TMI Blog2018 (12) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... materials for enhancement in quality and accuracy et cetera of testing, calibration, research and development of laboratories. The learned departmental representative could not point out any infirmity in the order of the learned Commissioner of income tax appeals which is following the decision of the jurisdictional High Court in case of ICAI vs DGIT [2013 (7) TMI 205 - DELHI HIGH COURT]. No infirmity in the order of the learned Commissioner of income tax appeals and confirm his finding. Therefore assessee is eligible for exemption under section 11 and 12 of the income tax act and is not hit by the proviso to section 2 (15) of the income tax act. - Decided in favour of assessee - ITA No. 3872/Del/2015 - - - Dated:- 28-11-2018 - SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For The Revenue : Shri Surender Pal, Sr. DR For The Assessee : None ORDER PER PRASHANT MAHARISHI, A. M. 1. This is an appeal filed by the revenue against the ld CIT(A)-21, New Delhi dated 12.03.2015 for the Assessment Year 2010-11. 2. The revenue has raised the following grounds of appeal:- 1. That on the facts and circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143 (three) of the act was passed on 12/3/2013 determining total income of the assessee at ₹ 7.91 crores. 4. The assessee aggrieved with the order of the learned AO preferred an appeal before the Commissioner of income tax (appeals) 21, New Delhi. The learned Commissioner appeals passed in order on 12/3/2015 allowing the appeal of the assessee holding that where the business is the main activity and not the incidental to the charitable activities of such organisation the amendment to section 2 (15) of the act are hard. The learned Commissioner held that assessee is eligible for exemption under section 11 and 12 of the income tax act. He further relied on the decision of the honourable Delhi High Court in Ay CAI vs DGIT (exemption) of the honourable Delhi High Court. 5. The learned AO aggrieved with the order of the Commissioner of income tax appeals has preferred an appeal before us. 6. The learned departmental representative submitted that as assessee is charging fees and receiving grant the assessee is carrying on business and therefore is not eligible for exemption under section 11 and 12 of the income tax act and according to the proviso inserted under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained National Physical Laboratory (NPL) and at Bhabha Atomic Research Centre (BARC) through an unbroken chain of comparisons c) To encourage proficiency test / inter-laboratory comparisons in order to ensure accuracy, reliability and reproducibility of test results d) To ensure that the accredited laboratories adhere to all the conditions of accreditation, by periodic surveillance e) To oversee the quality requirements of Testing and Calibration Laboratories as per National and International Standards and to facilitate up-gradation of testing and calibration facilities and laboratories f) To ensure that activities of NABL are in conformity with the objectives of the Quality Council of India g) To help to establish credibility of the Testing and Calibration Laboratories to their users through the process of accreditation h) To organize Awareness on all aspects of laboratory accreditation for the laboratories by various means including seminars, workshops and laboratory-industry-accreditation body meets, etc. i) To promote Good Laboratory Practice for various discipline including hazardous materials j) To prepare and maintain a data b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fairs, exhibitions, seminars and other recognized national and international fora v) To publish books, literature and periodicals and disseminate information relevant and relating to the objectives of NABL w) To acquire by gift, purchase, exchange lease, hire or otherwise any property movable or immovable x) To construct, improve, alter, demolish or repair buildings and structures as may be necessary or convenient for carrying on the activities of NABL. Since the NABL would be substantially financed out of grants-in-aid given by the Government, provisions contained in GFR relating to such grants shall be followed particularly with regard to utilization certificates, maintenance of accounts in respect of grant received, Audit by C AG, disposal of assets as acquired out of grants with prior approval of the Central Government / Authority which sanctions grants y) To sell, assign, mortgage, lease, exchange and otherwise transfer or dispose of all or any, movable and immovable property of NABL for the furtherance of the objects of NABL z) To undertake Scientific and Industrial Research on the lines of DSIR ( aa) Any surplus funds will be invested i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alia Charitable purpose‟ includes relief of the poor, education, medical relief and any other object of general public utility. These activities are tax exempt, as they should be. However, some entities carrying on regular Hade, commerce or business or providing services in relation to any trade, commerce or business and earning incomes have sought to claim that their purposes would also fall under charitable purpose . Obviously, this was not the intention of Parliament and, hence. I propose to amend the law to exclude the aforesaid cases. Genuine charitable organizations will not in any way be affected. Of course, each case stands on its own legs and has to be scrutinized based on its objects and activity during the particular previous year in question. 5.3 It is further observed from the assessment order u/s 143(3) that for assessing the activity of the appellant in the last limb of Section 2(15) i.e. advancement of any other object of general public utility‟, the AO has not accepted the arguments adduced by the appellant for exemption u/s 11 12, on the following grounds i. the utilization of funds or income earned, whether for charitable purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... public utility‟ but in view of the fact that certification of seeds by the petitioner facilitated trade, commerce or business in the certified seeds by the client of the petitioner, the proviso to section 2(15) would come into operation and hence the rejection of the petitioner‟s application for approval u/s 10(23C)(iv) by CCIT was rejected vi. The activity of the appellant was squarely under the ambit of the first proviso to Section 2 (15) of the Act as it was commercial in nature with a view to earn profits and involved rendering of services in relation to carrying on of commerce or business 5.4 It is mentioned in the judgement in ICAI v DGIT (E) in 2013, the Hon‟ble Delhi High Court has taken cognizance of its earlier judgement in the case of ICAI v DGIT(E) (as referred to above), but the judgement rendered in 2013 is latter and goes on a step further in clarifying the legislative intent of the amendment in Section 2(15) of the Act by the Finance Act 2008 (applicable for AY 2009-10 onwards). As for the decision of the Hon‟ble Andhra Pradesh High Court referred above, it is stated with utmost regard that the appellant‟s argument regardin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he nature of trade, commerce or business or any activity of rendering certain services in relation to any trade, commerce or business, for a cess or fee or any other consideration is irrespective of the nature of the use or obligation, or retention of the income from such activity. The expressions trade , commerce and business , as occurring in the first proviso to section 2(15) of the Act, must be read in the context of the intent and purport of section 2(15) of the Act and cannot be interpreted to mean any activity which is carried on in an organized manner. The purpose and the dominant object for which an institution carried on its activities is material to determine whether the same is business not. The purport of the first proviso to section 2(15) of the Act is not to exclude entities which are essentially for charitable purpose but are conducting some activities for a consideration or a fee. The object of introducing the first proviso is to exclude organizations which are carrying on regular business from the scope of charitable purpose . The expression business or commerce as used in the first proviso must, thus, be interpreted restrictively and where the dominant ob ..... X X X X Extracts X X X X X X X X Extracts X X X X
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