TaxTMI 
TaxTMI 
2021 (1) TMI 227
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....sion 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, Amritsar in the case of Jammu Development Authority Vs. CIT (ITA No.30(Asr).2011 (52 SOT 153) (b) Hon....
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....able institution' has been cancelled by the Director of Exemptions with effect from 29th October 2001. It was in this backdrop and for the reasons that (a) the assessee was a 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 Asse....
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....nts of track, drainage and removal of encroachments and trespassers and coordinate with organizations operating the train services and responsible 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 i....
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....n accordance with its objects in order to justify his invoking of section 12AA(3) of the Act. As per the Director, the activities 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....
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.... 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 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 12-AA/2013-14/2 dated 10.0....
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....sment year. We are, therefore, in agreement with the Tribunal that the income of the assessee 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 securitie....
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....the light of the definition of the words "charitable purposes" 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 se....
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....inding judicial 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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....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:] [Provided further that the first p....
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....s 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 of India, exercised through the Ministry of Railways. It has also been....
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....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 has even termed the funds received by the assessee from the Government of Mah....
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....7] 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 Hon'ble Supreme Court has held that "the primary meaning of the word "trade" is the exchange of goods....
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....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 Speech of the Finance Minister while introducing the Finance Bill 2008. The relevant extract to the Speech is as under: Charitable purpose includes....
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.... 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, either actually continued or contemplated to be continued with a profit motive, and not for sport or pleasure, (Underlining added) 72. There is nothing on record to indicate the assertio....
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....k 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 earn profit. Profit motive is determinative and a critical factor to discern whether an activity is business, trade or commerce. The court further held:- 22. Business activity has an important pervading element of self-interest, though fai....
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....(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 of advancement of any other object of general public utility and that exception is limited to activities 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 oth....
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.... 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 said to be in the nature of trade, commerce and business and therefore, proviso to Section 2(15)of the Act shall not be applicable so far as assessee is concerned and therefore, the assessee is entitled to exemption under Section 11 of the Income Tax Act. Therefore, the question no.1 is to be h....
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....r 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 guidelines for determining whether any entity is carrying on 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. Whether the purpose is a charitable purpose will depend on the totality of the facts of the case. Ordinarily,....
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....uch 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 statutory provisions, as explained in the would be excluded from the term charitable purpose if it is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business for a cess, fee and/or any other consideration. It is not aimed at excluding the genuine charitable trusts of ge....
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....owed 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 consideration, that it was collecting entertainment tax, and service tax for the events organized in the hall, that the activities carried out by it did not entail any benefit to the general public, that it was earning huge profit which was primarily commercial in nature. Accordingly he after issuing the show cause to the assessee to this effect, the AO, after invoking the provi....
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....ditions 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 judgment of the Hon'ble Bombay High Court in the case of Women's India Trust and it reads as under: the assessee is a trust formed to carry out the object of education and development of natural talents of the people having special skills, more particularly the women in the society. The assessee trains them to earn while learning. It educates them in the field of catering, stitching, toy mak....
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....roduced 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 circumstances, it was not vitiated by any error of law apparent on the face of the record." 6.1 We also find that the assessee had suffered loss in the various activities, carried out by it, to the tune of Rs. 32 lakhs (app.) except for eye care department and interest on investment (Pg. 50,52, 56-57 of the PB).A perusal of Pg.s 82-84 reveal that expenditure incurred by it during the year under appe....
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....dress 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 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." If we consider the various activities carried out by the assessee, as evident from the various pages o....
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....te 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, iii) 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 charitable purpose to the extent that it involves carrying on any activity in the nature of trade, commerce, or business or any activity of rendering certain services in relation to any trade, commerce, or business, for a cess or fee or any other consideration is irrespective of the nature of the use or obligation, or retention of the income from such activity. The expressions "trade" "commerce" and "business", as occurring in the first proviso to section 2(15) of the Act....
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....ncellation 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 an efficient economical system of road transport services and coordination between any form and road transport or any other form of road transport. Surplus of receipts over expenses after payment of interest/dividend on capital as provided by Central/State Government and providing for depreciation and reserves etc. Is to be applied for amenities to the passenger, welfare of labour employed, financing the expansion programme etc., as approved by the Government and remainder, if any, is to be hande....
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....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 or business...". As it stands so, giving a purposive interpretation to the statute, it may have to be read and understood that the second limb of exclusion under clause (b) in relation to the service rendered by the assessee the terms "any trade, commerce or business" refer to the trade, commerce or business pursued by the recipient to whom the service is rendered (as there may be a situation involving letting out the premise? for purposes other than involving trade, commerce or business as well). Since the petitioners hav....
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....scribes 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 activities lose the character of being for 'charitable purpose'. 9. The first and the foremost point that is required to be addressed is whether the assessee is an institution involved in education or not? In order to address this controversy, we may briefly touch upon the objects of the assessee as appearing in the Memorandum of Association and also the activities that are being carried out by the assessee over the years. The main objects of the assessee have been reproduced by us in the earlier part of this order and a perusal thereof clearly shows th....
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....efer 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 world-recognised 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 this activity to be in the realm of education, the Hon'ble Court also observed that merely because some profit was arising from such activity, it would not distract from holding that such an entity was existing solely for education purposes. The Hon'ble Court also explained that in order to ascertain whether an entity is being run with the object of making profit or not, the existence of profit is not paramount, but what is of importance is whether or not the resultant income is being applied wholly and exclusively for the objects for which the entity has been ....
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.... 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 in the field of banking and finance and, therefore, following the decision of the Hon'ble Patna High Court in the case of Bihar Institute of Mining & Mine Surveying vs CIT, 208 ITR 608 (Pat), it could not be said that the assessee was carrying out any 'education' activity. In this context, we may refer to the judgment of the Hon'ble Gujarat High Court in the case of DIT(E) vs Ahmedabad Management Association, [2014] 47 taxmann.com 162 (Gujarat), wherein the association undertook multifaceted activity, viz. conducting continuing education, Diploma & Certificate progra....
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.....". 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 this order, assessee has been 15 National Institute of Bank Management ITA Nos. 2913 to 2915/M/16, 2506/M/14 & CO 182/M/15 established by the Government of India through the Reserve Bank of India. In the Paper Book filed before us, apart from other things, a report of a Committee appointed by the RBI on "The Training and Development of Higher Banking Personnel" of 1969 has been placed. In 1969, nationalisation of banks undertaken by the Government of India brought in the policy of social control over banking which intended to provide a new direction to the banking industry in India. Since bankin....
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....ining 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 a means to further the national policy relating to banking sector consequent to nationalisation of banks in 1969. In our considered opinion, the objectives for which the assessee is set-up and the manner in which it is managed, i.e., through a Governing Board consisting, inter-alia, of nominees of the Government and member- nationalised banks, it can hardly be said that there is any profit motive in carrying out its activities. No doubt, there may remain some surplus in the course of carrying on activities since assessee is undertaking programmes by charging fee and/or subscription from its mem....
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....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 that the surplus is not applied for the purpose of company stated objects. When the assessee was accepted to be entitled to exemption upto preceding assessment year there is no case that the activities of the assessee have undergone a change which warrant denial of exemption. Hence, to quote from the aforesaid precedent even if we were to go along with the stand of the Assessing Officer that the activities of the assessee falls within the expression "advancement of any other object of general public utility" contained in section 2(15) then introduction of proviso does not disentitle the assessee's ....
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.... 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 year do not exceed 25% of the total receipts of the entity, the exclusion provision will not apply. 7. Learned counsel for the assessee made supplementary submissions on merits, and also a comprehensive written note supporting the conclusions arrived at by the learned CIT(A). He fairly pointed out that the above decision was in the context of cancellation of registration granted to the assessee under section 12AA, even though the ratio of this decision squarely covers the core issue before us i.e. whether or not proviso to Section 12(5) will apply to the facts of this case. That issue, learned counsel states, has been comprehensively decided in favour of the assessee in t....