TMI Blog2015 (7) TMI 531X X X X Extracts X X X X X X X X Extracts X X X X ..... o to section 2(15) restricts the application of first proviso only to such trusts and institutions having receipts from commercial activity exceeding a prescribed limit in a particular previous year. Therefore, application of proviso to section 2(15) has to be looked into in every assessment year. Further, ld. AR has demonstrated before us, receipts from sales of finished goods and royalty forms only a small percentage of total receipts of the assessee. Therefore, it cannot be said that assessee is mainly engaged in commercial activity. Another important aspect worth mentioning is, in course of hearing ld. AR brought to our notice, that similar institutions established in other parts of the country have been granted registration u/s 12AA of the Act. To substantiate such claim, he submitted registration certificates granted to similar institutions at Bhubaneswar, Indore and Aurangabad. Though, ld. AR submitted that this fact was also placed before ld. DIT(E), but, the order of ld. DIT(E) is totally silent on the issue. Be that as it may, if similar institutions established by central govt. in other states having similar object have been granted registration u/s 12AA, as is the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal was prepared and filed finally on 19/10/14. Thus, it was submitted that the delay being unintentional and beyond the control of assessee, the same is to be condoned. 3. Ld. DR, though, opposed condonation of delay, finally, he expressed that he has no objection if the appeal is decided on merit. 4. Having considered the submissions of the parties and perused the material on record, we are of the view that delay is required to be condoned not only because of the fact that assessee is a central govt. institution but also due to the sufficiency of reasons shown by assessee for delay in filing the appeal. Accordingly condoning the delay of 769 days, we admit the appeal for hearing on merit. 5. Briefly, the facts are, assessee was established by the Govt. of India, under the Ministry of Small, Micro and Medium Industries with the technical help of the International Labour Organisation (ILO). Assessee, as stated by it, is one of the 18 such Tool Rooms established by the Govt. of India across different states. Subsequently, the govt. of India had decided to register the tool rooms as societies and as per the said decision assessee was registered as a public society under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1967], 65 ITR 611, observed that a trust or society having both charitable and non-charitable objects is not eligible for exemption of its income, is, not entitled for registration u/s 12A of the Act. Accordingly, he rejected assessee s application for registration. Being aggrieved of the said order, assessee is before us. 7. Ld. AR referring to the object of the society submitted before us the main object of the society is to impart training in designing and making tools, dyes and moulds, in the form of vocation education. It was submitted, society also imparts vocational training in both mechanical, engineering and computer aided design, VLSI, embedded systems, Mechatronics for post graduate students in collaboration with JNTU, Hyderabad and Osmania University. It was submitted, society also provides certain vocational courses and the main source of revenue for the society is vocational training fees. Ld. AR submitted, in order to sustain practical training in making dyes, moulds and tools, precision engineering manufacturing orders from public sector undertakings, Hindustan Aeronautics Ltd, Defence Research Laboratories and other government organizations are being undertaken. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure, which has to be reimbursed by the trainees, who undergoes training programme conducted by assessee. Therefore, considered in the aforesaid perspective, it cannot be said that assessee is engaged in commercial activity. As far as allegation of ld. DIT(E) that it has earned substantial amounts from sale of finished goods, it was submitted by ld. AR that tools are manufactured by trainees during the training programme, assessee makes available stocks of raw material to the trainees and the required plant and machinery is also provided. Trainees with the knowledge acquired during the class room course undertakes the process of production and resultant finished goods , waste materials, etc. are sold. However, receipts from sale effected varies between 10% to 15% of the total income of assessee. Thus, it is clear that society is imparting technical education and in the process of providing such training certain products are produced which are sold. Therefore, the activities are considered as part of education. Only because sales are recorded in the books of account, it will not adversely effect assessee s entitlement to registration u/s 12A of the Act. As far as allegation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision relied upon by ld. DIT(E), ld. AR submitted, the facts involved in the said decision being totally different, ratio laid down in that case, will not apply to assessee s case. 8. Ld. DR, on the other hand, supporting the order of ld. DIT(E), submitted, perusal of objects of assessee society would clearly indicate that objects are not restricted to educational purpose alone. Specifically referring to object clause 2 3, ld. DR submitted that they are in the nature of consultancy, which generates royalty income for assessee. Ld. DR submitted, since the object of assessee society is not purely educational, it cannot be said that the restriction imposed under proviso to 2(15) would not apply to assessee. He, therefore, submitted, since assessee has earned substantial revenue in different AYs from commercial activity, ld. DIT(E) was justified in rejecting assessee s application for grant of registration. 9. We have considered the submissions of the parties and perused the order of ld. DIT(E) as well as other material on record. It is clear from the order of ld. DIT(E) that he has considered assessee as noncharitable institution because it has receipts from the sale of fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrough the order of ld. DIT(E) it is clear that he has not expressed any opinion under which limb of charitable purpose assessee s activity can be classified. Only observation made by him is assessee is involved in both charitable and non-charitable activities. Even, ld. DIT(E) has not specifically referred to the first proviso to section 2(15) while holding that assessee is not entitled for registration as it is engaged in commercial activity. However, as could be understood from the submissions of ld. DR, according to department assessee s activity comes under the last limb of section 2(15), hence, the proviso applies. Even assuming that assessee s objects/activity comes without the last limb, viz; advancement of any other object of general public utility , the proviso to section 2(15) will not automatically disqualify the assessee from being considered as a society established for charitable purpose only because it has receipts from sale of dyes, moulds etc. or from royalty. It has to be seen whether the primary or dominant purpose or object of the assessee is to carry out object of general public utility or any activity of profit . If for achieving its primary or dominant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness' for the said section, the object and purpose of the section has to be kept in mind. We do not think that a very broad and extended definition of the term 'business' is intended for the purpose of interpreting and applying the first proviso to section 2(15) of the Act to include any transaction for a fee or money. An activity would be considered 'business' if it is undertaken with a profit motive, but in some cases this may not be determinative. Normally, the profit motive test should be satisfied but in a given case activity may be regarded as business even when profit motive cannot be established/ proved. In such cases, there should be evidence and material to show that the activity has continued on sound and recognized business principles, and pursued with reasonable continuity. There should be facts and other circumstances which justify and show that the activity undertaken is infect in the nature of business. The test as prescribe in Raipur Manufacturing Co. (supra) and Sai Publication Fund (supra) can be applied. The six indicia stipulated in Lord Fisher (supra) are also relevant. Each case, therefore, has to be examined on its own facts. 9.3 T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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