TMI Blog2022 (7) TMI 1004X X X X Extracts X X X X X X X X Extracts X X X X ..... denied the exemption u/s 11 of the I.T.Act for the reason that the assessee s activities are hit by proviso to section 2(15) since it is charged fees for the services rendered and the receipt of such fee exceeds 20% of the total turnover. As in the case of Karnataka Badminton Association [ 2015 (1) TMI 1202 - KARNATAKA HIGH COURT] had held that cancellation of registration u/s 12AA(3) of the I.T.Act is not warranted for the reason that the assessee is hit by first proviso to section 2(15) of the I.T.Act. It was observed by the Hon ble High Court that the revenue s interest is protected by virtue of section 13(8) introduced by the Finance Act, 2012 with effect from 1st April, 2009. Section 13(8) provides that nothing contained in section 11 or 12 shall operate so as to exclude any income from the total income of the previous year of the person in receipt thereof if the provisions of the first proviso to clause (15) of section 2 become applicable in the case of such person in the said previous year . Thereby meaning irrespective whether the registration u/s 12A is in force when assessee is hit by first proviso to section 2(15) of the I.T.Act, exemption u/s 11 or 12 can be denied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of justice. 2. On the facts and circumstances of the case, the learned Commissioner, failed to appreciate the returns filed by the appellant and without considering the nature of service oriented certification activities of the appellant and made additions are excessive, thus the order of the CIT(Exemption) are liable to be set aside in the Interest of Justice. 3. On the facts and circumstances of the case, the learned Commissioner ought to have appreciated that, the commissioner ought to have appreciated that the activities of the appellant which were verified by the assessing officer and granted exemption are correct. Thus, the commissioner ought to have refrained from denying the claim of the appellant in the interest of the justice. 4. On the facts and circumstances of the case, ought to have the commissioner erred in not considering the exemption granted to the appellant in the case and denied the claim of the appellant that it is against the law. Thus, the order of the relevant assessment year 2016-2017 are not maintainable in law and are liable to be set aside. 5. On the facts and circumstances of the case, the learned commissioner failed to appreciate th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices. Accordingly, looking to the facts and circumstances of the case and in view of decision of the Hon ble Andhra Pradesh High Court delivered in the case of M/s.Andhra Pradesh State Seed Certification Agency, it is further observed that the proviso to section 2(15) of the Act applies in the case of the assessee and the assessee is not eligible for exemption u/s 11 12 of the Act. 9. Therefore, the assessment order dated 28.12.2018 passed u/s 143(3) of the Act for A.Y. 2016-17 being erroneous and prejudicial to the interest of revenue is required to be revised. Accordingly, the JAO is directed to revise the assessment order for A.Y. 2016-17 as per the above observations. 5. Aggrieved by the orders of the CIT(E) for assessment years 2016-2017 and 2017-2018, the assessee has filed these present appeals before the Tribunal. The learned AR filed a paper book enclosing therein copy of certificate of registration under the Karnataka Societies Registration Act, 1860, copy of memorandum of association of the assessee-society, copy of 12A certificate issued by the Income Tax Department, copy of the order passed u/s 10(23C)(iv) of the I.T.Act, etc. The learned AR submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by any person on behalf of ** ** ** (iv) any other fund or institution established for charitable purposes which may be approved by the prescribed authority, having regard to the objects of the fund or institution and its importance through out India or through out any State or States; or .. 15. Section 2 (15) as amended by Finance (Nos.2) Act, 2009 is as follows: (15) charitable purpose includes relief of the poor, education, medical relief, (preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest,) and the advancement of any other object of general public utility: Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves 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: 16. A reading of the above provisions of the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enough to enable it to sustain its activities and may not result in much profit. The term advancement of any other object of general public utility used in Section 2 (15) of the Act includes all objects to promote the welfare of the public particularly when the object is to promote or protect the interest of a particular trade or industry. The activity of the petitioner which facilitates sale of certified seeds to farmers therefore falls within advancement of any other object of general public utility included in the definition of the term charitable purpose as defined in Section 2 (15) of the Act but in view of the fact that certification of seeds by the petitioner facilitates trade, commerce or business in the certified seeds by the client of the petitioner, the proviso to the said section would come into operation. Thus the petitioner s activity assists the sale of certified seeds and is in relation to any trade, commerce or business and therefore its activity cannot be held to be a charitable purpose . In this view of the matter, we hold that the 1st respondent rightly rejected the application of the petitioner for approval under Section 10 (23C) (iv) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce or business in the first proviso to Section 2 (15) of the Act have to be ignored. This is not permissible because the High Court cannot substitute or ignore the wording in a provision in a statute. In Aswini Kumar Bose v. Arabinda Ghose AIR 1952 SC 368, the Supreme Court held that it is not a sound principle of construction to brush aside words in a statute as being inapposite surplusage, if they can have appropriate application in circumstances conceivably within the contemplation of the statute. In Mahindra and Mahindra s case (5 supra), the Supreme Court held that the High Court cannot substitute the language in a statute or subordinate legislation. 20. The Memorandum explaining the provisions in the Finance Bill, 2008 and the budget speech of the Minister of Finance for 2008-2009 delivered on 29- 02-2008 extracted above clearly indicate that the first proviso to Section 2 (15) as extracted above was introduced by the Finance (Nos.2) Act, 2009 with effect from 01-04-2009 to exclude entities carrying on regular trade, commerce or business or providing services in relation to any trade, commerce or business and earning incomes from claiming to be engaged in activities for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay be a situation involving letting out the premises for purposes other than involving trade, commerce or business as well). 22. We endorse the said view of the Kerala High Court in the above case and we respectfully follow the same. 23. In the case of Institute of Chartered Accountants (3 supra), the Delhi High Court had taken the view that the activity of conducting coaching classes by the said institute was not enough to deprive the institute of approval under Section 10 (23C) of the Act and the matter was remitted to the Income Tax Department to consider the matter whether the institute carried on business or not when its primary and dominant activity is to regulate the profession of chartered accountancy and to consider the application of the proviso of Section 2 (15) of the Act introduced with effect from 01-04-2009. Although there is discussion in this case and also the other case (4 supra) on the subject, there is no finality attached to the above issue as in both cases the matter was remitted to the department to consider the application of the said institute for approval under Section 10 (23C) (iv) of the Act. Therefore they are of no assistance to the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit of exemption u/s 11 and 12 of the I.T.Act. 9. The assessee has raised a contention that the CIT(E) has erred in cancelling the registration u/s 12AA without following due procedure u/s 12AA(3) of the I.T.Act. This contention of the assessee is devoid of any merits. The CIT(E) in the impugned orders u/s 263 of the I.T.Act has not cancelled the registration u/s 12A of the I.T.Act but only denied the benefit of exemption u/s 11 of the I.T.Act for the reason that the assessee s activities are hit by proviso to section 2(15) of the I.T.Act. We notice that the SLP is pending before the Hon ble Apex Court against the judgment of the Hon ble Andhra Pradesh High Court. In the event, the judgment of the Hon ble Andhra Pradesh High Court is set aside or reversed by the Hon ble Apex Court, the assessee shall be at liberty to move necessary rectification petition. 10. Before concluding, it is to be mentioned that after the case was heard, the assessee has filed a memo enclosing therein the judgment of the Hon ble Rajasthan High Court in the case of CIT v. Manna Trust in DB ITA No.1/2021 (judgment dated 12.01.2022). It is submitted that the judgment of the Hon ble Rajasthan High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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