National Accreditation Board for Testing and Calibration Laboratories, New Delhi V. ADIT (E), New Delhi

ITA 1115/DEL/2013

• Counselvise Citation: 111520114 RSA 2013
• Duration Of Justice: 2 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 16-11-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 26-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Charitable institution; Benefit of exemption
• Section: 143(3); 142(1); 12A; 12; 11

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E: NEW DELHI BEFORE SHRI H.S.SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER IN ITA NO. 1115/DEL/2013 (ASSESSMENT YEAR: 2009 - 10) NATIONAL ACCREDITATION BOARD FOR TESTING AND CALIBRATION LABORATORIES, 3 RD FLOOR, NISCAIR, 14, SATSANG VIHAR MARG, NEW MEHRAULI ROAD, NEW DELH PAN:AAATN3528Q VS. ADIT (E XEMPTIONS) , INVESTIGATION CIRCLE - II, NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY : SH.N.K . GUPTA, ADV RESPONDENT BY : SH. P.DAM KANUNJNA, SR. DR DATE OF HEARING 17.11.2015 DATE OF PRONOUNCEMENT 26. 11.2015 O R D E R PER PRASHANT MAHARISHI, A. M. 01 . THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT ( A) - XXI, DATED 30.11.2012 PASSED FOR THE ASSESSMENT YEAR 2009 - 10. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD CIT ( A) - XXI HAS ERRED ON LAW AND FACTS BY UPHOLDING THE DECISION OF THE LD AO, THAT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 2(15), PROVISO, THE ACTIVITIES OF THE APPELLANT ARE IN THE NATURE OF TRADE, COMMERCE OR BUSINESS AND HENCE CANNOT BE GIVEN EXEMPTION UNDER SECTION 11 AND 12 OF THE IT ACT AS CHARITABLE ACTIVITY. THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE, THE ASSESSMENT ORDER DATED 20.12.2011 PASSED U/S 143(3) OF THE ACT BY THE LD AO, DENYING THE BENEFIT OF SECTION 11 AND 12 OF THE ACT AND RAISING A TAX DEMAND ON AN ASSESSED INCOME OF RS.2,28,54,196/ - , IS GROSSLY UNJUSTIFIED, ERRONEOUS AND UNS USTAINABLE IN LAW, THUS IS LIABLE TO BE QUASHED. NECESSARY DIRECTION MAY BE GIVEN TO THE LD AO TO GIVEN APPROPRIATE RELIEF IN ACCORDANCE WITH LAW. 02 . THE FACTS IN BRIEF OF THE CASE ARE THAT THE ASSESSEE IS A SOCIETY REGISTERED UNDER SO CIETIES REGISTRATION A CT, 1860 AND ITS INCOME WAS EXEMPT U/S 10(21) OF THE INCOME TAX ACT AND IS ALSO REGISTERED U/S 12A (A) OF THE INCOME TAX ACT. IT HAS ALSO BEEN GRANTED RECOGNITION U/S 35(1) (II) OF THE INCOME TAX ACT. THE BASIC AIMS AND OBJECTS OF THE ASSESSEE SOCIETY AR E TO PROMOTE, CO - ORDINATE, GUIDE, IMPLEMENT AND MAINTAIN AN ACCREDITATION SYSTEM FOR LABORATORIES SUITABLE IN THE COUNTRY IN ACCORDANCE WITH THE RELEVANT NATIONAL AND INTERNATIONAL STANDARDS AND GUIDES. TO ENSURE THAT ALL MEASUREMENTS EITHER DURING CALIBRA TION OR TESTING BY ACCREDITED LABORATORIES ARE RELATED TO APPROPRIATE NATIONAL/ INTERNATIONAL STANDARDS MAINTAINED BY NATIONAL PHYSICAL NATIONAL ACCREDITATION BOARD FOR TESTING AND CALIBRATION LABORATORIES V ADIT ( EXEMPTION) ITA NO 1115/ DEL/2013 A Y 2009 - 10 2 | P A G E LABORATORY (NPL) AND AT BHABHA ATOMIC RESEARCH CENTER (BARC) THROUGH AN UNBROKEN CHAIN OF COMPARISONS. TO ENCOURAGE PROF ICIENCY TESTS INTER - LABORATORY COMPARISONS IN ORDER TO ENSURE ACCURACY, RELIABILITY AND REPRODUCIBILITY OF TEST RESULTS AND TO ENSURE THAT THE ACCREDITED LABORATORIES ADHERE TO ALL THE CONDITIONS OF ACCREDITATION, BY PERIODIC SURVEILLANCE. THE ASSESSEE FI LED ON INCOME TAX RETURN DECLARING INCOME AT RS.2,28,54,196/ - AS AGAINST THE NIL INCOME ON 29.09.2009 ALONG WITH AUDIT REPORT DATED 10.09.2009. THE RETURN WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 AND THE CASE WAS SELECTED FOR SCRUTINY NOTICES U/S 143(2) AND 142(1) OF THE ACT, 1961 WERE ISSUED ON 09.09.2010, 21.04.2011 AND 25.07.2011 RESPECTIVELY. ON SCRUTINY INCOME OF THE ASSESSEE WAS ASSESSED AT GROSS INCOME SHOWN BY THE ASSESSEE AFTER ADJUSTMENT OF DEPRECIATION. LD AO DID NOT GRANT DED UCTION U/S 11 & 12 OF THE INCOME TAX ACT HOLDING THAT AS ASSESSEE CHARGES APPLICATION FEES, ANNUAL MEMBERSHIP FEES , ASSESSMENT FEES AND DESKTOP SURVEILLANCE CHARGES ASSESSEE IS ENGAGED IN THE BUSINESS ACTIVITY AND THEREFORE BECAUSE OF AMENDMENT TO S ECTION 2 (15) OF THE ACT W.E.F 1/4/2009 NOT ENTITLED T O THE EXEMPTION U/S 11 & 12 OF THE ACT. IT WAS ALSO OF THE VIEW OF THE AO THAT ASSESSEE HAS ACCUMULATED INCOME OF RS 878.60 LAKHS THEREFORE ASSESSEE EXITS WITH A PROFIT MOTIVE AND ACTIVITY OF THE ASSESSEE IS F CAPABLE OF GENERATING PROFIT. AGGRIEVED BY THE ORDER OF AO, ASSESSEE APPROACHED CIT (A) WHO IN TURN RELYING ON CIRCULAR NO 11/2008 DATED 19.12.2008 CONFIRMED THE ACTION OF AO. THEREFORE ASSESSEE IS IN APPEAL BEFORE US. 03 . ACCORDIN G TO THE LD AR THE ASSESSING OFFICER HAS WRONGLY INTERPRETED THE PROVISIONS OF SECTION 2(15) . HE SUBMITTED THAT ASSESSEE TRUST IS FORMED BY QUALITY COUNCIL OF INDIA VIDE ITS RESOLUTION DATED 9/02/1996.. THIS SOCIETY WAS ESTABLISHED WHICH IS RESPONSIBL E TO QUALITY COUNCIL OF INDIA AND IS CARRYING ON THE ACTIVITY OF TESTING AND CALIBRATION LABORATORIES . IT IS ALSO UNDER THE DIRECT CONTROL OF CENTRAL GOVERNMENT FOR ITS POLICIES AND PROGRAMS. IT IS FURTHER PROVIDED IN THE MEMORANDUM THAT THE INCOME A ND PROPERTY OF THE SOCIETY SHALL BE APPLIED TOWARDS THE PROMOTION OF THE OBJECTS OF THE TRUST AND ALSO WITH RESPECT TO GRANTS RECEIVED FROM CENTRAL GOVERNMENT AS PER LIMITATION IMPOSED BY GOVERNMENT. ITS FUNCTIONARIES ARE ALSO SECRETARY , DEPARTMENT OF SCIENCE AND TECHNOLOGY AND OTHER RENOWNED PERSONALITIES IN THE FIELD OF TECHNOLOGY. THE SOCIETY IS SET UP FOR THE BENEFIT OF PUBLIC AT LARGE AND DOES NOT EXIST FOR PROFIT. IT PROVIDES SOME ACCREDITATION TO VARIOUS ; LABORATORIES , GIVING U PDATES ON ACCREDITATION AND DESK TOP SURVEILLANCE. THEREFORE IT CHARGES FEES FROM SUCH LABORATORIES . THEREFORE IT WAS NATIONAL ACCREDITATION BOARD FOR TESTING AND CALIBRATION LABORATORIES V ADIT ( EXEMPTION) ITA NO 1115/ DEL/2013 A Y 2009 - 10 3 | P A G E SUBMITTED THAT AS IT IS FORMED BY GOVERNMENT OF INDIA AND HELPS IN PROMOTING QUALITY ACCREDITATION IN INDIA THEREFORE IT CANNOT BE SAID TO BE THAT IT IS CARRYING ON ANY BUSINESS. FOR THIS APPROPRIATION HE RILED ON THE DECISION OF HON OURABLE DELHI HIGH COU R T IN CASE OF INDIAN TRADE PROMOTION ORGANIZATION V DGIT ( EXEMPTION) 371 ITR 333 ( DELHI) . IT WAS ALSO SUBMITTED THAT HONOURAB LE DELHI HIGH COURT HAS CONSIDERED THE DECISION OF INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA V. DIRECTOR GENERAL OF INCOME - TAX (EXEMPTIONS) [2012] 347 ITR 99 (DELHI) AND INSTITUTE OF CHARTERED ACCOUNTANTS O F INDIA V. DGIT (EXEMPTIONS) [2013] 358 ITR 91 (DELHI) WHICH ARE RELIED BY THE AO. HONOURABEL DELHI HIGH COURT HAS ALSO CONSIDERED THE CIRCULAR STATED BY CIT (A) IN HIS ORDER. THEREFORE HE SUBMITTED THAT CASE OF THE ASSESSEE SQUARELY FALLS WITHIN THE PROVISION OF SECTION 2 (15) OF THE ACT AND IS ELIGIBLE FOR EXEMPTION BENEFIT AS PROVIDED U/S 11 & 12 OF THE ACT. 04 . LD DR RELYING UP ON THE ORDERS OF LOWER AUTHORITIES SUBMITTED THAT AS ASSESSEE IS CHARGING FEES AND ALSO HAS EARNED HUGE PROFITS SAME IS NOT ELIGIBLE FOR EXEMPTION U/S 11 & 12 OF THE INCOME TAX ACT. 05 . WE HAVE CAREFULLY CONSIDERED THE SUBMISSION OF PARTIES AND ALSO THE ORDERS OF LOWER AUTHORITIES. WE HAVE PERUSED THE OBJECTS OF THE TRUST FOR WHICH IT IS CREATED AND ALSO THE GOVERNING COUNCIL OF THE TRUST . THE MAIN OBJECT OF THE FORMATION OF THIS SOCIETY IS TO GIVE THE LABORATORIES ACCREDITATION BY WHICH THE QUALITY STANDARDS IN THE PRODUCTS AVAILABLE TO CONSUMERS AND PUBLIC AT LARGE CAN BE IMPROVED. IT HAS NOT BEEN ALLEGED BY AO OR CIT (A) ANYWHERE THAT THE ASSESSEE IS CHARGING EXORBITANT OR EXCESSIVE FEES . WE FIND THAT IN VIEW OF THE DECISION OF HONOURABLE JURISDICTIONAL HIGH COURT IN INDIA TRA DE PROMOTION ORGANIZATIONS V DGIT 371 ITR 333 THE CORRECT INTERPRETATION OF THE PROVISO TO SECTION 2(15) OF THE SAID ACT WOULD BE THAT IT CARVES OUT AN EXCEPTION FROM THE CHARITABLE PURPOSE OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AND THAT EXCEPTION IS LIMITED TO ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR R ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS FOR A CESS OR FEE OR ANY OTHER CONSIDERATION. IN BOTH THE ACTIVITIES, IN THE NATURE OF TRADE , COMMERCE OR BUSINESS OR THE ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR NATIONAL ACCREDITATION BOARD FOR TESTING AND CALIBRATION LABORATORIES V ADIT ( EXEMPTION) ITA NO 1115/ DEL/2013 A Y 2009 - 10 4 | P A G E BUSINESS, THE DOMINANT AND THE PRIME OBJECTIVE HAS TO BE SEEN. IF THE DOMINANT AND THE PRIME OBJECTIVE OF THE INSTITUTION, WHICH CLAIMS TO HAVE BEEN ESTAB LISHED FOR CHARITABLE PURPOSES, IS PROFIT MAKING, WHETHER ITS ACTIVITIES ARE DIRECTLY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR INDIRECTLY IN THE RENDERING OF ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, THEN IT WOULD NOT BE ENTITLED T O CLAIM ITS OBJECT TO BE A 'CHARITABLE PURPOSE '. ON THE FLIP SIDE, WHERE AN INSTITUTION IS NOT DRIVEN PRIMARILY BY A DESIRE OR MOTIVE TO EARN PROFITS BUT TO DO CHARITY THROUGH THE ADVANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTILITY, IT CANNOT BUT BE REGARDE D AS AN INSTITUTION ESTABLISHED FOR CHARITABLE PURPOSES. HONOURABLE HIGH COURT HAS HELD THAT : - 55 . IT WOULD BE APPROPRIATE TO ALSO EXAMINE THE OBSERVATIONS OF ANOTHER DIVISION BENCH OF THIS COURT IN GS1 (SUPRA). WHILE CONSIDERING CIRCULAR NO. 11 OF 2008 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES, TO WHICH A REFERENCE HAS BEEN MADE EARLIER IN THIS JUDGM ENT, THE DIVISION BENCH HELD THAT IT WAS EVIDENT FROM THE SAID CIRCULAR THAT THE NEW PROVISO TO SECTION 2(15) OF THE SAID ACT WAS 'APPLICABLE TO ASSESSEES, WHO ARE ENGAGED IN COMMERCIAL ACTIVITIES, I.E., CARRYING ON BUSINESS, TRADE OR COMMERCE, IN THE GARB OF 'PUBLIC UTILITIES' TO AVOID TAX LIABILITY AS IT WAS NOTICED THAT THE OBJECT 'GENERAL PUBLIC UTILITY' WAS SOMETIMES USED AS A MASK OR DEVICE TO HIDE THE TRUE PURPOSE, WHICH WAS 'TRADE, COMMERCE OR BUSINESS'. FROM THIS, IT IS EVIDENT THAT THE INTRODUCTIO N OF THE PROVISO TO SECTION 2(15) BY VIRTUE OF THE FINANCE ACT, 2008, WAS DIRECTED TO PREVENT THE UNHOLY PRACTICE OF PURE TRADE, COMMERCE AND BUSINESS ENTITIES FROM MASKING THEIR ACTIVITIES AND PORTRAYING THEM IN THE GARB OF AN ACTIVITY WITH THE OBJECT OF A GENERAL PUBLIC UTILITY. IT WAS NOT DESIGNED TO HIT AT THOSE INSTITUTIONS, WHICH HAD THE ADVANCEMENT OF THE OBJECTS OF GENERAL PUBLIC UTILITY AT THEIR HEARTS AND WERE CHARITY INSTITUTIONS. THE ATTEMPT WAS TO REMOVE THE MASKS FROM THE ENTITIES, WHICH WERE PURELY TRADE, COMMERCE OR BUSINESS ENTITIES, AND TO EXPOSE THEIR TRUE IDENTITIES. THE OBJECT WAS NOT TO HURT GENUINE CHARITABLE ORGANISATIONS. AND, THIS WAS ALSO THE ASSURANCE GIVEN BY THE FINANCE MINISTER WHILE INTRODUCING THE FINANCE BILL, 2008. 56 . IN GS1 (SUPRA) IT WAS CONTENDED BY THE REVENUE THAT GS1 (INDIA) HAD ACQUIRED INTELLECTUAL PROPERTY RIGHTS FROM GS1 (BELGIUM) AND THEREAFTER RECEIVED REGISTRATION FEES FROM THIRD PARTIES IN INDIA. THIS WAS SOUGHT TO BE EQUATED TO ROYALTY PAYMENTS. IT WAS AL SO CONTENDED THAT GS1 (INDIA) HAD HUGE SURPLUSES OF RECEIPTS OVER EXPENDITURE AND THAT PAYMENTS WERE MADE TO GS1 (BELGIUM). ACCORDING TO THE REVENUE, ALL THIS ENTAILED THAT GS1 (INDIA) WAS ENGAGED IN 'BUSINESS, TRADE OR COMMERCE'. THE PETITIONER HEREIN REF UTED THIS. IN THIS BACKDROP, THIS COURT ASKED THE QUESTION CAN IT BE SAID THAT THE PETITIONER IS ENGAGED IN ACTIVITIES WHICH CONSTITUTE BUSINESS, COMMERCE OR TRADE ? WHILE ANSWERING THE SAID QUESTION, THE COURT HELD AS UNDER (PAGE 153 OF 360 ITR) : NATIONAL ACCREDITATION BOARD FOR TESTING AND CALIBRATION LABORATORIES V ADIT ( EXEMPTION) ITA NO 1115/ DEL/2013 A Y 2009 - 10 5 | P A G E 'AS OBS ERVED ABOVE, THE LEGAL TERMS, 'TRADE', 'COMMERCE' OR 'BUSINESS' IN SECTION 2(15), MEAN ACTIVITY UNDERTAKEN WITH A VIEW TO MAKE OR EARN PROFIT. PROFIT MOTIVE IS DETERMINATIVE AND A CRITICAL FACTOR TO DISCERN WHETHER AN ACTIVITY IS BUSINESS, TRADE OR COMMERC E.' THE COURT FURTHER HELD (PAGE 153 OF 360 ITR) : 'BUSINESS ACTIVITY HAS AN IMPORTANT PERVADING ELEMENT OF SELF - INTEREST, THOUGH FAIR DEALING SHOULD AND CAN BE PRESENT, WHILST CHARITY OR CHARITABLE ACTIVITY IS ANTITHESIS OF ACTIVITY UNDERTAKEN WITH PR OFIT MOTIVE OR ACTIVITY UNDERTAKEN ON SOUND OR RECOGNISED 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 ?' 57 . ULTIMATELY, IN THE CONTEXT OF THE FACTUAL MATRIX OF THAT CASE, THIS COURT HELD THAT (PAGE 155 OF 360 ITR) : 'CHARGING A NOMINAL FEE TO USE THE CODING SYSTEM AND TO AVAIL OF THE ADVANTAGES AND BENEFITS THEREIN IS NEITHER REFLECTIVE OF THE BUSINESS APTITUDE NOR INDICATIVE OF THE PROFIT ORIENTED INTENT'. THE COURT FURTHER OBSERVED (PAGE 155 OF 360 ITR) : '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 DECISIVE ELEMENT OF BEQUEATHING IS PRESENT. IN T HE ABSENCE OF 'PROFIT MOTIVE' AND CHARITY BEING THE PRIMARY AND SOLE PURPOSE BEHIND THE ACTIVITIES OF THE PETITIONER IS PERSPICUOUSLY DISCERNIBLE AND PERCEPTIBLE.' THE COURT ALSO HELD (PAGE 155 OF 360 ITR) : 'AS OBSERVED ABOVE, FEE CHARGED AND QUANTU M OF INCOME EARNED CAN BE INDICATIVE OF THE FACT THAT THE PERSON IS CARRYING ON BUSINESS OR COMMERCE AND NOT CHARITY, BUT WE MUST KEEP IN MIND THAT CHARITABLE ACTIVITIES REQUIRE OPERATIONAL/RUNNING EXPENSES AS WELL AS CAPITAL EXPENSES TO BE ABLE TO SUSTAIN AND CONTINUE IN LONG RUN. THE PETITIONER HAS TO BE SUBSTANTIALLY SELF - SUSTAINING IN LONG - TERM AND SHOULD NOT DEPEND UPON GOVERNMENT, IN OTHER WORDS, TAXPAYERS SHOULD NOT SUBSIDIZE THE SAID ACTIVITIES, WHICH NEVERTHELESS ARE CHARITABLE AND FALL UNDER THE R ESIDUARY CLAUSE 'GENERAL PUBLIC UTILITY'. THE IMPUGNED ORDER DOES NOT NATIONAL ACCREDITATION BOARD FOR TESTING AND CALIBRATION LABORATORIES V ADIT ( EXEMPTION) ITA NO 1115/ DEL/2013 A Y 2009 - 10 6 | P A G E REFER TO ANY STATUTORY MANDATE THAT A CHARITABLE INSTITUTION FALLING UNDER THE LAST CLAUSE SHOULD BE WHOLLY, SUBSTANTIALLY OR IN PART MUST BE FUNDED BY VOLUNTARY CONTRIBUTIONS. NO SUCH REQUIREMENT HAS BEEN POINTED OUT OR ARGUED. A PRACTICAL AND PRAGMATIC VIEW IS REQUIRED WHEN WE EXAMINE THE DATA, WHICH SHOULD BE ANALYSED OBJECTIVELY AND A NARROW AND COLOURED VIEW WILL BE COUNTER - PRODUCTIVE AND CONTRARY TO THE LANGUAGE OF SECTION 2(15) OF THE ACT.' 58 . IN CONCLUSION, WE MAY SAY THAT THE EXPRESSION 'CHARITABLE PURPOSE', AS DEFINED IN SECTION 2(15) CANNOT BE CONSTRUED LITERALLY AND IN ABSOLUTE TERMS. IT HAS TO TAKE COLOUR AND BE CONSIDERED IN THE CONTEXT OF SECTION 10(23C)(IV) OF THE SAID ACT. I T IS ALSO CLEAR THAT IF THE LITERAL INTERPRETATION IS GIVEN TO THE PROVISO TO SECTION 2(15) OF THE SAID ACT THEN THE PROVISO WOULD BE AT RISK OF RUNNING FOWL OF THE PRINCIPLE OF EQUALITY ENSHRINED IN ARTICLE 14 OF THE CONSTITUTION OF INDIA. IN ORDER TO SAV E THE CONSTITUTIONAL VALIDITY OF THE PROVISO, THE SAME WOULD HAVE TO BE READ DOWN AND INTERPRETED IN THE CONTEXT OF SECTION 10(23C)(IV) BECAUSE, IN OUR VIEW, THE CONTEXT REQUIRES SUCH AN INTERPRETATION. THE CORRECT INTERPRETATION OF THE PROVISO TO SECTION 2(15) OF THE SAID ACT WOULD BE THAT IT CARVES OUT AN EXCEPTION FROM THE CHARITABLE PURPOSE OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AND THAT EXCEPTION IS LIMITED TO ACTIVITIES IN THE NATURE OF TRADE, 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. IN BOTH THE ACTIVITIES, IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR THE ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, C OMMERCE OR BUSINESS, THE DOMINANT AND THE PRIME OBJECTIVE HAS TO BE SEEN. IF THE DOMINANT AND THE PRIME OBJECTIVE OF THE INSTITUTION, WHICH CLAIMS TO HAVE BEEN ESTABLISHED FOR CHARITABLE PURPOSES, IS PROFIT MAKING, WHETHER ITS ACTIVITIES ARE DIRECTLY IN TH E NATURE OF TRADE, COMMERCE OR BUSINESS OR INDIRECTLY IN THE RENDERING OF ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, THEN IT WOULD NOT BE ENTITLED TO CLAIM ITS OBJECT TO BE A 'CHARITABLE PURPOSE'. ON THE FLIP SIDE, WHERE AN INSTITUTION IS NOT DRIVEN PRIMARILY BY A DESIRE OR MOTIVE TO EARN PROFITS BUT TO DO CHARITY THROUGH THE ADVANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTILITY, IT CANNOT BUT BE REGARDED AS AN INSTITUTION ESTABLISHED FOR CHARITABLE PURPOSES. 06 . WE ARE ALSO OF THE VIEW THAT AMENDMENT MADE IN SECTION 2 (15) OF THE ACT WITH EFFECT FROM 1.4.2016 BY SUBSTITUTING THE FIRST PROVISO AND SECOND PROVISO BY A SINGLE PROVISO, WHICH WOULD NOW EXEMPT THE BUSINESS INCOME, WHERE THE ACTIVITY IS UNDERTAKEN IN THE COURSE OF ACTUAL CARRYING OUT OF SUCH ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY , SO THAT IT RECOGNIZES ALL THE ACTIVITIES CONSISTENT WITH THE OBJECTS, WHERE THE OBJECTS ARE NOT PROMPTED BY PROFIT MOTIVE, FROM THE PURVIEW OF LIABILITY BRINGING THE LAW TO CONFORM THE CONSTITUTION WHICH WAS CHALLENGED BEFORE HONOURABEL DELHI HIGH COUR T NATIONAL ACCREDITATION BOARD FOR TESTING AND CALIBRATION LABORATORIES V ADIT ( EXEMPTION) ITA NO 1115/ DEL/2013 A Y 2009 - 10 7 | P A G E IN ABOVE DECISION. THE EFFECT OF THIS PROVISION WOULD BRING THOSE TRUSTS AND INSTITUTIONS, LIKE ASSESSEE, WITH THE OBJECT OF GENERAL PUBLIC UTILITY ON PAR WITH THOSE WITH THE OTHER THREE OBJECTS IN RESPECT OF THE TREATMENT FOR INCOME FROM BUSINESS, IF IT IS INCIDENTAL TO THE OBJECTS AS PROVIDED UNDER SECTION 11(4A) OF THE ACT, SUBJECT TO CERTAIN LIMITATION. 07 . IN VIEW OF ABOVE WE REVERSE THE ORDER OF CIT (A) AND HOLD THAT ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S 11 & 12 OF THE INCOME TAX ACT AS ASSES SEE IS NOT ENGAGED IN ANY TRADE, COMMERCE OR BUSINESS AND ITS DOMINANT AND PRIME OBJECTIVE IS CHARITABLE IN NATURE IN ACCORDANCE WITH SECTION 2 (15 ) OF THE INCOME TAX ACT. 59 . ORDER PRONOUNCED IN THE OPEN COURT ON 2 6 .11.2015. - S D / - - S D / - (H.S.SIDHU) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 6 /11/2015 A K KEOT COPY FORWARDED TO 1 . APPLICANT 2 . RESPONDENT 3 . CIT 4 . CIT (A) 5 . DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI