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2019 (8) TMI 1821 - AT - Income TaxExemption u/s 11 - as per revenue appellant-Corporation cannot be treated as State within the Article 12 of the Constitution of India - claim denied assessee is engaged in commercial activity carrying out arranging tour and travel packages on commercial basis for fees/charges - scope of introduction of proviso to section 2(15) - assessee in this case is a Trust registered with DIT(E), Mumbai u/s. 12A - first contention of assessee that it is the agency of Government of Maharashtra and its income is not taxable - AO concluded that the assessee apart from running simple buses is also running luxury buses in large scale and is also engaged in providing parcel/courier service in large scale from one location to another for fees/charges - HELD THAT:- As noted above the assessee is a State Corporation engaged in the business of public transportation. The objects of the corporation are development and growth of public, trade and industry of the development of road transport, facilities of road transport in any area and providing an efficient economical system of road transport services and coordination between any form and road transport or any other form of road transport. Surplus of receipts over expenses after payment of interest/dividend on capital as provided by Central/State Government and providing for depreciation and reserves etc. is to be applied for amenities to the passenger, welfare of labour employed, financing the expansion programme etc., as approved by the Government and remainder, if any, is to be handed over to the State Government for the purpose of development. It is noted that there is no change in the activity of the assessee since beginning and it is all along providing road transportation facility to the general public for a ticket as a token contribution. Prior to introduction of proviso to section 2(15), there was no dispute that the assessee was established for charitable purpose and assessee has all along been granted relief u/s. 2(15) and exemption under section 11 of the Act. Revenue’s plea that amendment to section 2(15) of the Act shall take assessee’s activity subject to denial of exemption u/s. 11 has been rejected by Hon'ble Karnataka High Court in the case of Karnataka State Road Transport Corporation [2016 (2) TMI 1291 - KARNATAKA HIGH COURT] - Also as relying on ANDHRA PRADESH STATE SEED CERTIFICATION AGENCY VERSUS CHIEF COMMISSIONER OF INCOME-TAX - III, HYDERABAD [2013 (1) TMI 63 - ANDHRA PRADESH HIGH COURT] we are of view taken by the authorities below that the assessee should be denied exemption u/s. 11 simply because of amendment to section 2(15) is not sustainable. Upto A.Y. 2011-12, there was no dispute that the assessee was entitled to exemption u/s. 11 of the Act. The dispute has only arisen pursuant to introduction of proviso to section 2(15) of the Act. Considering the objects for which the assessee is set up and manner in which it is managed and the manner in which funds generated are utilized, there is no doubt that there is no profit motive in carrying out the activity of the assessee. No doubt there may remain some surplus but that by itself does not mean that the motive is to earn profit. Hon'ble Apex Court in the case of American Hotel and Lodging Association (2008 (5) TMI 17 - SUPREME COURT] has expounded that it may not be possible to carrying on activities in such a way that expenditure exactly matches income and there is no resultant profit. There is no case made out by the Revenue that the surplus is not applied for the purpose of company stated objects. When the assessee was accepted to be entitled to exemption upto preceding assessment year there is no case that the activities of the assessee have undergone a change which warrant denial of exemption. Assessee is engaged in commercial activity and that also in large scale - This so called large scale has been observed from the data of buses operated by the assessee. Out of 15500 buses, from the website data gathered by the Assessing Officer himself this includes Deluxe buses-48, air conditioned buses-46 and midi-10. From the above how can the Assessing Officer make a deduction that the assessee is running luxury buses in large scale defers all sense of proportionality. To state the obvious assumption of the Assessing Officer is absurd. Assessee is engaging into profit oriented activities is that the assessee is arranging tour and travel packages on commercial basis for fees/charges - AO has noted eight trips from the website. How will these eight trips stand against thousands of trips undertaken by the assessee for transporting ordinary passengers is beyond comprehension. The Assessing Officer’s inference is totally unjustified. Details of other income which has been considered by the Revenue to be of a large scale pale into absolute insignificance when the same is considered as percentage to the non-operative revenue to operating revenue, which bring them to be lesser than 1% to the operating revenue. Hence figures quoted by the Assessing Officer for inferring that the assessee is engaged in profit motive activity in large scale is totally absurd - the finding given by the Assessing Officer that assessee is engaged commercial and profit motive activity is totally unsustainable. It may not be out of place to mention here that to remove/prevent the mischief which can be caused to the assessee such as the present large State, the present proviso No. (ii) to section 2(15) provides that if the aggregate receipt from such activity or activities during the previous year do not exceed 25% of the total receipts of the entity, the exclusion provision will not apply. - Decided in favour of assessee.
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