Case Law Details

Case Name : DCIT Exemption Vs Ernet India (ITAT Delhi)
Appeal Number : ITA No. 1355/DEL/2017
Date of Judgement/Order : 26/08/2020
Related Assessment Year : 2012-13
Courts : All ITAT (7802) ITAT Delhi (1854)

DCIT Vs Ernet India (ITAT Delhi)

Conclusion: Merely earning surplus by assessee did not result into the conclusion, that assessee was carrying on its activities, which could be termed as business, trade, or commerce, charging a nominal fee to use coding system and to avail of advantages and benefits therein was neither reflective of business aptitude nor indicative of profit-oriented intent.  Accordingly, proviso to section 2(15) did not get attracted, and hence, there was no justification for denying exemption under section 11.

Held:  Assessee was an autonomous society established under the aegis of Department of Information Technology, Ministry of Communications and Information Technology, Government of India, as a non-profit organization. Looking to the activities carried out by it, which fell within the ambit of ‘charitable purposes’ under section 2(15), it was granted registration u/s.12A vide order dated 26.03.2004. AO observed that, assessee was neither in the field of education nor in the field of medical relief or relief of poor albeit it fell within the scope of “general public utility” as per Section 2(15). AO held that looking to its receipts, its activities were commercial in nature. He observed that in view of the amendment to Section 2(15) assessee cannot be held to be carrying out charitable activities as it was carrying on activities in the nature of trade commerce or business in terms of first proviso to Section 2(15) and after detailed discussion, he held that entire surplus as per income and expenditure claimed, computed the net taxable income at Rs. 8,93,98,650/-. It was held that  Assessee was engaged in research based activity which was highly cost intensive and required continuous spending on innovation and new developments as it was concerning with the education of society. Assessee was charging subscription as well as consultancy fees on actual, which fact was not denied. Therefore, merely earning surplus did not result into the conclusion, that assessee was carrying on its activities, which could be termed as business, trade, or commerce, charging a nominal fee to use coding system and to avail of advantages and benefits therein was neither reflective of business aptitude nor indicative of profit-oriented intent. Accordingly, proviso to section 2(15) did not get attracted, and hence, there was no justification for denying exemption under section 11.

FULL TEXT OF THE ITAT JUDGEMENT

The aforesaid appeal has been filed by the Revenue against the impugned order dated 20.12.2016, passed by Ld. Commissioner of Income Tax (Appeals)-XL, Delhi for the quantum of assessment passed u/s.143(3) for the Assessment Year 2012-13. In the grounds of appeal, the Revenue has raised following grounds:

“1.On the facts and circumstances of the case, Ld CIT(A) has erred in allowing the appeal of the assessee by ignoring the fact that even though the objects of the Society may have been charitable but the activities carried out by the Society which yielded income to the Society were commercial in nature.

2. On the facts and circumstances of the case, Ld CIT(A) has erred in allowing the appeal of the assessee by ignoring the fact that assessee was earning huge profits by providing data connectivity to its subscribers in lieu of consideration as per its objects and nowhere, charity can be seen in the whole process

3. On the facts and circumstances of the case, Ld. CIT (A) has erred in allowing the appeal of the assessee by ignoring the fact that as capital expenditure for earlier years was allowed as application of income in the year in year of purchase of fixed asset/s

4. On the facts and circumstances of the case, Ld CIT(A)has erred in allowing assessee’s appeal by ignoring that assessee like charitable or religious institutions are governed by almost the separate or independent provisions of sections 11, 12, 12A, 12AA & 13 and these provisions are independent code in itself in Chapter III of the Income Tax Act, 1961. The income and expenditure is computed on the basis of the entire expenditure including the capital expenditure for purchase of capital asset u/s. 11(1).”

2. At the outset, ld. counsel for the assessee submitted that in the appeal for the Assessment Years 2009-10 and 2010-11 this Tribunal on similar issues and grounds raised by the Revenue has decided the issue in favour of the assessee and dismissed the Revenue’s Appeal. Not only that, the decision of the Tribunal has been affirmed by the Hon’ble Delhi High Court in ITA No. 637/2018 vide judgment and order dated 25.09.2018. Thus, the matter stands squarely covered in favour of the assessee.

3. On the other hand, ld. DR strongly relied upon the order  of the Assessing Officer.

4. The facts in brief are that the assessee is an autonomous society established under the aegis of Department of Information Technology, Ministry of Communications and Information Technology, Government of India, as a non-profit organization. The main objects of the assessee’s society was to run nation-wide academic and research network to undertake and promote R&D in the area of communication, develop policy options in the country for development of network infrastructure and to act as research center for technological and managerial resources in the area of computer network. Looking to the activities carried out by it, which fell within the ambit of ‘charitable purposes’ under section 2(15), it was granted registration u/s.12A vide order dated 26.03.2004. Ld. Assessing Officer observed that, assessee is neither in the field of education nor in the field of medical relief or relief of poor albeit it falls within the scope of “general public utility” as per Section 2(15) of the Act. The ld. Assessing Officer held that looking to its receipts, its activities were commercial in nature. He observed that in view of the amendment to Section 2(15) assessee cannot be held to be carrying out charitable activities as it was carrying on activities in the nature of trade commerce or business in terms of first proviso to Section 2(15) and after detailed discussion, he held that entire surplus as per income and expenditure claimed, computed the net taxable income at Rs. 8,93,98,650/-.

5. Ld. CIT (A) following the appellate order for the Assessment Year 2011-12 held that the assessee is not involved in any trade, commerce or business activities and as such the provision to Section 2(15) is not attracted, and therefore, there is no justification for denying the exemption u/s.11.

6. We find that this Tribunal in assessee’s own case for the Assessment Years 2009-10 and 2010-11 in ITA No. 2873 & 2874/Del/2014 vide order dated 27.12.2017 has discussed this issue in detail and allowed the exemption u/s. 11. The relevant observations and the findings are as under:

“11. We have carefully considered the rival contentions and perused the orders of the lower authorities. Undoubtedly, the assessee trust has been created by the Govt. of India with an object for development of computer communication in the country and it is a non-profit society. Subsequently, various certificates issued by various authorities also show that the assessee does not exist for the profit. The subscribers to the society were eminent persons such as Prof. YK Alagh and Honble former President of India, Dr. APJ Abdul Kalam when, his Excellency was scientific advisor to Govt. of India. Further, the governing council also has the Honble Minister of Communication and Information Technology as its Chairman and several high-ranking government officials along with the eminent technocrats of the country.

12. The main object of which the trust is formed are as under:-

“3.1 The society has been established as a non-profit society only for the objects as under:-

3.1.1 To advance the cause of computer communication in the country in all its aspects and dimensions with a view to provide rapid nationwide development of the sector and technological and economic growth of the county.

3.1.2 To develop, design, setup and operate nationwide state of the art computer communication infrastructure with international connectivity directed towards research and development, advancement of high quality education, create and host content, express creative and academic potential via intranet and intranet peer to peer connectivity among educational and research institutions in the country and the world and make available the communication infrastructure to users in academic, research and development institutions, Govt organizations in line with national priorities.

3.1.3 To undertake and promote education, research, development, training and standardization in the area of computer networking and information technology as well as allied areas of communication and to provide a forum for such activities.

3.1.4. To promote and inculcate awareness of the strategic importance of computer communication and information technology for the benefit of academic, research and development institutions, Government organizations and public at large.

3.1.5 To develop policy options for consideration of the Government for development of information infrastructure and computer networking in the country and implement/participate in programme thereof.

3.1.6 To make available its experience and know how for the effective utilization of the technology and provide services to potential users and developers.

3 17 To act as a research centre for technological and managerial resources and a so act as a bridge for cooperation among other countries in the area of computer communication information technology, computer, networking and other related emerging technologies.

3.2 With a view to attain the aforesaid objectives set out in the Para 3.1 above, the Society may carry on the following activities. 3.2.1 Undertake research, design, development, consultancy to build competence in the areas of computer networking, information technology, digital library, voice-on data, satellite communication and other related emerging fields in terms of present futuristic and perspective technologies.

3.2.2 Undertake test bed programmes and evaluate emerging trends in the area of computer, networking, information technology and other related emerging fields in India and abroad.

3.2.3 Work in the areas of advanced computer, networking taking into consideration of both technological forecasts and national needs.

3.2.3 Work in the areas of advanced computer, networking taking into consideration of both technological forecasts and national needs.

3.2.4 Conduct general and customized educational and training activities for users and others through classroom and distance learning modes.

3.2.5 Conduct National and international conferences including teleconferences, seminars, symposia and workshops to inclulcate awareness of the strategic importance of computer communication and information technology in educational and research.

3.2.6 Carry out guide research leading to advanced degrees from leading national and international educational institutions and universities.

3.2.7 Institute stipends scholarships, associate ship and fellowship to students and individuals.

3.2.8 Carryout demonstration filed trials pilot production of its products and services developed in house or in collaboration with other educational and research institutions.

3.2.9 Develop or acquire and assimilate inputs from indigenous sources of computer networking and information technology and transfer relevant knowledge technology to users.

3.2.10 Promote and ancillary research, design and development (R&D) Units in the country for development of systems, sub­systems, hardware and software to build an appropriate technological and application base in the country.

3.2.1 Award research surveys studies technology development and consultancy projects to other institutions, organizations and companies to achieve objectives of the society and disburse funds and grants for the purpose.

3.2.12 Invite experts in the filed each from within and outside the country for advice consultancy and participation in specific arrangements.

3.2.13 Participate in and /or promote professional bodies and institutions in the country and abroad.

3.2.14 Undertake publications in the form of papers, books, monographs and journals on various media including electronic media.

3.2.15 Disseminate its findings, development and inventions etc. through exhibitions and other promotional activities in the area of computer networking and Information Technology.

3.2.16 Apply for registration of patents arid copyrights to protect intellectual property rights for the products and services developed by the Society by itself or in collaboration with others. 3.2.17 To purchase or take on lease or hire or develop or improve or construct or after or execute of maintain or otherwise acquire temporarily or permanently any movable or immovable property including land and building machine and equipment works etc and to mortage or create any charge on the assets so acquired, necessary or convenient for the activities in furtherance of the objectives of the society.

3.2.18 Acquire establish maintain, disseminate and manage facilities of information to achieve the objective of the society. 3.2.19 Set up library of books, periodicals, audiovisual aids, database of industry and end users etc on national and international basis to enable to society to meet its objective and effectively carry out its activities.

3.2.20 Provide services and charge for the same from the users and exploit the know how and products developed by the society.

3.2.21 Decide subscription, membership tariff and other charges for the services provided by the society.

3.2.22 Receive grants, loans, subscriptions, hire/lease charges, donations or any other financial contribution in cash and securities and of any property either movable or -movable from within the country and/on abroad including international agencies, cacentral and multilateral agencies subject to prevailing laws of the Government of India and to invest and deal with funds and moneys of the Society and to vary, after or transfer such investments from time to time.

3:2.23 To accept remuneration for, consultancy, design, development, technology transfer, providing services or any related activity in the Country as well as abroad.

3.2.24 To establish and maintain provident and’ other funds for the benefit of the employees or for the purpose of the Society and open and operate bank accounts.

3.2.25 Any surplus funds not needed or capable of being used for immediate application towards the objects for the society will be invested by the society only in accordance with the provisions contained from time to time in Income Tax Act 1961 applicable to such organizations which presently are as under:-

i) Investment in savings Certificates as defined in clause (c) of section 2 of Govt Savings Certificate Act, 1959 (46 to 1959) and any other securities and certificates issued by the Central Govt under the small savings schemes of that govt.

ii. Deposit in any account with the post office savings bank.

iii. deposit in any account with a scheduled bank or a cooperative society engaged in carrying on the business of banking (including a cooperative land mortgage bank or a cooperative land development bank.

Explanation: In this clause scheduled bank means the state bank of India constitutes under the State Bank of India Act 1955 (23 of 1959) a subsidiary bank as defined in the state bank of India (Subsidiary banks) Act 1959 (38 of 1959), a corresponding new bank constituted under section 3 of the banking companies (Acquisition and transfer of Undertakings) Act, 1970 (5 of 1970) or under section 3 of the Banking Companies ( Acquisitions and Transfer of Undertakings) Act 1960 (40 of 1980) or any other bank being a bank included in the second schedule to Reserve Bank of India Act, 1934 (2 of 1934)

iv) Investment in units of the unit trust of India established under the Unit Trust of India Act, 1963) (52 of 1963)

v) Investment in any security for money created and issued by the Central Government or a State Government;

vi) Investment in debentures issued by. or on behalf of, any company corporation both the principal whereof and the interest whereon are fully and unconditionally guaranteed by the Central Government or by a Stale Government;

viiInvestment or deposit in any public Sector company;

viii) Deposits with or investment in any bonds issued by a financial corporation which is engaged in providing long-term finance for industrial development in providing long-term finance for construction of purchase of houses in residential purposes ‘ arid which is approved by the Central Government for the purpose of clause (viii) of sub-section (1) of section 36 of IT Act.

(ix) Deposits with or investment in any bonds issued by a public company formed and registered in India with the main object of carrying on the business of providing long term finance for constitution of purchase of house in India for residential purposes and which is approved by the Central Govt for the purpose of clause (vii) of sub-section (1) of Section 36 of IT Act.

(x) Investment in immovable property i.e. in any building or other immovable property/ asset related to the approved activities of the SIRO.

xi) Deposits with the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 (18 of 1964).”

13. The above objects of the assessee must be tested on the actual performance of the trust to understand the nature of activities carried on by it. Assessee has submitted the projects undertaken by it which are as under :-

“A. ERNET network is a judicious mix of terrestrial and satellite based wide area network. £T India provides services through its 15 Points of Presence (PoPs) located across the country. All PoPs are equipped to provide access to Intranet, Internet and Digital Library through trial leased circuits and radio links to the user institutions. The PoP at STPI Bengaluru provides Intranet and Internet access through Satellite.

ERNET network supports IPv4 and IPv6 Internet Protocol. IPv6, routing protocol OSPFv3, end to end Ethernet services, QoS (DiffServ), video conferencing, authentication and authorization rave also been implemented on ERNET Network. ERNET provides, services, namely, Network Access Services, Network Applications Services, Hosting Services, Operations Support Services und Domain Registration Services under srnet.in, ac.in, edu.in & res.in domains.

The network infrastructure is being upgraded in terms of both technology and capacity. At its Delhi PoP, ERNET India has installed’ mail, security appliances with antivirus and anti-spam software. The aggregate internet bandwidth was upgraded to more than 630 Mbps. More than 1100 user institutions covering diverse.

application domains are now connected to ERNET network. A total of 6500 .in domains under edu.in, ac.in and res.in have been registered, it has also been hosting websites for the academic and research community.

B. Research Activities and ICT Projects .

1. Trans Eurasia Information Network – TEIN3

The Trans-Eurasia Information Network (TEIN) initiative was launched at the Asia. Europe Meeting (ASEM) Summit in Seoul in 2000 to improve Euro-Asian research networking.

TEIN3 that started in 2009 has expanded its footprint to South Asia bringing the total number of partners to 18. Asian countries – Bangladesh, Bhutan, Cambodia, India, Nepal, Pakistan and Sri Lanka – are also connected/ being connected. In India, TEIN3 Point of Presence (PoP) has been co-located at ERNET PoP at Mumbai and is acting as the hub for connecting research networks in South Asia except Pakistan.

From Mumbai, two high speed links of 2.5 Gbps each have been commissioned to Europe and Singapore providing direct connectivity to GEANT (the pan- European data network) and TEIN3 PoP at Singapore. India is now acting as the hub for connectivity between Europe and Asia-Pacific countries. The network of ERNET India is connected to TEIN3 PoP in Mumbai through National Knowledge Network (NKN). The connectivity to TEIN3 is being used by India for connecting to researchand education networks worldwide for collaborative research.

2. EU-IndiaGrid2 – Sustainable e-Infrastructures across Europe and India EU-India Grid 2 is the second phase of the EU-IndiaGrid project which was initiated in January, 2010. There are six European partners and 10 Indian partners in this new project. The role of ERNET India in the new project is to provide network infrastructure support using-TEIN3.

3. My FIRE – Multi-disciplinary Networking of Research Communities in FIRE MyFIRE (my-fire.eu) is an European Commission funded project launched in June, 2010 through the EU FP7 programme, under the ICT thematic priority Future Internet Research and Experimentation (FIRE). The project aims to ensure a balance between the requirements for researcher’s collaboration and the stakeholder’s expectations. MyFIRE project consortium includes, four. European partners (Inno TSD SA France, ETSI France, University of Edinburgh UK and Fraunhofer Germany), and four international partners from BRIC (IPT Brazil, ITMO Russia, ERNET India and BII China) countries.

4. Mobile IPv6 Test bed – Mobility between heterogeneous access networks Mobile IPv6 test bed is a joint project between ERNET India and Indian Institute of Science (IISc) -Bengaluru which is funded by the Department. Under the project, a WLAN access network testbed has been setup at ERNET Bengaluru with Mobile IPv6Home Agent (HA), Mobile Node (MN) anti Correspondent Node (CN) services configured using the UMIP MIPv6 stack. The seamless network layer mobility test between different WLAN subnets is completed.

5. 6L0WPAN – Management and Monitoring of Wireless Sensor Networks 6L0WPAN is a joint project between, ERNET India and IISc Bengaluru, funded by the Department. IEEE 802.15.4 Low-rate Wireless Personal Area Network (LoWPAN) standard supports wireless connectivity in low-cost devices that operate with limited computing resources and battery power. The objective of this project is to develop a prototype for monitoring and managing a 6L0WPAN based Wireless Sensor Network (WSN). An experimental 6L0WPAN testbed is setup at ERNET using TelosB motes with temperature, light and humidity sensors for development and testing.

6. Virtual Scalable Educational Services for Schools. The Department has approved in Nov., 2011 the implementation of the R&D project, “Virtual Scalable Educational Services for Schools – a pilot project”. In the project, select Kendriya Vidyalayas from Delhi, Bengaluru and Chennai region will participate for which ERNET has signed an MoU with KVS.

7. Setting up Repository of Digitized Data under the Digital Library Initiative

The Department has funded a project titled “Setting up Repository of Digitized Data under the Digital Library Initiative”. As part of this project, ERNET India is to set up a repository for hosting the digitized data and provide Internet bandwidth to three centres namely IISc (Indian Institute of Science) Bengaluru, International Institute of Information Technology (HIT) Hyderabad and CD AC Noida. The digital repository has been set-up at ERNET PoP in Pune and all the available data from IISc Bengaluru has been downloaded and hosted in the new repcaite.

8. e-Linkage of Jawahar Navodaya Vidyalayas & Kendriya Vidyalayas ERNET India has provided Internet connectivity to 31 remote Vidyalayas under Kendriya Vidyalaya Sangathan and had also provided connectivity to around 300 Jawahar Navodaya Vidyalayas under the Navodaya Vidyalaya Samiti.

9. Community Information Centre’s – Vidya Vahini (CIC-Ws) CIC-VVs are operational in the Government school’s located in Andaman & Nicobar Islands and Lakshadweep Islands with the dual purpose of imparting ICT based education and training in the schools as well as for providing citizen centric services to the people of the region. The VS AT link enables reliable Intranet and Internet connectivity including distance education in the region.

10. ICT Vocational Centres for Children with Disabilities-Phase II After implementation of the pilot project by setting up of ICT centers in 21 schools in Tamil Nadu and NCR Delhi, ERNET India has implemented the second phase of the project. In this phase, select 100 schools spread throughout the country have been made disable friendly through setting up of ICT centers for students who are physically challenged, and those with hearing or vision impairment.

11. Moll with State Government of Rajasthan for establishing ICT Infrastructure at Schools in rural areas This Memorandum of Understanding (MoU) is made between ERNET India and State Government of Rajasthan for establishing Information & Communication Technologies (ICT) Infrastructure in the Schools located in rural areas of Rajasthan.

ICT Centres have been setup under the project in 250 Schools located in rural areas of Ajmer and Jaipur districts. The establishment of connectivity to the ICT centers is in progress.

12. c-Linkage of Krishi Vigyan Kendras under ICAR

Under an MoU, ERNET India has established a dedicated VSAT Hub and deployed Information Technology Infrastructure at 200 Krishi Vigyan Kendras (KVKs)/ Zonal Project Directorates (ZPDs) under ICAR to develop them into Information Hubs. ELinkage of the remote 200 KVKs/ZPDs has been established with the VSAT Hub at ICAR Headquarters in New Delhi. The scientists, and officials at each of the KVK/ZPD can access Internet, e-mailing and web services on 24X7 basis. The e- Linkage network is enabled for Video Multicast and IP telephony which allows each KVK/ZPD to watch Video sessions broadcast from the HUB and to have voice interaction among each other and the centre. The e-linkage facility had been operationalized. The facility is being used for scheduling talks, lectures and seminars delivered from the Hub by domain experts on weekly basis for officials of the KVKs/ZPDs. ERNET India is supervising the operation management and support of the Hub and also liaisoning with Department of Space (DoS), Department of Telecommunications (DoT) and Network Operations Control Centre (NOCC).

13. Campus Network at National University of Juridical Sciences, Kolkata-

Under an MoU with the National University of Juridical Sciences (NUJS), Kolkatta, ERNET India has designed & setup a fibre optic based gigabit Campus Network connecting academic, administration and finance wings. The work has been completed and is serving-814 user nodes. All blocks, hostels and guest house have been connected through fibre optic cable supporting 10 Gigabit Ethernet Technology.

14. Agreement w ith ICAR for setting up a Centralized Data Center

A contract agreement had been concluded with Indian Council of Agricultural Research – National Agricultural Innovation Project (ICAR- NAIP) for setting up a centralized Data Centre for 274 ICAR institutes connected on ERNET through World Bank funding.

15. Video Conference Facility at various Institutes 203

ERNET India has taken up projects for setting up of video conference facility for various Institutions including provisioning of bandwidth, maintenance & operational support. ERNET India is implementing/implemented the following Video Conference projects:

  • VC facility for Govt, of UP at State Capital, 18 Divisions & 1 District of UP with a total of 21 sites.
  • High Definition VC facility at 9 locations of Indian Meteorological Department.
  • Deployment of VC facility at 11 locations of the Mahatma Phule Krishi Vidyapeedh, Rahuri.
  • Tele-presence based High Definition Video Conference facility at 8 locations of Ministry . of Earth Sciences (MoES).
  • Video Conferencing facilities at 49 locations of Income Tax, 7 locations of DGS&D and 11 locations of the National Institute of Immunology (Nil) under the Department of Biotechnology(DBT).

C. Conferences & Workshops

A PAN (the Asia Pacific Advanced Network) refers to both the organization representing its members, and to the backbone network that connects the research and education networks of its member countries/economies to each other and to other research networks around the world. APAN coordinates developments and interactions among its members, and with peer international organizations, in both network technology and applications, and is a key driver in promoting and faciiitating network-enabled research collaboration; knowledge discovery telehealth; and natural disaster mitigation.

ERNET India is a primary member of APAN (the Asia Pacific Advanced Network) representing the education and research network of the country. During 22nd-26th August 2011, ERNET India organized the 32nd Asia Pacific Advanced Network Meeting at New Delhi. The workshop was attended by around 330 delegates from India and abroad.”

14. Over and above this, the assessee is also carrying on several projects for which grants have been received such as for VCSC for disabled children, dynamic web content for CERT, traffic analysis for CERT, project for digital library, project VI choice India-Europe Cooperation to IPV-vi, UP Govt. Video Conferencing Project, Video Conferencing for Income Tax Department. It is also providing services for the subscribers for network connectivity, web hosting and content development and domain registration. For these services, it charges income from subscribers, which are on actual basis. As per the list of subscribers placed at page No. 125 to 191, it is apparent that most of the subscribers are schools, colleges and educational institutes and universities. For professional fees and technical services, Jawahar Novodaya Vidalaya and Several universities pay it.

15. Now in this background it is necessary to examine whether the assessee has an object to earn the profit or not. According to the memorandum of association, it is non-profit society.

Further, the additional secretary to the Ministry of Communication and Information Technology has also certified that it is functioning under the ministry as an autonomous body and it is working on no profit and no loss basis. Further, it has a mandate to interconnect only educational and research institutions in the country so as to provide services like distance education and digital library. Further, the sole object of setting up of the infrastructure is to improve the quality of education in the country. According to the object of the society, it is setting up ERNET Network. Further, the subscription charged by the assessee from the various subscribers as well as the professional charges is at actual. Merely, on generation of surplus it cannot be said that the assessee is functioning with the motive of earning profit.

Further, as per the clause No. 33 of the MOU that in the case of dissolution of the society all the properties shall revert to Department of Information Technology, Govt. of India. All these facts show that assessee trust is not functioning with a dominant and prime objective of profit making. Therefore, it is evident that the assessee is formed not for the purposes of the profit.

16. As amended w.e.f. 01.04.2009 the provisions of section 2(15) has undergone change by inserting the proviso therein. The impact of the proviso is that the trust and societies who are engaged in carrying on “charitable purposes” falling into the category of „advancement of any other object of general public utilitythey would not be considered as carrying on charitable purposes if they carry on any activity in the nature of trade, commerce and business for a cess, fee or any other consideration. If the above conditions are fulfilled then use of the income is immaterial. The main reason for the insertion of the above proviso is to deny the exemption to the institutions which are driven primarily by a desire or motive to earn profit and do charity through the “advancement an object of general public utility” then such institutes shall not be regarded as institutions established for charitable purposes. Hon’bleDelhi High Court in (371 ITR 333) in India Trade Promotion Vs. DGIT has held that the correct interpretation of proviso to section 2(15) would be that it carves out an exception from the charitable purposes of “advancement of any other object of general public utility” and that exception is limited to activities in the nature of trade, commerce or business or any activity of rendering any service in relation to trade, commerce or business for a cess or fee or any other consideration. Therefore, it is important to see the dominant and the prime objective of the institution. If the dominant and prime objective is profit making and its activities are trade, commerce or business then, such institution would not be entitled to claim that it is set up for charitable purposes as per section 2(15) of the Act. In this background, it is required to be examined that whether the assessee trust has dominant and prime objective of making profit and carry on trade, commerce, and business.

17. The thrust has been emphasized by revenue on the agreement entered into by the assessee with the service receiver. The copy of the sample agreement is available at page No. 96 to 119 of the paper book. The ld Assessing Officer has stated that such agreements are drawn on a commercial line and have clauses such as of liquidated damages, defect liability clause, performance security requirement, terms and manner of payment fixed with the milestones etc. gives a semblance that assessee is carrying on business. Looking to the various service agreement entered into by the assessee with the service recipient, which is heavily relied upon by the revenue that assessee is carrying on a business. The ld Assessing Officer has cited various clauses of the agreements. we are of the view that the services provided by the assessee are for creating a public infrastructure, which should be sustainable, and effective as the public money is involved in that. This is apparent from the fact that many of the projects of the assessee are based on grants and the  payer of the services are various schools, educational institutes and universities and other govt organizations such as Income Tax Department and CBI. Therefore, it is also not correct on part of the revenue to look at various clauses of the agreement and to pick and choose the relevant clauses, which gives a colour to that agreement of a business agreement. It must not be forgotten that assessee may not be engaged in the business, trade, or commerce but the service receiver i.e. the other party to the contract is necessarily engaged in obtaining those services, which should be effective, efficient, reliable and sustainable. Hence, such clauses are required. Therefore, it cannot be said that those clauses suggests that assessee is carrying on business.

18. Further, merely because the profits have been earned in one or two years it cannot lead to the fact that assessee is existing for making profit. It is required to be ascertained that whether profit making is not the driving force or dominant objective of the assessee. The assessee has given enough evidences to show that profit earning is not the driving force or objective of the assessee. As the principal emerges from the decision of the Hon’ble Supreme Court in CIT Vs. Surat Art Silk Manufacturing Association 121 ITR 1 activity for the profit connotes that the predominant object of the activity must be the making of profit. It is not enough that as a matter of fact the activities results into profit. Where an activity is not pervaded by the profit motive but is carried on primarily for serving the charitable purposes, it would not be correct to describe it as an activity for profit merely because profit accrues. Even the proposition was rejected that if the purposes truly charitable, the attainment of the purpose must rigorously exclude any activity for profit. Further, conversely where profit making is the predominant object of the activity, the purpose though it may aim at advancing an object of general public utility, would cease to be a charitable purpose u/s 2(15) of the Act. It is demonstrated by assessee by overwhelming evidences that its activities do not exist for profit. Hence, the argument of the revenue that assessee is having considerable surplus deserves to be rejected.

19. Furthermore, the ld DR has heavily relied on the decision of Institute of Chartered Accountant of India Vs. Director General of Income Tax (13 com 175) where it is held that whether an activity would be considered as business if it is undertaken with a profit making motive but in some cases this may not be determinative, in such cases there should be evidence and material to show that activity has continued on sound and recognized business principles which are pursued with reasonable continuity. In that decision, Hon’ble High Court has shown the clear distinction between coaching classes conducted by the private parties and institute of Chartered Accountants of India. We are also of the view that service provided by the assessee is to be looked from different perspective for the reason that its main objective are incidental to education and that too without any profit motive.

20. Ld AR has relied up on the decision of Hon Delhi high court in case of GS1 V DGIT (exemption) 360 ITR 138 (Delhi) (2014) wherein, though the issue pertained to AY 2008- 09, the Hon high court also discussed the provisions w.e.f. 1-4-2009. Hon High court also considered the decision rendered in 347 ITR 99, which is relied up on by revenue. The Hon high court held that

Statutory provisions

12. In the present case, the period in question is both prior and subsequent to the amendments made applicable, vide Finance Act, 2008, with effect from April 1, 2009. Before deciding the contentions of the parties we would like to first reproduce section 2(15) of the Act which defines the term “charitable purpose” before and after its amendment by the Finance Act, 2008. Section 2(15), before amendment by the Finance Act, 2008, was as under :

“2. (15) ‘charitable purpose’ includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility.” By the Finance Act, 2008, with effect from April 1, 2009, the following proviso was added :

“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.”

A second proviso inserted to section 2(15) by Finance Act, 2010, with ret rospective effect from April 1, 2009, reads as under :

“Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is ten lacs or less in the previous year.”

Rupees ten lakhs mentioned in the second proviso stands enhanced to rupees twenty-five lakhs by the Finance Act, 2011, with effect from April 1, 2012.

The main section 2(15) of the Act has also undergone amendments, now reads :

“2. In this Act, unless the context otherwise requires,. . .

(15) ‘charitable purpose’ includes relief of the poor, education, medical relief, preservation of environment (including watersheds, forests and wild life) 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 :

Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is twenty-five lakh rupees or less in the previous year ;”

Period prior to the amendment, vide Finance Act, 2008, with effect from April 1, 2009

13. With regard to the period prior to April 1, 2009, the controversy should not have been raised by the respondent with respect to the first reason (reason a) in view of the authoritative pronouncement of the Supreme Court in Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 (SC). In the said decision, it was held that the primary or dominant purpose of the trust or institution has to be examined to determine whether the said institution/trust was involved in carrying on any activity for profit. If the primary/dominant purpose or object of the trust or institution was to carry out object of “general public utility” and not “any activity for profit” then the same would satisfy the requirements of section 2(15) of the Act. Money earned from business held under trust or otherwise, to feed the charity would not disentitle or negate the claim of engagement in charitable purpose defined under section 2(15) of the Act. The following quote from the said judgment is relevant (page 25) :

“The test which has, therefore, now to be applied is whether the predominant object of the activity involved in carrying out the object of general public utility is to subserve the charitable purpose or to earn profit. Where profit-making is the predominant object of the activity, the purpose, though an object of general public utility, would cease to be a charitable purpose. But here 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. The exclusionary clause does not require that the activity must be carried on in such a manner that it does not result in any profit. It would indeed be difficult for persons in charge of a trust or institution to so carry on the activity that the expenditure balances the income and there is no resulting profit. That would not only be difficult of practical realization but would also reflect unsound principle of management.”

Period post the amendment, vide Finance Act, 2008, with effect from April 1, 2009

14. A bare perusal of the main provision indicates that there are four main factors that need to be taken into consideration before classifying the activity of the assessee as “charitable” under the residuary category, i.e., “advancement of any other object of general public utility” under section 2(15) of the Act. The four factors are (i) activity should be for advancement of general public utility, (ii) activity should not involve any activity in the nature of trade, commerce and business, (iii) activity should not involve rendering any service in relation to any trade, commerce or business, (iv) activities in clauses (ii) and (iii) should not be for fee, cess or other consideration and if for fee, cess or consideration the aggregate value of the receipts from the activities under (ii) and (iii) should not exceed the amount specified in the second proviso. The earlier test of business feeding or application of income earned towards charity because of the statutory amendment is no longer relevant and apposite.

15. In Institute of Chartered Accountants of India v. Director-General of Income-tax (Exemptions) [2012] 347 ITR 99 (Delhi), “charitable purpose” under the residuary clause of section 2(15) was discussed and explained in the following words (page 108) :

“The proviso applies only if an institution is engaged in advancement of any other object of general public utility and postulates that such an institute 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. The second part, ‘any activity of rendering any service in relation to any trade, commerce or business’ obviously intends to expand the scope of the proviso to include services, which are rendered in relation to any trade, commerce or business. The proviso further stipulates that the activity must be for a cess or fee or any other con sideration. The last part states that the proviso will apply even if the cess or fee or any other consideration is applied for a charitable activity/purpose. The proviso has to be given full effect to. Thus, even if cess, fee or consideration is used or utilized for charitable purposes, the proviso and the bar will apply. An institution will not be regarded as established for charitable purpose/activity under the last limb, if cess, fee or consideration is received for carrying on any activity in nature of trade, commerce or business or for any activity of rendering of any service in relation to any trade, commerce or business, even if the consideration or the money received is used in furtherance of the charitable purposes/activities. In view of the first proviso, the decisions that the application of money/profit is relevant for determining whether or not a person is carrying on charitable activity, are no longer relevant and apposite. Even if the profits earned are used for charitable purposes, but fee, cess or consideration is charged by a person for carrying on any activity in the nature of trade, commerce or business or any activity of rendering of any service in addition to any trade, commerce or business, it would be covered under the pro viso and the bar/prohibition will apply.” 

Scope of “trade, commerce or business”

16. The key words, namely ; trade, commerce and business were enumerate and elucidate in Institute of Chartered Accountants of India v. Director-General of Income-tax (Exemptions) [2012] 347 ITR 99 (Delhi) as under (page 113) :

“Trade, as per the Webster’s New Twentieth Century Dictionary (2nd edition), means, amongst others, ‘a means of earning one’s living, occupation or work’. In Black’s Law Dictionary, ‘trade’ means a business which a person has learnt or he carries on for procuring subsistence or profit ; occupation or employment, etc.

The meaning of ‘commerce’ as given by the Concise Oxford Dictionary is ‘exchange of merchandise, specially on large scale’. In ordinary parlance, trade, and commerce carry with them the idea of purchase and sale with a view to make profit. If a person buys goods with a view to sell them for profit, it is an ordinary case of trade. If the transactions are on a large scale it is called commerce. Nobody can define the volume, which would convert a trade into commerce. For the purpose of the first proviso to section 2(15), trade is sufficient, therefore, this aspect is not required to be examined in detail.

The word ‘business’ is the broadest term and is encompasses trade, commerce and other activities. Section 2(13) of the Income-tax Act defines the term ‘business’ as under :

‘2. Definitions.. . . (13) “business”‘ includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture.’

The word ‘business’ is a word of large and indefinite import. Section 2(13) defines business to include any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. The intention of the Legislature is to make the definition extensive as the term ‘inclusive’ has been used. The Legislature has deliberately departed from giving a definite import to the term ‘business’ but made reference to several other general terms like ‘trade’, ‘commerce’, ‘manufacture’ and ‘adventure or concern in the nature of trade, commerce and manufacture’.

In Black’s Law Dictionary, sixth edition, the word ‘business’ has been defined as under :

‘Employment, occupation, profession or commercial activity engaged in for gain or livelihood. Activity or enterprise for gain, benefit, advantage or livelihood. Union League Club v. Johnson 18 Cal 2d 275. Enterprise in which person engaged shows willingness to invest time and capital on future outcome. Doggett v. Burnet 62 App DC 103 65 F. 2D 191. That which habitually busies or occupies or engages the time, attention, labour and effort of persons as a principal serious concern or interest or for livelihood or profit.’

According to Sampath Iyengar’s Law of Income Tax (9th edition), a business activity has four essential characteristics. Firstly, a business must be a continuous and systematic exercise of activity. Business is defined as an active occupation continuously carried on. Business vocation connotes some real, substantive and systematic course of activity or conduct with a set purpose. The second essential charac teristic is profit motive or capable of producing profit. To regard an activity as business, there must be a course of dealings continued, or contemplated to be continued, normally with an object of making profit and not for sport or pleasure (Bharat Development P. Ltd. v. CIT [1982] 133 ITR 470 (Delhi)). The third essential characteristic is that a business transaction must be between two persons. Business is not a unilateral act. It is brought about by a transaction between two or more persons. and, lastly, the business activity usually involves a twin activity. There is usually an element of reciprocity involved in a business transaction.’

17. In the said case, reliance and reference was made to State of Punjab v. Bajaj Electricals Ltd. [1968] 70 ITR 730 (SC) ; [1968] 2 SCR 536, Khoday Distilleries Ltd. v. State of Karnataka [1995] 1 SCC 574, Bharat Development P. Ltd. v. CIT [1982] 133 ITR 470 (Delhi), Barendra Prasad Ray v. ITO [1981] 129 ITR 295 (SC), State of Andhra Pradesh v. H. Abdul Bakshi and Bros. 15 STC 664 (SC), State of Gujarat v. Raipur Manufacturing Co. Ltd. 19 STC 1 (SC), Director of Supplies and Disposal v. Member, Board of Revenue 20 STC 398 (SC) and Mrs. Sarojini Rajah v. CIT [1969] 71 ITR 504 (Mad) to explain the terms “trade, commerce or business”.

18. Referring to the concept and principle of “economic activity” that has gained some acceptability in European Union and England it was explained that the said principle is applicable to sales tax, value added tax, excise duty, etc., because these are not taxes on income but the taxable event occurs because of the “economic activity” involved. Even if a person/ organization is carrying on trading/business on “no loss no profit” principle, it may be liable to pay taxes or comply with the statute when the charge, or incident of tax, is on the “economic activity”. The words “trade, commerce and business” are etymological chameleon and suit their meanings to the context in which they are found. Five tests propounded in Customs and Excise Commissioners v. Lord Fisher [1981] STC 238 and the decision in CST v. Sai Publication Fund [2002] 258 ITR 70 (SC) ; [2002] 4 SCC 57 was quoted.

19. The final and determining factors, it was observed was consequential profit motive or purpose behind the activity and when an activity is trade, commerce or business was elucidated in Institute of Chartered Accountants of India v. Director-General of Income-tax (Exemptions) [2012] 347 ITR 99 (Delhi) in the following words (page 123) :

“Section 2(15) defines the term ‘charitable purpose’. Therefore, while construing the term ‘business’ for the said section, the object and purpose of the section has to be kept in mind. We do not think that a very broad and extended definition of the term ‘business’ is intended for the purpose of interpreting and applying the first proviso to section 2(15) of the Act to include any transaction for a fee or money. An activity would be considered ‘business’ if it is undertaken with a profit motive, but in some cases this may not be determinative. Normally, the profit motive test should be satisfied but in a given case activity may be regarded as business even when profit motive cannot be established/proved. In such cases, there should be evidence and material to show that the activity has continued on sound and recognized business principles, and pursued with reasonable continuity. There should be facts and other circumstances which justify and show that the activity undertaken is infect in the nature of business. The test as prescribe in Raipur Manufacturing Co. (supra) and Sai Publication Fund (supra) can be applied. The six indicia stipulated in Lord Fisher (supra) are also relevant. Each case, therefore, has to be examined on its own facts.”

20. Recently in another decision in WP(C) No. 1755 of 2012 titled Bureau of Indian Standards v. Director-General of Income-tax (Exemptions) [2013] 358 ITR 78 (Delhi) dated September 27, 2012, it was held that Bureau of Indian Standards (BIS) was carrying on charitable activities as described within the ambit of section 2(15) and was entitled to registration/notification under section 10(23C)(iv). We, however, note that there is one distinction between the present petitioner and BIS. BIS is a statutory authority created by the legislation and, therefore, their case and claim stands on a better footing but this does not imply that only statutory bodies can be treated as established for charitable purpose under section 2(15) of the Act. Such contention has not been raised and cannot be sustained/accepted.

Circular No. 11 of 2008 by the Central Board of Direct Taxes 21. It may be relevant to reproduce extract from Circular No. 11 of 2008, dated December 19, 2008, issued by the Central Board of Direct Taxes explaining the amendments to section 2(15) of the Act. The relevant portion of the circular reads as under (see [2009] 308 ITR (St.) 5 ) :

“Section 2(15) of the Income-tax Act, 1961 (‘Act’) defines ‘charitable purpose’ to include the following :

(i) relief of the poor

(ii) education

(iii) medical relief, and(iv) the advancement of any other object of general public utility.

2. An entity with a charitable object of the above nature was eligible for exemption from tax under section 11 or alternatively under section 10(23C) of the Act. However, it was seen that a number of entities who were engaged in commercial activities were also claiming exemption on the ground that such activities were for the advance ment of objects of general public utility in terms of the fourth limb of the definition of ‘charitable purpose’. Therefore, section 2(15) was amended vide Finance Act, 2008, by adding a proviso . . .

3. The newly inserted proviso to section 2(15) will apply only to entities whose purpose is ‘advancement of any other object of general public utility’, i.e., the fourth limb of the definition of ‘charitable pur pose’ contained in section 2(15). Hence, such entities will not be eli gible for exemption under section 11 or under section 10(23C) of the Act if they carry on commercial activities. Whether such an entity is carrying on an activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of the activity . . .

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 business. Each case would, therefore, be decided on its own facts and no generalization is pos sible. Assessees, who claim that their object is ‘charitable purpose’ within the meaning of section 2(15), would be well advised to eschew any activity which is in the nature of trade, commerce or business or the rendering of any service in relation to any trade, commerce or business.” (emphasis supplied)

22. It is, evident from Circular No. 11 of 2008 that the new proviso of section 2(15) of the Act is applicable to the assessees who are engaged in commercial activities, i. e., carrying on business, trade or commerce, in the garb of “public utility” to avoid tax liability as it was noticed that the object of “general public utility” was sometimes only a mask or device to hide the true purpose which was “trade, commerce or business.”

Discussion ; Activities of the petitioner and difference between business and charity

23. In the present case, “the business” is not held in trust and neither is “the business” feeding the charity. The very “act or activity of charity” as claimed by the petitioner is regarded by the Revenue as nothing but business, trade or commerce. Money received, of course is used and utilized for the charitable activities. Four reasons are elucidated and propounded in the impugned order to state that the petitioner is engaged in business, trade or commerce and aforesaid encapsulated in the impugned order. The petitioner has acquired intellectual property rights, receives fee from third parties, which is nothing but payment of royalty, there is a huge surplus of receipts over expenditure (refer table reproduced in paragraph 7 above) and payment is made by the petitioner to GS1 Global Services, Belgium.

24. Can it be said that the petitioner is engaged in the activities which constitute business, commerce or trade ? As observed above, the legal terms “trade, commerce, or business” in section 2(15), means activity undertaken with a view to make or earn profit. Profit motive is determinative and a critical factor to discern whether an activity is business, trade or commerce.

25. Business activity has an important pervading element of self-interest, though fair dealing should and can be present, whilst charity or charitable activity is anti-thesis of activity undertaken with profit motive or activity undertaken on sound or recognized business principles. Charity is driven by altruism and desire to serve others, though element of self-preservation may be present. For charity, benevolence should be omnipresent and demonstrable but it is not equivalent to self-sacrifice and abnegation. The antiquated definition of charity, which entails giving and receiving nothing in return is outdated. A mandatory feature would be ; charitable activity should be devoid of selfishness or illiberal spirit. Enrichment of oneself or self-gain should be missing and the predominant purpose of the activity should be to serve and benefit others. A small contribution by way of fee that the beneficiary pays would not convert charitable activity into business, commerce or trade in the absence of contrary evidence. The quantum of fee charged, economic status of the beneficiaries who pay, commercial value of benefits in comparison to the fee, purpose and object behind the fee, etc., are several factors which will decide the seminal question, is it business ?

26. The petitioner charges an initial registration fee of Rs. 20,000 plus annual fee of Rs. 4,000, enhanced to Rs. 5,000 from the financial year 2006­07 onwards from third parties, who become subscribing members and are entitled to use the coding system, GS1. The Revenue acknowledges that the petitioner enjoys monopoly and has exclusive rights to issue global bar coding system GS1 in India. However, the petitioner is not dealing or treating the prized rights as a right, which is to be exploited commercially to earn or generate profits. A coding system of this nature if marketed on commercial lines with profit motive would amount to business but when the underlying and propelling motive is not to earn profits or commercially exploit the rights but “general public good”, i.e., to promote and make GS1 coding system available to Indian traders, manufacturers, Government, etc., it will fail the test of business and meets the touchstone of charity. The petitioner is not directly or indirectly subjecting their activity to market mechanism/dynamics (i.e., demand and supply), rather it is motivated and compted to serve the beneficiaries. This is not a case of commercial exploitation of intellectual property rights to earn profits but rather a case where a token fee has been fixed and payable by the user of the global identification system.

27. The petitioner does not cater to the lowest or marginalized section of the society, but Government, public sector and private sector manufacturers and traders. No fee is charged from users and beneficiaries like stockist, whole sellers, Government departments, etc., while a nominal fee is only paid by the manufacturer or marketing agencies, i.e., the first person who installs the coding system which is not at all exorbitant in view of the benefit and advantage which are overwhelming. Any one from any part of the world can access the database for identification of goods and services using global standard. The fee is fixed and not product specific or quantity related, i.e., dependent upon the quantum of production. Registration and annual fee entitles the person concerned to use the GS1 identification on all their products. Non-levy of fee in such cases may have its own disadvantages and problems. Charging a nominal fee to use the coding system and to avail of the advantages and benefits therein is neither reflective of business aptitude nor indicative of profit oriented intent.

28. Having applied the test mentioned above, including the criteria for determining whether the fee is commensurate and is being charged on commercial or business principles, we find that the petitioner fulfils the charitable activity test. It is apparent to us that the Revenue has taken a contradictory stand as they have submitted and accepted that the petitioner carries on charitable activity under the residuary head “General public utility” but simultaneously regards the said activity as business. Thus, the contention of the Revenue that the petitioner charges fee and, therefore, is carrying on business, has to be rejected. The intention behind the entire activity is philanthropic and not to recoup or reimburse in monetary terms what is given to the beneficiaries. The element of give and take is missing, but the decisive element of bequeathing is present. In the absence of “profit motive” and charity being the primary and sole purpose behind the activities of the petitioner is perspicuously discernible and perceptible.

29. The table relied on by the respondent and mentioned in paragraph 7 above tells a partial story. Only direct expenses incurred have been set off from the fee earned from registration and renewal. The activity of the petitioner involves promotion, propagation and spreading awareness and knowledge about global coding identification system GS1. The entire expenditure of the petitioner has to be taken into consideration and cannot be ignored. There are stipulations in sections 11, 13, etc., of the Act to prevent misuse of or siphoning of funds, bar/prohibit gains to related persons, stipulations of time limits for use of funds, which are effective checks and curtail and deny benefit in cases of abuse. There is no such allegation or contention of the Revenue in the present case.

30. As observed above, the fee charged and the quantum of income earned can be indicative of the fact that the person is carrying on the 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 long-term and should not depend upon the 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 analyzed objectively and a narrow and coloured view will be counter-productive and contrary to the language of section 2(15) of the Act.”

21. All the questions raised in the order of the ld. AO has been answered by the Hon Delhi high court. With respect to the fees charged by the assessee naturally, it should be commensurating with the efforts put in by the organization and to defray its cost as well as further capital cost. It is also required to be noted that assessee is engaged in research based activity which is highly cost intensive and requires continuous spending on the innovation and new developments as it is concerning with the education of the society. The Assessee has categorically stated before the ld AO as well as before Ld CIT (A) that it is charging subscription as well as consultancy fees on actual, which fact is not denied. Therefore merely earning the surplus does not result in to the conclusion, that assessee is carrying on its activities, which can be termed as business, trade, or commerce.

22. Furthermore on perusal of the order of the ld CIT (A), we do not concur with the arguments of the ld CIT DR that order is perfunctory and devoid of reasons for the reasons that he has decided the issues relying on the decision of Honorable Delhi high court. According to us, the ld CIT (A) has also given his finding on all the aspects of the issues raised by ld AO.

23. In view of the above facts and respectfully relying on the decision of Hon Delhi High Court in 360 ITR 138 , we find no infirmity in the order of the ld CIT (A), hence we dismiss all the grounds of appeal of revenue in ITA no 2873/del/2011 for AY 2009-10.

24. Further, the appeal of the revenue for AY 2010-11 in ITA No 2874/Del/2011, also involves the same issues. Therefore, for the reasons given by us in appeal of revenue for AY 2009-10, we also dismiss all the grounds of appeal of revenue in ITA No 2874/Del/2011 for AY 2010-11.”

7. This order of the Tribunal has also been confirmed by Hon’ble High Court in the appeal filed by the Revenue. Admittedly, same facts and issues are permeating in this year also including the observations and the findings of the Assessing Officer. Hence, respectfully following the earlier year precedent, we dismiss the grounds raised by the Revenue.

8. In the result, the appeal of the Revenue is dismissed.

Order pronounced in the open Court on 26th August, 2020.

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