TaxTMI 
TaxTMI 
2025 (2) TMI 1668
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....s, consultancy income was incidental to the assessee's activities as per MOA and was towards the relief of poor and not in the nature of business for profit. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the decision in the case of Thanthi Trust 247 ITR 785 (SC) applied to the assessee's case and allowing the exemption u/s. 11 without appreciating the amendment in the definition of 'charitable purpose' as per section 2(15) of the Income Tax Act, 1961 w.r.t. the activities falling under the category of 'advancement of any other object of general public utility'. 4. The appellant craves leave to add, to alter or amend any ground of appeal raised above at the time of hearing." 3. Brief facts of the case is that the assessee is a resident Trustregistered u/s 12A (a) of the I.T Act, since 23.06.2010. The assessee (APTDC)is promoted by Confederation of Indian Industry (CII), Government of Andhra Pradesh (GoAP)& Technology Information Forecasting and Assessment Council (TIFAC), is an autonomous society, registered under the Andhra Pradesh Public Societies Registration Act. APTDC has been e....
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....tions, Registration of Gl for Narayanpet, SiddipetGollabama, Mangalagiri and Venkatagiri Sarees. 7. The Society commercial activities involve providing services for protection of all forms of Intellectual property Rights (IPR) and assist parties with filing, prosecution and registration of Patents, Trade Marks, Designs on Geographical Indications (GI) and Copyrights in India and Abroad. The service is provided by the network of IP EXPERTS (Law firms across the country) and also in-house IP experts. It is claimed that: 7.1 To recover costs and overheads, parties who are supported are charged for providing such services. At times, the fees are highly subsidised for parties who cannot afford. Only fees paid to the government are charged. 7.2 Workshops & Seminars are organised as a platform for representatives of various Government Departments, Entrepreneurs, Scientists, Research Scholars, Experts, University students etc; from India and abroad, who participate in the deliberations during the various sessions. In order to recover the cost of organising such programs, the society receives funds in the form of Sponsorships from Industry & Government as well as Delegate fees. ....
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....d the assessee keeps its share for such services rendered. It does not have the expertise to implement the various project w.r.t the Waste Management activity as claimed to have been done by it. Further it has not been able to establish that the activities w.r.t to intellectual property rights has been for the alleviation of poverty and benefited any particular class of poor people, through any concrete evidence. 10. The AO further noted that the assessee is showing amount receivable from different persons including private Ltd companies year after year in its balance sheets. For eg. in the balance sheet for the year ended 31.03.2007 the amount receivable are shown at Rs. 36,53,157/-. In the balance sheet for 31.03.2008, such receivable are Rs. 29,27,503/- in the balance sheet under consideration i.e., as on 31.03.2009 it is shown at Rs. 40,37,008/- and in the balance sheet as on 31.03.2010 receivables are shown at Rs. 70,14,764/- Another striking feature is that against some of the persons like Ram Energy Pvt.Ltd. (Rs. 200,000/-); Thermal System (Hyderabad) P.Ltd.) (Rs. 3,00,000/-) Microsoft Corporation India Pvt. Ltd. (Rs. 2,00,000/-) Mr. Fredrik Lorence (Rs. 400435/-) Ms. Tid....
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....or under section 10(23C) of the Act if they carry on commercial activities. Whether such an entity is carrying on an activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of the activity. 3.1 There are industry and trade associations who claim exemption from tax u/s.11 on the ground that their objects are for charitable purpose as these are covered under 'any other object of general public utility. Under the principle of mutuality, if trading takes place between persons who are associated together and contribute to a common fund for the financing of some venture or object and in this respect have no dealings or relations with any outside body, then any surplus returned to the persons forming such association is not chargeable to tax. In such cases, there must be complete identity between the contributors and the participants. Therefore, where industry or trade associations claim both to be charitable institutions as well as mutual organizations and their activities are restricted to contributions from and participation of only their members, these would not fall under the purvi....
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....elief of the poor in the aims and objectives. The ld DR vehemently argued that the amendment in section 2(15) was brought with the purpose of bringing such kind of assessee who are doing business in the garb of activities for the poor. The ld DR submitted that the agreement with Green Earth Associates for setting up bamboo wood manufacturing unit was cancelled by the assessee which shows that the society had not executed any activity for upliftment of rural population far less promoting "relief to the poor". 15. Per contra, the ld counsel of the assessee explained that the term "relief to poor" has to be understood in a wider perspective. For instance, it is not necessary that the object should be for the betterment of all the poor people living in a particular country or province. It would be sufficient if the objects are for the benefit of a section of the public as distinguished from individuals. It may be noted that in order to become charitable, the relief should be for a section of the community which could be well defined and identified by some common quality of public nature. 16. The ld AR further stated that since the trust is formed with a view to provide help and g....
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....f all forms of intellectual Property Rights (IPR) and assists parties with filing, prosecution and registration of patents, trade- marks, designs and copy rights. 20. Admittedly, the society maintains separate books for its commercial activity as required u/s.11(4A) of the Act. We find that the assessee has asserted that its commercial activities are undertaken to fund its rural activities which aim to provide help and guidance to the villagers where funds mobilization for small artisans is always in deficit as Govt grants are never adequate to meet the expenditure. Admittedly, till 31 March 2009, Financial support to the tune of Rs. 11,45,430/- has been provided out of commercial activity to meet commitment for its rural activity. We find that the AO has considered the intellectual property right activity as purely business activity and not incidental to the attainment of the objectives of the society. 21. We note that the issue of charitable activities and its taxation has been adjudicated by the Hon'ble Supreme Court in the case of ACIT (Exemptions) vs. Ahmedabad Urban Development Authority, (2022) 449ITR1(SC), wherein the Hon'ble Supreme Court has laid down certain princi....
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....ntitative standard - i.e., income (fees, cess or other consideration) derived from activity in the nature of trade, business or commerce or service in relation to these three activities, should not exceed the quantitative limit of Rs. 10,00,000 (w.e.f. 01.04.2009), Rs. 25,00,000 (w.e.f. 01.04.2012), and 20% (w.e.f. 01.04.2016) of the total receipts. Lastly, the "ploughing" back of business income to "feed" charity is an irrelevant factor again emphasizing the prohibition from engaging in trade, commerce or business. 168. If one understands the definition in the light of the above enunciation, the sequitur is that the reference to "income being profits and gains of business" with a further reference to its being incidental to the objects of the Trust, cannot and does not mean proceeds of activities incidental to the main object, incidental objects or income derived from incidental activities. The proper way of reading reference to the term "incidental" in Section 11(4A) is to interpret it in the light of the sub-clause (i) of proviso to Section 2(15), i.e., that the activity in the nature of business, trade, commerce or service in relation to such activities should be condu....
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....e an exact equivalent, such mathematical precision being impossible in the case of variables, - may be a little surplus is left over at the end of the year - the broad inhibition against making profit is a good guarantee that the carrying on of the activity is not for profit". 171. Therefore, pure charity in the sense that the performance of an activity without any consideration is not envisioned under the Act. If one keeps this in mind, what Section 2(15) emphasizes is that so long as a GPU's charity's object involves activities which also generates profits (incidental), or in other words, while actually carrying out the objectives of GPU, if some profit is generated), it can be granted exemption provided the quantitative limit (of not exceeding 20%) under second proviso to Section 2(15) for receipts from such profits, is adhered to. 172. Yet another manner of looking at the definition together with Sections 10(23) and 11 is that for achieving a general public utility object, if the charity involves itself in activities, that entail charging amounts only at cost or marginal mark up over cost, and also derive some profit, the prohibition against carrying o....
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....of mid-day meal was supplied by the government. The assessee society claimed that it only obtains nominal charges for preparation of mid-day meals. The assessee's claim for registration was rejected on the ground that it was involved in commercial activity. Upon appeal, the ITAT agreed with the assessee that supply of mid-day meals did not constitute business or commerce and that it promoted the objects of general public utility. 249. The revenue in its appeal contends that the assessee's only activity for the relevant year was supply of mid-day meals to primary schools. This was not relatable to any object of the society. The assessee's contention is that the state ordinarily would have carried on the activity of supply of mid-day meals. Yet, nevertheless it outsourced its activity to an outside agency like the assessee which performed it for nominal charges. 250. This court is of the opinion that there is no clarity with respect to whether the activity of supplying mid-day meals falls within the objects clause of the assessee society. The order of the ITAT as well as the High Court disclosed that the assessee's objects involved maintenance of hea....
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....only when the charges are markedly or significantly above the cost incurred by the assessee in question, that they would fall within the mischief of "cess, or fee, or any other consideration" towards "trade, commerce or business". In this regard, the Court has clarified through illustrations what kind of services or goods provided on cost or nominal basis would normally be excluded from the mischief of trade, commerce, or business, in the body of the judgment. A.4. Section 11(4A) must be interpreted harmoniously with Section 2(15), with which there is no conflict. Carrying out activity in the nature of trade, commerce or business, or service in relation to such activities, should be conducted in the course of achieving the GPU object, and the income, profit or surplus or gains must, therefore, be incidental. The requirement in Section 11(4A) of maintaining separate books of account is also in line with the necessity of demonstrating that the quantitative limit prescribed in the proviso to Section 2(15), has now been breached. Similarly, the insertion of Section 13(8), seventeenth proviso to Section 10(23C) and third proviso to Section 143(3) (all w.e.f. 01.04.2009), reaffi....