TMI Blog2020 (1) TMI 1149X X X X Extracts X X X X X X X X Extracts X X X X ..... tional activities. Therefore, such activities cannot be construed to be business activities, such activity being an incidental activity; and thus income generated therefrom cannot be brought to tax. This court in Shree Nahsik Panchvati Panjrapole [2017 (3) TMI 1262 - BOMBAY HIGH COURT] emphasized that the test that should be applied whether it was income earned from business or income earned from incidental activity is the test of dominant object of the trust i.e., what is the dominant object of the activity. If the dominant object of the activity is profit making, the purpose would not be charitable but if the dominant object of the activity is charitable then notwithstanding making of profit, the charitable character of the purpose would not be lost. Depreciation to assessee trust - double deduction - HELD THAT:- Issue covered by the decision of the Supreme Court in Commissioner of Income Tax-III, Pune Vs. Rajasthan and Gujrat Charitable Foundation, Poona , [2017 (12) TMI 1067 - SUPREME COURT ] whereby those questions have been answered in favour of the assessee and against the revenue. - INCOME TAX APPEAL NO.1764 OF 2017 - - - Dated:- 22-1-2020 - UJJAL BHUYAN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department has filed SLP on the issue of depreciation in the case of G.D.Birla Medical Research Educational Foundation in which leave has been granted by the Apex Court- S.L.P.(C) No.24904 of 2016 (C.A. No.8294 of 2016) and is pending for adjudication? (d) Whether, on the facts and in the circumstances of the case and in law, the ITAT erred in relying upon the judgment of Bombay High Court in the case of Institute of Banking Personnel Selection, ignoring the fact that the Department has not accepted the said decision of the jurisdictional High Court on merit of the case, but due to smallness of tax effect appeal was not filed before Supreme Court. However, on this issue the Department has filed SLP before the Apex Court in the case of MIDC(SLP) (Civil) 9891 of 2014 in which leave has been granted by the Apex Court after considering the fact that the SLP on this issue in the case of Gem Jewellary Export Promotion Council was dismissed by the Apex Court without discussion? 4. Assessee is a Trust having registration under Section 12 of the Act. Object of the assessee is to promote, organize and popularize various outdoor and indoor games like cricket, tennis etc., bes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctum of the promotion of sports and games being a charitable purpose within the meaning of section 2(15) of the Act is not in dispute. In fact, the Assessing Officer also does not dispute the fact that the activities of the promotion of sports and games carried out by the assessee fall within the meaning of charitable purpose . The assessee trust derives income by way of receipts from its members viz. Membership fee, entrance fee, identity card fee, locker rent, reservation charges etc. The assessee trust is also earning incomes by way of compensation from caterer from rent/leasing of premises and such receipts in the instant year are of a sum of ₹ 16,23,656/-. Further, it has also received compensation from Decorator of ₹ 1,65,630/- and Miscellaneous income of ₹ 20,074/-. Apart therefrom, assessee has earned interest income of ₹ 2,36,07,023/- on RBI Bonds and other permitted investments as per section 11(5) of the Act. The aforesaid incomes, totaling to ₹ 2,54,16,380/- have been brought to tax by the Assessing Officer as according to him the same are not eligible for the benefits of section 11 12 of the Act and since, they had been derived f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Before proceeding further, we may reiterate that there is no charge against the assessee at any stage that there is an application of income for any purpose other than the objects of the assessee trust. Much has been made out by the lower authorities to the fact that assessee has charged a fee for allowing use of its spots grounds and therefore, it is asserted that such an activity is hit by the disability contained in the proviso to section 2(15) of the Act. In our considered opinion, mere charging of fee ipso-facto would not enable an activity to be governed by the proviso to section 2(15) of the Act without establishing any profit-motive in the charging of fees. In this context, one may refer to the judgment of the Hon ble Delhi High Court in the case of GS 1 India (supra), wherein the expression trade, commerce or business was being examined in the context of situation where assessee was charging a fee for rendering services. As per the Hon ble High Court the charging of fee was necessary for carrying out the activities and the sustenance thereof, and, it would not reflect any profit-motive. The judgment of the Hon ble Gujarat High Court in the case of Sabarmati Ashram G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal held that object of the assessee is undoubtedly promotion of sports, games and providing recreation facilities to the public at large and to the members in particular and therefore receipts on account of compensation from decorator against gymkhana function, miscellaneous income and compensation from caterer (restaurant) cannot be construed as activities in the nature of trade, commerce or business for the purpose of the proviso to Section 2(15) of the Act. 16. This court in the case of Director of Income Tax (Exemptions) Vs. Shri Vile Parle Kelavani Mandal, (2015) 378 ITR 593 (Bom) has held that educational institutions require funds; activity of letting out of halls for marriages, sale and advertisement rights is not a regular activity undertaken as part of business. Income is generated by giving various halls and properties of the institution on rental basis on holidays when those are not required for educational activities. Therefore, such activities cannot be construed to be business activities, such activity being an incidental activity; and thus income generated therefrom cannot be brought to tax. 17. This position has also been reiterated by this court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the above heads were earned only as activity incidental to the dominant activity of the Trust and held as under :- Many activities of genuine charitable purposes which are not in the nature of trade, commerce or business may still generate marketable products. After setting off of the cost, for production of such marketable products from the sale consideration, the activity may leave a surplus. The law does not expect the trust to dispose of its produce at any consideration less than the market value. If there is any surplus generated at the end of the year, that by itself would not be the sole consideration for judging whether any activity is trade, commerce or business particularly if generating surplus is wholly incidental to the principal activities of the trust; which is otherwise for general public utility, and therefore, of charitable nature . Merely because while carrying out the activities for the purpose of achieving the objects of the trust, certain incidental surpluses were generated, would not render the activity in the nature of trade, commerce or business. As clarified by the Central Board of Direct Taxes in its Circular No. 11 of 2008, dated Decemb ..... X X X X Extracts X X X X X X X X Extracts X X X X
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