TMI Blog2017 (9) TMI 1032X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act dt. 27th August,2007. The society is solely engaged in charitable activities and is not running with any profit motive. - Decided against revenue - ITA No. 4292/Del/2012 And ITA No. 2870/Del/2014 - - - Dated:- 18-9-2017 - SHRI I.C. SUDHIR, JUDICIAL MEMBER AND AND SHRI L.P. SAHU, ACCOUNTANT MEMBER For The Appellant : Sh. Padma Singh, Sr. DR. For The Respondent : Dr. Rakesh Gupta, Adv. Sh. Somil Aggarwal, C.A. ORDER PER L.P. SAHU, ACCOUNTANT MEMBER These two appeals have been filed by the Revenue against orders of Ld. CIT(A)-XXI, New Delhi vide order dt. 11.6.2012 for the A.Y. 2009-10 and vide order dt. 28.2.2014 for A.Y. 2010-11 on the following grounds of appeal. ITA 4292/Del/2012 AY: 2009-10 1. Ld. CIT(A) is not justified in holding the assessee in the limb of Education as per sec.2(15) definition whereas the activities of the assessee shows that it is a general public utility doing commercial activity. 2. Ld. CIT(A) is also not justified as the activities of the assessee has attributes of business and trade. As the activities of the assessee are not directly relatable to mainstream of education and are of the nature such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on u/s 12A and notification u/s 80G of the Income Tax Act, 1961 and other documents as required by the A.O. The A.O. observed that the assessee has sold the books to the Bihar Jharkhand govt. of ₹ 4.55 crores and sale of Eklavya and other publishers of ₹ 35.78 lakhs. The A.O. further observed that : (a) the books sold to the Bihar, Jarkhand govt. is in the nature of general interest books which the government has decided to provide to young school children to encourage the reading habit and none of them are in the nature of text book. Some of the titles selected include nach chali, khel khel me, khilonon ka khajana, matha pachi, pathe hi pathe etc. The total sale of books under this programme in Bihar and Jharkhand of ₹ 4.55 crores has yielded a surplus of ₹ 1.74 crores after excluding all the related expenses etc.(b) Sale of Eklavya Publishers ₹ 12.74 lakhs; (c ) Educational consultancy receipts ₹ 5.62 lakhs. A.O. also made additions under the head income from other sources . Therefore, in view of the total the A.O. assessed his total income at ₹ 2,04,022/-. A.O. did not agree to the submissions made before him that the Society is fulfill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tively under section 10(23C) of the Act. However, it was seen that a number of entities who were engaged in commercial activities were also claiming exemption on the ground that such activities were for the advancement of objects of general public utility in terms of the fourth limb of the definition of 'charitable purpose'. Therefore, section 2(15) was amended vide Finance Act, 2008 by adding a proviso which states that the 'advancement of any other object of general public utility' shall not be a charitable purpose if it involves the carrying on of- (a) any activity in the nature of trade, commerce or business; or (b) any activity of rendering any service in relation to any trade, commerce or business; for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention of the income from such activity. 2. The following implications arise from this amendment - 2.1 The newly inserted proviso to section 2(15) will not apply in respect of the first three limbs of section 2(15), i.e., relief of the poor, education or medical relief. Consequently, where the purpose of a trust or institution is relief of the poor, educ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot chargeable to tax. In such cases, there must be complete identity between the contributors and the participants. Therefore, where industry or trade associations claim both to be charitable institutions as well as mutual organizations and their activities are restricted to contributions from and participation of only their members, these would not fan under the purview of the proviso to section 2(15) owing to the principle of mutuality. However, if such organizations have dealings with non-members, their claim to be charitable organizations would now be governed by the additional conditions stipulated in the proviso to section 2 (15). 3.2. In the final analysis, however, 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 relation to trade, commerce or business, it would not be entitled to claim that its object is charitable purpose. In such a case, the object of 'general public utility' will be only a mask or a device to hide the true purpose which is trade, commer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the meaning of Section 10(23)(c)(vi) of the act. The prescribed authority, in our view, has not taken into consideration the relevant factors in coming to the conclusion that the petitioner is not entitled to the approval as 'educational institution'. His understanding of the judgment of the Supreme Court in the case of Loka Shikshana Trust Vs.CIT (supra) seems to us to be flawed. It also appears to us that the prescribed authority has not examined and appreciated properly the nature of activities of the petitioner-school and the rules and regulations governing those activities. 4.3 I put my reliance on the judgement of the Hon'ble Delhi High Court in the case of Delhi Music Society as discussed above, and after putting my reliance on the above mentioned order of Hon'ble Delhi High Court, it is found that the activities done by Eklavya Foundation comes under the purview of 'education' because appellant society was founded under the aegis of the Planning Commission with the object' to contribute to change in Government school education system by conducting micro I level experiments and collaborating with governments to implements them on a larger ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'b' that Eklavya sells books for generating surplus is not true. Eklavya's publication programme has relied on grants. It is quite clear that book development costs can't be recovered. However direct costs of paper and printing and part of distribution costs could be recovered, despite this we could attempt to keep our publications low priced so that it has as wide a reach as possible. Using a thumb rule principle of three items the direct costs of paper and printing does not provide a margin as understood by the AO. It provides the possibility of recovering a part of the distribution costs. It needs to be emphasized that our books are accessed by groups and this happens slowly over time. We often have to carry large stocks since it takes two to three years for these books to be disseminated. It is our social purpose to make available a large collection of low priced books for various educations groups. Thus, adverse observations of Ld.AO are misplaced and it is prayed that the relief prayed for may please be granted. 4.4 From the above reply it is crystal clear that Eklavya Foundation is engaged in social cause without any profit motive. So allegation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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