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TMI Blog2021 (9) TMI 1141X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and circumstances of the case and in law, the Ld. CIT (A) has erred in ignoring the fact that the assessee is rendering services to the laboratories and by monitoring such labs carrying out activities in a commercial manner with a view to earn profit and charging fee from them which is liable to be taxed under the head 'Profit & Gains of Business and Profession' and as such, its activities are not in charitable nature." 3. Briefly stated the facts necessary for adjudication of the controversy at hand are : Assessee being a society registered under Societies Registration Act is also granted registration under section 12A of the Income-tax Act, 1961 (for short 'the Act'). The main aims and objects of the assessee society are to promote, coordinates, guide, implement and maintain accreditation system for laboratories suitable in the country in accordance with the relevant national and international standards and guides; to encourage proficiency tests inter-laboratory comparisons in order to ensure accuracy, reliability and reproducibility of test results, to ensure that the accredited laboratories adhere to all the conditions of accreditation by periodic surveillance, etc. 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gible for exemption under sections 11 and 12 as the assessee is not engaged in any trade, commerce business and its dominant and prime objective is charitable in nature in accordance with section 2(15). The operative part of the judgement is reproduced below: "05. We have carefully considered the submission of parties and also the orders of lower authorities. We have perused the objects of the trust for which it is created and also the governing council of the trust . The main object of the formation of this society is to give the laboratories accreditation by which the quality standards in the products available to consumers and public at large can be improved. It has not been alleged by AO or CIT (A) anywhere that the assessee is charging exorbitant or excessive fees. We find that in view of the decision of Honourable jurisdictional high court in India Trade promotion Organizations' V DGIT 371 ITR 333 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, comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... true identities. The object was not to hurt genuine charitable organisations. And, this was also the assurance given by the Finance Minister while introducing the Finance Bill 2008. 56. In GS1 (supra) it was contended by the Revenue that GS1 (India) had acquired intellectual property rights from GS1 (Belgium) and thereafter received registration fees from third parties in India. This was sought to be equated to royalty payments. It was also contended that GS1 (India) had huge surpluses of receipts over expenditure and that payments were made to GS1 (Belgium). According to the Revenue, all this entailed that GS1 (India) was engaged in "business, trade or commerce". The petitioner herein refuted this. In this backdrop, this court asked the question-scan it be said that the petitioner is engaged in activities which constitute business, commerce or trade ? While answering the said question, the court held as under (page 153 of360 ITR) : "As observed above, 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 factor to discern whether an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the person is carrying on business or commerce and not charity, but we must keep in mind that charitable activities require operational/running expenses as well as capital expenses to be able to sustain and continue in long run. The petitioner has to be substantially self-sustaining in longterm and should not depend upon Government, in other words, taxpayers should not subsidize the said activities, which nevertheless are charitable and fall under 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 analysed objectively and a narrow and coloured view will be counter-productive and contrary to the language of section 2(15) of the Act." 58. In conclusion, we may say that the expression "charitable purpose", as defined in section 2(15) cannot be construed literally and in absolute terms. It has to take colour and be considered in the conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi High court in above decision. The effect of this provision would bring those trusts and institutions, like assessee, with the object of general public utility on par with those with the other three objects in respect of the treatment for income from business, if it is incidental to the objects as provided under section 11 (4A) of the Act, subject to certain limitation. 07. In view of above we reverse the order of CIT (A) and hold that assessee is eligible for exemption u/s 11 & 12 of the Income Tax Act as assessee is not engaged in any trade, commerce or business and its dominant and prime objective is charitable in nature in accordance with section 2 (15) of The Income Tax Act." 5.1.3 Further, the Hon'ble Delhi High Court in appellant's own case in ITA 284/2016 by the order dated 02.05.2016 have held as under: "3. The short question is whether the Respondent National Accreditation Board For Testing and Calibration Laboratories is entitled to exemption under Section 11 and 12 of the Income Tax Act, 1961. 4. The positive findings of the ITAT on facts is that the Assessee is not engaged in trade, commerce and business and its dominant and prime objective is char ..... X X X X Extracts X X X X X X X X Extracts X X X X
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