TMI Blog2017 (3) TMI 522X X X X Extracts X X X X X X X X Extracts X X X X ..... uch registration cane be withdrawn. Further, if similar institutions established by central government in other states having similar objects have been granted registration under section 12 AA of the income tax act as stated by the Ld. authorized representative and submitted the respective such registration certificate, We are also of the view that there is no reason to single out the assessee for not granting such registration. Therefore we set aside the impugned order of Ld. CIT, Meerut and remit the issue back to him to verify the above facts and if it is found that the institutions in other places having similar objects have been granted registration under section 12 AA he may consider granting registration under this act to the assessee under the respective section applied for. That the assessee may be granted reasonable of Portugal due being heard and to adduce any further evidence which it would like to place before him. In the result appeal of the assessee is allowed for statistical purposes. - ITA No.410/Del/2012 - - - Dated:- 13-2-2017 - SHRI H.S.SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For The Assessee : Sh. K Sampath, Adv Sh. V R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this, the assessee has claimed various expenditure including establishment and other administrative expenses. Hence, the Ld. CIT reached at the conclusion that the activities of the society are of the income earning in nature. He further held that in the copy of the memorandum of Association and rules whether any property remaining after bearing out the liability on the dissolution of the Association shall be transferred to other trust or Association having similar objects. He further held that the society cannot also be considered as an educational institution providing regular or systematic education as defined in the statutory provisions to consider the grant of registration. Therefore, he held that even if the contention of the assessee that it is engaged in the object of general public utility is acceptable the same is in the nature of trade, commerce or business as admittedly consideration is received. Against this order of the Ld. CIT, assessee is in appeal before us. 4. Ld. authorized representative submitted that appellant is a society registered under section 21 of the societies registration act 1860 by the Ministry of industry with the main objects to develop new tec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the ministries/departments concerned with the subject matter and are funded through grants in aid, fully or partially; depending on the extent with such institutes generate internal resources of their own. These grants are regulated by the Ministry of Finance true there are instructions as well as the instructions relating to power posts, etc. These autonomous bodies are generally registered as societies under the societies registration act and in certain cases, they have been setup as statutory institutions under the provisions contained under various acts. Under the various ministries technology and development centers are opened which are product specific for looking into MSME is specific problems and rendering technical services, developing and upgrading technologies and manpower development in specific product groups. Appellant is one such institute. It carries on its activities for the purpose of the benefit of the SC and ST candidates . The assessee submitted the various other such institutes which have been granted registration under section 12 AA of the income tax act by various Commissioners across the country. Assessee has also placed reliance upon the decision of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to receipts from services/training, has also got receipts from sale of finished products in different assessment years. Ld. DIT(E) observed that on verification of the annual accounts, it was found that assessee has shown various amounts towards stock-in-trade, finished goods, work-in-progress and raw materials. He also noted that sales tax assessments have been completed in case of assessee up to AY 2003-04 and assessments for AY 2004-05 2005-06 are pending. He also observed that apart from receipts from sales assessee has also income from royalty as found from income and expenditure account in different assessment years. Ld. DIT(E) observed that, though as per the objects of assessee, it is not supposed to indulge in commercial activities, but, assessee in fact has undertaken commercial activities generating receipts therefrom. He, therefore, held that activity of assessee cannot be considered to be charitable as it is engaged in commercial activity. Ld. DIT(E) referring to a decision of Hon'ble Supreme Court in case of East India Industries (Madras) (P.) Ltd. v. CIT [1967] 65 ITR 611 , observed that a trust or society having both charitable and non-charitable objects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, which is as per the object of the society. Ld. AR submitted, even the introduction of new proviso to sub-section (15) to section 2 with effect from 01/04/2009, will have no effect on assessee as the said proviso is applicable residuary clause, 'advancement of any other object of general public utility' whereas assessee is basically engaged in providing education. Ld. AR submitted, since the so called commercial activity is inextricably linked with the training activity of assessee, it cannot be said that assessee is a non-charitable institution. Ld. AR submitted, society is running on no profit no loss basis and the fee structure is always based on the nature of training provided. Therefore, uniform rate of fee is not fixed for course organized. In this context, it was submitted, since society is engaged in providing technical education in manufacture of tools and dyes moulds, etc., it has to establish necessary infrastructure like class rooms and other facilities besides providing technical training on the machinery used in the manufacture of dyes, etc. For this purpose, it has incurred substantial expenditure, which has to be reimbursed by the trainees, who undergoes t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. DIT(E). In support of his contention, ld. AR relied upon a number of decisions, which are as under: 1. Chartered Ship Brokers v. DIT(E) [2012] 53 SOT 172/25 taxmann.com 289 (Chennai) 2. ICAI Accounting Research Foundation v. DGIT(E) [2010] 321 ITR 73/[2009] 183 Taxman 462 (Delhi) 3. Institute of Chartered Accountants of India v. DGIT(E) [2013] 358 ITR 91/217 Taxman 152/35 taxmann.com 140 (Delhi) 4. Himachal Pradesh Environment Protection and Pollution Control Board v. CIT [2010] 42 SOT 343 (CHD.) 5. Sikkim Manipal University of Health, Medical and Technological Sciences v. CIT [2011] 43 SOT 206/[2010] 8 taxmann.com 279 (Kol.) 6. St. Don Bosco Educational Society v. CIT [2004] 90 ITD 477 (Luck.). 7.1 Ld. AR submitted, while granting registration u/s 12A of the Act, ld. DIT(E) cannot consider the aspects which are to be examined at the time of grant of exemption u/s 11. In this context, he relied upon the following decisions:- 1. CIT v. Surya Educational and Charitable Trust [2013] 355 ITR 280/203 Taxman 53/15 taxmann.com 123 (Punj. Har.). 2. Hardayal Charitable Educational Trust v. CIT [2013] 355 ITR 534/214 Taxman 655/32 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce with the Rules and Regulations, (vii) To impose and recover affiliation and other fee and charges for services rendered, (viii) To sell or dispose of products, bye-products or waste material, arising out of or incidental to the sources of training. 9.1 Though, on a cursory look at the objects it appears that assessee society is engaged in various activities including consultancy, but, on deeper analysis certainly one gets the impression that primary object of the assessee is to impart training in various courses of preparing and designing tools, moulds, dyes etc., which is an activity in the field of education and all other objects are ancillary and incidental to the said main object. A plain reading of definition of 'charitable purpose' as provided u/s 2(15) of the Act would make it clear that the restriction imposed under the proviso to the said section applies to only the last limb, advancement of any other object of general public utility'. There is no express provision u/s 2(15) of the Act, which restricts a trust or institution from undertaking any business or commercial activity if it comes under any other limb of 'charitable purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... predominant object of the activity, the purpose, though an object of general public utility, would cease to be a charitable purpose. But where the predominant object of the activity is to carry out the charitable purpose and not to earn profit, it would not lose its character of a charitable purpose merely, because some profit arises from the activity. The exclusionary clause does not require that the activity must be carried on in such a manner that it does not result in any profit. It would indeed be difficult for II persons in charge of a trust or institution to so carry on the activity that the expenditure balances the income and there is no resulting I profit. That would not only be difficult of practical realization but would also reflect unsound principle of management. 9.2 Aforesaid principle laid down by the Hon'ble Apex Court still hold good even after introduction of proviso to section 2(15) by Finance Act, 2008 w.e.f. 01/04/2009. The words 'any activity 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' was considered and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication 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. 9.4 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 case in Bhubaneswar, Indore and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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