M/s. Association of State Road transport, New Delhi V. CIT-V, New Delhi

ITA 3271/DEL/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91014 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 26-02-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 29-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A MISRA
• Assessee Lawyers: TARUNDEEP SINGH
• Keywords: Business income; Charitable institution; Opportunity of being heard; Application of stay
• Section: 143(3); 12AA; 263; 10; 11

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL IN (DELHI BENCH A NEW DELHI) BEFORE SHRI N.K.SAINI, ACCOUNTANT MEMBER AND SHRI C.M.GARG, JUDICIAL MEMBER ITA NO. 3271/DEL/2014 (ASSESSMENT YEAR: 2009-10) ASSOCIATION OF STATE ROAD TRANSPORT VS. CIT- V ASTRU BHAWAN, PLOT NO. 4A, PSP BLOCK, POCKET-14, SECTOR -8, DWARKA NEW DELHI NEW DELHI PAN : AAAAA0233A (APPLICANT) (RE SPONDENT) ASSESSEE BY : SH. TARUNDEEP SINGH, CA REVENUE BY : SH. A.MISRA, CIT DR DATE OF HEARING : 26.02.2015 DATE OF PRONOUNCEMENT : 08 .05.2015 ORDER PER C.M.GARG, JUDICIAL MEMBER : THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AG AINST THE ORDER OF THE DIRECTOR OF INCOME TAX (EXEMPTIONS), NEW DELHI DATED ITA NO. 3271/ DEL/2014 2 28/03/2014 PASSED U/S 263 OF THE INCOME TAX ACT 19 61 (FOR SHORT THE ACT). 2. THE MAIN GROUNDS RAISED BY THE ASSESSEE IN THIS APPEAL READS AS UNDER : 1. THAT ON FACTS AND IN LAW THE DIRECTOR OF INC OME TAX (EXEMPTIONS), NEW DELHI {HEREINAFTER REFERRED TO AS THE DIT(E)} ERRED IN ASSUMING JURISDICTION U/S 263 OF THE ACT IN AS MUCH AS THE ORDER PASSED BY THE ASSTT DIRECTOR O F INCOME TAX (EXEMPTIONS) {HEREINAFTER REFERRED TO AS THE AO} U/S 143(3) OF THE ACT WAS NEITHER ERRONEOUS N OR PREJUDICIAL TO THE INTEREST OF REVENUE. 2. THAT ON FACTS AND IN LAW THE DIT(E) ERRED IN H OLDING / OBSERVING THAT : A. RECEIPTS OF APPELLANT FROM TEST LABORATO RY SERVICES OF RS. 7.72 CRORES AND CONSULTANCY SERVICES OF RS. 62. 47 LAKHS DO NOT FALL WITHIN THE AMBIT OF SECTION 2(15) OF THE INCOME TAX ACT. B. THE APPELLANT IS NOT ELIGIBLE FOR CLAIM ING EXEMPTION U/S 11 OF THE ACT ON INCOME DERIVED FROM THE ABOVE RECE IPTS. C. IN PROCEEDINGS U/S 143(3), THE AO HAD N OT EXAMINED THE ISSUE OF TAXABILITY OF ABOVE RECEIPTS IN LIGHT OF PROVISIONS OF SECTION 2(15) OF THE ACT. 3. THAT ON FACTS AND IN LAW THE ORDER OF DIT(E) SUFFERS FROM AN INHERENT CONTRADICTION VITIATING HIS ORDE IN AS MUC H AS ON ONE HAND HE DECIDED THE ISSUE ON MERITS WHILE AT TH E SAME TIME HE DIRECTED THE AO TO MAKE A DE NOVO EXAMINATI ON. 4. THAT ON FACTS AND IN LAW THE DIT(E) ERRED I N SETTING ASIDE THE ORDER OF ASSESSMENT DATED 28 TH DECEMBER 2011 PASSED BY THE AO U/S 143(3) OF THE ACT. 5. THAT ON FACT AND IN LAW THE ORDER PASSED BY DIT(E) U/S 263 OF THE ACT IS BAD IN LAW AND VOID AB-INITIO. 3. BRIEFLY STATED THE FACTS GIVING RISE TO THI S APPEALS ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 30.3.2010 DE CLARING RETURN ITA NO. 3271/ DEL/2014 3 INCOME AT NIL. THEREAFTER THE ASSESSMENT IN THIS CA SE WAS COMPLETED ON 28.12.2011 AT AN INCOME OF RS. 4,39,07,729/- BEI NG ACCUMULATED AMOUNT IN FINANCIAL YEAR 2003-04 NOT UTILIZED WITHI N A PERIOD OF 4 YEARS WHICH WAS EXPIRED ON 31.3.2009. IT IS PERTINE NT TO NOTE THAT THE ASSESSING OFFICER ACCEPTED NIL RETURN OF INCOME U/S 143(3) OF THE ACT BUT MADE ADDITION OF ACCUMULATED AMOUNT AS PER CLAU SE (A) GIVEN AFTER THIRD PROVISO TO SECTION 10 (23C) (IV) OF THE ACT. 4. SUBSEQUENTLY ON GOING THROUGH THE RECORDS IT WAS NOTICED BY THE DIT(E) THAT THE ASSESSEE HAD RECEIVED UNDER THE HEA D OF REVENUE FROM TAX LABORATORY OF RS. 7.72 CRORES AND CONSUL TANCY RECEIPTS OF RS. 62.47 LAKHS WHICH WERE FOUND TO BE COMMERCIAL IN NATURE BY THE DIT(E). THE DIT(E) PROCEEDED TO ISSUE NOTICE U/S 26 3 OF THE ACT IN PURSUANCE BY OBSERVING THAT AS PER AMENDED PROVISIO NS OF SECTION (2) (15) OF THE ACT, CHARITABLE PURPOSE INCLUDES RE LIEF OF THE POOR, EDUCATION, MEDICAL RELIEF, PRESERVATION OF ENVIRONM ENT (INCLUDING WATERSHEDS, FORESTS AND WILDLIFE) PRESERVATION OF M ONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTORIC INTEREST AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY; PROV IDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CARRYING O N OF ANY ACTIVITY IN THE ITA NO. 3271/ DEL/2014 4 NATURE OF TRADE, COMMERCE OF BUSINESS, OR ANY ACTIV ITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR B USINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IF AGGREGATE REC EIPT EXCEEDS RS. 10 LACS DURING THE YEAR IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY. 5. THE LD. DIT(E) ISSUED A NOTICE U/S 263 OF THE ACT VIDE DATED 06.02.2014 TO THE ASSESSEE AND AFTER CONSIDERING TH E WRITTEN SUBMISSIONS OF THE ASSESSEE FILED ON 10.3.2014 THE DIT(E), REJECTED THE SUBMISSIONS AND OBJECTION OF THE ASSESSEE AND P ASSED IMPUGNED ORDER BY HOLDING THAT THE ORDER PASSED BY THE AO IS ERRONEOUS INASMUCH AS IT IS PREJUDICIAL TO THE INTEREST OF TH E REVENUE AND THE DIT(E) SET ASIDE THE ORIGINAL ASSESSMENT ORDER WITH THE DIRECTIONS TO THE AO TO FRAME THE ASSESSMENT AFRESHING AFTER DUE APPLICATION OF MIND AND LAW AND AFTER CALLING AND EXAMINING NECESS ARY DETAILS / EVIDENCES AND GIVING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. NOW THE AGGRIEVED ASSESSEE IS BEFORE THIS TRIBUNAL WITH THE GROUNDS AS REPRODUCED HEREINABOVE. 6. WE HAVE HEARD ARGUMENT OF BOTH THE SIDES AND CAREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. TH E LD. ASSESSEES REPRESENTATIVE (AR) SUBMITTED THAT THE ASSESSMENT ORDER PASSED ITA NO. 3271/ DEL/2014 5 U/S 143(3) OF THE ACT WAS NEITHER ERRONEOUS NOR PRE JUDICIAL TO THE INTEREST OF REVENUE AND THE DIT(E) ERRED IN HOLDING AND OBSERVING THAT THE RECEIPTS OF THE ASSESSEE APPELLANT FROM TE ST LABORATORY SERVICES AND CONSULTANCY SERVICES DO NOT FALL WITHI N AMBIT OF SECTION 2(15) OF THE ACT AND THEREFORE, THE ASSESSEE IS NOT ELIGIBLE FROM CLAIMING EXEMPTION U/S 11 OF THE ACT ON THE INCOME DERIVED FROM THE ABOVE RECEIPTS. THE LD. AR VEHEMENTLY CONTENDED THA T DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE A O EXAMINED AND VERIFIED THE ISSUE OF TAXABILITY OF ABOVE RECEIPTS IN THE LIGHT OF PROVISIONS OF SECTION 2(15) OF THE ACT AND THE DIT( E) WAS NOT JUSTIFIED IN HOLDING THAT THE AO HAD NOT EXAMINED THE SAME. T HE LD. AR ALSO CONTENDED THAT THE IMPUGNED ORDER SUFFERS FROM INHE RENT CONTRADICTION AS MUCH AS ON ONE HAND HE DECIDED THE ISSUE ON MERITS AND AT THE SAME TIME HE DIRECTED TO AO TO MAKE A D E NOVO EXAMINATION SETTING ASIDE THE ORIGINAL ASSESSMENT O RDER DATED 28.12.2011 PASSED U/S 143(3) OF THE ACT. 7. THE LD. AR FURTHER DRAWN OUR ATTENTION TOWAR DS ORDER OF HONBLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF I NDIA TRADE PROMOTION ORGANISATION VS. DGIT (E) 2015 TIOL-227-HC-DEL-I T AND SUBMITTED THAT THE FIRST PROVISO TO SECTION 2(15) O F THE ACT AS ITA NO. 3271/ DEL/2014 6 AMENDED BY THE FINANCE ACT WOULD HAVE TO BE READ DO WN AND INTERPRETED IN THE CONTEXT OF SECTION 10(23C) (IV) OF THE ACT AS THE CONTEXT REQUIRES SUCH INTERPRETATION AND WHERE A IN STITUTION IS NOT DRIVING PRIMARILY BY DESIRED OR MOTIVE TO EARN PROF IT BUT TO DO CHARITY WITH AN OBJECT OF GENERAL PUBLIC UTILITY THEN IT MU ST BE RECORDED AS AN INSTITUTION ESTABLISHED FOR CHARITABLE PURPOSES. 8. THE LD. AR ALSO PLACED A RELIANCE ON VAR IOUS DECISIONS INCLUDING DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF INSTITUTE OF CHARTERED ACCOUNTANT OF INDIA VS. DGI REPORTED I N 347 ITR 99(DELHI) AND SUBMITTED THAT THE FIRST PROVISO TO SECTION 2( 15) OF THE ACT TO INCLUDE ANY TRANSACTION FOR A FEE OR MONEY A ND THE ACTIVITY WOULD BE BUSINESS IF IT IS UNDERTAKEN WITH A PROF IT MOTIVE, BUT IN SAME CASES THIS MAY NOT BE DETERMINATIVE AND THE PR OFIT MOTIVE TEST SHOULD BE SPECIFIED IN THE CONTEXT OF SECTION 10(2 3C) (IV) OF THE ACT. 9. THE LD. AR ALSO POINTED OUT THAT THE ASSE SSEE IS AN ASSOCIATION AND APEX COORDINATING BODY OF STATE RO AD TRANSPORT UNDERTAKINGS (STUS) REGISTERED AS A SOCIETY UNDER THE SOCIETIES REGISTRATION ACT AND IS WHOLLY PATRONIZED BY CENTRA L GOVERNMENT FOR WORKING UNDER AEGIS OF MINISTRY OF ROAD TRANSPORT A ND HIGHWAYS. THE LD. AR, FURTHER, POINTED OUT THE SECRETARY TO THE GOVERNMENT OF ITA NO. 3271/ DEL/2014 7 INDIA, MINISTRY OF ROAD TRANSPORT AND HIGHWAYS IS E X-OFFICIO PRESIDENT OF THE ASSESSEE ASSOCIATION AND THE GOVERNING BODY OF THE ASTRU COMPRISES OF REPRESENTATIVE FROM ALL STATE ROAD TRA NSPORT UNDERTAKING. THE LD. AR FURTHER POINTED OUT THAT TH E ASSESSEE ASSOCIATION WAS ESTABLISHED WITH THE MAIN OBJECT OF IMPROVING PUBLIC TRANSPORT SYSTEM IN THE COUNTRY AND SOME OF THE REL EVANT AIM AND OBJECTS OF THE ASSESSEE ASSOCIATION MENTIONED IN IT S MEMORANDUM OF ASSOCIATION WHICH ARE AS FOLLOWS :- (I) TO UNDERTAKE AND PROMOTE RESEARCH STUDIE S IN TRANSPORT ECONOMIC AND ENGINEERING AND OTHER MATTERS AFFECTIN G THE TRANSPORT INDUSTRY. (II)- A TO HAVE ESTABLISHED A CENTRAL INS TITUTE OF ROAD TRANSPORT (CIRT) FOR UNDERTAKING TRAINING AND RESEA RCH, LABORATORY AND DEVELOPMENT OF APPROPRIATE AND ADVAN CED TECHNOLOGY, NEW TECHNOLOGIES, IMPROVEMENT OF INDIGENOUS TECHNOLOGY, ADOPTION AND DEVELOPMENT OF IMPORTED TECHNOLOGY IN THE FIELD OF TRANSPORT; (II) TO SECURE AND PROVIDE A TECHNICAL CO NSULTANCY SERVICE WHICH CAN BE AVAILED OF BY THE STATE TRANSPORT UNDERTAKINGS. (III) TO RENDER COMMON SERVICE TO THE MEM BERS AND ASSIST THEM IN SUCH MATTERS AS STANDARDIZATION OF EQUIPMEN T, PURCHASE OF MATERIALS FOR THEIR OWN USE AT ECONOMIC PRICES, PROMOTION OF EFFICIENCY OF ROAD TRANSPORT SERVICES AND REDUCTION IN THE OPERATIONAL COSTS OF THE MEMBERS. (IV) TO PROVIDE AND PROMOTE FACILITIES FOR ADVANCING THE SKILL OF PERSONS EMPLOYED OR TO BE EMPLOYED IN THE STATE TRANSPORT UNDERTAKINGS THROUGH INSTRUCTION, TRAININ G AND RESEARCH. (XII) TO ASSIST IN THE WORK OF PRESCRIBING STANDARDS AND SPECIFICATIONS AND IN CARRYING OUT TESTS. ITA NO. 3271/ DEL/2014 8 10. THE LD AR FURTHER, SUBMITTED THAT THE ASSESSE E IS REGISTERED UNDER THE PROVISIONS OF SECTION12A OF THE ACT WITH EFFECT FROM 27.4.1982 AND THE ASSESSEE HAS ALSO BEEN NOTIFIED A S A CHARITABLE ORGANIZATION U/S 10(23C) (IV) OF THE ACT VIDE NOTIF ICATION NO. 1348 DATED 31.10.2007 AND THESE REGISTRATION, APPROVAL A ND NOTIFICATION ARE STILL SUBSISTING AS ON THE DATE. 11. THE LD. AR FURTHER, POINTED OUT THAT THE I MPUGNED TEST CHARGES HAVE NOT BEEN CHANGED / REVISED SINCE 2001 WHICH SU PPORTS THE FACT THAT THE ASSESSEE IS NOT RUNNING ON COMMERCIAL LINE S HAVING PROFIT AS A PRE-DOMINENT MOTIVE THE LD. AR ELABORATED THAT IN ACCORDANCE WITH ONE OF THE MAIN OBJECT OF CENTRAL INSTITUTION OF RO AD TRANSPORT WAS ESTABLISHED BY THE ASSESSEE IN 1967 AND CIRT HAS BE EN AWARDED THE ISO 9001 AND ISO 14001 CERTIFICATES BY TUV SUDDEUTS CHLAND OF MUNICH, GERMANY FOR THE DESIGN AND EXECUTION OF TRA INING, RESEARCH, CONSULTANCY AND TESTING SERVICES. THE MAIN INCOME O F CIRT IS FROM THE TEST CHARGES CONDUCTED IN COMPLIANCE TO THE STA TUTORY OBLIGATIONS ENTRUSTED AND BESTOWED UPON IT. THE TEST CHARGES AR E CHARGED FROM THE MANUFACTURERS ARE JUST TO MEET THE RUNNING COST OF LABORATORY AND ITA NO. 3271/ DEL/2014 9 NO COMMERCIAL RATE IS BEING CHARGED AND THE CHARGES FOR TESTING ARE SAME WITHOUT ANY CHANGE OR REVISION SINCE 2001. 12. ABOUT IMPUGNED CONSULTANCY CHARGES THE LD. AR SUBMITTED THAT APART FROM AUTOMOBILE COMPONENTS TESTING, THE OTHER PRIMARY ACTIVITY OF THE ASSESSEE IS MANAGEMENT DEVELOPMENT , RESEARCH AND CONSULTANCY IN THE FIELD OF AUTOMOBILE COMPONENTS A ND IN THE INTEREST OF THE ROAD TRANSPORT SECTOR AS A WHOLE. THE LD. AR FURTHER, DRAWN OUR ATTENTION TOWARDS TEST APPLICATION FILED PAGE 7 AND SUBMITTED THAT THE CIRT OFFERS CONSULTANCY SERVICES SPECIALLY AKIN TO TRAFFIC POLICIES, PROMOTION OF EFFICIENCY OF ROAD TRANSPORT SERVICES, REDUCTION IN THE OPERATIONAL MANAGEMENT AND MAINTENANCE FUNCTION OF AUTOMOBILE PARTS, PERFORMANCE IMPROVEMENT MEASURES, BUS BODY I NSPECTION, INSPECTION OF CNG BUSES, IMPROVEMENT ON TYRE LIFE A ND FUEL ECONOMY OF FLEET ETC. THE LD. AR STRENUOUSLY CONTENDED THA T FOR PROVIDING THESE KIND OF SERVICES TO THE STATE TRANSPORT UNDER TAKINGS WHICH PROVIDE TRANSPORT FACILITY TO A COMMON PUBLIC , A V ERY NOMINAL AND ECONOMICAL RATE IS CHARGED. THE AR LASTLY POINTED OUT THAT THESE ACTIVITIES ARE BEING CARRIED OUT IN THE FURTHERANC E AND ADVANCEMENT OF THE OBJECT OF THE ASSESSEE AS SET OUT IN THE MEM ORANDUM OF ASSOCIATION AND THAT TOO NOT ON COMMERCIAL LINES, A S THE PREDOMINANT ITA NO. 3271/ DEL/2014 10 OBJECT OF ASSESSEE IS NOT TO EARN PROFIT BUT TO SUB -SERVE AND PROVIDE SERVICES TO ITS MEMBER STUS AND THE GOVERNMENT OF I NDIA. 13. THE LD. AR REITERATES ITS ARGUMENT AND GROU NDS OF APPEALS SUBMITTED THAT THE DIT(E) REJECTED DETAILED OBJECTI ON OF THE ASSESSEE DATED 10.03.2014 AND PASSED IMPUGNED ORDER BY DIREC TING THE AO TO FRAME DE NOVO ASSESSMENT AFTER CALLING AND EXAMININ G NECESSARY DETAILS AND EVIDENCES AND AFTER PROVIDING DUE OPPOR TUNITY OF BEING HEARD FOR THE ASSESSEE. THE LD. AR FINALLY CONTENDE D THAT THE DIT(E) MISUNDERSTOOD THE PROVISO TO SECTION 2(15) OF THE A CT WHICH WAS INSERTED BY FINANCE ACT, 2008 WITH EFFECT FROM 01.0 4.2009 AS THE SAME SHOULD BE CONSIDERED IN THE CONTEXT OF SECTION 10 (23C) (IV) OF THE ACT, THEREFORE, THE NOTICE U/S 263 OF THE ACT A S WELL AS IMPUGNED ORDER MAY KINDLY BE QUASHED. 14. REPLYING TO THE ABOVE, THE LD. DR SUPPORT ED THE IMPUGNED ORDER AND SUBMITTED THAT THE AO HAD NOT EXAMINED TH E ISSUE AS PER PROVISONS OF THE ACT SPECIALLY AS PER PROVISO ATTAC HED TO SECTION 2(15) OF THE ACT AND THE AO DID NOT EXAMINED THE IS SUE OF TAXABILITY OF REVENUE FROM TEST LABORATORY AND CONSULTANCY CHARGE S IN THE LIGHT OF AMENDED PROVISIONS OF SECTION 2(15) OF THE ACT A ND THEREFORE, THE DIT(E) WAS QUITE JUSTIFIED IN HOLDING THAT THE ORDE R IS ERRONEOUS AND ITA NO. 3271/ DEL/2014 11 INASMUCH AS IT IS PREJUDICIAL TO THE INTEREST OF TH E REVENUE. THE LD. DR ALSO CONTENDED THAT THE ASSESSEE WOULD GET DUE O PPORTUNITY OF HEARING AND TO SUBMIT NECESSARY DETAILS, EVIDENCES AND EXPLANATIONS REGARDING HIS CLAIM DURING REFRAMING OF DE NOVO ASS ESSMENT IN PURSUANCE TO IMPUGNED ORDER PASSED U/S 263 OF THE A CT AND THERE WOULD BE NO PREJUDICED OF THE ASSESSEE IN THIS REGA RD. 15. ON CAREFUL CONSIDERATION ON ABOVE SUBMISSIO NS AT THE VERY OUTSET WE FIND APPROPRIATE TO THE PRODUCE NOTICE IS SUED BY THE DIT(E) DATED 6.2.2014 TO THE ASSESSEE WHICH READS AS UNDER :- THE PRINCIPAL OFFICER, ASSOCIATION OF STATE ROAD TRANSPORT UNDERTAKING PLOT NO. 4A PSP BLOCK, POCKET-14 SECTOR 8 DWARKA, NEW DELHI-110075 SIR, SUB : SHOW CAUSE NOTICE FOR SETTING ASIDE THE ASSES SMENT U/S 263 OF THE INCOME TAX ACT, 1961 ASSTT. YEAR 2009-10. PLEASE REFER TO THE SUBJECT CITED ABOVE IT IS NOTED THAT THE ASSESSMENT OF THE ABO VE MENTIONED ASSESSEE WAS COMPLETED IN DECEMBER, 2011 AT AN INCO ME OF RS. 4,39,07,729/- AS THE ASSESSEE HAS FAILED TO UTI LIZE THE ACCUMULATED SUM WITHIN THE SPECIFIED PERIOD. ACTIVI TIES OF THE TRUST ARE COVERED UNDER THE LAST LIMB OF AMENDED SE CTION 2(15) I.E. ADVANCEMENT OF ANY OTHER OBJECT OF GENE RAL PUBLIC UTILITY. A PERUSAL OF TDS CERTIFICATES AND INCOME & EXPENDITURE A/C REVEALED THAT THE ASSESSEE HAD RECE IPTS UNDER THE HEADS REVENUE FROM TEST LABORATORY OF R S. 7.72 CRORES AND CONSULTANCY RECEIPTS OF RS. 62.47 LACS , WHICH WERE COMMERCIAL IN NATURE AND THEIR AGGREGATE EXCEE DED RS. 10 LACS. ITA NO. 3271/ DEL/2014 12 2. AS PER AMENDED PROVISIONS OF SECTI ON 2(15) OF THE INCOME TAX ACT, 1961, CHARITABLE PURPOSE INCLUDES R ELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF, [PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILD LIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF A RTISTIC OR HISTORIC INTEREST ] AND THE ADVANCEMENT OF ANY OTHE R OBJECT OF GENERAL PUBLIC UTILITY; PROVIDED THAT THE ADVANCEME NT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CARRYING ON OF ANY ACTI VITY IN THE NATURE OF TRADE, COMMERCE OF BUSINESS, OR ANY ACTIV ITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COM MERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERAT ION, IF AGGREGATE RECEIPT EXCEEDS RS. 10 LACS DURING THE YE AR IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, O R RETENTION, OF THE INCOME FROM SUCH ACTIVITY. 3. IN VIEW OF THE ABOVE STATED FACTS AND AS PER THE AMENDED PROVISIONS OF SECTION 2(15), THE ACTIVITIES OF THE ASSESSEE ARE NOT CHARITABLE IN NATURE. HENCE, THE A SSESSEE WAS NOT ELIGIBLE FOR EXEMPTION U/S 11 OF INCOME TAX ACT AND ITS INCOME SHOULD BEEN BROUGHT TO TAX IN VIEW OF TH E PROVISIONS OF SECTION 2(15) READ WITH SECTION 13(8 ) OF THE INCOME TAX ACT, 1961. THUS, THE AO HAS FAIL ED TO ASSESS THIS TAXABLE INCOME OF THE ASSESSEE AND HAS ERRONEOUSLY TREATED ITS INCOME AMOUNTING TO RS. 1,32,76,185/- AS EXEMPT U/S 11 OF THE INCOME TAX ACT. 4. THIS HAS RESULTED IN FRAMING AN ERRO NEOUS ASSESSMENT AND CAUSING PREJUDICE TO THE INTEREST OF REVENUE. Y OU ARE HEREBY GIVEN AN OPPORTUNITY OF BEING HEARD TO EXPLA IN AS TO WHY THE ORDER PASSED BY THE AO MAY NOT BE SET ASIDE U/S 263 TO BE MADE AFRESH. DATE OF HEARING HAS BEEN FIX ED FOR 14.2.2014 AT 11.00 AM AT MY OFFICE. YOU MAY PRODUCE ALL EVIDENCE NECESSARY IN SUPPORT OF YOUR EXPLANATION. 16. FROM THE BARE READING OF THE IMPUGNED ORDER W E FURTHER OBSERVE THAT THE DIT(E) REJECTED THE OBJECTION OF THE ASSES SEE AND PASSED THE IMPUGNED ORDER BY HOLDING AS UNDER :- ITA NO. 3271/ DEL/2014 13 I HAVE GONE THROUGH FACTS OF THE CASE AND SUBMISSIONS OF THE ASSESSES. THERE IS NOT MERIT IN THE SUBMISSIONS OF THE ASSESSEE. THE ASSESSEE HAS CONTENDED THAT IT ACTIVI TIES ARE CHARITABLE IN NATURE AS IT IS CATERING THE STAT E ROAD TRANSPORT UNDERTAKINGS (STUS) NEEDS FOR EXPERTISE W HICH IN TURN ARE CARRYING OUT ACTIVITIES OF GENERAL PUBL IC UTILITY AS THE ASSESSEE IS NTO CARRYING OUT ANY BUSINESS WITH PARTIES OTHER THAN STUS WHICH ARE ALSO MEMBERS OF FEDERATIO N. THERE IS NO ELEMENT OF COMMERCE AND BUSINESS INVOLV ED. IT IS FURTHER CONTENDED THAT THIS ISSUE WAS EXAMINED B Y THE AO AT THE TIME OF FRAMING ASSESSMENT HENCE PROVISIO NS OF SECTION 263 OF THE ACT CANNOT BE INVOKED IN ITS CAS E. 4.1 IT IS SEEN THAT THE ACTIVITIES OF PROVIDING LAB TEST SERVICE AND CONSULTANCY ARE BEING CARRIED OUT LIKE ANY OTHE R AGENCY PERFORMING THIS FUNCTION. ITS ACTIVITIES CAN NOT BE TERMED AS CHARITABLE SIMPLY BECAUSE IT IS CATERING TO GOVERNMENT AGENCY. FURTHER STUS CAN GET THE SAME WO RK DONE FROM ANY OTHER AGENCY TOO BY PAYING THE REQUIS ITE CHARGE. THE ASSESSEE IS ONLY A PREFERRED SOURCE OF SERVICE FOR STUS. IT IS ACTIVITIES ARE CLEARLY HIT BY THE P ROVISION OF SECTION 2(15) OF THE ACT. 4.2 BUSINESS NORMALLY HAS FOLLOWING INGREDIENTS . (I) CONTINUANCE AND SYSTEMATIC ACTIVITY, (II) TRANSACTION BETWEEN TWO PERSONS, (III) ELEMENT OF RECIPROCITY; AND (IV) PROFIT MOTIVE. NORMALLY, PROFIT MOTIVE TEST MUST BE SATISFIED, BUT IT IS NOT FINAL. IF THERE IS EVIDENCE AND MATERIAL TO SHOW THAT THE ACT IVITIES WERE CARRIED OUT ON SOUND AND RECOGNIZED BUSINESS PRINCIPLES AND PURSUED WITH REASONABLE CONTINUITY, IT WOULD CONSTITUTE BUSINESS, EVEN IF THERE IS NO PROFIT MOT IVE. IN THE CASE OF P. KRISHNAMANON (356 ITR 48), THE APEX COUR T HAS HELD THAT IT IS NOT MOTIVE OF THE PERSON DOING AN A CT, WHICH DECIDES WHETHER THE ACT DONE BY HIM IS THE CARRYING ON WHAT OTHERWISE WOULD BE A BUSINESS VOCATION. IF IT WERE NOT SO, A PERSON CARRYING ON WHAT OTHERWISE WOULD BE A BUSINESS MAY SAY THAT HE DID NOT CARRYING ON BUSINE SS BECAUSE IT WAS NOT HIS INTENTION TO MAKE ANY INCOME OUT OF IT. THE SUPREME COURT FOLLOWED THE 1888 BRITISH DEC ISION IN THE CASE OF INCORPORATED COUNSIL OF LAW (3 TAX CA S 105) ITA NO. 3271/ DEL/2014 14 WHEREIN IT WAS HELD THAT IT WAS NOT ESSENTIAL TO CA RRYING ON OF TRADE THAT THE PEOPLE CARRYING IT ON SHOULD MAKE PROFIT NOR IS IT NECESSARY THAT THE PEOPLE CARRYING IT ON SHOULD DESIRE OR WISH TO MAKE A PROFIT. IN THE CASE OF CUS TOMS AND EXCISE COMMISSIONER VS. LORD FISSUR (1981 STC 238), IT WAS HELD THAT LACK OF PURSUIT OF PROFIT OR EARNINGS DID NOT PREVENT AN ACTIVITY FROM BEING A BUSINESS IF IN ANY OTHER RESPECT IT PLAINLY WAS. 17. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSI ON OF BOTH THE SIDES AND THE ALLEGATIONS MENTIONED BY THE DIT(E) I N THE NOTICE U/S 263 OF THE ACT (SUPRA) AND CONCLUSION OF THE DGIT(E ) IN THE IMPUGNED ORDER (SUPRA) FROM PAGE NO. 34 AND 35 OF THE STAY APPLICATION FOLDER WE NOTE THAT THE ASSESSEE FILED DETAILED REPLY TO T HE DIT(E) TO THE NOTICE U/S 263 OF THE ACT. THE LD. AR HAS SUBMITTED THAT THE PURPOSE OF INTRODUCING THE PROVISO TO U/S 2 (15) OF THE ACT CAN BE UNDERSTOOD FROM THE PAGE SPEECH OF THE FINANCE MINISTER WHILE INTRODUCING THE FINANCE BILL, 2008 THE RELEVANT EXTRACT OF THE SPEE CH HAS BEEN MENTIONED AS UNDER :- CHARITABLE PURPOSE INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF AND ANY OTHER OBJECT OF GENERAL PUBL IC UTILITY. THESE ACTIVITIES ARE TAX EXEMPT, AS THEY SHOULD BE. HOWEVER, SOME ENTITIES CARRYING ON REGULAR TRADE, COMMERCE OR BUSINESS OR PROVIDING SERVICES IN RELAT ION TO ANY TRADE, COMMERCE OR BUSINESS AND EARNING INCOMES HAVE SOUGHT TO CLAIM THAT THEIR PURPOSE WOULD ALSO FALL UNDER CHARITABLE PURPOSE. OBVIOUSLY, THIS WAS NOT THE FUNCTION OF PARLIAMENT AND, HENCE, APROPOS TO AMEND THE ITA NO. 3271/ DEL/2014 15 LAW TO EXCLUDE THE AFORESAID CASES, GENUINE CHARITA BLE ORGANIZATIONS WILL NOT IN ANY WAY BE AFFECTED. 18. THE LD. AR HAS ALSO CONTENDED THAT DURING TH E COURSE OF ASSESSMENT PROCEEDINGS VIDE QUESTIONNAIRE DATED 1.8 .2011. THE AO DIRECTED THE ASSESSEE TO SUBMIT A REPLY IN THE LIGH T OF RECENT AMENDMENT TO SECTION 2(15) OF THE ACT AND THE ASSE SSEE FILED VIDE WRITTEN SUBMISSIONS DATED 5.9.2011 AND 22.9.2011. T HE LD. AR ALSO CONTENDED THAT IN REPLY TO THE CARRY OF THE AO THE INFORMATION SOUGHT BY THE AO WAS PLACED ON RECORD VIDE SUBMISSIONS DAT ED 28.12.2011 OF THE ASSESSEE AND ASSESSEE IS PLACED COPIES OF TH E BILLS APPROVALS, CERTIFICATES AND RATES- LIST EVIDENCING THE NATURE OF ACTIVITIES AND MODUS OF OPERATION OF CIRT CENTRAL. THE LD. AR AL SO POINTED OUT THAT AFTER CONSIDERING THE ABOVE REPLIES, THE AO, I N HIS ORDER OF ASSESSMENT DATED 28.12.2011, GRANTED THE CHARITABL E STATUS TO THE ASSESSEE. THEREFORE, THE ASSESSING OFFICER MADE DET AILED INQUIRIES ABOUT CHARITABLE PURPOSE OF THE ASSESSEE AS WELL AS IMPUGNED AMOUNT OF TAX CHARGES AND CONSULTANCY CHARGES. 19. THE LD. AR HAS ALSO PLACED ON RELIANCE ON TH E DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF DIT(E) INST ITUTION OF CHARTERED ACCOUNTANT OF INDIA (2012) 347 ITR 86 (DELHI ) AND SUBMITTED THAT THE ITA NO. 3271/ DEL/2014 16 PURPOSE AND OBJECT TO DO BUSINESS IS NORMALLY TO EA RN AND IS CARRIED OUT WITH A PROFIT MOTIVE; IN SOME CASES THE ABSENCE OF PROFIT MOTIVE MAY NOT BE DETERMINATIVE. THE LD. AR CONTENDED THAT IN THAT CASE THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT WHE RE THE COMMISSIONER WITHOUT EXAMINING THE CONCEPT OF BUSIN ESS HAD HELD THAT THE INSTITUTION WAS CARRIED ON BUSINESS AND CO ACHING AND PROGRAMMES WERE HELD BY THEM AND A FEE WAS BEING CH ARGED FOR THE SAME THEN ALSO IN ABSENCE OF PROFIT MOTIVE THE ORDE R OF REVISION U/S 263 ACT WAS NOT HELD TO BE VALID. 20. THE LD. AR PLACING RELIANCE ON THE ANOTH ER DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF INSTITUTE O F CHARTERED ACCOUNTANTS OF INDIA AND ORS. VS. DGI REPORTED IN 3 47 ITR 99 (DELHI) SUBMITTED THAT THE DENIAL OF EXEMPTION ON THE GROUN D THAT THE ACTIVITY CONSTITUTED WITH THE BUSINESS WITHIN THE MEANING OF SECTION 2(15) OF THE ACT IS NOT VALID AS THERE SHOULD BE MATERIAL AN D SUSTAINABLE FACTS AND OTHER INCRIMINATING CIRCUMSTANCES WHICH JUSTIFY AND SHOW THAT THE ACTIVITY UNDER TAKEN BY THE ASSESSEE IS IN FACT IN THE NATURE OF BUSINESS. THE LD. AR POINTED OUT THAT WHEN THE ASSE SSEE ASSOCIATION IS NOT CARRYING OUT ANY BUSINESS ACTIVITIES AND SIM PLY RENDERING SERVICES TO MEET THE PURPOSE AND OBJECTS FOR WHICH IT WAS ITA NO. 3271/ DEL/2014 17 INCORPORATED THEN THE RECEIPTS OF THE ASSESSEE FROM ANCILLARY ACTIVITIES CANNOT BE HELD ON BUSINESS ACTIVITY AND SUCH INCOME CANNOT BE HELD AS BUSINESS INCOME OF THE ASSESSEE. THE LD. COUNSEL VEHEMENTLY POINTED OUT THAT THE ASSESSEE ASSOCIATION NEVER CAR RIED ANY BUSINESS ACTIVITY WITH PROFIT MOTIVE, THEREFORE, ALLEGATION OF THE DEPARTMENT ARE BASELESS. 21. THE LD. AR OF THE ASSESSEE, FURTHER, PLACIN G RELIANCE ON THE RECENT DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF ICAI VS. DGIT (E) 258 ITR 91 (DELHI) SUBMITTED THAT THE EXPR ESSION BUSINESS, TRADE OR COMMERCE AS USED TO PROVIS O TO SECTION 2(15) OF THE ACT IS NOT OBJECTED TO EXCLUDE ENTITIE S WHICH ARE ESSENTIALLY FOR CHARITABLE PURPOSE BUT ARE CONDUCTI NG SOME ACTIVITIES FOR A CONSIDERATION OR A FEES WITHOUT ANY PROFIT MO TIVE AND THESE WORDS USE IN THE FIRST PROVISO MUST BE INTERPRETED RESTRICTIVELY AND WHERE THE MAIN OBJECT OF ASSOCIATION IS CHARITABLE THEN ANY INCIDENTAL ACTIVITY FOR FURTHERANCE OF THE OBJECT DOES NOT FAL L WITHIN THE EXPRESSION OF BUSINESS, TRADE OR COMMERCE FOR PROFIT MOT IVE. 22. THE LD. AR COMPLETED HIS SUBMISSION AND CON TENTION BY CONTENDING THAT WHEN THE ASSESSING OFFICER IS REGUL ARLY GRANTING EXEMPTION U/S 11 OF THE ACT FOR ALLEGED RECEIPTS T HEN MERELY BECAUSE ITA NO. 3271/ DEL/2014 18 A NEW PROVISO WAS INSERTED TO SECTION 2(15) OF THE ACT DOES NOT PUT THE ASSESSEE ASSOCIATION OUT OF AMBIT OF CHARITABLE ORGANIZATION AND IT CANNOT BE HELD THAT THE ACTIVITIES OF THE ASSESS EE IN ORDER TO IMPARTING TEST AND CONSULTANCY SERVICES AND CHARGES EARN THEREFROM ARE THE ACTIVITIES WITH PROFIT MOTIVE. THE LD. AR R EITERATING ITS ARGUMENT SUBMITTED THAT THE ACTIVITY OF TESTING OF AUTO MOBILE PARTS AND THE ACTIVITY OF CONSULTANCY ARE BEING CARRIED O UT IN FURTHERANCE AND ADVANCEMENT OF THE OBJECT OF THE ASSESSEE ASS OCIATION SET OUT TO IN THE MEMORANDUM OF ASSOCIATION (CLAUSE NO. II) AND NOT ON COMMERCIAL LINES BECAUSE THE PRE DOMINANT OBJECT OF THE ASSESSEE ASSOCIATION IS NOT TO EARN PROFIT BUT TO SUBSERVE A ND PROVIDE SERVICES TO ITS MEMBER STATE TRANSPORT UNDERTAKINGS AND GOVE RNMENT OF INDIA WITHOUT ANY PROFIT MOTIVES WITHIN THE LIMITS OF ITS CHARITABLE PURPOSE AND OBJECTS. THE LD. AR FINALLY PRAYED THAT THE IMP UGNED ORDER PASSED U/S 263 OF THE ACT AND ALL SUBSEQUENT PROCE EDINGS AND ORDERS DESERVE TO BE QUASHED. 23. REPLYING TO THE ABOVE, THE LD. DEPARTMENTA L REPRESENTATIVE PLACING RELIANCE ON THE DECISION OF HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS. TRUCK OPERATORS ASSOCI ATION 328 ITR 636 (P & H) SUBMITTED THAT WHEN THE ASSESSEE WAS VIGOROUSLY PU RSUING ITA NO. 3271/ DEL/2014 19 BUSINESS ACTIVITY BY RECEIVING HUGE QUANTUM OF LABO RATORY & TEST AND CONSULTANCY CHARGES THEN THAT THE SAME COULD NOT BE TERMED FOR GENERAL PUBLIC UTILITY AND THEREFORE, THE ASSESSEE ASSOCIATION CANNOT BE HELD AS ENTITLED TO THE BENEFIT OF THE REGISTRAT ION U/S 12AA OF THE ACT AND EXEMPTION U/S 11 AND OTHER RELEVANT PROVISI ONS OF THE ACT. SUPPORTING THE ACTION OF THE CIT(A) THE LD. DR POIN TED OUT THAT THE ACTIVITIES OF PROVIDING LAB TEST SERVICES AND CONSU LTANCY ARE BEING CARRIED OUT BY THE ASSESSEE ASSOCIATION LIKE ANY OT HER AGENCY OR BUSINESS ENTITY PERFORMING THIS KIND OF SIMILAR FUN CTION AND THUS THESE ACTIVITIES CANNOT BE TERMED AND CHARITABLE BECAUSE IT IS CATERING TO GOVERNMENT AGENCY. THE LD. DR, FURTHER SUBMITTED TH AT THE STATE TRANSPORT UNDERTAKINGS CAN GET SAME WORK DONE FROM ANY OTHER AGENCY BY PAYING THE REQUISITE CHARGES AND THE ASSE SSEE IS ONLY A PREFERRED SERVICE PROVIDER, THEREFORE, ACTIVITIES C ONDUCTED BY THE ASSESSEE ASSOCIATION CLEARLY HIT BY NEWLY INSERT P ROVISO TO SECTION 2(15) OF THE ACT. 24. THE LD. DEPARTMENTAL REPRESENTATIVE ALSO C ONTENDED THAT THERE IS RELIABLE EVIDENCE AND MATERIAL TO SHOW THA T THE ACTIVITIES WERE CARRIED OUT ON SOUND AND RECOGNIZED BUSINESS PRINCI PLES AND PURSUED WITH REASONABLE CONTINUITY IT WOULD CONSTITUTE BUS INESS EVEN IF THERE ITA NO. 3271/ DEL/2014 20 IS NO PROFIT MOTIVE. THE LD. DR, FURTHER, CONTENDED THAT IT IS NOT THE MOTIVE OF THE PERSON DOING ON ACT WHICH DECIDES WHE THER THE ACT DONE BY HIM IS THE CARRYING ON BUSINESS, PROFESSIO N OR VOCATION BUT A PERSON CARRYING ON WHAT OTHERWISE WOULD BE A BUSINE SS MAY SAY THAT HE DID NOT CARRYING ON BUSINESS BECAUSE IT WAS NOT HIS FUNCTION TO MAKE ANY INCOME OUT OF IT. SUPPORTING THE IMPUGNED NOTICE AND ORDER U/S 263 OF THE ACT, THE LD. DR ALSO POINTED OUT THA T SIMPLY BECAUSE CERTAIN DETAILS WERE CALLED BY THE AO AND ALSO PLAC ED ON RECORD DO NOT IN FACT THAT THE AO HAS APPLIED HIS MIND TO THE CASE WHILE GRANTING EXEMPTION U/S 11 OF THE ACT TO THE ASSESSEE. THE LD . DR VEHEMENTLY CONTENDED THAT AS THE IMPUGNED ASSESSMENT ORDER IS SILENT ON THE ISSUE OF APPLICABILITY OF PROVISO TO SECTION 2(15) OF THE ACT THEN IT WAS RIGHTLY HELD THAT THE AO DID NOT EXAMINE THE ISSUE OF TAXABILITY OF REVENUE FROM TEST LABORATORY AND CONSULTANCY CHARGE S IN THE LIGHT OF NEWLY INSERTED PROVISO TO SECTION 2(15) OF THE ACT AND THEREFORE, THE CIT RIGHTLY HELD THAT THE ORDER SO FRAMED BY THE AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AS THE RECEIPTS / INCOME FROM TEST LABORATORY AT RS. 7.72 CRORES AND CONSUL TANCY CHARGES OF RS. 62.47 LAKH HAVE NOT BEEN BROUGHT TO TAX. ITA NO. 3271/ DEL/2014 21 25. A CAREFUL CONSIDERATION ON ABOVE SUBMISSIO NS AT THE VERY OUTSET, WE RESPECTFULLY TAKE GUIDANCE FROM THE RECE NT JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT DELHI IN THE CAS E OF ICAI VS. DGIT (E) 358 ITR 91 (DELHI) WHEREIN THEIR LORDSHIP PROVIDED A LANDMARK INTERPRETATION TO SECTION 2(15) OF THE ACT AS WELL AS NEWLY INSERTED PROVISO TO THIS SECTION AFTER CONSIDERING THE RATIO AND PREPOSITIONS LAID DOWN BY VARIOUS JUDGMENTS AND ORDERS OF HONBLE SUP REME COURT AND HIGH COURT THE RELEVANT OPERATIVE PART OF THIS ORDER AT PAGE 122 PARA 67 READS AS UNDER :- 67. THE EXPRESSIONS TRADE, COMMERCE AND BUSINESS, AS OCCURRING IN THE FIRST PROVISO TO S ECTION 2(15) OF THE ACT, MUST BE READ IN THE CONTEXT OF THE INTE NT AND PURPORT OF SECTION 2(15) OF THE ACT AND CANNOT BE INTERPRETED TO MEAN ANY ACTIVITY WHICH IS CARRIED O N IN AN ORGANIZED MANNER. THE PURPOSE AND THE DOMINANT OBJE CT 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 TH E ACT IS NOT TO EXCLUDE ENTITIES WHICH ARE ESSENTIALLY FOR CHARI TABLE PURPOSE BUT ARE CONDUCTING SOME ACTIVITIES FOR A CONSIDERATION OR A FEE. THE OBJECT OF INTRODUCING T HE FIRST PROVISO IS TO EXCLUDE ORGANIZATIONS WHICH ARE CARRY ING ON REGULAR BUSINESS FROM THE SCOPE OF CHARITABLE PURP OSE. 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 (SEE [2008] 298 ITR (ST.) 33, 65) : ITA NO. 3271/ DEL/2014 22 CHARITABLE PURPOSE INCLUDES RELI8EF O F THE POOR, EDUCATION, MEDICAL RELIEF AND ANY OTHER OBJECT OF G ENERAL PUBLIC UTILITY. THESE ACTIVITIES ARE TAX EXEMPT, AS THEY SHOULD BE. HOWEVER, SOME ENTITIES CARRYING ON REGUL AR TRADE, COMMERCE OR BUSINESS OR PROVIDING SERVICES I N RELATION TO ANY TRADE, COMMERCE OR BUSINESS AND EAR NING INCOMES HAVE SOUGHT TO CLAIM THAT THEIR PURPOSES WO ULD ALSO FALL UNDER CHARITABLE PURPOSE . OBVIOUSLY, T HIS WAS NOT THE INTENTION OF PARLIAMENT AND, HENCE, I PROPOSE T O AMEND THE LAW TO EXCLUDE THE AFORESAID CASES. GENUINE CHA RITABLE ORGANIZATIONS WILL NOT IN ANY WAY BE AFFECTED. THE EXPRESSIONS BUSINESS, TRADE OR COMMERCE A S USED IN THE FIRST PROVISO MUST, THUS, BE INTERPRETED RES TRICTIVELY AND WHERE THE DOMINANT OBJECT OF AN ORGANIZATION IS CHARITABLE ANY INCIDENTAL ACTIVITY FOR FURTHERANCE OF THE OBJECT WOULD NOT FALL WITHIN THE EXPRESSIONS BUSIN ESS, TRADE OR COMMERCE. 26. IT WOULD BE ALSO APPROPRIATE TO CONSIDER THE RATIO OF THE DECISION OF HONBLE PUNJAB AND HARYANA COURT IN THE CASE OF CIT VS. TRUCK OPERATOR ASSOCIATION (SUPRA), AS RELIED BY THE LD. DR, WHEREIN FACTS OF THAT CASE AND OBSERVATIONS OF HONBLE HIGH COURT READS AS UNDER :- ON EXAMINATION OF THE OBJECTS AND THE PURPOSE O F THE ASSOCIATION IN THE PRESENT CASE, IT EMERGES THAT TH E RESPONDENT-ASSOCIATION IS UNION OF TRUCK OPERATORS CONSTITUTED FOR FACILITATING ITS MEMBERS TO CARRY ON THE TRADE OF TRANSPORTATION AND NOT TO ALLOW THE OUTSIDER OR NON -MEMBER TO UNDERTAKE ANY BUSINESS ACTIVITY WITHIN THE PRECINCT S OF HANSI TOWN/VILLAGE. THE ASSO-CIATION CHARGES FEES FROM IT S MEMBERS BEFORE THE TRANSPORTATION ON THE BASIS OF THE DISTA NCE INVOLVED. THE MEMBERSHIP AND PAYMENT OF FEES ARE MANDATORY AND THE ELEMENT OF VOLUNTARY CONTRIBUTION IS MISSING. THE ASSO-CIATION IS VIGOROUSLY PURSUING TRANSPORTATION BUSINESS BY RECEIVING FREIGHT CHARGE S ON BEHALF ITA NO. 3271/ DEL/2014 23 OF ITS MEMBERS. THE WELFARE ACTIVITIES ADOPTED FOR THE TRUCK DRIVERS, CLEANERS AND MECHANICS OF THE TRUCK OWNERS ARE IN THE NATURE OF STAFF WELFARE ACTIVITES, AS ARE COMMO N IN OTHER BUSINESS ORGANIZATION WHICH CANNOT BE TERMED FOR GE NERAL PUBLIC UTILITY. 27 . IN VIEW OF ABOVE, WE HAVE NOT HESITATION OF HOLD THAT THE FACTS OF THE PRESENT CASE CLEARLY DISTINGUISHABLE. WE ARE IN AGREEMENT WITH THE CONTENTION OF THE LD. AR THAT THE FACTS OF THE PRES ENT CASE ARE CLEARLY DISTINGUISHABLE FROM THIS CASE OF TRUCK OPERATORS A SSOCIATION (SUPRA) AS IN THAT CASE THE ASSESSEE ASSOCIATION WAS VIGORO USLY PURSUING TRANSPORATION WITH THIS BY RECEIVING FREIGHT CHARGE S ON BEHALF OF ITS MEMBER AND THE SO CALLED WELFARE ACTIVITIES ADOPTED FOR THE TRUCK DRIVERS, CLEANERS, MECHANICS OF THE TRUCK OWNERS WE RE IN THE NATURE OF STAFF WELFARE ACTIVITIES WHICH WERE SIMILAR AND COM MON IN THE OTHER TRANSPORT BUSINESS ORGANIZATIONS WHICH COULD NOT BE TERMED FOR GENERAL PUBLIC UTILITY. IN THE PRESENT CASE, THE CI T(A) HAVE NOT CONCLUSIVELY HELD THAT THE ASSESSEE ASSOCIATION WAS CARRYING ON LABORATORY TEST AND CONSULTANCY SERVICES WITH THE M AIN OBJECT OF EARNING PROFIT IN THE LINE OF BUSINESS, TRADE OR COMMERCE. ACCORDINGLY WE RESPECTFULLY HELD THAT THE BENEFIT O F THE RATIO OF THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT (SU PRA) IS NOT ITA NO. 3271/ DEL/2014 24 AVAILABLE FOR THE REVENUE AS THE FACTS OF THE PRESE NT CASE ARE CLEARLY DISTINGUISHABLE FROM THAT CASE. 28. TURNING TO THE FACTS OF THE PRESENT CASE, WE NOTE THAT THE ASSESSEE ASSOCIATION IS AN ASSOCIATION OF APEX GOVE RNING BODY OF STATE ROAD TRANSPORT UNDERTAKINGS (STU) REGISTERED AS A SOCIETY UNDER THE SOCIETYS REGISTRATION ACT WHICH IS WHOLL Y PATRONIZED BY THE CENTRAL GOVERNMENT FOR WORKING UNDER THE MINISTRY O F ROAD TRANSPORT AND HIGHWAYS AND THE SECRETARY TO THE GOVERNMENT OF INDIA, MINISTRY OF ROAD TRANSPORT AND HIGHWAYS IS THE EX-OFFICIO PR ESIDENT OF THE ASSESSEE ASSOCIATION AND THE GOVERNING BODY OF THE ASSESSEE ASSOCIATION INCLUDES REPRESENTATIVES FROM ALL THE S TATE ROAD TRANSPORT UNDERTAKINGS. 29. WE ALSO NOTE THAT THE ASSESSEE ASSOCIATION WAS ESTABLISHED WITH THE MAIN OBJECT OF IMPROVING PUBLIC TRANSPORT SYSTEM IN THE COUNTRY AND ITS OBJECTS AS PER MEMORANDUM OF ASSOCI ATION AS REPRODUCED HEREINABOVE IN PARA 9 OF THIS ORDER CLE ARLY REVEALS THAT THE OBJECTS OF THE ASSESSEE ASSOCIATION ARE DEDICAT ED TOWARDS IMPROVING ROAD SAFETY STANDARDS AND TO PROMOTE FACI LITIES FOR ADVANCING THE SKILL OF EMPLOYEES OF STATE TRANSPORT UNDERTAKINGS ITA NO. 3271/ DEL/2014 25 THROUGH REGULAR TRAINING AND RESEARCH WHICH CANNOT BE HELD AS BUSINESS ACTIVITIES. IT IS ALSO PERTAINMENT TO NOTE THAT THE LD. DR HAS NOT DISPUTED THIS FACT THAT THE ASSESSEE ASSOCIATIO N WAS PROVIDED EXEMPTION U/S 11 OF THE ACT IN THE EARLIER ASSESSME NT ORDERS ON THE REVENUE RECEIPTS FROM TEST LABORATORY CHARGES AND C ONSULTANCY CHARGES. 30. NOW WE CONSIDER THE EFFECT OF INSERTION OF P ROVISO TO SECTION 2(15) OF THE ACT. AS PER RECENT JUDGMENT OF HONBLE HIGH COURT OF DELHI IN THE CASE OF ICAI VS. DGIT (SUPRA). WE RESP ECTFULLY NOTE THAT THEIR LORDSHIP HAS EXPLICITLY HELD THAT THE FIRST PROVISO TO SECTION 2(15) OF THE ACT CARVES OUT AND EXCEPTION WHICH EXCLUDES ADVANCEMENT OF ANY OBJECT OF GENERAL PUBLIC UTILITY FROM THE SCOPE OF CHARITABLE PURPOSE TO THE EXTENT THAT IT INVOLVES CARRYING ON ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR ANY ACTIVITY OF RENDERING CERTAIN SERVICES IN RELATION TO ANY TRAD E, COMMERCE OR BUSINESS FOR A CESS OR FEE OR ANY OTHER CONSIDER ATION, IRRESPECTIVE OF THE NATURE OF THE USE OR OBLIGATION OR RETENTION OF INCOME FROM SUCH ACTIVITY. THEIR LORDSHIP ALSO HELD THAT THE EXPRES SION TRADE, COMMERCE OR BUSINESS, AS OCCURRING IN THE FIRS T PROVISO OF SECTION ITA NO. 3271/ DEL/2014 26 2(15) OF THE ACT, MUST BE READ IN THE CONTEXT OF TH E INTENT IN PURPORTED OF SECTION 2(15) OF THE ACT AND CANNOT BE INTERPRET ED TO MEAN ANY ACTIVITY WHICH IS CARRIED ON IN AN ORGANIZED MANNER . 31. EXPLAINING THE DOMINANT OF OBJECT OF NEWLY INSERTED PROVISO TO SECTION 2(15) OF THE ACT, SPEAKING FOR JURISDICTION AL HIGH COURT OF DELHI, THEIR LORDSHIP ALSO HELD THAT THE FIRST PROV ISO TO SECTION 2(15) OF THE ACT DOES NOT PURPORTED TO EXCLUDE ENTITIES WHIC H ARE ESSENTIALLY FOR CHARITABLE PURPOSE BUT ARE CONDUCTING SOME ACTI VITIES FOR A CONSIDERATION OR A FEE AND THE OBJECT OF INTRODUCIN G FIRST PROVISO IS TO EXCLUDE ORGANIZATIONS WHICH ARE CARRYING ON REGULAR BUSINESS FROM THE SCOPE OF CHARITABLE PURPOSE. IT WAS ALSO HELD T HAT EXPRESSION BUSINESS TRADE OR COMMERCE AS USED IN FIRST PROVISO MUST, THUS, WE INTERPRETED RESTRICTIVELY AND WHERE THE DOMINANT OBJECT AND ORGANIZATION IS CHARITABLE ANY INCIDENTAL ACTIVITY FOR FURTHERANCE OF THE OBJECT WOULD NOT FALL WITHIN THE EXPRESSION BUSINE SS, TRADE OR COMMERCE. 32. IN VIEW OF THE RATIO OF THE JUDGMENT OF HO NBLE HIGH COURT OF DELHI IF WE ANALYSIS THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AT THE OUTSET WE NOTE THAT THE ACTIVITY LABORATORY TESTING AND ITA NO. 3271/ DEL/2014 27 CONSULTANCY IS CERTAINLY BRINGING REVENUE FOR THE A SSESSEE ASSOCIATION BUT THE CIT HAS NOT CONTROVERTED OR DEM OLITION THIS FACT THAT THE MAIN OBJECT FOR WHICH ASSESSEE ASSOCIATION WAS CREATED BY GOVERNMENT OF INDIA IS TO IMPART SERVICES TO THE ST ATE ROAD TRANSPORT UNDERTAKINGS AND FROM CAREFUL READING OF THE OBJECT S OF THE ASSESSEE ASSOCIATION AS REPRODUCED HEREINABOVE CLEARLY MANDA TES ITS CHARITABLE OBJECTS AND PURPOSE. THE CONTENTION OF T HE ASSESSEE ASSOCIATION ALSO SUPPORT FROM THIS FACT THAT THE AS SESSEE ASSOCIATION HAVE NOT REVISED ITS LABORATORY TEST CHARGES SINCE 2001 AND THE SERVICES ARE PROVIDED ON THE SIMILAR LINE BY CHARGI NG REASONABLE FEES WITHOUT ANY PROFIT EARNING OBJECT. 33. AFTER GOING THROUGH THE OBJECTS AND ACTIVI TIES OF THE ASSESSEE ASSOCIATION IT IS CLEAR THAT THE ASSESSEE ASSOCIATI ON DID NOT CARRY ON ANY BUSINESS, TRADE OR COMMERCE WITH THE MAI N OBJECT OF EARNING PROFIT. THE ACTIVITY OF IMPARTING SUPPORT S ERVICES TO STATE ROAD TRANSPORT UNDERTAKINGS WITHOUT ANY PROFIT MOTI VE ARE BEING CONDUCTED IN FURTHERANCE OF THE OBJECT FOR WHICH AS SESSEE ASSOCIATION HAD NOT CONSTITUTED BY THE GOVERNMENT OF INDIA. THE ACTIVITIES OF PROVIDING LABORATORY TEST SERVICES AND CONSULTANCY TO THE STATE ROAD ITA NO. 3271/ DEL/2014 28 TRANSPORT UNDERTAKINGS OF ALL OVER INDIA CANNOT BE HELD TO BE TRADE, BUSINESS OR COMMERCE MERELY BECAUSE SOME FEE OR CHARGES ARE BEING RECEIVED BY THE ASSESSEE ASSOCIATION. ACCORDI NGLY, EVEN IF SOME FEES OR CHARGES ARE BEING CHARGED BY THE ASSES SEE ASSOCIATION FOR PROVIDING LABORATORY TEST SERVICES AND CONSULTA NCY SERVICES IN ACCORDANCE WITH ITS CHARITABLE OBJECTS, THE ACTIVIT IES CANNOT BE HELD TO BE RENDERED IN RELATION TO ANY TRADE , COMMERCE OR BUSINESSAS SUCH ACTIVITIES ARE UNDERTAKEN BY THE ASSESSEE ASSO CIATION IN FURTHERANCE OF ITS MAIN OBJECTS WHICH ARE UNDISPUTE DLY OF CHARITABLE NATURE AND WHICH IS NOT AN ACTIVITY OF TRADE, C OMMERCE OR BUSINESS WITH MAIN OBJECT OF EARNING PROFIT. 34. WE ARE UNABLE TO AGREE WITH THE REASONING OF DGIE THAT THERE IS EVIDENCE AND MATERIAL TO SHOW THAT THE ACTIVITY WERE CARRIED OUT ON SOUND AND RECOGNIZED BUSINESS PRINCIPLES AND PERSUA DED WITH REASONABLE CONTINUITY THEN IT WOULD CONSTITUTE BUSI NESS EVEN IF THERE IS NO PROFIT MOTIVE AS WE HAVE ALREADY NOTED THAT I N ASSESSEES OWN CASE FOR A.Y. 1989-90, 1990-91 AND 1993-94, ASRTU V S. DDIT(E) (SUPRA) IT WAS HELD THAT THE AIMS AND OBJECTS OF TH E ASSESSEE WERE TO RENDER COMMON SERVICES TO MEMBERS AND ASSIST THEM I N SUCH MATTERS ITA NO. 3271/ DEL/2014 29 AS STANDARDIZATION OF EQUIPMENT, PURCHASE OF MATERI ALS FOR THEREON USE AT ECONOMICAL PRICES, PROMOTIONAL EFFICIENCY OF ROAD TRANSPORT SERVICES AND DEDUCTION IS OPERATIONAL COST OF MEMBE R STATE ROAD TRANSPORT UNDERTAKINGS ARE THE ACTIVITIES OF CHARIT ABLE PURPOSE TOWARDS PROMOTION OF MAIN OBJECTS SET OUT IN THE ME MORANDUM OF ASSOCIATION OF THE ASSESSEE ASSOCIATION, THUS, IN A BSENCE OF ANY SUBSTANTIAL ALLEGATION OR INCRIMINATING MATERIAL. W E ARE UNABLE TO ACCEPT VIEW OF THE CIT THAT THE ASSESSEE ASSOCIATIO N IS CONDUCTING THESE ACTIVITIES WITH THE MAIN OBJECT OF EARNING PR OFITS. IN THE PRESENT CASE, THE ACTIVITIES OF THE ASSESSEES ASSOCIATION CANNOT BE TERMED EITHER TRADE , COMMERCE OR BUSINESS SIMPLY B ECAUSE THE ASSESSEE ASSOCIATION IS RECEIVING SOME CHARGES OR F EES FOR RENDERING SERVICES ON NON-COMMERCIAL PRINCIPLES TO STATE ROAD TRANSPORT UNDERTAKINGS AND OTHER CONCERN MEMBERS FOR A FEE OR CHARGES. 35. AT THIS JUNCTURE , WE ALSO RESPECTFULLY FO LLOW THE RATIO LAID DOWN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF INDI AN TRADE PROMOTION ORGANISATION VS. DGIT (SUPRA) WHEREIN IT WAS HELD THAT THUS, FIRST PROVISO TO SECTION 2(15) OF THE ACT WOU LD HAVE BEEN TO BE READ DOWN AND INTERPRETED IN THE CONTEXT OF SECTION 10 (23C) (IV) OF ITA NO. 3271/ DEL/2014 30 THE ACT AS THE CONTEXT REQUIRES SUCH INTERPRETATION WHERE ASSESSEE IS NOT DRIVING PRIMARILY BY DESIRED OR MOTIVE TO EARN PROFIT BUT TO PURSUE ACTIVITIES IN FURTHERANCE OF ITS OBJECTS OF GENERAL PUBLIC UTILITY THEN IT MUST BE RECOGNIZED AS AN INSTITUTION ESTABLISHED FO R CHARITABLE PURPOSES. THE HONBLE DELHI HIGH COURT IN THE CASE OF INSTITUTE OF CHARTERED ACCOUNTANT OF INDIA VS. DGI 347 ITR 99 ( DELHI) HELD THAT THE OBJECT OF THE FIRST PROVISO TO SECTION 2(15) OF THE ACT IS TO INCLUDE ANY TRANSACTION FOR A FEE OR MONEY AND THE ACTIVITY WOULD BE BUSINESS IF IT IS UNDERTAKEN WITH THE PROFIT MOTIVE BUT IN S OME CASES THIS FACT MUST BE DETERMINATIVE AND THE PROFIT MOTIVE TEST SH OULD BE SPECIFIED AND VIEWED IN THE CONTEXT OF SECTION 10 (23C) (IV) OF THE ACT. AS WE HAVE ALREADY NOTED THAT WE FOUND FORCE IN THE CONTE NTION OF THE LD. AR THAT THE ASSESSING OFFICER RAISED QUERY ABOUT TH E REVENUES RECEIVED FROM TEST LABORATORY CHARGES AND CONSULTAN CY CHARGES AND THE ASSESSEE PLACED REQUIRED DETAILS AND EXPLANATIO N BEFORE THE AO IN THIS REGARD AND THIS FACT WAS ALSO NOTED BY THE CIT(A) IN PARAGRAPH 4.4 OF THE IMPUGNED ORDER. WE ARE UNABLE TO APPROV E THE OBSERVATIONS OF THE CIT THAT THE AO DID NOT EXAMINE THE ISSUE OF TAXABILITY OF REVENUE FROM TEST LABORATORY AND CONS ULTANCY CHARGES IN ITA NO. 3271/ DEL/2014 31 THE LIGHT OF PROVISO TO SECTION 2 (15) OF THE ACT. WE MAY ALSO POINT OUT THAT THE AO HAS CONSIDERED THIS ISSUE IN PARAGRAPH NO. 2 AND 3 OF THE ASSESSMENT ORDER AND CONCLUSION OF THE AO CANNOT BE HELD AS ERRONEOUS MERELY BECAUSE THE AO HAS NOT DECIDED THE ISSUE IN SO MANY WORDS AS PER EXPECTATION OF THE LD. CIT. 36. UNDER ABOVE NOTED FACTS AND CIRCUMSTANCES, WE REACH TO A CONCLUSION THAT THE CIT WAS NOT JUSTIFIED IN HOLDIN G THAT THE VIEW TAKEN BY THE AO WAS GRANTING EXEMPTION U/S 11 OF THE ACT WAS NOT INACCORDANCE WITH LAW AND WAS UNSUSTAINABLE. PER CO NTRA, FROM BARE READING OF THE ASSESSMENT ORDER, IT IS VIVID THAT T HE ASSESSING OFFICER MADE REASONABLE INQUIRY ON THE ISSUE OF TEST LABORA TORY CHARGES AND CONSULTANCY CHARGES AND THE AO TOOK A PLAUSIBLE AND REASONABLE VIEW THAT THE REVENUE EARN FROM THESE ACTIVITIES CA NNOT BE HELD AS INCOME WITH THE MAIN OBJECT TO EARN PROFITS. WE ALS O CLEARLY NOTE THAT THE ACTIVITIES OF LABORATORY TESTING AND CONSULTANC Y WAS IN FURTHERANCE OF MAIN AND CHARITABLE OBJECT OF THE ASSESSEE ASSOC IATION IT CANNOT BE TERMED AS ACTIVITIES WITH THE MAIN OBJECT OF PROFIT EARNING MOTIVE. THUS, NOTICE U/S 263 OF THE ACT AND IMPUGNED ORDER IS NOT SUSTAINABLE AND ASSUMPTION OF JURISDICTION FOR REVISING THE ASS ESSMENT ORDER U/S ITA NO. 3271/ DEL/2014 32 263 OF THE ACT IS ALSO NOT HELD BE VALID AND THE SA ME IS VOID AB INITIO AND THEREFORE, WE QUASH THE SAME. 37. ACCORDINGLY, APPEAL OF THE ASSESSEE IS ALLOW ED AND IMPUGNED NOTICE AND ORDER U/S 263 OF THE ACT AND ALL SUBSEQU ENT PROCEEDINGS AND ORDERS IN PURSUANT THERETO ARE QUASHED. IN THE RESULT, THE APPEAL OF THE ASSESSEE ASSOCIAT ION IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 08 TH MAY , 2015. SD/- SD/- (N.K.SAINI) (C.M.GARG) ACCOUNTANT MEMBER JUDICI AL MEMBER DATED 8 TH MAY, 2015 B.RUKHAIYAR COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. CIT (ITAT), NEW DELHI. BY ORDER AR, ITAT N. DELHI ITA NO. 3271/ DEL/2014 33