Tax Management India. Com
                        Law and Practice: A Digital eBook ...

Category of Documents

Latest Case Laws

TMI - Tax Management India. Com
Case Laws Acts Notifications Circulars Classification Forms Manuals SMS News Articles
Highlights
D. Forum
What's New

Share:      

        Home        
 

TMI Blog

Home List
← Previous Next →

2018 (2) TMI 769

t be treated as charitable in nature - Held that:- Merely because the State had itself not been able to cook and supply cooked food by way of mid-day-meals at it's schools and further because it out-sourced that part of the work, against consideration, it cannot be said that it transformed the activity into one in the nature of trade, commerce or business etc. Execution of a contract between two parties, in these facts cannot be decisive whether the activity itself was one purely in the nature of trade, commerce or business. What was more important is to examine whether assessee had engaged in an activity that was inseparably linked to and performed in continuation of the charitable scheme of the government. - The fact that some money had been paid by the State to the assessee was only a necessary expense at the hands of the State. Looking at the nature of expenses met by the assessee one cannot escape the conclusion that similar expenses would have been incurred by the State, had it performed that work itself or though it's own agencies. - The payments received were utilized to defray the expenses met to perform the task of cooking and supplying the meals as directed by th .....

X X X X X X X

Full Text of the Document

X X X X X X X

uot; of any other object of "General Public Utility" shall not be a charitable purpose, if it involves carrying on of any activity in the nature of trade, commerce or business, which is the case here? 2. Whether the ITAT erred in law in directing the C.I.T. to register the assessee society U/s 12-AA when the assessee does not fall under the provisions of Section 2(15) which uses the language "any activity of rendering any service in relation to any trade, commerce or business for a cess or fee" which is the case here where the assessee is providing services with a profit motive? 3. Whether the ITAT erred in law in curbing the legislative powers provided to the C.I.T. U/s 12-AA regarding satisfaction that the activities are genuine before granting of registration? 4. Whether the ITAT has justified in directing the C.I.T. to register the society U/s 12-AA and not considering the facts that the assessee's sole activity was in the nature of trade, commerce or business which does not make its activities as advancement of any activities of general public utility and, therefore, it was ineligible for registration in terms of the first proviso of Section 2(15) of I. .....

X X X X X X X

Full Text of the Document

X X X X X X X

the Tribunal has, relied upon the second proviso to Section 2(15) of the Act and held, the assessee was entitled to registration under Section 12-AA of the Act. Sri Shubham Agarwal, learned counsel for the revenue submits that the Tribunal has in the first place misread the order of the CIT in so far as the Tribunal has assumed that the CIT had found that the activity of supply of mid-day-meals was an activity of general public utility. No finding was recorded by the CIT to that effect. Therefore, the Tribunal has erred in making an assumption as to the same. Also, the Tribunal having itself not recorded any finding that the activity of the assessee was charitable, it could not have directed the CIT to grant registration to the assessee. Second, Sri Shubham Agarwal, learned counsel for the revenue submits that in fact the CIT had reasoned that the activity of the assessee was purely contractual. According to him, it was therefore for the assessee to lead such evidence and establish that it was actually engaged in an activity of 'general public utility" and not an activity covered under the first proviso to Section 2(15) of the Act. According to the learned counsel for the .....

X X X X X X X

Full Text of the Document

X X X X X X X

ut any profit motive. In any case, he would submit, the activity of the assessee is inseparably linked to and purely consequential to the welfare measure adopted by the State Government to provide mid-day-meals to students at village schools who may otherwise be malnourished or who may otherwise dropout from school. The policy of the State Government being wholly for the advancement of an object of general public utility, the assessee who had been engaged to give effect to and to carry out such policy, was clearly working for a charitable purpose. Then, in the alternative, learned counsel for the assessee submits that by virtue of the clear language of the second proviso to Section 2(15) of the Act, even if it is assumed that the assessee was engaged in an activity of trade, commerce or business for consideration, yet, in view of the fact that his total receipts were below ₹ 10,00,000/-, it was clearly entitled to registration under Section 12-AA of the Act. Having considered the argument so made by learned counsel for the parties, we first take note of the provision of Section 2(15) of the Act. It reads as below:- "2(15) "Charitable purpose' includes relief of .....

X X X X X X X

Full Text of the Document

X X X X X X X

d not apply in the event the receipt from activities referred to above did not exceed ₹ 10,00,000/- in the previous year. While agreeing with the view taken by the Bombay High Court in the case of D.I.T. (Exemption) Vs. North Indian Association (supra), we have, in ITA No. 134 of 2013 ACIT Vs. Agra Development Authority, decided on 7.12.2017 held as below:- "Upon a co-joint reading of both the provisos to Section 2(15) of the Act, the legislative intent appears not to allow exemption to an assessee who may engage in an activity mentioned in the first proviso to Section 2(15) of the Act, if his receipts for a previous year exceed ₹ 10,00,000/-. At the same time the benefit is not to be denied to such an assessee it his receipts in the previous year do not exceed ₹ 10,00,000/-. The activities of any assessee are conducted on a day-to-day basis and accounts are made up at the year end. Therefore, at the relevant time i.e. during the previous year relevant to an assessment year, it may not always be predicted or determined or known as to whether the receipts (from activities have been specified in the first proviso to Section 2(15) of the Act) exceed the statutor .....

X X X X X X X

Full Text of the Document

X X X X X X X

by the learned counsel that the only activity carried on by the assessee during the year under consideration was for preparation of mid-day meals and is supply to the primary schools in the villages as per the direction of the government. Therefore, the kitchen expenses and salary expenses were for the preparation of mid-day meals and transportation expenses were for supply of such mid-day meals to the various primary schools. The only other expenditure was telephone charges at ₹ 12,833/- and office rent at ₹ 14,400/- which are around ₹ 1,000/- per month which is necessary to supervise the activity of preparation and supply of mid-day meals." In view of the above, we are of the opinion that the activity of the assessee falls within the ambit of object of general public utility which is also accepted by the learned CIT himself in paragraph 4 of his order reproduced above by us." The Tribunal has, upon examination of the assessee's income & expenditure account found: (i) the total receipts (from the activity conducted by the assessee) were less than ₹ 10,00,000/-. Then, more importantly the Tribunal found (ii) the activity of the assessee inv .....

X X X X X X X

Full Text of the Document

X X X X X X X

as not pursuing a "charitable purpose". On the other hand the activity performed by the assessee clearly appears to be inseparably linked to the 'charitable purpose' of providing mid-day meals at village schools. Also, admittedly, the total receipts of the assessee were below the limit of ₹ 10,00,000/- as stipulated under the second proviso to Section 2(15) of the Act. In that view of the matter, the Tribunal has rightly concluded that the restriction created by the first proviso to Section 2(15) of the Act did not operate against the assessee and therefore the activity of the assessee, even though it may have involved an activity in the nature of trade, commerce or business, etc., it would fall within the ambit of general public utility and therefore be a charitable purpose under Section 2(15) of the Act. Accordingly, we answer question nos. 1, 2 & 4 raised in this appeal thus: In view of the fact the assessee was engaged solely to implement the welfare scheme of the state government to provide mid-day-meals to students at its various village schools, it was rightly held to be engaged in an activity of general public utility. Alternatively, if it be ass .....

X X X X X X X

Full Text of the Document

X X X X X X X

 

 

← Previous Next →

 

 

|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || Database || Members || Refer Us ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.
|| Blog || Site Map - Recent || Site Map ||