Dakshina kannada jilla Padmashali Vidyavardhaka Sangha, Udupi V. CIT, Mangalore

ITA 141/BANG/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0711 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 29-09-2009
• Assessment Year: misc
• Appeal Filed On: 24-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JASON P BOAZ
• Assessee Lawyers: H A K RAO

Judgement Text

ITA.141/B/09 PAGE - 1 IN THE INCOME-TAX APPELLATE TRIBUNAL BANGALORE BENCH 'A' BEFORE SHRI. K. P. T. THANGAL, VICE PRESIDENT AND SHRI. N. L. KALRA, ACCOUNTANT MEMBER I.T.A.NO.141/BANG/2009 (ASSESSMENT YEAR : NA) DAKSHINA KANNADA JILLA PADMASHALI VIDYAVARDHAKA SANGHA (R) UDUPI .. APPELLANT V. COMMISSIONER OF INCOME TAX, MANGALORE .. RESPONDENT APPELLANT BY : SHRI. H. A. K. RAO RESPONDENT BY : SHRI. JASON P. BOAZ O R D E R PER K. P. T. THANGAL, VICE PRESIDENT : THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER O F THE COMMISSIONER OF INCOME-TAX, MANGALORE REJECTING THE ASSESSEE'S APPLICATION U/S.80G. 2. THE ASSESSEE FILED AN APPLICATION ON 26.6.2008 S EEKING REGISTRATION. A PROPOSAL LETTER REJECTING THE ASSE SSEE'S APPLICATION WAS ISSUED AS THE COMMISSIONER OF INCOME-TAX FORMED THE OPINION THAT ITA.141/B/09 PAGE - 2 THE ACTIVITY OF THE ASSESSEE TRUST IS OUTSIDE THE P URVIEW OF CHARITABLE ACTIVITY. HE FOUND THAT AS PER INCOME AND EXPENDIT URE STATEMENT THE ASSESSEE COLLECTED RS.1,06,595/-, RS.73,500/- AND R S.86,570/- DURING THE PERIOD ENDED ON 31.3.2005, 31.3.2006 AND 31.3.2 007 WHICH ACCORDING TO THE COMMISSIONER OF INCOME-TAX WAS INC OME IN THE NATURE OF TRADE AND BUSINESS. THE COMMISSIONER OF INCOME-TAX HELD AFTER THE AMENDMENT BROUGHT TO SECTION 2(15) OF THE ACT, W.E.F.1.4.2009, IF THE TRUST/INSTITUTION/SOCIETY CO VERED BY ANY ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY CARRIES ON ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BU SINESS OR IS ENGAGED IN RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS FOR A CESS OR FEES OR ANY OTHER CONSIDE RATION IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION OR RELATION OF THE INCOME FROM ANY SUCH ACTIVITY, SUCH ASSESSEES WERE NOT ENTITLED FOR REGISTRATION U/S.80G. SINCE THE ASSESSEE WAS COLLECTING FEES FR OM THE STUDENTS HE REJECTED THE ASSESSEE'S APPLICATION WHEREAS THE ASS ESSEE CONTENDED THAT IT WAS CONDUCTING COMPUTER CLASSES AND THE FEE S COLLECTED FROM THE STUDENTS WILL NOT CHANGE THE CHARITABLE NATURE OF THE ASSESSEE'S SERVICE DOES NOT BEAR THE CHARACTER OF TRADE. ITA.141/B/09 PAGE - 3 3. THE LEARNED REPRESENTATIVE FOR THE ASSESSEE SUBM ITTED THE ASSESSEE SOCIETY WAS REGISTERED UNDER THE KARNATAKA SOCIETIES REGISTRATION ACT, 1960 FOR PROMOTING EDUCATION IN T HE SOCIETY AND TO DISTRIBUTE SCHOLARSHIP; TO ESTABLISH AND TO RUN EDU CATIONAL INSTITUTIONS; TO ESTABLISH AND TO RUN HOSTEL FOR POOR STUDENTS; T O ESTABLISH AND TO RUN A PUBLIC LIBRARY, LABORATORY AND MUSEUM; AND TO ENG AGE IN SUCH OTHER ACTIVITIES WHICH ARE INCIDENTAL, CONDUCIVE AND ENCO URAGING THE ABOVE AIMS AND IN FURTHERANCE OF THE ABOVE OBJECTS, GIVIN G BENEFITS TO THE PUBLIC IRRESPECTIVE OF THE CASE, CREED AND COMMUNIT Y. ASSESSEE WAS ALWAYS ENJOYING THE RECOGNITION U/S.80G IN THE PAST . THE MERE COLLECTION OF FEE, IT WAS CONTENDED, WILL NOT CHANG E THE CHARACTER OF THE SERVICE. THE FEES WAS NOT COLLECTED WITH A PRO FIT MOTIVE. IT DOES NOT FALL WITHIN THE NATURE OF TRADE, COMMERCE OR BU SINESS BECAUSE IN ALL THESE A PROFIT MOTIVE OR AN ELEMENT OF ADVANTAG E TO THE TRUSTEES OR THE PERSONS WHO WERE MANAGING THE AFFAIRS, IS NOT P RESENT IN THIS CASE. 4. THE LEARNED DR SUPPORTED THE ORDER OF THE LEARNE D COMMISSIONER OF INCOME-TAX. 5. HEARING THE RIVAL SUBMISSIONS, WE ARE OF THE VIE W THAT THE COMMISSIONER OF INCOME-TAX WAS NOT JUSTIFIED WITHOU T GIVING THE ITA.141/B/09 PAGE - 4 REASONS AND DISCUSSING THE ISSUE, SIMPLY TO DENY TH E BENEFIT U/S.80G BY HOLDING THAT 'THE ASSESSEE COLLECTED FEES FROM T HE STUDENTS'. A READING OF PROVISO TO SECTION 2(15) MAKES IT CLEAR THAT MERE CHARGING FEE, CESS OR ANY OTHER CONSIDERATIONS SIMPLICITER W ILL NOT THROW OUT THE ASSESSEES OUT OF THE SCOPE OF A TRUST. SUCH CHARGI NG OF CESS OR FEE OR OTHER CONSIDERATION SHOULD BE IN THE NATURE OF TRAD E, COMMERCE OR BUSINESS OR ANY ACTIVITY IN RELATION TO TRADE, BUSI NESS OR COMMERCE. COMMON THREAD OF TRADE, COMMERCE OR BUSINESS ARE PR OFIT MOTIVE. THEREFORE, IT IS CLEAR MERE CHARGING OF CESS, FEE O R CONSIDERATION WITHOUT A PROFIT MOTIVE WILL NOT DEPRIVE THE ASSESS EE THE BENEFIT OF REGISTRATION U/S.12A. SINCE THERE IS NO DISCUSSIO N ON THE POINT, WE REMAND THE MATTER BACK TO THE FILE OF THE COMMISSIO NER OF INCOME-TAX TO PASS A FRESH ORDER. 6. IN THE RESULT, APPEAL BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 30TH D AY OF NOVEMBER, 2009. SD/- SD/- (N. L. KALRA) (K. P. T. THANGAL) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE DATED : 30TH NOVEMBER, 2009 MCN* ITA.141/B/09 PAGE - 5 COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, NEW DELHI 7. GF, ITAT, BANGALORE