TMI Blog2021 (9) TMI 513X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot lead to a conclusion that the very nature of its activities have lost the character of charity and such activities are undertaken for earning profits. Where as part of rendering of such activities, it recovers certain nominal fees to meet its operational and administrative expenses, the same will not disqualify it from being involved in carrying on charitable activities. As a settled position that the proviso to section 2(15) applies only if an institution is engaged in advancement of any other object of general public utility and postulates that such an institution is not charitable if it is involved in carrying on 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, fee or any other consideration. In the instant case, the assessee society is carrying out charitable activities in the field of medical relief to the poor and needy section of the society and not in the field of general public utility and thus, the proviso to section 2(15) is not applicable and thus cannot be invoked. There are enough safeguards provided in the Act including by way of section 11(4A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly applicable in case of any other objects of General Public Utility is not applicable in the instant case and has been wrongly invoked by the ld. CIT(E). In support, reliance was placed on the following decisions: Institute of Chartered Accountants of India and another vs. Director-General of Income-Tax (Exemptions) and others [2013] 358 ITR 91 (Del) Director of Income-tax vs. Bharat Diamond Bourse [2003] 259 ITR 280 (SC) Samarpan Samiti vs. CIT-II, Agra (ITAT Agra) dated 22.06.2012. It was accordingly submitted that necessary directions may be issued to the ld. CIT(E) to grant registration to the assessee society. 3. Per contra, the ld. CIT/DR submitted that during the course of proceedings before the ld CIT(E) in connection with assessee s trust application seeking registration u/s 12AA, information was called u/s 133(6) of the Act from the Principal Medical Officer, Pratapgarh and as per his letter dated 25.06.2019, he has submitted the details of payment made to the assessee society and details of TDS being deducted along with copy of the agreement. It was submitted that on perusal of the details so submitted, the ld. CIT(E) noted that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but are pre-dominant activity of the applicant. Hence, the assessee also fails condition (a) of the proviso. Therefore, as per the proviso, such activity in the nature of advancement of an object of GPU shall not qualify as charitable activity. 05. Based on above discussion, it is clear that the activities of the applicant society are not charitable in nature as it is predominantly carrying out business of providing man power and contractual services of Ambulance Van. The applicant society cannot be held as charitable within the meaning of sec. 2(15) of the Income-tax Act, 1961. Based on above, I am satisfied that the applicant trust is not fit for registration and, therefore, registration u/s 12AA is rejected. 4. It was accordingly submitted that there is no infirminity in the order so passed by the ld CIT(E) in denying registration u/s 12AA and the same may be confirmed and the appeal of the assessee be dismissed. 5. We have heard the rival contentions and perused the material available on record. The relevant provisions which are under consideration is Section 2(15) which defines the term charitable purpose and the same reads as under: 2(15) charita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accountants Act, 1949 ( the CA Act ) and its fundamental or dominant function is to exercise overall control and regulate the activities of the members/enrolled chartered accountants. This is apparent from the CA Act and the regulations framed under the said Act. This Court while dismissing the appeal (ITA no. 274/2012) preferred by the revenue under section 260A of the Act against the order dated 16.06.2011 passed by the Tribunal in relation to the Assessment year 2007-08 by its judgment dated 11.5.2012 held as under: As held by this Court in its decision dated 19.9.2011 in Writ Petition No.1927/2010 entitled as Institute of Chartered Accountants of India v. DIT, Delhi and Others, the dominant purpose and objective of the Institute is to regulate the profession of chartered accountants in India and for this purpose it holds entrance examination, regulates the conduct of the members and prescribes and fixes the accountancy standards etc. No doubt, the assessee holds classes and provides coaching facilities for the members and articled clerks etc. who want to appear in the examination conducted by the Institute of Chartered Accountants, but these classes are not held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, schooling, cultural activities, sports, medicine, tourism and similar other activities; to prepare Master Plan for traffic control and management; devise policy and programmes of action for smooth flow of traffic and matters connected therewith; undertaking housing activity in Jodhpur Region etc., are essentially the functions, which promote the welfare of the general public. Of course, while discharging the said functions, the JDA also discharges function to acquire, hold, manage and dispose of property movable or immovable as may be deemed necessary and also enters into contract, agreements or arrangements with any person or organization may deem necessary for performing its function and in this process, it might be earning income but the primary object of the JDA certainly does not involve any profit motive whatsoever. It is pertinent to note that as per the provisions of Section 51 of the JDA Act, for the purpose of discharging the statutory functions, The Jodhpur Region Development Fund is created to which all money received by the authority is credited including amount of contribution to be made by the State Government, such other money as may be paid to the authority b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer from any infirmity or illegality. 8. In case of Director of Income Tax vs Bharat Diamond Bourse (supra), the Hon ble Supreme Court held as under: Though the assessee earned certain income by reason of hiring of locker facilities as incidental to the main custom clearance facilities made available to members as well as non-members, and debited the expenses incurred in respect of customs department, transport charges, security charges and rent for the premises, these earnings must be treated as ancillary to the dominant purpose for which the diamond bourse was established. The Constitutional Bench of the Apex Court in Addl. CIT v. Surat Art Silk Cloth Mfrs. Association [1980] 2 SCC 31 has held that if the primary or dominant purpose of the institution is charitable and another which, by itself may not be charitable, but is merely ancillary or incidental to the primary or dominant object, it would not prevent the institution from validly being recognized as a charity. The test to be applied is, whether the object which is said to be non-charitable is the main or primary object of the trust or institution or it is ancillary or incidental to the dominant object which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s at Pratapgarh where none of the good medical facility is available and in case of emergency, even ambulance is also not available to carry the patients to the nearby metro place for better medical facilities. To cater to the need of ambulance, the society has purchased and operated ambulance on cost recovery basis and it has been categorically submitted that none of the individuals involved in the functioning of the assessee s society is entitled to share in any surplus or profits or bear the losses except the society. Similar contentions have been advanced before us and which we have noted supra. 11. We therefore find that primary and the dominant object of the assessee society is to provide medical relief to poor and needy people and not to carry out any such activities for the purposes of earning profit. The objective is not to earn profit rather the objective is to provide medical facility to the people and make the same accessible by providing ambulance services. Where as part of such services, the assessee has entered into some arrangement with local hospital whereby the ambulances are provided to the needy patients, such activities are in furtherance of its main objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circular is reproduced as below:- 2.2. 'Relief of the poor' encompasses a wide range of objects for the welfare of the economically and socially disadvantaged or needy. It will, therefore, include within its ambit purposes such as relief to destitute, orphans or the handicapped, disadvantaged women or children, small and marginal farmers, indigent artisans or senior citizens in need of aid. Entities who have these objects will continue to be eligible for exemption even if they incidentally carry on a commercial activity, subject, however, to the conditions stipulated under section 11(4A) or the seventh proviso to section 10(23C) which are that - (1) the business should be incidental to the attainment of the objectives of the entity, and (ii) separate books of account should be maintained in respect of such business. Similarly, entities whose object is 'education' or 'medical relief' would also continue to be eligible for exemption as charitable institutions even if they incidentally carry on a commercial activity subject to the conditions mentioned above. 3. The newly inserted proviso to section 2(15) will apply only to e ..... 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