M/s. Akhil Bhartiya Grameen Vikas Sanstha, New Delhi V. DIT (Exemptions), New Delhi

ITA 1037/DEL/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 4078 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-05-2016
• Assessment Year: misc
• Appeal Filed On: 21-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI JAIN
• Keywords: Charitable institution
• Section: 12A; 12AA; 11

Judgement Text

ITA NO. 1037/D/2014 AKHIL BHARTIYA GRAMEEN VIKAS SANSTHA PAGE 1 OF 13 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT & SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 1037/DEL/2014 ( ASSESSMENT YEAR: 2009-10) AKHIL BHARTIYA GRAMEEN VIKAS SANSTHA 1442, WAZIR NAGAR, KOTLA MUBARAKAPUR, NEW DELHI. AAAAA5560E VS DIT(EXEMPTIONS) NEW DELHI. ASSESSEE BY DR. RAKESH GUPTA, ADV. SH. SOMIL AGARWAL, ADV. SH. ABHISHEK ANAND, ADV. REVENUE BY SH. RAVI JAIN, CIT DR ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER : THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER U/S 12AA(1)(B) DATED 29/01/2014 PASSED BY THE LD. DIRECTOR OF INCOME TAX (EXEMPTIONS), NEW DELHI IN WHICH THE ASS ESSEE HAS BEEN REFUSED GRANT OF REGISTRATION U/S 12AA. DATE OF HEARING 11.05.2016 DATE OF PRONOUNCEMENT 11.08.2016 ITA NO. 1037/D/2014 AKHIL BHARTIYA GRAMEEN VIKAS SANSTHA PAGE 2 OF 13 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAD FILED AN APPLICATION SEEKING REGISTRATION U/S 12AA OF THE I. T. ACT ON 18/07/2013. THE RELEVANT DOCUMENTS AS REQUIRED BY THE LD. DIREC TOR OF INCOME TAX (EXEMPTIONS) WERE ALSO FILED DURING THE COURSE OF P ROCEEDINGS. ON PERUSAL OF THE DOCUMENTS, THE LD. DIT (E) NOTED THAT THE AS SESSEE SOCIETY WAS CARRYING ON THE ACTIVITY OF TRAINING THE FARMERS FO R SCIENTIFIC HORTICULTURE BY RECEIVING TRAINING FEES DIRECTLY FROM VARIOUS GOVT. DEPARTMENTS. DURING FY 2012-13 THE ASSESSEE HAS RECEIVED RS. 3,492,584/- A S TRAINING FEES FROM DIFFERENT DEPARTMENTS AGAINST WHICH THE AMOUNT SPEN T FOR THE PERIOD 01/04/2013 TO 31/12/2013 WAS RS. 3,777,952/-. THE LD. DIT(E) WAS OF THE OPINION THAT SINCE THE ASSESSEE SOCIETY WAS BEING R EIMBURSED FOR THE TRAINING PROVIDED BY IT TO THE FARMERS, SUCH TRAINING COULD NOT BE HELD TO BE CHARITABLE IN NATURE IN VIEW OF SECTION 2(15) OF THE INCOME TA X ACT. THE LD. DIT(E) FURTHER NOTED THAT AS THE VARIOUS GOVERNMENT AGENCI ES SPONSORED THE CANDIDATES AND THE ASSESSEE WAS IN RECEIPT OF FEE F OR SUCH TRAINING/SERVICES, THE SAME WAS IN THE NATURE OF A COMMERCIAL ACTIVITY AND, THEREFORE, FELL UNDER THE LAST LIMB I.E. ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. THE LD. DIT (E) ALSO NOTED THAT THE ASSESSEES GROS S RECEIPT WERE MORE THAN THE INCOME AS STIPULATED IN THE SECOND PROVISO TO S EC. 2(15) OF THE ACT. THE ASSESSEES APPLICATION FOR REGISTRATION U/S 12AA WA S ACCORDINGLY REJECTED. ITA NO. 1037/D/2014 AKHIL BHARTIYA GRAMEEN VIKAS SANSTHA PAGE 3 OF 13 3. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE THE T RIBUNAL AND HAS ASSAILED THE ACTION OF THE LD. DIT (E) IN REFUSING TO GRANT REGISTRATION TO THE ASSESSEE SOCIETY. 4. THE LD. AR SUBMITTED THAT THE CONSIDERATIONS WIT H RESPECT TO THE FIRST PROVISO TO SECTION 2(15) COMING INTO PLAY HAVE NO R OLE TO PLAY IN THE MATTERS RELATING TO THE REGISTRATION OF A TRUST OR AN INSTI TUTION U/S 12A OR 12AA EITHER IN RESPECT OF GRANTING OR DECLINING OF A REGISTRATI ON OR IN RESPECT OF CANCELLATION THEREOF. THE LD. AR SUBMITTED THAT TH E RIDERS TO THE DEFINITION OF CHARITABLE PURPOSES CAN COME INTO PLAY ONLY ON YE AR TO YEAR BASIS AND NOT IN ABSOLUTE TERMS. IT WAS FURTHER SUBMITTED THAT T HE SAME ACTIVITY MAY BE HIT BY THE RIDER IN ONE YEAR AND THAT VERY ACTIVITY MAY REMAIN UNAFFECTED BY THE SAME DISABLING PROVISION FOR ANOTHER YEAR. THE LD. AR SUBMITTED THAT SIMILARLY A TEMPORARY DISABLEMENT IN ONE YEAR WILL NOT ALTER THE VERY NATURE OF TRUST AND THE INSTITUTION SO AS TO LEAD TO CANCE LLATION OF REGISTRATION OR WITHDRAWAL OF APPROVAL OR RESCINDING OF NOTIFICATIO N ISSUED IN RESPECT OF TRUST OR INSTITUTION. THE LD. AR FURTHER SUBMITTED THAT THE IMPACT OF THE PROVISO TO SEC. 2(15) WILL BE THAT THE ASSESSEE WILL NOT BE EL IGIBLE FOR EXEMPTION U/S 11 OF THE ACT AND ALTHOUGH THE ASSESSEE MAY BE HIT BY THE PROVISO TO SEC. 2(15), THE SAME WILL NOT HAVE ANY BEARING ON THE GRANT, DE NIAL OR WITHDRAWAL OF THE REGISTRATION U/S 12AA. THE LD. AR ALSO RELIED ON T HE DECISION OF THE ITAT ITA NO. 1037/D/2014 AKHIL BHARTIYA GRAMEEN VIKAS SANSTHA PAGE 4 OF 13 AMRITSAR BENCH IN KAPOORTHALA IMPROVEMENT TRUST VS. CIT IN ITA NO. 732/ASR/2013. 5. THE LD. DR SUPPORTED THE ORDER OF THE LD. DIT (E ) AND SUBMITTED THAT THE REGISTRATION HAS BEEN CORRECTLY DENIED. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PER USED THE MATERIAL ON RECORD. THE MEMORANDUM OF THE SOCIETY REVEALS THAT THE AIMS & OBJECTS OF THE SOCIETY FOR WHICH THE SOCIETY HAS BEEN ESTABLIS HED ARE AS UNDER: 1. TO IMPROVE THE ECONOMY OF THE RURAL PEOPLE THROUGH AFFORESTATION AND REFORESTATION PROGRAMME. 2. TO IMPROVE SOCIAL STATUS THROUGH LITERACY CAMPAIGN. 3. TO ENHANCE AESTHETIC VALUE OF RURAL CULTURE AND TEC HNOLOGY. 4. TO GENERATE EMPLOYMENT TO UNEMPLOYED RURAL YOUTHS T HROUGH AFFORESTATION AND REFORESTATION PROGRAMME. 5. TO MOTIVATE THE RURAL PEOPLE FOR PARTICIPATION IN L ITERACY PROGRAMMES, DEMONSTRATION, COMMUNICATION AND EXTENS ION PROGRAMME. 6. TO PROMOTE RURAL TECHNOLOGY THROUGH USING DOMESTIC AS WELL AS IMPORTED TECHNOLOGY FOR AGRI-HORTICULTURE DEVELOPME NT. 7. TO GENERATE MARKETING FACILITIES FOR RURAL DEVELOPM ENT AND TRADE PROMOTIONS IN THE COUNTRY. 8. TO PROMOTE INDIAN LANGUAGES AND THEIR PARTICIPATION IN CULTURAL AND SOCIAL ACTIVITIES. ITA NO. 1037/D/2014 AKHIL BHARTIYA GRAMEEN VIKAS SANSTHA PAGE 5 OF 13 9. TO USE LOCAL DIALECTS AND LANGUAGES FOR EXCHANGE OF VARIOUS DEVELOPMENTAL INFORMATION IN BETWEEN THE POLICY MAK ER AND RURAL PEOPLE. 10. TO DEVELOP A PLATFORM FOR EXCHANGE OF IDEAS, VIEWS AND TECHNOLOGY OF RURAL FOLKS. 11. TO TRANSFER THE MODERN TECHNOLOGY THROUGH SEMINARS, WORKSHOPS, TRAININGS PROGRAMME AND NUKKAR NATAK IN RURAL COMMU NITY. 12. TO PROMOTE URBAN FORESTRY FOR PROTECTION OF ENVIRON MENT, HEALTH HAZARDS AND RECREATION TO MAINTAIN EQUILIBRIUM BETW EEN FLORA AND FAUNA. 13. TO INCREASE PRODUCTION OF FRUITS, PULSES AND VEGETA BLES AND PROVIDE HEALTHY AND HYGIENIC QUALITY OF STANDARD FOOD RESOU RCES TO THE COUNTRYMEN. 14. TO PROVIDE KNOW-HOW FOR THE CONSERVATION OF SOIL AN D CHECK FURTHER DETERIORATION OF SOIL FERTILITY, TO OBTAIN HIGHER PRODUCTIVITY. 15. TO UTILIZE SHADE AND ORNAMENTAL TREES FOR THE LANDS CAPE. 16. TO USE MODERN TECHNOLOGY TO RAISE FORESTS, ORCHARDS AND NEW VARIETY OF THE DIFFERENT CROPS E.G.BY TISSUE CULTUR E AND HYDROPONICS ETC. 17. TO INCULCATE TREE CONSCIOUSNESS AND LOVE OF TREES A MONGST THE PEOPLE. 18. TO ESTABLISH NURSERY THROUGH TISSUE CULTURE, VEGETA TIVE E PROPAGATION AND SEED TECHNOLOGY. 19. TO DEVELOP ETHNO MEDICINE THROUGH MAINTAINING OF HE RBAL GARDEN. 20. TO PROMOTE FOLKART, E.G. HANDICRAFT, SCULPTURE, WOO DEN WORK ETC. ITA NO. 1037/D/2014 AKHIL BHARTIYA GRAMEEN VIKAS SANSTHA PAGE 6 OF 13 21. TO POPULARIZE THE PLANTING AND TENDING IN FARMS, VI LLAGES, MUNICIPAL AND PUBLIC LAND FOR THEIR AESTHETIC, ECON OMIC AND PROTECTIVE VALUE. 22. TO PREPARE PLANT FOR MAXIMUM UTILIZATION OF LAND AN D ITS RESOURCES WITH MAINTAINING THE SUSTAINABILITY. 23. TO PUBLISH THE SCIENTIFIC INFORMATION, BULLETINS, A CHIEVEMENTS AND APPLICABILITY OF AVAILABLE TECHNOLOGY IN LOCAL LANG UAGES. 24. TO INTENSIFY AND PROMOTE THE POTENTIAL YOUTH TO UTI LIZE AVAILABLE TECHNOLOGY AND THEIR RELATED INDUSTRIAL MATTER. 25. TO COLLECT THE INFORMATION WITH REGARDS TO RESEARCH TECHNOLOGY AND THEIR RELATED INDUSTRIAL MATTER. 26. TO EMPLOY AND PAY NECESSARY STAFF FOR THE PURPOSES OF THE SOCIETY. 27. TO DO ALL OTHER SUCH THINGS AS THE SOCIETY MAY CONS IDER NECESSARY, INCIDENTAL OR CONDUCIVE TO THE ATTAINMENT OF THE AB OVE OBJECTIVES. 28. UTILIZATION OF NON-CONVENTIONAL ENERGY RESOURCES FO R RURAL. 29. TO ESTABLISH, OPEN AND RUN EDUCATIONAL AND VOCATION AL STUDY CENTERS, SKILL KNOWLEDGE PROVIDING CENTERS, VOCATIO NAL TRAINING PROVIDING CENTERS, SMART SCHOOL CLASSES & INSTITUTE S IN THE NAME & STYLE OF INSTITUTE OF HORTICULTURE TECHNOLOGY A CROSS ALL OVER INDIA UNDER THE BANNER OF SOCIETY TO IMPART VOCATIO NAL & TECHNICAL EDUCATION TO FARMERS, RESEARCH ASSOCIATES , UNEMPLOYED YOUTHS, STUDENTS OF SCHOOLS & COLLEGES I N THE FIELD OF AGRICULTURE, HORTICULTURE, AGRI BUSINESS MANAGEMENT , FOOD PROCESSING, FOOD SCIENCES, DAIRY SCIENCE & TECHNOLO GY, BIO- CHEMISTRY & BIOTECHNOLOGY. ITA NO. 1037/D/2014 AKHIL BHARTIYA GRAMEEN VIKAS SANSTHA PAGE 7 OF 13 30. TO ESTABLISH, OPEN AND RUN EDUCATIONAL AND VOCATION AL STUDY CENTERS, SKILL KNOWLEDGE PROVIDING CENTERS, VOCATIO NAL TRAINING PROVIDING CENTERS SMART SCHOOL CLASSES & INSTITUTES ACROSS ALL OVER INDIA UNDER THE BANNER OF SOCIETY TO IMPART VO CATIONAL & TECHNICAL EDUCATION TO FARMERS, RESEARCH ASSOCIATES , UNEMPLOYED YOUTHS, UNDER PRIVILEGED YOUTHS OF INDIA , SOCIALLY WEAKER SECTIONS, STUDENTS OF SCHOOLS & COLLEGES IN THE FIELD OF ENGINEERING, MEDICINES, COMPUTER TECHNOLOGY HARDW ARE & SOFTWARE, NANO TECHNOLOGY, RETAIL MANAGEMENT, FASHI ON & DESIGNING, INSURANCE, BANKING, ACCOUNTANCY & AUDITI NG, FINANCIAL MARKET MANAGEMENT, BUSINESS MANAGEMENT & ADMINISTRATION. 6.1 THE MEMORANDUM OF THE ASSESSEE SOCIETY ALSO MEN TIONS THAT ALL THE INCOME, EARNINGS, MOVABLE AND IMMOVABLE PROPERTIES OF THE SOCIETY SHALL BE SOLELY UTILIZED AND APPLIED TOWARDS THE PROMOTION O F ITS AIMS AND OBJECTS ONLY AS SET FORTH IN THE MEMORANDUM OF ASSOCIATION AND THAT NO PROFIT THEREOF SHALL BE PAID OR TRANSFERRED DIRECTLY OR IN ANY OTH ER MANNER WHATSOEVER TO THE PRESENT FOR THE PAST MEMBERS OF THE SOCIETY OR TO A NY PERSON CLAIMING THROUGH ANY PAST OR PRESENT MEMBERS. IT HAS ALSO B EEN PROVIDED THAT NO MEMBER OF A SOCIETY SHALL HAVE ANY PERSONAL CLAIM O N ANY IMMOVABLE OR MOVABLE PROPERTIES OF THE SOCIETY OR MAKE ANY PROFI T WHATSOEVER BY VIRTUE OF HIS MEMBERSHIP. IT HAS BEEN FURTHER PROVIDED THAT ON WINDING UP OR RESOLUTION OF THE SOCIETY ANY SURPLUS REMAINING SHA LL NOT BE DISTRIBUTED ITA NO. 1037/D/2014 AKHIL BHARTIYA GRAMEEN VIKAS SANSTHA PAGE 8 OF 13 AMONGST THE MEMBERS BUT SHALL BE DEALT WITH IN SUCH MANNER AS THE GENERAL BODY MAY DETERMINE. 6.2 A PERUSAL OF THE OBJECTS AND OTHER RELEVANT CLA USES AS PROVIDED IN THE MEMORANDUM OF THE SOCIETY AS REPRODUCED ABOVE REVEA LS THAT THE SOCIETY HAS BEEN FORMED WITH A PRIMARY OBJECT OF IMPROVING ECON OMY OF THE RURAL PEOPLE THROUGH AFORESTATION AND REFORESTATION. IT IS NOT IN DISPUTE THAT THE ABOVE MENTIONED OBJECTS ARE CHARITABLE IN NATURE AN D THE LD. DIT (E) HAS ALSO NOT RECORDED ANY ADVANCE FINDING TO THIS EFFECT. I T IS ALSO NOT THE CASE OF THE DEPARTMENT THAT THE OBJECTIVES OF THE SOCIETY ARE N OT GENUINE. CLAUSE (A) OF SUB-SECTION (1) OF SECTION 12AA PROVIDES THAT FOR T HE PURPOSES OF REGISTRATION, THE CIT MAY CALL FOR SUCH DOCUMENTS O R INFORMATION FROM THE TRUST OR THE INSTITUTION AS HE THINKS NECESSARY IN ORDER TO SATISFY HIMSELF ABOUT THE GENUINENESS OF ACTIVITIES OF THE TRUST OR INSTI TUTION AND MAY ALSO MAKE SUCH INQUIRIES AS HE MAY DEEM NECESSARY IN THIS BEH ALF. THUS, THE SCOPE OF ENQUIRY BY THE CIT WHILE CONSIDERING THE ISSUE OF R EGISTRATION U/S 12AA IS VERY MUCH LIMITED AND CANNOT INCLUDE ENQUIRY RELATI NG TO GRANT OF EXEMPTION U/S 11 OF THE ACT. IT IS EVIDENT FROM THE ORDER OF THE LD. DIT (EXEMPT IONS) THAT HE HAS CONSIDERED THE ASSESSEE AS A NON CHARIT ABLE INSTITUTION BECAUSE AS PER HIM THE ACTIVITIES OF THE ASSESSEE ARE COMMERCI AL IN NATURE AND HENCE NOT ELIGIBLE FOR REGISTRATION U/S12AA OF THE ACT. ON A CURSORY LOOK AT THE OBJECTS ITA NO. 1037/D/2014 AKHIL BHARTIYA GRAMEEN VIKAS SANSTHA PAGE 9 OF 13 OF THE ASSESSEE, IT IS SEEN THAT THE ASSESSEE IS EN GAGED IN IMPROVING ECONOMY OF THE RURAL PEOPLE THROUGH AFORESTATION AND REFORE STATION. ALL OTHER OBJECTS ARE ANCILLARY AND INCIDENTAL TO THE SAID MAIN OBJEC TS. A PLAIN READING OF THE DEFINITION OF CHARITABLE PURPOSE AS PROVIDED U/S 2( 15) OF THE INCOME TAX ACT, 1961 WOULD MAKE IT CLEAR THAT THE RESTRICTION IMPOS ED UNDER THE PROVISO TO THE SAID SECTION APPLIES ONLY TO THE LAST LIMB I.E ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. THERE IS NO EXPRE SS PROVISION U/S 2(15) OF THE ACT WHICH RESTRICTS AN INSTITUTION FROM UNDERTAKING ANY COMMERCIAL ACTIVITY IF IT COMES UNDER OTHER LIMB OF CHARITABLE PURPOSES . ONLY REQUIREMENT IS THAT THE ASSESSEE MUST NOT HAVE PROFIT MOTIVE AND THE IN COME GENERATED FROM COMMERCIAL ACTIVITY IS UTILISED FOR ACHIEVING THE C HARITABLE OBJECT. EVEN ASSUMING THAT THE ASSESSEES OBJECTS / ACTIVITIES C OME UNDER ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY, THE PRO VISO TO SECTION 2(15) WILL NOT AUTOMATICALLY DISQUALIFY THE ASSESSEE FROM BEIN G CONSIDERED AS A SOCIETY ESTABLISHED FOR CHARITABLE PURPOSES ONLY BECAUSE IT HAS RECEIPTS IN THE FORM OF GRANTS, TRAINING FEE , ETC. WHAT HAS TO BE SEEN IS WHETHER THE PRIMARY OR THE DOMINANT PURPOSE OR OBJECT OF THE ASSESSEE IS TO CA RRY OUT OBJECT OF GENERAL PUBLIC UTILITY OR ANY OTHER ACTIVITY WITH A PROFIT MOTIVE. IF FOR ACHIEVING ITS PRIMARY OR DOMINANT OBJECT OF EDUCATION OR EVEN ADV ANCEMENT OF ANY OTHER OBJECT OF PUBLIC UTILITY, THE ASSESEE SOCIETY HAS E ARNED SOME INCOME FROM FEE ITA NO. 1037/D/2014 AKHIL BHARTIYA GRAMEEN VIKAS SANSTHA PAGE 10 OF 13 ETC., IT CANNOT BE SAID THAT THE ASSESSEE HAS CARRI ED ON A BUSINESS ACTIVITY WITH A PROFIT MOTIVE. CHARITABLE ACTIVITIES ALSO REQUIR E OPERATIONAL/RUNNING EXPENSES AS WELL AS CAPITAL EXPENSE FOR BEING ABLE TO SUSTAIN ITSELF AND CONTINUE IN THE LONG RUN. THERE IS NO SUCH STATUTOR Y MANDATE THAT A CHARITABLE INSTITUTION FALLING UNDER THE RESIDUARY CLAUSE SHOU LD BE WHOLLY, SUBSTANTIALLY OR IN PART BE FUNDED BY VOLUNTARY CONTRIBUTIONS ONL Y. THE HONBLE SUPREME COURT IN THE CASE OF ADDL. CIT V. SURAT ART SILK CL OTH MANUFACTURERS ASSOCIATION (1980) 121 ITR 1 (SC) HAS HELD AS UNDER (PAGE 25): THE TEST WHICH HAS, THEREFORE, NOW TO BE APPLIED I S WHETHER THE PREDOMINANT OBJECT OF THE ACTIVITY INVOLVED IN CARR YING OUT THE OBJECT OF GENERAL PUBLIC UTILITY IS TO SUB SERVE THE CHARITAB LE PURPOSE OR TO EARN PROFIT. WHERE PROFIT-MAKING IS THE PREDOMINANT OBJECT OF TH E ACTIVITY, THE PURPOSE, THOUGH AN OBJECT OF GENERAL PUBLIC UTILITY WOULD CE ASE TO BE A CHARITABLE PURPOSE. BUT WHERE THE PREDOMINANT OBJECT OF THE AC TIVITY 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 ARIS ES FROM THE ACTIVITY. THE EXCLUSIONARY CLAUSE DOES NOT REQUIRE THAT THE ACTIV ITY 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 INSTI TUTION TO SO CARRY ON THE ACTIVITY THAT THE EXPENDITURE BALANCES THE INCOME A ND THERE IS NO RESULTING PROFIT. THAT WOULD NOT ONLY BE DIFFICULT OF PRACTIC AL REALIZATION BUT WOULD ALSO REFLECT UNSOUND PRINCIPLE OF MANAGEMENT. ITA NO. 1037/D/2014 AKHIL BHARTIYA GRAMEEN VIKAS SANSTHA PAGE 11 OF 13 6.3 IN OUR OPINION, THE AFORESAID PRINCIPLE LA ID DOWN BY THE HON'BLE APEX COURT STILL HOLDS GOOD EVEN AFTER THE INTRODUCTION OF PROVISO TO SECTION 2(15) BY THE FINANCE ACT, 2008 WITH EFFECT FROM APRIL 1, 2009 . THE WORDS 'ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINE SS OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COM MERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION' WAS CONSIDERED AND INTERPRETED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA V . DGIT (EXEMPTIONS) 347 ITR 99 (DELHI), AS UNDER (PAGE 123): 'SECTION 2(15) DEFINES THE TERM 'CHARITABLE PURPOSE '. THEREFORE, WHILE CONSTRUING THE TERM 'BUSINESS' FOR THE SAID S ECTION, 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 TE RM 'BUSINESS' IS INTENDED FOR THE PURPOSE OF INTERPRETING AND APPLYI NG THE FIRST PROVISO TO SECTION 2(15) OF THE ACT TO INCLUDE ANY TRANSACT ION FOR A FEE OR MONEY. AN ACTIVITY WOULD BE CONSIDERED 'BUSINESS' I F IT IS UNDERTAKEN WITH A PROFIT MOTIVE, BUT IN SOME CASES THIS MAY NO T BE DETERMINATIVE. NORMALLY, THE PROFIT MOTIVE TEST SHOULD BE SATISFIE D 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 RECOGNISED BUSINESS PRINCIPLES, AND PURSU ED WITH REASONABLE CONTINUITY. THERE SHOULD BE FACTS AND OT HER CIRCUMSTANCES WHICH JUSTIFY AND SHOW THAT THE ACTIVITY UNDERTAKEN IS IN FACT IN THE NATURE OF BUSINESS. THE TEST AS PRESCRIBED IN STATE OF GUJARAT V. RAIPUR MANUFACTURING CO. LTD. [1967] 19 STC 1 SC AND CST V. SAI ITA NO. 1037/D/2014 AKHIL BHARTIYA GRAMEEN VIKAS SANSTHA PAGE 12 OF 13 PUBLICATION FUND [2002] 258 ITR 70 SC ; [2002] 126 STC 288 SC CAN BE APPLIED. THE SIX INDICIA STIPULATED IN CUSTOMS AND EXCISE COMMISSIONERS V. LORD FISHER [1981] S. T. C. 238 ARE ALSO RELEVANT. EACH CASE, THEREFORE, HAS TO BE EXAMINED ON ITS OWN FACTS,' 6.4 THUS, THE PRINCIPLE OF LAW WHICH EMERGES FR OM THE JUDICIAL PRONOUNCE- MENTS IS THAT IF THE PREDOMINANT OBJECT OF A TRUST OR INSTITUTION IS CHARITABLE AND IN THE PROCESS OF ACHIEVING THAT OBJECT SOME AC TIVITY OF COMMERCIAL NATURE GENERATING INCOME IS CARRIED OUT, WHICH AGAI N IS UTILISED FOR THE ADVANCEMENT OF ITS CHARITABLE OBJECTS, IT CANNOT BE INFERRED THAT THE TRUST OR INSTITUTION IS NOT ESTABLISHED FOR CHARITABLE PURPO SES. MOREOVER, THE ISSUE OF APPLICABILITY OF THE PROVISO TO SECTION 2(15) HAS T O BE EXAMINED AT THE STAGE OF ASSESSMENT WHILE ADJUDICATING THE ASSESSEES CLA IM OF EXEMPTION U/S 11 OF THE INCOME TAX ACT, 1961 AND HENCE IT IS NOT GERMAN E AT THE TIME OF CONSIDERING THE ISSUE OF GRANTING REGISTRATION U/S 12AA. THIS IS SO BECAUSE THOUGH THE FIRST PROVISO TO SEC. 2(15) OF THE ACT E XCLUDES ANY ACTIVITY OF THE NATURE OF TRADE, COMMERCE OR BUSINESS FROM BEING CO NSIDERED TO BE A CHARITABLE PURPOSE BUT, THE SECOND PROVISO TO SECTI ON 2(15) RESTRICTS THE APPLICATION OF FIRST PROVISO ONLY TO SUCH TRUSTS AN D INSTITUTIONS HAVING RECEIPTS FROM COMMERCIAL ACTIVITY EXCEEDING A PRESCRIBED LIM IT IN A PARTICULAR PREVIOUS YEAR. THEREFORE, THE APPLICATION OF THE P ROVISO TO SECTION 2(15) HAS ITA NO. 1037/D/2014 AKHIL BHARTIYA GRAMEEN VIKAS SANSTHA PAGE 13 OF 13 TO BE LOOKED INTO IN EVERY ASSESSMENT YEAR. IN OUR CONSIDERED VIEW, THE FIRST PROVISO TO SECTION 2(15) WILL HAVE NO ROLE TO PLAY IN THE MATTER OF GRANTING REGISTRATION AND THE ROLE OF THE LD. DIT (E) IS RES TRICTED TO HIM BEING SATISFIED THAT THE OBJECTS ARE GENUINE AND CHARITABLE. IN ABS ENCE OF ANY SUCH FINDING BY THE LD. DIT (E) IN THIS INSTANT APPEAL, WE HOLD THA T THE BENEFIT OF GRANT OF REGISTRATION HAS BEEN DENIED TO THE ASSESSEE WITHOU T ANY COGENT REASON AND HENCE WHILE ALLOWING THE ASSESSEES APPEAL WE DIREC T THE LD. DIT (E) TO GRANT REGISTRATION TO THE ASSESSEE U/S 12AA OF THE ACT. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 11.08.2016 SD/- SD/- (G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA ) VICE PRESIDENT JUDICIAL MEMBER DATED: 11.08.2016 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI