TMI Blog2015 (5) TMI 863X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus the CIT was not justified in holding that the view taken by the AO was granting exemption u/s 11 of the act was not inaccordance with law and was unsustainable. Per contra, from bare reading of the assessment order, it is vivid that the assessing officer made reasonable inquiry on the issue of test laboratory charges and consultancy charges and the AO took a plausible and reasonable view that the revenue earn from these activities cannot be held as income with the main object to earn profits. We also clearly note that the activities of laboratory testing and consultancy was in furtherance of main and charitable object of the assessee association it cannot be termed as activities with the main object of profit earning motive. - Decided in favour of assesse. - ITA No. 3271/DEL/2014 - - - Dated:- 8-5-2015 - Shri N. K. Saini And Shri C. M. Garg,JJ. For the Petitioner : Sh. Tarundeep Singh, CA For the Respondent : Sh. A.Misra, CIT DR ORDER Per C. M. Garg, Judicial Member : This appeal has been preferred by the Assessee against the order of the Director of Income Tax (Exemptions), New Delhi dated 28/03/2014 passed u/s 263 of the Income Tax Act 1961 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in nature by the DIT(E). The DIT(E) proceeded to issue notice u/s 263 of the Act in pursuance by observing that as per amended provisions of Section (2) (15) of the Act, charitable purpose includes relief of the poor, education, medical relief, preservation of environment (including watersheds, forests and wildlife) 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 of 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, if aggregate receipt exceeds ₹ 10 lacs during the year irrespective of the nature of use or application, or retention, of the income from such activity. 5. The Ld. DIT(E) issued a notice u/s 263 of the Act vide dated 06.02.2014 to the assessee and after considering the written submissions of the assessee filed on 10.3.2014 the DIT(E), rejected the submissions and objection of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed a reliance on various decisions including decision of Hon ble Delhi High Court in the case of Institute of Chartered Accountant of India Vs. DGI reported in 347 ITR 99(Delhi) and submitted that the first proviso to Section 2(15) of the Act to include any transaction for a fee or money and the activity would be business if it is undertaken with a profit motive, but in same cases this may not be determinative and the profit motive test should be specified in the context of Section 10(23C) (iv) of the Act. 9. The Ld. AR also pointed out that the assessee is an association and apex coordinating body of State Road Transport Undertakings (STUs) registered as a Society under the Societies Registration Act and is wholly patronized by Central Government for working under aegis of Ministry of Road Transport and Highways. The Ld. AR, further, pointed out the Secretary to the Government of India, Ministry of Road Transport and Highways is ex-officio president of the assessee association and the Governing Body of the ASTRU comprises of Representative from all State Road Transport Undertaking. The Ld. AR further pointed out that the Assessee association was established with the main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed upon it. The test charges are charged from the manufacturers are just to meet the running cost of laboratory and no commercial rate is being charged and the charges for testing are same without any change or revision since 2001. 12. About impugned consultancy charges the Ld. AR submitted that apart from Automobile components testing, the other primary activity of the Assessee is management development, research and consultancy in the field of automobile components and in the interest of the Road Transport Sector as a whole. The Ld. AR further, drawn our attention towards test application filed page 7 and submitted that the CIRT offers consultancy services specially akin to traffic policies, promotion of efficiency of Road Transport services, reduction in the operational management and maintenance function of automobile parts, performance improvement measures, bus body inspection, inspection of CNG buses, improvement on tyre life and fuel economy of fleet etc. The Ld. AR strenuously contended that for providing these kind of services to the State Transport Undertakings which provide transport facility to a common public , a very nominal and economical rate is charged. The AR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e subject cited above It is noted that the assessment of the above mentioned assessee was completed in December, 2011 at an income of ₹ 4,39,07,729/- as the assessee has failed to utilize the accumulated sum within the specified period. Activities of the Trust are covered under the last limb of amended section 2(15) i.e. Advancement of any other object of general public utility . A perusal of TDS certificates and Income Expenditure A/c revealed that the assessee had receipts under the heads Revenue from Test Laboratory of ₹ 7.72 crores and Consultancy receipts of ₹ 62.47 lacs, which were commercial in nature and their aggregate exceeded ₹ 10 Lacs. 2. As per amended provisions of Section 2(15) of the Income Tax Act, 1961, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause it is catering to government agency. Further STUs can get the same work done from any other agency too by paying the requisite charge. The assessee is only a preferred source of service for STUs. It is activities are clearly hit by the provision of section 2(15) of the Act. 4.2 Business normally has following ingredients . (i) Continuance and systematic activity, (ii) Transaction between two persons, (iii) Element of reciprocity; and (iv) Profit motive. Normally, profit motive test must be satisfied, but it is not final. If there is evidence and material to show that the activities were carried out on sound and recognized business principles and pursued with reasonable continuity, it would constitute business, even if there is no profit motive. In the case of P. Krishnamanon (356 ITR 48), the Apex Court has held that it is not motive of the person doing an act, which decides whether the act done by him is the carrying on what otherwise would be a business vocation. If it were not so, a person carrying on what otherwise would be a business may say that he did not carrying on business because it was not his intention to make any income out of it. The Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral. The Ld. AR also pointed out that after considering the above replies, the AO, in his order of assessment dated 28.12.2011, granted the charitable status to the assessee. Therefore, the Assessing Officer made detailed inquiries about charitable purpose of the assessee as well as impugned amount of tax charges and consultancy charges. 19. The Ld. AR has also placed on reliance on the decision of Hon ble Delhi High Court in the case of DIT(E) Institution of Chartered Accountant of India (2012) 347 ITR 86 (Delhi) and submitted that the purpose and object to do business is normally to earn and is carried out with a profit motive; in some cases the absence of profit motive may not be determinative. The Ld. AR contended that in that case the Hon ble Jurisdictional High Court has held that where the Commissioner without examining the concept of business had held that the institution was carried on business and coaching and programmes were held by them and a fee was being charged for the same then also in absence of profit motive the order of revision u/s 263 Act was not held to be valid. 20. The Ld. AR placing reliance on the another decision of Hon ble Delhi High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of the object of the Assessee Association set out to in the memorandum of association (Clause no. ii) and not on commercial lines because the pre dominant object of the assessee association is not to earn profit but to subserve and provide services to its member State Transport Undertakings and Government of India without any profit motives within the limits of its charitable purpose and objects. The Ld. AR finally prayed that the impugned order passed u/s 263 of the Act and all subsequent proceedings and orders deserve to be quashed. 23. Replying to the above, the Ld. Departmental Representative placing reliance on the decision of Hon ble Punjab and Haryana High Court in the case of CIT vs. Truck Operators Association 328 ITR 636 (P H) submitted that when the assessee was vigorously pursuing business activity by receiving huge quantum of laboratory test and consultancy charges then that the same could not be termed for general public utility and therefore, the assessee association cannot be held as entitled to the benefit of the registration u/s 12AA of the Act and exemption u/s 11 and other relevant provisions of the Act. Supporting the action of the CIT(A) the Ld. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E) 358 ITR 91 (Delhi) wherein their lordship provided a landmark interpretation to section 2(15) of the Act as well as newly inserted proviso to this section after considering the ratio and prepositions laid down by various judgments and orders of Hon ble Supreme Court and High Court the relevant operative part of this order at page 122 para 67 reads as under :- 67. The expressions trade , commerce and business , as occurring in the first proviso to section 2(15) of the Act, must be read in the context of the intent and purport of section 2(15) of the Act and cannot be interpreted to mean any activity which is carried on in an organized manner. The purpose and the dominant object for which an institution carries on its activities is material to determine whether the same is business or not. The purport of the first proviso to section 2(15) of the Act is not to exclude entities which are essentially for charitable purpose but are conducting some activities for a consideration or a fee. The object of introducing the first proviso is to exclude organizations which are carrying on regular business from the scope of charitable purpose . The purpose of introducing the proviso to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot hesitation of hold that the facts of the present case clearly distinguishable. We are in agreement with the contention of the Ld. AR that the facts of the present case are clearly distinguishable from this case of Truck Operators Association (Supra) as in that case the assessee association was vigorously pursuing transporation with this by receiving freight charges on behalf of its member and the so called welfare activities adopted for the Truck Drivers, cleaners, mechanics of the truck owners were in the nature of staff welfare activities which were similar and common in the other transport business organizations which could not be termed for general public utility. In the present case, the CIT(A) have not conclusively held that the assessee association was carrying on laboratory test and consultancy services with the main object of earning profit in the line of business , trade or commerce . Accordingly we respectfully held that the benefit of the ratio of the decision of Hon ble Punjab Haryana High Court (Supra) is not available for the revenue as the facts of the present case are clearly distinguishable from that case. 28. Turning to the facts of the present case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carried on in an organized manner. 31. Explaining the dominant of object of newly inserted proviso to section 2(15) of the Act, speaking for Jurisdictional High Court of Delhi, their lordship also held that the first proviso to section 2(15) of the act does not purported to exclude entities which are essentially for charitable purpose but are conducting some activities for a consideration or a fee and the object of introducing first proviso is to exclude organizations which are carrying on regular business from the scope of charitable purpose. It was also held that expression business trade or commerce as used in first proviso must, thus, we interpreted restrictively and where the dominant object and organization is charitable any incidental activity for furtherance of the object would not fall within the expression business , trade or commerce . 32. In view of the ratio of the judgment of Hon ble High Court of Delhi if we analysis the facts and circumstances of the present case at the outset we note that the activity laboratory testing and consultancy is certainly bringing revenue for the assessee association but the CIT has not controverted or demolition this fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of materials for thereon use at economical prices, promotional efficiency of Road Transport Services and deduction is operational cost of member State Road Transport Undertakings are the activities of charitable purpose towards promotion of main objects set out in the Memorandum of Association of the assessee association, thus, in absence of any substantial allegation or incriminating material. We are unable to accept view of the CIT that the assessee association is conducting these activities with the main object of earning profits. In the present case, the activities of the assessee s association cannot be termed either trade , commerce or business simply because the assessee association is receiving some charges or fees for rendering services on non-commercial principles to State Road Transport Undertakings and other concern members for a fee or charges. 35. At this juncture , we also respectfully follow the ratio laid down by the Hon ble Delhi High Court in the case of Indian Trade Promotion Organisation vs. DGIT (Supra) wherein it was held that thus, first proviso to section 2(15) of the Act would have been to be read down and interpreted in the context of section 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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