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DDIT (E) , Inv. Circle II, New Delhi Versus Quality Council of India

2016 (5) TMI 38 - ITAT DELHI

Registration u/s 12A denied - nature of activity - profit motive - When the assessment is carried out by QCI, the assessed body is required to pay assessment fee to the assessee based on the cost incurred. - Held that:- No hesitation in holding that the Assessing Officer was wrong in coming to a conclusion that the assessee activities are in the nature of trade, business or commerce or that the assessee was rendering any service in relation to such trade, business or commerce. The assessee has n .....

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assessee. Thus we uphold the order of the First Appellate Authority and dismiss this appeal of the Revenue. - Decided in favour of assessee. - ITA No. 2754/Del/2013 - Dated:- 26-4-2016 - Shri J. Sudhakar Reddy, Accountant Member And MS. Suchitra Kamble, Judicial Member For the Appellant : Sh. Raman Kant Garg, Sr.D.R. For the Respondent : None ORDER Per J. Sudhakar Reddy, Accountant Member This is an appeal filed by the Revenue directed against the order of the Ld.Commissioner of Income Tax (App .....

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. The Assessing Officer (AO) passed an order u/s 143(3) of the Act on 28.12.2011 denying exemption u/s 11 of the Act and determining the total income at ₹ 4, 24, 67, 644/-. The Ld. AO held that the assessee is engaged in advancement of any other object of general public utility and in view of the Proviso to Section 2(15) of the Act, such an institute is not charitable if it is involved in carrying on any activity in the nature of any trade, commerce or business. The AO held that the activi .....

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(A). 3. The First Appellate Authority considered various submissions of the assessee and held that the Proviso to Section 2(15) does not apply to the assessee by relying on the judgement of the Hon ble Delhi High Court in the case of Bureau of Indian Standards vs. DGIT (E), in W.P.(C) No.1755 of 2012 dated 27th Sept.2012. He granted relief. Aggrieved the revenue is in appeal before us. 4. None appeared on behalf of the assessee despite issual of notice. On the earlier occasions the Ld.Counsel of .....

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by the Ministry of Industry, Government of India and apex industry bodies such as CII, FICCI and Assocham, with the view to promote quality in India. QCI has established an accreditation structure in India including rules for application, assessment, accreditation and applicable accreditation criteria. As per the accreditation structure various certifying bodies, educational institutions and Hospitals etc., apply to their respective boards i.e., NABCB, NABET and NABH seeking accreditation from Q .....

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nt and accreditation fees of ₹ 5,59,08,546. He further received Honorarium, sale of quality literature and miscellaneous receipts of ₹ 70,12,636. The assessee further received an amount of ₹ 4,99,17,750/- on improvement of health services initiative. The issue is whether the assessee is covered under the newly inserted proviso to section 2(15) of the Act. 7. In our view the Ld. CIT(A) has rightly followed the propositions laid down by the Jurisdictional High Court in the case o .....

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f trade or commercial activity. 7.1. Similar is the decision of the Jurisdictional High Court in the case of ICAI Accounting Research Foundation and Ors vs. DGIT (E) reported in 321 ITR 73 as well as ICAI vs. DGIT(E) 245 CTR 541 Delhi. QCI which has been established by initiative of the Government of India for the purpose of evolving, prescribing and enforcing standards relating to products and processes and is charging, fees for providing services of accreditation facilities. Further the fact t .....

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f (service). It is basically intended to improve the quality of medical services in India resulting in medical relief to the citizens of India. The assessee grants accreditation to quality auditors, conducts training courses and accredit education institutions. It contends that this activity falls within the ambit of education. 7.3. The assessee further submitted that the activities of the assessee carried on by NABCB relating to accreditation of certifying bodies doing Environment Management Sy .....

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ards (BIS) was a statutory body established under the BIS Act and was brought into existence for the harmonious development of the activities of standardization, marking and quality certification of goods . This was, and has been, its primary and predominant object. Even though it does take licence fees for granting marks/certification, that cannot be said to be done for the purpose of profit. If any profit/revenue is earned, it is purely incidental. The BIS performs sovereign and regulatory fun .....

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tion 2(15) by the Finance Act, 2010, with retrospective effect from April 1, 2009. There are four main factors that need to be taken into consideration before classifying the activity of the assesseee as "charitable" under the residuary category, i.e.," advancement of any other object of general public utility" under section 2(15) of the Act. The four factors are (i) the activity should be for advancement of general public utility; (ii) the activity should not involve any act .....

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e earned towards charity because of the statutory amendment is no longer relevant and apposite. It is evident from Circular No. 11 of2008 that a new proviso to section 2(15) of the Act is applicable to assessees who are engaged in commercial activities, i.e., carrying on business, trade or commerce, in the garb of "public utility" to avoid tax liability. The legal terms "trade, commerce, or business" in section 2(15) mean activity undertaken with a view to make or earn profit .....

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enefits, in comparison to the fee, the purpose and object behind the fee, etc., are several factors which will decide the seminal question, is it business? Charitable activities require operational/running expenses as well as capital expenses to be able to sustain and continue in the long run. There is no statutory mandate that a charitable institution falling under the last clause should be wholly, substantially or in part must be funded by voluntary contributions. A practical and pragmatic vie .....

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