TMI Blog2017 (4) TMI 175X X X X Extracts X X X X X X X X Extracts X X X X ..... um profit of 5% which also fixed in consultation with the State Govt. This 5% margin will be utilized to meet the expenditure in State Resource Centre (SRC) which was taken over by the assessee. As per the income and expenditure statement extracted by the AO, profit earned by the assessee is about 3% which may be applied by the society for the mandate under the National Literacy Mission to undertake the task of procurement and supply of teaching material. Therefore, one cannot jump into conclusion merely because there is buying and selling activity. Whether it is in the nature of commercial activity or not has to be determined. It can be termed as commercial activity when it is carried out with the intention of making only profit. When ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 12A of the Income tax Act with effect from 01/04/2005. 2.1 The assessee filed its return of income for the AY 2010-11 on 14/10/2010 declaring Nil income after claiming exemption u/s 11 of the Income-tax Act, 1961 (in short the Act ) and subsequently, the case was converted into scrutiny. Accordingly, notices u/s 143(2) 142(1) of the Act were issued. In the scrutiny proceedings, AO observed that assessee has prominent aims and objectives as per the Memorandum of Association as below: i . To take over the State Resource Centre for Adult Education, from Andhra Mahila Sabha on a mutually agreed date and on mutually agreed terms and to run it with the assistance of the Govt. of India. ii. To prepare and disseminate materials rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34,00,000/- Books Publication 4,97,906/- Profit 12,05,632/- 4,14,20,798 4,14,20,798 2.3 AO opined that the provisions of section 2(15) of the Act clearly envisages that 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, or business or commerce irrespective of the nature or application or retention of the income from such activity. 2.4 The AO observed that the assessee society is involved in the business activity i.e. sale of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correspondence and documents and these are being relied upon for the purpose of this appeal u/r 46A( 4). 24. Vide letter in F. No. 6-2/88-AE-I, dated 15.4.1988 of the Joint Eucational Adviser of the Ministry of HRD, Government of India, the role and administrative and financial pattern of the SRCs was communicated. The letter, inter alia, stated as follows: 2 .... (iv) The SRCs will be permitted to create a rolling fund out of the sales proceeds of the books published by them. The prices of the books are to be fixed in consultation with the State Governments, so as to allow a marginal profit only. Apart from utilizing this money for publishing and production of books, the SRCs can also meet the 5% share of their contribut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in law. 2. On the facts and circumstances of the case, the Ld.CIT(A) erred in holding that the assessee is entitled to exemption u/s. 11 of the Act for the A.Y.2010-11. 3. The Ld.CIT(A) ought to have appreciated that, as per that letter dated 15.04.1998 of the Joint Educational Advisor of Ministry of HRD, Government of India, the SRCs will be permitted to create a rolling fund out of the sales proceeds of the books published by them, whereas in the case of the assessee it has not published any books, but as per its Income Expenditure etc, has purchased books at a cost of ₹ 3,68,15,166/- and has made sale out of the same at a consideration of ₹ 4,09,22,892/- and under that circumstances, such activity on part of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ha on a mutually agreed terms and to run it with the assistance of the Govt. of India. As per the aims and objects of SPACE (assessee) and as per the guidance and direction of Govt. of AP, assessee is to procure books and distribute the same to Anganwadis, for which, assessee received cost of the books from Govt. of AP, which is also confirmed by the AO in his order. No doubt, this activity will fall under 5th limb of charitable activity u/s 2(15) of the Act. i.e. advancement of any other object of general public utility. AO by observing income and expenditure statement of assessee, came to an understanding that assessee is in commercial activity considering buying and selling of books. In our considered view mere buying and selling may not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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