TaxTMI 
TaxTMI 
2024 (7) TMI 1646
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.... rate charged compared to its borrowing rates thereby disallowing / withdrawing the claim of exemption u/s. 11 of the Act. For this, assessee has raised various grounds numbering 1 to 18, which are argumentative, factual and case law citations and hence, need not be reproduced. 3. Brief facts are that the assessee filed return of income for the relevant assessment year 2013-14 claiming exemption u/s. 11 of the Act at Rs. 76,36,477/- declaring 'nil' total income. Assessment was completed u/s. 143(3) of the Act after examining the aims and objects of the assessee and also examining the claim of assessee with regard to charitable activities, held that the assessee is carrying on micro-finance business in a commercial manner so as to earn profit and there is no iota of charity carried out by the assessee so as to continue enjoying exemption u/s. 11 of the Act. Therefore, the AO vide para 9 to 11 denied exemption u/s. 11 of the Act as under:- "9. The assessee is providing loans by association with various commercial banks by raising loans from them. Such kind of micro finance activity cannot be termed as charitable activity rather it is a business activity. In order to become a chari....
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....as also the Memorandum regarding Delegated Legislation - Rationalisation and Simplication Measures and a reference of extract from the Speech of the Minister of Finance on 29.02.2008 and reply of the Hon'ble Finance Minister to the Debate in the Lok Sabha on the Finance Bill, 2008, Circular issued by RBI for Section 25 companies engaged in Micro Finance Activities and also applicability of Sec. 13(8) of the Act. However, it is found from the perusal of the submission of the appellant that the appellant has failed to provide any specific counter comments on the main observation of the AO that it charged higher interest than the market rates which cannot be considered as an activity carried on by the assessee as charitable and for the benefit of the public. In the absence of any reasonable, cogent and valid arguments/contentions advanced by the appellant, I am unable to accept the grounds of appeal raised by the appellant and have no other option but to concur with the findings of the Assessing officer that the appellant has carried on its micro finance activity in a commercial line and it is not a charitable activity but an activity to expand a finance business by bringing in it....
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....e before AO as well as before CIT(A) has brought out how the assessee is doing charity. The ld.counsel pointed out the following charities carried out: i. Provides self-employment opportunities for women by providing them access to credit; ii. Reduces migration and poverty by providing them employment opportunities; iii. Provides capital for small entrepreneurs; iv. improves the well being of children as the families have income generation; v. Provides100% of its loan ONLY for Income generation activities; vi. Targets the scheduled castes, Schedule tribes, landless small and marginal farmers; vii. Offers dignity of life by freeing people from the clutches of moneylenders. viii. Does not charge any processing fees, Documentation charges and does not collect any collateral from the poor and provides loan at the door step of the borrower. ix. Does not offer multiple loans to the poor who borrow from us and helps prevents over indebtedness. x. Does not compound the interest or charge overdue interest or penal interest in any form. xi. The Directors work on an honorary capacity on the board of IMPACT and NO consideration is paid for. xii. has lent to 81% of the b....
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....ance sheet and accounts of the assessee for the year under consideration, it is found that the corpus fund for the year under consideration carry forwarded is Rs. 50,000/- at page 37 in the balance sheet. General fund that has been carried forwarded from the preceding assessment year is approximately Rs. 23.02 crores and the current year balance after adding the excess income over expenditure amounting to Rs. 5.74 crores approximately totals to Rs. 28.76 crores approximately. The assessee has been accumulating the income year by year by providing financial assistance to the beneficiaries of the self help group. Further from the balance sheet it is noted that assessee has obtained loans and advances from SDCC bank amounting to Rs. 15.51 crores approximately and the loans advanced to SHG is Rs. 38.60 crores approximately. This itself reveals that the entire money is sourced from corpus fund, general fund and loans and advances received by assessee during the year. 35. Coming to the objection of the Ld.DR that assessee has been charging interest at 15% as against 10% at which assessee itself pays interest, it is noted that the assessee does not demand any security towards the loans ....
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....ant purpose would not prevent the institution from being a charitable institution. It was further held that if the purpose of an institution is the advancement of an object of general public utility, it is that object and not its accomplishment which must not involve the carrying on of any activity for profit. So long as the dominant purpose of the institution does not involve the carrying on of any activity for profit, it is immaterial how the money for achieving that purpose is found, whether by carrying on an activity for profit or not. The Hon'ble Supreme Court has emphatically clarified that the primary activity cannot be run for profit, once the primary activity is not run with profit motive the organization can have other activities which may generate profit. There is a fundamental difference between running the primary activity for profit and having incidental profitmaking activities. 38. To sum up, in our opinion, it is undisputed that the assessee was granted registration under s. 12A w.e.f. 8th July, 2004. The Department also accepted the returns for the last many years allowing exemption under s. 11. It is only for the asst. yr. 2017-18, the Department is taking a....
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.... financing activity is merely a money lending activity without any charitable object cannot be accepted. There is nothing on record brought by the Ld. DR or the authorities below that the objects of the assessee is not towards advancement of any other object of general public utility. As considered hereinabove, the various activities carried on by assessee by providing finances to the members of self help group reveals that it is working towards the alleviation of economically backward section more importantly the rural women folk who do not have any security to offer for availing loan. These women folk belong to low income households and the finances provided to such groups help them to provide education to their children, improve the household condition etc. In our considered opinion, the activity being charitable in nature towards general public utility cannot be equated with a money lending activity carried out in a corporate world. Therefore the decisions relied by the Ld.DR on this issue is factually different with the present facts of the assessee before us. The assessee therefore has the benefit of the decisions rendered by Hon'ble Supreme Court and Hon'ble Andhra Pradesh H....
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....commercial banks and by raising loans from them. The assessee is obtaining loan from various commercial banks at the rate of 12% to 14% and advancing loan to its customer or the so called power beneficiaries at 25.13% which is exorbitant rate. The AO noted that the rate charged by assessee from its poor customers or board beneficiaries, allegedly at 25.13% cannot be compared with m market rate and once it cannot be compared with market rate which is almost 12 to 14% or 15%, assessee's activity cannot be called charitable or for the benefit of poor. We noted that exactly identical issue was considered by Co-ordinate Bench of ITAT, Bangalore in the case of Sanghamitra Rural Financial Services, supra, wherein considering various case laws exactly on identical facts denied exemption u/s. 11 of the Act by observing in para 6.7 to 6.28 as under:- 6.7 In the present case, from the details given in the assessment order, it is seen that the assessee was charging interest @ 18% to 20% per annum from its clients. The assessee admitted that they were taking loan from commercial banks at an interest rate below 11.75% per annum for disbursing these loans. Therefore, the difference between thes....
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....ure incurred by the micro finance institutions. Even going by the Malegam Committee Report of the RBI, the interest charged by the assessee is 18% to 20% which is very high. Hence, the activity carried on by the assessee cannot be considered as charitable so as to grant exemption u/s. 11 of the Act. 6.11 The Ld. AR relied on various judgments of Tribunals and Supreme Court. The Ld AR relied on the decision of the ITAT, Visakhapatnam in the case of Spandana (Rural & Urban Development Organisation) vs. ACIT in ITA No. 364/Vizag/2009 dated 17/02/2019 which is related to grant of approval u/s. 12AA of the Act. In this order, the Tribunal considered the micro finance activities as charitable activities as the assessee was charging interest at 15% per annum. In the order of the ITAT, Delhi Benches in the case of Disha India Micro Credit vs. CIT in ITA No. 1374/Del/2010 dated 28/01/2011, the issue was related to approval u/s. 12AA of the Act and not with regard to granting of exemption u/s. 11 of the Act while passing assessment order u/s. 143(3) of the Act. 6.12 The assessee relied on the following judgements which we will consider one by one. (A) The Bangalore Bench of the Tribuna....
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....is with the assessee trust. The facts and circumstances show that the assessee is carrying out its charitable activities and the surplus funds are used for charitable purposes. So, the CIT (A) was justified in holding that the assessee is engaged in charitable activities and qualify for exemption under section 11." (B) Further, the ld. A.R. relied on the decision of the Delhi Bench of the Tribunal in the case of Disha India Micro Credit v. CIT 120111 Tax Pub (DT) 873 (Del- Trib)/38(II) ITCL 301, where the assessee was a micro finance company registered under section 25 of the Companies Act, 1956. It had applied for registration under section 12A in Form No. 10A. The assessee's application for registration under section 12A was rejected by the CIT. The CIT had observed that the various clauses of the Memorandum of the company would clearly show that the assessee had a motive of profit also, along with the stated motive of service to the poor and needy people as claimed by the assessee. He further observed that such profit even if to be ploughed back as claimed by the assessee, liable to income-tax under IT Act. It was held that merely because there was a surplus from the activ....
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....der surplus to the assessee to hold a view that the assessee is conducting the business of earning Interest." It was again noted that the Hon'ble ITAT, Cuttack Bench, Cuttack again has been consistent with the various other rulings, in both the above cases the facts and circumstances did not reflect surpluses made from MFI activity to justify profit intent. The observation, "the interest received is not beyond the permissible market rates in order to render surplus to the assessee to hold a view that the assessee is conducting the business of earning interest" The Judgment of the Hon'ble ITAT, Cuttack in these two cases makes it clear that two conditions should be complied with; firstly, the rate should be comparable with the market and secondly, it should not be such that it generates profit at the cost of the beneficiaries. "'] The appellant has cited the Supreme Court ruling in CIT v. Thanthi Trust [2001] 247 ITR 785. In this case the Hon'ble Apex Court held that income from incidental business was permissible if the amount was applied for charitable purposes. The appellant has totally misunderstood the ruling and nowhere it suggests that the primary charitable activ....
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....y with the predominant intention of making profit and no activity other than microfinance activity was conducted by the assessee in the nature of charity. Therefore, the facts of that case is not similar to the facts of the present case before us. (E) Hon'ble Supreme Court in the case of Surat Art Silk Cloth Mfrs. Association cited (supra) has held that main test to find out whether an institution is run for charitable purpose is to find out what is the dominant or primary purpose of the assessee. It was observed by Hon'ble Supreme Court that it is necessary to analyse whether the purpose was to promote commerce and trade in Art Silk etc. or the advancement of the object of the general public utility. It was also held if the primary or dominant purpose of an institution is charitable, another object which by it may not be charitable but which is merely ancillary or incidental to the dominant purpose would not prevent the institution from being a charitable institution. It was further held that if the purpose of an institution is the advancement of an object of general public utility, it is that object and not its accomplishment which must not involve the carrying on of any activi....
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....at the assessee has charged Rs. 200/- - Rs. 300/- over and above the interest rate of 14%. Accordingly he has held that the effective rate of interest would work out to 17% to 18%. As contended by Ld A.R, the AO has not given the basis for observing that the effective rate of interest would work out to 17% to 18%. Hence, we are of the view that it is merely a surmise entertained by the AO. The question is whether the rate of interest of 14% charged by the assessee is an exorbitant rate?. The Ld A.R submitted that the assessee is constrained to charge interest at a higher rate than the cost of borrowing, so that it can absorb administrative and allied expenses and also possible defaults by the borrowers, which is an inherent risk in the financing activities. The Ld A.R submitted that the assessee has charged interest @ 14%, which is normal interest charged by commercial banks for lending during the period under consideration. Accordingly the ld A.R has contended that the rate of interest charged by the assessee cannot be considered to be exorbitant. We find merit in the said contentions. As submitted by Ld A.R, the rate of interest of 14% is the normal rate charged by the banks for ....
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.... by the Tribunal that assessee has been utilizing income derived from property held under the trust for its charitable activities, as such exemption u/s 11 of the Act cannot be denied. It was also noted by the Tribunal that profit motive was absent and the activities of that assessee cannot be considered as involving trade, commerce or business. But in the case of present assessee, the ld. AO clearly brought on assessee is charging interest at 18 to 20% after borrowing the same @ 10 to 11.75% and made huge profit from year to year, after analyzing the facts of the assessee's case and his finding is not surmice or conjecture. (H) The ld. A.R. placed further reliance on the decision of the Visakhapatnam Tribunal in the case of SPANDANA (Rural and Urban Development Organisation) in ITA No. 364/Vizag/2009 dated 17.2.2010, wherein it was held; "19. In the aforesaid case assessee was mainly engaged in micro financing activities and the money was lent to its project members at a rate of interest higher than that of the rate of interest the loan was borrowed. In that case also assessee has borrowed the funds either from the bank or other financial institutions and was lent to the proje....
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....ount by the assessee while granting a loan to the poor woman. Suppose a loan was given to some of the poor women and they would not be in a position to repay the loans what the assessee will do. He cannot enforce the recovery of the loan by other means and ultimately he has to write off the loan. Meaning hereby, in these types of micro finance activities most of the times the assessee could not recover the loans granted to the poor women as no one stood as the guarantor for them at the time of advancement of the loan. No doubt assessee is that charging higher rate of interest from the poor women or the downtrodden or socio-economically weaker section of the society. The reason behind is that most of the time the assessee could not recover the loan from these poor and weaker sections of the society, besides incurring heavy expenditure In maintaining the organised sector. These poor and weaker sections happily agreed with the assessee for loan at higher rate, because they could not get advancement of certain funds by the assessee to other organisations who were also engaged in similar type of activities are concerned, by advancing a fund on interest to other organisations, assessee h....
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....ightly upheld the charitable character of the assessee as there was no reason to believe that the assessee was benefiting at the cost of the beneficiaries and there was profit intent. Again, the fact and circumstances of this case do not provide any credible support to the claim of the assessee regarding the charitable character of activities due to its high profit margin maintained consistently for several years. 6.12 Further, specifically in the case of Navodaya Grama Vikas Charitable Trust cited (supra) relied by the assessee counsel, there was a specific finding by the Tribunal that funds are utilized to the benefit of the poor and also carrying out various charitable activities and assessee was running various activities like animator activities, donations, payment of Health insurance premiums, Shantwana training, Uniform giving, SHG formation, Sahaya Dhana, Insurance premium payment, Scholarship awarding for students in rural area to make the poor ladies aware of the scheme and to encourage their participation, which are the principal objects of the assessee trust. Further, there was a clear finding that assessee is carrying out its charitable activities and surplus funds a....
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....ral area to make the poor ladies aware of the scheme and to encourage their participation as the principle objects of the trust. All these things need some expenditure. The facts and circumstances show that the assessee is carrying out its charitable activities and the surplus funds are used for charitable purposes." 6.13 However, in the present case, surplus funds are not at all used for charitable purpose and used for carrying out further microfinance activities as such ratio of that order cannot be applied. 6.14 Further, the High Court of Bombay ruling in the case of Commissioner of Income-tax v. Agricultural Produce and Market Committee [2007] TAXMAN 359 (BOM.). In this ruling, it was held that even if there was some profit in activity carried on by trust/institution, so long as dominant object was of general public utility, it cannot be said that said trust/ institution is not established for charitable purposes. The case was at the stage of 12AA registration where it was held that existence of some profit or charging of fees could not be a reason for denying 12AA registration as long as the dominant objects remained charitable. In this case the court relied on the Supreme....
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.... activity may have profit but cannot have profit intent to benefit out of the beneficiaries. 6.17 In the case of ITO (Exemption), Madurai Vrs. Kalanjiam Development Financial Services reported in [2015] 64 taxmann.com 255, the assessee is a micro finance company registered u/s. 25 of Company Act and also u/s. l2AA of IT. Act, 1961 operating as a financial Intermediary between the banks and SHGs. The main objective of the company Is to bridge the gap in microfinance to SHGs. The A.O. observed that the assesses company took credit facilities from different banks at interest rate up to 11% and charged interest from SHGs at much higher rate so much so that net profit out of the above operations was 20.4% in the F.Y.2009-10. The assessment was completed by assessing the income at Rs. 30,33,950/- by denying exemption u/s. 11 and 12 and by invoking provisions of sec.2(15) on the ground that the assessee was doing business of banking which fail under 4th Limb of Proviso to Sec.2(15) i.e. any other object of public utility. The CIT(Appeals) granted exemption u/s. 11 & 12 of the Act by holding that the assess is carrying on charitable activities u/s. 2(15) of the Act. The Revenue was in Ap....
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....d as charitable purpose right from the inception of the Act in 1961 till 1st April, 1984, when the words "not involving the carrying on of any activity for profit" were deleted. Thus the contention is that after 1st April, 1984, there is no allergy to profit and if the profit feeds charity, it stands cleared for exemption under s. 11 of the Act. 8.2 To analyse the scope and object of the amendment, we have gone through the "Budget Speech" of the Minister for Finance in the Finance Bill 2008, reported in (298 ITR (St.) 33 at page 65 "180 'Charitable purpose' includes relief of the poor, education, medical relief and any other object of general public utility. These activities are tax exempt, as they should be. However, some entities carrying on regular trade, commerce or business or providing services in relation to any trade, commerce or business and earning incomes have sought to claim that their purposes would also fall under 'charitable purpose'. Obviously, this was not the intention of Parliament and hence I propose to amend the Law to exclude the aforesaid cases. Genuine charitable organizations will not in any way is affected (Emphasis supplied). 8.3 The....
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.... amendment by incorporating proviso to section 2(15), the 4th limb as to the advancement of "any other object of general public utility" will no longer remain as charitable purpose, if it involves carrying on of: (a) any activity in the nature of trade, commerce or business, (b) any activity of rendering any service in relation to any trade, commerce or business for a cess or a fee or any other consideration, irrespective of the nature of use or application or retention of the income from such activity. 8.5 The first limb of exclusion from charitable purpose under cl. (a) will be attracted, if the activity pursued by the institution involves any trade, commerce or business. But the Situation contemplated under the second limb [cl. (b)J stands entirely on a different pedestal, with regard to the service in relation to the trade, commerce or business mentioned therein. To put it more clear, when the matter comes to the service in relation to the trade, commerce or business, it has to be examined whether the words "any trade, commerce or business" as they appear in the second limb of cl. (b) are in connection with the service referred to the trade, commerce or business pursued b....
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.... shall not apply in relation to any income of a trust or an institution, being profits and gains of business, unless the business is incidental to the attainment of the objectives of the assessee and separate books of account are maintained by such trust or institution in respect of such business. In the present case, there is no dispute on the fact that the assessee is carrying on the business of micro finance. The assessee is maintaining separate accounts for the above business activities. But, the crucial question is whether running of micro finance is a business incidental to the attainment of the objectives of the trust or not. By any stretch of imagination, it is not possible to hold that the business of micro finance is incidental to the above stated objectives of the assessee trust. Incidental" means offshoot of the main activities, inherent byproduct of principal activities. Activities to compliment and support the main objectives are not in the nature of incidental to the business. They are supporting activities, at the maximum. The genesis of incidental activities must be from the principal activities themselves. There cannot be one source for the principal activities an....
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....ec.11 of the Act. Accordingly, we are inclined to uphold the order of the AO and reverse the order of the CIT(A). 9. In the result, the appeal of the revenue is allowed." 6.18 Further, same view was taken by Cochin Bench of Tribunal in the case of Shalom Charitable Ministries of India Vs. ACIT in ITA Nos.79 & 80/coch/2017 & SP Nos.17 & 18/Coch/2017 dated 25.4.2018. 6.19 Further, in the case of Sreema Mahila Samity Vs. DCIT reported 167 ITD 420, wherein held as under: "Amendment came into force by the Finance Act 2008, wherein proviso was added to section 2(15) states that the advancement of any other object of general public utility shall not be charitable purpose if it involves carrying on "Amendment came into force by the Finance Act 2008, wherein proviso was added to section 2(15) states that the advancement of any other object of general public utility shall not be charitable purpose if it involves carrying on ITA Nos.744 & 745/Bang/2023 Sanghamitra Rural Financial Services, Bangalore Page 48 of 54 any activity in the nature, trade, commerce or bus/ness or any activity of rendering in services in relation to trade, commerce or business. Therefore, the exemption is not a....
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.... AO and the CIT-A opined that the assessee conducted its activities on commercial line in the nature of trade, -commerce or business. Therefore, they rightly denied the exemption by following statutory provisions. Tribunal do not find any infirmity in the impugned order of the CIT-A. Tribunal find that the ratio laid down by the decisions as relied upon by the Id.AR are not applicable to the facts of this case. Tribunal uphold the same. This issue of the assessee is dismissed. (Para 23) Conclusion: Where assessee conducted its activities on commercial line in nature of trade, commerce or business, therefore, addition made on account of income from micro finance justified." 6.20 Further, in the case of Janalakshmi Social Service Vs. DIT (Exemptions) reported in 27 CCH 618 (2008) (Bang.), wherein held that "where assessee being a company registered u/s 25 of the Companies Act, was engaged in providing microfinance to traders charging interest at 25% on commercial lines, there being no charitable activity, it is not entitled to registration u/s 12AA of the Act." 6.21 Further, in the case of ACIT Vs. Grama Vidiyal Trust reported in 180 TTJ 559 (2016) (Chny), wherein held as under....
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....ets attracted if the organisation is engaged in business activities or the charitable activities are masked commercial activities. The explanatory Circular No. 11/2008 [F.No.l34/34//2008-TPL on proviso to Section 2(15) has provided the clarification regarding its applicability. It provides that the entities which run commercial activities under the mask of charitable activities are also covered. However, it was seen that a number of entities who were engaged in commercial activities were also claiming exemption on the ground that such activities were for the advancement of objects of general public utility in terms of the fourth limb of the definition of charitable purpose. 6.24 In our opinion, whether the assessee has for its object the advancement of any other object of general public utility is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service In relation to trade, commerce or business, it would not be entitled to claim that its object is charitable purpose. In such a case, the object of general public utility will be only a mask or a device to hide the true purpose which is trade, commerce or bu....
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....of services which include, in addition to the provision of credit, many other services such as savings, insurance, money transfers, counselling, etc. 2.2. For the purposes of this report, the Sub-Committee has confined itself to only one aspect of Microfinance, namely, the provision of credit to low income groups. 2.3 The provision of credit to the Microfinance sector is based on the following postulates: a) It addresses the concerns of poverty alleviation by encouraging the poor to work their way out of poverty. b) It provides credit to that section of society that is unable to obtain credit at reasonable rates from traditional sources. c) It enables women's empowerment by routing credit directly to women, thereby enhancing their status within their families, the community and society at large. d) Easy access to credit is more important: for the poor than cheaper credit which might involve lengthy bureaucratic procedures and delays. e) The poor are often not in a position to offer collateral security to the credit. f) Given the imperfect market in which the sector operates and the small size of individual loans, high transaction costs are unavoidable. However, wh....
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.... present case, which has been brought out in the earlier paragraphs of this order. It is also noted that nothing has been spent by the assessee, which could be considered in the nature of charity and therefore, the benefit under the proviso to section 2(15) of the Act is not available to the assessee. The facts of the case relied by the ld. A.R. therefore, does not help the present facts of the case in hand. 6.28 In view of this, we do not find any merit in the argument of the ld. A.R. to support various grounds raised by the assessee. Accordingly, all the grounds of assessee are dismissed and appeals of the assessee are dismissed. 7.2 There is a concurrent finding by AO as well as CIT(A) that the activities carried on by the assessee cannot be classified under any of the specific activities of relief of the poor, education or medical relief and held that the correct way to express the nature of activities carried on by the assessee is that the assessee is carrying on advancement of any other object of general public utility and the case of the assessee is hit by the proviso to section 2(15) of the Act, which reads that advancement of any other object of general public utility s....
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.... its overall receipts. ............... ............... ............... 253. In view of the foregoing discussion and analysis, the following conclusions are recorded regarding the interpretation of the changed definition of "charitable purpose" (w.e.f. 01.04.2009), as well as the later amendments, and other related provisions of the IT Act. A. General test under Section 2(15) A.1. It is clarified that an assessee advancing general public utility cannot engage itself in any trade, commerce or business, or provide service in relation thereto for any consideration ("cess, or fee, or any other consideration"); A.2. However, in the course of achieving the object of general public utility, the concerned trust, society, or other such organization, can carry on trade, commerce or business or provide services in relation thereto for consideration, provided that (i) the activities of trade, commerce or business are connected ("actual carrying out..." inserted w.e.f. 01.04.2016) to the achievement of its objects of GPU; and (ii) the receipt from such business or commercial activity or service in relation thereto, does not exceed the quantified limit, as amended over the years (Rs. ....
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.... receipts. This is in line with the larger bench judgments of this court in Ramtanu Cooperative Housing Society and NDMC (supra). B.2. However, at the same time, in every case, the assessing authorities would have to apply their minds and scrutinize the records, to determine if, and to what extent, the consideration or amounts charged are significantly higher than the cost and a nominal mark-up. If such is the case, then the receipts would indicate that the activities are in fact in the nature of "trade, commerce or business" and as a result, would have to comply with the quantified limit (as amended from time to time) in the proviso to Section 2(15) of the IT Act. B.3. In clause (b) of Section 10(46) of the IT Act, "commercial" has the same meaning as "trade, commerce, business" in Section 2(15) of the IT Act. Therefore, sums charged by such notified body, authority, Board, Trust or Commission (by whatever name called) will require similar consideration - i.e., whether it is at cost with a nominal mark-up or significantly higher, to determine if it falls within the mischief of "commercial activity". However, in the case of such notified bodies, there is no quantified limit in ....
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....e 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 assessee's are driven by charitable purposes. However, the claims of such non-statutory organisations performing public functions, will have to be ascertained on a yearly basis, and the tax authorities must discern from the records, whether the fees charged are nominally above the cost, or have been increased to much higher levels. E.2. It is held that though GS1 India is in fact, involved in advancement of general public utility, its services are for the benefit of trade and business, from which they receive significantly high receipts. In the circumstances, its claim for exemption cannot succeed having regard to amended Section 2(15). However, the Court does not rule out an....