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2019 (7) TMI 874 - ITAT MUMBAIExemption u/s 11 - charitable activity u/s 2(15) or not? - AO held that the assessee was not a regular educational institute and therefore, not entitled for exemption u/s 11 - HELD THAT:- So far as the object of the assessee are concerned, our attention has been drawn to the fact that the trust was established for charitable purpose of education and for encouraging and promoting theoretical and practical education in gemology and scientific study of precious stones of all types and the assessee was established to impart education. Another plea raised is that the assessee was engaged in carrying out Research & Development Activities during the year and as a part of the same, carried out testing activities with a view to address the problem of imitation being faced by the Gem industry and therefore, the said activities would merely be an incidental activity carried out in furtherance to achieve pre-dominant objective of Research & Development. We are of the considered opinion that the issue would require reappreciation by Ld. AO in view of the fact that the main objects of the assessee trust as well as the connection of testing activities vis-à-vis main objects, has not been brought on record by lower authorities. Onus would be on assessee to establish that the testing activities were merely incidental to the attainment of the prime objective of the trust i.e. education and separate books were maintained by the assessee in respect of such business. On the other hand, if the objects of the assessee are found to be covered by last limb i.e. advancement of any other object of general public utility, the 1st proviso of Section 2(15) would squarely apply to the case of the assessee since the assessee is providing service in relation to any trade, business or commerce. In that case, the case has to be adjudicated in the light of the binding judicial pronouncements from the point of view of ‘profit motive’ as cited by us in the opening paragraphs. Needless to add that, in the event of activity of ‘testing fees’ found to be having no connection with assessee’s primary objectives, the same would be a separate line of business activity for the assessee and no deduction would be available to the assessee u/s 11 on account of this activity. With these directions & observations, the matter would stand reverted back to the file of Ld. AO for re-adjudication - Assessee' appeal stands allowed for statistical purposes.
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