TMI Blog2015 (5) TMI 1210X X X X Extracts X X X X X X X X Extracts X X X X ..... . There is no finding arrived at by the Ld. CIT, that the activities of the assessee Trust are not genuine. Hence on facts there is no dispute that the activities of the Institution are genuine and that the assessee trust is carrying on its activities in accordance with its objects. In the absence of contrary findings, we have to hold that the Ld. CIT was wrong in invoking the provisions u/s. 12AA(3) As the conditions specified under the section 12AA(3) have not been satisfied, the cancellation of registration is bad in law. The finding of the Ld. CIT that the provisions of S. 12AA(3) need to be construed in a holistic manner, with a view to give effect to the object which the legislation intends to achieve and to derecognize the objects of the assessee, on the ground that they are not charitable under certain circumstances prescribed in both the provisions of S. 2(15) of the Act, in letter and spirit, is not the correct position of law. This interpretation is not based on a plain reading of the provisions of the Statute. The Courts have stated the manner in which this section has to be interpreted. Thus, we uphold the contentions of the assessee the very invocation of the power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es in relation to trade, commerce or business etc. The assessee has no profit motto. Hence the Proviso to S. 2(15) does not apply to the case of the assessee. Thus the cancellation of registration granted u/s. 12A(a) of the Act is bad in law. Violation of provisions of S. 13(3)(g) r.w.s. 13(cc) - Representative of M/s. South India Corporation Ltd. was not a trustee of the assessee trust, during the period when excess fee collected was refunded. This factual position, as already stated, was not controverted by the Ld. CIT, D.R. Thus prima facie, invocation of S. 13(2)(g) of the Act rws 13(3)(cc) is bad in law. Fee to be charged by the assessee trust is fixed by the Visakhapatnam Port Trust through the Visakhapatnam Dock Labour Board - Visakhapatnam Port refunded an aggregate amount of ₹ 7.99 crores, of which, an amount of ₹ 4.39 crores was adjusted by credit notes and the balance only was refunded to the party to which it was due. This amount was refunded to South India Corporation Ltd. on various dates during the A.Y. 2008-09, 2009-10 and 2010-11. Refunding the amount legally due to a party cannot be considered a violation of any of the provisions of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 8. The Learned Commissioner of Income-tax ought to have followed the decided judicial Pronouncements where the collection of fee or cess to subsidise the cost of the activity is not business. Therefore the activities carried out to support of the main objectives of the trust or institution does not effect the genuineness of the Trust nor is against the main objects of the Trust to cancel the Registration. 9. The Trust is not meant for benefit of any of the trustees or members of the trust and is rendering the services in accordance with the Main Objectives of the Trust since, 1994. The Learned Commissioner of income Income-tax should have appreciated the fact available in the record. 10. The Honourable Commissioner of Income-tax could not establish or give a finality that the conditions specified in Section 12AA(3) of the Income-tax Act are met before cancelling the Registration of the Trust. 11. For these and such other Grounds of appeal that might be submitted at the time of the hearing of the appeal, the Appellant prays the Honourable Income-tax Appellate Tribunal that the appeal may be allowed in its favour. 2. Facts in brief:- M/s. Cargo Handling Private Work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, the successive Assessing Officers of the Department had been maintaining that despite the grant of registration u/s. 12A. the assessee trust was manifestly engaged in business activity of supplying labour to various stevedores and clearing and forwarding agents at Visakhapatnam Port and earning surplus year after year. It was also their contention that the real motive behind the formation of the trust was to ensure supply of dock labourers for cargo loading and unloading work etc. to the stevedores and clearing and forwarding agents in an assured, uninterrupted and regular basis at a relatively cheaper rate than charged by the Visakhapatnam Dock Labour Board (hereinafter known as VDLB ) in the backdrop of erratic, uncertain and costly labour supply by the VDLB, which had been adversely affecting their business interests at Visakhapatnam Port. Keeping in view such dire necessity, the trust was created by none other than the Visakhapatnam Stevedores Association represented by its President, Shri K. Gangi Reddy and the Visakhapatnam Clearing and Forwarding Agents Association represented by its President, Shri T.S. Rajeswaran (two trade unions) at Visakhapatnam Port who are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o taxation. (c) When an entity, prior to the amendment had enjoyed the benefit of exemption from such activity, and supported by grant of registration u/s. 12A of the Act, the preliminary step of denial of exemption from the AY 2009-10 onwards, would be to initiate steps for withdrawal of registration u/s. 12AA(3) of the Act, as the claim of exemption u/s. 11 cannot be denied to an entity, unless the registration is withdrawn/cancelled. 4.2. The Ld. CIT issued a show cause notice to the assessee dt. 28.8.2012, calling for an explanation as to why the registration granted earlier should not be cancelled. The Ld. CIT also observed that, it was seen from the activities of the assessee's Trust, which involves rendering of services in relation to the port related business of stevedores and clearing and forwarding agents at Visakhapatnam Port, has a prominently commercial tinge about it, which fact has not been denied by the assessee trust so far. 5. The assessee objected to the proposed cancellation of registration vide his reply dt. 06th October, 2012. This is extracted from page 4 para 4.1 of the impugned order of the Ld. CIT, D.R. The objects of the trust: (a) T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not permit the Commissioner to seek cancellation of registration already granted earlier merely on the ground that an entity whose activities had been reckoned to have been falling under the object of advancement of any other object of general public utility and whose gross total receipts exceed the prescribed monetary limit, without fulfilling the conditions prescribed u/s. 12AA(3) such as/satisfaction by the Commissioner that (i) the activities of a trust or institution are not genuine or (ii) the activities are not being carried out in accordance with the objects of the trust or institution. If any of the conditions are not satisfied, then alone, the Commissioner of Income Tax would be entitled to withdraw registration. Such proposition of law has been laid down by the Hon'ble I.T.A.T. in the following decisions: (i) H.P. Government Energy Development Agency v. Commissioner of Income Tax [(2010) 134 TIJ (Chd)(U0) 33]; (ii) Himachal Pradesh Environment Protection and Pollution Control Board v. Commissioner of Income Tax, Chandigarh [(2010) 42 SOT 343 (CHD.)]; (iii) Chaturvedi Har Prasad Educational Society v. Commissioner of Income Tax [(2010) 134 TTJ (Lucknow) 781] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Such attempt has been made by the assessee, for the first time, as it realised that it is hit by the two Proviso to S. 2(15) of the Act, due to commercial nature of its activities. (iii) Reference is made for the expression poor , to the study made by the Planning Commission of India, to an affidavit submitted by the Planning Commission before the Hon'ble Supreme Court and the 66th round of National Sample Survey for the AY 2009-10 etc. and he came to a conclusion that the government study has refixed poverty lines at incomes per head at ₹ 66.10 and ₹ 35.10 for urban and rural areas respectively, which translates into monthly income of ₹ 1,984/- and ₹ 1,054/- and stated that such parameters would apply to the port cargo workers engaged by the assessee Trust to demonstrate that the claim of the assessee that it involves in relief of the poor is hallow and devoid of merit, as the assessee Trust charges its shipping companies for each worker per day(time rate per day of ₹ 500, piece rate of ₹ 30 per day and levy of ₹ 700 per day). He records that each worker receives ₹ 15,000/- per month. (iv) Further he observes as follows at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the assessee that the Trust has fulfilled both conditions stipulated u/s. 12AA(3) of the Act he held that: (a) The activities carried out by the Trust are in accordance of its objects and that the activities are genuine and not bogus, the Ld. CIT-I, Visakhapatnam held that S. 12AA(3) of the Act needs to be construed in the holistic manner, keeping in view the effect to the legislation which is evident from derecognizing an object or activity as non charitable, under circumstances prescribed under both the Provisos to S. 2(15) of the Act in letter and spirit. He held that the interpretation placed by the assessee is of a narrow perspective. (b) Though the assessee is carrying on its activities in accordance with its objects, as the dominant object is not charitable, in view of the provisos introduced to S. 2(15) of the Act, the root of its activities is cut off and hence the revenue is empowered to cancel the registration u/s. 12AA(3) of the Act. Otherwise the intent and purpose of the legislation referred to would be nugatory. (c) Except on paper the assessee has not carried out any visible charitable activity, except for minimum welfare measures and that some of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 300 (Madras) (2012) and certain other decisions which we would be referring to, during the course of our order. (e) On the finding of the Ld. Commissioner that the assessee had violated the provisions of S. 13, he submitted that: (i) The wages and the levy to be charged on the users of the labour force are fixed by Visakhapatnam Dock Labour Port (ii) When the dock labour board finds that the levy is excessive, the same is refunded to the assessee and hence the assessee should in turn refund this amount to the party concerned. (iii) The genuineness of the transaction is reflected by the fact that the actual refund was paid, only when funds were available to the assessee from DLB on this count, based on board's resolutions. (iv)That refunds were part of the genuine transactions of is a khapatnam Port Trust (v) Pari passu payments were made by the assessee, and consequently it do not violate any of the provisions of S. 13 of the Act. (vi) The refunds are made in the normal course of genuine activity of the assessee's trust and hence cannot be considered as a ground for cancellation of registration u/s. 12AA(3) of the Act. (vii) Applicability of S. 13( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of Association would not qualify assessee for exemption as a charitable organization. He took us through the order of Ld. CIT, Visakhapatnam and supported each and every finding therein. He tried to distinguish the case laws relied upon by the assessee. On a query from the Bench he could not factually controvert the submissions of the assessee that M/s. South India Corporation Ltd. was not a Trustee of the assessee trust, at the time of refunds in question and other factual submissions in this regard. 8.1. In reply the Ld. Counsel for the assessee tried to distinguish the decision relied upon by the Ld. DR and reiterated his contentions. 9. Rival contentions heard. On a careful consideration of the facts and circumstances of the case and on perusal of papers on record, orders of the authorities below, case laws cited, we hold as follows. 10. The undisputed fact is that the objects of the assessee society are charitable in nature. It was for this reason that the Ld. CIT had granted registration to the assessee w.e.f. 19.1.1994 vide its order No. Hqrs. No. III/41/94-95, dt. 02.03.2001. The ITAT in the assessee's own case for the earlier AY in ITA No. 272 to 274/Vizag/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Performance of service by Board or other person include receiving, removing, shifting, transporting, storing or delivering goods brought within the board premises. Hence the activities of the assessee trust falls in the category of one of the services as defined in the Major Port Trust Act, 1963. Since the activities carried on without any profit motive and only for the purpose of the welfare of the workers, in our opinion, it cannot be treated as business activity for the detailed reasons discussed supra. (Emphasis ours). 10.1. The Ld. CIT has erred in not following this binding decision of the ITAT. The issue is no more res-integra. We respectfully follow the decision of the Coordinate Bench and hold that assessee trust carries on its activities without a profit motive and is not carrying on any business activity. This finding of fact has not been vacated by any higher authority till date. Applying the proposition laid down by the Hon'ble Delhi High Court in the case of India Trade Promotion (supra) to the factual finding that the assessee is not carrying on any trade, commerce or business and the fact that activities of the assessee are not being carried out with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner to cancel the registration granted under the stated circumstances, reads as under: Provision inserted under the Finance Act, 2004: 12AA. (3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution: Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard. 31. After the amendment in the year 2010, section 12AA(3) of the Income-tax Act reads as follows: 12AA. (3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996) and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of test matches and ODI are in the nature of commerce or business. Though the assessee claimed their activities for promotion of sports, he held that the dominant feature is evident from the huge profits received and hence the amount received from BCCI as subsidy are commercial. As regards conducting of IPL Matches, he pointed out that though no services are rendered by the assessee for conducting the matches, the ground where the matches are played are given for rent which is a commercial venture. The subsidy received from BCCI included mainly TV Advertisements sold by BCCI for the conduct of IPL and their commercial receipts arising for IPL transactions. Therefore, the nature of receipt was important than the name of account under which it was accounted. Thus he viewed that the objects and activities would no longer come within the definition of Section 2(15) of the Act after the amendment come in effect from 01.04.2009. 52. As rightly pointed out by the assessee, the Revenue does not question the objects of the Association as not genuine or are in accordance with the objects. All that the Revenue stated was that the nature of receipt could not be called a subsidy. Thus Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 003, The Revenue does not deny as a matter of fact that the objects remain as it was in 2003 and there is no change in its content to call the assessee's object as not genuine. There are no materials to indicate that the grant of registration was not based on materials indicating objects of general public utility. 56. The assessee is a member of Board of Control for Cricket in India (BCCI), which in turn is a member of ICC (International Cricket Council). BCCI allots test matches with visiting foreign team and one day international matches to various member cricket association which organise the matches in their stadia. The franchisees conduct matches in the Stadia belonging to the State Cricket Association. The State Association is entitled to all in stadia sponsorship advertisement and beverage revenue and it incurs expenses for the conduct of the matches. BCCI earns revenue by way of sponsorship and media rights as well as franchisee revenue for IPL and it distributes 70% of the revenue to the member cricket association. Thus the assessee is also the recipient of the revenue. Thus, for invoking Section 12AA read with Section 2(15) of the Act, Revenue has to show that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the powers conferred on him under section 12AA(3) of the Act. The only reason given by the Commissioner of Income Tax to cancel the registration is that the activities of the trust were not charitable and therefore, the trust is not entitled to exemption under section 11 and consequently, cancelled the registration granted under section 12AA. 7. It is not as if that the registration was granted without considering the objects of the trust in question, namely, (a) The publication, sale and spread of Sarvodaya Literature. (b) To support all activities connected with the constructive programmes of the father of the nation, Mahatma Gandhi. (c) To organize meetings, seminars, symposium and conferences to propagate Gandhian and Sarvodaya Ideologies. (d) To do all other acts and things incidental to and necessary in the furtherance of the said objects. (e) To apply the profit derived by the society to the activities connected with spreading and propagating of Gandhian and Sarvodaya Ideologies and to help the Sarvodaya movement. 8. The Commissioner of Income Tax, before granting the registration, had gone into the above objects and satisfied himself for grant of regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions u/s. 12AA(3) of the Act. As the conditions specified under the section 12AA(3) have not been satisfied, the cancellation of registration is bad in law. The finding of the Ld. CIT that the provisions of S. 12AA(3) need to be construed in a holistic manner, with a view to give effect to the object which the legislation intends to achieve and to derecognize the objects of the assessee, on the ground that they are not charitable under certain circumstances prescribed in both the provisions of S. 2(15) of the Act, in letter and spirit, is not the correct position of law. This interpretation is not based on a plain reading of the provisions of the Statute. The Courts have stated the manner in which this section has to be interpreted. Thus, we uphold the contentions of the assessee the very invocation of the power of cancellation of registration by the Ld. CIT u/s. 12AA(3) of the Act is bad in law. 11. The second argument is whether the Ld. CIT has power to cancel registration u/s. 12AA(3) with retrospective effect from 1.4.2009 relevant to the AY 2009-10 vide his order dt. 6th Feb., 2013. This issue is no more res integra. 11.1. The Hon'ble Delhi High Court in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent has been made applicable and effective from 1st June, 2010. Keeping in view the ratio laid down by the Hon'ble High Court in the case of Oxford Academy for Career Development (supra) and also the amendment of s. 12AA(3) by the Finance Act, 2010 w.e.f 1st June, 2010, it is amply clear that s. 12AA(3) is prospective in nature and if any trust/institution has been registered prior to 1st Oct. 2004 either u/s. 12A or 12AA, the CIT has no power to cancel the registration u/s. 12AA(3). In the instant case, registration to the assessee society was granted on 1st March, 1999 i.e. much prior to 1st Oct. 2004 when s. 12AA(3) was introduced and made effective from 1st Oct. 2004 and the CIT had no jurisdiction to cancel the registration granted to the assessee society u/s. 12A and that the order passed by the CIT u/s. 12AA(3) is without jurisdiction, bad in law and liable to be quashed. We accordingly quash the impugned order of the Ld. CIT cancelling the registration granted to the assessee society u/s. 12A of the Act on 1st March, 1999. The appeal of the assessee stands allowed. (emphasis ours) 11.3. The Hon'ble Allahabad High Court in the case of Oxford Academy for Career ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r final disposal before the High Court. Section 12AA(3) has been amended by the Finance Act of 2010 w.e.f. June 2010 giving the power to cancel the registration under section 12A. The Commissioner issued fresh show cause notice on 11th March 2011 for cancellation of registration for reasons mentioned in his order dated 9th October, 2007. The assessee challenged the constitutional validity of provision of Sub-section (3) of the section 12AA as amended by the Finance Act of 2010 w.e.f. 1st June 2010 to the extent they provide for revocation of a registration granted under section 12A. The Court held that amendment of section 12AAA(3) by the Finance Act, 2010 is not arbitrary and it does not take away vested right nor does it create new obligation in respect of past actions and cannot be said to be retrospective in operation; even if construed to be retrospective, it cannot be held to be violate of Article 14. Accordingly the petition was dismissed. (A.Y. 1999-2000) (Emphasis ours) In this case the assessee challenged the constitutional validity of the amendment and the Court upheld the constitutional validity. While doing so it held that this amendment cannot be said to be ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 2(15) of the Act. The four factors are (i) the activity should be for advancement of general public utility; (ii) the activity should not involve any activity in the nature of trade, commerce and business; (iii) the activity should not involve rendering any service in relation to any trade, commerce, or business; and (iv) the activities in clauses (ii) and (iii) should not be for fee, cess or other consideration and if for fee, cess or consideration the aggregate value of the receipts from the activities under (ii) and (Hi) should not exceed the amount specified in the second proviso. The earlier test of business feeding or application of income earned towards charity because of the statutory amendment is no longer relevant and apposite. It is evident from Circular No. 11 of 2008 that a new proviso to section 2(15) of the Act is applicable to assessees who are engaged in commercial activities, i.e., carrying on business, trade or commerce, in the garb of public utility to avoid tax liability. The legal terms trade, commerce, or business in section 2(15) mean activity undertaken with a view to make or earn profit. Profit motive is determinative and a critical fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject of general public utility u/s. 2(15) of the Act, the following four factors have to be satisfied. i. Activity should be for advancement of general public utility. ii. Activity should not involve any activity in the nature of trade, commerce and business. iii. Activity should not involve rendering of services in relation to any trade, commerce or business. iv. Activities in Clauses b and c above, should not be for a fees, cess or other consideration, the aggregate value of which should not exceed the amount specified in the Second Proviso to S. 2(15). (c) The earlier test that if the income so collected, is applied towards the charitable activity, then the trust cannot be held as non-charitable, is no longer relevant after the statutory amendment. (d) The scope of the term activity in the nature of trade, commerce or business would mean that: i. It is undertaken with the profit motive; ii. The activity is continued on sound and recognized business principles and is pursued with reasonable continuity; iii. There should be facts and other circumstances which justify and show that the activity undertaken is in fact, in the nature of business; iv. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ire or intention to carry on business or commerce. (n) The so called business activities, when intrinsically woven into and is part of the charitable activity undertaken, the business activity is not feeding charitable activities, as they are integral to the charity/charitable activity. (o) What has to be seen is, as to what is the core/main activity of the assessee. The predominant activity shall be the basis of decision making. 13.4. In the case of Indian Trade Promotion Organization and others (supra) the Hon'ble Delhi High Court considering the Memorandum regarding delegated legislation and the amendment which took effect from 2009 alongwith the speech of the Hon'ble Minister of Finance on 29.02.2008, which is addressed in paras 15 to 17 of the said judgement and also considered the decisions in the case of ICAI v. DGIT (Exemption) 347 ITR 99 (Del); Bureau of India Standards v. Director General of Income tax (Exemptions) [2013] 212 taxman 210 (Delhi); Institute of Chartered Accountants of India v. DGIT (E) WP (C) 3147/2012 dated 04.07.2013; and M/s. G.S.I India v. Director General of Income Tax (Exemption) and Another WP(C) 7797/2009 dated 26.09.2013 [2013] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 2(15) of the said Act, there was no dispute that the petitioner was established for charitable purposes and, therefore, its income was not to be included in the total income and was, therefore, granted the benefit of exemption. We have already noted above, while discussing the facts of the case that the income received by the petitioner is from the letting out of space, sale of publications, sale of tickets and leasing out food and beverages outlets in Pragati Maidan. The dominant and main object of the petitioner is to organise trade fairs/exhibitions in order to promote trade, commerce and business not only within India, but internationally. This is done through the organization of trade fairs, including the annual international Trade Fair and other exhibitions. It is for this purpose that the space is let out to various entities during the said fairs and exhibitions. All these activities, including the sale of tickets and sale of publications are an inherent part of the main object of the petitioner. It is clear from the facts of the case that profit making is not the driving force or objective of the petitioner. It is registered under Section 25 of the Companies Act, 1956, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any activity is in the nature of trade commerce or business, it has to be examined whether there is an element of profit making or not. Similarly, while considering whether any activity is one of rendering any service in relation to any trade, commerce or business, the element of profit making is also very important. 6.1. Specific attention was invited to para 48 to 58:-- 48. With this as to what is meant by the expressions trade , commerce or business . The word trade was considered by the Supreme Court in its decision in the case of Khoday Distilleries Ltd. and Others v. State of Karnataka and Others: 1995 (1) SCC 574, whereby the Supreme Court held that the primary meaning of the word 'trade' is the exchange of goods for goods or goods for money . Furthermore, in State of Andhra Pradesh v. H. Abdul Bakhi and Bros: 1964 (5) STC 644 (SC), the Supreme Court held that the word business W8S of indefinite import and in a taxing statute, it is used in the sense of an occupation, or profession which occupies time, attention or labour of a person, and is clearly associated with the object of making profit . This court, in ICAI (I) (supra) held that, while constr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch fees. It cannot be said that the public utility activity of evolving, prescribing and enforcing standards, involves the carrying on of trade or commercial activity. 50. In ICAI(II) (supra), while considering whether the activities of ICAI fell within the proviso to Section 2(15) as introduced with effect from 0104.2009. this court, after considering the Supreme Court decision in the case of Commissioner of Sales Tax v. Sai Publication Fund' (2002) 258 ITR 70(SC) held: Thus, if the dominant activity of the assessee was not business, then any incidental or ancillary activity would also not fall within the definition of business. 51. This Court also observed in ICAI (II) (supra) that: 6.4..... It is not necessary that a person should give something for free or at a concessional rate to qualify as established for a charitable purpose. If the object and purpose of the institution is charitable, the fact that the institution collects certain charges, does not alter the character of the institution.... This court in ICAI (11) (supra) held:-- 67. The expressions trade , commerce and business as occurring in the first proviso to section 2(15) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h an object of general public utility would cease to be a charitable purpose. But where the predominant object of the activity is to any out the charitable purpose and not to earn profit, it would not lose its character of a charitable purpose merely be cause some profit arises from the activity. 70. Although in that case the statutory provisions being considered by the Supreme Court were different and the utilisation of income earned is, now, not a relevant consideration in view of the express words of the first proviso to section 2(15) of the Act, nonetheless the test of dominant object of an entity would be relevant to determine whether the entity is carrying on business or not. In the present case, there is little doubt that the objects of the activities of the petitioner are entirely for charitable purposes. Finally in ICAI(II) (supra), this court, with reference to H. Abdul Bakhi and Bros (supra) observed as under:-- 71. Although, it is not essential that an activity be carried on for profit motive in order to be considered as business, but existence of profit motive would be a vital indicator in determining whether an organisation is carrying on business or not. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should always endeavour to uphold the Constitutional validity of a provision and, in doing so, the provision in question may have to be read down, as pointed out above, in Arun Kumar (supra). 54. It would be pertinent to reiterate that Section 2(15) is only a definition clause. Section 2 begins with the words, in this Act, unless the context otherwise requires . The expression charitable purpose appearing in Section 2(15) of the said Act has to be seen in the context of Section 10(23C)(iv). When the expression charitable purpose , as defined in Section 2(15) of the said Act, is read in the context of Section 10(23C)(iv) of the said Act, we would have to give up the strict and literal interpretation sought to be given to the expression charitable purpose by the revenue. With respect, we do not agree with the views of the Kerala and Andhra Pradesh High Courts. 55. It would be appropriate to also examine the observations of another Division Bench of this court in G.S.I (supra). While considering Circular No. 11 of 2008 : issued by the CBDT, to which a reference has been made earlier in this judgment, the Division Bench held that it was evident from the said circular that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esent, whilst Charity or charitable activity is and 'thesis of activity undertaken with profit motive or activity undertaken on sound or recognized business principles. Charity is driven by altruism and desire to serve others, though element of self preservation may be present. For charity, benevolence should be omnipresent and demonstrable but it is not equivalent to self sacrifice and abnegation. The antiquated definition of charity, which entails giving and receiving nothing in return is outdated A mandatory feature would be; charitable activity should be devoid of selfishness or illiberal spirit. Enrichment of oneself or self gain should be missing and the predominant purpose of the activity should be to serve and benefit others. A small contribution by way of fee that the beneficiary pays would not convert charitable activity into business, commerce or trade in the absence of contrary evidence. Quantum of fee charged, economic status of the beneficiaries who pay. commercial value of benefits in comparison to the fee, purpose and object behind the fee etc. are several factors which will decide the seminal question, is it business? 57. Ultimately, in the context of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia. In order to save the Constitutional validity of the proviso, the same would have to be read down and interpreted in the context of Section 10(23C)(iv) because, in our view, the context requires such an interpretation. The correct interpretation of the proviso to Section 2(15) of the said Act would be that it carves out an exception from the charitable purpose of advancement of any other object of general public utility and that exception is limited to activities in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business for a cess or fee or any other consideration. In both the activities, in the nature of trade, commerce or business or the activity of rendering any service in relation to any trade, commerce or business, the dominant and the prime objective has to be seen. If the dominant and prime objective of the institution, which claims to have been established for charitable purposes, is profit making whether its activities are directly in the nature of trade, commerce or business or indirectly in the rendering of any service in relation to any trade, commerce or business, then it would not be entitle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment and not for applying the provisions of S. 12AA(3) of the Act. Sec. 12AA(3) does not permit the CIT to examine violation u/s. 13 etc. 14.1. Be it as it may, on facts we find that the Representative of M/s. South India Corporation Ltd. was not a trustee of the assessee trust, during the period when excess fee collected was refunded. This factual position, as already stated, was not controverted by the Ld. CIT, D.R. Thus prima facie, invocation of S. 13(2)(g) of the Act rws 13(3)(cc) is bad in law. 14.2. Even otherwise, the fee to be charged by the assessee trust is fixed by the Visakhapatnam Port Trust through the Visakhapatnam Dock Labour Board. In the case on hand, it is the Visakhapatnam Dock Labour Board, which found that fee charged from M/s. South India Corpn. Ltd. for a particular period was excessive. This amount was refunded by the Dock Labour Board to the assessee on the ground that excess levy was collected. The assessee is bound to return the said amount to the party, from which such excess levy was collected. Otherwise it would amount to undue enrichment. In this case the Visakhapatnam Port refunded an aggregate amount of ₹ 7.99 crores, of whi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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