TMI Blog2021 (1) TMI 227X X X X Extracts X X X X X X X X Extracts X X X X ..... ances raised by the appellant are as follows: 1. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) is right in allowing the exemption u/s 11 of the IT. Act in view of proviso to section 2(15) of the I.T. Act, when the receipts from the business of developing, coordinating plants and implementing the rail infrastructure projects, etc. for Indian Railways, exceeded the limit provided in proviso to section 2(15), ignoring the detailed discussion made in assessment order in Para B C of 6.3 . 2. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) is right in allowing the exemption u/s 11 of the I.T. Act in view of proviso to section 2(15) of the I.T. Act, by holding that the assessee is a Government organization especially formed to implement Rail components of MUTP and has taken projects funded fully by the Government and using all its funds without any profit markup, ignoring the fact that not only the nature of activities of assessee such as that of consultancy and of implementing projects for the government, are in the nature of business but also that substantial surplus is being generated from the same,'' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollows: 3. The assessee before us is a public sector undertaking, working under Ministry of Railways in the Government of India, and a company registered under section 617 of the Companies Act, 1956. The assessee is engaged in the business of, as the Assessing Officer puts it, developing plans and implementation of rail infrastructure projects . During the course of the assessment proceedings, the Assessing Officer noticed that the registration granted to the assessee under section 12AA as a charitable institution has been cancelled by the Director of Exemptions with effect from 29th October 2001. It was in this backdrop and for the reasons that (a) the assessee was a company registered under section 617, and not as a not for profit company under section 25, of the Companies Act; and that (b) the registration under section 12 AA was cancelled by the learned Director of Exemptions, the Assessing Officer declined benefit of exemption under section 11 of the Act. The Assessing Officer further noted that in view of proviso to Section 2(15), the nature of activity of the assessee and the receipts of the assessee being more than ₹ 25 lakhs, the assessee is not entitled to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rail Network. In fact, a perusal of the Main Objects clause in the Memorandum and Articles of Association of the assessee- company bears testimony to the above, and it reads as under:- A. MAIN OBJECTS OF THE COMPANY TO BE PURSUED ON ITS INCORPORATION: (i) To develop coordinated plans and implement the rail infrastructure projects, integrate urban development plan for Mumbai with rail capacity and purpose investments, undertake commercial development Railway land and air space, coordinate and facilitate improvements of track, drainage and removal of encroachments and trespassers and coordinate with organizations operating the train services and responsible for protection of Railway's right of way and urban development for purposeful resolution of allied issues and problems, and discharge its liabilities arising due to such projects and action. Before us, it has been elaborately brought out that under the first phase of MUTP (at cost of ₹ 4501 crores) 101 EMU rakes have been procured, which have made 418 additional train services possible-and generated an additional 33% carrying capacity in local trains in Mumbai. It has also been pointed out that a state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee company are funded by the World Bank and/or by the budgetary support provided by the State Exchequer and no funds are received from any outside party. All the aforesaid features do show that the task of the assessee is to act as an overall co-ordination and implementing agency for the railway component of MUTP works. 6.3 Be that as it may, in the background of the aforesaid features of assessee company, we now refer to the specific points raised by the Director to say that activities of the assessee are not being carried, out in accordance with its objects in order to justify his invoking of section 12AA(3) of the Act. As per the Director, the activities carried on by the assessee are not in accordance with the objects because - (i) assessee is only leveraging its funds to earn interest income and the same is not applied for its object; and (ii) the expenses are incurred for establishment, administrative functions and not for any charitable or general public utility purpose. On both the aspects, ld. Representative for the assessee pointed out that the activities of assessee are totally controlled/managed by Government of India and subject to review by the Comptroller a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e clearly, any organization would require to spend on administrative overheads in order to carry out its objectives. So however, the function of maintaining an administrative set-up cannot be confused with the objects for which the assessee company has been set up and which it has been undertaking ever since namely, the execution of the railway component of the MUTP. In fact, at no stage has Revenue disputed the fact that the assessee company is executing rail projects identified under the MUTP. In our considered opinion, the Director erred in not appreciating the difference between the functioning of administrative set-up, which is essential to execute the object entrusted to the assessee and, the activity of executing the railway component of the MUTP. The administrative set-up and its functions cannot be viewed in isolation to say that assessee company is not carrying out the activities in accordance with its objectives, which in the present case is quite clearly being undertaken by the assessee by executing the railway component of the project under MUTP----------- (emphasis supplied) 10.1 In the back drop of the above findings of the hon'ble ITAT, perusal of the afo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion which, according to the revenue, disentitled the assessee for claim under section 11, having been rectified during the previous year relevant to the assessment year/ 1974-75, the exemption under section 11 has to be allowed for the whole of the assessment year irrespective of the fact that the amendment took place in the midst of the previous year. We are of the view that after the said amendment had been carried out in December, 1973 the decisions of the Tribunal in respect of earlier assessment years could not be applied in respect of the present assessment year. We are, therefore, in agreement with the Tribunal that the income of the assessee for the whole of the previous year relevant to the assessment year 1974-75 is entitled to exemption under section 11. We accordingly answer the question referrer in the affirmative, i.e., in favour of the assessee and against revenue. There will, however, be no order as to costs. 10.1.1.1 Similar ruling has been made by Hon'ble High Court of Rajasthan in the case of Commissioner of Income-tax, Jaipur II v. Jaipur Stock Exchange Ltd. [2017] 79 taxmann.com 388 (Rajasthan). The Jaipur Stock Exchange limited was registered as Publ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or charitable purposes and in the circumstances the CIT rejected the Board's application under s. 12A of the 1961 Act. In the light of the above case of the Department we are required to consider the expression any other object of general vublic utility in s. 2(15) of the 1961 Act. 9. At the outset, we may point out that s. 10(20) and s. 11 of the 1961 Act operate in totally different spheres. Even if the Board has ceased to be a local authority , it is not precluded from claiming exemption under s. 11(1) of the 1961 Act, therefore, we have to read s. 11(1) in the light of the definition of the words charitable purposes as defined under s. 2(15) of the 1961 Act. 10. We have perused number of decisions of this Court which have interpreted the words, in s. 2(15), namely, any other object of generally public utility . From, the said decisions it emerges that the said expression is of the widest connotation. The word general in the said expression means pertaining to a whole class. Therefore, advancement of any object of benefit to the public or a section of the public as distinguished from benefit to an individual or a group of individuals would be a charita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid test it is clear, that Gujarat Maritime Board is under legal obligation to apply the income which arises directly and substantially from the business held under trust for development of minor ports in the State of Gujarat. Therefore they are entitled to be registered as charitable trust11 under 12A of the 1961 Act. 14. For the afore stated reasons, we see no infirmity in f/je impugned judgments of the High Court and Tribunal and consequently civil appeal stand dismissed with no order as to costs. (emphasis supplied) 10.1.1.3 In view of the above discussion, factual matrix and binding judicial precedents, I am of the view that the assessee, MRVC, cannot be denied exemption U/s.11 of the Act merely on the ground that the assessee is not a Trust or a Company incorporated U/s.25 of the Companies Act, 1956. 10.1.2 The second reason for denial of the exemption is the cancellation of registration U/S.12A of the Act by the DIT (E) vide order dated 10.01.2014. This ground does not exist as on date as the registration u/s. 12A has been restored by the Hon'ble Mumbai ITAT in ITA No. 105?'/Mum/2014 ITA No.2626/Mum/2014, dated 03.08.2016, supra while holding as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009 w.e.f. 01.04.2009.The AO has held that the purpose of the assessee trust was 'the advancement of any other object of general public utility' and since assessee was engaged in commercial activities for a fees or cess either directly or indirectly and also the receipts from such .commercial activity is more than ₹ 25 lakhs, the provisions of proviso to Section 2(15) of the Act are attracted. It is, therefore, a undisputed fact that the purpose of the assessee trust was 'the advancement of any other of general public utility'. Therefore, the only issue for decision is that whether the activities of the assessee constitute the carrying on of any activity 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, irrespective of the nature of use or application, or retention, of the income from such activity. For the sake of convenience, the provisions of section 2(15) (15) charitable purpose includes relief of the poor, education, medical relief, (preservation of environment (including watersheds, forests and wildlife) and preserv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been procured, which have made 418 additional train services possible and generated an additional 33% carrying capacity in local trains in Mumbai. It has also been pointed out that a state of the art EMU maintenance car shed has been set up at Virar and additional 93 track kilometres have been added, which has facilitated segregating mainline operations from suburban operations. It was extended further to network expansion, service efficiency improvement, rolling stock procurement, institutional strengthening and R R is under progress under MUTP-II at approximate cost of ₹ 7000 crore. It leaves no doubt in my mind that the projects which are being undertaken by the -assessee company are in public interest with the ultimate aim of improving transportation infrastructure in MMR. It is also clear that the funds for projects are disbursed to the assessee out of budgetary allocation of Indian Railways and Government of Maharashtra, including-the specific funds received from the World Bank. It has been assessee's uncontroverted submission that all operating assets created under MUTP, through assessee are transferred to / retained by the railways for operations, maintenance an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f investment. It can be seen that even interest income is utilized towards the objects of the assessee company and in support reference has been made to a communication from Railway Board, a copy of which is placed at page 53 of the Paper Book titled 'INDEX of NOTES' filed before the ITAT and a copy submitted during the appellate proceedings. It is .also prescribed therein that any surplus with the assessee is also to be ploughed for funding of the MUTP projects. It has been the assessee's contention that no commercial activity has been carried out and that all its activities are for the purpose for which assessee was set-up. In this context, the contention of the AO made in his the assessment order that the assessee is carrying on commercial activities with profit motive are only a bald assertions, devoid of any factual support. In fact, the main object of the assessee, as reproduced earlier, is to develop coordinated plans and the railway infrastructure projects, integrate urban development plan for Mumbai with rail capacity, etc. In order to achieve the aforesaid, assessee company is an SPY tasked to execute the Sub-urban rail projects identified under MUTP. The vari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness. 10.2.3 In recent years, a number of decisions of the various High courts and ITATs have come which have held that where objects of the assessees demonstrated that they existed and operated purely for purpose of achieving an object of general public utility and these objects had nothing to do with any trade, commerce or business and profit earning was not predominant purpose of assessee, the proviso to section 2(15) could not have been invoked to decline benefit of sections 11. One such land mark judgment has been delivered by the Hon'ble Gujarat High court in Ahmedabad Urban Development Authority v/s, Assist. Comm. of IT, (E) [2017] 83 taxmann.com 78 (Gujarat) where the hon'ble High Court has considered the various case laws relied upon by the AO in the present case and also various decisions of the Supreme court and the High courts on issues of definition of trade and business, interpretation of section 2(15) and its provisio, CBDT Circular No. 11 of 2008 dated 19th December 2008 explaining the purpose of introduction of provisio to section 2(15) and the Finance Minister s speech. While reversing the decisions of the1 1TAT and deciding the issue in favour of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y undertaken is in fact in the nature of business. 12.6 In the aforesaid decision, after considering the decision of the Hon'ble Supreme Court in the case of CST v. Sai Publication Fund! [2002] 258 ITR 70/122 Taxman 437, it is held by the Delhi High Cow that thus, if the dominant activity of the assessee was not business, the] anv incidental or ancillary activity would also not fall within M definition of business. In para 64, 67, 69, 70, 71 and 72 the Delhi Hie Court has observed and held as under: 64. It is not necessary that a person should give something for free on at a concessional rate to qualify as being 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. 67. 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 carries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 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. WP(C) 1872/13 Page 48 of 55 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 organization is carrying on business or not. In the present case, the petitioner has submitted figures to indicate that expenditure on salaries and depreciation exceeds the surplus as generated from holding coaching classes. In addition, the petitioner institute provides study material and other academic support su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edures, or accreditation involves charging of such 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. 12.8 Circular No. 11 of 2008 issued by the CBDT fell for consideration by the Delhi High Court in the case of G.S.L India (supra). It is held that even as per the said circular, proviso to Section 2(15) of the Act is applicable to assessee, who are engaged in commercial activities i.e. carrying on business, trade or commerce, in the garb of 'public utilities' to avoid tax liability as it was noticed that the object 'general public utility' was sometimes used as a mask or device to hide the true purpose, which was 'trade, commerce or business1. Thus, it is evident that introduction of proviso to Section 2(15) by virtue of the Finance Act, 2008 was directed to prevent the unholy practice of pure trade, commerce and business entities from masking their activities and portraying them in the garb of an activity with the object of a general public utility. It is not designed to hit at those institutions, which had the advancement of the objects of ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not subsidize the said activities, which nevertheless are charitable and fall under WP(C) 1872/13 Pages 53 of 55 the residuary clause - general public utility. The impugned order does not refer to any statutory mandate that a charitable institution falling under the last clause should be wholly, substantially or in part must be funded by voluntary contributions. No such requirement has been pointed out or argued. A practical and pragmatic view is required when we examine the data, which should be analyzed objectively and a narrow and coloured view will be counter-productive and contrary to the language of Section 2(15) of the Act 12.9 While, upholding the constitutional validity of the proviso to Section 2(15) of the Act, the Division Bench of the Delhi High Court in the case of Indian Trade Promotion Organization (supra) has observed in para 58 as under: As defined in Section 2(15) cannot be construed literally and in absolute terms. It has to take colour and be considered in the context of Section 10(23C)(iv) of the said Act. It is also clear that if the literal interpretation is given to the-proviso to Section 2(15) of the said Act, then the proviso would be at ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheme an while selling the said plots they are sold by holding the public auction, h cannot be said that activities of the assessee is profiteering, to be in tl\e nature of trade, commerce and business. 13.1 In the case of Lucknow Development Authority, Gomti Nagar (supra), it is held by the Allahabad High Court that the activities of the authority cannot be said to be in the nature of trade, commerce c business and/or profiteering and therefore, proviso to Section 2(15) of the Act shall not be applicable. 13.2 Similar, view has been expressed by the Rajasthan High Court in the case of Commissioner of Income Tax-I, Jodhpur vs. Jodhpur Development Authority, Jodhpur -Tax Appeal No. 63 of 2012 decide on 5.7.2016. 14. Considering the aforesaid facts and circumstances and more particularly, considering the fact that the assessee is a statutory body - Urban Development Authority constituted under the provisions of the Act, constituted to carry out the object and purpose of Town Planning Act and collects regulatory fees for the object of the Acts; no services are rendered to any particular trade, commerce or business; whatever me income is earned/received by the assessee e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is observed and held as under: 6. The legal controversy in the present Tax Appeal centers around the first proviso. In the plain terms, the proviso provides for exclusion from the main object of the definition of the term Charitable purposes and applies only to cases of advancement of any other of general general public utility. If the conditions provided under the proviso are satisfied, any entity, even if involved in advancement of any other object of general public utility by virtue to proviso, would be excluded from the definition of charitable trust. However, for the application of the proviso, what is necessary is that the entity should be involved in carrying on activities in the nature of trade, commerce or business, or any activity of rendering services in relation to any trade, commerce or business, for a cess or fee or any other consideration. In such a situation, the nature, use or application, or retention of income from such activities would not be relevant. Under the circumstances, the important elements of application of proviso are that the entity should be involved in carrying on the activities of any trade, commerce or business or any activities of rende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y between the contributors and the participants. Therefore, where industry or trade associations claim both to be charitable institutions as well as mutual organizations and their activities are restricted to contributions from and participation of only 'their members, these would not fall under the purview of the proviso to section 2 (15) owing to the principle of mutuality. However, if such organizations have dealings 'with non-members, their claim to be chargeable organizations would now be governed by the additional conditions stipulated in the proviso to section 2 (15). 3.2 In the final analysis, however, whether the assessee has for its object the advancement of any other object of general public utility is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled to claim that its object is charitable purpose. In such a case, the object of general public utility will be only a mask or a device to hide the true purpose which is trade, commerce or business or the rendering of any service in relation to trade, commerce or bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. For the reasons stated above, it is held that the proviso to Section 2(15) of the Act shall not be applicable far as assessee- AUDA is concerned and as the activities of the assessee can be said to be providing general public utility services, the assessee is entitled to exemption under Section 11 of the Act. Both the questions are therefore, answered in favour of the assessee and against the revenue. 16. In view of the above and for the reasons stated above, the impugned order passed order passed by the learned Tribunal in respective appeal for different assessment year are hereby quashed and set-aside. Accordingly, all these appeals are allowed and questions in favour of assessee and against the replied) 10.2.4 The Hon'ble Mumbai Tribunal has followed the Ahmedabad Urban Development Authority, (supra) in its recent decision in the case of Shanmukhananda Fine Arts .. Vs. DDIT (E) 1(2), ITA No.l975/Mum./2Q16, dated:02-03-2018. In this case during the assessment proceedings, the AO observed that the objective of the assessee were primarily in the nature of advancement of any other object of general public utility. He issued a notice to the assessee mentioning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AA and a certificate is issued granting registration to the trust or institution the certificate is a document evidencing satisfaction about : (i) the genuineness of the activities of the trust or institution, and (ii) about the objects of The trust or institution. Section 12A stipulates that the provisions of sections 11 and 12 shall not apply in relation to income of a trust or an institution unless the conditions stipulated therein are fulfilled. Thus, granting of registration under section 12AA denotes that the conditions laid down in section 12A stand fulfilled. The effect of such a certificate of registration under section 12AA , therefore, cannot be ignored or wished away by the Assessing Officer by adopting a stand that the trust or institution is not fulfilling the conditions for applicability of sections 11 and 12. We find that the main objection of the departmental authorities was that the SH was rented out most of the time and that it was a commercial activity. In our opinion, act of letting out of hall cannot be and should not be considered in isolation. Eligibility or otherwise of benefit u/s. 11 of the Act cannot depend solely on one factor. What has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, the bank interest received was continued and, then, there was a deficit. It was in these circumstances that the argument was canvassed that the fees collected for training women were only to meet the cost of expenses for providing them food items. Their accommodation and other facilities were free of cost. The Tribunal found that the trust may be set up for advancement of any other object of general public utility but that would not cease to be charitable purposes because the activities in which the trust was involved could not be termed as carrying on of trade, commerce or business, that the activity undertaken did not partake of the character of trade, commerce or business nor of rendering of any service in relation thereto but was only to teach or impart skills and to instill confidence that the produced goods or articles were sold. To that extent also deficit had occurred. The Tribunal took a view that occasional sales or the trust's own fund generation were for furthering the objects but not indicative of trade, commerce or business. The proviso did not apply. ...... considering the fact that the trust had been set up and was functional for the past several decades an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d unless there was any material to justify the Department to take a different view of the matter. While deciding the appeal, the Hon'ble Court had taken note of the proceedings of the earlier AY.s. As the rule of consistency has not followed without bringing distinguishing features of the year under appeal, as compared to the facts of the earlier years, so, in our opinion the order of the FAA cannot be endorsed on this count. 6.3. We also find that one of the object of the assessee was to impart training in music and that training of music has been considered education by the Hon'ble Court. In that regard we would like to rely upon the cases of Delhi Music Society(supra) Jeevan Vidya Mission(supra) and hold that imparting training of music was an educational activity. 6.4. Finally, we would like to address the argument of the FAA about applicability of proviso to section 2(15) of the Act. We find that the AO as well as the FAA has empasised the fact that the provisions of the proviso to the section 2(15)the assessee was not entitled to claim the benefit of section 11 of the Act. We would like to reproduce the proviso and it reads as under: (15) ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking is the predominant object of the activity, the purpose, though an object of general public utility would cease to be a charitable purpose. But where the predominant object of the activity is to carry out the charitable purpose and not to earn profit, it would not lose its character of a charitable purpose merely because some profit arises from the activity. Considering the above, we hold that the assessee is running music school and providing medical services and it is utilising SH for augmenting its funds. In these circumstances in our opinion, it cannot be held that the it is carrying out business activities and the charitable activities are by product, as alleged by the departmental authorities. What has to seen in such cases is a holistic view of the things and not a narrower view. We would like to refer to the matter of Institute of Chartered Accountants of lndia (358 ITR 91),wherein the Hon'ble Delhi High Court has held as under: A plain reading of section 2(15) of the Income-tax Act, 1961, indicates that the expression charitable purpose has been divided into six categories, namely, (i) relief to poor, (ii) education, iii) medical relief, (iv) preserv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbai Metropolitan Region (MMR) has under taken projects funded fully by the government and using all its funds for its objectives without any profit mark up, existed and operated purely for purpose of achieving an object of general public utility and these objects had nothing to do with any trade, commerce or and profit earning was not predominant purpose of assessee, the proviso to section 2(15) could not have been invoked to decline benefit of sections 11. The A.O. is therefore, directed to allow the assessee exemption u/s. 11 of the Act. 4. The Assessing Officer is not satisfied and is in appeal before us. 5. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 6. We find that, in the meantime, the action of the learned Director of Exemptions, in cancellation of registration under section 12 AA, has been reversed by a coordinate bench of this Tribunal. Learned representatives have fairly agreed that the core issue in this appeal is covered, by a coordinate bench decision dated 8th August 2019, in assessee s own case, wherein the coordinate bench has, inter alia, obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature of trade, commerce or business. (b) any activity of rendering any service in relation to any trade, commerce or business for a cess or a fee or any other consideration, irrespective of the nature of use or application-or retention of the income from such activity. The first limb of exclusion from charitable purpose under clause (a) will be attracted, if the activity pursued by the institution involves any trade, commerce or business. But the situation contemplated under the second Limb [clause (b)l stands entirely on a different pedestal, with regard to the service in relation to the trade, commerce or business mentioned therein. To out it more clear, when the matter comes to the service in relation to the trade, commerce or business, it has to be examined whether the words any trade, commerce or business as they appear in the second limb of clause (b) are in connection with the service referred to the trade, commerce or business pursued by the institutions to which the service is given by the assessee. If the said words are actually in respect of the trade, commerce or business of the assessee itself, the said clause (second limb of the stipulation under cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed within the meaning of 'charitable purpose' contained in Sec. 2(15) of the Act. The stand of the Revenue is to the contrary as, according to it, the activities of the assessee are merely to carry out training, seminars, post-graduate training and, that too, against collection of fees and, therefore, cannot be considered as 'education'. Further, the expression 'charitable purpose' also includes the activity of 'advancement of any other object of general public utility'. According to the Revenue, even if the activities are to be considered as falling within the scope of Sec. 2(15) of the Act, it fits into the said expression 'advancement of any other object of general public utility'. The proviso to Sec. 2(15) of the Act was added w.e.f. 01.04.2009, which 9 National Institute of Bank Management ITA Nos. 2913 to 2915/M/16, 2506/M/14 CO 182/M/15 prescribes that the activity of 'advancement of any other object of general public utility' shall not be construed to be for 'charitable purpose' if it involves carrying on of any activity in the nature of trade, commerce or business or any activity of rendering any service in relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed out that assessee offers programmes in collaboration with Kellogg School of Management, Northwestern University USA, The London School of Economics and Political (LSC), UK and CME Group, Chicago, etc. All these assertions of the assessee have not found any negation by the assessing authority or even by the Revenue before us. 10. Before us, it was argued by the ld. DR that fee is being charged and subscriptions are received from the member-banks which generates surplus in the course of activities, and thus, the activities are not for education. It is well understood that educational institutions are also required to generate funds for carrying out its activities, and the fact that assessee is collecting fees, by itself, will not make it a non-educational activity so as to go out of the definition of 'education' contained in Sec. 2(15) of the Act. In this context, we may refer to the judgment of the Hon'ble Supreme Court in the case of T.M.A. Pai Foundation vs State of Karnataka, (2002) 8 SCC 481, wherein the Hon'ble Supreme Court has also recognised the necessity for the educational institution to generate funds for its betterment and growth. In the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Though the decision of the Hon'ble Gujarat High Court is in the context of Sec. 10(22) of the Act, yet, it is of relevance for us since it has explained the meaning of the expression 'education' which, in our view, is germane to decide the controversy before us. The assessee before us is indisputably engaged in conducting higher education training, coaching and research in the field of banking and finance, and the ratio of the judgment of the Hon'ble Gujarat High Court certainly goes to show that its activities are in the field of 'education' for the purposes of Sec. 2(15) of the Act. 12. Similarly, the decision of the Mumbai Bench of the Tribunal in the case of Indian Institute of Bankers vs DCIT (Exemption), (2002) 74 TTJ 523 (Mum) was also relied upon. The assessee before the Mumbai Bench of the Tribunal, i.e. Indian Institute of Bankers, was engaged in the activity of promoting the study of theory of banking and, for that purpose, it was conducting exams, lectures, etc. Notably, the activities of the assessee before us are also on the same lines and the Tribunal in the case of Indian Institute of Bankers (supra) accepted those activities to be in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, on this basis, it will be in the fitness of things to deduce that assessee is not ousted from Sec. 2(15) of the Act because the proviso is not applicable to it. In any case, if one is to examine the applicability of the proviso on merit, even then we find that the same does not come into operation in the present case. Firstly, the CBDT in its Circular no. 11/2008 dated 19.12.2008 clarified that the proviso would apply only in situations where there is a profit motive in the activities undertaken. Secondly, the phraseology of the proviso itself lends credence to a premise that it comes into operation only in situations where profit is the motive in the activities undertaken. Pertinently, the proviso applies in a situation if it involves carrying on of any activity in the nature of trade, commerce or business or any activity of rendering any services in relation to any trade, commerce or business.......... . Ostensibly, the three expressions used therein, i.e., 'trade', 'commerce' or 'business' are to be understood as activities which are undertaken with a motive of earning profits. Therefore, the moot question to be examined is as to whether or not t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... early bring out that the activities of the assessee are exclusively in the field of education and research in the field of banking and finance. Not elaborating further on this aspect, as we have already inferred earlier that assessee is in the field of education, at this stage it would suffice for us to note that there is no commercial intent behind setting-up of the assessee. In fact, the Assessing Officer has sought to draw a parallel with the case before the Hon'ble Patna High Court in Bihar Institute of Mining Mine Surveying (supra) which, in our view, is wholly inappropriate. The Hon'ble Patna High Court was dealing with the claim of an entity for registration u/s 12A of the Act on the ground that its activity of coaching of students for particular examinations was to be viewed as imparting education. The Hon'ble Court noted that the running of a private coaching institute for the purpose of training the students to appear at some specified examinations upon taking specified sum from the trainees would not bring the petitioner within the provisions of section 2(15) of the Act. The aforesaid observation of the Hon'ble Court clearly bring out the distinction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case. Therefore, even if we were to go along with the stand of the Assessing Officer that the activities of assessee fall within the expression 'advancement of any other object of general public utility' contained in Sec. 2(15) of the Act, even then, from Assessment Year 2009-10 onwards, the insertion of proviso does not take away the benefits of Sections 11 12 of the Act from the assessee inasmuch as the proviso does not disentitle the assessee's activities from being considered as for charitable purpose because of the above discussion. Thus, on this aspect also, we uphold the stand of the assessee. The above precedent and case law are fully applicable in the present case. Upto A.Y. 2011-12, there was no dispute that the assessee was entitled to exemption u/s. 11 of the Act. The dispute has only arisen pursuant to introduction of proviso to section 2(15) of the Act. Considering the objects for which the assessee is set up and manner in which it is managed and the manner in which funds generated are utilized, there is no doubt that there is no profit motive in carrying out the activity of the assessee. No doubt there may remain some surplus but that by itself do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich has been considered by the Revenue to be of a large scale pale into absolute insignificance when the same is considered as percentage to the non-operative revenue to operating revenue, which bring them to be lesser than 1% to the operating revenue. The same is emanating from the following chart submitted by learned Counsel of the assessee. Sr. No Particulars Amount in Rs. Percentage to Non- operating Revenue to Operating Revenue 1. Adverting 52122184 0.095% 2. Rent 20786834 0.05% 3. Interest 14213788 0.025% 4. Publication 3986 5. Excess Receipt 3958812 0.007% 6. Licence Fees 171405862 0.031% 7. Mis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the matter than the view so taken by the coordinate bench in assessee s own case. Respectfully following the same, we approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter. 5. The appeal is thus dismissed. 6. As regards the cross objection filed by the assessee also, we find that the issue is squarely covered by our order of even date for the assessment year 2012-13 wherein we have dismissed the same by observing as follows: The assessee has also filed a cross objection claiming that the assessee, being State/ an instrumentality of the State, cannot be imposed the income tax, but given the fact that the departmental appeal has been dismissed, and given the fact that the learned counsel has stated that in the event of the departmental appeal being dismissed, the cross objection may be treated as not pressed, we see no need to deal with the same. We may, however, take on record learned counsel s statement that he may not press the issue raised in the cross objection at this stage, he would like to keep the issues raised therein alive, so that, if required, this issue be pursued in future. 8. We see no reasons to take any other view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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