TaxTMI 
TaxTMI 
2022 (6) TMI 1385
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....tion u/s 11 of the Income-tax Act,1961 ['the Act' for short] by invoking the first proviso to section 2(15) of the Act. 3. The assessees have raised following common additional ground in all the appeals:- "The lower authorities have failed to appreciate that the assessee being a State under Article 12 of the Constitution, is exempted from the levy of Union Tax under Article 289 of the Constitution." 4. In both the cases, the assessee filed petition for admission of additional grounds on the reason that these grounds are inadvertently missed out while filing the appeals before this Tribunal. In our opinion, these grounds are legal grounds and these grounds are very much necessary to adjudicate in the interest of justice. Accordingly, these grounds are admitted by placing reliance on the judgement of Hon'ble Supreme Court in the case of NTPC Vs. CIT 229 ITR 383 as there is no necessity of investigation of any fresh facts otherwise on record in all assessment years for adjudication. 5. In ITA No.948/Bang/2019 for the AY 2016-17, the assessee has raised a ground that AO erred in issuing notice u/s 143(2) of the Income-tax Act,1961 ['the Act' for short]....
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....ancement of an object of general public utility" as is included in the fourth limb of the current definition of "charitable purpose". Such a claim, when made in respect of an activity carried out on commercial lines, is contrary to the intention of the provision. With a view to limiting the scope of the phrase "advancement of any other object of general public utility", it is proposed to amend section 2 (15) so as to provide that "the advancement of any other object of general public utility" shall not be a charitable purpose if it involves the carrying on of - (a) any activity in the nature of trade, commerce or business or, (b) any activity of rendering of any service in relation to any trade, commerce or business, for a fee or cess or any other consideration, irrespective of the nature of use or application of the income from such activity, or the retention of such income, by the concerned entity. 3.6 A reference may be made to Budget Speech of the Finance Minister on 29.02.2008, which reads as follows: 180. "Charitable purpose" includes relief of the poor, education, medical relief and any other object of general public util....
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....nd subsequent assessment years." 3.8 The Finance Minister, while piloting the Finance Bill, 2008 in Lok Sabha, on the insertion of clause (26AAB) in section 10 to except Agricultural Produce Marketing Committee and State Agricultural Marketing Boards, had occasion to comment on the criticism levelled against the amendment to section 2 (15) in following words: '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, Chambers of Commerce and similar organizations rendering services to their members would not be affected by the amendment and their activities would continue to be regarded as "advancement of any other object of general public utility".' ......... 3.9 A reference may be made to Circular No. 11/ 2....
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....mitted that phrase "trade, commerce or business" as used in the 1st proviso to section 2 (15) of the IT Act has to be read contextually keeping in mind the intent and purport of section 2 (15) of the IT Act. The object of introducing the 1st proviso is to exclude organizations which are carrying on regular business from the scope of "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. 3.12 A reference may made to relevant extracts from Principles of Statutory Interpretation, 10th Edition, authored by Justice G.P. Singh, which read as follows: When the material words are capable of bearing two or more constructions the most firmly established rule for construction of such words "of all statutes in general (be they penal or beneficial, restrictive or enlarging of the common law)" is the rule laid down in Heydon's case [(1584) 3 Co. Rep. 71, p. 7b: 76 ER 637] which has "now attained the status of a classic [Kanailal Sur v. Paramnidhi Sadhukhan AIR 1957 SC 907]. The rule which ....
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....ore passing of the statute and then if more than one construction is possible, favour that which will eliminate the mischief so identified" [Anderton v. Ryan, (1985) 2 All ER 355, p.359 (HL)]. In the words of Lord Griffith: "The courts now adopt a purposive approach which seeks to give effect to the true purpose of legislation and are prepared to look at much extraneous material that bears on the background against which the Legislation was enacted [Pepper v. Hart, (1993) 1 AL ER 42, p. 50 (HL)]. .............. Similarly, in another case Kanailal Sur v. Paramnidhi Sadhukhan AIR 1957 SC 907, Gajendragadkar, J. stated that the recourse to object and policy of the Act or consideration of the mischief and defect which the Act purports to remedy is only permissible when the language is capable of two constructions. But it has already been seen that for deciding whether the language used by the Legislature is plain or ambiguous it has to be studied in its context, and 'context' embraces previous state of the law and the mischief which the statute was intended to remedy. Therefore, it is not really correct to say that the rule in Heydon's case is not applicable when the language ....
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....s connection the speech made by the Finance Minister while moving the amendment introducing subsection (2) is extremely relevant, as it throws considerable light on the object and purpose of the enactment of sub-section (2). The Finance Minister explained the reason for introducing sub-section (2) in the following words: "Today, particularly every transaction of the sale of property is for a much lower figure than what is actually received. The deed of registration mentions a particular amount; the actual money that passes is considerably more. It is to deal with these classes of sales that this amendment has been drafted. It does not aim at perfectly bonafide transactions ... but essentially relates to the day-to-day occurrences that are happening before our eyes in regard to the transfer of property. I think, this is one of the key sections that should help us to defeat the free play of unaccounted money and cheating of the Government." Now it is true that the speeches made by the Members of the Legislature on the floor of the House when a Bill for enacting a statutory provision is being debated are inadmissible for the purpose of interpreting the statutory prov....
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....out using low cost technology, environmental friendly and pre-case technologies; b) The activities of the Assessee fall within the domain of the State list [List II of 7th Schedule to the Constitution]; c) The Assessee is a State as already submitted in paragraph 2 (2.1 to 2.34). In Waman Rao Deshpande vs. Chairmen, Nirmithi Kendra & Others, in WP No. 11674/ 2005 (S-DIS), dated 17.03.2010, the Hon'ble Karnataka High Court held that the Nirmithi Kendra is a State; d) When the Assessee functions as a State, it cannot be conceivably carrying the avowed mischief i.e. carrying on business under the mask of charity; e) The close control over the affairs of the Assessee by the officers of the Government will obviate even the remotest chance of occurrence of aforesaid mischief; Ld. A.R. relid on the decision in India Trade Promotion Organization vs. DGIT (Exemptions) [2015] 371 ITR 333 (Delhi) [Para 10]; f) The Commissioner has recognized the activity of the Assessee to be charitable after being satisfied with its objects and issued a registration certificate; 3.16 In the instant case, the State has a complete control over the activitie....
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....to give effect to the purpose and intention of any particular provision of the Act. (See: Shree Sajjan Mills Ltd. v. CIT [1985] 156 ITR 585/23 Taxman 37 (SC). From a bare reading of Sectin 36(1)(v) of the Act, it is manifest that the real intention behind the provision is that the employer should not have any control over the funds of the irrevocable trust created exclusively for the benefit of the employees. In the instant case, it is evident from the findings recorded by the Commissioner and affirmed by the Tribunal that the assessee had absolutely no control over the fund created by the LIC for the benefit of the employees of the assessee and further all the contribution made by the assessee in the said fund ultimately came back to the Textool Employees Gratuity Fund, approved by the Commissioner with effect from the following previous year. Thus, the conditions stipulated in Section 36(1)(v) of the Act were satisfied. Having regard to the facts found by the Commissioner and affirmed by the Tribunal, no fault can be found with the opinion expressed by the High Court, warranting our interference. ∂ In PCIT vs. State Bank of India (2020) 420 ITR 376 (Bombay), it was ....
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....e, clearly aimed at curbing the activities of those taxpayers who did not discharge their statutory liability of payment of excise duty, employer's contribution to provident fund, etc., for long periods of time but claimed deductions in that regard from their income on the ground that the liability to pay these amounts had been incurred by them in the relevant previous year. It was to stop this mischief that section 43B was inserted. It was clearly not realised that the language in which section 43B was worded would cause hardship to those taxpayers who had paid sales-tax within the statutory period prescribed for this payment, although the payment so made by them did not fall in the relevant previous year. This was because the sales-tax collected pertained to the last quarter of the relevant accounting year. It could be paid only in the next quarter which fell in the next accounting year. Therefore, even when the sales-tax had in fact been paid by the assessee within the statutory period prescribed for its payment and prior to the filing of the income-tax return, these assessees were unwittingly prevented from claiming a legitimate deduction in respect of the tax paid by them.....
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....rse needs of housing and building construction and other developmental activities undertaken by individual house holds or public housing/development agencies utilising appropriate and cost effective building technologies. 4th e) housing and building guidance, information and counselling 1st 3.19 It is submitted that in many cases the Courts have held that carrying on statutory, State, regulatory functions by a body cannot be regarded as carrying on trade, commerce or business. Therefore, the very mischief envisaged in the context of section 2(15) is inconceivable in the instant case. When carrying out the statutory functions are not trade etc., it is axiomatic that the Provisos to section 2(15) should not simply apply. Ld. A.R. relied on the following cases: ∞ State of Tamil Nadu vs. Board of Trustees of the Port of Madras [1999] 114 STC 520 (SC); ∞ CIT (Exemptions) vs. National Internet Exchange of India (2019) 417 ITR 436 (Delhi); ∞ Bureau of Indian Standards vs. DGIT (E) [2013] 358 ITR 78 (Delhi); 3.20 Therefore, it is submitted the in the aforesaid background of the Assessee, the Assessee's case does not fa....
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....aken on an exposure visit to the successful centres in other parts of India, and convinced about its replicability. At the policy - level, major initiatives taken were a three-point agenda for revision of academic curricula to include these technologies, preparation of relevant Indian Standard Codes and incorporation in the 'Standard Specifications and Schedule of Rates' of construction agencies. Other efforts included support for 'Performance Evaluation and Validation' of selected technologies, lobbying for fiscal incentives for Building Centre products, allowing a 0.25% rebate in HUDCO's lending interest rates for the works executed by Building Centres, lobbying State governments for the award of projects to Building Centres, etc. The resources for the building centre movement were made available from the Govt. of India through its annual budgetary support, to the extent of Rs. 0.5 million per building centre from the MoU D & PA [Ministry of Urban Development and Poverty Alleviation] in urban areas and an enhanced grant of Rs. 1.5 million from the MoRD [Ministry of Rural Development]" 4.3 The Objects of the Assessee trust as per the Memorandum of Association (MOA) ar....
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.... • Walling - Stabilized mud blocks; Fly ash Blocks; Rat trap bond walls; Hollow blocks walls • Foundations - Brick Arch Foundation; Under Reamed Piles • Roofing - Under Reamed Piles; Stone slabs over RCC rafters; RCC planks over RCC joists; RCC planks over RCC joists; Ferro cement shell roofing; Filler slab roofing; Funicular shell roofing; Brick funicular shell roofing; Precast blocks over inverted T-beams; Micro-concrete roofing tiles • Miscellaneous - Ferro cement door shutters; RCC door/window frames; Ferro cement sun shades cum - lintel; Brick on edge lintels; Corbelling for lintels; Precast Ferro cement shelves; Ferro cement water tank; Brickarch for lintels; Precast RCC shelves units • Drinking water facilities - Methods which bring Conservation and regeneration of resource base and Reduction of water wastage and energy conservation - Rainwater harvesting: stream based water treatment and pumping systems.; Photovoltaic cells-based solar pumps • Dug Well-based Water Supply - Eco friendly water supplying method; single piped water supply for the entire area, laying of pipeline and location of overhea....
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....cture, Single layer arches, Corbel, Frameless Doors & Windows, Reinforces Brick Lintel, Reinforced brick pillars, Rain water harvesting, Brick Jally, Ferro cement steps, Attic tiles, Semi underground ferro cement water tank; 53 The Assessee with its extensive study and research on traditional practices & engineering techniques has restored heritage buildings; 54-56 Renovation of existing building while retaining the heritage style and structure; 60-64 Low cost/ Cost effective technologies like exposed masonry, brick or laterite arches, filler slab roof, concrete frames etc. 65 Innovative works & wood houses; 68-70 Assessee has entered into MOUs with Mangalore Institute of Technology & Manipal Institute of Technology for providing platform for the students for their academic and research oriented project studies; 73 R&D - Dome construction; R&D - Polymer concrete; R&D - Pet bottle wall; R&D - Pet bottle lintel; R&D - Reinforced brick lintel; 74-77 Zero maintenance houses; 79-82 2 To bring the fruits of research from lab to land Ferro Cement Products; 47 Pre-Cast Concrete Products; 48-49 Earthen Products; 50 Mode....
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.... Seminar on construction and recycling of demolition wasted was organized; 29-30 Bio-Digester was put to use at the Assessee's premises and also conducted Bio-Digester implementation and awareness program; 35-36 Field training on rainwater harvesting program was conducted; 37-38 5 To be a R&D institution R&D - Dome construction; R&D - Polymer concrete; R&D - Pet bottle wall; R&D - Pet bottle lintel; R&D - Reinforced brick lintel; 74-77 4.7 The finding by the Learned Assessing Officer that the Assessee has not carried out its objects is perverse as is evident from the aforesaid activities being regularly carried out by the Assessee. 4.8 The carrying out of aforesaid objects is not in the nature of trade, commerce or business. In fact, pursuance of the aforesaid objects would only mean incurring costs on them with no monetary return. There is no question of making profits by carrying the aforesaid activities. 4.9 Section 2 (15) of the IT Act reads as follows: (15) "charitable purpose" includes relief of the poor, education, medical relief, preservation of environment (including watersheds, forests and wildlife) and pre....
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....ctivities do not emanate from the main object/s, there is bar as long as funds so raised are applied in pursuance of main objects. 4.14 In this context, it is important to understand the meaning of 'involves'. 4.15 As per Advanced Law Lexicon, 3rd Edition, authored by P. Ramanatha Aiyar: ε Involve - To comprise, to contain, to include by rational or logical construction; to connect with something as a natural or logical consequence or effect; to include necessarily; to imply (Webster Dict.); entangle, implicate in charge or crime; implying financial embarrassment (as) "Involved circumstances." A thing is only said to be "involved" in another when it is a necessary resultant of that other. In its more exact and literal signification, the word is synonymous with "comprise" or "embrace." (st. John v. West, 4 How. Pr. N.Y. 329,332; see also 23 All 94 (98): 21 AWN 8. A point involving a substantial question of law.) This word is also used, according to the context, as synonymous with "affected." ε The primary signification of the word 'involve' is 'to roll up or envelop; and it also means to comprise, to contain, to include by rational....
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....d up with or implied in the purpose of the trust or institution or in other words it must be an integral part of such purpose. But the question again is what do we understand by these verbal labels or formulae; what is it precisely that they mean? Now there are two possible ways of looking at this problem of construction. One interpretation is that according to the definition what is necessary is that the purpose must be of such a nature that it involves the carrying on of an activity for profit in the sense that it cannot be achieved without carrying on an activity for profit. On this view, if the purpose can be achieved without the trust or institution engaging itself in an activity for profit, it cannot be said that the purpose involves the carrying on of an activity for profit. Take, for example, a case where a trust or institution is established for promotion of sports without setting out any specific mode by which this purpose is intended to be achieved. Now obviously promotion of sports can be achieved by organising cricket matches on free admission or no-profit no-loss basis and equally it can be achieved by organising cricket matches with the predominant object of earning ....
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.... trust or institution from being a valid charity - CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722. The test which has, therefore, to be applied is whether the object which is said to be non-charitable is a main or primary object of the trust or institution or it is ancillary or incidental to the dominant or primary object which is charitable. It was on an application of this test that in CIT v. Andhra Chamber of Commerce (supra), the Andhra Chamber of Commerce was held to be a valid charity entitled to exemption from tax. The Court held that the dominant or primary object of the Andhra Chamber of Commerce was to promote and protect trade, commerce and industry and to aid, stimulate and promote the development of trade, commerce and industry and to watch over and protect the general commercial interests of India or any part thereof and this was clearly an object of general public utility and though one of the objects included the taking of steps to urge or oppose legislation affecting trade, commerce or manufacture, which, standing by itself, may be liable to be condemned as non-charitable, it was merely incidental to the dominant or primary object and did not prevent the Andhr....
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....he requirement of the definition would be met and it is immaterial how the moneys for achieving or implementing such purpose are found, whether by carrying on an activity for profit or not. Ld. A.R. pointed out that even in Sole Trustee, LokaShikshana Trust v. CIT [1975] 101 ITR 234 (SC), a decision which, as he shall presently point out, does not command itself to us on another point, the same interpretation has been accepted by this Court. 15. He must then proceed to consider what is the meaning of the requirement that where the purpose of a trust or institution is advancement of an object of general public utility, such purpose must not involve the carrying on of any activity for profit. The question that is necessary to be asked for this purpose is as to when can the purpose of a trust or institution be said to involve the carrying on of any activity for profit. The word "involve" according to the Shorter Oxford Dictionary means "to enwrap in anything, to enfold or envelop; to contain or imply". The activity for profit must, therefore, be intertwined or wrapped up with or implied in the purpose of the trust or institution or in other words it must be an integral part o....
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....ying out the purpose of the trust or institution or, to put it differently, it must be carried on in order to advance the purpose or in the course of carrying out the purpose of the trust or institution. It is then that the inhibition of the exclusionary clause would be attracted. This appears to us to be a more plausible construction which gives meaning and effect to the last concluding words added by the Legislature and he preferred to accept it. Of course, there is one qualification which must be mentioned here and it is that if the constitution of a trust or institution expressly provides that the purpose shall be carried out by engaging in an activity which has a predominant profit motive, as, for example, where the purpose is specifically stated to be promotion of sports by holding cricket matches on commercial lines with a view to making profit, there would be no scope for controversy, because the purpose would, on the face of it, involve carrying on of an activity for profit and it would be non- charitable even though no activity for profit is actually carried on or, in the example given, no cricket matches are in fact organised. 17. The next question that arises i....
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....nt object of the activity is to carry out the charitable purpose and not to earn profit, it would not lose its character of a charitable purpose merely because some profit arises from the activity. ............. 4.19 The aforesaid law was declared when the provision existed prior to Amendment by Finance Act, 1983, which reads as under: "charitable purpose" includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility not involving the carrying on of any activity for profit" 4.20 It may be noted that the Legislature amended section 2(15) in 1983 by excluding the concluding exclusionary words "not involving the carrying on of any activity for profit". The Section between 1984 to 2009 read as follows: (15) "charitable purpose" includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility; 4.21 Thus between 1984 to 2009, the definition of charitable purpose in Section 2(15) was identical to the concluding words of Section 4(3) of the 1922 Act. 4.22 The amended section 2 (15) as applicable for the impugned AY 2013-1....
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.... other object of general public utility" were also a part of section 2(15) as it originally stood. The words that follow in the proviso "shall not be a charitable purpose, if it involves the carrying of any activity in the nature of trade, commerce or business......etc." replaced the words in the original Section 2(15) "not involving the carrying on of any activity for profit". On a parity of the reasoning in Surat Art Silk case, the words in the proviso that follow the opening words "Provided that the advancement of any other object of general public utility" equally apply to the "object of general public utility" and not to the word "advancement". The plain language of the proviso does not convey an intention to the contrary. In fact, the legislature could have continued the opening part of the amended section 2(15) with the words "not involving" instead of the words " provided that the advancement of any other object of general public utility shall not be a charitable purpose if it involves" in the proviso. Either way the amendment would have been the same. In that event there could have been no doubt whatsoever that the legislature did not seek to set at naught the eff....
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.... 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 or industry that object becomes an object of public utility, but not so, if it seeks to promote the interest of those who conduct the said trade or industry-CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC). If the primary or predominant object of an institution is charitable, any other object which might not be charitable but which is ancillary or incidental to the dominant purpose, would not prevent the institution from being a valid charity-Addl. CIT v. Surat Art Silk Cloth Mfrs. Association [1980] 121 ITR 1 (SC). 4.26 It is submitted that 1st proviso to section 2 (15) gets attracted only if the primary/ dominant objects are (a) in the nature of trade, commerce or business; or (b) rendering any service in relation to any trade, commerce or business. In the instan....
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....merce and business not only within India, but internationally. This is done through the organisation of trade fairs, including the annual International Trade Fair and other exhibitions. It is for this purpose that the space is let out to various entities during the said fairs and exhibitions. All these activities, including the sale of tickets and sale of publications are an inherent part of the main object of the petitioner. It is clear from the facts of the case that profit making is not the driving force or objective of the petitioner. It is registered under Section 25 of the Companies Act, 1956, which specifically applies to entities which intend to apply their profits, if any, or other income in promoting their objects and prohibits, the payment of any dividend to its members. This makes it clear that any income generated by the petitioner does not find its way into the pockets of any individuals or entities. It is to be utilized fully for the purposes of the objects of the petitioner. 45. To be clear, if an activity in the nature of trade, commerce or business is carried on and it generates income, the fact that such income is applied for charitable purposes, would n....
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....ture of trade, commerce or business or indirectly in the rendering of any service in relation to any trade, commerce or business, then it would not be entitled to claim its object to be a 'charitable purpose'. On the flip side, where an institution is not driven primarily by a desire or motive to earn profits, but to do charity through the advancement of an object of general public utility, it cannot but be regarded as an institution established for charitable purposes. Θ In DIT (E) vs. Sabarmati Ashram Gaushala Trust [2014] 362 ITR 539 (Gujarat) it was held as follows: 6. The legal controversy in the present Tax Appeal centers around the first proviso. In the plain terms, the proviso provides for exclusion from the main object of the definition of the term "Charitable purposes" and applies only to cases of advancement of any other object of general public utility. If the conditions provided under the proviso are satisfied, any entity, even if involved in advancement 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 nece....
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....viso aims to attract those activities which are truly in the nature of trade, commerce or business but are carried out under the guise of activities in the nature of 'public utility'. Θ In DIT (E) vs. Shree Nashik Panchvati Panjrapole [2017] 397 ITR 501 (Bombay), it was held as follows: 15. As noted above, Ld. AR found that that impugned order of the Tribunal has recorded a finding of fact that the dominant function of the respondent Trust is to provide an asylum to old, maimed, sick and stray cows. Further, only 25% of the cows being looked after yield milk and if the milk is not procured, it would be detrimental to the health of the cows. Therefore, the milk which is obtained and sold by the respondent assessee is an activity incidental to its primary / principal activity of providing asylum to old, maimed, sick and disabled cows. In the present facts, the activity of milking the cows and selling the milk is almost compelled upon the Trust, in the process of giving asylum to the cows. In our view, the activity to be considered in the nature of trade, commerce or business would in most cases have to be carried out on a regular basis with a view to e....
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....09 held that the object of the Bar Council, to safeguard the interests of its advocates, to assist disabled advocates, to see that advocates who misbehave are taken to task, to promote law reform etc. shows that the body is constituted under Section 6 of the Advocates Act, 1961 to benefit the public at large by having on its rolls, advocates who are not only competent in law but who are respectable and proper persons to belong to the noble profession of lawyers; the said activities have been held for the advancement of general public utility within the meaning of Section 2(15) of the Act. In Ahmedabad Rana Caste Association (supra), the Supreme Court held that the expression "any other object of general public utility" 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. 16. What survives to be determined is whether any of BIS's activities fall within the latter and larger category of "involved ....
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....23 taxmann.com 319 (Mumbai), it was held as follows: 9. ............. The first proviso thus puts a rider only on the sixth category i.e. for "advancement of any other object of general public utility", that it will not be held to be charitable purpose if it involves the carrying out 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 any other consideration, irrespective of the nature of use or application. Second proviso carves out the exception to the first proviso wherein the receipts from such activities is less than Rs.10 lakhs. Thus, the nature and dominant object of general public utility should not be in the nature trade, commerce or business. ............ 10. Thus, the test of business, trade or commerce has to be viewed from the angle that the activity of the trust has continued on business principle and pursued with reasonable continuity. If the principle and ratio laid down by the Hon'ble High Court is applied in the instant case, it would be seen that none of its receipts can be said to be arising or accruing from the activities w....
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.... 3 Every trust must have a Purpose Every purpose must for its accomplishment involve the carrying on of an activity. The activity must not be for profit Para 4.6 Para 4.6 No 4.30 It is submitted that the lower authorities have neither disputed nor made any adverse inference regarding the objects of the Assessee involving carrying on any activity in the nature of trade, commerce or business or rendering any service in relation to any trade, commerce or business. 4.31 However, it is submitted that the Learned Assessing Officer in paragraph 6.10 stated that "in the entire year the assessee has not carried out any activity as envisaged in the Objects of its MOA ...........". It is submitted that in paragraph 4.6, it is demonstrated that these objects are in fact carried out. Hence, the said statement of the Learned Assessing Officer is perverse and contrary to the facts. 4.32 In this regard, Ld. AR made his submission with reference to specific observation made by the Learned Assessing Officer in the table below: (For the AY 2013-14) Observation of the AO Our Submission 6.8 Now after considering the object of the assessee trust and ....
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....see. In paragraph 4.6, it is demonstrated how the objects stated in MOA are carried out. It is submitted that the Learned Assessing Officer has conceded that the MOA of the Assessee does not envisage construction activity. Therefore, the project activities carried out by the Assessee are not main objects but are only fund raising activities. 6.8 (n) The commercial activity authorised by the Object of the Assessee Trust/ Society are (a) Production of Pre Fabricated Housing Material - Clause 3, (b) Retail Store of Housing Material - Clause 6 and (c) Transportation & Distribution of Building Material -Clause 7. On examination of the work carried out as submitted it can be safely said that the Assessee Trust/ Society has not carried out any of these activities during the year. It is submitted that the exemption cannot be denied on the basis that certain objects were not carried out. 6.8 (o) Further as an agency promoting innovation in housing, the Objects of the Assessee Trust/ Society required it to (a) run a training house to train worker - Clause 4, (b) arrangement for financial assistance - Clause 8, (c) Organise Seminars, Exhibitions, Demonstration - Clause 9. As ca....
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.... Trust/ Society, it can be categorically stated that none of these activities have been carried out during the year. 4.34 Such being the case, if the Assessee has not carried out the main objects, then there is no scope for invocation of 1st Proviso. 4.35 Without prejudice to the above, it is submitted that even the project activities cannot be treated as trade, commerce or business or rendering of any service in relation to any trade, commerce or business. 4.36 Ld. A.R. made a reference to the meaning of the terms trade, commerce & business. 4.37 In the following paragraphs, a reference may be made to meaning of the term 'trade': • As per Advance Law Lexicon, 3rd Edition authored by P. Ramanatha Aiyar the term 'Trade' means as follows: * "TRADE" means any trade, business, industry, profession or occupation relating to production, supply, distribution, or control of goods and includes the provision of only services. [M.R.T.P. Act (54 of 1969), S. 2 (s) and Competitions Act, 2002 (12 of 2003), S. 2 (x)]. * In its ordinary sense, that is to say exchange of goods for money or goods for goods with the object of making a....
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....rned professions or agriculture. The question whether trade is carried on by a person at a given place must be determined on a consideration of all the circumstances. No test or set of tests which is or are decisive for all cases can be evolved for determining whether a person carries on trade at a particular place. The question, though one of mixed law and fact, must in each case be determined on a consideration of the nature of the trade, the various steps taken for carrying on the trade and other relevant facts. 4. In the present case, the respondent has no shop or office within the State of Punjab. The respondent supplies goods within the State pursuant to orders received and accepted at New Delhi, and also receives price for the goods within the State. But these are ancillary activities and do not in our judgment amount to carrying on trade within the State of Punjab. We need not refer in detail to cases such as Grainger and Son v. Gough (Surveyor of Taxes); F.L. Smith & Co. v. F. Greenwood (Surveyor of Taxes) and Firestone Tyre Co. Ltd. v. Lewellin which interpret the expression "trade exercised within the United Kingdom" in the English Income-tax Acts, for they mere....
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....ed as interchangeable terms. Indeed, 'trade' is not only in the etymological or dictionary sense, but in legal usage, a term of the widest scope. It is connected originally with the word 'tread' and indicates a way of life or an occupation. In ordinary usage it may mean the occupation of a small shopkeeper equally with that of a commercial magnate; it may also mean a skilled craft." 71. In Aviation and Shipping Co. Ltd. v. Murray (Inspector of Taxes), Lord Donovan has observed: "A trade is an organised seeking after profits, as a rule with the aid of physical assets." 72. Thus it is apparent that the word 'trade' may include all the connotations of the word 'business'..." In Shree Nashik Panchavati Panjrapole (2017) 397 ITR 501 (Bombay) it was held that the presence of profit motive would normally be a sine qua non for an activity to be regarded as trade. 4.38 Accordingly, the term 'trade', means (a) buying and selling, (b) exchange of goods for goods or goods for money, (c) business carried on with a view to make profit & (d) includes manufacture. Further, as analysed below [paragraphs 4.43 to 4.....
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....1] 1 QB 7. See also Dena Bank Ahmed Nagar v. Prakash BirbhanKataria, AIR 1994 Bom 343, 345. o Commerce is "traffic, trade, or merchandize, in buying and selling of goods. There is a distinction between commerce and trade; the former relates to our dealings with foreign nations or our colonies, etc., abroad - the other to our mutual traffic and dealings among ourselves at home. Jacob; People v. Fisher, 14 Wend, 15' see also MERCHANT). But this distinction may be questioned. (Stroud, 6thEdn. 2000). • In the case of Institute of Chartered Accountants of India (ICAI) vs. DGIT (E) [2012] 347 ITR 99 (Delhi), the Honourable Delhi High Court has held as follows: 17. The meaning of "commerce" as given by the Concise Oxford Dictionary is "exchange of merchandise, specially on large scale". In ordinary parlance, trade, and commerce carry with them the idea of purchase and sale with a view to make profit. If a person buys goods with a view to sell them for profit, it is an ordinary case of trade. If the transactions are on a large scale it is called commerce. Nobody can define the volume, which would convert a trade into commerce. For the purpose of the first pro....
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....; (e) dealings, commercial activity, a commercial or industrial concern. The word "business" in the Oxford English Dictionary means: (a) A task appointed or undertaken; a person's official duty, part or province; function; occupation. (b) A person's official or professional duties as a whole; stated occupation, profession or traded. (c) A pursuit of occupation demanding time and attention; a serious employment as distinguished from a pastime. (d) A particular occupation; a trade or profession; commercial transactions or engagement as cited in M.M. Hassan (Dr.) v. T.C. Mohammed, AIR 1994 Ker 278, 280 o Ordinarily speaking, "business is synonymous with trade". It is also defined as "anything which occupies the time and attention and labour of a man, for the purpose of profit, is "business" Dena Bank Ahmednagar v. Prakash BirbhanKataria, AIR 1994 Bom 343, 345 o Any activity incidental or ancillary to the main business will also come within the definition of "business" (Karnataka Pawnbrokers' Assn. v. State of Karnataka, (1998) 7 SCC 707 para 35: AIR 1999 SC 201). o The sales of unclaimed and unserviceable goods, in discharge of various statutory charge....
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....taxability under Sales Tax, Excise Duty, Value Added Tax, etc. because these are not taxes on income but the taxable event occurs because of the "economic activity" involved. Even if a person/an organization is carrying on trading on the principle of "no loss no profit", it may be liable to pay taxes or comply with the statute when the charge, or incidence of tax, is on the "economic activity". This concept is today well recognized in European Union and England (see Riverside Housing Association Ltd. v. Revenue & Customs Commissioner, (2006) EWHC 2383 (Ch) and the case law cited therein). It may also be also appropriate here to refer the decision of the House of Lords in Town Investments Ltd. v. Department of the Environment [1977] 1 All ER 813. In this case, a Government department was claiming benefit under a legislation that protected "business tenancies" from increase in rent. The term "business" in the said case by a majority decision was held to include Government activities. It was held that the word "business" is a etymological chameleon; it suits its meaning to the context in which it is found. It is not the term of legal art but in its dictionary meaning it includes anyth....
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....scussed above since the applicant is engaged in the activity in the nature of trade, commerce and business and is engaged in the trade of real estate business predominantly with a profit motive, its engagement in any of the activities as stated above will not affect its character as such since the proviso provides that the advancement of any other object of general public utility shall not be regarded as charitable purpose if it involves in carrying on any activity in the nature of trade, commerce or business or 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. 17. Thus, the activities of the assessee are aimed at earning profit as it is carrying on activity in the nature of trade, commerce or business. Further profit making by the assessee is not mere incidental or byproduct of the activity of the assessee. The main pre-dominant purpose of assessee is making profit, it is real object of the assessee and also there is no spending of the income exclusively for the purpose of charitable activities and profits of the....
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....of similar phrase being used while defining the term 'business', one has to understand that, any activity which is carried on for the profit or gain alone will qualify to be regarded as 'business' for the purpose of IT Act. 4.51 It is submitted that under section 2 (13), business includes trade or commerce. As submitted above, any activity will mean to be a business only if the same is carried on for profit. Hence, it is submitted that even a trade or commerce should be an activity carried on for profit so as to fall within 'business'. 4.52 In The Tribune Trust vs. CIT (2017) 390 ITR 547 (P&H), it was held as follows: 44. The second sentence is important while considering the meaning of the words "trade, commerce or business" used in the proviso to Section 2(15) as amended in 2009. The second sentence states that ordinarily, profit motive is a normal incident of business activity and if the activity of a trust results in yielding profit, it could be concluded that the object of the trust involves the carrying on of an activity for profit. We will restrict our reliance upon paragraph-21 insofar as it is observed that ordinarily, profit motive is a normal i....
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....t to the devotees of Saibaba at cost price. There is no dispute that the primary and dominant activity of the trust is to spread the message of Saibaba. This main activity does not amount to 'business'. The activity of publishing and selling literature, books and other literature is obviously incidental or ancillary to the main activity of spreading message of Saibaba and not to any business as such even without profit motive and it is in a way a mean to achieve the object of the trust through which message of Saibaba is spread. It is clear from the trust deed and objects contained therein that it was not established with an intention of carrying on the business/occupation of selling or supplying goods. This being the position, it cannot be said that the trust carries on the business of selling and supplying goods so as to fall within the meaning of 'dealer' under section 2(11). 11. No doubt, the definition of 'business' given in section 2(5A) even without profit motive is wide enough to include any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture and any transaction in connection with or inc....
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....firmative and in favour of the respondent-assessee. We must, however, add here that whether a particular person is a 'dealer' and whether he carries on 'business', are the matters to be decided on the facts and in the circumstances of each case. ∗ In Institute of Chartered Accountants of India (ICAI) vs. DGIT (Exemptions) [2012] 347 ITR 99 (Delhi), the Hon'ble Delhi High Court after discussing various decisions with regard to the scope of the words trade, commerce & business held that while construing the term business for the purpose of Section 2(15) of the IT Act the object and purpose of the section must be kept in mind and a broad and extended definition of business would not be applicable for the purpose of interpreting and applying the first proviso to section 2(15) of the IT Act. The relevant extract of the said judgment is as under: 33. Section 2(15) defines the term 'charitable purpose'. Therefore, while construing the term 'business' for the said section, the object and purpose of the section has to be kept in mind. Ld. A.R. did not think that a very broad and extended definition of the term 'business' is in....
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...., commerce or business" used in the proviso to Section 2(15) as amended in 2009. The second sentence states that ordinarily, profit motive is a normal incident of business activity and if the activity of a trust results in yielding profit, it could be concluded that the object of the trust involves the carrying on of an activity for profit. We will restrict our reliance upon paragraph-21 insofar as it is observed that ordinarily, profit motive is a normal incidence of business activity. We see no reason to take a different view as regards the words "trade" and "commerce". 45. The normal incidence of trade and commerce is also profit. Considering the nature of the legislation, we are inclined to accept Mr. Bhan's contention that each of these three words indicates the element of profit. A wider meaning ought not to be given to these words especially in a taxing statute. Section 2(15) defines charitable purpose. As in the case of any other definition, it is to assist the construction of the main provisions in which the terms defined are used. The main provisions such as Sections 11, 12 and 13 use the words "charitable purpose" in the context of granting the assessee'....
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.... would be; charitable activity should be devoid of selfishness or illiberal spirit. Enrichment of oneself or self- gain should be missing and the predominant purpose of the activity should be to serve and benefit others. A small contribution by way of fee that the beneficiary pays would not convert charitable activity into business, commerce or trade in the absence of contrary evidence" ∗ In the case of State of Maharashtra vs. Saifuddin Mujjaffarali Saifu, AIR 1994 Bom 48, the Hon'ble Bombay High Court has held as follows: "Construction of bridges, roads, Highways, on reckoning can be said to be "Industry" or "Trade". Such activity is for the benefit of people at large without no profit even in the remotest possibility. The witness for the assessee clearly stated that the bridge across river Serpani was for the benefit of Tribals of that area." 4.54 It is submitted that to decide when a particular activity can be treated as business, the following various tests need to be adopted according to the facts and circumstance of the case: (1) Whether activity undertaken is a commercial activity; (2) Whether activity undertaken is for ga....
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....ctivities on business principles'. The former refers to activity itself assuming the character of business and the latter refers to activity carried on for a different purpose but with the acumen of business world. The latter indicates the import of business kind efficiency in carrying out activities in a structured and efficient manner. 5 Whether profit making is the aim or object of the trust As submitted earlier, Assessee is formed under the policy by Government of Karnataka. Objects of the Assessee are not self chosen but mandated by Ministry of Urban Development, Government of India. The Assessee was formed with an object for propagation of low cost technology, environmental friendly and pre-case technologies. The said objects are State driven. The activities carried out by the Assessee in pursuance to its MOA as demonstrated in paragraph 4.6 are not commercial in nature. The project works carried on by it are incidental to the attainment of said primary/ dominant object. The project works carried on by the Assessee are in respect of construction or up keeping of public infrastructural facilities using the aforesaid technologies. ....
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....inion of the Court, receive such a wide construction as to enfold regulatory and sovereign authorities, set up under statutory enactments, and tasked to act as agencies of the State in public duties which cannot be discharged by private bodies. Often, apart from the controlling or parent statutes, like the BIS Act, these statutory bodies (including BIS) are empowered to frame rules or regulations, exercise coercive powers, including inspection, raids; they possess search and seizure powers and are invariably subjected to Parliamentary or legislative oversight. The primary object for setting up such regulatory bodies would be to ensure general public utility. The prescribing of standards, and enforcing those standards, through accreditation and continuing supervision through inspection etc, cannot be considered as trade, business or commercial activity, merely because the testing procedures, or accreditation involves charging of such fees. It cannot be said that the public utility activity of evolving, prescribing and enforcing standards, "involves" the carrying on of trade or commercial activity." 4.60 In ADIT (Exemption)-II (1) vs. Jeevan Vidya Mission [2015] 155 ITD 1150....
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....ied out to feed the charitable activities. It would thus follow that even for invoking second limb of first proviso to Section 2(15), it is sine qua non that the assessee has extended services to business, trade or commerce and such services have been extended in the course of business carried on by the assessee. It is thus clear that even in a situation in which an assessee receives a fees or consideration for rendition of a service to the business, trade or commerce, as long as such a service is subservient to the charitable cause and is not in the nature of business itself, the disability under second limb of first proviso to Section 2(15) will not come into play. 9.3. Similarly, in Institute of Chartered Accountants of India v. DGIT (Exemptions) [2013] 358 ITR 91/217 Taxman 152/35 taxmann.com 140, Hon'ble Delhi High Court has held that, "even though fees are charged by the petitioner institute for providing coaching classes and for holding interviews with respect to campus placement, the said activities cannot be stated to be rendering service in relation to any trade, commerce or business as such activities are undertaken by the petitioner institute in furtherance....
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....ssee income was exempt from Income Tax under Section 11 of the Act. 7. Careful consideration of the rival contentions and perusal of material papers lead us to following irrefutable inferences:- (i) Respondent/assessee is a statutory authority created under Karnataka Improvement Boards Act, 1976; (ii) The purpose and intent of creation of respondent/authority is to carry out Rehabilitation & Resettlements of Displaced persons due to construction of Almatti Dam; (iv) Assessee acts as an agent of the Government to give effect to the Rehabilitation & Resettlement policies; (v) Assessee has no discretion in mode of deployment or utilisation of funds and fully controlled by periodical instructions issued by the Government; and (vi) Funds belonging to the Government placed in deposits in the Banks by the assessee and the interest accruing thereon shall continue to remain under the absolute control of the Government and the respondent functioned in a fiduciary capacity. 9. In instant case also assessee is a statutory authority created under the Karnataka Improvement Boards Act to carry out public purpose. Therefore, ratio of a....
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....9 (Kar. HC), it was held as follows: This appeal was admitted on 31.07.2013 to consider the following substantial questions of law raised in the memorandum of appeal: "i) Whether in law, the finding arrived at by the Tribunal is perverse and contrary to the facts and circumstances in as much as whether the activity carried on by the assessee would amount to an activity in the nature of trade, commerce or business to deny registration under Section 12A of the Income Tax Act? ........... 3. The relevant facts of the case are that the assessee, which is a statutory authority constituted under the provisions of the Karnataka Urban Development Authorities Act, 1987 (hereinafter referred to as 'KUDA Act', for short), filed an application for registration under Section 12A(1)(aa) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act', for the sake of brevity). ............. 16. From the aforesaid judgments what emerges is that in respect of two similar authorities namely Bagalkot Town Development Authority and Lucknow Development Authority which are similar to the assessee Authority, it has been held that they are entitled to registration und....
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....llotting to eligible persons, the said activity cannot be held to be profit motive so as to come within the mischief of the expression trade, commerce or business. The upshot of the aforesaid discussion is that the assessee is a statutory Authority created under the Karnataka Urban Development Authorities Act, 1987. The purpose and intent of creation of the assessee Authority is to establish urban areas in Belgaum in a planned manner. The assessee being a statutory Authority is under the control of the State Government, which has the power to issue directions to the Authority as per Section 65 of the Act. The said directions are those, which are necessary or expedient for carrying out the purposes of the Act and it shall be the duty of the assessee to comply with such directions. Even the utilization of funds by the assessee is fully controlled by periodical instructions issued by the Government. The funds standing in the name of the assessee is under the absolute control of the Government as the assessee functions in a fiduciary capacity. Therefore, following the judgment of Bagalkot Town Development Authority, which has in turn followed the judgment of the Hon'ble Supreme Court i....
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....ssee does not driven primarily by desire or motive to earn profits but to do charity through advancement of an object of general public utility. The assessee is operating on no profit basis. This is substantiated by the actual income received on operations of the Assessee and the expenditure incurred set out in the earlier paragraphs of this order. The proviso to Sec.2(15) of the Act is therefore not applicable to the case of the Assessee. We therefore 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 not includible in the total income and therefore the income returned by the Assessee is directed to be accepted." • • In the case of Karnataka Water Supply and Drainage Board (KWSDB) vs. Deputy Director (Exemption) in ITA No. 283/Bang/2015, dt., 04.09.2015, the Hon'ble, ITAT Bengaluru relied on the principle of 'dominant purpose' the decision of the Ho....
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....the Assessee, he hold that the Assessee's income is not includible in the total income and therefore the income returned by the Assessee is directed to be accepted." • • In Bangalore Development Authority (BDA) vs. Addl. CIT (2019) 104 taxmann.com 266 (Bengaluru), it was held as follows: 2.1 The assessee, Bangalore Development Authority (BDA), a statutory body constituted under the State Government of Karnataka, filed its return of income for Assessment Year 2012-13 on 29.09.2012 declaring a loss of (-) Rs.357,92,21,808/-, after claiming exemption under section 11 of the Income Tax Act, 1961 (in short 'the Act'). ....... 5.3.4 At para 5.5 of the impugned order of assessment for Assessment Year 2012-13, the AO has extracted the Powers / Functions of the 'BDA' as per sections 15 & 16 of the Bangalore Development Act, 1976 as under:- (i) To undertake works and incur expenditure for development of the Bangalore Metropolitan Area by drawing up detailed schemes. (ii) To undertake from time to time any works for the development of the Bangalore Metropolitan Area and incur expenditure thereof and also for framing and exe....
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....t an amount of Rs.278,78,43,000/- (disallowed by the AO - para 15.20 of Assessment Order and reflected int eh computation of total income) on activities that fall under the head 'Advancement of General Public Utility' like construction of grade separators, PRR Bridges on Flyovers, renovation and remodeling works, Maintenance of BBMP facilities, Development of Lakes, etc. Be that as it may, if one were to peruse the object for which the assessee, viz., BDA was constituted, it is clear that the intent and purpose is for planned urban development of Bangalore City and not with the purpose of profit making; i.e., the activity of formation of layouts and allotment of sites is only carried out with the primary and main object to ensure planned development of Bangalore City and not with the intention to make profits. 5.10.1 Ld. A.R. find that the view of the AO in (iv) of para 6.20 of the order of assessment and which is impliedly endorsed by the CIT(A) in the impugned order; i.e., that (iv) "The activities of the assessee and the generation of profits on account of the same are akin to the activities carried on by real estate companies, property developers, infrastructur....
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....s not to be reckoned as the test for applicability of the proviso to section 2(15) of the Act; but rather, whether the activity is embarked upon solely with the view to earn profit or not; which the AO and CIT(A) have not done. 5.10.4 Ld. A.R. find that the aforesaid judicial pronouncements relied upon by the assessee are those of other urban development authorities, in whose cases also the AO has taken the view that the activities of city development are hit by the proviso to section 2(15) of the Act. Referring to the above cited cases, he find that in the case of Ahmedabad Development Authority (supra) the Hon'ble Gujarat High Court has upheld the appeal of the assessee, by overruling therein the decision of the Ahmedabad Tribunal in that case. In the case of Lucknow Development Authority (supra) the Hon'ble Allahabad High Court has upheld the decision of the Lucknow Bench of ITAT which was in favour of the assessee. He find that in the above judicial pronouncements cited by the assessee, the facts are identical to that of the assessee in the case on hand; that the AOs in these cases have taken a view that the activity is in the nature of trade, commerce or busin....
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....ssessee-Corporation is established and constituted under the provisions of the Gujarat Industrial Development Act, 1962 and collection of fees or cess is incidental to the object and purpose of the Act, and even the case would not fall under the second part of proviso to Section 2 [15] of the IT Act. As the activities of the assessee is for advancement of any other object of general public utility, the same can be for "charitable purpose" and therefore, the assessee Corporation shall be entitled to exemption under Section 11 of the Act. No error has been committed by the learned Tribunal in holding so. We are in complete agreement with the view taken by the learned Tribunal" • • In Himachal Pradesh Environment Protection and Pollution Control Board vs. CIT [2009] 125 TTJ (Chd) 98, it is held as follows: "17. On a perusal of these objectives, as sanctioned by the statute, it is obvious that the activities performed by the assessee trust are regulatory functions for the public good, and any collection for fees or charges, in the course of discharging these regulatory functions, cannot be viewed as a consideration of rendering these services of pollu....
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....ate Government legislation and is doing commendable work in the field of providing affordable accommodation. ...... 8. Viewed thus, merely the fact that the assessee has constructed and sold the dwelling units does not make it a business venture as long as predominant object, which is what the trust set up by the State Government is pursuing, is implementation of the provisions of the trust through various schemes. What has been said in the context of the aforesaid case is equally applicable on the present set of facts. There is no dispute that the objects of the Trust are covered by the objects of general public utility and the registration granted to the assessee trust is still valid. Clearly, therefore, pursing these valid objects of general public utility through lawful statutory schemes cannot be considered as business activity, and, as a corollary thereto, exemption under section 11(2) cannot be declined by invoking proviso to Section2(15) which can only come into play in the event of the assessee pursuing the activities in the nature of trade, commerce or business or services thereto. The case of the revenue does not, therefore, derive any strength from the judicial....
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....uction of infrastructure and even buildings. Carrying out and rendering the said activities is directly connected with the role and statutory mandate assigned to the petitioner. It has not been asserted and alleged that these activities were or are undertaken on commercial lines and intent. Petitioner does not earn profits or income from any other activity unconnected with their regulatory and administrative role. Income in the form of taxes, fee, service charges, rents and sale proceeds is intrinsically, immediately and fundamentally connected and forms part of the role, functions and duties of the petitioner. • • In ITO vs. Moradabad Development Authority [2017] 159 ITD 971 (Delhi Trib), it was held as follows: 9. We have heard both the parties and perused all the records. The status of the assessee in the earlier years was accepted by the Revenue as a charitable in nature having income allowable for exemption u/s 11 of the Act. There was no change in the facts and circumstances during the present assessment year. The Assessing Officer never denied the fact that the assessee is registered u/s 12AA of the Income- tax Act. During the year under co....
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....both the sides and gone through the relevant material on record. It is seen, as is evident from para 4.1 of the impugned order itself, that the assessee was allowed exemption u/s 11 of the Act by the Tribunal for the assessment years 2008-09 and 2009-10. It is an admitted position that the regular assessment for the assessment years 2010-11 and 2011-12 was not taken up and the claim for exemption u/s 11 of the Act got automatically allowed. We have gone through the lead order passed by the Tribunal for the assessment year 2009-10, whose copy is available on page 75 of the paper book. In this order, the Tribunal considered the effect of proviso to section 2(15) and, thereafter, held that the activities of the assessee of construction and sale of plots were incidental to the main object of town planning and, hence, exemption u/s 11 was to be granted. The said order of the Tribunal was challenged by the Department before the Hon'ble Allahabad High Court. Vide its judgment dated 03.05.2017, a copy of which is available on page 80 of the paper book, the Hon'ble Allahabad High Court dismissed the Revenue's appeal by following another judgment of the co-ordinate Bench in CIT vs. Y....
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....e of the pupil of the specified area with the charitable purposes for development of infrastructure facilities of general public utility without any profit motive therefore it was held that the predominant object of the authority created under UPUPDA Act, 1973, is not profit earning therefore it was held that it is entitled for registration of under section 12A of the Act. We further observed that the ld CIT DR has not disputed this factum that the provisions of UPUPDA, Act 1973 are paremateria to the provisions of UPIDA Act, 1976 and thus ratio of the decision of Hon'ble Jurisdictional High Court in the case of Lucknow Development Authority (supra) and order of the tribunal in the case of Haridwar Development Authority (supra) are applicable in favour of the assessee. 40. On the basis of forgoing discussion, we reach to a logical conclusion that the CIT (E) dismissed application of assessee for grant of registration under section 12A of the Act, by considering the irrelevant fact and by taking a hyper technical approach and he has not followed procedure for grant of registration as prescribed under section 12AA of the Act. At the same, we observed that the assessee su....
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....o not the case of the revenue that the assessee was in any manner free to utilize either the materials supplied to it or food cooked by it, as per it's own wish/discretion. The assessee appears to have acted merely as an agent of the State. 30. Therefore, on the basis of findings recorded by the Tribunal and the material examined by the Commissioner it would be wrong to conclude that because there existed a contract between the assessee & the government therefore the assessee was not pursuing a "charitable purpose". On the other hand the activity performed by the assessee clearly appears to be inseparably linked to the 'charitable purpose' of providing mid-day meals at village schools. Also, admittedly, the total receipts of the assessee were below the limit of Rs. 10,00,000/- as stipulated under the second proviso to Section 2(15) of the Act. 31. In that view of the matter, the Tribunal has rightly concluded that the restriction created by the first proviso to Section 2(15) of the Act did not operate against the assessee and therefore the activity of the assessee, even though it may have involved an activity in the nature of trade, commerce or busines....
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....objects of the assessee includes:- (1) To promote, encourage, support data protection and information security, maintenance of data privacy of any kind in India carrying out research, dissemination of information, setting of standards, for members providing education, training, conducting meetings, seminars, workshops, conferences interacting with government or non-government bodies, agencies, companies or any other person, taking appropriate legal or any other action by itself or on behalf of its members. (2) No objects of the company will be carried by the company without obtaining prior approval/no objection certificate from concern authority (if any). 3. ........... He noted that during the year under consideration, the assessee had received income under the following heads:- Sl. No. Heads Amount (in Rs.) 1 Donation 2,00,00,000 2 Grants Apportioned 1,21,87,672 3 Participation Fees 3,86,799 4 Membership Fees 6,81,250 5 Sponsorship Fees 1,03,90,522 6 Interest from bank and on refund 1,60,223 14. I have considered the submissions of both the parties and perused the record of the case....
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....hip was accepted from a private company in respect of Asian games and Youth Olympic games. • In PCIT (Exemptions) vs. Animal Breeding Research Organisation (India) [2018] 95 taxmann.com 226 (Gujarat), it was held that assessee-society, established with a view to undertake and promote activities connected with development of cattle and buffaloes being covered by section 2(15), income earned by it from sale of semen was eligible for exemption 4.62 It is submitted that Courts in several cases have held that even the cricket association are not carrying on activities in the nature of trade, commerce or business, hence not hit by proviso to section 2 (15). It is submitted that where Courts have taken a view that the activities carried on by the cricket association are not in the nature of trade, commerce or business, in no manner the activities of the Assessee could be regarded to be in the nature of trade, commerce or business. The following are such cases; • Gujarat Cricket Association (2019) 419 ITR 561 Gujarat HC; • Tamil Nadu Cricket Association vs. DIT (Exemptions) and others [2014] 360 ITR 633 (Mad. - HC); • Mumbai Cric....
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.... stage wise photographs, savings achieved. There is no scope for misuse of public funds. * Projects are allotted by KARNIK for promoting the objectives for which Assessee is set up. The primary objective of carrying out various civil works is for propagation of low-cost technology, environmental friendly, pre-cast technologies to general public and to develop skilled workforce and artisans to use such technologies in building/housing and allied activities. The activities are carried out to promote the objectives for which the Assessee is set up. * The Assessee is a State under Article 12 as held in Waman Rao Deshpande vs. Chairmen, Nirmithi Kendra & Others, in WP No. 11674/ 2005 (S-DIS), dated 17.03.2010 and hence cannot be compared with a private contractor; * The activity of infrastructure development - roads, museums, roads, water facilities, community asset buildings etc. squarely falls within the domain of List II of (State List) of Seventh Schedule of the Constitution of India. * The Assessee does not have Capital funds of its own. The projects are undertaken based on advance granted by the Department of State Government. * The Ass....
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....ssee has rendered service as VAT has been imposed. It is submitted that mere levy of VAT does not make the Assessee's activities non charitable. As submitted earlier, section 2(6) of Karvat Act defines business as under: 4.63.3.1 As per Section 2 (6) of the Karvat Act, the term "Business" is defined as follows: (6) "Business" includes.- a. any trade, commerce, manufacture or any adventure or concern in the nature of trade, commerce or manufacture, whether or not such trade, commerce, manufacture, adventure or concern is carried on in furtherance of gain or profit and whether or not any gain or profit accrues therefrom; and b. any transaction in connection with, or incidental or ancillary to, such trade, commerce, manufacture, adventure or concern. 4.63.3.2 The definition of "business" given in section 2(5A) of the KVAT Act even without profit-motive is wide enough to include any trade, commerce or manufacture or any adventure. The context in which business is understood under the Incometax Act is not the same as KVAT Act as explained in aforesaid paragraphs. 4.64 Therefore, it is submitted that the proviso to section 2 (15) does....
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.... significant problems of homelessness is lack of affordable housing. 5.5 It is submitted that it is necessary for the State to ensure that it provides facilities for affordable housing through promotion of low-cost techniques so that even economically weaker sections could afford construction of the houses. 'Housing for all' removes inequalities in status among citizens to considerable extent. The objective of the State to follow the "Principles of Directive Policy" in Part IV of Constitution of India, both in the matter of administration as well as making of laws. 5.6 Articles 36 & 37 read as follows: 36. In this Part, unless the context otherwise requires, "the State" has the same meaning as in Part III. 37. The provisions contained in this Part shall not be enforceable by any court, but the principles therein laid down are nevertheless fundamental in the governance of the country and it shall be the duty of the State to apply these principles in making laws. 5.7 The Article 38 reads as follows: (1) The State shall strive to promote the welfare of the people by securing and protecting as effectively as it may a social order in....
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....tate has the authority to delegate the powers and authorities as may be necessary to Municipalities to enable them to function as institutions of self-government and to plan and implement schemes for economic development and social justice, including those in relation to matters listed in the Twelfth Schedule. 5.13 It is submitted that within the Constitutional framework, 'local government' is a State subject and States Legislatures pass legislations suitable in their context. 5.14 The functions of self-government and schemes for economic development and social justice included in the Eleventh Schedule to Constitution are as under: 1. Agriculture, including agricultural extension. 2. Land improvement, implementation of land reforms, land consolidation and soil conservation. 3. Minor irrigation, water management and watershed development. 4. Animal husbandry, dairying and poultry. 5. Fisheries. 6. Social forestry and farm forestry. 7. Minor forest produce. 8. Small scale industries, including food processing industries. 9. Khadi, village and cottage industries. 10. Rural housi....
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.... 18. Regulation of slaughter houses and tanneries. 5.16 As submitted earlier, the Assessee is set up for propagation of low cost technology in entire spectrum of building in order to provide assistance to economically weaker sections to adopt such innovative technologies in construction of their houses which is otherwise the duty of the State to ensure housing for all. 5.17 These technologies have been adopted in carrying out incidental civil works results in skill upgradation and training to the artisans (masons, carpenters, barbenders, plumbers, electricians, etc.) on innovative and cost-effective technology options. This has resulted in creation of skilled workforce, artisans who are now technically equipped to adopt these low-cost technologies in building houses. This has visible impact in improving standard of living of artisans. 5.18 As explained earlier, Assessee has fostered the development of construction of community asset buildings, roads, drinking water facilities, development of tribal colonies, development of parks, rain water harvesting, solarization works, rain water channel at road, digging work of public well, fly mast lightning sy....
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....ove, it is submitted that the Learned Commissioner (Appeals) is not justified in upholding the action of the Learned Assessing Officer in denying exemption by invoking 1st proviso to section 2 (15) of the IT Act, failing to appreciate that the objects of the Assessee fall within the ambit of "relief of the poor". 6.2 It is submitted that the phrase "relief of the poor" is not defined under the IT Act. 6.3 The phrase "relief of the poor" as explained by CBDT in Paragraph 2.2 of Circular No. 11/ 2008, dated 19.12.2008, reads as follows: 2.2. 'Relief of the poor' encompasses a wide range of objects for the welfare of the economically and socially disadvantaged or needy. It will, therefore, include within its ambit purposes such as relief to destitute, orphans or the handicapped, disadvantaged women or children, small and marginal farmers, indigent artisans or senior citizens in need of aid. ............. 6.4 In Bangalore Development Authority (BDA) vs. Addln. CIT (2019) 104 taxmann.com 266 (Bengaluru), it was held as follows: 5.9.1 The question of whether allotment of sites and flats to the economically weaker sections of society c....
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....bit of relief of poor. 6.6 In DCIT vs. A.P. State Civil Supplies Corporation Ltd., [2016] 160 ITD 117 (Hyderabad - Trib.), it was held as follows: 11. The assessee was established with an object to ensure supply of food grains, edible oils, dall etc., to the masses/general public through the approved outlets by State Civil supplies department by grant of substantial subsidies given by the Govt. and is a Corporation governed and controlled by the Govt. of A.P {then}. The main activities of the Corporation are purchase/procurement, storage and distribution essential commodities to the poor and needy people of the society in general. The Corporation is dealing in levy items like rice, edible oils, sugar etc. The Assessee Corporation has been carrying out its object of distribution of essential commodities to the people particularly to the poorer section of the society at lower prices with the support of subsidy being provided by the then Government of Andhra Pradesh. Without the subsidy the Corporation cannot survive. The sale price is less than the procurement price. This activity no way can be considered as trading activity. Whereas in the case of a trader or an or....
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....ee or any other consideration. 7.2 As submitted earlier, the Assessee is a Government of Karnataka entrusted Kendra, set-up by KARNIK and was formed as an implementing agency of the State. The Assessee is functioning at the instructions of the State. It is also submitted that even the work executed is at instance of the State. It is submitted that complete functioning of the Assessee is under the control of the State. 7.3 It is submitted that when project is undertaken at the instance of government department, on-site inspection report would be prepared detailing the estimate for cost of work to be carried out. The Assessee has to take into consideration, the rates as prescribed by PWD or Engineering department, of Zilla Panchayath and in no case the same will be more than the standard rates prescribed by them. There is no freedom to fix the price. 7.4 The meaning of the term "Cess" as per Advanced Law Lexicon, 3rd Edition, authored by P. Ramanatha Aiyar, reads as follows: π "Cess" is "An assessment; tax; levy; specifically; (a) A rate or local tax............(b) In Scotland, the land tax. (c) In India, a tax for a special object; as, a road c....
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....A great many miscellaneous cesses, imposts and charges were imposed under the Government of the Moghuls in addition to the land revenue both by the government and the zemindars. These have been either abolished or assimilated with the land revenue. The cesses abolished are called siwai (i.e. extras) or abwa or mathaut : S. 74 Bengal Tenancy Act 8 of 1885. Other cesses indirectly connected with the use of land and water and called sayar the landlord was allowed to retain: S.3(4) Agra Tenancy Act, UP Act 3 of 1926. Such cesses were Banker or a tax on jungle products; and Juifar, a tax on fisheries; and Phulkar, a tax on fruits trees. π An assessment, tax or levy. [S. 14(1), Cardamom Act (42 of 1965)] 7.5 Section 2(b) of Central Road Fund Act, 2000 (India) defines the term 'cess' meaning a duty in the nature of duty of excise and customs, imposed and collected on motor spirit commonly known as petrol and high speed diesel oil for the purposes of this Act. 7.6 Section 8 of Goods and Services Tax (Compensation to States) Act, 2017, defines the term 'cess' meaning the goods and services tax compensation cess levied. 7.7 In Vijayalashmi Rice Mill v. ....
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....or fixed by custom; compensation paid to professional men, as an attorney or physician; the reward or compensation allowed by law to an officer for specific services performed by him in the discharge of his official duties; frequently for services rendered in the progress of a cause, to be paid by the parties obtaining the benefit of the acts, or receiving the services, at whose instances they were performed. Sometimes the term may mean charges, and is often used in interchangeably with the term 'cost'. π The word 'fees' is used in connection with occupational charges for the occupation of the Municipal property and not in connection with any services that the municipality may render to the occupiers of its property - NagapurKshtriayaskhattikSamraj v. Corporation of the city of Nagpur, AIR 1959 Bom 112, 120. π A fee is levied essentially for services rendered and as such there is an element of quid pro quo between the person who pays the fee and the public authority which imposes it." Krishan puri v. state of Punjab, AIR 1980 SC 1008. 7.11 It is submitted that the monies received by the Assessee do not fall within the meaning of 'cess' or 'fee'. ....
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....iming exemption and the has been allowed by the department. It is submitted that the impugned AYs 2010-11 to 201314 is the first ever year the department denied exemption for the Assessee. It is also submitted that more particularly, even after the insertion of proviso by Finance Act 2008, the Assessee has been granted exemption under section 11 of the IT Act. 8.2 It is submitted that there has been no change in the circumstances in the impugned assessment year from that of the earlier AY 2009-10. 8.3 In this regard, he relied on the following decisions: ∗ Radhasoami Satsang vs. CIT [1992] 193 ITR 321 (SC); ∗ CIT vs. Excel Industries and others [2013] 358 ITR 295 (SC); ∗ Berger Paints India Ltd vs. CIT [2004] 187 CTR (SC) 193: [2004] 266 ITR 99 (SC); ∗ PCIT vs. Maruti Suzuki India Ltd., [2019] 416 ITR 613 (SC); ∗ CIT vs. Sridev Enterprises (1991) 192 ITR 165 (Kar.HC); ∗ DIT (E) vs. Lovely Bal Shiksha Parishad [2004] 186 CTR (Del) 384: [2004] 266 ITR 349 (Del); ∗ CIT vs. Leader Values Ltd. [2008] 214 CTR (P&H) 429: (2007) 295 ITR 273 (P&H); &lowa....
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....ties, of that previous year" 6.4 From the reading of the clauses to Proviso to sec.2(15), of the Act it is clear that even if the trust or institution carries out certain activities in the nature of trade, commerce, business to promote the objects of trust, such quantum has to be less than 20% of total receipts. In the instant case, the assessee has not proved that the civil works that it executed were towards its objectives mentioned in the MOA. Therefore, the relaxation given under clause (i) to proviso is applicable in its case. Without prejudice, even if some works are carried out towards the objects of the assessee, the Ld.AR has not produced any facts and figures to show that such receipts did not exceed 20% of total receipts for the respective years. Therefore, the proviso to sec.2(15) of I.T.Act is clearly applicable in his case. 6.5 Further, Assessee tried to argue that the civil works carried out by him are not commercial in nature by mentioning that they are fund-raising activities. Same is not acceptable as the nature of getting the contracts and its execution is like any other work contracts. Whatever the by-laws of the society speaks, it cannot surpass the provi....
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....ibunal in the case of Zilla NirmithiKendra in ITA No.2069/Bang/2018 dated 14.2.2022, wherein it was held as under:- "13. The facts of the case which were identical to the facts of the assessee's case, the Tribunal had to examine claim for exemption under section 11 of the Act. The facts of the case were that the assessee received funds for undertaking construction projects of the State Government and these projects were undertaken by the assessee in a very systematic and organized manner. The nature of activities carried on by the assessee was carrying on 'advancement of any other object of general public utility'. The Tribunal held that when that is the case, the assessee is hit by the proviso to section 2(15). The proviso reads that 'advancement of any other object of general public utility' shall not be a charitable purpose, if its involving carrying on any activity in the nature of trade, commerce or business, or any activity of rendering any service relating to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the application of money. Therefore, the case of the assessee is hit by the proviso to section 2(15....
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....e generated by the business is not relevant consideration and what is relevant is whether the activity is so inextricably connected or linked with the objects of the trust that it could be considered as incidental to those objectives. It was contended by the assessee that the surplus funds generated from the construction business was spent towards charitable activities and therefore, the assessee is entitled for exemption under section 11(4). This contention is not acceptable. Initially, the assessee carried on the business itself which is not at all property held under trust. This activity is a business activity and the provisions of section 11(4A) is applicable. The tribunal held that there is no nexus between the activities carried on and the objects of the assessee that can constitute an activity incidental to the attainment of the objects, namely, to promote cause of charity, mission activities, welfare, employment, diffusion of useful knowledge, upliftment and education and to create an awareness of selfreliance among the members of the public etc. Being so, the assessee is not entitled for any exemption under section 11. 14. We have examined the facts of the assesse....
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....sions of section 2(15) of the I.T. Act. According to the Ld. AR, none of the objectives of the assessee were carried on with any profit motive or involved in activities in the nature of trade, commerce or business. According to the Ld. AR, the assessee had undertaken activities of the Government of Kerala so as to facilitate the implementation of the government projects at very lowest rate. The Ld. AR also contended that registration u/s. 12A of the Act was granted to the assessee and there has been no question of the assessee indulging in any trade or commercial activities. The objectives of the assessee are mainly to carry out charitable activities and not of general public utility. As such, the proviso of section 2(15) of the Act was not applicable to the assessee was erroneous and beyond the intention of the legislation. The activities carried out by the assessee were for the purpose of attainment of the objectives of the assessee. 7.3 As per the provisions of Section 2(15) of the Income Tax Act, 1961, 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, c....
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....not. By any stretch ofimagination, it is not possible to hold that the business carried on by the assessee is incidental to the objects mentioned in the Memorandum of Association. On the other hand, it is a predominant activity carried on by the assessee. In other words, "incidental" is an offshoot of the "main activities", inherent bye-product of predominant activities. The activities complementing the main activities are not in the nature of incidental to the business. It is incidental if it is supporting the activities to the main activities. In the present case, the activities carried on by the assessee .is itself principal activities and not incidental activities. Hence, it is not possible to hold that the construction activities carried out by the assessee is not protected by the provisions of section 11(4A) of the Act. In view of this, we do not find any merit in the argument of the Ld. AR. Thus, this ground of appeal of the assessee is dismissed. 8. We now proceed to consider the question whether the said activities carried on by the assessee were incidental to the attainment of the objects of the Trust. We fail to see any connection between the activities relating....
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....12. In our opinion, these observations have to be understood in the light of the facts before the Supreme Court in the case of Thanthi Trust (supra), wherein the trust carried on the business of a newspaper and that business itself was held under trust. The charitable object of the trust was the imparting of education which falls u/s. 2(15) of the Act. The newspaper business was incidental to the attainment of the object of the trust, namely that of imparting education and the profits of the newspaper business are utilized by the trust for achieving the object of imparting education. In this case, there is no such nexus between the activities carried on and the objects of the assessee that can constitute an activity incidental to the attainment of the objects, namely, to promote cause of charity, mission activities, welfare, employment, diffusion of useful knowledge, upliftment and education and to create an awareness of self-reliance among the members of the public etc. We are therefore, of the opinion that the observations of the Supreme Court must be understood and appreciated in the background of the fact in that case and should not be extended indiscriminately to all cases. Be....
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....has established Building Centers in each district under the 'National Network of Building Centers' in India. 2.6.2 The Government of Karnataka took a leading initiative to promote, monitor, oversee, guide the Nirmithi Kendras and Rural Building Centers in the State and established an apex center called "Karnataka Rajya Nirmana Kendra [KARNIK]". KARNIK is a registered society under Karnataka Society Registration Act, 1960 [KSR Act, 1960] which was established on 11.06.1991. 2.6.3 The Department of Housing is under the direct control of the Ministry of Works and Housing. At the State level the Department of Housing is the umbrella organization overseeing the activities Karnataka Rajya Nirmana Kendra [KARNIK]. 2.6.4 KARNIK has established Nirmithi Kendras in each district in the State of Karnataka including Dakshina Kannada Nirmithi Kendra, the Assessee. 2.6.5 The Assessee's Governing Board is constituted by the following members: * Chairman - The Chief Secretary, DKZP Mangalore * Deputy Commissioner, DK Mangalore * Executive Director HUDCO, Madras * General Manager, DIC Mangalore * Officer in charge, NBO....
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.... various civil works results in skill upgradation and training to the artisans (masons, carpenters, barbenders, plumbers, electricians, etc.) on innovative and cost-effective technology options. This has resulted in creation of skilled workforce, artisans who are now technically equipped to adopt these low-cost technologies in building houses. This has visible impact in improving standard of living of artisans. 2.7.4 As explained earlier, Assessee has fostered the development of construction of housing and community asset buildings, roads, drinking water facilities, development of tribal colonies, development of parks, rain water harvesting, solarization works, rain water channel at road, digging work of public well, fly mast lightning system, erection of brass idol, public stadium, and development work in sanctuaries. 2.7.5 Assessee is the projection of the State Government. It is further controlled by Department of Housing & Urban Development of Government of Karnataka through its wing Karnataka Rajya Nirmana Kendra [KARNIK]. 2.7.6 Activities of the Assessee are not run on the commercial lines or are not in the nature of trade, business or commerce. ....
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.... using low- cost technology, environmental friendly and pre-cast technologies. The Copy of the directive dated 14.11.1995 is kept on record. In this regard, the following factors are relevant: 2.13.1 Projects are allotted by KARNIK for promoting the objectives for which Assessee is set up. The project is approved by KARNIK only after confirmation of the technologies adopted and on estimation for savings sought to be achieved through adoption of said technologies. 2.13.2 Projects are sanctioned by technical advisory committee and performance evaluations of projects are undertaken. The documentation of project work should consist of the details of work order, entrusting agency, estimated cost, actual expenditure, date of commencement, date of handing over, technology adopted, quality check certificates, stage wise photographs, savings achieved. 2.13.3 The works which are incidental to the primary objects undertaken by the Assessee are in the nature of infrastructure development viz., constructing or upkeeping of roads, museums, water facilities, community asset buildings etc. squarely falling within the domain of List II of (State List) of Seventh Schedule ....
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.... (c) It is not necessary that some of the powers conferred be governmental sovereign functions to carry on commercial activities. (d) Since the State is empowered under the Articles 19(1)(g) and 298 to carry on any trade or business, it was held that Rajasthan State Electricity Board was 'other authority' under Article 12 of the Constitution. 2.14.2 Sukhdev Singh v. Bhagatram [1975] 1 SCC 421: (a) The concept of State had undergone drastic change. It cannot be conceived of simply as cohesive machinery wielding the thunderbolt of authority. (b) The State is a service corporation. It acts only through instrumentalities or agencies of natural and juridical person. (c) There is distinction between State action and private action. (d) There is nothing strange in the notion of the State acting through a corporation and making it an agency or instrumentality of the State with an advent of the welfare state. 2.14.3 Maneka Gandhi v. UOI [1978] 1 SCC 248 referred in the decision of Ajay Hasia v. Khalid Mujib Sheravardi [1981] 1 SCC 722: (a) If the entire share capital of the corporation is held by the Government it wo....
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....the same public law, principles and limitations. 2.15.7 Though the instrumentality, agency or persons conduct commercial activities according to business principles and are separately accountable under their appropriate bye-laws or Memorandum of Association, they become the arms of the Government. 2.15.8 The existence of deep and pervasive State control depends upon the facts and circumstances in a given situation and in the altered situation it is not the sole criterion to decide whether the agency or instrumentality or persons is by or under the control of the appropriate Government. 2.15.9 Functions of an instrumentality, agency or persons are of public importance following public interest element. 2.15.10 The instrumentality, agency, or person must have an element of authority or ability to effect the relations with its employees or public by virtue of power vested in it by law, Memorandum of Association or by laws or Articles of Association. 2.15.11 The instrumentality, agency or person renders an element of public service and is accountable to health and strength of the workers, men and women, adequate means of livelihood, th....
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.... his ex-officio capacity and the Deputy Commissioner of District followed by six members as Executive Committee Members. 6. .................Obviously this would be in violation of Article 311 of the Constitution of India. The law is settled in this regard. It is not really required for this order to be burdened with catenea of decision propounding the proposition of law as envisaged under Article 311 of the Constitution of India. Since the impugned order of termination is without considering the reply to the second show cause notice, I am of the view that Annexure-'K' is liable to be quashed. Indeed the proceedings are required to commence from the date of the petitioner filing his reply to the second show cause notice. Needless to say that the first respondent is required to issue a notice to the petitioner before embarking upon the enquiry into the charges leveled against the petitioner. Indeed it is to be noticed that the Deputy Commissioner also acts as exofficio Chairman of first respondent-Nirmithi Kendra. 2.20 Article 311(1) provides that no person who is a member of a civil service of the Union or an all-India service or a civil service of a State or hold....
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....r the powers conferred by the statutes creating such bodies. (b) Regulations in Table-A of the Companies Act are to be adopted by a company. Such adoption is a statutory requirement. (c) A company cannot come into existence unless it is incorporated in accordance with the provisions of the Companies Act. A company cannot exercise powers unless the company follows the statutory provisions. The provision in the Registration Act requires registration of instruments. The provisions in the Stamp Act contain provisions for stamping of documents. The non-compliance with statutory provisions will render a document to be of no effect. (d) The source of the power for making rules and regulations in the case of corporation created by a statute is the statute itself. (e) A company incorporated under the Companies Act is not created by the Companies Act but comes into existence in accordance with the provisions of the Act. It is not a statutory body because it is not created by the statute. It is a body created in accordance with the provisions of the statute. 2.23 In Pradeep Kumar Biswas vs. Indian Institute of Chemical Biology (2002) 5 SCC 111 the ....
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....ng upon every authority I shall presently explain what the word 'authority' means upon every authority which has got either the power to make laws or the power to have discretion vested in it. Therefore, it quite clear that if the Fundamental Rights are to be clear, then they must be binding not only upon the Central Government, they must not only be binding upon the Provincial Government, they must not only be binding upon the Governments established in the Indian States, they must also be binding upon District Local Boards, Municipalities, even village panchayats and taluk boards, in fact, every authority which has been created by law and which has got certain power to make laws, to make laws, or make byelaws." (e) While defining the use of 'includes' suggests what follows is not exhaustive, the definition is expansive of the meaning of the term defined. 2.25 The Honourable Court applying the aforesaid principles to the facts of the case of CSIR held that the 'CSIR' is not 'State' on the following basis: (a) The Government does not hold the entire share capital of CSIR. (b) The Government funding is about 70% and grant by Government of India is....
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....as under: "A government agency's conduct that is expressly or impliedly mandated or authorized by constitution, statute, or other law and that is carried out for the benefit of the general public." 2.29 The meaning of sovereign functions as per Ramanathan Aiyer's law lexicon: "Welfare measure also partake character of sovereign functions. Duty to provide telecommunication service is a sovereign function. Hence, it is not an industry. (SubDivisional Inspector of Post, Vaikari v. Theyyam Joseph, AIR 1996 SC 1271). [Industrial Disputes Act (14 of 1947), S. 2(j)]" 2.30 In K.V. Panduranga Rao vs. Karnataka Dairy Development Corporation 1993 SCC On Line Kar 243 (FB), it was held that the federation has undertaken and is exercising functions which were earlier discharged by the Government and which are public obligations of the State. Hence, the Federation as it is presently stands, is an agent and instrumentality of the State and is therefore a 'State' within the meaning of Article 12 of the Constitution. 2.31 From the above, it is submitted that the Assessee is carrying out governmental function. Therefore, the applicability of the defi....
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....pt the contention of the assessee. 10.4 According to Ld. D.R., the ld. AR has not provided any specific evidence to show that the Assessee is a State. His arguments are based on the Activity Book produced by him which mentions that it is established to forward the object of popularizing housing technology which was initiated by Ministry of Urban Development. The Governments promote and support various activities and certain kind of support will be provided to such entities to augment such objects of the Government. However, such entities /organizations/ concerns cannot be termed State just because they are established to take forward certain projects of the government. 10.5 Regarding reliance placed by the ld. AR the Ld. D.R. submitted that the case law relied upon by the ld. AR cannot be considered as a precedent to hold that the Assessee is a State as the facts are totally different. The decision is on a different pretext. It cannot be applied to Taxation Law. 10.6 In view of above, it is clear that the assessee is not a State but it is registered as a Society and hence it is to be treated as an AOP or Trust for the purpose of Taxation. 10.7 We have heard the rival su....
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....r business of any kind carried by or on behalf of the State Government. 9. It is true, as submitted by Sri Venugopal, that Clause (2) of Article 289 empowers the Parliament to make a law imposing a tax on income earned only from trade or business of any kind carried by or on behalf of the State. It does not authorize the Parliament to impose a tax on the income of a State if such income is not earned in the manner contemplated by Clause (2) of Article 289. This, to our mind, does not answer the question which arises for our consideration in this appeal. Clause (2) of Article 289 presupposes that the income sought to be taxed by the Union is the income of the State, but the question to be answered at the threshold is whether in terms of Clause (1) of Article 289, the income of the assessee/ Authority is the income of the State. Having regard to the provisions of the Bihar Industrial Areas Development Authority Act, 1974, particularly Section 17 thereof, we have no manner of doubt that the income of the assessee/ Authority constituted under the said Act is its own income and that the assessee/ Authority manages its own funds. It has its own assets and liabilities. It can sue....
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....smissed. 11. In the assessment year 2013-14 in ITA No.2089/Bang/2018 the assessee has raised ground with regard to the depreciation. 11.1 In this regard assessee through his written submissions, submitted as follows:- 9. As regards depreciation denied on the basis that Assessee gained double benefit up to earlier assessment years: [Ground No. 3] [For the AY 2013-14] 9.1 It is submitted that the Learned Commissioner (Appeals) is not justified in denying depreciation to the extent of Rs. 2,34,685/- on the basis that the Assessee gained double benefit upto earlier AY 2012-13. 9.2 In CIT vs. Rajasthan & Gujarati Charitable Foundation Poona [2018] 402 ITR 441 (SC), the Hon'ble Supreme Court held that depreciation is allowable as deduction even though expenditure incurred for acquisition of capital assets was treated as application of income for charitable purposes under section 11(1)(a). Further, it was held that it does not amount to giving double benefit to the assessee. 9.3 It is submitted that the Assessee relies on the below said decisions of various courts which reiterate that trust is eligible to claim depreciation on the basis of commerc....
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....o the IT Act by the Finance (No. 2) Act, 2014. The relevant extract is as under: 7.5 The second issue which had arisen was that the existing scheme of section 11 as well as section 10(23C) of the Income-tax Act provided exemption in respect of income when it is applied to acquire a capital asset. Subsequently, while computing the income for purposes of these sections, notional deduction by way of depreciation etc. was being claimed and such amount of notional deduction was not being applied for charitable purpose. As a result, double benefit was being claimed by the trusts and institutions. Therefore, these provisions were required to be rationalised to ensure that double benefit is not claimed and such notional amount does not get excluded from the condition of application of income for charitable purpose. 7.5.1 Accordingly, the Income-tax Act has been amended to provide that under section 11 and section 10(23C), income for the purposes of its application shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under these sections in the s....
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....imed as labourcess under the provisions of section 43B of the Act: {Ground No. 4.1 & 4.2} [For the AY 2013-14] 10.1 It is submitted that assessee claimed deduction of labourcess amounting to Rs. 4,98,427/- which was incurred but outstanding as on 31.03.2013. The said liability was paid to the credit of Central Government on 21.03.2014. 10.2 It is submitted that Learned Assessing Officer denied expenses claimed towards labourcess outstanding as on 31.03.2013 by invoking the provisions of section 43B of the IT Act. 10.3 It is submitted that action of Learned Assessing Officer is wholly unjustified in law. 10.4 It is submitted that the lower authorities have failed to appreciate the difference between application of income and claim of expenditure. 10.5 It is submitted that the lower authorities have misdirected themselves between application of income and computation of income on commercial principles. There are 2 steps in computation of income in the case of a charitable trust. First, computation of income on commercial principles and second, application of income so computed. 10.6 The income of the trust is to be computed on com....
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....ann.com 276 (Bang.-ITAT), The above said decision was relied in the case of Karnataka State Muslim Federation vs. DIT 2013-TIOL-973-ITATBang; * CIT vs. Institute of Banking Personnel Selection (IBPS) [2003] 264 ITR 110 (Bom.-HC); * CIT vs. Shri Gujrati Samaj, [2012] 204 Taxman 151 (MP)(Mag.); 10.10 It is submitted that provisions of section 11, 12 & 13 fall under Chapter III which deals with incomes which do not form part of total income subject to certain conditions. The provisions of section 43B fall under chapter IV-D which deals with computation of profits and gains from business or profession. The profits and gains from business or profession are computed under section 28. As per the provisions of section 29, income under the head profits and gains of business or profession is computed in accordance with the provisions of Section 28 to Section 43B. Therefore, the provisions of section 43B are relevant, if income is computed under the head profits and gains of business or profession and not under chapter III where the income is computed on commercial principles. 10.11 In CIT & another vs. Sri AdichunchanagiriShikshana Trust ITA No. 2....
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....ill have to be ascertained and if the assessee had accumulated more than twenty-five per cent., then the consequences contemplated by s. 11 will follow. The remand made by the Tribunal will, therefore, have to stand and the ITO will compute the income in the light of the above." 10.13 In ITO vs. Mother Theresa Educational Society [2016] 158 ITD 473 (Visakhapatnam - Trib.), it was held as follows: "In the present case on hand, the income of the assessee is eligible for exemption under sec. 11 of the Act by virtue of registration under sec. 12A. The income of any trust/society, enjoying exemption u/s 11, is exempt from tax, subject to certain conditions. If, such conditions are fulfilled, the whole income of such trust is exempt from tax. The concept of computation of income under section 11 is real income concept, which is computed on the principles of real income generated from property held under trust and not notional income like under other provisions of the Act. Section 11(1)(a) provides for application of income for charitable purpose, therefore, the question of application of income arise only when income is available for application. If any expenditure is d....
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....gains of business or profession. This provision does not relate to computation of income but only determination of amount of application. As held in CIT vs. Rajasthan And Gujarati Charitable Foundation (2018) 402 ITR 441 (SC) there is a difference between computation of income and application of income. 10.16 Even otherwise, the aforesaid Explanation does not deal with section 43B. Further, the said Explanation is effective only from AY 2019-20 onwards. In this regard, He relied on the decision in CIT & another vs. Sri AdichunchanagiriShikshana Trust ITA No. 209 of 2010/ TS-56-HC-2019(KAR), dated 07.01.2019." 12.2 The Ld. D.R. relied on the order of the lower authorities. 12.3 We have heard the rival submissions and perused the materials available on record. We have gone through the section 43B of the Act. As per this Act, certain payments could be claimed as expenses in the year in which they have been paid and not in the year in which the liability to pay such sum was incurred. In other words, certain statutory expenses are allowed to be claimed in the year of payment only. In the case of this payment of Rs.4,98,427/-, it has not been paid within the due date of fi....
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....such things and to perform all such acts as may be necessary or appropriate for the achievement of any of all the above objects." 13.2 However, the assessee carried out the activities in the field of civil contract, where the assessee has undertaken following activities:- 1. Concretizing of Roads 2. Road repairs 3. Fixing of interlock blocks 4. Repairs to Footpath & Drainage 5. Building repairs 6. Tiles fixing 7. White Washing &colour painting 8. Construction of Compound wall 9. Blocked Drainage repairs 10. Construction of commercial buildings (Schools, Library, Commercial complex, etc) 11. Doing fencing work for forest department etc. 13.3 This is with reference to the Dakshina Kannada Nirmithi Kendra. Similar is the position with Udupi Nirmithi Kendra. As such, the AO in para 6.6 in the case of Udupi Nirmithi Kendra in AY 2016-17 observed as under:- "6.6 In view of the above, it is proved without any shadow of doubt that the actual activities carried out by the assessee are in the nature of pure commercial activity carried out by any Contractor. The work/activity carr....