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2016 (5) TMI 1175 - ITAT AMRITSAR

2016 (5) TMI 1175 - ITAT AMRITSAR - [2016] 48 ITR (Trib) 80 - Exemption u/s 11 - charitable purposes - business activity incidental to the attainment of objectives of the trust - the words "not involving the carrying on any activity for profit" were dropped from section 2(15). - Held that:- As long as broader public cause is served, whether by the State funding or by efficient regulation of the affairs, it is an object of general public utility. It is also important to bear in mind that costs of .....

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against revenue - I. T. A. Nos. 91 and 92 (Asr)/2014 - Dated:- 1-1-2016 - A. D. Jain (Judicial Member) And T. S. Kapoor (Accountant Member) For the Petitioner : Salil Kapoor For the Respondent : Ratinder Kaur ORDER A. D. Jain (Judicial Member) 1. These are the assessee's appeal for the assessment years 2008-09 and 2010-11, against different orders, each dated December 12, 2013, passed by the learned Commissioner of Income-tax (Appeals), Amritsar. The issues involved in both the appeals are s .....

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hancement of income is illegal and bad in law. 3. That, in view of the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in law and on facts in enhancing the income by making the addition of ₹ 6,58,59,246 on account of excess of income over expenditure, which is illegal, bad in law and without jurisdiction. The enhancement itself is illegal, bad in law and without jurisdiction. 4. That the Assessing Officer/Commissioner of Income-tax (Ap .....

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section 11 of the Act on the ground that the activities carried out by the assessee-appellant is not for charitable purpose as per section2(15) of the Act. In any case, it is wrongly held that the asses see-trust is not entitled to exemption under section 11 of the Act. 6. That, in view of the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in law in making the ad hoc addition/disallowance of ₹ 2,88,41,750 and in the hands of the trus .....

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jurisdiction and are also highly excessive. The learned Commissioner of Income-tax (Appeals) has wrongly and illegally upheld the addition of ₹ 2,88,41,750 and enhanced the income by/to ₹ 6,58,59,246. 9. The additions made and the observations made are unjust, unlawful and based on mere surmises and conjectures. The additions made cannot be justified by any material on record and are also highly excessive. 10. That the explanation given, evidence produced, material placed and availab .....

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disallowances/additions made and could not have included the same in the current income for payment of advance tax. The interest charged under various sections is also wrongly worked out." 3. In ITA No. 92(Asr)/2014, for the assessment year 2010-11, the assessee has taken the following grounds : "1. The assessment order passed under section 143(3) and the additions/disallowances made by the Assessing Officer are illegal bad in law and without jurisdiction. 2. That, in view of the fact .....

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ssioner of Income-tax (Appeals) has erred in law and on facts in making the addition/disallowance of the expense under the head of work bill of ₹ 15,55,47,181 on the ground that the said expense is capital in nature not revenue in nature. The same is wrongly and illegally upheld by the Commissioner of Income-tax (Appeals). 4. That, in view of the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in law in making the addition of ₹ 7 .....

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ing balance and no disallowance was called for. 6. The additions/disallowances made are unjust, unlawful, without jurisdiction and are also highly excessive. The learned Commissioner of Income-tax (Appeals) has wrongly and illegally upheld the addition of ₹ 16,31,74,925. 7. The additions made and the observations made are unjust, unlawful and based on mere surmises and conjectures. The additions made cannot be justified by any material on record and are also highly excessive. 8. That the e .....

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illegally charged as the appellant could not have foreseen the disallowances/additions made and could not have included the same in the current income for payment of advance tax. The interest charged under various sections is also wrongly worked out." 4. At the outset, the learned counsel for the assessee states at the Bar that ground No. 5 in ITA No. 91(Asr)/2014 for the assessment year 2008-09 and ground No. 2 in ITA No. 92(Asr)/2014 for the assessment year 2010-11 pertain to one and the .....

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tsar)), the Income-tax Appellate Tribunal had decided this issue in favour of the assessee, under similar facts and circumstances. 5. The learned Departmental representative, on the other hand, placed reliance on the impugned order. 6. The grievance of the assessee by way of ground No. 5 for the assessment year 2008-09 and ground No. 2 for the assessment year 2010-11, under similar facts and circumstances, stands answered in favour of the assessee by the Income-tax Appellate Tribunal, vide order .....

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ribunal order dated September 10, 2015. 7. In the Income-tax Appellate Tribunal order for the assessment years 2009-10 and 2011-12, it has been held as follows (page 695 of 45 ITR (Trib)) : "Before we address ourselves to the facts of this case, let us analyse the relevant legal provisions. Section 2(15), which defines 'charitable purposes' though in an inclusive rather than an exhaustive manner, had a rather quite existence, unaffected by the frequent amendments to the Income-tax A .....

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atersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest)', were added and, on a more relevant note, a new proviso, (i.e., the first proviso) was added to this provision, carving out an exception in the cases of 'advancement of any other object of general utility', and, by the immediately following Finance Act, 2009, there was yet another proviso, (i.e., the second proviso) introduced to carve out an exception from the excep .....

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application or retention of the income from such activity. However, these provisions are not to apply when the activities are such a modest scale that the value of receipts in respect of the same are less than ₹ 25 lakhs. These two provisos, as they stand now, are as follows : '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 .....

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al in the case of Himachal Pradesh Environment Protection and Pollution Control Board v. CIT [2011] 9 ITR (Trib) 604 (Chandigarh), has observed as follows (page 611) : 'It is also important to bear in mind that the insertion of proviso to section 2(15) does not mean that in case an assessee is to receive any payment for anything done for trade, commerce or business, the assessee will be hit by the said proviso. It may be recalled that elaborating the scope of this amendment, Central Board of .....

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if they carry on commercial activities. Whether such an entity is carrying on an activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of activity. 3.1 There are industry and trade associations who claim exemption from tax under section 11 or on the ground that their objects are for charitable purposes as these are covered under the 'any other object of public utility'. Under the principle of mut .....

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ality. However, if such organisations have dealings with the non- members, their claim for charitable institution would now be governed by the additional conditions stipulated in proviso to section 2(15). 3.2 In the final analysis, whether the assessee has for its object 'the advancement of any other object of general public utility' is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in connection to trad .....

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ose' within the meaning of section 2(15) would be well advised to eschew any activity which is in the nature of trade, commerce or business or rendering of any service in relation to any trade, commerce or business." (emphasis supplied) As the above Central Board of Direct Taxes circular, which is binding on the Commissioner of Income-tax under section 119(1)(a) of the Act, aptly puts it, whether the assessee has, as its object, advancement of any other object of general public utility .....

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Commissioner of Income-tax to contend that where an object of general public utility is not merely a mask to hide the true purpose or rendering of any service in relation thereto, and where such services are being rendered as purely incidental to or as subservient to the main objective of 'general public utility', the carrying on of bona fide activities in furtherance of such objectives of 'general public utility' will also be hit by the proviso to section 2(15). As the Central .....

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ity is not merely a mask to hide true purpose or rendering of any service in relation thereto, and where such services are being rendered as purely incidental to or as subservient to the main objective of 'general public utility', the carrying on of bona fide activities in furtherance of such objectives of 'general public utility' cannot be hit by the proviso to section 2(15). By the Finance Act, 2015, these two provisos also stand substituted, with effect from April 1, 2016, a n .....

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ty, unless- (i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility ; and (ii) the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent. of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year.' It may be noted that while the earlier proviso simply stated that exclusion from 'charitable purposes' .....

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as earlier triggered by 'involvement in any activity in the nature of trade, commerce or business, etc.,' but, post- Finance Act, 2015, amendment, it will be triggered even if 'such an activity in the nature of trade, commerce or business, etc., is under taken in the course of carrying out such advancement of any other object of general public utility'. This substitution of the proviso to section 2(15), in our considered view, may be viewed as representing a paradigm shift in the .....

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ble purposes' because 'in such a case, the object of "general public utility" will only be a mask or a device to hide the true purpose which is trade, commerce, or business or rendering of any service in relation to trade, commerce or business'. The advancement of any objects of general public utility and engagement in trade, commerce and business, etc., were thus seen as mutually exclusive in the sense that either the assessee was pursuing the objects of general public uti .....

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y is undertaken in the course of actual carrying out of such advancement of any other object of general public utility' it is excluded from the scope of charitable purposes only when 'the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent. of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year'. In other words, even when the activities are in the course of advancement o .....

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n the course of pursuing advancement of any objects of general public utility when any activities in the nature of trade, commerce or business, etc., 'is undertaken in the course of actual carrying out of such advancement of any other object of general public utility', unless, of course, the activity level remains within the threshold limit, i.e., receipts from such activities are less than twenty per cent. of total receipts of that year. As the above provisions, which, in our humble und .....

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e activities will continue to be covered by the scope of section 2(15). As we hold so, we may only refer to the observations of a Five Member Bench of the honourable Supreme Court, in the case of CIT v. Vatika Township Pvt. Ltd. [2014] 367 ITR 466 (SC), as follows (page 486) : 'Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, legislation is presumed not to be intended to have a retrospective operation. The .....

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of law is known as lex prospicit non respicit : law looks forward not backward. . . . We would also like to point out, for the sake of completeness, that where a benefit is conferred by legislation, the rule against a retrospective construction is different. . . . . . . In the instant case, the proviso added to section 113 of the Act is not beneficial to the assessee. On the contrary, it is a provision which is onerous to the assessee. Therefore, in a case like this, we have to proceed with the .....

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ases of Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234 (SC), Indian Chamber of Commerce v. CIT [1975] 101 ITR 796 (SC), it may also be appropriate to briefly deal with the relevant developments. The Central Board of Direct Taxes Instruction No. 1024, dated November 7, 1976, was issued in the light of the two Supreme Court rulings referred to above and it stated as follows : 'Board's Instruction No. 1024, dated November 7, 1976 7th November, 1976 Section 2(15) of the Income- .....

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upreme Court in the great detail in the cases of Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234 (SC) and Indian Chamber of Commerce v. CIT [1975] 101 ITR 796 (SC). Commenting on this expression, their Lordships, in the case of the Indian Chamber of Commerce v. CIT [1975] 101 ITR 796 (SC), etc., observed (page 803) : "Notwithstanding the possibility of obscurity and of dual meanings when the emphasis is shifted from 'advancement' to 'object' used in section 2(15 .....

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Lordships Khanna J. and Gupta J. observed (page 243) : ". . . Ordinarily, profit motive is a normal incident of business activity and if the activity of a trust consists of carrying on of a business and there are no restrictions on its making profit, the court would be well justified in assuming in the absence of some indication to the contrary that the object of the trust involves the carrying on of an activity for profit . . ." 3. The test which has been laid down by the Supreme Cou .....

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rmatively, the claim for exemption collapses and the benefit of section 11 will not be available to the entire income. However, if such activity is undertaken without profit motive, the object will be charitable purpose within the meaning of section 2(15). 4. These two decisions of the Supreme Court may kindly be brought to the notice of the officers working in your charge. You may also kindly direct them to carry out a review of the completed cases in the light of the pronouncement of the Supre .....

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C) did not meet the approval of a Larger Bench of the honourable Supreme Court in the case of Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 (SC). While doing so, the honourable Justice Bhagwati, in his order representing majority views, observed as follows (page 27) : 'There is, however, one comment which is necessary to be made whilst we are on this point and that arises out of certain observations made by this court in Sole Trustee, Loka Shikshana Trust's .....

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rofit". (page 243 of 101 ITR) And to the same effect, observed Krishna Iyer J. in Indian Chamber of Commerce's case [1975] 101 ITR 796, 804 (SC) when he said : "An undertaking by a business organisation is ordinarily assumed to be for profit unless expressly or by necessary implication or by eloquent surrounding circumstances the making of profit stands loudly negatived . . . a pragmatic condition, written or unwritten, proved by a proscription of profits or by long years of invari .....

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never an activity is carried on which yields profit, the inference must necessarily be drawn, in the absence of some indication to the contrary, that the activity is for profit and the charitable purpose involves the carrying on of an activity for profit. We do not think the court would be justified in drawing any such inference merely because the activity results in profit. It is in our opinion not at all necessary that there must be a provision in the constitution of the trust or institution t .....

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dominant object of the activity is profit making or carrying out a charitable purpose. If it is the former, the purpose would not be a charitable purpose, but, if it is the latter, the charitable character of the purpose would not be lost.' (emphasis supplied) It was in this backdrop, and shortly after the above judgment was delivered by the honourable Supreme Court was rendered, that the words "not involving the carrying on any activity for profit" were dropped from section 2(15). .....

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on the statute, and the judicial precedent, which the Central Board of Direct Taxes instruction has interpreted, has already faded into oblivion. It is, however, important to bear in mind the fact that, going by the Circular No. 372 dated December 8, 1983 ([1984] 146 ITR (St.) 9 ) issued by the Central Board of Direct Taxes explaining the amendments made by the Finance Act, 1983, dropping of the words "not involving the carrying on any activity for profit" did not represent any paradig .....

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blic utility not involving the carrying on of any activity for profit. Section 3(a) of the Finance Act has omitted the words "not involving the carrying on of any activity for profit" from the definition. This amendment is consequential to the amendment made in section 11 of the Income-tax Act by section 6(b) of the Finance Act whereunder profits and gains of business in the case of charitable or religious trusts and institutions will not be entitled to exemption under that section exc .....

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s inserted by the Finance Act, 1983 (4A) Sub-section (1) or sub-section (2) or sub-section (3) or sub- section (3A) shall not apply in relation to any income, being profits and gains of business, unless- (a) the business is carried on by a trust wholly for public religious purposes and the business consists of printing and publication of books or publication of books or is of a kind notified by the Central Government in this behalf in the Official Gazette ; or (b) the business is carried on by a .....

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-section (4A) in section 11 of the Income-tax Act to provide that the provisions of sub-section (1) of that section relating to exemption of income derived from property held under trust for charitable or religious purposes ; or of sub-section (2) thereof relating to accumulation of setting apart of such income for application to such purposes ; or the connected provisions of sub-sections (3) and 3(A) of the said section will not apply in relation to profits and gains of business. This provision .....

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a kind notified by the Central Government in this behalf in the Official Gazette ; (b) the business is carried on by an institution wholly for charitable purposes and the work in connection with the business is mainly carried on by the beneficiaries of the institution. 19.2 The exceptions mentioned under (a) and (b) above will not be available unless separate books of account are maintained by the trust or institution in respect of such business. In consequence of the new provisions made in sub- .....

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rovisions of section 10 of the Income-tax Act, and as such, profits derived by any trust, institution, association, etc., referred to in clauses (21), (22), (22A), (23), (23A), (23B), (23BB) and (23C) will continue to be exempt from Income-tax. 19.4 The Finance Act has also amended section 164 of the Income-tax Act to clarify that profits and gains of business which are not exempt under section 11 of the Income-tax Act will be charged to Income-tax as if such profits and gains (including any oth .....

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inasmuch as this limitation did not, as per the honourable Madras High Court in the case of Thanthi Trust v. CBDT [1995] 213 ITR 639 (Mad), apply to the income derived from property held under the trust for charitable purposes. To that extent, paragraph 13.1 of the above circular was held to be inconsistent with section 11(4A). This uncertainty did not last long as there was yet another amendment in section 11, and the new sub-section (4A) with effect from April 1, 1992, which was to substitute .....

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amendment in law, the Central Board of Direct Taxes Circular No. 621 dated December 19, 1991 ([1992] 195 ITR (St.) 154 ), read with Circular No. 642 dated December 15, 1992 ([1993] 199 ITR (St.) 7 ) stated as follows : 'Central Board of Direct Taxes Circular No. 621, dated December 19, 1991 ([1992] 195 ITR (St.) 154 at page 165) 15.8 In order to bring exemption of charitable or religious trusts in line with the corresponding provisions in section 10(23C)(iv) or (v) sub-section (4A) of secti .....

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d above) of the Circular No. 621, dated 19th December, 1991 issued from F. No. 133/389/91-TPL, it is clarified that according to the provisions of section 11(4A) of the Income-tax Act, as amended through the Finance (No. 2) Act, 1991, with effect from April 1, 1992, profits and gains of business in the case of a trust or institution will not be liable to tax if the business is incidental to the attainment of the objectives of the trust or institution, as the case may be. In addition, separate bo .....

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the assessee, the same were exempt from tax under section 11. There is no substantive change in law vis-a-vis the law prevailing as at the point of time in the context of which the honourable Supreme Court's five Judge Bench had delivered the judgment in the case of Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 (SC). In the said case, their Lordships had, inter alia, held, by majority view, that 'What is necessary to be considered is whether having regard .....

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or profit, it is excluded from the ambit of charitable purpose defined in section2(15)' was articulated in the said order but that was part of the minority view stated by Justice A. P. Sen, as he then was. His Lordships did proceed to observe, as is the stand taken by the authorities below, as follows (page 49 of 121 ITR) : 'With respect, I venture to say that if an object of general public utility is engaged in an activity for profit, it ceases to be a charitable purpose and, therefore, .....

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elief. To illustrate, a charitable hospital holding buildings on trust may run a nursing home. The profits of the nursing home owned and run by the trust will be exempt under section 11(4), because the business is carried on by the trust in the course of the actual carrying out of the primary purpose of the trust. The concept of "profits to feed the charity", therefore, is applicable only to the first three heads of charity and not the fourth. It would be illogical and, indeed, difficu .....

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y or incidental to the main object. In fact, if any other view were to prevail, it would lead to an alarming result detrimental to the Revenue.' Clearly, therefore, so far as pre insertion of provisos to section2(15), i.e., prior to April 1, 2009, is concerned, the stand taken by the authorities below cannot be sustained in law. Assuming that all the allegations of the Assessing Officer, with respect to presence to profit motive in activities of the assessee are correct, since these activiti .....

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me will 'not be exempt from tax'. There is no finding to that effect by any of the authority below. In any case, it is not even the case of the Revenue authorities that the activities of the trusts do not serve the objects of the general public utility but the case is confined to the stand that these activities have been carried out in such a manner as to make profit and no activities directly of any general public utility are carried out. The registration granted to the assessee evidenc .....

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s nature, the books of account maintained by the assessee- trust meet this requirement as well. Of course, we will deal with the issue of activities being in the nature of 'profit making activities' a little later, but, suffice to say, that on the admitted facts of this case, so far period prior to April 1, 2009, is concerned and for the reasons set out above, the benefit of section 11 read with section 2(15) could not have been declined at all. Turning once again to the amendments broug .....

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iso to section 2(15) was introduced) ; and-second in which any activities in the nature of trade, commerce or business, etc., are 'undertaken in the course of actual carrying out of such advancement of any other object of general public utility', (insertion of new proviso to replace first and second proviso to section 2(15)-effective April 1, 2016, i.e., the assessment year 2016-17). As for the first category, post April 1, 2009, amendment, this category cannot be treated as covered by s .....

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profit seeking entity that a business inherently is. In other words, thus, the case of the Revenue is that the activities in the nature of trade, commerce and business are carried out for advancement of objects of general public utility. This situation at best falls in the second category. However, these cases, for the detailed reasons set out above, the exclusion of these cases from section 2(15) is only effective from April 1, 2016, i.e., assessment year 2016-17. The law is well settled by a .....

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s, even post insertion of proviso to section 2(15) but before April 1, 2016, when business activities are carried by the assessee-trust "in the course of actual carrying out of such advancement of any other object of general public utility", the benefit of section 11 read with section 2(15) cannot be declined. Nothing, therefore, turns on the assessee carrying out, even if that be actually so, activities in the nature of trade, commerce or business, etc., as long as these activities ar .....

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esidential and commercial units and residential and commercial lands 'just to earn profit'. This profiteering, as the learned Departmental representative puts it, is the core issue in these appeals. As we deal with this aspect of the matter, we may reproduce the following written submissions filed by the learned Departmental representatives : A : In all improvement trust cases It is submitted that the learned counsel namely Shri Y. K. Sood, chartered accountant and Shri J. S. Bhasin, adv .....

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ade commerce or business. (b) Where the assessee have the objective of rendering general public utility services but for doing so they first earn income by engaging themselves in activities in the nature of trade, commerce or business or rendering any service in relation to any trade and then apply such income to the charitable objects. Whereas in the former situation, registration under section 12AA would be allowable and also the exemption under sections 11 and 12 but for the latter situation, .....

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S. No. 9 had not been pressed by Shri Sood. The judgment at S. No. 12 pertains to pre-amended provisions of section 2(15) and is thus not applicable. As regards the judgment at S. Nos. 6 and 13, the same run counter to the judgment of the jurisdictional Tribunal's order in the case of Jammu Development Authority which has been confirmed by the Jammu and Kashmir High Court and the special leave petition filed by the assessee has also been dismissed by the honourable Supreme Court. It is pert .....

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rable Delhi High Court clearly supports the cause of the Revenue as the precise nature of the activities is the same as articulated by the honourable Delhi High Court in the above paragraph. It is further submitted that at paragraph 58, the court has observed that the provisions of section 2(15) need to be read down but such reading has been contemplated in the context of section 10(23C)(iv) of the Income-tax Act, 1961 and when read in its totality, the judgment support the case of the Revenue a .....

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d further it has been held by the honourable Tribunal Mumbai "C" Bench that the assessee is an agent of the Government and does not hold any independent entity whereas the trusts are a corporate body and have perpetual succession and common seal and can sue and be sued in its name as per section 3 of the Punjab Towns Improvement Trusts Act, 1922. In view of this difference also, the said judgment is not applicable to this case. It is further submitted that the trusts do not get any gra .....

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t sells residential plots or residential buildings, it sells the same at reserve price. It is submitted that reserve price so fixed is fixed in such a manner and may take within its sweep huge profit as would be seen from the annexure at page 9 of the paper book filed by Shri J. S. Bhasin, advocate, which includes the following : (a) Conservancy charges for five years at 10 per cent. per month per acre. (b) Provisions for unforeseen charges at 15 per cent. of total reserve price as computed as p .....

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arges' at sub-para (v) where provision for 'other public utility' has already been considered. It is further submitted that along with copy of the Punjab Town Improvement (Utilisation of Land and Allotment of Plots) Rules, 1983, Shri Bhasin has appended a report dated June 4, 2015, which is in Gurmukhi script and its English translation as under : 'It is worth mentioning here that improvement trust gets no grant from the Government. Trust gets its income from sale of plots/ shops .....

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ing the commercial plots and commercial building on auction, it spends on such public utility services which is eminently hit by the proviso to section 2(15) of the Income-tax Act, 1961. It clearly falsifies the claim of Mr. Bhasin that trusts have income from other sources as contemplated in section 68 of the Act. This shows that the Government does not give to trusts what it itself has assured the trusts in the Act. It may further be mentioned that trusts are not agent of the State as if it we .....

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,43,65,946. Thus in a period of three and a half years, it had more than doubled the price of its plot measuring 60.35 marlas. An affidavit of Shri Charan Dass, Assistant Commissioner of Income-tax, Pathankot is enclosed in support of this fact. If this is the way the trust does charity by way of developing cities and town then certainly, it amounts to robbing Peter to pay Paul and surely such an activity cannot be clothed as charitable activity. In view of above, it is prayed that the appeals o .....

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hether they are in the nature of charitable within the meaning of section 2(15) of the Act in respect of assessment years in question or not, keeping in view the arguments raised by the learned counsel for the appellant-assessee. It is submitted that the activities of the trust are not in the nature of charitable for multiple reasons, i.e., A. The assessee-trust is engaged in the sale and purchase of properties with a commercial motive. First, it purchases landed properties including plots and s .....

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st's case in ITA No. 402/ASR/2014). It is clear that the residential plots/buildings are sold with profit motive and thus partake the commercial character though for the allottees the same is for residence purposes. Thus, it is clear that this activity is commercial activity for the assessee-trust. The trust sells the plots/buildings by way of open auction with a fixed reserve price and tries to get as much as profit as is possible and if the bidders do raise the bid beyond the reserve price .....

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ients who finally carry out trade or commerce in certified seeds. Thus, petitioner had rendered its services not directly to farmers but was rendering its services directly to its clients/agents who are engaged in trading of the certified seeds with profit motive. Activities of the petitioner had not indicted involvement of any charitable activity or advance of any other object of general public utility. Functioning of the petitioner was akin to a corporate profit earning service provider.' .....

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but the way the trust fixes its reserve price as discussed above, it is clear that the activity is commercial in nature for the trust and not charitable. It is further pertinent to mention here that when the trust fixes the reserve price for residential as well commercial plots or buildings, it includes in its cost all the amenities which it promises to the people including all development charges like roads, sewerage, water supply, storm water drainage, street lighting and local distribution s .....

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o the two decisions which the honourable Bench asked the undersigned to comment upon. It is submitted in the case of Stock Exchange Ahmedabad v. Assistant CIT reported at [2000] 74 ITD 1 (Ahd), it may be submitted that as discussed above, there is no element of cypress involved in the activities of the trust. It may be mentioned here that the most distinguishable feature of the trust is it is rendering no general public utility as whatever public utility service it is providing, it first recover .....

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ted, exemption under section 11 cannot be denied to the assessee on the ground that it was not a charitable institution. If this decision of the Tribunal is to prevail then restoration of the issue to the Tribunal by the High Court would become redundant. It is submitted that submissions made in the case of Jalandhar Improvement Trust and other trust during the course of hearing of trusts' cases are also pressed into service in these appeals. In view of the above submissions, it is prayed th .....

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evi Foundation v. DIT (Exemptions) [2015] 40 ITR (Trib) 1 (Delhi) ; [2015] 56 taxmann.com 56 (Delhi) (page 30) : '. . . . The soul of charity is benevolence and generosity towards others and the community at large. Of course, it is important as to what are the activities of a charitable institution but what is even more important is what is the predominant motivation for such activities. No activity, by itself, could be charitable in nature when it is dominated and triggered by economic gree .....

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. What is really, therefore, required to be carefully examined, in order to find whether an act of the institution is charitable or not, is not only to assess the work being done by the institutions, which claim to be pursuing charitable activities, but also the economic dynamics and motivations of such activities.' The learned Departmental representative has pointed out that the commercial plots and units are auctioned off which shows that the idea is to make maximum profits but what he cle .....

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cial venture. It is also important that this use of bidding process is only in the context of commercial units, etc. The development of commercial areas is in the interest of planned growth of an area and when such commercial areas develop, all the stakeholders in the development of that area benefit. In order of this benefit to the common cause, it is not necessary that the businessmen, buying such units, must also benefit. The denial of any advantage, at the cost of general public, to the busi .....

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mprovement (Utilisation of Land and Allotment of Plots) Rules, 1983, there is a formulae on the basis of which the price is worked out. The learned Departmental representative does not dispute that aspect but he alleges profit motive embedded in this formula as shown by adjustments for (a) conservancy changes for five years at 10 per cent. per month per acre; and (b) provision for unforeseen charges at 15 per cent. of the total reserve price. Firstly, even if this allegation about presence of th .....

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Instruction No. 1024 (supra), it has been stated thus : 'Ordinarily profit motive is a normal incident of business activity and if the activity of a trust consists of carrying on of a business and there are no restrictions on its making profit, the court would be well justified in assuming in the absence of some indication to the contrary that the object of the trust involves the carrying on of an activity for profit'. That apart, mere presence of these two items does not show that the u .....

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ed development of the area in accordance with the policies of the State Government. A lot of emphasis has been made by the learned Departmental representative on the fact that nothing, or very little, has been done by the trusts for the poor people but what this argument overlooks is that the assessee-trust is not granted registration under section 2(15) for implementing poverty alleviation programs or doing other acts of charity but it is granted registration because what it is pursuing, by fol .....

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e, such expectations, no matter how legitimate, do not obliterate the work done by these agencies and the role played by these agencies for public good in furtherance of advancement of objects of general public utility. The learned Departmental representative has also pointed out that the assessee-trusts do not get any grant from the State Government which shows that first they make profits from land deals and then use the income so earned for the public causes stated. It is for this reason, acc .....

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er public cause is served, whether by the State funding or by efficient regulation of the affairs, it is an object of general public utility. It is also important to bear in mind that costs of proper development of area are also costs incidental to the plots and units sold by the assessee and, therefore, these two things should not be seen in isolation. As for the specific instance of inordinate hike in prices within a short period of three and a half years, we are unable to comment upon the sam .....

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on this aspect, and that is a crucial aspect having bearing on the conclusions. There was also no, and could not have been any, occasion to consider the impact, what is referred to as "kill effect", of the amendments by the Finance Act, 2015. The Revenue, thus, derives no advantage from this judicial precedent. As regards the decision of the co-ordinate Bench in the case of Amritsar Improvement Trust, on which so much reliance has been placed by the learned Departmental representative, .....

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