TMI Blog2018 (5) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... venue comes from different avenues, which includes the sale of statutory forms. As such, nothing turns on the fact, as argued, that but for this, the business (undertaking) would not have returned a surplus (profit), which argument is though valid for only two years. How, one may ask, the sale of forms be ignored, which is an integral part of the assessee’s undertaking? In fact, the service rates, which are in addition to the statutory fee being charged by the Government, could be increased at any time, of course following the procedure for the purpose. It is, as explained, the ability to produce profit from the stated/pursued (set of) activity/s, that is relevant. In our view, therefore, the assessee is undertaking business and, accordingly, is hit by the second proviso to section 2(15) of the Act. SEE Sukhmani Society for Citizen Services, Mansa [2012 (11) TMI 947 - ITAT AMRITSAR] - Decided against assessee. - I.T.A. No. 52/(Asr)/2014 And I.T.A. No. 594/(Asr)/2017 - - - Dated:- 24-4-2018 - SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER For The Appellant : Sh. J. S. Bhasin (Adv.) And Sh. Naresh Kumar (C.A.) For The Respondent : Sh. A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act by the competent authority. The operative part of the order read out during hearing, reads as under: 7.8. Keeping in view the aforesaid discussions as per records as well as per documentary evidence given by the assessee, we find that the main project was initiated by the Govt. of Punjab in the month of August, 2002 at Fatehgarh Sahib. It was inaugurated by the Chief Minister of Punjab on 31.10.2002. The project was founded by the Govt. of India, Department of Communication Information Technology. The Govt. of Punjab has decided to implement this project in all Districts of Punjab along with SUWIDHA Back-end Services (SUBS) of the Deputy Commissioner Branches in December, 2004. The project replication started in all districts with technical support of NIC-District Centres. As of now, the project is being executed in all Deputy Commissioner s offices. The appellant society is registered with the Additional Registrar of Societies, Mansa vide No.44 of 22.03.2004 and its aims and objects are contained in Memorandum of Association of the Society which we have already mentioned in the foregoing paragraphs. After perusing the objects of the Society, we find that the Ld. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes not arise, even otherwise these judgments are different from the facts of present case and are not helpful the Society. The present society is doing its business and charging huge fees from the public which is in addition to the prescribed fee of the Punjab Govt. Even otherwise, the fees charged by the present society is in addition to the burden forced upon the common-man. Because (of) this service has to be rendered by the Punjab Govt. free of cost to the public against the fee prescribed in the chart as reproduced in the foregoing paragraphs. We are of the considered opinion that no interference is called for in the well reasoned order passed by the ld. CIT, Bathinda. Therefore, we uphold the impugned order dated 26.09.2011 by dismissing the present appeal filed by the assessee-society. (emphasis, ours) The ld. Authorized Representative (AR), the assessee s counsel, would, on the other hand, vehemently contest the said reliance, stating that the said decision is factually distinguishable. The assessee in that case, as apparent from para 7.8 of the tribunal s order, did not produce the books of account, as required to be by the competent authority, referring the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mechanism in an integrated fashion, a concept since successfully implemented in the states of Andhra Pradesh, Rajasthan, Himachal Pradesh, Kerala and Maharashtra under different names. The purpose is a better delivery of the citizen services through the use of Information Technology (IT). For the purpose, a parent society by the name Punjab State E-Governance Society (PSEGS) has been formed at the state level, which, along with the citizen services societies at the district level, provides the institutional framework for the delivery of the citizen services. Detailed guidelines in the matter have been formulated by the Government, and circulated by the Chief Secretary, Government of Punjab, to all District Administrations, with the Deputy Commissioner of the respective District to be the over-all project in-charge. Being on a self-sustaining basis, user charges, termed facilitation charges , are to be charged and retained by the society, to be appropriated between the Punjab E-Governance Society; the District Sukhmani Society for Citizen Services; and the private partner. In fact, the Government of Punjab has set up a separate Department, by the name Department of Government Ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Affidavit / Self Declaration 1493420 1631180 1453218 1023309 1148806 2109879 2360548 2495792 Arms Licence 1361300 1707300 719550 662557 965390 1044216 886351 1375129 Certification Charges 747900 815830 375109 324092 371065 393859 507557 553319 Copying 116930 124250 156737 140757 156348 152208 177359 193163 Counter Signature 1153000 988400 1025052 883572 898589 1454529 1565415 1650696 Demarcation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - - - 12982375 10018590 Forms Receipts 120221 120760 145050 140000 130122 119575 18000 5500 Total (B) 576330 609246 658221 853177 799820 926380 14197064 11259922 Gross Total (A) + (B) 6345805 9369065 9562927 8800466 9380321 13336445 28913776 29906658 Net Surplus / Deficit -834027 2901260 1401968 488329 543839 3611346 6006981 3486615 On that basis, it was submitted by him that but for the sale of statutory forms (in the last two years, i.e., fys. 2014-15 and 2015-16), the society would have incurred a loss; the said sale being at ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charitable, does not preclude the Revenue to examine the actual carrying out of these objects in-as-much it is only this that would reveal if the same, admittedly advancing an object of general public utility , is a charitable purpose within the contracted scope of section 2(15) read with first proviso thereto. The gross receipt of the assessee-society, first year onwards, far exceeds ₹ 10 lacs or, as the case may be, ₹ 25 lacs, so that the second proviso to section 2(15), carving an exception to the first proviso , making it applicable only where the said monetary limit is breached, does not apply. Reference to the decision in Asst. CIT v. Surat City Gymkhana [2008] 300 ITR 214 (SC), as well as by the tribunal reported at [2000] 74 ITD 1 (Ahbd) and [2004] 90 ITD 569 (Chd), would therefore be of little assistance to the assessee. 4.2 The assessee s next objection is that the decision in Sukhmani Society for Citizens Services, Mansa (supra) is distinguishable. True, the issue in that case was if registration u/s. 12AA stands rightly denied to the appellant-society. However, the decision by the tribunal in that case rested on the true interpretation of the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me by the Apex Court reference has also been made in the assessment order. In Laxmaninarayan Ram Gopal Son Ltd. v. Government of Hyderabad [1954] 25 ITR 449 (SC), the term was understood to include services to others of a variegated character, by holding as under: (pg. 459) The activities which constitute carrying on of business need not necessarily consist of activities by way of trade, commerce or manufacture or activities in the in the exercise of a profession or vocation. They may even consist of rendering services to others which services may be of a variegated character. In the facts of that case, the appellant acting under an agency agreement for carrying on general management of the business of the company, subject to the control and supervision of the directors, was held by the Apex Court as carrying on business. It is the nature and scope of the activities, and not the extent of operations, which was relevant for the purpose, so that it was immaterial that the business was restricted to an individual or concern (i.e., the company). In CIT v. Lahore Electric Supply Company Ltd. [1996] 60 ITR 1 (SC), it was held that the term business as contemplated un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33, at pg. 123 of 347 ITR). 4.4 The preamble of the assessee-society reads as under: 1. Preamble The primary objective of the Sukhmani Society for Citizen Services, Jalandhar (SSCS- JALANDHAR) is to establish, manage, operate, maintain and control the service centres, namely, Sukhmani centers in the District for providing integrated citizen services to the public in an efficient, transparent, convenient and friendly manner using IT in all aspects of citizen services to maximize speed, accountability, objectivity, affordability, and accessibility from the perspective of the citizens. The Sukhmani Society is a district level body that would work under the overall umbrella of Punjab State E-Governance Society (PSEGS). All the service centers in a district would be established, managed and run by the Sukhmani Society of that district on a selfsustaining revenue model. Sukhmani Centres would be a one-stop shop for all Government services in an integrated manner. It is considered expedient to provide the Society a legal entity by getting it registered under The Societies Registration Act, 1860. We reproduce the preamble instead of all the different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Cl. 4 read as under: e. To workout and recommend the service fee/ user charges that could be charged from the end customers for the approval of the competent authority and concerned departments/ organizations over and above the prescribed bill amount/ fee/ statutory fee for providing the services through Sukhmani Centres/ Financial Institutions or Franchisees. f. To collect the revenue/ payments/ service charge on behalf of Punjab E-Governance Society, various government departments and organizations and to issue receipts on behalf of the Punjab E-Governance Society and concerned Departments and Organizations. h. To chalk out detailed procedures for the collection of revenue for various services provided by the Sukhmani centres and to transfer the revenue in to the accounts of the Punjab E-Governance Society and to the concerned departments and organizations as per the policy guidelines of Punjab E-Governance Society. i. To chalk out, plan and execute the infrastructure requirements for site preparation, IT resources like hardware, software, connectivity, networking, operational managerial staff, training, stationery items and consumables with assoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommendation of administrative reforms and process reengineering, to usher e-governance and good governance, in the various departments, would only be through, largely, this resource. That is, even the policy making and execution is to a considerable extent only with the active participation of the private partner. We rather find it to be a classical example of a public- private partnership, so as to bring about a better delivery of citizen services and, in a broader context, administrative reform and, thereby, governance, by co-opting IT - a challenging and highly technical work, made more so as the government staff is generally not technically skilled/equipped (apart from being not motivated) and the government forms/processes, apart from being archaic, silo based. It may be argued that the society is only a facilitator, enabling the Government in better discharge of its functions, i.e., enabling a state function. True, but then the assessee-society, or other societies of its kind, is not a State (refer Article 12 of the Constitution of India), nor any organ of the State. It is a separate legal entity, mandated to work for the government/state though. The State, which comes in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR). 4.6 It could then be said that the profit motive guides the government decision. We have firstly seen that generation of revenue, and of being able to operate on a self-sustaining basis, without government support, is a prime consideration for setting up the societies as the assessee-society and, in fact, informs the government initiative. Consideration of profit is implicit in the model approved, embedded in the Preamble itself. Further, we have, on a review of case law, seen that what is necessary is not the actual earning of profit which has in fact been, but the capability to produce profit, and which is apparent. Rather, while a private person has to compete in the market which is fiercely competitive, which, through an open competitive process, exercises a downward pressure on price and upward pressure on quality/delivery, government services face no such pressure. This is as they are, being outside the market paradigm, not subject to any competition. We are not making any criticism. All we wish to bring home is the fact that the government activities are generally not subject to the competitive pressure of the market, allowing a much larger freedom/field to eff ..... X X X X Extracts X X X X X X X X Extracts X X X X
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