Paschimbanga Rajya Pratibandhi Sammilani, Kolkata V. A.D.I.T., (Exemption)-II, Kolkata

ITA 1201/KOL/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1317 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 17-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAUTAM KR MONDAL ADD
• Assessee Lawyers: S DASGUPTA
• Keywords: Depreciation; Search and seizure; Charitable institution; Benefit of exemption; Set aside
• Section: 143(3); 12A; 11; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA B BENCH, KOLKATA (BEFORE SRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER & SRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER) I.T.A. NO. 1201/KOL/2019 ASSESSMENT YEAR: 2010-11 PASCHIMBANGA RAJYA PRATIBANDHI SAMMILANI................................ APPELLANT [PAN : AAATP 3202 B] VS. ADIT (EXEMPTION)-II, KOLKATA.................................................................................................... RESPONDENT APPEARANCES BY: SHRI S. DASGUPTA, AR, APPEARED ON BEHALF OF THE ASSESSEE. SHRI GAUTAM KR. MONDAL, ADD.CIT, APPEARED ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : AUGUST 14 TH , 2019 DATE OF PRONOUNCING THE ORDER : SEPTEMBER 6 TH , 2019 ORDER PER J. SUDHAKAR REDDY, AM :- THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-25 [LD.CIT(A) FOR SHORT], KOLKATA, DATED 28.03.2019. 2. THE ASSESSEE IS A SOCIETY. AS PER PARA-1 OF THE LD.CIT(A)S ORDER THE FACTS ARE AS FOLLOWS: THE ASSESSEE SOCIETY HAS BEEN SET UP WITH ALL FORMS OF HUMANITARIAN GROUNDS TO TAKE CARE OF THE PHYSICALLY AND MENTALLY CHALLENGED PERSONS FOR THEIR UP LIFTING, SURVIVAL AND FURTHER ESTABLISHMENT IN LIFE. THIS SOCIETY HAS BEEN SPREAD OVER THROUGHOUT WEST BENGAL SPECIALLY IN RURAL AREAS WITH THOUSANDS OF CHILDREN AND THOUSANDS OF PERSONS WHO ARE MENTALLY AND PHYSICALLY DISABLED. 3. THE ASSESSEE SOCIETY FILED ITS RETURN OF INCOME ON 30.09.2010 DECLARING NIL INCOME BY CLAIMING EXEMPTION U/S 11 OF THE INCOME TAX ACT, 1961 (THE ACT FOR SHORT). THE ASSESSEE SOCIETY IS REGISTERED U/S 12A OF THE ACT VIDE REGISTRATION NO. DIT(E)/S- 23/8E/201/91-92 DATED 06.08.1996 W.E.F. 01.04.1993. APPROVAL U/S 80G(5)(VI) WAS ALSO GRANTED. THE ASSESSING OFFICER (AO FOR SHORT) IN HIS ORDER PASSED U/S 143(3) OF THE ACT ON 23.03.2013 DENIED EXEMPTION TO THE ASSESSEE U/S 11 OF THE ACT FOR THE REASON THAT (A) THE DEFINITION OF CHARITABLE PURPOSE HAS BEEN AMENDED AND THAT ADVANCEMENT OF ANY OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE IF IT INVOLVES THE CARRYING 2 I.T.A. NO. 1201/KOL/2019 ASSESSMENT YEAR: 2010-11 PASCHIMBANGA RAJYA PRATIBANDHI SAMMILANI ON ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR ANY ACTIVITY OF RENDERING OF ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS AND THAT THE ASSESSEE HAD CARRIED ON BUSINESS BY RUNNING PRESS, CAKE SHOP, PHARMACY, STD BOOTH ETC. HE REFERRED TO CLAUSE 17B OF THE CONSTITUTION OF THE SOCIETY AND HELD THAT, THESE CLAUSES WERE INDEPENDENT CLAUSES AND THAT THE ASSESSEE IS RUNNING COMMERCIAL CONCERNS AND HENCE THE ACTIVITY WOULD NOT FALL WITHIN THE KEN OF THE DEFINITION OF THE CHARITABLE PURPOSE. THUS HE DENIED THE BENEFIT OF EXEMPTION U/S 11 OF THE ACT TO THE ASSESSEE. 4. ON APPEAL THE LD. FIRST APPELLATE AUTHORITY CONFIRMED THIS FINDING OF THE AO. FURTHER AGGRIEVED, THE ASSESSEE IS IN APPEAL. 5. WE HAVE HEARD MR. S. DASGUPTA, THE LD. AR ON BEHALF OF THE ASSESSEE AND MR. GAUTAM KR. MONDAL, THE LD. ADD.CIT DR ON BEHALF OF THE REVENUE. 6. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, A PERUSAL OF THE PAPERS ON RECORD AND THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS CASE LAWS CITED, WE HOLD AS FOLLOWS. 7. THE ACTIVITIES OF THE ASSESSEE SOCIETY HAVE BEEN BROUGHT OUT AT PAGE 1 OF THE AOS ORDER. THIS INCLUDES RUNNING OF A NURSING TRAINING SCHOOL AND RUNNING OF A B-ED SPECIAL EDUCATION COLLEGE WHICH IS ESTABLISHED FOR THE TRAINING OF TEACHERS. THESE TWO ACTIVITIES ARE NOT DISPUTED BY THE REVENUE. 8. SECTION 2 SUB-SECTION 15 OF THE ACT READS AS FOLLOWS: 'CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR, EDUCATION, YOGA, MEDICAL RELIEF, PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTORIC INTEREST, AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY, UNLESS (I) SUCH ACTIVITY IS UNDERTAKEN IN THE COURSE OF ACTUAL CARRYING OUT OF SUCH ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY; AND (II) THE AGGREGATE RECEIPTS FROM SUCH ACTIVITY OR ACTIVITIES DURING THE PREVIOUS YEAR, DO NOT EXCEED TWENTY PER CENT OF THE TOTAL RECEIPTS, OF THE TRUST OR INSTITUTION UNDERTAKING SUCH ACTIVITY OR ACTIVITIES, OF THAT PREVIOUS YEAR. 3 I.T.A. NO. 1201/KOL/2019 ASSESSMENT YEAR: 2010-11 PASCHIMBANGA RAJYA PRATIBANDHI SAMMILANI 9. THE OBJECTS AND THE ACTIVITIES OF THE ASSESSEE SOCIETY IN RUNNING EDUCATIONAL INSTITUTIONS SUCH AS NURSING TRAINING SCHOOL AND B-ED SPECIAL EDUCATION COLLEGE BRINGS THE ACTIVITIES WITHIN THE AMBIT OF THE DEFINITION OF CHARITABLE PURPOSE, BEING EDUCATION. THE PROVISO TO SECTION 2(15) OF THE ACT APPLIES ONLY FOR THE LAST LIMB OF THE DEFINITION U/S 2(15) OF THE ACT I.E. ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AND NOT TO THE LIMBS OF (A) RELIEF TO THE POOR, (B) EDUCATION, (C) MEDICAL RELIEF, (D) PRESERVATION OF ENVIRONMENT, (E) PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTORIC INTEREST. THUS IN VIEW OF THE MATTER, THE ORDER OF THE AO IN DENYING THE EXEMPTION TO THE ASSESSEE BY RELYING ON THE PROVISO OF THE SECTION 2(15) OF THE ACT IS ERRONEOUS AND HAVE STRUCK DOWN AS ILLEGAL. 10. FURTHER, WE FIND THAT THE LD.CIT(A) AT PARA-3.2 OF HIS ORDER PAGE-7 & 8 HELD AS FOLLOWS: 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 AND 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 POSSIBLE. 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.' PERUSAL OF PARA NO. 3 POINT NO. 2 OF THE AFORESAID CIRCULAR SAYS THAT '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'. PERUSAL OF AO ORDER SAYS THAT THE APPELLANT INCOME IS NOT FROM CHARITABLE ACTIVITY, MAINTENANCE AND SALE OF MEDICINE SALE OF LUXURY ITEMS ETC. IT IS ALSO MENTIONED IN THE AUDIT REPORT THAT THE APPELLANT HAS ENGAGED IN BUSINESS AND. IT IS A BUSINESS UNIT OF PASCHIMBANGA RAJYA PRATIBANDHI SAMMILANI. KEEPING IN VIEW OF THE FACT THAT THE OBJECT OF THE TRUST WAS TO RUN FOR PROFIT MOTIVE AND KEEPING IN VIEW OF THE OBSERVATION MADE BY THE AO THAT APPELLANTS TRUST HAD A NUMBER OF OBJECTS, INDEPENDENT OF EACH OTHER, INCLUDING ONE TO OPEN, CREATE OR ESTABLISH COMMERCIAL CONCERNS LIKE RUNNING OF PCO BOOTHS WITH LOCAL STD AND ISD FACILITIES, RUNNING OF CHEMIST SHOP, PRODUCTION CENTERS ETC. AS MENTIONED IN CLAUSE 17B OF THE CONSTITUTION OF THE SOCIETY THE CORE ACTIVITY OF THE APPELLANTS ARE BUSINESS ACTIVITY. IT HAS ALREADY BEEN OBSERVED THAT THE OBJECTS OF THE TRUST AS SET OUT IN ITS CONSTITUTION WERE INDEPENDENT OBJECTS AND SINCE ONE OF THESE OBJECTS WAS TO RUN COMMERCIAL CONCERNS, IT COULD NOT BE DESCRIBED AS A CHARITABLE PURPOSE. THE ARGUMENT THAT THE SOLE AND DOMINANT PURPOSE OF THE TRUST DEED WAS CHARITABLE AND THAT THE CARRYING ON OF A COMMERCIAL ACTIVITY WAS ONLY SUBSERVIENT TO THE MAIN OBJECT COULD NOT BE ACCEPTED IN VIEW OF THE INDEPENDENT NATURE OF ALL THE OBJECTS SET OUT IN ITS CONSTITUTION. FURTHER, I ALSO AGREE WITH THE VIEW OF THE AO THAT THE CONSTITUTION OF THE TRUST ITSELF PROVIDED THAT THE PURPOSE OF THE TRUST WOULD BE CARRIED OUT BY 4 I.T.A. NO. 1201/KOL/2019 ASSESSMENT YEAR: 2010-11 PASCHIMBANGA RAJYA PRATIBANDHI SAMMILANI ENGAGING IN THE ACTIVITY AS MENTIONED IN CLAUSE 17B WHICH HAD A PREDOMINANT PROFIT MOTIVE. THE EXEMPTION COULD NOT, THEREFORE, BE AVAILABLE AS T,1:1 VERY EXISTENCE AND NATURE THEREIN OF THE ASSESSEE TRUST RALLIED UPON CLAUSE 4K, OF THE CONSTITUTION OF THE SOCIETY. I AGREE WITH THE VIEW OF THE AO. 11. WE FIND THAT LD.CIT(A) HAS ONLY EXTRACTED A PART OF CLAUSE 17B OF THE CONSTITUTION OF THE ASSESSEE. THE ENTIRE CLAUSE READS AS FOLLOWS: 17 B) AT THE INITIATIVE AND MANAGEMENT OF THE ORGANIZATION SMALL PROJECTS MAY BE CREATED LIKE RUNNING OF PCO BOOTHS WITH LOCAL STD AND ISD FACILITIES, RUNNING OF CHEMIST SHOP, PRODUCTION CENTRES ETC. THUS PERSONS WITH DISABILITIES EMPLOYMENT OPPORTUNITIES CAN BE TRIED. 12. THE WORDING THUS PERSONS WITH DISABILITIES EMPLOYMENT OPPORTUNITIES CAN BE TRIED WHICH WAS PART OF CLAUSE 17B WAS IN OUR VIEW WRONGLY IGNORED TO DENY THE ASSESSEE BENEFIT U/S 11 OF THE ACT. 13. EVEN OTHERWISE IT IS NOT IN DISPUTE THAT SEPARATE BOOKS OF ACCOUNT ARE BEING MAINTAINED FOR EACH OF THE ACTIVITIES OF THE ASSESSEE SOCIETY. THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF DIVYA YOG MANDIR TRUST VS. JCIT, HARDWAR [2013] 37 TAXMANN.COM 227 (DELHI - TRIB.) HELD AS FOLLOWS: SECTION 2(15) OF THE INCOME-TAX ACT, 1961 - CHARITABLE PURPOSE [EDUCATION] - ASSESSMENT YEAR 2009-10 - WHETHER IMPARTING OF YOGA TRAINING THROUGH WELL STRUCTURED YOGA CAMPS FALLS UNDER CATEGORY OF IMPARTING EDUCATION WHICH IS ONE OF CHARITABLE OBJECTS DEFINED UNDER SECTION 2(15) AND, SUCH AN ACTIVITY IS NOT HIT BY PROVISO TO SECTION 2(15). SECTION 12A OF THE INCOME-TAX ACT, 1961 - CHARITABLE OR RELIGIOUS TRUST - REGISTRATION OF [SCOPE OF POWER OF ASSESSING OFFICER] - ASSESSMENT YEAR 2009-10 - WHETHER ONCE REGISTRATION UNDER SECTION 12A HAS BEEN GRANTED BY COMMISSIONER, ASSESSING OFFICER CANNOT QUESTION CHARITABLE CHARACTER OF INSTITUTION DURING COURSE OF ASSESSMENT PROCEEDINGS. SECTION 2(15), READ WITH SECTIONS 11 AND 12A, OF THE INCOME-TAX ACT, 1961 - CHARITABLE PURPOSE [PROFIT MOTIVE] - ASSESSMENT YEAR 2009-10 - ASSESSEE WAS A PUBLIC CHARITABLE TRUST REGISTERED UNDER SECTION 12A - MAIN OBJECTIVE OF ASSESSEE-TRUST WAS TO PROVIDE MEDICAL RELIEF THROUGH YOGA, AYURVED, ACUPRESSURE AND NATUROPATHY AND TO IMPART EDUCATION IN FIELD OF YOGA FOR PURPOSE OF ALLEVIATING ALL KINDS OF DISEASE - IN ORDER TO ACHIEVE AFORESAID OBJECTIVES, ASSESSEE HAD SET-UP AYURVEDIC HOSPITALS, AUYRVEDIC PHARMACEUTICAL UNITS AND YOG SADHNA KENDRAS - DURING RELEVANT ASSESSMENT YEAR, ASSESSEE FILED ITS RETURN CLAIMING EXEMPTION OF INCOME UNDER SECTION 11 - REVENUE AUTHORITIES OPINED THAT ACTIVITIES UNDERTAKEN BY ASSESSEE FELL UNDER SIXTH LIMB OF DEFINITION OF 'CHARITABLE PURPOSE' GIVEN UNDER SECTION 2(15), I.E., ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY - AUTHORITIES BELOW THUS APPLYING PROVISO TO SECTION 2(15) CONCLUDED THAT ASSESSEE'S TRANSACTIONS WERE IN NATURE OF BUSINESS AND COMMERCE WHICH WERE NOT ELIGIBLE FOR EXEMPTION UNDER SECTION 11 - IT WAS NOTED FROM RECORDS THAT ALL BUSINESS ACTIVITIES INCLUDING BUSINESS OF PHARMACY WERE INCIDENTIAL TO ATTAINMENT OF MAIN OBJECT, I.E., PROPAGATION OF YOGA, WHICH WAS UNDOUBTEDLY CHARITABLE IN NATURE - IT WAS ALSO APPARENT THAT PROFITS FROM BUSINESS WERE APPLIED FOR CHARITABLE OBJECTS AND SEPARATE BOOKS OF ACCOUNT WERE MAINTAINED IN RESPECT OF THOSE BUSINESS ACTIVITIES - WHETHER ON FACTS, ASSESSEE SATISFIED CONDITIONS PRESCRIBED IN SECTION 11(4)/11(4A) AND, THUS, ITS CLAIM FOR EXEMPTION OF INCOME WAS TO BE ALLOWED. 5 I.T.A. NO. 1201/KOL/2019 ASSESSMENT YEAR: 2010-11 PASCHIMBANGA RAJYA PRATIBANDHI SAMMILANI SECTION 11 OF THE INCOME-TAX ACT, 1961 - CHARITABLE/RELIGIOUS TRUST - EXEMPTION OF INCOME FROM PROPERTY HELD UNDER [BUSINESS HELD IN TRUST] - WHETHER THERE IS NO BAR IN CHARITABLE TRUST/INSTITUTION CARRYING ON BUSINESS PROVIDED CONDITIONS PRESCRIBED IN SECTION 11(4)/11(4A) ARE SATISFIED - HELD, YES - WHETHER A CHARITABLE TRUST CAN CARRY ON BUSINESS AND UTILIZE ITS PROFITS THEREFROM FOR CHARITABLE PURPOSES BUT IT CANNOT HAVE ITS PURPOSE, AN ACTIVITY THAT INVOLVES BUYING AND SELLING OF GOODS AND MAKING PROFITS. THE HONBLE DELHI HIGH COURT IN THE CASE OF INDIA TRADE PROMOTION ORGANIZATION VS. DIRECTOR GENERAL OF INCOME TAX (EXEMPTION) & OTHERS W.P. (C) 1872/2013 JUDGMENT DATED 22.01.2015 HAS HELD AS FOLLOWS: 47. WE HAVE ALREADY NOTED THAT PRIOR TO THE AMENDMENT BEING INTRODUCED WITH EFFECT FROM 01.04.2009, THE PETITIONER HAD BEEN RECOGNIZED AS AN INSTITUTION ESTABLISHED FOR CHARITABLE PURPOSE AND THIS HAD BEEN DONE HAVING REGARD TO THE OBJECTS OF THE INSTITUTION AND ITS IMPORTANCE THROUGHOUT INDIA. IT IS ONLY BECAUSE OF THIS THAT THE PETITIONER HAD BEEN GRANTED THE EXEMPTION BY THE RESPONDENT FOR THE PERIOD PRIOR TO ASSESSMENT YEAR 2009-10. THEREFORE, INSOFAR AS THE RECEIVING OF INCOME IS CONCERNED, THAT CANNOT BE TAKEN AS AN INSTANCE TO DENY THE PETITIONER ITS STATUS AS AN INSTITUTION ESTABLISHED FOR CHARITABLE PURPOSES. BECAUSE, IF THAT WERE TO BE SO, THEN THERE WOULD BE NO NECESSITY TO TAKE RECOURSE TO SECTION 10(23C)(IV) FOR THE BENEFIT OF AN EXEMPTION. TO PUT IT PLAINLY, IF AN INSTITUTION ESTABLISHED FOR CHARITABLE PURPOSES DID NOT RECEIVE AN INCOME AT ALL, THEN WHAT WOULD BE THE NEED FOR TAKING ANY BENEFIT UNDER SECTION 10(23C)(IV) OF THE SAID ACT. THEREFORE, IF A MEANING IS GIVEN TO THE EXPRESSION CHARITABLE PURPOSE SO AS TO SUGGEST THAT IN CASE AN INSTITUTION, HAVING AN OBJECTIVE OF ADVANCEMENT OF GENERAL PUBLIC UTILITY, DERIVES AN INCOME, IT WOULD BE FALLING WITHIN THE EXCEPTION CARVED OUT IN THE FIRST PROVISO TO SECTION 2(15) OF THE SAID ACT, THEN THERE WOULD BE NO INSTITUTION WHATSOEVER WHICH WOULD QUALIFY FOR THE EXEMPTION UNDER SECTION 10(23C)(IV) OF THE SAID ACT. AND, THE SAID PROVISION WOULD BE RENDERED REDUNDANT. THIS IS SO, BECAUSE, IF THE INSTITUTION HAD NO INCOME, RECOURSE TO SECTION 10(23C)(IV) WOULD NOT BE NECESSARY. AND, IF SUCH AN INSTITUTION HAD AN INCOME, IT WOULD NOT, ON THE INTERPRETATION SOUGHT TO BE GIVEN BY THE REVENUE, BE QUALIFIED FOR BEING CONSIDERED AS AN INSTITUTION ESTABLISHED FOR CHARITABLE PURPOSES. SO, EITHER WAY, THE PROVISIONS OF SECTION 10(23C)(IV) WOULD NOT BE AVAILABLE, EITHER BECAUSE IT IS NOT NECESSARY OR BECAUSE IT IS BLOCKED. THE INTENTION BEHIND INTRODUCING THE PROVISO TO SECTION 2(15) OF THE SAID ACT COULD CERTAINLY NOT HAVE BEEN TO RENDER THE PROVISIONS OF SECTION 10(23C)(IV) REDUNDANT. 48. WITH THIS IN MIND, IT IS TO BE SEEN AS TO WHAT IS MEANT BY THE EXPRESSIONS 'TRADE', 'COMMERCE' OR 'BUSINESS'. THE WORD 'TRADE' WAS CONSIDERED BY THE SUPREME COURT IN ITS DECISION IN THE CASE OF KHODAY DISTILLERIES LTD AND OTHERS V. STATE OF KARNATAKA AND OTHERS: 1995 (1) SCC 574, WHEREBY THE SUPREME COURT HELD THAT 'THE PRIMARY MEANING OF THE WORD 'TRADE' IS THE EXCHANGE OF GOODS FOR GOODS OR GOODS FOR MONEY'. FURTHERMORE, IN STATE OF ANDHRA PRADESH V. H. ABDUL BAKHI AND BROS: 1964 (5) STC 644 (SC), T HE SUPREME COURT HELD THAT THE WORD 'BUSINESS' WAS OF INDEFINITE IMPORT AND IN A TAXING STATUTE, IT IS USED IN THE SENSE OF AN OCCUPATION, OR PROFESSION WHICH OCCUPIES TIME, ATTENTION OR LABOUR OF A PERSON, AND IS CLEARLY ASSOCIATED WITH THE OBJECT OF MAKING PROFIT'. THIS COURT, IN ICAI (I) (SUPRA) HELD THAT, WHILE CONSTRUING THE TERM 'BUSINESS' AS APPEARING IN THE PROVISO TO SECTION 2(15), THE OBJECT AND PURPOSE OF THE SECTION HAS TO BE KEPT IN MIND. IT WAS OBSERVED THEREIN THAT A VERY BROAD AND EXTENDED DEFINITION OF THE TERM 'BUSINESS' WAS NOT INTENDED FOR THE PURPOSE OF INTERPRETING AND APPLYING THE FIRST PROVISO TO SECTION 2(15) OF THE ACT SO AS TO INCLUDE ANY TRANSACTION FOR A CESS, FEE OR CONSIDERATION. THE COURT SPECIFICALLY HELD THAT:- 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 A 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 IN FACT IN THE NATURE OF BUSINESS. 6 I.T.A. NO. 1201/KOL/2019 ASSESSMENT YEAR: 2010-11 PASCHIMBANGA RAJYA PRATIBANDHI SAMMILANI 49. IN BUREAU OF INDIAN STANDARDS (SUPRA), THIS COURT, WHILE CONSIDERING WHETHER THE ACTIVITIES OF THE BUREAU OF INDIAN STANDARDS (SUPRA) IN GRANTING LICENCES AND TRADING CERTIFICATES AND CHARGING OF FEE AMOUNTED TO CARRYING ON BUSINESS, TRADE OR COMMERCE, HELD AS UNDER:- 73. ... IN THESE CIRCUMSTANCES, RENDERING ANY SERVICE IN RELATION TO TRADE, COMMERCE OR BUSINESS CANNOT, IN THE OPINION OF THE COURT, RECEIVE SUCH A WIDE CONSTRUCTION AS TO ENFOLD REGULATORY AND SOVEREIGN AUTHORITIES, SET UP UNDER STATUTORY ENACTMENTS, AND TASKED TO ACT AS AGENCIES OF THE STATE IN PUBLIC DUTIES WHICH CANNOT BE DISCHARGED BY PRIVATE BODIES. OFTEN, APART FROM THE CONTROLLING OR PARENT STATUTES, LIKE THE BIS ACT, THESE STATUTORY BODIES (INCLUDING BIS) ARE EMPOWERED TO FRAME RULES OR REGULATIONS, EXERCISE CO-ERCIVE POWERS, INCLUDING INSPECTION, RAIDS; THEY POSSESS SEARCH AND SEIZURE POWERS AND ARE INVARIABLY SUBJECTED TO PARLIAMENTARY OR LEGISLATIVE OVERSIGHT. THE PRIMARY OBJECT FOR SETTING UP SUCH REGULATORY BODIES WOULD BE TO ENSURE GENERAL PUBLIC UTILITY. THE PRESCRIBING OF STANDARDS, AND ENFORCING THOSE STANDARDS, THROUGH ACCREDITATION AND CONTINUING SUPERVISION THROUGH INSPECTION ETC., CANNOT BE CONSIDERED AS TRADE, BUSINESS OR COMMERCIAL ACTIVITY, MERELY BECAUSE THE TESTING PROCEDURES, OR ACCREDITATION INVOLVES CHARGING OF SUCH FEES. IT CANNOT BE SAID THAT THE PUBLIC UTILITY ACTIVITY OF EVOLVING, PRESCRIBING AND ENFORCING STANDARDS, INVOLVES THE CARRYING ON OF TRADE OR COMMERCIAL ACTIVITY. 50. IN ICAI(II) (SUPRA), WHILE CONSIDERING WHETHER THE ACTIVITIES OF ICAI FELL WITHIN THE PROVISO TO SECTION 2(15) AS INTRODUCED WITH EFFECT FROM 01.04.2009, THIS COURT, AFTER CONSIDERING THE SUPREME COURT DECISION IN THE CASE OF COMMISSIONER OF SALES TAX V. SAI PUBLICATION FUND: (2002) 258 ITR 70(SC) HELD:- 'THUS, IF THE DOMINANT ACTIVITY OF THE ASSESSEE WAS NOT BUSINESS, THEN ANY INCIDENTAL OR ANCILLARY ACTIVITY WOULD ALSO NOT FALL WITHIN THE DEFINITION OF BUSINESS.' 51. THIS COURT ALSO OBSERVED IN ICAI(II) (SUPRA) THAT:- 64. ... IT IS NOT NECESSARY THAT A PERSON SHOULD GIVE SOMETHING FOR FREE OR AT A CONCESSIONAL RATE TO QUALIFY AS BEING ESTABLISHED FOR A CHARITABLE PURPOSE. IF THE OBJECT AND PURPOSE OF THE INSTITUTION IS CHARITABLE, THE FACT THAT THE INSTITUTION COLLECTS CERTAIN CHARGES, DOES NOT ALTER THE CHARACTER OF THE INSTITUTION. ... THIS COURT IN ICAI (II) (SUPRA) HELD:- 67. THE EXPRESSIONS TRADE, COMMERCE AND BUSINESS AS OCCURRING IN THE FIRST PROVISO TO SECTION 2(15) OF THE ACT MUST BE READ IN THE CONTEXT OF THE INTENT AND PURPORT OF SECTION 2(15) OF THE ACT AND CANNOT BE INTERPRETED TO MEAN ANY ACTIVITY WHICH IS CARRIED ON IN AN ORGANISED MANNER. THE PURPOSE AND THE DOMINANT OBJECT FOR WHICH AN INSTITUTION CARRIES ON ITS ACTIVITIES IS MATERIAL TO DETERMINE WHETHER THE SAME IS BUSINESS OR NOT. THE PURPORT OF THE FIRST PROVISO TO SECTION 2(15) OF THE ACT IS NOT TO EXCLUDE ENTITIES WHICH ARE ESSENTIALLY FOR CHARITABLE PURPOSE BUT ARE CONDUCTING SOME ACTIVITIES FOR A CONSIDERATION OR A FEE. THE OBJECT OF INTRODUCING THE FIRST PROVISO IS TO EXCLUDE ORGANIZATIONS WHICH ARE CARRYING ON REGULAR BUSINESS FROM THE SCOPE OF CHARITABLE PURPOSE. THE PURPOSE OF INTRODUCING THE PROVISO TO SECTION 2(15) OF THE ACT CAN BE UNDERSTOOD FROM THE BUDGET SPEECH OF THE FINANCE MINISTER WHILE INTRODUCING THE FINANCE BILL 2008. THE RELEVANT EXTRACT TO THE SPEECH IS AS UNDER:- ....... CHARITABLE PURPOSE INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF AND ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. THESE ACTIVITIES ARE TAX EXEMPT, AS THEY SHOULD BE. HOWEVER, SOME ENTITIES CARRYING ON REGULAR TRADE, COMMERCE OR BUSINESS OR PROVIDING SERVICES IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS AND EARNING INCOMES HAVE SOUGHT TO CLAIM THAT THEIR PURPOSES WOULD ALSO FALL UNDER CHARITABLE PURPOSE. OBVIOUSLY, THIS WAS NOT THE INTENTION OF PARLIAMENT AND, HENCE, I PROPOSE TO AMEND THE LAW TO EXCLUDE THE AFORESAID CASES. GENUINE CHARITABLE ORGANIZATIONS WILL NOT IN ANY WAY BE AFFECTED.' THE EXPRESSIONS BUSINESS, TRADE OR COMMERCE AS USED IN THE FIRST PROVISO MUST, THUS, BE INTERPRETED RESTRICTIVELY AND WHERE THE DOMINANT OBJECT OF AN ORGANISATION IS CHARITABLE ANY INCIDENTAL ACTIVITY FOR FURTHERANCE OF THE OBJECT WOULD NOT FALL WITHIN THE EXPRESSIONS - BUSINESS, TRADE OR COMMERCE. 52. WITH REGARD TO THE SURAT ART SILK CASE (SUPRA), THIS COURT, IN ICAI (II) (SUPRA) OBSERVED AS UNDER:- 7 I.T.A. NO. 1201/KOL/2019 ASSESSMENT YEAR: 2010-11 PASCHIMBANGA RAJYA PRATIBANDHI SAMMILANI 69. IN THE CASE OF ADDL. COMMISSIONER OF INCOME TAX V. SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION: [1980] 121 ITR 1 (SC), THE SUPREME COURT HELD AS UNDER:- 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 WHERE THE PREDOMINANT OBJECT OF THE ACTIVITY IS TO ANY OUT THE CHARITABLE PURPOSE AND NOT TO EARN PROFIT, IT WOULD NOT LOSE ITS CHARACTER OF A CHARITABLE PURPOSE MERELY BE CAUSE SOME PROFIT ARISES FROM THE ACTIVITY.' 70. ALTHOUGH IN THAT CASE THE STATUTORY PROVISIONS BEING CONSIDERED BY THE SUPREME COURT WERE DIFFERENT AND THE UTILISATION OF INCOME EARNED IS, NOW, NOT A RELEVANT CONSIDERATION IN VIEW OF THE EXPRESS WORDS OF THE FIRST PROVISO TO SECTION 2(15) OF THE ACT, NONETHELESS THE TEST OF DOMINANT OBJECT OF AN ENTITY WOULD BE RELEVANT TO DETERMINE WHETHER THE ENTITY IS CARRYING ON BUSINESS OR NOT. IN THE PRESENT CASE, THERE IS LITTLE DOUBT THAT THE OBJECTS OF THE ACTIVITIES OF THE PETITIONER ARE ENTIRELY FOR CHARITABLE PURPOSES. FINALLY IN ICAI(II) (SUPRA), THIS COURT, WITH REFERENCE TO H. ABDUL BAKHI AND BROS (SUPRA) OBSERVED AS UNDER:- 71. ALTHOUGH, IT IS NOT ESSENTIAL THAT AN ACTIVITY BE CARRIED ON FOR PROFIT MOTIVE IN ORDER TO BE CONSIDERED AS BUSINESS, BUT EXISTENCE OF PROFIT MOTIVE WOULD BE A VITAL INDICATOR IN DETERMINING WHETHER AN ORGANISATION IS CARRYING ON BUSINESS OR NOT. IN THE PRESENT CASE, THE PETITIONER HAS SUBMITTED FIGURES TO INDICATE THAT EXPENDITURE ON SALARIES AND DEPRECIATION EXCEEDS THE SURPLUS AS GENERATED FROM HOLDING COACHING CLASSES. IN ADDITION, THE PETITIONER INSTITUTE PROVIDES STUDY MATERIAL AND OTHER ACADEMIC SUPPORT SUCH AS FACILITIES OF A LIBRARY WITHOUT ANY MATERIAL ADDITIONAL COSTS. THE SUPREME COURT IN THE CASE OF STATE OF ANDHRA PRADESH V. H. ABDUL BAKHI AND BROS. (SUPRA) HELD AS UNDER: THE EXPRESSION 'BUSINESS' THOUGH EXTENSIVELY USED A WORD OF INDEFINITE IMPORT, IN TAXING STATUTES IT IS USED IN THE SENSE OF AN OCCUPATION, OR PROFESSION WHICH OCCUPIES THE TIME, ATTENTION AND LABOUR OF A PERSON, NORMALLY WITH THE OBJECT OF MAKING PROFIT. TO REGARD AN ACTIVITY AS BUSINESS THERE MUST BE A COURSE OF DEALINGS, EITHER ACTUALLY CONTINUED OR CONTEMPLATED TO BE CONTINUED WITH A PROFIT MOTIVE, AND NOT FOR SPORT OR PLEASURE. (UNDERLINING ADDED) 72. THERE IS NOTHING ON RECORD TO INDICATE THE ASSERTION OF THE PETITIONER THAT ITS ACTIVITIES ARE NOT FUELLED BY PROFIT MOTIVE IS INCORRECT. ABSENCE OF PROFIT MOTIVE, THOUGH NOT CONCLUSIVE, DOES INDICATE THAT THE PETITIONER IS NOT CARRYING ON ANY BUSINESS. 53. FROM THE SAID DECISION, IT IS APPARENT THAT MERELY BECAUSE A FEE OR SOME OTHER CONSIDERATION IS COLLECTED OR RECEIVED BY AN INSTITUTION, IT WOULD NOT LOSE ITS CHARACTER OF HAVING BEEN ESTABLISHED FOR A CHARITABLE PURPOSE. IT IS ALSO IMPORTANT TO NOTE THAT WE MUST EXAMINE AS TO WHAT IS THE DOMINANT ACTIVITY OF THE INSTITUTION IN QUESTION. IF THE DOMINANT ACTIVITY OF THE INSTITUTION WAS NOT BUSINESS, TRADE OR COMMERCE, THEN ANY SUCH INCIDENTAL OR ANCILLARY ACTIVITY WOULD ALSO NOT FALL WITHIN THE CATEGORIES OF TRADE, COMMERCE OR BUSINESS. IT IS CLEAR FROM THE FACTS OF THE PRESENT CASE THAT THE DRIVING FORCE IS NOT THE DESIRE TO EARN PROFITS BUT, THE OBJECT OF PROMOTING TRADE AND COMMERCE NOT FOR ITSELF, BUT FOR THE NATION - BOTH WITHIN INDIA AND OUTSIDE INDIA. CLEARLY, THIS IS A CHARITABLE PURPOSE, WHICH HAS AS ITS MOTIVE THE ADVANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTILITY TO WHICH THE EXCEPTION CARVED OUT IN THE FIRST PROVISO TO SECTION 2(15) OF THE SAID ACT WOULD NOT APPLY. WE SAY SO, BECAUSE, IF A LITERAL INTERPRETATION WERE TO BE GIVEN TO THE SAID PROVISO, THEN IT WOULD RISK BEING HIT BY ARTICLE 14 (THE EQUALITY CLAUSE ENSHRINED IN ARTICLE 14 OF THE CONSTITUTION). IT IS WELL-SETTLED THAT THE COURTS SHOULD ALWAYS ENDEAVOUR TO UPHOLD THE CONSTITUTIONAL VALIDITY OF A PROVISION AND, IN DOING SO, THE PROVISION IN QUESTION MAY HAVE TO BE READ DOWN, AS POINTED OUT ABOVE, IN ARUN KUMAR (SUPRA). 54. IT WOULD BE PERTINENT TO REITERATE THAT SECTION 2(15) IS ONLY A DEFINITION CLAUSE. SECTION 2 BEGINS WITH THE WORDS, IN THIS ACT, UNLESS THE CONTEXT OTHERWISE REQUIRES. THE EXPRESSION 'CHARITABLE PURPOSE' APPEARING IN SECTION 2(15) OF THE SAID ACT HAS TO BE SEEN IN THE CONTEXT OF SECTION 10(23C)(IV). WHEN THE EXPRESSION 'CHARITABLE PURPOSE', AS DEFINED IN SECTION 2(15) OF THE SAID ACT, IS READ IN THE CONTEXT OF SECTION 10(23C)(IV) OF THE SAID ACT, WE WOULD HAVE TO GIVE 8 I.T.A. NO. 1201/KOL/2019 ASSESSMENT YEAR: 2010-11 PASCHIMBANGA RAJYA PRATIBANDHI SAMMILANI UP THE STRICT AND LITERAL INTERPRETATION SOUGHT TO BE GIVEN TO THE EXPRESSION 'CHARITABLE PURPOSE' BY THE REVENUE. WITH RESPECT, WE DO NOT AGREE WITH THE VIEWS OF THE KERALA AND ANDHRA PRADESH HIGH COURTS. 55. IT WOULD BE APPROPRIATE TO ALSO EXAMINE THE OBSERVATIONS OF ANOTHER DIVISION BENCH OF THIS COURT IN G.S.1 (SUPRA). WHILE CONSIDERING CIRCULAR NO.11 OF 2008 ISSUED BY THE CBDT, TO WHICH A REFERENCE HAS BEEN MADE EARLIER IN THIS JUDGMENT, 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 ASSESSES, 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 INTRODUCTION 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 ORGANIZATIONS. AND, THIS WAS ALSO THE ASSURANCE GIVEN BY THE FINANCE MINISTER WHILE INTRODUCING THE FINANCE BILL 2008. 56. IN G.S. 1 (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 ALSO 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 REFUTED 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:- 21. ... AS OBSERVED ABOVE, 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 COMMERCE. THE COURT FURTHER HELD:- 22. 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. 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 'CHARGING A NOMINAL FEE TO USE THE CODING SYSTEM AND TO AVAIL THE ADVANTAGES AND BENEFITS THEREIN IS NEITHER REFLECTIVE OF THE BUSINESS APTITUDE NOR INDICATIVE OF THE PROFIT ORIENTED INTENT'. THE COURT FURTHER OBSERVED:- THUS THE CONTENTION OF THE REVENUE THAT THE PETITIONER CHARGES FEE AND, THEREFORE, IS CARRYING ON BUSINESS, HAS TO BE REJECTED. 9 I.T.A. NO. 1201/KOL/2019 ASSESSMENT YEAR: 2010-11 PASCHIMBANGA RAJYA PRATIBANDHI SAMMILANI THE INTENTION BEHIND THE ENTIRE ACTIVITY IS PHILANTHROPIC AND NOT TO RECOUP OR REIMBURSE IN MONETARY TERMS WHAT IS GIVEN TO THE BENEFICIARIES. ELEMENT OF GIVE AND TAKE IS MISSING, BUT 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. THE COURT ALSO HELD:- 27. AS OBSERVED ABOVE, FEE CHARGED AND QUANTUM 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 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. 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. IT 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 INDIA. IN ORDER TO SAVE 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, COMMERCE OR BUSINESS, THE DOMINANT AND THE PRIME OBJECTIVE HAS TO BE SEEN. IF THE DOMINANT AND PRIME OBJECTIVE OF THE INSTITUTION, WHICH CLAIMS TO HAVE BEEN ESTABLISHED 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 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. 59. THUS, WHILE WE UPHOLD THE CONSTITUTIONAL VALIDITY OF THE PROVISO TO SECTION 2(15) OF THE SAID ACT, IT HAS TO BE READ DOWN IN THE MANNER INDICATED BY US. AS A CONSEQUENCE, THE IMPUGNED ORDER DATED 23.01.2013 IS SET ASIDE AND A MANDAMUS IS ISSUED TO THE RESPONDENT TO GRANT APPROVAL TO THE PETITIONER UNDER SECTION 10(23C)(IV) OF THE SAID ACT WITHIN SIX WEEKS FROM THE DATE OF THIS JUDGMENT. THE WRIT PETITION STANDS ALLOWED AS ABOVE. THE PARTIES ARE LEFT TO BEAR THEIR OWN COSTS. 14. APPLYING THE PROPOSITIONS OF LAW LAID DOWN IN THE ABOVE REFERRED CASE LAW TO THE FACTS OF THE CASE, AS THE PREDOMINANT OBJECT OF THE ASSESSEE IS TO CARRY OUT CHARITABLE PURPOSE AND NOT TO EARN PROFIT, IT WOULD NOT LOSE ITS CHARITABLE CHARACTER. THE SURPLUS DERIVED FROM RUNNING THE STD BOOTHS, PHARMACEUTICAL SHOPS ETC. WAS INCIDENTAL AND ANCILLARY TO THE DOMINANT OBJECT OF TAKING CARE OF PHYSICALLY AND MENTALLY CHALLENGED PERSONS AND UPLIFTING THEM AND ENABLING THEM TO SURVIVE AND LIVE IN THIS SOCIETY. 10 I.T.A. NO. 1201/KOL/2019 ASSESSMENT YEAR: 2010-11 PASCHIMBANGA RAJYA PRATIBANDHI SAMMILANI 15. IN VIEW OF THE ABOVE DISCUSSION WE DIRECT THE AO TO GRANT BENEFIT OF SECTION 11 OF THE ACT TO THE ASSESSEE. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. KOLKATA, THE 6 TH SEPTEMBER, 2019. SD/- SD/- [S.S. VISWANETHRA RAVI] [J. SUDHAKAR REDDY] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 06.09.2019 BIDHAN COPY OF THE ORDER FORWARDED TO: 1. PASCHIMBANGA RAJYA PRATIBANDHI SAMMILANI, 4, SANTOSHPUR AVENUE, KOLKATA-700 075. 2. ADIT (EXEMPTION)-II, KOLKATA. 3. CIT(A)-25, KOLKATA. (SENT THROUGH MAIL) 4. CIT- 5. CIT(DR), KOLKATA BENCHES, KOLKATA. (SENT THROUGH MAIL) TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, KOLKATA BENCHES