TMI Blog2013 (11) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... profits, the same would not be hit by proviso to section 2(15) of the Act - aims and objects of the assessee-trust are admittedly charitable in nature, and was granted registration by the Charity Commissioner as well as by the Commissioner of Income-Tax (Exemption) under Section 12A of the Act. The assessee has carried out its activities for the fulfillment of its object of breeding the cattle and to improve the quality of the cows and oxen and had sold semen, fodder, milk etc. and in the process some profit was earned by the assessee-trust, which is incidental in nature. The activities undertaken by the assessee-trust for the fulfillment of its charitable objects on non-commercial lines are not hit by the proviso to section 2(15) of the Act. For the applicability of newly inserted proviso to section 2(15) of the Act, the objects of the trust, the purpose and manner of activities of the Trust, whether to make profit or whether the profit earned was incidental to the activities of the trust, overall facts and circumstances in its entirety, the volume of the profit received by the trust, and whether the activities of the trust were conducted in a way to fulfill its object of the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar - Decided in favour of assessee. - ITA No.670/Ahd/2013 - - - Dated:- 7-6-2013 - G.C. GUPTA AND ANIL CHATURVEDI ,JJ. For the Appellant : Sanjay R. Shah. For the Respondent : Alok Johri. ORDER:- PER : G.C. Gupta This appeal by the assessee for the assessment year 2009-2010, is directed against the order of the CIT(A)-XXI, Ahmedabad dated 26.12.2012. 2. The grounds of the appeal of the assessee are as under: "1. The order passed by the learned CIT(A) is erroneous and contrary to the provisions of law and facts and therefore requires to be quashed. It is submitted that it be so held now. 2. The learned CIT(A) has erred in law and on facts by holding that the object of the appellant trust is 'any other object of general public utility' and accordingly covered by proviso to Section 2(15) of the Act, he has accordingly denied benefit of Section II of the Act. The appellant submits that its object is 'relief to the poor' and accordingly proviso to Section 2(15) is not applicable to its case. It is therefore entitled to benefit tinder Section II or the Act. It is submitted that it be so held now. 3. The learned CIT(A) has erred on facts by ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 12A of the I.T. Act. He referred to page no.1 of the trust-deed wherein it is mentioned that after returning from South Africa to India in the year 1915, Mahatma Gandhi acquired some of the land in Ranip and Wadaj villages of Taluka Daskroi, District Ahmedabad and established an institution named "Satyagrah Ashram" and started Gaushala as one of the part of his constructive activities, and that, the said Gaushala was run separately as an independent institution and the eminent personalities of the country were named as its trustees from time to time, including that of Shri G.V. Mavlankar. The objects of the said trust were to breed the cattle and endeavour to improve the quality of the cows and oxen in view of the need of good oxen as India is prominent agricultural country and the cow milk as food is both conducive to and requisite for good health and longevity of human life, and likewise, other objects. He referred to the order of the Joint Commissioner of Sales-Tax (Legal), Gujarat State, Ahmedabad wherein the assessee-trust was not considered as "trader" for the sales-tax purpose, and it was specifically mentioned that the activities are also not business like but are allied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilation by the assessee. We have also perused the contents of trust-deed of the assessee-trust filed in the compilation before the Tribunal. We find that the proviso to section 2(15) of the Act was inserted by the Finance Act, 2008 w.e.f 1.4.2009, and therefore is applicable to the relevant assessment year 2009-2010 in appeal before us. The only issue before us for adjudication is that whether the proviso to section 2(15) is applicable to the facts of the case of the assessee for the relevant assessment year 2009-2010. The proviso provides 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 any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention of the income from such activity. The second proviso to section 2(15) provides that aforesaid first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is Rs.10 lakhs (Rs.25 lakhs from 1.4.2012) or less in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nance Minister and Circular of the CBDT reproduced above make it clear that only the institutions carrying on commercial activities are intended to be covered by the proviso, not the genuine charitable institutions. The activity will be deemed to be in the nature of trade, commerce or business, only if same is carried on with the intention to earn profit. The Courts in series of decisions have held that it is an activity carried on in a systematic manner with a view to earn profit, which will be termed as "business". Accordingly, in order to hold that the activity is in the nature of trade, commerce or business, there should be profit motive. If during the course of carrying out any activity on non-commercial lines, some profit is received by the Trust, which is incidental to the activities of the trust, the same shall not be construed to be activity in the nature of trade, commerce or business of the assessee. We find that the present trust before us was in a way founded by the Father of the Nation, late Mahatma Gandhi. On page no.1 of the trust-deed, it is mentioned that after returning from South Africa to India in the year 1915, Mahatma Gandhi acquired some land in Ranip, Wadaj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he trust objects conditionally or otherwise. 9. To open schools and hostels for imparting education in cow keeping and agriculture having regard to the trust objects or to help such schools and hostels and to make suitable arrangements for training workers required for the trust work. 10. To get the money from time to time as required for the trust work by way of gift, borrow on securities of the trust properties or obtain in any other way as deemed fit by the trustees. 11. To undertake such other activities from time to time for achieving or helping the trust objects as deemed fit by the trustees. 7. We find that the assessee trust was registered with Charity Commissioner and the copy of the certificate issued by the Charity Commissioner has been filed in the compilation before us. The Commissioner of Income-tax, Gujarat has registered the assessee-trust under Section 12A. The Joint Commissioner of Sales-Tax (Legal) vide its order dated 2.9.2006 has noted that the activities of the assessee-trust are also not business like, but are allied activities to meet the objectives of the trust, and hence as per the exception in notification (notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts of the each case has to be seen to decide whether the proviso to section 2(15) is applicable to the facts of the case of the assessee. Mere selling some product at a profit will not ipso facto hit the assessee by applying the proviso to section 2(15) and deny the exemption available under Section 11 of the Act. The intention of the trustees and the manner in which the activities of the charitable trust/institution are undertaken are highly relevant to decide the issue of applicability of proviso to section 2(15) of the Act. The Hon'ble Delhi High Court in Institute of Chartered Accountants of India (supra) has considered this controversy. The facts of the case were that DCIT(Exemption) passed an order under Section 263 of the Act, taking a view that ICAI was running a coaching class and it was a business activity, and therefore it has violated the provision of Income Tax Act. The Tribunal held that the order passed by the DIT(Exemption) was not correct in the facts of the case. The Hon'ble High Court after going through the facts and discussing the legal position, held that in the case of the institute, it cannot be said that it was carrying on business and has obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hit by the said proviso." Further, the Tribunal has observed as under in this regard:- "As CBDT rightly puts it, sweeping 'generalizations are not possible' and 'each case will have to decided on its facts'. The question then arises whether on the present set of facts it can be said that the assessee was engaged in trade, commerce or business or in rendering of a service to trade, commerce or business. As far as assessee being engaged in trade, commerce or business is concerned, it is not even learned Commissioner's case that running a organization, set up under the statute law, for controlling, preventing and abating pollution, is pursuing trade, commerce or business. Obviously, a trade, commerce or business implies an activity with profit motive even though public good may be a secondary benefit from such an activity. This is not the case before us. The legal framework under which the assessee is set up is quite clear and unambiguous and it reflects will of the lawmakers in no uncertain terms, which is to prevent pollution.' 8. These decisions of the Hon'ble Courts/Tribunal make the scope of applicability of proviso to section 2(15) of the Act clear that to decide the ap ..... 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