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TMI Blog2025 (5) TMI 1096X X X X Extracts X X X X X X X X Extracts X X X X ..... year 2011-12 is also invalid/nullity in eyes of law? 2. Whether the Tribunal erred in upholding that 2nd proviso to Section 2 (15) [as it stood at the relevant juncture of time] would be applicable in the case of appellant trust for assessment year 2011-12 and making sequitur addition of Rs. 2,20,250/- to income of appellant trust in teeth with law laid down by the Hon'ble Apex Court in Assistant CIT vs. Ahmedabad Urban Development Authority 2023 (7) SCC 249 reiterated in CIT vs. Servants of People Society 2023 SCC OnLine SC 104." 2. The aforesaid questions of law arise for consideration on the following factual backdrop: - 3. The appellant herein / assessee filed return of income for the assessment year 2011-12 on 30-9-2011 declaring total income as NIL. Its case was selected for scrutiny under compulsory selection criteria with the prior approval of the Chief Commissioner of Income Tax, Raipur and accordingly, notice under Section 143 (2) of the Act was issued on 26-9-2012 which was served to the assessee on 1-10-2012 by registered post and thereafter, assessment was completed under Section 143 (3) of the Act and assessment order was passed by the Deputy Commissioner of Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on or before 30-9-2012, whereas it was served on 1-10-2012 and as such, the notice so issued under Section 143 (2) was barred by one day and therefore the impugned order deserves to be set aside and the instant appeal deserves to be allowed. 2. The second proviso to Section 2 (15) of the Act would not be applicable because the services provided by the appellant Trust are charitable in nature and not profit driven. He would rely upon the decision of the Supreme Court in the matter of Assistant Commissioner of Income Tax (Exemptions) v. Ahmedabad Urban Development Authority (2023) 4 SCC 561 (paragraphs 190 & 272). 6. Mr. Ajay Kumrani, learned counsel appearing for the respondent/Revenue, would submit as under: - 1. Notice under Section 143 (2) of the Act was issued on 26-9-2012 and since last day of the month of September, 2012 was Sunday, therefore, it has rightly been served on 1-10-2012 by registered post as such, the service made is in accordance with law, as Section 10 of the General Clauses Act, 1897 would apply and since last day of the month was holiday and as per the Postal Department it was a non-working day, therefore, by virtue of Section 10 of the General Clauses Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncial year in which the return is furnished." 9. The proviso appended to clause (ii) of sub-section (2) of Section 143 of the Act clearly states that no notice under Section 143 (2) shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished and the proviso to clause (ii) of Section 143 (2) of the Act is mandatory. 10. The dispute is of the assessment year 2011-12 relevant to financial year 2010-11 and notice under Section 143 (2) of the Act, dispatched by registered post, was issued on 26-9-2012, which was said to be served on the assessee / appellant Trust on 1-10-2012. 11. At this stage, Rules and Regulations relating to the Inland Post as enumerated in the Post Office Guide Part I issued by the Director-General of Posts may be noticed herein of which clause 7 relates to Business done on Sundays and P.O. holidays, which states as under: - "7. Business done on Sundays and P.O. holidays (a) Except the Night Post Offices all post offices Mobile Post Offices are generally closed on Sundays and PO Holidays and no business transacted with the public. There is also no clearance of street letter post boxes del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the commencement of this Act, any act or proceeding is directed or allowed to be done or taken in any Court or office on a certain day or within a prescribed period, then, if the Court or office is closed on that day or the last day of the prescribed period, the act or proceeding shall be considered as done or taken in due time if it is done or taken on the next day afterwards on which the Court or office is open: Provided that nothing in this section shall apply to any act or proceeding to which the Indian Limitation Act, 1877 (15 of 1877), applies. (2) This section applies also to all Central Acts and Regulations made on or after the fourteenth day of January, 1887." 13. A careful perusal of Section 10 of the General Clauses Act, 1897 would show that it embodies the general principles enshrined in two maxims - (i) lex non cogit ad impossibilia and (the law does not compel a man to do the impossible) (ii) actus curiae reminem gravabit (the act of court shall prejudice no man). The principle underlying Section 10 is that the act to Court shall prejudice no man. There is the general principle that a party prevented from doing an act by some circumstances beyond his control, ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reddi (1898) 8 MLJ 265 : ILR 22 Mad 179). The underlying object of the principle is to enable a person to do what he could have done on a holiday, on the next working day. Where, therefore, a period is prescribed for the performance of an act in a court or office, and that period expires on a holiday, then the act should be considered to have been done within that period if it is done on the next day on which the court or office is open. The reason is that law does not compel the performance of an impossibility. (See Hossein Ally v. Donzelle ILR (1880) 5 Cal 906 : 6 CLR 239.) Every consideration of justice and expediency would require that the accepted principle which underlies Section 10 of the General Clauses Act should be applied in cases where it does not otherwise in terms apply. The principles underlying are lex non cogit ad impossibilia (the law does not compel a man to do the impossible) and actus curiae neminem gravabit (the act of court shall prejudice no man). Above being the position, there is nothing infirm in the orders passed by the forums below. However, the rate of interest fixed appears to be slightly on the higher side and is reduced to 9% to be paid with effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n-above, therefore, notice was came to be served on 1-10-2012 on Monday. In our considered opinion, such service of notice under Section 143 (2) of the Act on the assessee on 1-10-2012 is the valid service of notice in view of Section 10 of the General Clauses Act and the principles of law laid down by their Lordships of the Supreme Court in the above-noticed judgments (supra) and thus the assessee was timely served and as such, both the appellate authorities are absolutely justified in holding that notice served was within the period of limitation prescribed under Section 143 (2). We accordingly answer the first substantial question in favour of the Revenue and against the assessee. Answer to the second substantial question of law 18. In order to consider the plea raised at the Bar, it would be appropriate to notice Section 2 (15) of the Act. Section 2 (15) - which had been amended last, in 19831, was again amended, by the Finance Act, 2008, w.e.f. 1-4-2009. Some other amendments too were made, with effect from the same date by the Finance Act, 2009 and Finance Act, 2010. With the said amendments, as on 1-4-2009, the provision read as follows: - "2. (15) "charitable purpose" i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation, yoga, medical relief, preservation of environment (including watersheds, forest 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. The expression "advancement of any other object of general public utility" has been considered by the Supreme Court in number of judgments. 21. In the matter of Commissioner of Income Tax v. Gujarat Maritime Board (2007) 14 SCC 704, the words in Section 2 (15) of the Act, namely, "any other object of general public utility" have been considered by their Lordships of the Supreme Court and it has been held that the said expression would prima facie include all objects which promote the welfare of the general public. Their Lordships further held that if the primary purpose and the predominant object are to promote the welfare of the general public the purpose would be charitable purpose. It has been observed by their Lordships of the Supreme Court as under: - "13. We have perused number of decisions of this Court which have interpreted the words in Section 2 (15), namely, "any other object of general public utility". From the said d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commerce or business or provide services in relation thereto for consideration, provided that (i) the activities of trade, commerce or business are connected ("actual carrying out ..." inserted w.e.f. 1-4-2016) to the achievement of its objects of GPU; and (ii) the receipt from such business or commercial activity or service in relation thereto, does not exceed the quantified limit, as amended over the years (Rs 10 lakhs w.e.f. 1-4-2009; then Rs 25 lakhs w.e.f. 1-4-2012; and now 20% of total receipts of the previous year, w.e.f. 1-4-2016). 272. Generally, the charging of any amount towards consideration for such an activity (advancing general public utility), which is on cost-basis or nominally above cost, cannot be considered to be "trade, commerce, or business" or any services in relation thereto. It is only when the charges are markedly or significantly above the cost incurred by the assessee in question, that they would fall within the mischief of "cess, or fee, or any other consideration" towards "trade, commerce or business". In this regard, the Court has clarified through illustrations what kind of services or goods provided on cost or nominal basis would normally be excl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limit indicated by proviso (ii) to Section 2 (15). H. Application of interpretation 285. At the cost of repetition, it may be noted that the conclusions arrived at by way of this judgment, neither precludes any of the assessees (whether statutory, or non-statutory) advancing objects of general public utility, from claiming exemption, nor the Taxing Authorities from denying exemption, in the future, if the receipts of the relevant year exceed the quantitative limit. The assessing authorities must on a yearly basis, scrutinise the record to discern whether the nature of the assessee's activities amount to "trade, commerce or business" based on its receipts and income (i.e. whether the amounts charged are on cost-basis, or significantly higher). If it is found that they are in the nature of "trade, commerce or business", then it must be examined whether the quantified limit (as amended from time to time) in the proviso to Section 2 (15), has been breached, thus disentitling them to exemption." 24. Coming to the facts of the case in light of the principles of law laid down by their Lordships of the Supreme Court in Gujarat Maritime Board's case (supra) followed in Ahmedabad U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be no way to preserve the corpus of the trust for deriving income. It has been observed in paragraph 5 of the report as under: - "5. It was not disputed that the mercantile system of accounting was followed by the assessee. In that case, as held in CIT v. Society of the Sisters of St. Anne, [1984] 146 ITR 28 (Kar), if depreciation is not allowed as a necessary deduction for computing the income of a charitable institution, then there would be no way to preserve the corpus of the trust for deriving income. We respectfully agree with that decision." 26. In the matter of Commissioner of Income Tax-III, Pune v. Rajasthani and Gujarati Charitable Foundation, Poona (2018) 7 SCC 810, it has been held that the income of the Trust is required to be computed under Section 11 on commercial principles after providing for allowance for normal depreciation and deduction thereof from gross income of the trust. It has been observed in paragraph 2 of the report as under: - "2. From the judgments of the High Courts, it can be discerned that the High Courts have primarily followed the judgment of the Bombay High Court in CIT v. IBPS CIT v. IBPS, 2003 SCC OnLine Bom 642 : (2003) 131 Taxman 386 (I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re in the nature of trade, commerce or business. 28. In the instant case, it is the case of the assessee that renting of marriage hall was done on a cost-basis or nominally above cost to cover up the expenditure, which has not been considered by all the authorities and merely by holding that Rs. 15,89,163/- was received by the assessee Trust, the authorities have proceeded to hold that Rs. 2,20,247/- was liable to tax. In our considered opinion, the Dharamshala was let out for charitable purpose mentioned in the trust deed on a cost-basis or nominally above cost to cover up the charges as demonstrated by the assessee and the primary and predominant object of the Trust was charitable. Furthermore, it has been shown by the appellant/assessee that the appellant Trust has adopted the mercantile system of accounting for the financial year 2010-11 (assessment year 2011-12) for which depreciation of Rs. 8.55 lakhs is to be accepted which the authorities have not accepted, same ought to have been allowed as depreciation being notional expenditure in light of the decision of the Supreme Court in Rajasthani and Gujarati Charitable Foundation, Poona's case (supra) and that of the M.P. High C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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