to introduction of proviso to section 2(15) of the Act. Considering the objects for which the assessee is set up and manner in which it is managed and the manner in which funds generated are utilized, there is no doubt that there is no profit motive in carrying out the activity of the assessee. No doubt there may remain some surplus but that by itself does not mean that the motive is to earn profit. Hon'ble Apex Court in the case of American Hotel and Lodging Association (supra) has expounded that it may not be possible to carrying on activities in such a way that expenditure exactly matches income and there is no resultant profit. There is no case made out by the Revenue ....
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....el of the assessee. Sr. No Particulars Amount in Rs. Percentage to Non- operating Revenue to Operating Revenue 1. Adverting 52122184 0.095% 2. Rent 20786834 0.05% 3. Interest 14213788 0.025% 4. Publication 3986 5. Excess Receipt 3958812 0.007% 6. Licence Fees 171405862 0.031% 7. Miscellaneous Receipt 310766685 0.57% 8. Work done for outside parties 810320 0.0014% 9. Total Non-operating revenue 574068471 1.05% 34. Hence figures quoted by the Assessing Officer for inferring that the assessee is engaged in profit motive activity in large scale is totally absurd in light of the above said figures. Hence, in our considered opinion the finding given by the Assessing Officer that assessee is engaged commercial and profit motive activity is totally unsustainable. 35. It may not be out of place to mention here that to remove/prevent the mischief which can be caused to the assessee such as the present large State, the present proviso No. (ii) to section 2(15) provides that if the aggregate receipt from such activity or activities during the previous....