TMI Blog2015 (1) TMI 957X X X X Extracts X X X X X X X X Extracts X X X X ..... de in the absence of contrary evidence” and that “quantum of fee charged, economic status of the beneficiaries who pay, commercial value of benefits in comparison to the fee, purpose and object behind the fee etc. are several factors which will decide the seminal question, is it business”. There is nothing on the record to even suggest that the fees charged by the assessee is such that it suggests that it is in nature of a business, nor is it even the case of the Assessing Officer. It was, therefore, not a fit case for holding that merely because the assessee has charged a fees, even if that be so, for processing the subsidy applications, the assessee’s activities cease to be charitable activities under section 2(15). The Assessing Officer is, accordingly, directed to delete the impugned addition of ₹ 2,20,57,530. The assessee gets the relief accordingly. - Decided in favour of assessee. - I.T.A. No. 4521/Del/12 - - - Dated:- 16-1-2015 - Pramod Kumar AM and A. T. Varkey JM,JJ. For the Petitioner : Ved Jain and Rano Jain For the Respondent : J. P. Chandrakar ORDER Per Pramod Kumar: 1. By way of this appeal, the assessee appellant has challenged corr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be treated as charitable activities in nature. In support of this stand, the assessee also relied upon the stand of the Chief Commissioner of Income Tax, as set out while withdrawing approval under section 10(23C)(iv). When the views of the Assessing Officer were put to the assessee, it was explained by the assessee that a careful reading of second proviso to Section 2(15) would show that as long as an assessee was not engaged in any trade, commerce or business , the fees or any other consideration received by the assessee cannot be outside the ambit of receipts in the course of pursuing charitable activities. The Assessing Officer, however, did not approve this argument and concluded as follows: The submissions of the assessee applicant have been pursued and carefully considered. Since the assessee applicant is earning income from rendering of services, in relation to many activities which are in the nature of business or commerce, by charging processing fees and service charges in the shape of cost of application form and scheme brochure . As the rendering of services after charging fees/ remuneration from customers does not fulfil the condition to qualify for charitabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cord and duly considered facts of the case in the light of the applicable legal position. 6. The short question that we are really required to adjudicate is whether or not, on the facts and in the circumstances of the case, the fact that the assessee is receiving de facto service charges and processing fees from the subsidy applicants would render the activities of the assessee as non-charitable activities. 7. Section 2 (15), which defines charitable purposes , as it stood at the relevant point of time, is reproduced below for ready reference: Section 2 (15) 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 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 oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommerce or business when it generates receipts for an amount exceeding the figure mentioned in second proviso. The stipulation broadens and widens the negative stipulation [see The Institute of Chartered Accountants of India case (supra)].The petitioner is providing services to persons engaged in trade, commerce or business who are the beneficiaries. Question is whether the legislative intent is to exclude from definition of charitable purpose any activity which has the aim and object of providing services to trade, commerce or business. The matter is not free from doubt but there are good reasons to hold that the bar or probation is not with reference to activity of the beneficiary but the activity of the assessee under the residuary clause. The intent is to exclude an assessee who carries on business, trade or commerce to feed the charitable activities under the last limb. Application of income earned from business is no longer relevant and cannot help an assessee. Circular No.11 of 2008 is to the said effect and does not promote contrary interpretation. The said circular clearly stipulates that the object of general public utility should not be a mask or a device to hide the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill not apply in the case of a rendition of a service per se, for a cess, fee or any other consideration, or to a trade, commerce or business, but that this clause can come into play for the purpose of excluding an assessee who carries on business, trade or commerce to feed the charitable activities . In other words, the scope of second limb, as held by Hon ble jurisdictional High Court, extends only to such cases in which a business is carried out to feed the charitable activities. It would thus follow that even for invoking second limb of first proviso to Section 2(15), it is sine qua non that the assessee has extended services to business, trade or commerce and such services have been extended in the course of business carried on by the assessee. This inference is on the basis of Their Lordships observation, in the context of second limb of first proviso, to the effect that, (t)he proviso applies when business was/is conducted and the quantum of receipts exceeds the specified sum and that (t)he proviso does not seek to disqualify charitable organization covered by the last limb, when a token fee is collected from the beneficiaries in the course of activity which is not a bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of Hon ble Delhi High Court to choose an interpretation in furtherance to the overall legislative scheme of taxation of charitable institutions and an interpretation, which, in our humble understanding, is a very pragmatic interpretation in accordance with the purpose of the legislation. The views so expressed by Hon ble Delhi High Court bind this bench of the Tribunal. However, even as we hold so, we are alive to the fact, as pointed out by the learned departmental representative, that Hon ble Karnataka High Court, in the case of Andhra Pradesh State Seed Certification Agency (supra), has indeed taken a contrary view and has held that what is to be seen is the activity of the beneficiary and not the activity of the assessee. That was a case in which Hon ble High Court has, following the footsteps of Kerala High Court in the unreported case of Info Parks Kerala Vs DCIT, subscribed to the view that, so far as the scope of second limb of first proviso to Section 2(15) is concerned, the terms any trade, commerce or business refer to the trade, commerce or business pursued by the recipient to whom the service is rendered (as there may be a situation involving letting out the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y evidence and that quantum of fee charged, economic status of the beneficiaries who pay, commercial value of benefits in comparison to the fee, purpose and object behind the fee etc. are several factors which will decide the seminal question, is it business . There is nothing on the record to even suggest that the fees charged by the assessee is such that it suggests that it is in nature of a business, nor is it even the case of the Assessing Officer. It was, therefore, not a fit case for holding that merely because the assessee has charged a fees, even if that be so, for processing the subsidy applications, the assessee s activities cease to be charitable activities under section 2(15). 18. As regards the Assessing Officer s frequent references to the findings of the Chief Commissioner in denying approval under section 10(23C)(iv) to the assessee, we may usefully refer to a decision of the coordinate bench in the case of DCIT Vs General Electric Co plc [(2001) 71 TTJ 973]. As evident from the observations to the effect that .it is not in dispute that the no objection certificate was issued at the instance of the Chief CIT and the AO did not even have the liberty of apply ..... X X X X Extracts X X X X X X X X Extracts X X X X
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