TaxTMI 
TaxTMI 
TaxTMI 
2023 (8) TMI 766
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....ation Act, 1955 (on 27.10.2004) and registered u/s. 12AA of the Act as a charitable trust, is entitled to exemption u/s. 11 thereof in view of the amended section 2(15), i.e., by Finance Act, 2010 w.r.e.f. 01.4.2009, which reads asunder: "Definitions 2. In this Act, unless context otherwise requires,- (15) "Charitable purpose" includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility: Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any services 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; Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is ten lakh rupees (*) or less in the previous year;" [(*)] enhanced to twenty-five lakh rupees from AY 2012-13 onwards] The proviso stands substituted by Finance ....
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....isaged to be created by enjoining private sector participation, including through joint ventures. Further, Infopark area, Kochi was declared as an industrial area by GoK in April, 2010. The basis of the denial of it's claim for exemption by the Revenue is that the activity of letting built-up space and provision of amenities, the principal activity undertaken by the assessee in pursuance of it's objects, though otherwise qualifying as 'advancement of an object of general public utility' and, thus, a charitable purpose, is no longer so in view of the proviso to sec.2(15). 3.2 The second issue arising in the instant appeals is if depreciation is to be deducted in computing income liable for application for charitable purpose inasmuch as the cost of the capital assets, on which the same stands claimed, had already been allowed in full by way of application of income on the deployment of funds on their acquisition. The same, though a part of the statute w.e.f. AY 2015-2016 [s.11(6)] inasmuch as it amounts to a double relief, stands disapproved by the Hon'ble Apex Court in CIT v. Rajasthan and Gujarathi Charitable Foundation [2018] 402 ITR 441 (SC), so that no disallowance thereof ....
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....d by the recent decision by the Hon'ble Apex Court in Asst. CIT v. Ahmedabad Urban Development Authority [2022] 449 ITR 1(SC), placing a copy thereof on record. No assistance, however, from the parties, i.e., as to how the given activity/s and the assessee's modus operandi would stand to be considered, or require being understood, in light of the said decision, was forthcoming from the parties. This, despite this being precisely the reason the instant appeals, heard initially by the Tribunal on 31/01/2023, were released for hearing on the applicability of the said detailed judgment. The Hon'ble Apex Court having however held, in relation to a class/category of assessees, that provision of goods or services at cost or on a nominal mark-up basis, would not ipso facto amount to a consideration within the meaning of proviso to sec.2(15), the assessee was called upon by the Bench to place on record the statement of its gross receipts and income from year to year, and which was accordingly done, and the hearing, accordingly, closed. 4.4 The Hon'ble Apex Court has in Ahmedabad Urban Development Authority (supra), upon analyzing the words "cess, fee, or other consideration" in proviso....
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....entities), etc.; (b) While carrying on of such activities to achieve such objects (which are to be discerned from the objects and policy of the enactment; or in terms of the controlling instrument, such as memorandum of association etc.), the purpose for which such public GPU charity, is set-up - whether for furthering the development or a charitable object or for carrying on trade, business or commerce or service in relation to such trade, etc.; (c) Rendition of service or providing any article or goods, by such boards, authority, corporation, etc., on cost or nominal mark-up basis would ipso facto not be activities in the nature of business, trade or commerce or service in relation to such business, trade or commerce; (d) where the controlling instrument, particularly a statute imposes certain responsibilities or duties upon the concerned body, such as fixation of rates on pre-determined statutory basis, or based on formulae regulated by law, or rules having the force of law, setting apart amenities for the purposes of development, charging fixed rates towards supply of water, providing sewage services, providing food-grains, medicines, and/or retaining monies in deposits o....
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....other costs plus a small proportion for provision) - such amounts are not consideration towards trade, commerce or business, or service in relation thereto. However, amounts which are significantly higher than recovery of costs, have to be treated as receipts from trade, commerce or business. It is for those amounts, that the quantitative limit in proviso (ii) to section 2(15) applies, and for which separate books of account will have to be maintained under other provisions of the IT Act. (emphasis, supplied) 4.5 The assessee's - a self-governing body, case, quite clearly, falls under the latter category of cases, i.e., of entities engaged in providing other than essential services. The assessee's sole activity, and inspite lapse of a number of years, continues to be restricted to provision, in a systematic and organized manner though - being in fact not feasible otherwise, i.e., on the scale and in the manner it is to be pursued, of builtup space for housing IT/ITES units at the park developed (or being developed) by it, including provision for incidental services, viz., water, electricity, etc. -- the consumption cost of which though is met by the unit concerned, air conditioni....
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....tion by the Hon'ble Apex Court; the bunch of appeals decided in Ahmedabad Urban Development Authority (supra) including some similar cases, which we reproduce as under: 253.....D. Trade promotion bodies Bodies involved in trade promotion (such as AEPC), or set up with the objects of purely advocating for, coordinating and assisting trading organisations, can be said to be involved in advancement of objects of general public utility. However, if such organisations provide additional services such as courses meant to skill personnel, providing private rental spaces in fairs or trade shows, consulting services, etc. then income or receipts from such activities, would be business or commercial in nature. In that event, the claim for tax exemption would have to be again subjected to the rigors of the proviso to Section 2(15) of the IT Act. E. Non-statutory bodies E.1. In the present batch of cases, non-statutory bodies performing public functions, such as ERNET and NIXI are engaged in important public purposes. The materials on record show that fees or consideration charged by them for the purposes provided are nominal. In the circumstances, it is held that the said two asse....
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....plus % to turnover 2008-09 2009-10 8,91,68,222 9,76,547 9,01,44,769 5,25,76,865 79,14,551 8.88 6,04,91,416 67.10 2009-10 2010-11 9,86,57,022 17,80,875 10,04,37,897 5,02,78,032 1,48,39,831 15.0 6,51,17,863 64.83 2010-11 2011-12 11,32,29,712 25,68,017 11,57,97,729 4,91,85,724 1,79,63,217 15.8 6,71,48,941 57.98 2011-12 2012-13 20,26,25,731 22,00,466 20,48,26,197 11,98,34,273 45,73,086 2.26 12,44,07,359 60.73 2012-13 2013-14 29,05,64,628 17,30,364 29,22,94,992 13,20,16,767 2,46,44,599 8.48 15,66,61,366 53.59 2013-14 2014-15 33,34,15,598 12,46,945 33,46,62,543 13,96,44,898 2,07,39,685 6.22 16,03,84,583 47.92 2014-15 2015-16 38,12,38,355 18,97,255 38,31,35,610 14,66,71,112 78,10,586 2.05 15,44,81,698 40.32 2015-16 2016-17 44,81,58,011 33,64,195 45,15,22,206 17,54,42,421 (44,22,577) (0.99) 17,10,19,844 37.87 2016-17 2017-18 47,76,13,029 97,45,036 48,73,58,065 25,55,35,337 (8,49,29,663) (17.7 17,06,05,674 35.00 2017-18 2018-19 53,11,16,585 15,31,32,588 68,42,49,173 31,08,69,716 63,81,782 1.20 31,72,51,498 46.36 2018-19 2019-20 61,54,48,892 18,10,97,975 79,65,46,867 30,12,19,545 9,73,....
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....lly fixed or, atleast, largely so. This, to us, appears to be the case in the instant case. The Revenue states of the assessee charging lease rent at the market rate. Though this has been it's consistent stand, there has been no rebuttal thereof by the assessee at any stage. The assessee before us per its argument notes states that it is not so. This is however not supported by any facts and figures. The assessee has in fact during hearing admitted to charging rent even for parking space and, further, interest on delayed payment of rent. It is, thus, clearly operating on a commercial basis. Lower profit for a particular year could thus have its reasons specific to that year, viz. low off-take, increased costs, etc., and would not detract from the fact that the assessee is operating on a commercial basis. Though extremely relevant, we, in view of the foregoing, are not solely moved by the profit rate for a particular year, but, in view of the inconsistent behavior and unexplained variation therein, guided more by the fact of the assessee operating in a commercial environment, on commercial lines, charging lease rent to the industrial units at the going market rate/s. If that does no....
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....at a lease, which envisages charge of consideration over an extended time in future, on cost basis is inconsistent with the imperatives of such an activity. And to think that the assessee is providing lease even on 99 year lease basis! We may further add that the profit reported is after depreciation, which we observe as material. Sure, capital to the extent deployed in fixed assets, is subject to depreciation on their user, so that a capital allowance by way of depreciation is justified from an accounting standpoint; the income of a charitable trust being liable to be computed following the principles of commercial accounting. However, funds generated from operations are, to this extent, though not reported as profit in view of this charge, are yet available for growth. This is particularly so as capital infusion, which is by GoI and GoK, is toward capital and corpus, both of which are to be retained as part of the capital base of the assessee. Loans from financial institutions, being liable to be repaid, so that they may not continue to be a part of it's capital structure indefinitely, constitute an insignificant part thereof. In fact, such loans are usually on soft terms, and f....
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....entals are deployed to finance both creation of more built-up space, as per it's mandate, and which we observe to be at, besides Cochin, Thrissur, Ambalapuzha and Cherthala, as well as through charge of depreciation, sustain that existing. Further, we may clarify that this business is not a property held under trust, but one carried on the basis or by virtue of such property, being, for instance, 80 acres of land transferred from KINFRA; the capital infusion by GoI and GoK, etc. The income generated from it's business by the assessee, or, more precisely, the assets representing the same, again, is property held under trust inasmuch as there is no other activity, at least for the present, by the assessee-society. The same qualifies as an eligible business u/s. 11(4A), and it's income assessable as business income. The head of income under which the income of a charitable institution, where taxable, would stand to be assessed under the Act, cannot even otherwise be determinative of the matter. Vetting the financial summary provided by the assessee, which finds reproduction as Table A above, reveals it to have excluded, in arriving at the surplus, the interest earned by it on it's ca....