Give Foundation, Ahmedabad V. The Jt. Director of Income Tax (Exemp), Ahmedabad

ITA 1465/AHD/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89402 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 27-04-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 17-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROOP CHAND
• Assessee Lawyers: SN SOPARKARAR
• Keywords: Depreciation; Charitable institution; Principle of natural justice; Initiation of penalty proceedings; Cancellation of registration; Capital expenditure
• Section: 234B; 12AA; 12; 28; 11

Judgement Text

1 ITA.NO. 1465 /AHD/2013 ASSESSMENT YEAR 2009-2010 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH, AHM EDABAD (BEFORE SHRI N.S.SAINI, ACCOUNTA NT MEMBER AND SHRI KUL BHARAT JUDICIAL MEMBER.) ITA NO.1465/AHD/2013 ASSESSMENT YEAR: 2009 -2010 GIVE FOUNDATION, 113/16, J.B. TOWERS, OPP. DOORDARSHAN T.V.TOWER, THALTEJ, AHMEDABAD-380054. ...............A PPELLANT [PAN:AABCG 2322D ] VS. JOINT DIRECTOR OF INCOME TAX, (EXEMPTON),2 ND FLOOR, NATURE VIEW BUILDING, ASHRAM ROAD, AHMEDABAD. .................RESPONDE NT APPELLANT BY : SHRI S.N. SOPARKAR,A.R. RESPONDENT BY: SHRI ROOPCHAND, SR. D.R. DATE OF HEARING : 27-04-2015 DATE OF PRONOUNCEMENT : 13-05-2015 O R D E R PER SHRI N.S. SAINI, ACCOUNTANT MEMBER. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT (APPEALS) XXI, AHMEDABAD DATED 20-03-2013. 2 ITA.NO. 1465 /AHD/2013 ASSESSMENT YEAR 2009-2010 2. THE ASSESSEE HAS RAISED GROUND NOS.1 TO 6 OF THE APPEAL WHICH ARE AS UNDER:- 1. LD. CIT(A) ERRED IN LAW AND ON THE FACTS IN CON FIRMING ACTION OF A.O. IN HOLDING THAT THE APPELLANT TRUST CARRIE D ON ACTIVITY IN THE NATURE OF BUSINESS AND PROFESSION UNDER THE GUISE OF SECTION 25 COMPANY. LD. CIT (A) OUGHT TO HAVE HELD THAT THE APPELLANT TRUST REGISTERED U/S. 12AA OF THE ACT WOR KING IN THE AREA OF EDUCATION, MEDICAL RELIEF AND RELIEF TO POO R CARRIED ON ACTIVITIES OF CHARITABLE PURPOSE AND NOT ANY BUSINE SS OR PROFESSION. 2. LD. CIT(A) ERRED IN LAW AND ON THE FACTS IN CONF IRMING ACTION OF A.O.IN ASSESSING INCOME OF THE APPELLANT TRUST A T RS.48,61,533/- BY INVOKING PROVISO TO SECTION 2(15) OF THE ACT DENYING OF EXEMPTION U/S.11 OF THE ACT. BOTH TH E LOWER AUTHORITIES ERRED IN NOT APPRECIATING SUBMISSIONS T HAT THE APPELLANT TRUST BEING REGISTERED U/S. 12AA OF THE A CT AS A PUBLIC CHARITABLE TRUST, THE EXEMPTION U/S.11 CANNO T BE DENIED. THE ORDER OF LD. CIT (A) BEING UNJUST AND A GAINST PRINCIPLES OF NATURAL JUSTICE DESERVES TO BE QUASHE D. 3. LD. CIT (A) ERRED IN LAW AND ON FACTS IN CONFIRM ING ACTION OF A.O. IN TAXING SURPLUS OF INCOME OVER EXPENDITURE A MOUNTING TO RS.31,93,755/- HOLDING THE ACTIVITIES OF THE APP ELLANT TRUST AS ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBL IC UTILITY NOT GRANTING BENEFIT OF SECTION 11 & 12 OF THE ACT. LD. CIT (A) OUGHT TO HAVE HELD APPELLANT ELIGIBLE FOR EXEMP TION U/S.11 OF THE ACT.IT BE SO HELD NOW. 4 LD. CIT (A) FURTHER ERRED IN LAW AND ON FACTS IN IGNORING SUBMISSIONS OF THE APPELLANT THAT THE PROPOSAL BY A O TO DIT (EXEMPTION) TO CANCEL REGISTRATION OF THE APPELLANT TRUST UNDER PROVISIONS OF SECTION 12AA(3) OF THE ACT ON T HE BASIS OF THE ASSESSMENT ORDER FOR YEAR UNDER CONSIDERATIO N WAS 3 ITA.NO. 1465 /AHD/2013 ASSESSMENT YEAR 2009-2010 QUASHED HOLDING APPELLANT TRUST A CHARITABLE ENTITY . LD. CIT (A) OUGHT TO HAVE HELD THE APPELLANT TRUST TO BE A CHARITABLE ENTITY ENGAGED IN CHARITABLE ACTIVITIES. 5. LD. CIT (A) ERRED IN LAW AND ON FACTS IN CONFIRM ING ACTION OF AO REFUSING TO GRANT EXEMPTION U/S.11 AND ASSESSING INCOME OF THE APPELLANT U/S. 28 TO 44 OF THE ACT. B OTH THE LOWER AUTHORITIES FAILED TO APPRECIATE THAT PROVISO TO SECTION 2(15) WAS NOT APPLICABLE TO THE APPELLANT AND FURTH ER PROVISIONS OF SECTION 13 (8) WERE ALSO NOT APPLICAB LE. IT BE SO HELD NOW BY GRANTING EXEMPTION U/S. 11 OF THE AC T AS CLAIMED. 6. LD. CIT (A) ERRED IN LAW AND ON FACTS IN NOT APP RECIATING THE FACT THAT THE APPELLANT WAS NOT ENGAGED IN ANY COMM ERCIAL /BUSINESS ACTIVITY BUT WAS CARRYING OUT CHARITABLE ACTIVITY IN ACCORDANCE WITH ITS OBJECTS FOR WHICH REGISTRATION U/S.12AA OF THE ACT WAS GRANTED TO THE APPELLANT TRUST. 3. AS THE FACTS AND ISSUES INVOLVED ARE SAME THEY A RE BEING DISPOSED OF TOGETHER AS UNDER. BRIEF FACTS OF THE CASE ARE THA T HE ASSESSEE IS A CHARITABLE ORGANISATION UNDER SECTION 25 OF THE COM PANIES ACT, 1956. THE ASSESSEE WAS REGISTERED UNDER SECTION12A OF THE INC OME TAX ACT, 1961 ON 4- 8-2000.THE ASSESSEE FILED RETURN OF INCOME FOR ASSE SSMENT YEAR 2009-10 ON 29-09-2009 SHOWING LOSS OF RS.1,82,38,329/-. 4. ASSESSING OFFICER IN AN ASSESSMENT MADE UNDER SE CTION143(3) OF THE ACT DETERMINED THE INCOME OF THE ASSESSEE AT RS.48, 61,533/- BY PASSING ORDER ON 30-12-2011 AND RAISING A TAX DEMAND OF RS. 19,48,370/-. ASSESSING OFFICER COMPUTED THE INCOME AFTER DISALLOWING DEDUC TION CLAIMED UNDER THE PROVISIONS OF SEC.11 AND ALSO DISALLOWING CAPITAL E XPENDITURE TO THE EXTENT OF RS.13,47,700/- AND ALSO MAKING ADDITION ON ACCOUNT OF GRATUITY UNDER SEC. 4 ITA.NO. 1465 /AHD/2013 ASSESSMENT YEAR 2009-2010 40(A)(IA) OF THE ACT. WHILE DOING SO THE ASSESSING OFFICER HAS OBSERVED AS UNDER:- 1 THE ASSESSEE WORKS AS A CONSULTANT OR FACILITAT OR TO DONORS WHO ARE CORPORATE OR HIGH NET WORTH INDIVIDUALS (HNI). THE ASSESSEE PROVIDES THE DATA OF TRUSTS TO WHOM SUCH DONORS SHO ULD GIVE DONATIONS. HENCE, SERVICES HAVE BEEN RENDERED BY TH E ASSESSEE TO BIG CORPORATE HOUSES AND HNIS AND NOT TO TRUSTS OR TO PUBLIC AT LARGE. THE ASSESSEE IS CHARGING CONSULTANCY FEES FROM SAID BIG CORPORATE HOUSES AND HNIS FOR PROVIDING SUCH SE RVICES. 2. THE ASSESSEE IS COLLECTING DONATIONS TO BE MADE BY BIG CORPORATE HOUSES AND HNIS IN THE BANK ACCOUNTS OF T HE ASSESSEE. THE SAID FUNDS ARE NOT DISBURSED TO THE T RUSTS AND SHOWN AS CURRENT LIABILITIES. THE SAID FUNDS ARE IN VESTED IN BANK AS DEPOSITS AND SUBSTANTIAL INTEREST IS EARNED BY T HE ASSESSEE. THE ASSESSEE IS CLAIMING SUCH INCOME ALSO AS INCOME FROM CHARITABLE PURPOSE. 3. THE ASSESSEE IS CONSTANTLY MAKING PROFITS AND UN DER THE GUISE OF SECTION 25 COMPANY TO EVADES THE TAX WHICH THE ASSE SSEE IS SUPPOSED TO PAY. THE ASSESSEE HAS CHANGED ITS OBJEC T CLAUSE IN NEW YEAR. IN OLD OBJECT CLAUSE THE PROFIT MOTIVE WA S THERE WHICH IS AGAINST THE PRINCIPLE OF FORMING SECTION 25 COMP ANIES. 4. THE CORPORATE HOUSE WHO HAVE PAID CONSULTANCY CH ARGES HAVE DEDUCTED TAX AT SOURCE U/S.194J AS PER DETAILS GIVE N ELSEWHERE IN THIS ASSESSMENT ORDER WHICH ALSO SUGGESTS THAT T HE TYPE OF SERVICES PROVIDED BY THE ASSESSEE ARE PROFESSIONAL IN NATURE AND IT IS THE BENEFICIARY SERVICES RENDERED AND HENCE, IT HAS NOTHING TO DO WITH CHARITY. 5 ITA.NO. 1465 /AHD/2013 ASSESSMENT YEAR 2009-2010 5. THE STAND TAKEN BY THE ASSESSEE THAT THE ULTIMAT E BENEFITS OF SAID CONSULTANCY RESULTS INTO BENEFITS TO COMPANY I S NOT ACCEPTABLE OTHERWISE ALL WHO PROVIDES ANY SERVICE T O TRUST FOR FEES OR PROFIT WILL CLAIM THAT AS THE SERVICES HAVE BEEN PROVIDED TO TRUSTS THEIR INCOME SHOULD BE EXEMPT U/S.11. 6. THE QUANTUM OF PERSONNEL EXPENDITURE INCURRED TH E PROFESSIONAL QUALIFICATION OF EMPLOYEES, THE HIGH AMOUNT OF SALA RIES /PROFESSIONAL FEES PAID, THE TYPE OF EXPERIENCE WHI CH THE EMPLOYEES/PROFESSIONALS POSSESS, SUGGESTS THAT IT I S THE REQUIREMENT OF BUSINESS OR PROFESSION AND NOT OF A CHARITABLE INSTITUTION. 7. THE AMOUNT OF INTEREST INCOME EARNED BY THE ASSE SSEE ON FUNDS NOT DISBURSED TO TRUST CANNOT BE TREATED AS THE INC OME OF THE TRUST BECAUSE BY OVERRIDING TITLE, IT BECOMES THE I NCOME OF THE CONCERNED TRUST FOR WHICH THE FUNDS ARE EARMARKED A ND NOT DISBURSED. AS THE DONOR HAS GIVEN DONATION WITH SPE CIFIC INSTRUCTION TO BE PAID TO SPECIFIC TRUST AND WHICH ARE SHOWN UNDER CURRENT LIABILITIES ARE THE FUNDS OWNED BY THE TRUS TS FOR WHOM THEY ARE MEANT AND HENCE, INCOME EARNED THEREON SHOULD A LSO BE PROVIDED TO TRUSTS FOR WHOM DONATIONS WERE PAID BY DONORS. THE FIGURES OF INCOME OF THE TRUST BY WAY OF CONSULTANC Y FEES, PERSONNEL EXPENDITURE INCURRED AND INTEREST INCOME AS DISCUSSED ABOVE HAVE BEEN PROVIDED IN THIS ASSESSMENT ORDER. 8. THE DECISION RELIED UPON BY THE ASSESSEE AND REP RODUCED IN THIS ASSESSMENT ORDERS HAVE BEEN CAREFULLY CONSIDERED AN D ON CAREFUL PERUSAL IT HAS BEEN NOTICED THAT FACTS OF T HE CASE OF THE ASSESSEE AND FACTS OF THE CASE OF THE CASES RELIED UPON ARE DIFFERENT. IN THE DECISIONS RELIED UPON THE FACTS A RE THAT ONE TRUST HAS COLLECTED DONATIONS AND HAS GIVEN PART OF THE D ONATIONS TO 6 ITA.NO. 1465 /AHD/2013 ASSESSMENT YEAR 2009-2010 OTHER TRUSTS CARRYING ON SIMILAR OBJECTS BUT THE TR USTS WHICH HAVE GIVEN DONATIONS ARE NOT CONSULTANTS FOR OTHER DONOR S. THEY ARE ACTUALLY INTO CHARITABLE ACTIVITIES AND SURPLUS FUN DS WHICH THEY HAVE, HAS BEEN GIVEN TO OTHER TRUST. HENCE, SAID DE CISIONS SHELTER CANNOT BE ALLOWED TO THE ASSESSEE. 9. ON DETAILED VERIFICATION OF ACCOUNTS, BALANCE SH EET AND INCOME AND EXPENDITURE ACCOUNT AND NATURE OF ACTIVITIES CA RRIED ON IT CAN BEYOND DOUBT BE CONCLUDED THAT THE PROFESSIONAL ACT IVITY IN THE NATURE OF BUSINESS AND PROFESSION IS CARRIED ON UND ER THE ORGANISATION STRUCTURE OF SECTION 25 COMPANY AND IN COME TAX ON INCOME EARNED IS EVADED. IF THIS TYPE OF TAX PLANNI NG IS MEANT TO EVADE TAX ARE ALLOWED, ALL CORPORATE HOSPITALS WILL START THEIR BUSINESS OF HOSPITALS UNDER THE ORGANISATION STRUCT URE OF SECTION 25 COMPANY. IT IS ALSO CONCLUDED THAT NOVEL TAX PLA NNING IS DONE BY THE ASSESSEE WHEREBY THE DONOR GIVING DONATION G IVES DONATION, MAY BE GETTING DEDUCTION U/S. 80G, 35 ETC ., SHOWS THE SAME IN THEIR BALANCE SHEET BY WAY OF CORPORATE SOC IAL RESPONSIBILITY STATEMENT, THE RECEIPTS OF DONATIONS WOULD HAVE BEEN ISSUED ON BEHALF OF TRUSTS, BUT INCOME BY WAY OF RECEIPTS ARE NOT SHOWN BY THE TRUSTS IN THEIR INCOME AND EXP ENDITURE ACCOUNT AND HENCE, QUESTION OF APPLICATION OF SAID INCOME IS NOT REQUIRES TO BE SHOWN, THE INCOME ON SAID NON USED F UNDS IS ALSO NOT INCLUDED IN THE TRUSTS WHERE IT SHOULD HAVE ACC RUED HAD THE SAID DONATIONS CREDITED IN TRUSTS TO WHOM DONATIONS WERE TO BE GIVEN. EVEN APPLICATION PERIOD OF THE TRUST TO WHOM DONATIONS WERE GIVEN AND NOT DISBURSED BY THE ASSESSEE GETS E XTENDED AS THE TRUSTS WILL SHOW INCOME ONLY WHEN AMOUNT WOULD BE DISBURSED. ALL THE SEQUENCE OF EVENTS DISCUSSED HER EIN THIS PARA, LEADS TO CONCLUSION THAT SUCH NOVEL IDEAS OF TAX PL ANNING SHOULD NOT BE ALLOWED TO CONTINUE AND HENCE, THE CONCLUSIO N IS ARRIVED 7 ITA.NO. 1465 /AHD/2013 ASSESSMENT YEAR 2009-2010 AT THE ASSESSEE IS NOT CARRYING ON ACTIVITY WHICH C AN BE CONSIDERED AS CHARITABLE PURPOSE WITHIN THE MEANING OF SECTION 2(15) OF I.T. ACT,1961 BUT A WELL PLANNED BUSINESS AND PROFESSION UNDER SHELTER OF SECTION 25 COMPANY. 5. ON APPEAL THE CIT (APPEALS) HELD AS UNDER:- 4.10 I HAVE CAREFULLY CONSIDERED THE ORDER OF THE A.O. A ND THE SUBMISSIONS MADE IN THIS REGARD. IT IS AN ADMITTED FACT, AMPLY EVIDENT FROM THE WEBSITE OF THE APPELLANT, THAT THE APPELLANT IS NOT DOING ANY CHARITABLE ACTIVITY DIRECTLY. THE APP ELLANT HAS DEVISED AN INNOVATIVE IDEA OF COLLECTING MONEY OR D ONATION FROM INDIVIDUALS OR CORPORATE INTERESTED IN DONATING FOR A CHARITABLE CAUSE. SUCH MONEY IS COLLECTED AND KEPT BY THE APPE LLANT AND DISBURSED THEREAFTER TO VARIOUS NGOS ENLISTED WITH IT FOR WHICH THE APPELLANT HAS CARRIED OUT DUE DILIGENCE AND THE LIST OF ALL SUCH NGOS IS AVAILABLE ON ITS WEBSITE. AT THIS POINT, IT IS IMPORTANT TO LOOK AT SECTION 2(15) WHICH READS AS UNDER:- 15) CHARITABLE PURPOSE INCLUDES RELIEF OF THE POOR, E DUCATION, MEDICAL RELIEF, [PRESERVATION OF ENVIRONMENT {INCLU DING WATERSHEDS, FORESTS AND WILDLIFE} AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTO RIC INTEREST,] AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY; PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT O F GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PU RPOSE, IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NAT URE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR 8 ITA.NO. 1465 /AHD/2013 ASSESSMENT YEAR 2009-2010 BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERAT ION, 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 ACTIVI TIES REFERRED TO THEREIN IS [TWENTY-FIVE LAKH RUPEES] OR LESS IN THE PREVIOUS YEAR;] {EMPHASIS ADDED}. 4.11 PERUSAL OF THIS DEFINITION INDICATES THAT THE APPEL LANT IS NOT DIRECTLY DOING RELIEF OF THE POOR, EDUCATION, MEDIC AL RELIEF, PRESERVATION OF ENVIRONMENT INCLUDING WATER SHEDS, FORESTS AND WILD LIFE AND PRESERVATION OF MONUMENTS OR PLAC ES OR OBJECTS OR ARTISTIC OR HISTORIC INTEREST. IN FACT, THE APPELLANT IS A FACILITATOR FOR VARIOUS CAUSES WHICH MAY EVEN INCLUDE DONATION FOR DISABLED, HUMAN RIGHTS, YOUTH OR HEALT H. ACCORDINGLY, THE DONATION MOBILIZED BY THE APPELLAN T FROM VARIOUS DONORS IS FOR WIDE RANGING CAUSES, THE DETA ILS OF WHICH ARE EVIDENT AND HAVE BEEN POINTED OUT IN PARA 4.7 OF THIS ORDER. A HOLISTIC PERUSAL OF PURPOSES FOR WHIC H THE DONATION IS MOBILIZED HAS LED ME TO CONCLUDE THAT T HE APPELLANTS ACTIVITY FALLS UNDER THE 6 TH LIMB OF SECTION 2(15) WHICH IS ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. FURTHER, IT IS OBSERVED THAT THE APPELLAN T IS RECEIVING FEE FROM THE DONOR AS WELL AS DONEE AND S UCH RECEIPTS ARE CLASSIFIED AS ITS INCOME UNDER THE HEA D INCOME FROM CHARITY ADVICE. THE HEADING INCOME F ROM CHARITY ADVICE MAY DROP A HINT OF A CHARITABLE CHA RACTER OF THE RECEIPTS BUT THE SAME IS NOTHING BUT A FEE RECE IVED FROM RENDERING THE SERVICES BY IDENTIFYING A DONOR AND DONEE ORGANIZATIONS WHICH ARE LOOKING FOR FUNDS TO CARRY 9 ITA.NO. 1465 /AHD/2013 ASSESSMENT YEAR 2009-2010 OUT CHARITABLE ACTIVITY. THE ARGUMENT THAT SUCH FEE IS ONLY TO COVER COST OF VERIFICATION, PROCESSING DUE DILIG ENCE POINTS OUT TO THE FACT THAT SUCH AMOUNT IS COLLECTE D FOR THE SERVICES RENDERED BOTH TO THE DONOR AS WELL AS THE RECIPIENT NGOS WHICH ARE LISTED AS APPROVED BY THE APPELLANT. SIMILARLY, IN THE CASE OF CORPORATE DONO RS WHO HAVE DEDUCTED TDS SINCE THEY CONSIDER SUCH SERVICES AS PROFESSIONAL SERVICES FOR THE ADVICES GIVEN TO THEM BY THE APPELLANT, THE INCOME SHOWN UNDER THE HEAD INCOME FROM CHARITY ADVICE IS OF THE NATURE AND CHARACTER OF F EE CHARGED FOR RENDERING SERVICES OF FACILITATING FUND S FOR OTHER CHARITABLE ORGANIZATIONS. ACCORDINGLY, I AM O F THE VIEW THAT FIRST AND SECOND PROVISO TO SECTION 2(15) ARE APPLICABLE IN THE APPELLANTS CASE. IT MAY BE POINT ED OUT THAT IRRESPECTIVE OF NATURE OF USE OR APPLICATION O R RETENTION OF INCOME FROM SUCH ACTIVITY, THE SAID ACTIVITY OF THE APPELLANT MAY NOT BE TERMED AS CHARITABLE. I MAY DR AW ATTENTION TO SECTION 13(8) OF THE INCOME TAX ACT WH ICH COMES INTO FORCE WITH EFFECT FROM ASSESSMENT YEAR 2 009- 10. THE SAME READS AS UNDER: [ 13(8) NOTHING CONTAINED IN SECTION 11 OR SECTION 12 SHALL OPERATE SO AS TO EXCLUDE ANY INCOME FROM THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT THERE OF IF THE PROVISIONS OF THE FIRST PROVISO TO CLAUSE (15) OF SECTION 2 BECOME APPLICABLE IN THE CASE OF SUCH PERSON IN THE SAID PREVIOUS YEAR.] TO SUM UP, THUS, THE VARIETY OF CAUSES FOR DONATION MOBILIZATION BY THE APPELLANT ALSO THE REGISTRATION U/S.12AA OF INCOME TAX ACT INDICATE THAT THE APPELLANT IS DO ING 10 ITA.NO. 1465 /AHD/2013 ASSESSMENT YEAR 2009-2010 CHARITABLE WORK U/S. 2(15) BUT UNDER THE HEADING ADVANCEMENT OF GENERAL PUBLIC UTILITY. TO ELABORA TE, SOME OF THE DONATIONS ARE EARMARKED FOR POOR, OTHERS FOR MEDICAL NEEDS OF THE PEOPLE ETC, BUT IT IS THE ACTUAL DONOR WHO COULD ONLY BE DOING THE CHARITABLE ACTIVITY DIRECTL Y, BUT WITH THE HELP OF APPELLANT. THUS I AM OF THE OPINION THA T THE ACTIVITIES OF THE APPELLANT FALLS UNDER THE ADVANCE MENT OF GENERAL PUBLIC UTILITY. SINCE APPELLANT IS CHARGING FEE BOTH FROM THE DONOR AND DONEE, FOR SUCH ACTIVITY AND THE GROSS RECEIPTS EXCEEDS 10 LAKHS PROVISOS TO SECTION 2(15) ARE APPLICABLE IN THIS CASE FOR THIS ASSESSMENT YEAR. T HUS IN VIEW OF SECTION 13(8) OF THE INCOME TAX ACT THE APP ELLANT SHALL NOT BE GIVEN ANY BENEFIT OF SECTION 11 & 12 O F THE INCOME TAX ACT FOR THIS ASSESSMENT YEAR. IN VIEW OF THE DISCUSSION ABOVE I MAY ALSO ADD THAT PLETHORA OF JUDGEMENTS RELIED UPON BY THE APPELLANT ARE ON DIFFERENT SET OF FACTS AS THE ISSUE UNDER CONSIDERA TION IS WHETHER THE CHARITABLE ACTIVITIES CARRIED OUT BY TH E APPELLANT FALLS UNDER CATEGORY EDUCATION, MEDIC AL, RELIEF TO THE POOR, OR UNDER ADVANCEMENT OF GENERAL PUBL IC UTILITY. CONSIDERING THE ABOVE, I AM OF THE VIEW THAT THE AC TION OF THE A.O. NOT GRANTING ANY BENEFIT U/S.11 AND 12 AND TAXING SURPLUS OF INCOME OVER EXPENDITURE AMOUNTING TO RS.31,93,755/- IS CORRECT AND SAME IS THEREFORE CON FIRMED. GROUND NO.1 & 2 ARE THEREFORE DISMISSED. 6. BEFORE US, THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT INASMUCH AS THE DIT (EXEMPTION) HAS SPECIFICAL LY HELD AT PAGE 82A TO 82D THAT NO GROUND FOR INVOKING SECTION 12AA (3) F OR THE PURPOSE OF 11 ITA.NO. 1465 /AHD/2013 ASSESSMENT YEAR 2009-2010 WITHDRAWAL OF REGISTRATION IT IS NOT OPEN TO THE A .O. OR THE CIT (A) TO TAKE A CONTRARY VIEW. IT MAY BE NOTED THAT THE ACTION FOR CANCELLATION OF REGISTRATION WAS STARTED BY THE DIT (EXEMPTION) ONLY AT THE REQU EST OF THE A.O. AND WAS BECAUSE OF THE FACTS COMPILED FOR THE PURPOSE OF AS SESSMENT IN THE ASSESSMENT ORDER FOR A.Y. 2009-10 (THE PRESENT YEAR ) AS NOTED BY THE DIT (EXEMPTION) (PAGE 82A). 7. FURTHER IT IS SUBMITTED THAT THE ASSESSEE IS ENG AGED IN THE ACTIVITIES LIKE RELIEF TO THE POOR, EDUCATION, MEDICAL RELIEF AND PRESERVATION OF ENVIRONMENT. IT IS SUBMITTED THAT PAGE NOS.5, 19-2 2, 33-34, 72-81 AND 83-89 MAY BE REFERRED FOR THE DETAILS. FURTHER TABLE ON P AGE-9 OF THE PAPER BOOK SHOWS WHERE THE MONIES HAVE BEEN CONTRIBUTED; SOLEL Y FOR THE SAID OBJECTIVES. IT IS FURTHER SUBMITTED THAT IF THAT BE SO, THE PROVISO TO SECTION 2(15) HAS NO APPLICATION. FOR THIS CONTENTION HE RE LIED ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF DIT (E) V S. AHMEDABAD MANAGEMENT ASSOCIATION (2014) 366 ITR (85) (GUJ.) W HERE IT WAS HELD THAT ALL THROUGHOUT FOR THE PRECEEDING YEAR FROM THE ASSESSM ENT YEAR 1995-96 TILL 2008-09 THE REVENUE HAD CONSIDERED THE ACTIVITIES O F THE ASSESSEE EDUCATIONAL AND HAD GRANTED THE BENEFIT U/S.11. THE VIEW TAKEN BY THE TRIBUNAL THAT THE ACTIVITIES OF THE ASSESSEE SUCH A S CONTINUING EDUCATION DIPLOMA AND CERTIFICATE PROGRAMME; MANAGEMENT DEVEL OPMENT PROGRAMME, PUBLIC TALKS AND SEMINARS AND WORKSHOPS AND CONFERE NCES, WERE EDUCATIONAL ACTIVITIES OR IS IN THE FIELD OF EDUCATION WAS PROP ER. THE ACTIVITIES OF THE ASSESSEE WOULD FALL WITHIN THE DEFINITION OF CHARI TABLE PURPOSE IN TERMS OF SECTION 2(15) AND, THEREFORE, WOULD BE ENTITLED TO EXEMPTION UNDER SECTON11. 8. HE FURTHER ARGUED THAT THE ONLY GROUND ON WHICH THE CIT (A) HELD AGAINST THE ASSESSEE AFTER HOLDING THAT THE ASSESSE E IS A CHARITABLE INSTITUTION, IS THAT THE ASSESSEE FALLS IN THE RESI DUARY CLAUSE AND IS HIT BY THE PROVISO, IS CONTRARY TO THE FACTS AND THEREFORE, TH E ASSESSEE BE HELD AS A CHARITY. FOR THIS, HE PLACED RELIANCE ON THE DECISI ON OF HONBLE DELHI HIGH 12 ITA.NO. 1465 /AHD/2013 ASSESSMENT YEAR 2009-2010 COURT IN THE CASE OF THE DIT (E) VS. PRADAN PROPERT Y HOLDING TRUST IN ITA NO.361/2007 ORDER DATED 16-08-2010 WHEREIN THE HON BLE HIGH COURT HELD AS UNDER:- IT HAS BEEN DISCUSSED BY THE TRIBUNAL AND HAS ALSO COME ON RECORD THAT PRADAN IS ESSENTIALLY A SOCIETY ENGAGED IN CHA RITABLE ACTIVITIES. A COPY OF THE TRUST DEED IS FILED BY THE RESPONDENT ON THE RECORD OF THIS CASE AND A PERUSAL THEREOF CLEARLY DEMONSTRATE S THAT THE TRUST IS CREATED BY PRADAN FOR THE PURPOSES OF HOLDING PROPE RTIES AND CERTAIN ASSETS OF PRADAN SO AS TO MORE MEANINGFULLY DEPLOY AND USE THE SAME FOR VARIOUS DEVELOPMENT ACTIVITIES BEING CARRI ED BY PRADAN ALL OVER INDIA. THUS, THE BASIC AIM AND OBJECT OF THE RESPONDENT-TRUST IS TO ENSURE THAT THE CHARITABLE ACTIVITIES BEING ORGA NIZED BY PRADAN REACH THE WIDER SPECTRUM ALL OVER INDIA TO THOSE WH O DESERVE THEM, I.E., POOR PERSONS AS WELL AS WOMEN. IT MAY ALSO BE HIGHLIGHTED THAT AS PER CLAUSE 15 OF THE TRUST DEED, IT IS MADE IRREVOC ABLE AND EVEN IN CASE OF MERGER OR DISSOLUTION, NO PART OF THE FUNDS OR PROPERTIES ARE TO BE DISTRIBUTED AMONG THE TRUSTEES OR EVEN TO THE SE TTLOR. WE ARE, THEREFORE, OF THE OPINION THAT THE TRIBUNAL HAS RIG HTLY GIVEN DIRECTION TO THE APPELLANT TO GRANT THE REGISTRATION TO THE RESP ONDENT UNDER SECTION 12AA OF THE ACT. FINDING NO INFIRMITY WITH THAT ORD ER, WE DISMISS THIS APPEAL. 9. ALTERNATIVELY, IT WAS SUBMITTED THAT EVEN IF IT IS HELD THAT THE ASSESSEE FALLS IN THE RESIDUARY CLAUSE ON A TRUE INTERPRETAT ION OF THE PROVISO TO SECTION 2(15) THE SAME HAS NO APPLICATION, FOR THIS, HE REL IED ON THE RECENT DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF INDIA TRADE PROMOTION ORGANIZATION V/S. DIRECTOR GENERAL OF INCOME TAX (E) & OTHERS, 3 71 ITR 333 (DEL.) WHEREIN IT WAS HELD AS UNDER:- FROM THE SAID DECISION, IT IS APPARENT THAT MEREL Y BECAUSE A FEE OR SOME OTHER CONSIDERATION IS COLLECTED OR RECEIVE D BY AN INSTITUTION, IT 13 ITA.NO. 1465 /AHD/2013 ASSESSMENT YEAR 2009-2010 WOULD NOT LOSE ITS CHARACTER OF HAVING BEEN ESTABLI SHED 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 QUESTIO N. IF THE DOMINANT ACTIVITY OF THE INSTITUTION WAS NOT BUSINESS, TRADE OR COMMERCE, THEN ANY SUCH INCIDENTAL OR ANCILLARY ACTIVITY WOULD ALS O NOT FALL WITHIN THE CATEGORIES OF TRADE, COMMERCE OR BUSINESS. IT IS CL EAR 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. C LEARLY, THIS IS A CHARITABLE PURPOSE, WHICH HAS AS ITS MOTIVE THE ADV ANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTILITY TO WHICH THE EXCEP TION CARVED OUT IN THE FIRST PROVISO TO SECTION 2 (15) OF THE SAID ACT WOU LD 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 CONSTI TUTIONAL VALIDITY OF A PROVISION AND, IN DOING SO, THE PROVISION IN QUES TION MAY HAVE TO BE READ DOWN, AS POINTED OUT ABOVE, IN ARUN KUMAR CASE (SUPRA). 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 CH ARITABLE PURPOSE APPEARING IN SECTION 2(15) OF THE SAID ACT HAS TO B E SEEN IN THE CONTEXT OF SECTION 10(23C)(IV). WHEN THE EXPRESSION CHARIT ABLE PURPOSE, AS DEFINED IN SEC. 2(15) OF THE SAID ACT, IS READ IN T HE CONTEXT OF SEC 10(23C)(IV) OF THE SAID ACT, WE WOULD HAVE TO GIVE UP THE STRICT AND LITERAL INTERPRETATION SOUGHT TO BE GIVEN TO THE EX PRESSION CHARITABLE PURPOSE BY THE REVENUE. WITH RESPECT, WE DO NOT AGREE WITH THE VIEWS OF TH E KERALA AND ANDHRA PRADESH HIGH COURTS. 14 ITA.NO. 1465 /AHD/2013 ASSESSMENT YEAR 2009-2010 IT WOULD BE APPROPRIATE TO ALSO EXAMINE THE OBSERV ATIONS OF ANOTHER DIVISION BENCH OF THIS COURT IN G.S.IS CAS E (SUPRA). WHILE CONSIDERING CIRCULARNO.11 OF 2008 ISSUED BY THE CBD T, TO WHICH A REFERENCE HAS BEEN MADE EARLIER IN THIS JUDGMENT, T HE DIVISION BENCH HELD THAT IT WAS EVIDENT FROM THE SAID CIRCULAR THA T THE NEW PROVISO TO SEC.2(15) OF THE SAID ACT WAS APPLICABLE TO ASSESS EES, WHO ARE ENGAGED IN COMMERCIAL ACTIVITIES, I.E. CARRYING ON BUSINESS, TRADE OR COMMERCE, IN THE GARB OF PUBLIC UTILITIES TO AVOI D TAX LIABILITY AS IT WAS NOTICED THAT THE OBJECT GENERAL PUBLIC UTILITY WA S 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 IN TRODUCTION OF THE PROVISO TO SEC. 2(15) BY VIRTUE OF THE FINANCE ACT, 2008 WA S DIRECTED TO PREVENT THE UNHOLY PRACTICE OF PURE TRADE, COMMERCE AND BUS INESS 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 TH E OBJECTS OF GENERAL PUBLIC UTILITY AT THEIR HEARTS AND WERE CHARITY INS TITUTIONS. THE ATTEMPT WAS TO REMOVE THE MASKS FROM THE ENTITIES, WHICH WE RE PURELY TRADE, COMMERCE OR BUSINESS ENTITIES, AND TO EXPOSE THEIR TRUE IDENTITIES. THE OBJECT WAS NOT TO HURT GENUINE CHARITABLE ORGANIZAT IONS. AND, THIS WAS ALSO THE ASSURANCE GIVEN BY THE FINANCE MINISTER WH ILE INTRODUCING THE FINANCE BILL 2008. IN G.S.1S CASE (SUPRA) IT WAS CONTENDED BY THE RE VENUE THAT GS1 (INDIA) HAD ACQUIRED INTELLECTUAL PROPERTY RIGH TS FROM GS1 (BELGIUM) AND THEREAFTER RECEIVED REGISTRATION FEES FROM THEIR PARTIES IN INDIA. THIS WAS SOUGHT TO BE EQUATED TO ROYALTY PAY MENTS. IT WAS ALSO CONTENDED THAT GS1 (INDIA) HAD HUGE SURPLUSES OF RE CEIPTS OVER EXPENDITURE AND THAT PAYMENTS WERE MADE TO GS1 (BEL GIUM). ACCORDING TO THE REVENUE, ALL THIS ENTAILED THAT GS 1 (INDIA) WAS ENGAGED IN BUSINESS, TRADE OR COMMERCE. THE PETIT IONER HEREIN 15 ITA.NO. 1465 /AHD/2013 ASSESSMENT YEAR 2009-2010 REFUTED THIS. IN THIS BACKDROP, THIS COURT ASKED TH E QUESTION- CAN IT BE SAID THAT THE PETITIONER IS ENGAGED IN ACTIVITIES W HICH CONSTITUTE BUSINESS, COMMERCE OR TRADE? WHILE ANSWERING THE SA ID QUESTION, THE COURT HELD AS UNDER:- .........AS OBSERVED ABOVE, LEGAL TERMS, TRADE, COMMERCE OR BUSINESS IN SECTION 2(15),MEAN ACTIVITY UNDERTAKE N WITH A VIEW TO MAKE OR EARN PROFIT. PROFIT MOTIVE IS DETERMINAT IVE AND A CRITICAL FACTOR TO DISCERN WHETHER AN ACTIVITY IS B USINESS, TRADE OR COMMERCE. THE COURT FURTHER HELD:- BUSINESS ACTIVITY HAS AN IMPORTANT PERVADING ELEM ENT OF SELF-INTEREST, THOUGH FAIR DEALING SHOULD AND CAN B E PRESENT, WHILST CHARITY OR CHARITABLE ACTIVITY IS ANTI-THESI S OF ACTIVITY UNDERTAKEN WITH PROFIT MOTIVE OR ACTIVITY UNDERTAKE N ON SOUND OR RECOGNIZED BUSINESS PRINCIPLES. CHARITY IS DRIVEN B Y ALTRUISM AND DESIRE TO SERVE OTHERS, THOUGH ELEMENT OF SELF-PRES ERVATION MAY BE PRESENT. FOR CHARITY, BENEVOLENCE SHOULD BE OMNI PRESENT AND DEMONSTRABLE BUT IT IS NOT EQUIVALENT TO SELF-SACRI FICE AND ABNEGATION. THE ANTIQUATED DEFINITION OF CHARITY, W HICH ENTAILS GIVING AND RECEIVING NOTHING IN RETURN IS OUTDATED. A MANDATORY FEATURE WOULD BE; CHARITABLE ACTIVITY SHOULD BE DEV OID OF SELFISHNESS OR ILLIBERAL SPIRIT. ENRICHMENT OF ONES ELF OR SELF-GAIN SHOULD BE MISSING AND THE PREDOMINANT PURPOSE OF TH E ACTIVITY SHOULD BE TO SERVE AND BENEFIT OTHERS. A SMALL CONT RIBUTION BY 16 ITA.NO. 1465 /AHD/2013 ASSESSMENT YEAR 2009-2010 WAY OF FEE THAT THE BENEFICIARY PAYS WOULD NOT CONV ERT CHARITABLE ACTIVITY INTO BUSINESS, COMMERCE OR TRADE IN THE AB SENCE OF CONTRARY EVIDENCE. QUANTUM OF FEE CHARGED, ECONOMIC STATUS OF THE BENEFICIARIES WHO PAY, COMMERCIAL VALUE OF BENE FITS IN COMPARISON TO THE FEE, PURPOSE AND OBJECT BEHIND TH E FEE ETC. ARE SEVERAL FACTORS WHICH WILL DECIDE THE SEMINAL Q UESTION, AS IT BUSINESS? 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 REFL ECTIVE OF THE BUSINESS APTITUDE NOR INDICATIVE OF THE PROFIT ORIENTED INTE NT. THE COURT FURTHER OBSERVED:- THUS THE CONTENTION OF THE REVENUE THAT THE PETIT IONER CHARGES FEE AND, THEREFORE, IS CARRYING ON BUSINESS, HAS TO BE REJECTED. THE INTENTION BEHIND THE ENTIRE ACTIVITY IS PHILANTHROP IC AND NOT TO RECOUP OR REIMBURSE IN MONETARY TERMS WHAT IS GIVEN TO THE BE NEFICIARIES. ELEMENT OF GIVE AND TAKE IS MISSING, BUT DECISIVE E LEMENT OF BEQUEATHING IS PRESENT. IN THE ABSENCE OF PROFIT M OTIVE AND CHARITY BEING THE PRIMARY AND SOLE PURPOSE BEHIND THE ACTIV ITIES OF THE PETITIONER IS PERSPICUOUSLY DISCERNIBLE AND PERCEPT IBLE. THE COURT ALSO HELD:- 17 ITA.NO. 1465 /AHD/2013 ASSESSMENT YEAR 2009-2010 AS OBSERVED ABOVE, FEE CHARGED AND QUANTUM OF INCO ME EARNED CAN BE INDICATIVE OF THE FACT THAT THE PERSON IS CA RRYING ON BUSINESS OR COMMERCE AND NOT CHARITY, BUT WE MUST K EEP IN MIND THAT CHARITABLE ACTIVITIES REQUIRE OPERATIONAL/RUNN ING EXPENSES AS WELL AS CAPITAL EXPENSES TO BE ABLE TO SUSTAIN AND CONTINUE IN LONG RUN. THE PETITIONER HAS TO BE SUBSTANTIALLY SE LF-SUSTAINING IN LONG-TERM AND SHOULD NOT DEPEND UPON GOVERNMENT, IN OTHER WORDS TAXPAYERS SHOULD NOT SUBSIDIZE THE SAID ACTIV ITIES, WHICH NEVERTHELESS ARE CHARITABLE AN D FALL UNDER THE RES IDUARY CLAUSE GENERAL PUBLIC UTILITY. THE IMPUGNED ORDER DOES NOT REFER TO ANY STATUTORY MANDATE THAT A CHARITABLE INSTITUTION FAL LING UNDER THE LAST CLAUSE SHOULD BE WHOLLY, SUBSTANTIALLY OR IN P ART MUST BE FUNDED BY VOLUNTARY CONTRIBUTIONS. NO SUCH REQUIREM ENT HAS BEEN POINTED OUT OR ARGUED. A PRACTICAL AND PRAGMATIC VI EW IS REQUIRED WHEN WE EXAMINE THE DATA, WHICH SHOULD BE ANALYZED OBJECTIVELY AND A NARROW AND COLOURED VIEW WILL BE COUNTER-PROD UCTIVE AND CONTRARY TO THE LANGUAGE OF SECTION 2(15) OF THE AC T. IN CONCLUSION, WE MAY SAY THAT THE EXPRESSION CHAR ITABLE PURPOSE, AS DEFINED IN SECTION 2(15) CANNOT BE CONSTRUED LITERA LLY AND IN ABSOLUTE TERMS. IT HAS TO TAKE COLOUR AND BE CONSIDERED IN T HE CONTEXT OF SEC. 10(23C)(IV) OF THE SAID ACT. IT IS ALSO THAT IF THE LITERAL INTERPRETATION IS GIVEN TO THE PROVISO TO SEC. 2(15) OF THE SAID ACT, THEN THE PROVISO 18 ITA.NO. 1465 /AHD/2013 ASSESSMENT YEAR 2009-2010 WOULD BE AT RISK OF RUNNING FOWL OF THE PRINCIPLE OF EQUALITY ENSHRINED IN ARTICLE 14 OF THE CONSTITUTION OF INDIA. IN ORDER T O SAVE THE CONSTITUTIONAL VALIDITY OF THE PROVISO, THE SAME WO ULD HAVE TO BE READ DOWN AND INTERPRETED IN THE CONTEXT OF SEC. 10(23)( IV) BECAUSE, IN OUR VIEW, THE CONTEXT REQUIRES SUCH AN INTERPRETATION. THE CORRECT INTERPRETATION OF THE PROVISO TO SEC. 2(15) OF THE SAID ACT WOULD BE THAT IT CARVES OUT AN EXCEPTION FROM THE CHARITABLE PURP OSE OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AND T HAT EXCEPTION IS LIMITED TO ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR B USINESS 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 BO TH THE ACTIVITIES, IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR THE ACTIVI TY OF RENDERING ANY SERVICE IN RELATION 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 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 B USINESS, 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 P RIMARILY BY A DESIRE OR MOTIVE TO EARN PROFITS, BUT TO DO CHARITY THROUGH T HE ADVANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTILITY, IT CANNOT BUT BE REGARDED AS AN INSTITUTION ESTABLISHED FOR CHARITABLE PURPOSES. 19 ITA.NO. 1465 /AHD/2013 ASSESSMENT YEAR 2009-2010 THUS, WHILE WE UPHOLD THE CONSTITUTIONAL VALIDITY O F THE PROVISO TO SEC. 2(15) OF THE SAID ACT, IT HAS TO BE READ DOWN IN TH E MANNER INDICATED BY US. AS A CONSEQUENCE, THE IMPUGNED ORDER DATED 23-0 1-2013 IS SET ASIDE AND A MANDAMUS IS ISSUED TO THE RESPONDENT TO GRANT APPROVAL TO THE PETITIONER UNDER SEC. 10(23)(IV) OF THE SAID A CT WITHIN SIX WEEKS FROM THE DATE OF THIS JUDGMENT. THE WRIT PETITION S TANDS ALLOWED AS ABOVE. THE PARTIES ARE LEFT TO BEAR THEIR OWN COSTS . 10. IT WAS SUBMITTED THAT IN THE CASE OF THE ASSESS EE ALSO PRIOR TO THE ASSESSMENT YEAR 2009-10 THE ASSESSEE WAS GRANTED TH E BENEFIT OF CHARITY FOR WHICH PAPER BOOK PAGES NO.113 TO 118 MAY BE REFERRE D. UNDER THE CIRCUMSTANCES THE SAID BENEFIT CANNOT BE DENIED TO THE ASSESSEE. HE ALSO PLACED RELIANCE ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF DIT (E) VS. SABARMATI ASHRAM GAUSHALA TRUST (2014) 362 ITR 539 (GUJ.) WHERE IT WAS HELD THAT THE MAIN OBJECTIVES OF THE T RUST WERE TO BREED CATTLE AND ENDEAVOUR TO IMPROVE THE QUALITY OF THE COWS AN D OXEN IN VIEW OF THE NEED OF ALL INDIA IS PROMINENTLY AND AGRICULTURAL C OUNTRY. ALL THESE WERE OBJECTS OF GENERAL PUBLIC UTILITY AND WOULD SQUAREL Y FALL UNDER SEC. 2(15) OF THE ACT PROFIT MAKING WAS NEITHER THE AIM NOR OBJEC T OF THE TRUST. IT WAS NOT THE PRINCIPAL ACTIVITY. MERELY BECAUSE WHILE CARRYI NG OUT THE ACTIVITIES FOR THE PURPOSE OF ACHIEVING THE OBJECT OF THE TRUST, CERTA IN INCIDENTAL SURPLUSES WERE GENERATED, WOULD NOT RENDER THE ACTIVITY IN THE NAT URE OF TRADE, COMMERCE OR BUSINESS, THE ASSESSEE WAS ENTITLED TO EXEMPTION U/ S.11. 20 ITA.NO. 1465 /AHD/2013 ASSESSMENT YEAR 2009-2010 11. HE FURTHER RELIED ON THE DECISION OF HONBLE DE LHI HIGH COURT IN THE CASE OF INSTITUTED OF CHARTERED ACCOUNTANTS OF INDI A & ANOTHER V/S. D.I.T.(E) (2013) 358 ITR 91 (DELHI) WHERE IT WAS HELD THAT TH E ACTIVITIES OF PROVIDING COACHING CLASSES OR UNDERTAKING CAMPUS PLACEMENT I NTERVIEWS FOR A FEE WERE IN RELATION TO THE MAIN OBJECT OF THE INSTITUTE WHI CH CANNOT BE HELD TO BE TRADE BUSINESS OR COMMERCE. ACCORDINGLY, EVEN THOUGH FEES WERE CHARGED BY THE INSTITUTE FOR PROVIDING COACHING CLASSES AND FOR HO LDING INTERVIEWS WITH RESPECT TO THE CAMPUS PLACEMENT, THE ACTIVITIES CAN NOT BE STATED TO BE RENDERING SERVICE IN RELATION TO ANY TRADE, COMMERC E OR BUSINESS AS SUCH ACTIVITIES ARE UNDERTAKEN BY THE INSTITUTE IN FURTH ERANCE OF ITS MAIN OBJECT IT HAS HELD EARLIER ARE NOT TRADE, COMMERCE OR BUSINES S. 12. HE FURTHER RELIED ON THE DECISION OF HONBLE DE LHI HIGH COURT IN THE CASE OF INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA & ANOTHER VS. DIT (E) (2012) 347 ITR (99) (DEL.) WHEREIN IT WAS HELD THAT THE FUNDAMENTAL OR DOMINANT FUNCTION OF THE INSTITUTE WAS TO EXERCISE OVERALL CONTROL AND REGULATE THE ACTIVITIES OF THE MEMBERS/ENROLLED CHARTERED AC COUNTANTS. A VERY NARROW VIEW HAD BEEN TAKEN THAT THE INSTITUTE WAS HOLDING COACHING CLASSES AND THAT THIS AMOUNTED TO BUSINESS. THE INSTITUTE HAD FRAMED THE CHARTERED ACCOUNTANTS REGULATIONS, 1988 AND THE REGULATIONS P ROVIDED FOR TRAINING STUDENTS, THEIR EXAMINATION, AND AWARD OF DEGREES A ND MEMBERSHIP OF THE INSTITUTE. THERE WAS A CLEAR DISTINCTION BETWEEN CO ACHING CLASSES CONDUCTED BY PRIVATE COACHING INSTITUTIONS AND THE COURSES AN D EXAMINATIONS HELD BY THE 21 ITA.NO. 1465 /AHD/2013 ASSESSMENT YEAR 2009-2010 INSTITUTE. THE QUESTION WHETHER THE INSTITUTE CARRI ED ON BUSINESS HAD NOT BEEN EXAMINED WITH PROPER PERSPECTIVE. THE INSTITUTE MAI NTAINED THAT IT NEVER GRANTED ANY LOAN OR ADVANCE TO THE INSTITUTE OF CHA RTERED ACCOUNTANTS OF INDIA ACCOUNTING RESEARCH FOUNDATION. THE FACTS REG ARDING THIS QUESTION HAD NOT BEEN CONSIDERED. THE ORDER DENYING THE EXEMPTIO N WAS NOT A VALID. 13. THE DEPARTMENTAL REPRESENTATIVE SUPPORTED THE O RDERS OF THE LOWER AUTHORITIES. 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. THE ASSESSEE IS A COMPANY REGISTERED UNDER SECTION 25 OF THE COMPANIE S ACT,1956. THE ASSESSEE COMPANY IS ALSO REGISTERED UNDER SECTION 1 2AA OF THE INCOME TAX ACT,1961.THE ASSESSEE COMPANY CLAIMED ITS ENTIRE IN COME OF THE YEAR UNDER CONSIDERATION AS EXEMPT UNDER SECTION 11 OF THE ACT . ON ASSESSMENT THE ASSESSING OFFICER DENIED THE DEDUCTION CLAIMED UNDE R SECTION 11 OF THE ACT ON THE GROUND THAT THE ASSESSEE IS NOT CARRYING ON ACTIVITIES WHICH CAN BE CONSIDERED AS CHARITABLE PURPOSE WITHIN THE MEANING OF SECTION 2(15) OF THE INCOME TAX ACT, 1961 BUT A WELL PLANNED BUSINESS AN D PROFESSION UNDER SHELTER OF SECTION 25 OF COMPANIES ACT. 15. ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 16. WE FIND THAT THE MAIN OBJECT OF THE ASSESSEE CO MPANY AS PER ITS MEMORANDUM OF ASSOCIATION IS AS UNDER :- TO CARRY OUT EDUCATION, MEDICAL RELIEF, RELIEF OF POOR AND PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND W ILDLIFE), EITHER DIRECTLY, OR BY SUPPORTING FINANCIALLY AND OTHERWIS E, ORGANIZATIONS TO 22 ITA.NO. 1465 /AHD/2013 ASSESSMENT YEAR 2009-2010 CARRY OUT THE AFORESAID ACTIVITIES FOR CHARITABLE P URPOSES AND NOT FOR PROFIT. 17. FROM THE ORDER OF ASSESSMENT IT IS OBSERVED THA T DURING THE YEAR UNDER CONSIDERATION THE ASSESSEES INCOME IS AS UNDER:- PARTICULARS. YEAR ENDING 31.03.2009 REVENUE GRANTS DRAWN 23,04,760 INCOME FROM CHARITY ADVISE(S.11) 1,08,57,115 INCOME FROM CURRENT INV.(S.12) 57.92,631 OTHER INCOME (S.13) 7,22,035 TOTAL 1,9 6,76,541 18. THE EXPENSES OR PAYMENT DEBITED BY THE ASSESSEE IN ITS INCOME AND EXPENDITURE ACCOUNT ARE AS UNDER:- PARTICULARS YEAR ENDING 31.3.09 PERSONNEL EXPENDITURE(S.14) 91,59,959 TECHNICAL EXP. (S.15) 19,36,006 PROMOTIONAL EXP.(S.16) 11,994 ADM. & OTHER EXP. 53,00446 DEP. (117868 43487) LESS TR. FROM CAP. GRANT RES. 74,381 TOTAL 1,64,82,786 EXCESS OF INCOME OVER EXP. 31,93,755 23 ITA.NO. 1465 /AHD/2013 ASSESSMENT YEAR 2009-2010 19. THUS THE ASSESSEE DISCLOSED NET INCOME AT RS.31 ,93,755/-. 20. THE ASSESSEE IN ITS RETURN CLAIMED THE ABOVE IN COME OF RS.31,93,755/- AS FULLY EXEMPT UNDER SECTION 11 OF THE ACT. 21. WE FIND THAT THE ENTIRE EXPENSES INCURRED BY TH E ASSESSEE ARE FOR PROVIDING ADVISORY SERVICES TO THE AFFLUENT CORPORA TE AND HIGH NET WORTH INDIVIDUALS WHO DESIRE TO MAKE DONATIONS TO PUBLIC WELFARE TRUST OR INSTITUTION. THUS IT IS OBSERVED THAT THE ACTUAL ACTIVITY OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WAS CONFINED TO PROVIDE PROFESS IONAL SERVICES TO CORPORATE AND OTHER PERSONS WHO DESIRE TO DO CHARIT Y BY ADVISING THEM OR BY WAY OF IDENTIFYING GENUINE CHARITABLE INSTITUTIONS FOR THEM. THE ASSESSEE FOR THIS SERVICE ALSO CHARGED FEE FROM THE DONOR CORPO RATE OR OTHER PERSONS AND SUCH FEE AMOUNTED TO RS.1,08,57,115/- DURING THE YE AR. THUS WE FIND THAT NO INCOME OF THE ASSESSEE WAS UTILISED FOR PROVIDING E DUCATIONAL ACTIVITY MEDICAL RELIEF, RELIEF OF POOR AND PRESERVATION OF ENVIRONM ENT (INCLUDING WATERSHEDS, FORESTS AND WILDLIFE). THE ENTIRE EXPENSES OF THE A SSESSEE WERE DIRECTED TOWARDS PROVIDING SERVICES TO DONORS WHO ARE AFFLUE NT SECTION OF THE SOCIETY AND WISH TO MAKE DONATION FOR CHARITABLE PURPOSES. THE ABOVE ACTIVITY OF THE ASSESSEE OF PROVIDING SERVICES TO AFFLUENT SECTION OF THE SOCIETY CANNOT BE, IN OUR CONSIDERED VIEW HELD AS ACTIVITY OF GENERAL PUB LIC UTILITY ALSO. THUS WE FIND THAT NO PART OF THE INCOME OF THE ASSESSEE COM PANY WAS ACTUALLY UTILISED FOR ANY CHARITABLE ACTIVITY DURING THE YEAR. FURTHE R NO MATERIAL WAS BROUGHT BEFORE US TO SHOW THAT ANY ASSET OF THE ASSESSEE-CO MPANY WAS UTILISED TO CARRY OUT EDUCATION, MEDICAL RELIEF, RELIEF OF POOR AND PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILD LIFE) OR EXTENDING FINANCIAL HELP FOR SUCH ACTIVITIES. RATHER WE FIND THAT THE ASSESSEE RECEIVED THE AMOUNT FROM THE DONOR AND BEFORE DISBURSING THE SAM E UTILISED THE SAME FOR EARNING INTEREST INCOME. THE INTEREST INCOME SO EAR NED BY THE ASSESSEE WAS ALSO NOT UTILISED FOR PAYMENT TO ANY CHARITABLE TRU ST OR FOR ANY OTHER CHARITABLE ACTIVITIES. 24 ITA.NO. 1465 /AHD/2013 ASSESSMENT YEAR 2009-2010 22. SIMPLY BECAUSE THE ASSESSEE WAS REGISTERED UNDE R SECTION 12 AA OF THE ACT DOES NOT ENTITLE IT TO CLAIM ITS ENTIRE INC OME AS EXEMPT UNDER SECTION 11 OF THE ACT BUT FOR GETTING THAT EXEMPTION THE AS SESSEE IS REQUIRED TO FURTHER SATISFY CONDITION OF APPLYING 85% OF ITS INCOME FOR CHARITABLE ACTIVITIES. IN ABSENCE OF THE SAME ONLY THE AMOUNT WHICH IS UTILIS ED BY THE ASSESSEE FOR DOING CHARITABLE ACTIVITIES CAN ONLY BE ALLOWED AS DEDUCTION TO THE ASSESSEE. IN THE PRESENT CASE AS IT IS OBSERVED THAT NO PART OF THE ASSESSEES INCOME WAS ACTUALLY APPLIED FOR ANY CHARITABLE ACTIVITIES AS DEFINED IN SECTION 2(15) OF THE ACT, THE ASSESSEE WAS NOT ENTITLED FOR DEDUCTIO N UNDER SECTION 11 OF THE ACT FOR APPLICATION OF INCOME TOWARDS CHARITABLE AC TIVITIES. 23. THE AUTHORISED REPRESENTATIVE RELIED ON THE DEC ISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF [2014] 366 ITR-85 (GUJ.) DIRECTOR OF INCOME TAX (EXEMPTION) VS. AHMEDABAD MANAGEMENT ASSOCIATIO N WHEREIN IT WAS HELD AS UNDER:- THE ASSESSEE, A PUBLIC CHARITABLE TRUST, WAS DEDI CATED TO PURSUE THE OBJECTS OF CONTINUING EDUCATION, TRAINING AND R ESEARCH ON VARIOUS FACETS OF MANAGEMENT AND RELATED AREAS FOR THE PAST 50 YEARS. THE ASSESSING OFFICER, FOR THE ASSESSMENT YEAR 2009-10, HELD THAT CONSIDERING THE NATURE OF THE COURSES THEIR DURATIO N AND THE RESULTANT SURPLUS FROM EACH ACTIVITY, THE ACTIVITY OF THE ASS ESSEE WAS NOT EDUCATIONAL. THE ACTIVITIES OF THE ASSESSEE FELL WI THIN THE SCOPE OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AND ANY OTHER ACTIVITY OF SECTION 2(15) OF THE INCOME TAX ACT,19 61 AS AMENDED, AND SINCE THE AGGREGATE VALUE OF THE RECEIPTS WERE MORE THAN RS.10 LAKHS THE PROVISO TO SECTION 2(15) WAS APPLICABLE AND THE ASSESSEE WAS NOT ENTITLED TO EXEMPTION. HE DENIED THE EXEMPTION UNDE R SECTION 11 AND ASSESSED THE INCOME OF THE ASSESSEE AT RS.1,42,11,1 29 MAKING A FURTHER ADDITION OF RS.26,38,500/- ON ACCOUNT OF VO LUNTARY DONATIONS TO THE CORPUS RECEIVED BY THE ASSESSEE DURING THE YEAR . THE ORDER OF 25 ITA.NO. 1465 /AHD/2013 ASSESSMENT YEAR 2009-2010 ASSESSMENT WAS CONFIRMED BY THE COMMISSIONER OF INC OME TAX (APPEALS). THE TRIBUNAL HELD THAT THE ACTIVITIES O F THE ASSESSEE WERE IN THE FIELD OF EDUCATION AND THE ASSESSEE WAS ELIGIBL E FOR EXEMPTION UNDER SECTION 11. HELD DISMISSING THE APPEAL, THAT ALL THROUGHOUT FOR THE PRECEEDING YEAR FROM THE ASSESSMENT YEAR 1995-96 TILL 2008-09 THE R EVENUE HAD CONSIDERED THE ACTIVITIES OF THE ASSESSEE EDUCATION AL AND HAD GRANTED THE BENEFIT U/S.11. THE VIEW TAKEN BY THE TRIBUNAL THAT THE ACTIVITIES OF THE ASSESSEE SUCH AS CONTINUING EDUCATION DIPLOMA A ND CERTIFICATE PROGRAMME; MANAGEMENT DEVELOPMENT PROGRAMME, PUBLIC TALKS AND SEMINARS AND WORKSHOPS AND CONFERENCES, WERE EDUCAT IONAL ACTIVITIES OR IS IN THE FIELD OF EDUCATION WAS PROPER. THE ACT IVITIES OF THE ASSESSEE WOULD FALL WITHIN THE DEFINITION OF CHARITABLE PUR POSE IN TERMS OF SECTION 2(15) AND, THEREFORE, WOULD BE ENTITLED TO EXEMPTION UNDER SECTON11. 24. WE FIND THAT IN THE INSTANT CASE THE AR OF THE ASSESSEE COULD NOT BRING ANY MATERIAL BEFORE US TO SHOW THAT THE ACTIVITIES CARRIED OUT BY THE ASSESSEE DURING THE YEAR WAS TREATED BY THE REVENUE IN EARLI ER YEARS AS ACTIVITIES TOWARDS EDUCATION, MEDICAL RELIEF, RELIEF OF POOR A ND PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILD LIFE). 25. THUS, AT BEST IT CAN BE SAID THAT IN EARLIER YE AR THE ACTIVITIES OF THE ASSESSEE WAS TREATED AS ACTIVITY TOWARDS ADVANCEMEN T OF GENERAL PUBLIC UTILITY. HOWEVER, WE FIND THAT THERE WAS AN AMENDME NT IN PROVISO TO SECTION 2(15) OF THE ACT W.E.F. 1-4-2009 WHEREBY TWO PROVIS OS WERE INSERTED IN SECTION 2(15) WHICH DEFINE CHARITABLE PURPOSE AS UN DER:- PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT IN VOLVES CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINE SS, OR ANY ACTIVITY OF 26 ITA.NO. 1465 /AHD/2013 ASSESSMENT YEAR 2009-2010 RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COM MERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRES PECTIVE 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;] 26. THEREFORE, IN VIEW OF THE ABOVE AMENDMENT IN LA W THE ACTIVITIES WHICH WERE REGARDED AS ADVANCEMENT OF GENERAL PUBLIC UTIL ITY IN EARLIER YEARS CANNOT BE REGARDED AS ACTIVITIES FOR CHARITABLE PURPOSES I F THE ACTIVITIES ARE HIT BY FIRST PROVISO AND IS NOT COVERED BY EXEMPTION PROVI DED IN SECOND PROVISO. IN THE INSTANT CASE WE FIND THAT THE RECEIPT OF THE AS SESSEE FROM ADVISORY FEE CHARGED FOR RENDERING SERVICES EXCEEDS THE LIMIT PR OVIDED IN SECTION 2(15) OF THE ACT. THEREFORE, THE ACTIVITY OF THE ASSESSEE CA NNOT BE REGARDED AS OF CHARITABLE PURPOSE OF ADVANCEMENT OF GENERAL PUBLIC UTILITY DURING THE ASSESSMENT YEAR 2009-10. THEREFORE THE ABOVE DECISI ON IS NOT APPLICABLE ON FACTS OF THE CASE. 27. THE SECOND DECISION RELIED UPON BY THE ASSESSE E IS OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SABARMATI ASHRAM GAUSHALA TRUST (SUPRA). IN THIS CASE, HONBLE HIGH COURT HAS HELD AS UNDER:- THAT THE MAIN OBJECTIVES OF THE TRUST WERE TO BREE D CATTLE AND ENDEAVOUR TO IMPROVE THE QUALITY OF THE COWS AND OX EN IN VIEW OF THE NEED OF ALL INDIA IS PROMINENTLY AND AGRICULTURAL C OUNTRY. ALL THESE WERE OBJECTS OF GENERAL PUBLIC UTILITY AND WOULD SQUAREL Y FALL UNDER SEC. 2(15) OF THE ACT PROFIT MAKING WAS NEITHER THE AIM NOR OB JECT OF THE TRUST. IT WAS NOT THE PRINCIPAL ACTIVITY. MERELY BECAUSE WHIL E CARRYING OUT THE ACTIVITIES FOR THE PURPOSE OF ACHIEVING THE OBJECT OF THE TRUST, CERTAIN INCIDENTAL SURPLUSES WERE GENERATED, WOULD NOT REND ER THE ACTIVITY IN 27 ITA.NO. 1465 /AHD/2013 ASSESSMENT YEAR 2009-2010 THE NATURE OF TRADE, COMMERCE OR BUSINESS, THE ASSE SSEE WAS ENTITLED TO EXEMPTION U/S.11. 28. WE FIND THAT THE FACTS OF THE INSTANT CASE ARE DISTINGUISHABLE FROM THE FACTS OF THE CASE BEFORE THE HONBLE HIGH COURT. IN THAT CASE THE ASSESSEE WAS ENGAGED IN THE ACTIVITIES OF BREEDING CATTLE IN AN ENDEAVOUR TO IMPROVE THE QUALITY OF COWS AND OXEN AND AS AN INCIDENTAL A CTIVITY TO THAT IT SOLD MILK AND RECEIVED SURPLUS. THE HONBLE HIGH COURT HELD T HAT BREEDING CATTLE WAS ACTIVITY OF PUBLIC UTILITY AND MERELY BECAUSE SOME INCIDENTAL SURPLUS AROSE TO THE CHARITABLE TRUST IT CANNOT BE HELD THAT THE ASS ESSEE TRUST WAS CARRYING OUT ANY ACTIVITY IN THE NATURE OF TRADE. IN CONTRADICT ION TO THE FACTS OF THAT CASE IN THE INSTANT CASE WE FIND THAT THE ENTIRE EXPENSES I NCURRED BY THE ASSESSEE COMPANY WAS FOR RENDERING ADVISORY SERVICES FOR WHI CH IT ALSO RECEIVED CHARGES FROM THE PERSONS TO WHOM ADVISORY WERE GIVE N. THE MAIN ACTIVITY OF THE ASSESSEE WAS OF RENDERING SERVICES AND FOR THAT ACTIVITY IT RECEIVED CHARGES WHICH EXCEEDED THE LIMIT SPECIFIED IN SECON D PROVISO TO SECTION 2(15) OF THE ACT. THEREFORE, IT CANNOT BE HELD THAT THE RECEIPT GENERATED WAS INCIDENTAL TO THE ATTAINMENT OF THE MAIN OBJECT OF THE TRUST. RATHER THE RECEIPT WAS GENERATED IN RESPECT OF MAIN AND ONLY ACTIVITY CARRIED OUT BY THE ASSESSEE. THEREFORE, THIS DECISION DOES NOT HELP T HE CASE OF THE ASSESSEE. 29. THE ASSESSEE HAS ALSO RELIED ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF DIT (E) VS. PRADAN PROPERTY HOLDING TRUST IN ITA NO.361 OF 2007 ORDER DATED 16-08-2010. IN VIEW OF OUR OBSERVATION GIVEN ABOVE WHILE DISCUSSING THE CASE OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SABARM ATI ASHRAM GAUSHALA TRUST (SUPRA) THIS DECISION IS NOT APPLICABLE TO THE FACT S OF THE ASSESSEES CASE. 30. THE ASSESSEE HAS ALSO RELIED ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF INDIA TRADE PROMOTION ORGANISA TION VS. DIT (E) AND OTHERS 371 ITR 333 (DELHI). IN VIEW OF OTHER OBSERV ATION GIVEN ABOVE WHILE DISCUSSING THE CASE OF HONBLE GUJARAT HIGH COURT I N THE CASE OF SABARMATI 28 ITA.NO. 1465 /AHD/2013 ASSESSMENT YEAR 2009-2010 ASHRAM GAUSHALA TRUST (SUPRA) THIS DECISION IS NOT APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. 31. FOR THE ABOVE STATED REASONS WE HOLD THAT THE A SSESSEE IS NOT ENTITLED FOR DEDUCTION UNDER SECTION11 OF THE ACT DURING THE YEAR UNDER CONSIDERATION. IN VIEW OF OUR OBSERVATIONS MADE ABOVE WE CONFIRM T HE ORDER OF THE CIT (A) AND DISMISS THE GROUNDS OF APPEAL OF THE ASSESSEE. 32. GROUND NO.7 OF THE APPEAL READS AS UNDER:- LD. CIT (A) ERRED IN LAW AND ON FACTS IN CONFIRMIN G ACTION OF AO HOLDING SOFTWARE EXPENDITURE OF RS.19,25,285/- AS C APITAL IN NATURE AND ALLOWING DEPRECIATION OF 30% THEREON FAILING TO TR EAT THE EXPENSES AS APPLICATION OF FUNDS FOR CHARITABLE ACTIVITIES OF T HE APPELLANT TRUST. THE AO HAS HELD AS UNDER :- ADDITION FOR CAPITAL EXPENDITURE DEBITED TO REVEN UE EXPENSES:- THE ASSESSEE HAS DEBITED FOLLOWING EXPENSES TO SOFTWARE DEVELOPMENT EXPENSES ACCOUNT WHICH ARE OF CAPITAL IN NATURE. DATE PARTICULARS AS PER SUBMISSION MADE BY ASSESSEE . AMOUNT 30-12-2008 PAID TO PLANMAN TECHNOLOGY P. LTD. 1 ,20,746 31-03-2009 -DO- 1,00,000 31-03-2009 TECHNOLOGY CONSULTANCY FEE EARLIER CAPITALIZED NOW TRANSFERRED TO REVENUE EXPENSES. 3,00,000 31-03-2009 PAID SOFTWARE CHARGES USD 27567 @ 50.95 (GIVE USA) 14,04,539 TOT AL 19,25,285 29 ITA.NO. 1465 /AHD/2013 ASSESSMENT YEAR 2009-2010 LESS: DEPRECIATION ALLOWED @ 30% 5,77,585 ADDITION TO BE M ADE 13,47,700 33. AFTER ALLOWING DEPRECIATION ON SOFTWARE CHARGES @ 3 0% ON RS.19,25,285/- ADDITION FOR RS.13,47,700/- BEING MA DE FOR CAPITAL EXPENDITURE DEBITED TO REVENUE EXPENSES. PENALTY PROCEEDINGS U/ S.271(1)(C) OF THE I.T. ACT IS INITIATED SEPARATELY FOR FURNISHING INACCURA TE PARTICULARS OF INCOME. 34. THUS, IT IS OBSERVED THAT NO RELEVANT FACTS WER E BROUGHT ON RECORD BY THE A.O. AND NO REASON WAS GIVEN BY THE AO FOR NOT ACCEPTING THE CLAIM OF THE ASSESSEE OF SOFTWARE EXPENSES BEING OF REVENUE IN NATURE. IN OUR CONSIDERED VIEW SUCH AN UNREASONED ORDER IS NOT SUS TAINABLE. WE THEREFORE, DELETE THE DISALLOWANCE MADE BY THE A.O. OF RS.13,4 7,700/- AND ALLOW THE GROUND OF APPEAL OF THE ASSESSEE. 35. GROUND NO.8 OF THE APPEAL READS AS UNDER:- LEVY OF INTEREST U/S. 234A, 234B AND 234C OF THE ACT IS UNJUSTIFIED. 36. AT THE TIME OF HEARING NO ARGUMENTS WERE MADE O N THIS GROUND OF APPEAL BY THE A.R OF THE ASSESSEE. WE THEREFORE HOL D THAT THE CHARGING OF INTEREST IS CONSEQUENTIAL AND ACCORDINGLY DISMISS T HIS GROUND OF APPEAL OF THE ASSESSEE. 37. GROUND NO.9 OF THE APPEAL READS AS UNDER:- INITIATION OF PENALTY PROCEEDINGS U/S. 271(1)(C) O F THE ACT IS UNJUSTIFIED. 38. THIS GROUND IS PREMATURED AND HENCE ACCORDINGLY DISMISSED. 39. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 30 ITA.NO. 1465 /AHD/2013 ASSESSMENT YEAR 2009-2010 ORDER PRONOUNCED IN THE COURT ON WEDNESDAY THE 13 TH DAY OF MAY,2015. SD/- SD/- (KUL BHARAT) ( N. S. SAIN I) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, THE 13TH DAY OF MAY, 2015 COPIES TO: (1) THE APPELLANT (2) THE RESPON DENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT/DEPUTY REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD PATKI 1. DATE OF DICTATION . 5.5.15 & 12.5.15 & 13.5.15 (DICTATION-PAD PAGES ATTACHED AT THE END OF THIS F ILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 12.5.15. 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P .S./P.S 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER.. 10 DATE OF DESPATCH OF THE ORDER