TMI Blog2012 (11) TMI 891X X X X Extracts X X X X X X X X Extracts X X X X ..... alue of the receipts from the activities mentioned therein is less than ten lakh rupees in the relevant previous year). In these circumstances, "rendering any service in relation to trade, commerce or business" cannot, in the opinion of the Court, receive such a wide construction as to enfold regulatory and sovereign authorities, set up under statutory enactments, and tasked to act as agencies of the State in public duties which cannot be discharged by private bodies. The primary object for setting up such regulatory bodies would be to ensure general public utility. The prescribing of standards, and enforcing those standards, through accreditation and continuing supervision through inspection etc, cannot be considered as trade, business or commercial activity, merely because the testing procedures, or accreditation involves charging of such fees. It cannot be said that the public utility activity of evolving, prescribing and enforcing standards, "involves" the carrying on of trade or commercial activity. - Revenue directed to grant exemption u/s 10(23C)(iv). - W.P. (C) No. 1755 of 2012 - - - Dated:- 27-9-2012 - S. RAVINDRA BHAT AND R.V. EASWAR, JJ. JUDGMENT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the nature of business and hence covered by the proviso to section 2(15) of the Income Tax Act. 16. ...It is not disputed that the BIS is engaged in these socially, economically desirable activities relating to promotion of Indian trade. In fact it is for this reason that the activities of the organizations are treated as advancement of objects of general public utility. This however, will not make any difference so far as application of the new proviso to Section 2(15) is concerned. So far as applicability of this proviso is concerned in respect of commercial activities, there is nothing in the Income tax Act to warrant differential treatment to a private entity and an organization claiming to be a public charitable institution. 18. As seen from the above, it is evident that the assessee has earned substantial amount of its income by way of Product Certification, Gold Hallmarking Certification, Systems certification, from outside companies, business firms, etc. towards granting licenses to them. Under the circumstances, the assessee is directly hit by the newly introduced proviso below section 2(15) of the Income Tax Act. Accordingly, there is no doubt that the activity of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able purpose as provided under section 2(15). 5. This Court has considered the submissions of the parties, and has perused through the impugned judgment. The relevant provisions of the Income Tax Act, 1961 are extracted hereunder: "Section 10(23C)(iv): "10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included ** ** ** 23C. Any income received by any person on behalf of - (iv) Any other fund or institution established for charitable purposes which may be notified by the Central Government in the Official Gazette, having regard to the objects of the fund or institution and its importance throughout India or throughout any State or States; or.." Section 2(15) after the amendment made by the Finance Act 2010, w.e.f. 1.4.2009 is as follows: "charitable purpose" includes relief of the poor, education, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility: Provided t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cidental thereto POWERS AND FUNCTIONS OF THE BUREAU 10. (1) The Bureau may exercise such powers and perform such duties as may be assigned to it by or under this Act and, in particular, such powers include the power to - establish, publish and promote in such manner as may be prescribed the Indian Standard, in relation to any article or process; recognise as an Indian Standard, in such manner as may be prescribed, any standard established by any other Institution in India or elsewhere, in relation to any article or process; specify a Standard Mark to be called the Bureau of Indian Standards Certification Mark which shall be of such design and contain such particulars as may be prescribed to represent a particular Indian Standard; grant, renew, suspend or cancel a licence for the use of the Standard Mark; levy fees for the grant or renewal of any licence; make such inspection and take such samples of any material or substance as may be necessary to see whether any article or process in relation to which the Standard Mark has been used conforms to the Indian Standard or whether the Standard Mark has been improperly used in relation to any article or process wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court dealt with a similar question regarding interpretation of the amended section 2(15) in respect of the Institute of Chartered Accountants of India (established under the Chartered Accountants Act, 1949) which was charging fee for coaching students, and was earning profits therefrom. The Court examined in detail the meaning of the terms used (trade, commerce and business), and while noting that certain relevant factors had not been considered by the department and the issue was a question of fact, remanded the issue back for reconsideration. It made certain observations which are relevant to the present case, and are reproduced as under: "12... In view of the first proviso, the decisions that the application of money/profit is relevant for determining whether or not a person is carrying on charitable activity, are no longer relevant and apposite. Even if the profits earned are used for charitable purposes, but fee, cess or consideration is charged by a person for carrying on any activity in the nature of trade, commerce or business or any activity of rendering of any service in addition to any trade, commerce or business, it would be covered under the proviso and the bar/proh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. H. Abdul Bakhi and Bros. (1964) 15 STC 664, the Supreme Court dealt with the expression "business" and stated that it is an expression of indefinite import. In the taxing statutes it is used in the sense of an occupation or profession which occupies time, attention or labour of a person and normally associated with the object of making profit. It was held as under: "4. To regard an activity as business there must be a course of dealings, either actually continued or contemplated to be continued with a profit motive, and not for sport or pleasure. But to be a dealer a person need not follow the activity of buying selling and supplying the same commodity. Mere buying for personal consumption i.e. without a profit motive will not make a person, dealer within the meaning of the Act, but a person who consumes a commodity bought by him in the course of his trade, or use in manufacturing another commodity for sale, would be regarded as a dealer." 12. CIT v. Lahore Electric Supply Company Limited [1966] 60 ITR 1 (SC) held that "business", under the Act contemplates activities capable of producing profit which can be brought to tax. In the judgment reported as Institute of Chartered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this context, the Supreme Court held, in Commr. of Income Tax v. Gujarat Maritime Board [2007] 295 ITR 561 (SC) speaking about what constitutes "any other object of general public utility" that: "13. ...The said expression would prima facie include all objects which promote the welfare of the general public. It cannot be said that a purpose would cease to be charitable even if public welfare is intended to be served. If the primary purpose and the predominant object are to promote the welfare of the general public the purpose would be charitable purpose. When an object is to promote or protect the interest of a particular trade or industry that object becomes an object of public utility, but not so, if it seeks to promote the interest of those who conduct the said trade or industry (Commissioner of Income-Tax, Madras v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC)). If the primary or predominant object of an institution is charitable, any other object which might not be charitable but which is ancillary or incidental to the dominant purpose, would not prevent the institution from being a valid charity Addl. Commissioner of Income-Tax, Gujarat v. Surat Art Silk Cloth Manu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in is less than ten lakh rupees in the relevant previous year). The Bureau, it would appear at the first blush, renders service in relation to trade, commerce or business by granting certification/quality marks in return of license fee. Apparently, Parliament intended to clarify that not all activities of State agencies (some of which might be set up to carry on trading and commercial activities) can be considered charitable. This can be gathered from the Notes on clauses attached to the Finance Bill, 2008: "Government feels that claim of status of 'charitable organisation' by the organisations carrying out activities on commercial lines is contrary to legislative intention. Finance Bill, 2008 seeks to amend section 2(15) w.e.f. April 1, 2009, by substituting existing definition with following definition: '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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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