TMI Blog2015 (12) TMI 196X X X X Extracts X X X X X X X X Extracts X X X X ..... 4A) of the Act, subject to certain limitation. In view of above we reverse the order of CIT (A) and hold that assessee is eligible for exemption u/s 11 & 12 of the Income Tax Act as assessee is not engaged in any trade, commerce or business and its dominant and prime objective is charitable in nature in accordance with section 2 (15 ) of The Income Tax Act. - Decided in favour of assessee. - ITA No. 1115/Del/2013 - - - Dated:- 26-11-2015 - Shri H. S. Sidhu, Judicial Member And Shri Prashant Maharishi, Accountant Member For the Appellant : Sh. N. K. Gupta, Adv For the Respondent : Sh. P. Dam Kanunjna, Sr. DR ORDER Per Prashant Maharishi, A. M. 01. The present appeal filed by the assessee is directed against the order of learned CIT (A)-XXI, dated 30.11.2012 passed for the assessment year 2009-10. The assessee raised the following grounds of appeal: 1. That the ld CIT (A)-XXI has erred on law and facts by upholding the decision of the ld AO, that in accordance with the provisions of section 2(15), proviso, the activities of the appellant are in the nature of trade, commerce or business and hence cannot be given exemption under section 11 and 12 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w.e.f 1/4/2009 not entitled to the exemption u/s 11 12 of the Act. It was also of the view of the AO that assessee has accumulated income of ₹ 878.60 lakhs therefore assessee exits with a profit motive and activity of the assessee is f capable of generating profit. Aggrieved by the order of AO, assessee approached CIT (A) who in turn relying on circular no 11/2008 dated 19.12.2008 confirmed the action of AO. Therefore assessee is in appeal before us. 03. According to the ld AR the Assessing Officer has wrongly interpreted the provisions of section 2(15). He submitted that assessee trust is formed by Quality council of India vide its resolution dated 9/02/1996.. This society was established which is responsible to Quality council of India and is carrying on the activity of Testing and Calibration laboratories. It is also under the direct control of central government for its policies and programs. It is further provided in the memorandum that the income and property of the society shall be applied towards the promotion of the objects of the trust and also with respect to grants received from central government as per limitation imposed by government. Its functionaries are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blic utility and that exception is limited to activities in the nature of trade, commerce or r any activity of rendering any service in relation to any trade, commerce or business for a cess or fee or any other consideration. In both the activities, in the nature of trade, commerce or business or the activity of rendering any service in relation to any trade, commerce or business, the dominant and the prime objective has to be seen. If the dominant and the prime objective of the institution, which claims to have been established for charitable purposes, is profit making, whether its activities are directly in the nature of trade, commerce or business or indirectly in the rendering of any service in relation to any trade, commerce or business, then it would not be entitled to claim its object to be a charitable purpose . On the flip side, where an institution is not driven primarily by a desire or motive to earn profits but to do charity through the advancement of an object of general public utility, it cannot but be regarded as an institution established for charitable purposes. Honourable High court has held that :- 55. It would be appropriate to also examine the observations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make or earn profit. Profit motive is determinative and a critical factor to discern whether an activity is business, trade or commerce. The court further held (page 153 of 360 ITR) : Business activity has an important pervading element of self- interest, though fair dealing should and can be present, whilst charity or charitable activity is antithesis of activity undertaken with profit motive or activity undertaken on sound or recognised business principles. Charity is driven by altruism and desire to serve others, though element of self-preservation may be present. For charity, benevolence should be omnipresent and demonstrable but it is not equivalent to self-sacrifice and abnegation. The antiquated definition of charity, which entails giving and receiving nothing in return is outdated. A mandatory feature would be ; charitable activity should be devoid of selfishness or illiberal spirit. Enrichment of oneself or self-gain should be missing and the predominant purpose of the activity should be to serve and benefit others. A small contribution by way of fee that the beneficiary pays would not convert charitable activity into business, commerce or trade in the absence of contrar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15) cannot be construed literally and in absolute terms. It has to take colour and be considered in the context of section 10(23C)(iv) of the said Act. It is also clear that if the literal interpretation is given to the proviso to section 2(15) of the said Act then the proviso would be at risk of running fowl of the principle of equality enshrined in article 14 of the Constitution of India. In order to save the Constitutional validity of the proviso, the same would have to be read down and interpreted in the context of section 10(23C)(iv) because, in our view, the context requires such an interpretation. The correct interpretation of the proviso to section 2(15) of the said Act would be that it carves out an exception from the charitable purpose of advancement of any other object of general public utility and that exception is limited to activities 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. In both the activities, in the nature of trade, commerce or business or the activity of rendering any service in relation to any trade, commerce or business, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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