TaxTMI 
TaxTMI 
2022 (10) TMI 397
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....022 09.05.2022 10.12.2019 u/s143(3) 2018-19 271/JP//2022 10.05.2022 07.04.2021 u/s143(3) r.w.s. 143(3A) & 143(3B) 2016-17 275/JP//2022 22.04.2022 06.12.2018 u/s143(3) 2. At the outset of hearing, the Bench observed that there is delay of 21 days in filing the appeal by the Revenue for which the ld. DR of the Department filed an application for condonation of delay with following prayers. "2. The appeal in the above case was filed late by 21 days. The reason for delay in filing of appeal are explained as under:- a. The appeal order in this case was received from the office of CIT on 24.05.2022. As per the direction of the Ld. CIT(A), an opportunity to file certain details was provided to the assessee vide DIN & Letter No. ITBA/COM/F/17/2022-23/1043224369(1) dated 27.05.2022. The time allowed to the assessee was seven days. In the meantime, undersigned went on earned leave from 06.06.2022 to 19.06.2022 and joined back on 20.06.2022. On return from leave, the Central Scrutiny Report was immediately forwarded to the higher offices. b. As there is no regular CIT(E) posted at Jaipur, the charge is being held by CIT(E), New Delhi which has also resulted in certain dela....
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....ted for complete scrutiny through CASS and e-notice u/s. 143(2) of the IT Act, 1961 was issued on 08.07.2017 which was duly served upon the assessee in time. The assessee is registered under section 12AA of the Act. The objection of the assessee corporation is to provide road transportation in the State of Rajasthan and in other states as well. During the year its total revenue receipts were Rs. 17,07,56,24,135/-. After claiming various expenditure of Rs. 21,99,97,55,976/- and adjustment of disallowable expenditure it has shown net loss of Rs. 4,92,41,31,841/-. The corporation is registered as a charitable institution u/s. 12A(a) of the IT Act dated 08.03.1989. The objects fall in the last limb of the definition of section 2(15) i.e. advancement of any other object of general public utility. 6. Aggrieved by the order of the AO, the assessee preferred in appeal before the NFAC who has deleted the addition made by the AO. 7. The AO assessed the finding that the objects of the corporation are definitely charitable as they are of general public utility and there may not be any profit motive. However, the activities being carried out are not charitable. The corporation runs buses. Per....
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....ered under section 12A of Income Tax Act, 1961 deficit would be brought forward & eligible for application. The proposition is based on jurisdictional High Court Ruling in case of Maharana of Mewar Charitable Foundation reported in 164 ITR 0439 (Raj). The deficit is eligible for carry forward and may please be allowed. Please further note assessee Corporation submits that it is recognized u/s. 12A of Income Tax Act and the ruling of jurisdictional High Court is valid and binding. The other citation on above issue also favour assessee namely CIT Vs. Maharana of Mewar Charitable Foundation 164 ITR 271 ITR 293 (Guj) CIT Vs. Shri Plot Swetambar Murti Pujak CIT Vs. Matriseva Trust 242 ITR 20 (Mad) Govindu Naidker Estate Vs. ADI 248 ITR 368 (Mad) This carry forward of deficit is statutory requirement and cannot be denied. It is humbly prayed that the deficit claimed to be carried forward for set off in the next years may be allowed as claimed." 9. However, as discussed above, the assessee is not being allowed to take exemption u/s. 12A of the Act and it is not considered as charitable institution and hence the above quoted decision cannot be applied to the assessee. Therefore,....
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....e commercially viable. Thus even though running the transport services are of the nature of commerce or business, the primary object of the corporation itself cannot be treated as running a business activity and the dominant object of the corporation comes under the purview of advancement of general public utility and not under the purview of business since motive of earning profit is missing in the object of corporation. The activities of corporation are held to be covered under the charitable purpose and assessee is not caught by the newly inserted proviso in sec 2(15) in view of the decision of honourable Delhi High Court (supra) reading down the said proviso and holding to look into the dominant object to see whether activity is to the profit or it is for providing advancement of object of general public utility. Further, the theory of the pre-dominant object was also upheld by the Rajasthan High Court as discussed above. Further, it is also seen that the surplus if any generated and available for distribution is to go to the State Government and even then it will not become part of the general revenues of State but rather it can only be utilized for the stated purpose as p....
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....nate bench of ITAT. After hearing long arguments, evidences and established law honorable ITAT remanded back the case in the file of Ld. CIT(A) to consider all the material and decide the issue of registration u/s. 12AA. Both the years, the appeal was allowed by Ld. CIT(A) for which copies were filed during earlier hearing. It is very much relevant to consider finding of honorable ITAT, which is placed in para 21 of ITAT order which, I want to read if allow me that The next question that arise for consideration is whether the activities of the assessee corporation involves carrying on of activities in the nature of trade, commerce or business or any activity of rendering of services in relation to any trade, commerce or business for a cess, fee or any other consideration and the proviso to section 2(15) is applicable in the instant case. As per the Assessing officer, the activities of the assessee corporation are commercial in ITA Nos. 885 & 886/JP/2018 Rajasthan State Road Transport Corporation, Jaipur Vs. DCIT, Jaipur 17 nature for the reason that it is running buses and charging fare from the passengers and it is not providing free services to the public. The ld. CIT(A) referr....
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....were remanded back after hearing and considering all the documents, evidences, arguments by ITAT and Ld. CIT(A) has allowed the same for which no appeal has been filed further, the case has been settled in favour of Corporation. My Ld. Brother has said in earlier hearing that the appeal for A.Y. 2010-11 and A.Y. 2011-12 were not filed considering the tax effect is altogether wrong. Since it the question of law the CBST circular for restriction of appeals is not applicable. Further, if the argument of my LD. Brother is right than all the appeals for these 5 years should not have been filed, since the issue does not carry ant tax effect as per arguments of ld. DR. On the facts, your honour assessee corporation is state government owned organization providing transportation facilities to passengers by running of vehicles in the state and outside state for a nominal fare. The Corporation provides various concessions and relief to the society specifically to poor, students, senior citizen, women etc. In brief, various types of relief and concessions are provided by Corporation, which I read few of from page no 1 and 2 of paper book. And that's why your honour, assessee corpora....
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....iding services in very low or free fare and this loss is increasing day by day 5. State Government principally decides the routes facilities, fare, concessions, amenities and all such decides after taking care interest specially to poor people, widows, ST, SC etc. Assessee corporation cannot increase or decrease the rates on its own order for fixing the price by state government is placed on page no 6 of paper book. 6. Assessee corporation is charging much low fare in comparison to the private tour operators, your honours I would like to briefly differentiate the fare charged by private tour operators and RSRTC may I allow to do, Private tour operators charge Rs. 300/- for the same route while RSRTC charge 228/- please refer page no 7-8 of paper book where I have placed print out of ticket booking in both the cases. 7. New insertion in section 2(15) is made by Finance Minister in Finance Bill 2008 with the intension to limit the benefit of exemption to real charitable purposes and he targeted those who were doing commercial activities and earning tax free income in the garb of NGO as stated by FM in parliament. In view of above, assessee corporation qualifies the both the l....
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....ch might not charitable but which is ancillary or incidental to the dominant purpose may be involving element of profit would not prevent the institution from being a valid charitable trust coy of judgment is placed on (page no 18-51 of paper book) Alternatively your honours The predominant object for which the corporation has been established by the state is to provide efficient transport services to the people in public interest and even after sufferance of losses. As per section 3 of the Rajasthan State Road Transport Corporations Act, 1950 (page n 52-66) (a) the advantages offered to the public, trade and industry by the development of road transport; (b) the desirability of coordinating any form of road transport with any other form of transport; (c) the desirability of extending and improving the facilities for road transport in any area and of providing an efficient and economical system of road transport service therein, On account of its primary object being relief of the poor, such losses are being met/borne by the state of Rajasthan. RSRTC is not carrying any activity of trade, commerce or business with a motive to earn profit/income. Section 18 of RSRTCA, 19....
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.... to Sec. 2(15) of the Act is therefore not applicable to the case of the Assessee. We therefore concur with the view of the CIT(A) and hold that the Assessee is entitled to the benefits of Sec. 11 of the Act. The AO has not disputed the conditions necessary for allowing exemption u/s. 11 of the Act, except the applicability of proviso to Sec. 2(15) of the Act. In view of our conclusions that the said proviso is not applicable to the case of the Assessee, we hold that the Assessee's income is entitled to the benefits of Sec. 11 of the Act. 15. With regard to the arguments of the learned DR, we are of the view that the same are without any merit. The proviso to Sec. 2(15) of the Act has been discussed by the Hon'ble Delhi High Court in the case of India Trade Promotion Organization vs. DGIT(Exemption) (supra) and the dominant motive is the criteria as laid down therein. Therefore the answer to the arguments put forth by the learned DR are found in the aforesaid decision. As we have already seen, the profit of the Assessee have to be used only for road development, as in the case of the decision in the case M/s. Karnataka State Road Transport Corporation of APSRTC (supra) wh....
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....al public utility will be called charitable. Further, he explained that the basic principles for exemption of the income are mutual association is that there is a common identity of contributors and participants. During the assessment proceedings the AO has considered the reply filed and is not found acceptable, the relevant paras 5 to 9 has been considered by the ld. DR that the assessee corporation does not come within the definition of section 2(15) of the Act which defines charitable purpose it comes under business income. 13. The ld. AR for the assessee submitted that it is squarely covered matter where this Bench has passed the order in favour of the assessee in ITA No. 885 & 886/JP/2018 for the assessment years 2011-11 and 2011-12 dated 14.10.2019. The ld. AR has pointed out that the relevant portion of the order in which the assessee's objects and facts of the case is clearly mentioned. The relevant para 21 & 22 which are reproduced as under:- "21. The next question that arise for consideration is whether the activities of the assessee corporation involves carrying on of activities in the nature of trade, commerce or business or any activity of rendering of services ....
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....sthan High Court referred supra. The assessee corporation is at liberty at raise its aforesaid contentions before the ld. CIT(A). In the result, the matter is set-aside to the file of the ld. CIT(A) after providing reasonable opportunity to the assessee corporation. 22. In ITA No. 886/JP/2018, since facts and circumstances of the case are exactly identical to facts and circumstances of the case in ITA No. 885/JP/2018, our findings and directions contained therein shall apply mutatis mutandis to this appeal." 14. It was further submitted that thereafter the NFAC has passed the order in favour of the assessee. Further, the ld. AR for the assessee argue that the assessee corporation object is stood a charitable in nature and not profit earning to support this statement. The ld. AR for the assessee has filed documentary proof that the assessee is given various concessions and relief granted to various classes and societies at page No. 1 and 2 of the paper books which are reproduced as under:- The ld. AR for the assessee has relied upon a circulars No. 11 of 2002 dated 19.12.2008 which is related to second definition of charitable Trust u/s. 2(15) of the Income Tax Act, 1961. The re....
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....eed of aid. Entities who have these objects will continue to be eligible for exemption even if they incidentally carry on a commercial activity, subject, however, to the conditions stipulated under section 11(4A) or the seventh proviso to section 10(23C) which are that (i) the business should be incidental to the attainment of the objectives of the entity, and (ii) separate books of account should be maintained in respect of such business. Similarly, entities whose object is 'education' or 'medical relief' would also continue to be eligible for exemption as charitable institutions even if they incidentally carry on a commercial activity subject to the conditions mentioned above. 3. The newly inserted proviso to section 2(15) will apply only to entities whose purpose is 'advancement of any other object of general public utility' i.e. the fourth limb of the definition of 'charitable purpose' contained in section 2(15). Hence, such entities will not be eligible for exemption under section 11 or under section 10(23C) of the Act if they carry on commercial activities. Whether such an entity is carrying on an activity in the nature of trade, commer....
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.... nature and the activities of the Corporation is deemed to be under the advancement of any other object of general public utility than still the activities of the Corporation does not qualify the test of running trade, commerce or business activity for the fee. We are of the opinion that the assessee Corporation is continue to be within the definition of charitable u/s. 2(15) of the Act in relief to poor as main limb and first limb. Relief to poor encompasses a vide rage of objects for welfare of the economically and socially disadvantaged or needy. It will therefore, include within its ambit purposes such as relief to destitute, orphans or handicapped, disadvantages women or children, or senior citizens in need of aid. Going through the object of the RSRTC that Act where the Ld. AR assessee has produced for our kind perusal in paper books from 52 to 67. The objects of the RSRTC which is published in the Web site which reads as under:- "About RSRTC Rajasthan state Road Transport Corporation has entered it's 53 year if since its inception on 1st October, 1964. The corporation has been established under the Road Transport Act, 1960 with the objective of providing economic, ad....
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....roof ticket at paper books 7 and 8 which is reproduced as under:- The ld. AR for the assessee further submitted that Section 3 of the Act explains that established of Road Transport Corporation where the facilities is in charitable in nature. The establishment of Road Transport Corporations in the States. The State Government having regard to the advantages offered to the public, trade and industry by the development of road transport, the desirability of coordinating any form of road transport with any other form of transport, the desirability of extending and improving the facilities for road transport in any area and of providing an efficient and economical system of road transport service therein, may, by notification in the Official Gazette, establish a Road Transport Corporation for 1 [the whole or any part of the Union territory of Delhi] under such name as may be specified in the notification. 16. Going through the section 18 of the RSRTC Act which is explains the general duties of the Corporation it shall be the general duty of a Corporation so to exercise its powers as progressively to provide or secure or promote the provision of, an efficient, adequate, economical and....