The Dy. Commissioner of Income Tax, Chandigarh V. M/s Improvement Trust Bathinda, Bathinda

ITA 477/ASR/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7851 (ITAT-AMRITSAR)
• Duration Of Justice: 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 15-06-2017
• Assessment Year: 2013-2014
• Appeal Filed On: 23-09-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: P K SINGLA
• Keywords: Business income; Charitable institution
• Section: 12A; 12AA; 68; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. T. S. KAPOOR, ACCOUNTANT MEMBER AND SH. N.K. CHOUDHRY, JUDICIAL MEMBER I.T.A NOS. 476 & 477/(ASR)/2016 ASSESSMENT YEARS: 2012-13 & 2013-14 PAN: AAATE1563E DY. C. I. T. CIRCLE-1 (EXEMPTIONS), CHANDIGARH. VS. M/S IMPROVEMENT TRUST BHATINDA, DR. MELA RAM ROAD, BHATINDA. (APPELLANT) (RESPONDENT) APPELLANT BY : SH. RAHUL DHAWAN (D. R. ) RESPONDENT BY: SH. P. K. SINGLA (ADV.) DATE OF HEARING: 17.08.2017 DATE OF PRONOUNCEMENT: 30.08.201 7 ORDER PER T. S. KAPOOR (AM): THESE ARE TWO APPEALS FILED BY REVENUE AGAINST THE SEPARATE ORDERS OF LD. CIT(A), BHATINDA BOTH DATED 20.07.2016 FOR A SST. YEARS: 2012-13 & 2013-14. 2. THE REVENUE HAS TAKEN SIMILAR GROUNDS OF APPEAL: FOR THE SAKE OF CONVENIENCE GROUNDS OF APPEAL IN ITA NO. 476/ASR/20 16 ARE REPRODUCED BELOW: 1. THAT THE ORDER OF LD. CIT(A) IS DEFECTIVE BOTH IN LAW AND FACTS OF THE CASE. 2. THAT THE ORDER OF LD. CIT(A) ALSO FAILED TO CONSIDE R MOST RELEVANT JUDGMENTS OF TRIBUNAL OF CHANDIGARH BENCH E.G. PUDA VS. CIT REPORTED AS (2006) 103 TTJ CHD 988, WHICH GOES TO T HE ROOT OF THE MATTER, IN WHICH, THE TRIBUNAL UPHELD THE ORDER OF CIT WHICH REJECTED THE APPLICATION FOR REGISTRATION OF THE AS SESSEE PUDA U/S 12A (A) OF THE ACT ON SIMILAR INTERPRETATION OF SECTION 2(15) OF THE ACT. ITA NOS. 476 & 477(ASR)/2016 ASST YEARS: 2012-13& 2013-14 2 3. THAT THE ORDER OF LD. CIT(A) ALSO FAILED TO CONSIDE R THAT THE ABOVE PUDA JUDGMENT HAS FURTHER BEEN FOLLOWED BY TRIBUNAL OF AMRITSAR BENCH IN JALANDHAR DEVELOPMENT AUTHORITY V S. CIT REPORTED AS (2010) 35 SOT ASR 15 WHEREBY AGAIN UPHE LD THE ORDER OF CIT WHICH REJECTED APPLICATION FOR GRANT O F REGISTRATION U/S 12A OF THE ACT. 4. THAT THE ORDER OF LD.CIT(A) ALSO FAILED TO CONSIDER THAT JUDGMENTS IN PUDA VS. CIT AND JALANDHAR DEVELOPMENT AUTHORITY VS. CIT HAVE BEEN FOLLOWED BY TRIBUNAL OF AMRITSAR BENCH IN JAMMU DEVELOPMENT AUTHORITY VS. CIT REPORTED AS (2012) 52 SOT ASR 153 AND UPHELD THE ORDER OF CIT WHICH CANCELED THE REGISTRATION WHILE PASSING AN ORDER U/S 12AA (3) OF THE ACT. IT IS SIGNIFICANT TO REVEAL HERE THAT THIS JUDGMENT IN JAMMU DEVELOPM ENT AUTHORITY HAS BEEN UPHELD FIRSTLY BY HONBLE J&K HI GH COURT IN ITA NO. 164 OF 2012 VIDE ITS ORDER DATED 07.11.2013 ALSO BY HONBLE SUPREME COURT IN SPECIAL LEAVE TO APPEAL (C ) NO. 4990 OF 2014 VIDE ITS ORDER DATED 21.07.2014. [ 5. THE HONBLE ITAT, AHMEDABAD HAS RECENTLY DECIDED TH E APPEAL IN FAVOUR OF REVENUE IN THE CASE OF AHMEDABAD URBAN DEVELOPMENT VS ASSESSEE ON 19 TH APRIL 2016 VIDE ITA NO. 712 AND 71L/AHD/2013 DATED 19.04.2016 AFTER REFERRING T O AND DISCUSSING THE ABOVE CASE LAWS IN ITS ORDER. 6. THAT THE ORDER OF LD. CIT(A) IS BAD IN LAW AS THE AMENDMENT IN SECTION 2(15) IS EFFECTIVE W.E.F. 01.04.2009 AND TH E ASSESSMENT IN THE CASE HAS BEEN COMPLETED CONSIDERING THE ACTI VITIES OF ASSESSEE WHICH ARE NOT ADVANCEMENT OF ANY OTHER OB JECT OF GENERAL PUBLIC UTILITY. 7. THE DEPARTMENT HAD ALREADY FILED APPEAL BEFORE HON BLE PUNJAB & HAYRANA HIGH COURT, CHANDIGARH AGAINST THE ORDER U/S 143 (3) FOR THE A.Y. 2009-10 AS WELL AS THE ORDER OF 12 AA(3) OF HONBLE ITAT AMRITSAR BENCH, AMRITSAR. 8. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROU NDS OF APPEAL ON OR BEFORE IS HEARD AND DISPOSED OFF. 3. AT THE OUTSET, THE LD. AR INVITED OUR ATTENTION TO A COPY OF ORDER OF HON'BLE ITAT IN THE CASE OF ASSESSEE ITSELF IN ITA NO. 242 & 243/ASR/2014 DATED 30.06.2016, IN WHICH THE APPEAL OF THE ASSESSEE FOR ASST. YEAR 2008-09 & 2010-11 WAS ALLOWED BY THE HON 'BLE ITAT. 4. THE LD. AR SUBMITTED THAT THESE APPEALS RELATES TO ASST. YEAR 2012-13 & 2013-14 AND THESE APPEALS, THE LD. CIT(A) HAS ALLOWED RELIEF ITA NOS. 476 & 477(ASR)/2016 ASST YEARS: 2012-13& 2013-14 3 TO THE ASSESSEE BY FOLLOWING THE ORDER OF THE TRIBU NAL FOR ASST. YEAR 2008- 09 & 2010-11. OUR ATTENTION WAS INVITED TO PAPER BO OK PAGE 114 TO 142 WHERE A COPY OF THE ORDER DATED 30.06.2016 WAS PLAC ED. 5. THE LD. DR FAIRLY AGREED THAT THE ISSUE WAS SQUA RELY COVERED IN FAVOUR OF ASSESSEE. 6. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE THOUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE ISSUE IS UNDER A PPEAL IS RELATING TO REGISTRATION OF THE ASSESSEE U/S 12A(A) OF THE ACT. THE HON'BLE TRIBUNAL HAS ALLOWED THE APPEAL OF ASSESSEE IN GRANTING REGI STRATION U/S 12A(A) OF THE ACT FOR THE YEAR 2008-09 & 2010-11 AND LD. CIT( A) HAS ONLY FOLLOWED THE ABOVE ORDER OF THE TRIBUNAL. FOR THE SAKE OF CO NVENIENCE, THE RELEVANT PART OF HON'BLE TRIBUNAL IS REPRODUCED BELOW: 6. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE T HROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE ISSUE I N DISPUTE STANDS ALREADY ADJUDICATED IN FAVOUR OF THE ASSESSEE, VIDE OUR ORDER DATED 02.06.2016, PASSED IN ITA NO. 416/ASR/2013, FOR THE ASSESSMENT YEAR 2008-09, IN THE CASE OF ASSESSEE AND THE RELEV ANT FINDINGS GIVEN THEREIN ARE REPRODUCED HEREUNDER FOR THE SAKE OF CONVENIENCE. 6. ON CONSIDERING THE RIVAL CONTENTIONS IN THE LIGH T OF THE MATERIAL PLACED ON RECORD, WE FIND THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAI NST THE REVENUE BY THE DECISION OF THE ITAT, AMRITSAR BENCH, IN THE CASE OF HOSHIARPUR IMPROVEMENT TRUST VS. INCOME TAX OFFICE R, WARD-1, HOSHIARPUR, IN ITA NO.496(ASR)2013, FOR THE ASSESSM ENT YEAR 2009- 10, DATED 10.09.2015, WHEREIN IT HAS BEEN HELD THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN DECLINING THE BENEFIT OF SECTION 11 READ WITH SECTION 2(15) TO THE ASSESSEE, AND IN HOLDING THAT THE ASSESSEE TRUST WAS NOT COVERED BY ADVANCEMENT OF AN Y OBJECT OF GENERAL PUBLIC UTILITY. THE RELEVANT FINDINGS GIVEN BY THE TRIBUNAL IN THE AFORESAID ORDER ARE AS FOLLOWS: 13. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. ITA NOS. 476 & 477(ASR)/2016 ASST YEARS: 2012-13& 2013-14 4 14. BEFORE WE ADDRESS OURSELVES TO THE FACTS OF THI S CASE, LET US ANALYSE THE RELEVANT LEGAL PROVISIONS. SECTI ON 2 (15), WHICH DEFINES CHARITABLE PURPOSES THOUGH IN AN IN CLUSIVE RATHER THAN AN EXHAUSTIVE MANNER, HAD A RATHER QUIE T EXISTENCE, UNAFFECTED BY THE FREQUENT AMENDMENTS TO THE INCOME TAX ACT 1961, TILL 1 ST APRIL 1984. VIDE FINANCE ACT, 2013, AND WITH EFFECT FROM 1 ST APRIL 1984, THE WORDS NOT INVOLVING THE CARRYING ON ANY ACTIVITY FOR PROFIT WERE DELETED FROM SECTION 2(15), AND, WITH THIS AMENDMEN T, THIS DEFINITION WAS AS FOLLOWS: 'CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF, AND THE ADVANCEMENT OF A NY OTHER OBJECT OF GENERAL PUBLIC UTILITY: 15. VIDE FINANCE ACT, 2008, THE WORDS PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILD LIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTORIC INTEREST), WERE ADDED AND , ON A MORE RELEVANT NOTE, A NEW PROVISO (I.E. FIST PROVISO) WAS ADDED TO THIS PROVISION, CARVING OUT AN EXCEPTION IN THE CAS ES OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL UTILITY , AND, BY THE IMMEDIATELY FOLLOWING FINANCE ACT 2009, THERE W AS YET ANOTHER PROVISO (I.E. SECOND PROVISO) INTRODUCED TO CARVE OUT AN EXCEPTION FROM THE EXCEPTION ITSELF. IN ESSENCE , THE EFFECT OF THESE PROVISOS WAS THAT EVEN WHEN AN ASSESSEE WA S PURSUING A CHARITABLE PURPOSE IN THE EVENT OF ADV ANCEMENT OF ANY OTHER OBJECT OF PUBLIC UTILITY IT WOULD CEA SE TO BE FOR CHARITABLE PURPOSES IF IT INVOLVES (A) CARRYING ON AN ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS; OR (B) RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR B USINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECT IVE OF NATURE OF USE OR APPLICATION OR RETENTION OF THE INCOME F ROM SUCH ACTIVITY. HOWEVER, THESE PROVISIONS ARE NOT TO APPL Y WHEN THE ACTIVITIES ARE SUCH A MODEST SCALE THAT THE VALUE O F RECEIPTS IN RESPECT OF THE SAME ARE LESS THAN RS 25 LAKHS. THE SE TWO PROVISOS, AS THEY STAND NOW, ARE AS FOLLOWS: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT O F GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, I F IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TR ADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FRO M SUCH ACTIVITY; ITA NOS. 476 & 477(ASR)/2016 ASST YEARS: 2012-13& 2013-14 5 PROVIDED FURTHER THAT THE FIRST PROVISO SHALL NOT A PPLY IF THE AGGREGATE VALUE OF THE RECEIPTS FROM THE ACTIVITIES REFERRED TO THEREIN IS TWENTY FIVE LAKH RUPEES OR LESS IN THE P REVIOUS YEAR. 16. EXPLAINING THE SCOPE OF THESE PROVISIONS, A COO RDINATE BENCH OF THIS TRIBUNAL, IN THE CASE OF HIMACHAL PRADESH ENVIRONMENT PROTECTION AND POLLUTION CONTROL BOARD VS CIT [(2010) 9 ITR TRIB 204 (CHANDIGARH)], HAS OBSERVED AS FOLLOWS: 13. IT IS ALSO IMPORTANT TO BEAR IN MIND THAT THE I NSERTION OF PROVISO TO S. 2(15) DOES NOT MEAN THAT IN CASE AN A SSESSEE IS TO RECEIVE ANY PAYMENT FOR ANYTHING DONE FOR TRADE, COMMERCE OR BUSINESS, THE ASSESSEE WILL BE HIT BY THE SAID P ROVISO. IT MAY BE RECALLED THAT ELABORATING THE SCOPE OF THIS AMENDMENT, CBDT, VIDE CIRCULAR NO. 11, DT. 19TH DEC., 2008 [(2 009) 221 CTR (ST) 1], HAS OBSERVED AS FOLLOWS : '3. THE NEWLY AMENDED S. 2(15) WILL APPLY ONLY TO T HE ENTITIES WHOSE PURPOSE IS ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY I.E., THE FOURTH LIMB OF DEFINITION OF CHARITABLE PURPOSE CONTAINED IN S. 2(15). HENCE, SUCH ENTITIES WILL NOT BE ELIGIBLE FOR EXEMP TION UNDER S. 11 OR UNDER S. 10(23C) OF THE ACT, IF THEY CARRY ON COMMERCIAL ACTIVITIES. WHETHER SUCH AN ENTITY IS CARRYING ON AN ACTIVITY IN THE NATURE OF TRADE, COM MERCE OR BUSINESS IS A QUESTION OF FACT WHICH WILL BE DEC IDED BASED ON THE NATURE, SCOPE, EXTENT AND FREQUENCY OF ACTIVITY. 3.1 THERE ARE INDUSTRY AND TRADE ASSOCIATIONS WHO CLAIM EXEMPTION FROM TAX UNDER S. 11 OR ON THE GROU ND THAT THEIR OBJECTS ARE FOR CHARITABLE PURPOSES AS T HESE ARE COVERED UNDER THE ANY OTHER OBJECT OF PUBLIC U TILITY. UNDER THE PRINCIPLE OF MUTUALITY, IF TRADING TAKES PLACE BETWEEN THE PERSONS WHO ARE ASSOCIATED TOGETHER AND CONTRIBUTE TO A COMMON FUND FOR THE FINANCING OF SO ME VENTURE OR OBJECT, AND IN THIS RESPECT HAVE NO DEAL INGS OR RELATIONS WITH ANY OUTSIDE BODY, THEN THE SURPLU S RETURNED TO SUCH PERSONS IS NOT CHARGEABLE TO TAX. THEREFORE, WHERE INDUSTRY OR TRADE ASSOCIATIONS CLA IM BOTH TO BE CHARITABLE INSTITUTIONS AS WELL AS MUTUA L MEMBERS, THESE WOULD NOT FALL UNDER THE PURVIEW OF S. 2(15) OWING TO THE PRINCIPLE OF MUTUALITY. HOWEVER, IF SUCH ORGANIZATIONS HAVE DEALINGS WITH THE NON-MEMBE RS, ITA NOS. 476 & 477(ASR)/2016 ASST YEARS: 2012-13& 2013-14 6 THEIR CLAIM FOR CHARITABLE INSTITUTION WOULD NOW BE GOVERNED BY THE ADDITIONAL CONDITIONS STIPULATED IN PROVISO TO S. 2(15) . 3.2 IN THE FINAL ANALYSIS, WHETHER THE ASSESSEE HAS FOR ITS OBJECT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY IS A QUESTION OF FACT. IF S UCH ASSESSEE IS ENGAGED IN ANY ACTIVITY IN THE NATURE O F TRADE, COMMERCE OR BUSINESS OR RENDERS ANY SERVICE IN CONNECTION TO TRADE, COMMERCE OR BUSINESS, IT WOULD NOT BE ENTITLED TO CLAIM THAT ITS OBJECT IS FOR CHARITA BLE PURPOSES. IN SUCH A CASE, THE OBJECT OF GENERAL PU BLIC UTILITY WILL ONLY BE A MASK OR A DEVICE TO HIDE TH E TRUE PURPOSE WHICH IS TRADE, COMMERCE, OR BUSINESS OR RENDERING OF ANY SERVICE IN RELATION TO TRADE, COMM ERCE OR BUSINESS. EACH CASE WOULD, THEREFORE, HAVE TO BE DECIDED ON ITS OWN FACTS, AND GENERALIZATIONS ARE N OT POSSIBLE. AN ASSESSEE WHO CLAIMS THAT THEIR OBJECT IS CHARITABLE PURPOSE WITHIN THE MEANING OF S. 2(15) WOULD BE WELL ADVISED TO ESCHEW ANY ACTIVITY WHICH IS IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR RENDER ING OF ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE O R BUSINESS . (EMPHASIS, ITALICIZED IN PRINT, SUPPLIED BY US) 14. AS THE ABOVE CBDT CIRCULAR, WHICH IS BINDING ON THE CIT UNDER S. 119(1)(A) OF THE ACT, APTLY PUTS IT, WHETH ER THE ASSESSEE HAS, AS ITS OBJECT, ADVANCEMENT OF ANY OTH ER OBJECT OF GENERAL PUBLIC UTILITY IS ESSENTIALLY A QUESTION OF TO BE DECIDED ON THE FACTS OF THE ASSESSEES OWN CASE AND WHERE OBJECT OF GENERAL PUBLIC ACTIVITY IS ONLY A MASK OR DEVICE TO HIDE THE TRUE PURPOSE OF TRADE, BUSINESS OR COMMERC E, OR RENDERING OF ANY SERVICE IN RELATION THERETO, THE A SSESSEE CANNOT BE SAID TO BE ENGAGED IN A CHARITABLE ACTIVI TY WITHIN MEANINGS OF S. 2(15) OF THE ACT. AS A COROLLARY TO THIS APPROACH ADOPTED BY TAX ADMINISTRATION, IN OUR CONSIDERED VI EW, IT CANNOT BE OPEN TO LEARNED CIT TO CONTEND THAT WHERE AN OBJECT OF GENERAL PUBLIC UTILITY IS NOT MERELY A MASK TO H IDE TRUE PURPOSE OR RENDERING OF ANY SERVICE IN RELATION THE RETO, AND WHERE SUCH SERVICES ARE BEING RENDERED AS PURELY IN CIDENTAL TO OR AS SUBSERVIENT TO THE MAIN OBJECTIVE OF GENE RAL PUBLIC UTILITY, THE CARRYING ON OF BONA FIDE ACTIVITIES I N FURTHERANCE OF SUCH OBJECTIVES OF GENERAL PUBLIC UTILITY WILL AL SO BE HIT BY THE PROVISO TO S. 2(15). ITA NOS. 476 & 477(ASR)/2016 ASST YEARS: 2012-13& 2013-14 7 15. AS CBDT RIGHTLY PUTS IT, SWEEPING GENERALIZA TIONS ARE NOT POSSIBLE AND EACH CASE WILL HAVE TO DECIDED O N ITS FACTS. THE QUESTION THEN ARISES WHETHER ON THE PRESENT SET OF FACTS IT CAN BE SAID THAT THE ASSESSEE WAS ENGAGED IN TRADE, COMMERCE OR BUSINESS OR IN RENDERING OF A SERVICE T O TRADE, COMMERCE OR BUSINESS. 17. THEREFORE, AS THE LEGAL POSITION STANDS AS ON NOW, EVEN AFTER THE INSERTION OF THE ABOVE TWO PROVISOS, AS L ONG AS THE OBJECT OF GENERAL PUBLIC UTILITY IS NOT MERELY A MA SK TO HIDE TRUE PURPOSE OR RENDERING OF ANY SERVICE IN RELATIO N THERETO, AND WHERE SUCH SERVICES ARE BEING RENDERED AS PUREL Y INCIDENTAL TO OR AS SUBSERVIENT TO THE MAIN OBJECTI VE OF GENERAL PUBLIC UTILITY, THE CARRYING ON OF BONAFI DE ACTIVITIES IN FURTHERANCE OF SUCH OBJECTIVES OF GENERAL PUBLIC U TILITY CANNOT BE HIT BY THE PROVISO TO S. 2(15). BY THE FINANCE ACT 2015, THESE TWO PROVISOS ALSO STAND SUBSTITUTED, WI TH EFFECT FROM 1 ST APRIL 2016, A NEW PROVISO TO SECTION 2(15). THIS N EW PROVISO IS AS FOLLOWS: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT O F GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, I F IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TR ADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FRO M SUCH ACTIVITY, UNLESS (I) SUCH ACTIVITY IS UNDERTAKEN IN THE COURSE OF AC TUAL CARRYING OUT OF SUCH ADVANCEMENT OF ANY OTHER OBJECT OF GENE RAL PUBLIC UTILITY; AND (II) THE AGGREGATE RECEIPTS FROM SUCH ACTIVITY OR A CTIVITIES DURING THE PREVIOUS YEAR, DO NOT EXCEED TWENTY PER CENT. OF THE TOTAL RECEIPTS, OF THE TRUST OR INSTITUTION UND ERTAKING SUCH ACTIVITY OR ACTIVITIES, OF THAT PREVIOUS YEAR 18. IT MAY BE NOTED THAT WHILE THE EARLIER PROVISO SIMPLY STATED THAT EXCLUSION FROM CHARITABLE PURPOSES WI LL COME INTO PLAY IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN T HE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIV ITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS , THE REQUIREMENT OF EXCLUSION CLAUSE EXTENDS EVEN TO SITUATIONS IN WHICH SUCH ACTIVITY IS ITA NOS. 476 & 477(ASR)/2016 ASST YEARS: 2012-13& 2013-14 8 UNDERTAKEN IN THE COURSE OF ACTUAL CARRYING OUT OF SUCH ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY . IN OTHER WORDS, THE EXCLUSION CLAUSE, BY PROVIS O TO SECTION 2 (15), WAS EARLIER TRIGGERED BY INVOLVEMENT IN ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINE SS ETC BUT, POST FINANCE ACT 2015 AMENDMENT, IT WILL BE TRIGGERED EVEN IF SUCH AN ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS ETC IS UNDERTAKEN IN THE COURS E OF CARRYING OUT SUCH ADVANCEMENT OF ANY OTHER OBJECT O F GENERAL PUBLIC UTILITY . 19. THIS SUBSTITUTION OF PROVISO TO SECTION 2(15), IN OUR CONSIDERED VIEW, MAY BE VIEWED AS REPRESENTING A PA RADIGM SHIFT IN THE SCOPE OF THE EXCLUSION CLAUSE. 20. THE PARADIGM SHIFT IS THIS. SO FAR AS THE SCOPE OF EARLIER PROVISOS IS CONCERNED, THE CBDT ITSELF HAS, DEALING WITH AN ASSESSEE PURSING THE ADVANCEMENT OF ANY OBJECT OF GENERAL PUBIC UTILITY , OBSERVED THAT IF SUCH ASSESSEE IS ENGAGED IN ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR RENDERS ANY SERVICE IN CONNECTION TO TRADE, COMMERCE OR BUSINESS, IT WOULD NOT BE ENTITLED TO CLAIM THAT ITS OBJECT IS FOR CHARITA BLE PURPOSES BECAUSE IN SUCH A CASE, THE OBJECT OF GENERAL PUBLIC UTILITY WILL ONLY BE A MASK OR A DEVICE TO HIDE THE TRUE PURPOSE WHICH IS TRADE, COMMERCE, OR BUSIN ESS OR RENDERING OF ANY SERVICE IN RELATION TO TRADE, COMMERCE OR BUSINESS. THE ADVANCEMENT OF ANY OBJECTS OF GENERAL PUBLIC UTILITY AND ENGAGEMENT IN TRADE, COM MERCE AND BUSINESS ETC. WERE THUS SEEN AS MUTUALLY EXCLUSIVE IN THE SENSE THAT EITHER THE ASSESSEE WAS PURSUING THE OBJ ECTS OF GENERAL PUBLIC UTILITY OR PURSUING TRADE, COMMERCE OR BUSINESS ETC. IN THE GARB OF PURSING THE OBJECTS OF GENERAL PUBLIC UTILITY. AS THE CBDT CIRCULAR ITSELF DEMONSTRATES, THERE COU LD NOT HAVE BEEN ANY SITUATION IN WHICH THE ASSESSEE WAS PURSIN G THE OBJECTS OF GENERAL PUBLIC UTILITY AS ALSO ENGAGED I N TRADE, COMMERCE OF BUSINESS ETC. IN THE NEW PROVISO, HOWEV ER, EVEN WHEN THE ASSESSEE IS ENGAGED IN THE ACTIVITIES IN T HE NATURE OF TRADE, COMMERCE OR BUSINESS ETC. AND SUCH ACTIVITY IS UNDERTAKEN IN THE COURSE OF ACTUAL CARRYING OUT OF SUCH ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY IT IS EXCLUDED FROM THE SCOPE OF CHARITABLE PURPO SES ONLY WHEN THE AGGREGATE RECEIPTS FROM SUCH ACTIVITY OR ACTIVITIES DURING THE PREVIOUS YEAR, DO NOT EXCEED TWENTY PER CENT OF THE TOTAL RECEIPTS, OF THE TRUST OR INS TITUTION UNDERTAKING SUCH ACTIVITY OR ACTIVITIES, OF THAT PR EVIOUS ITA NOS. 476 & 477(ASR)/2016 ASST YEARS: 2012-13& 2013-14 9 YEAR . IN OTHER WORDS, EVEN WHEN THE ACTIVITIES ARE IN THE COURSE OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERA L PUBLIC UTILITY, BUT IN THE NATURE OF TRADE, COMMERCE OR BU SINESS ETC, THE PROVISO SEEKS TO EXCLUDE IT ONLY WHEN THE THRES HOLD LEVEL OF ACTIVITY IS NOT SATISFIED. WHETHER SUCH A STATUT ORY PROVISION STANDS THE LEGAL SCRUTINY OR NOT IS ANOTHER ASPECT OF THE MATTER, AND THAT IS NONE OF OUR CONCERN AT PRESENT ANYWAY, IT IS BEYOND DOUBT THAT THE NEW PROVISO, WITH EFFECT F ROM 1 ST APRIL 2016, SEEKS TO EXCLUDE, FROM THE SCOPE OF SEC TION 2(15), THE SITUATIONS IN WHICH EVEN IN THE COURSE OF PURSU ING ADVANCEMENT OF ANY OBJECTS OF GENERAL PUBLIC UTILIT Y WHEN ANY ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR BUSI NESS ETC IS UNDERTAKEN IN THE COURSE OF ACTUAL CARRYING OUT OF SUCH ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY , UNLESS, OF COURSE, THE ACTIVITY LEVEL REMAINS WI THIN THE THRESHOLD LIMIT I.E. RECEIPTS FROM SUCH ACTIVIT IES ARE LESS THAN TWENTY PERCENT OF TOTAL RECEIPTS OF THAT YEAR. 21. AS THE ABOVE PROVISIONS, WHICH, IN OUR HUMBLE UNDERSTANDING, SEEKS TO RESTRICT THE SCOPE OF SECTI ON 2(15) IS EFFECTIVE FROM THE ASSESSMENT YEAR 2016-17, IN OUR CONSIDERED VIEW, THESE PROVISIONS ARE ONLY PROSPECTIVE IN EFFE CT. AS A COROLLARY TO THIS LEGAL POSITION, IN OUR CONSIDERED VIEW, EVEN IF THE ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR BUSINESS ETC ARE UNDERTAKEN IN THE COURSE OF ACTUAL CARRYING OUT OF ADVANCEMENT OF ANY OBJECT OF GENERAL PUBLIC UTILITY , TILL THE END OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEA R 2016-17, THE ACTIVITIES WILL CONTINUE TO BE COVERED BY THE S COPE OF SECTION 2 (15). AS WE HOLD SO, WE MAY ONLY REFER TO THE OBSERVATIONS OF A FIVE MEMBER BENCH OF HONBLE SUPR EME COURT, IN THE CASE OF CIT VS VATIKA TOWNSHIPS PVT LTD [(2014) 367 ITR 466 (SC)] , AS FOLLOWS: 31. OF THE VARIOUS RULES GUIDING HOW LEGISLATION HA S TO BE INTERPRETED, ONE ESTABLISHED RULE IS THAT UNLESS A CONTRARY INTENTION APPEARS, LEGISLATION IS PRESUMED NOT TO BE INTENDED TO HAVE A RETROSPECTIVE OPERATION. T HE IDEA BEHIND THE RULE IS THAT A CURRENT LAW SHOULD G OVERN CURRENT ACTIVITIES. LAW PASSED TODAY CANNOT APPLY T O THE EVENTS OF THE PAST. IF WE DO SOMETHING TODAY, WE DO IT KEEPING IN VIEW THE LAW OF TODAY AND IN FORCE AND N OT TOMORROWS BACKWARD ADJUSTMENT OF IT. OUR BELIEF IN THE NATURE OF THE LAW IS FOUNDED ON THE BED ROCK THAT E VERY HUMAN BEING IS ENTITLED TO ARRANGE HIS AFFAIRS BY R ELYING ON THE EXISTING LAW AND SHOULD NOT FIND THAT HIS PL ANS HAVE BEEN RETROSPECTIVELY UPSET. THIS PRINCIPLE OF LAW IS ITA NOS. 476 & 477(ASR)/2016 ASST YEARS: 2012-13& 2013-14 10 KNOWN AS LEX PROSPICIT NON RESPICIT: LAW LOOKS FORW ARD NOT BACKWARD . . .. 33. WE WOULD ALSO LIKE TO POINT OUT, FOR THE SAKE O F COMPLETENESS, THAT WHERE A BENEFIT IS CONFERRED BY LEGISLATION, THE RULE AGAINST A RETROSPECTIVE CONST RUCTION IS DIFFERENT. . 34. .. IN THE INSTANT CASE, THE PROVISO ADDED T O SECTION 113 OF THE ACT IS NOT BENEFICIAL TO THE ASS ESSEE. ON THE CONTRARY, IT IS A PROVISION WHICH IS ONEROUS TO THE ASSESSEE. THEREFORE, IN A CASE LIKE THIS, WE HA VE TO PROCEED WITH THE NORMAL RULE OF PRESUMPTION AGAINST RETROSPECTIVE OPERATION. (EMPHASIS, BY UNDERLINING, SUPPLIED BY US NOW) 22. SINCE IN THE ORDERS OF THE AUTHORITIES BELOW, S OME REFERENCES HAVE BEEN MADE TO THE JUDICIAL PRECEDENT S AND THE CBDT INSTRUCTIONS IN THE CONTEXT OF THE LEGAL POSIT ION WHEN THE WORDS NOT INVOLVING THE CARRYING ON ANY ACTIVITY F OR PROFIT [I.E. CBDT INSTRUCTION NO. 1024 DATED 7 TH NOVEMBER 1976 AND HONBLE SUPREME COURTS JUDGMENTS IN THE CASES OF L OK SHIKSHAN TRUST VS CIT (SUPRA) INDIAN CHAMBER OF COM MERCE & ORS VS CIT (SUPRA)], IT MAY ALSO BE APPROPRIATE T O BRIEFLY DEAL WITH THE RELEVANT DEVELOPMENTS. THE CBDT INS TRUCTION NO. 1024 DATED 7 TH NOVEMBER 1976 WAS ISSUED IN THE LIGHT OF THE TWO SUPREME COURT RULINGS REFERRED TO ABOVE AND IT STATED AS FOLLOWS: BOARD'S INSTRUCTION NO. 1024 DT. 7TH NOVEMBER, 1976 7 TH NOVEMBER 1976 SEC. 2(15) OF THE IT ACT, 1961, DEFINES 'CHARITABLE PURPOSES' AS UNDER: 'CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF AND THE ADVANCEMENT OF AN Y OTHER OBJECT OF GENERAL PUBLIC UTILITY NOT INVOLVIN G THE CARRYING ON OF ANY ACTIVITY FOR PROFIT. 2. IN THE DEFINITION OF 'CHARITABLE PURPOSE' THE EXPRESSION 'NOT INVOLVING THE CARRYING ON OF ANY AC TIVITY FOR PROFIT' WAS ADDED IN THE 1961 ACT. THE SIGNIFIC ANCE ITA NOS. 476 & 477(ASR)/2016 ASST YEARS: 2012-13& 2013-14 11 OF THIS EXPRESSION HAS BEEN EXAMINED BY THE SUPREME COURT IN THE GREAT DETAIL IN THE CASES OF SOLE TRUS TEE, LOK SHIKSHANA TRUST VS. CIT (1975) 101 ITR 234 (SC) AND INDIAN CHAMBER OF COMMERCE VS. CIT (1975) 101 ITR 796 (SC) . COMMENTING ON THIS EXPRESSION, THEIR LORDSHIPS, IN THE CASE OF THE INDIAN CHAMBER OF COMMERCE VS. CIT ETC., OBSERVED : 'NOTWITHSTANDING THE POSSIBILITY OF OBSCURITY AND O F DUAL MEANING WHEN THE EMPHASIS IS SHIFTED FROM 'ADVANCEMENT' TO 'OBJECT' USED IN S. 2(15), WE ARE CLEAR IN OUR MINDS THAT BY THE NEW DEFINITION THE BENEFIT OF EXCLUSION FROM TOTAL INCOME IS TAKEN AWAY WHERE IN ACCOMPLISHING A CHARITABLE PURPOSE THE INSTITUTION ENGAGES ITSELF IN ACTIVITIES FOR PROFIT.' THE SUPREME COURT EMPHASIZED THAT IF IN THE ADVANCEMENT OF THE OBJECTS OF GENERAL PUBLIC UTILIT Y A TRUST RESORTS TO CARRYING ON OF ANY ACTIVITY FOR PR OFIT, THEM NECESSARILY S. 2(15) CANNOT CONFER EXEMPTION. IN LOK SHIKSHANA TRUST, THEIR LORDSHIPS KHANNA, J. AND GUPTA, J. OBSERVED: 'ORDINARILY, PROFIT MOTIVE IS A NORMAL INCIDENT OF BUSINESS ACTIVITY AND IF THE ACTIVITY OF A TRUST CO NSISTS OF CARRYING ON OF A BUSINESS AND THERE ARE NO RESTRICTIONS ON ITS MAKING PROFIT, THE COURT WOULD BE WELL JUSTIFIED IN ASSUMING IN THE ABSENCE OF SOME INDICATION TO THE CONTRARY THAT THE OBJECT OF THE T RUST INVOLVES THE CARRYING ON OF ANY ACTIVITY FOR PROFIT ...' 3. THE TEST WHICH HAS BEEN LAID DOWN BY THE SUPREME COURT FOR DETERMINING WHETHER A PARTICULAR ACTIVITY OF GENERAL PUBLIC UTILITY IS COVERED BY THE DEFINITION OF 'CHARITABLE PURPOSE' OR NOT IS: (A) IS THE OBJECT O F THE ASSESSEE ONE OF GENERAL PUBLIC UTILITY? (B) DOES TH E ADVANCEMENT OF THE OBJECT INVOLVE ACTIVITIES BRINGI NG IN MONEYS? (C) IF SO, ARE SUCH ACTIVITIES UNDERTAKEN, (I) FOR PROFIT, OR (II) WITHOUT PROFIT? IT WAS OBSERVED BY THE SUPREME COURT THAT IF (A) AND (B) ARE ANSWERED AFFIRMATIVELY, AND CL. (I) IS ALSO ANSWERED AFFIRMA TIVELY, THE CLAIM FOR EXEMPTION COLLAPSES AND THE BENEFIT O F S. 11 WILL NOT BE AVAILABLE TO THE ENTIRE INCOME. HOWE VER, IF SUCH ACTIVITY IS UNDERTAKEN WITHOUT PROFIT MOTIVE, THE OBJECT WILL BE CHARITABLE PURPOSE WITHIN THE MEANIN G OF S. 2(15). ITA NOS. 476 & 477(ASR)/2016 ASST YEARS: 2012-13& 2013-14 12 4. THESE TWO DECISIONS OF THE SUPREME COURT MAY KIN DLY BE BROUGHT TO THE NOTICE OF THE OFFICERS WORKING IN YOUR CHARGE. YOU MAY ALSO KINDLY DIRECT THEM TO CARRY OU T A REVIEW OF THE COMPLETED CASES IN THE LIGHT OF THE PRONOUNCEMENT OF THE SUPREME COURT AND TAKE REMEDIA L ACTION WHEREVER CALLED FOR AND FEASIBLE. A REPORT INDICATING THE RESULT OF THE REVIEW MAY PLEASE BE S ENT TO THE BOARD BY 1ST JAN., 1977 WITHOUT FAIL. 23. HOWEVER, THE JUDICIAL VIEWS RELIED UPON IN THE ABOVE INSTRUCTIONS (I.E. VIEWS EXPRESSED IN INDIAN CHAMBE R OF COMMERCE DECISION AND THE MAJORITY VIEWS, EXPRESSED BY HONBLE JUSTICE KHANNA AND HONBLE JUSTICE GUPTA, I N THE CASE OF LOK SHIKSHAN TRUST) DID NOT MEET THE APPROV AL OF A LARGER BENCH OF HONBLE SUPREME COURT IN THE CASE O F CIT VS SURAT ART SILK CLOTHES MANUFACTURERS ASSOCIATION [( 1980) 121 ITR 1 (SC)] . WHILE DOING SO, HONBLE JUSTICE BHAGWATI, IN HIS ORDER REPRESENTING MAJORITY VIEWS, OBSERVED AS FOLLOWS: THERE IS, HOWEVER, ONE COMMENT WHICH IS NECESSARY T O BE MADE WHILST WE ARE ON THIS POINT AND THAT ARISES OU T OF CERTAIN OBSERVATIONS MADE BY THIS COURT IN SOLE TRU STEE, LOKA SHIKSHANA TRUST'S CASE (SUPRA) AS WELL AS INDI AN CHAMBER OF COMMERCE'S CASE (SUPRA). IT WAS SAID BY KHANNA J. IN SOLE TRUSTEE, LOKA SHIKSHANA TRUST'S C ASE : '...IF THE ACTIVITY OF A TRUST CONSISTS OF CARRYI NG ON A BUSINESS AND THERE ARE NO RESTRICTIONS ON ITS MAKIN G PROFIT, THE COURT WOULD BE WELL JUSTIFIED IN ASSUMI NG IN THE ABSENCE OF SOME INDICATION TO THE CONTRARY THAT THE OBJECT OF THE TRUST INVOLVES THE CARRYING ON OF AN ACTIVITY FOR PROFIT.' AND TO THE SAME EFFECT, OBSERVED KRISHNA IYER J. IN INDIAN CHAMBER OF COMMERCE'S CASE (SUPRA) WHEN HE SAID : 'AN UNDERTAKING BY A BUSINESS ORGANIZATION IS ORDINARILY ASSUMED TO BE FOR PROFIT UNLESS EXPRESSL Y OR BY NECESSARY IMPLICATION OR BY ELOQUENT SURROUNDING CIRCUMSTANCES THE MAKING OF PROFIT STANDS LOUDLY NEGATIVED...A PRAGMATIC CONDITION, WRITTEN OR UNWRI TTEN, PROVED BY A PROSCRIPTION OF PROFITS OR BY LONG YEAR S OF INVARIABLE PRACTICE OR SPELT FROM SOME STRONG SURROUNDING CIRCUMSTANCES INDICATIVE OF ANTI-PROFIT MOTIVATION SUCH A CONDITION WILL NULLIFY FOR CHARIT ABLE PURPOSE.' ITA NOS. 476 & 477(ASR)/2016 ASST YEARS: 2012-13& 2013-14 13 NOW, WE ENTIRELY AGREE WITH THE LEARNED JUDGES WHO DECIDED THESE TWO CASES THAT ACTIVITY INVOLVED IN CARRYING OUT THE CHARITABLE PURPOSE MUST NOT BE MOTIVATED BY A PROFIT OBJECTIVE BUT IT MUST BE UNDERTAKEN FOR THE PURPOSE OF ADVANCEMENT OR CARRYI NG OUT OF THE CHARITABLE PURPOSE. BUT WE FIND IT DIFFI CULT TO ACCEPT THEIR THESIS THAT WHENEVER AN ACTIVITY IS CA RRIED ON WHICH YIELDS PROFIT, THE INFERENCE MUST NECESSAR ILY BE DRAWN, IN THE ABSENCE OF SOME INDICATION TO THE CONTRARY, THAT THE ACTIVITY IS FOR PROFIT AND THE CHARITABLE PURPOSE INVOLVES THE CARRYING ON OF AN ACTIVITY FOR PROFIT. WE DO NOT THINK THE COURT WOUL D BE JUSTIFIED IN DRAWING ANY SUCH INFERENCE MERELY BECA USE THE ACTIVITY RESULTS IN PROFIT. IT IS IN OUR OPINIO N NOT AT ALL NECESSARY THAT THERE MUST BE A PROVISION IN THE CONSTITUTION OF THE TRUST OR INSTITUTION THAT THE A CTIVITY SHALL BE CARRIED ON NO PROFIT NO LOSS BASIS OR THAT PROFIT SHALL BE PROSCRIBED. EVEN IF THERE IS NO SUCH EXPRE SS PROVISION, THE NATURE OF THE CHARITABLE PURPOSE, TH E MANNER IN WHICH THE ACTIVITY FOR ADVANCING THE CHARITABLE PURPOSE IS BEING CARRIED ON AND THE SURROUNDING CIRCUMSTANCES MAY CLEARLY INDICATE THAT THE ACTIVITY IS NOT PROPELLED BY A DOMINANT PROFIT MOTIVE. WHAT IS NECESSARY TO BE CONSIDERED IS WHETH ER HAVING REGARD TO ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DOMINANT OBJECT OF THE ACTIVITY IS PROFIT MAKING OR CARRYING OUT A CHARITABLE PURPOSE. IF IT IS THE FORMER, THE PURPOSE WOULD NOT BE A CHARITABLE PURPO SE, BUT, IF IT IS THE LATTER, THE CHARITABLE CHARACTER OF THE PURPOSE WOULD NOT BE LOST . (EMPHASIS, BY UNDERLINING, SUPPLIED BY US NOW) 24. IT WAS IN THIS BACKDROP, AND SHORTLY AFTER THE ABOVE JUDGMENT WAS DELIVERED BY HONBLE SUPREME COURT WAS RENDERED, THAT THE WORDS NOT INVOLVING THE CARRYIN G ON ANY ACTIVITY FOR PROFIT WERE DROPPED FROM SECTION 2(15 ). 25. IN VIEW OF THE ABOVE DISCUSSIONS, THE RELIANCE PLACED BY THE AUTHORITIES BELOW ON THE CBDT INSTRUCTION NO. 1 024 (SUPRA) AND ON HONBLE SUPREME COURT DECISIONS IN T HE CASES OF INDIAN CHAMBER OF COMMERCE (SUPRA) AND LOK SHIKS HAN SANSTHAN (SUPRA) IS DEVOID OF ANY LEGALLY SUSTAINAB LE MERITS. THESE DECISIONS ARE NO LONGER GOOD LAW, THE RELEVAN T PROVISION ITA NOS. 476 & 477(ASR)/2016 ASST YEARS: 2012-13& 2013-14 14 IN THE CONTEXT OF WHICH THE DECISIONS WERE GIVEN DO ES NO LONGER EXIST ON THE STATUTE, AND THE JUDICIAL PRECE DENT, WHICH THE CBDT INSTRUCTION HAS INTERPRETED, HAS ALREADY F ADED INTO OBLIVION. 26. IT IS, HOWEVER, IMPORTANT TO BEAR IN MIND THE F ACT THAT, GOING BY THE CIRCULAR NO.372 DATED 8 TH DECEMBER 1983 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES EXPLAINING THE AMENDMENTS MADE BY THE FINANCE ACT 1983, DROPPING O F THE WORDS NOT INVOLVING THE CARRYING ON ANY ACTIVITY F OR PROFIT DID NOT REPRESENT ANY PARADIGM SHIFT OR SUBSTANTIVE AMENDMENT IN LAW INASMUCH AS THIS AMENDMENT WAS STA TED TO BE ONLY CONSEQUENTIAL TO SIMILAR RESTRICTION NOW PLACED UNDER SECTION 11 ITSELF. IT WAS EXPLAINED, IN THE A FORESAID CIRCULAR, AS FOLLOWS: AMENDMENT OF THE DEFINITION OF 'CHARITABLE PURPOSE' SEC. 2(15) 8. UNDER S. 2(15) OF THE IT ACT, 'CHARITABLE PURPOS E' INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL REL IEF AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBL IC UTILITY NOT INVOLVING THE CARRYING ON OF ANY ACTIVI TY FOR PROFIT. SEC. 3(A) OF THE FINANCE ACT HAS OMITTED TH E WORDS 'NOT INVOLVING THE CARRYING ON OF ANY ACTIVIT Y FOR PROFIT' FROM THE DEFINITION. THIS AMENDMENT IS CONSEQUENTIAL TO THE AMENDMENT MADE IN S. 11 OF THE IT ACT BY S. 6(B) OF THE FINANCE ACT WHEREUNDER PROFIT S AND GAINS OF BUSINESS IN THE CASE OF CHARITABLE OR RELI GIOUS TRUSTS AND INSTITUTIONS WILL NOT BE ENTITLED TO EXE MPTION UNDER THAT SECTION EXCEPT IN CASES WHERE THE BUSINE SS FULFILS THE CONDITIONS SPECIFIED IN S. 11(4) OF THE ACT. THE AMENDMENT TAKES EFFECT FROM 1ST APRIL, 1984 AND WIL L, ACCORDINGLY, APPLY IN RELATION TO THE ASST. YR. 198 4-85 AND SUBSEQUENT YEARS. 27. THE CORRESPONDING AMENDMENT WAS INSERTION OF SE CTION 11(4A). THIS SECTION, AS IT WAS ORIGINALLY INTRODUC ED, IS SET OUT BELOW, FOLLOWED BY CBDT CIRCULARS (SUPRA) EXPLANAT ION ABOUT THE NATURE OF THIS AMENDMENT: SECTION 11 (4A)- AS INSERTED BY THE FINANCE ACT 198 3 ITA NOS. 476 & 477(ASR)/2016 ASST YEARS: 2012-13& 2013-14 15 (4A) SUB-SECTION (1) OR SUB-SECTION (2) OR SUB-SECT ION (3) OR SUB- SECTION (3A) SHALL NOT APPLY IN RELATION TO ANY INC OME, BEING PROFITS AND GAINS OF BUSINESS, UNLESS (A) THE BUSINESS IS CARRIED ON BY A TRUST WHOLLY FO R PUBLIC RELIGIOUS PURPOSES AND THE BUSINESS CONSISTS OF PRI NTING AND PUBLICATION OF BOOKS OR PUBLICATION OF BOOKS OR IS OF A KIND NOTIFIED BY THE CENTRAL GOVERNMENT IN THIS BEHALF I N THE OFFICIAL GAZETTE ; OR (B) THE BUSINESS IS CARRIED ON BY AN INSTITUTION WH OLLY FOR CHARITABLE PURPOSES AND THE WORK IN CONNECTION WITH THE BUSINESS IS MAINLY CARRIED ON BY THE BENEFICIARIES OF THE INSTITUTION, AND SEPARATE BOOKS OF ACCOUNT ARE MAIN TAINED BY THE TRUST OR INSTITUTION IN RESPECT OF SUCH BUSINES S CBDT CIRCULAR DATED 8 TH DECEMBER 1983 EXPLAINING THE ABOVE AMENDMENT IN LAW- BUSINESS INCOME OF CHARITABLE AND RELIGIOUS TRUSTS AND INSTITUTIONS 19.1 THE FINANCE ACT HAS INSERTED A NEW SUB-S. (4A) IN S. 11 OF THE IT ACT TO PROVIDE THAT THE PROVISIONS OF SUB -S. (1) OF THAT SECTION RELATING TO EXEMPTION OF INCOME DERIVED FRO M PROPERTY HELD UNDER TRUST FOR CHARITABLE OR RELIGIOUS PURPOS ES; OR OF SUB- S. (2) THEREOF RELATING TO ACCUMULATION OF SETTING APART OF SUCH INCOME FOR APPLICATION TO SUCH PURPOSES; OR THE CON NECTED PROVISIONS OF SUB-SS. (3) AND 3(A) OF THE SAID SECT ION WILL NOT APPLY IN RELATION TO PROFITS AND GAINS OF BUSINESS. THIS PROVISIONS WILL APPLY IRRESPECTIVE OF WHETHER THE P ROFITS AND GAINS ARE DERIVED FROM A BUSINESS CARRIED ON BY THE TRUST OR INSTITUTION OR FROM A BUSINESS UNDERTAKING WHICH IS HELD IN TRUST FOR SUCH PURPOSES . AN EXEMPTION HAS, HOWEVER, BEEN MADE IN RELATION TO PROFITS AND GAINS OF BUSINESS I N THE FOLLOWING CASES: (A) WHERE THE BUSINESS IS CARRIED ON BY A TRUST WHO LLY FOR PUBLIC RELIGIOUS PURPOSES AND THE BUSINESS CONSISTS OF PRINTING AND PUBLICATION OF BOOKS OR PUBLICATION OF BOOKS OR THE BUSINESS IS OF A KIND NOTIFIED BY THE CENTRAL GOVER NMENT IN THIS BEHALF IN THE OFFICIAL GAZETTE; (B) THE BUSINESS IS CARRIED ON BY AN INSTITUTION WH OLLY FOR CHARITABLE PURPOSES AND THE WORK IN CONNECTION WITH THE BUSINESS IS MAINLY CARRIED ON BY THE BENEFICIARIES OF THE INSTITUTION. ITA NOS. 476 & 477(ASR)/2016 ASST YEARS: 2012-13& 2013-14 16 19.2 THE EXCEPTIONS MENTIONED UNDER (A) AND (B) ABO VE WILL NOT BE AVAILABLE UNLESS SEPARATE BOOKS OF ACCOUNT A RE MAINTAINED BY THE TRUST OR INSTITUTION IN RESPECT O F SUCH BUSINESS. IN CONSEQUENCE OF THE NEW PROVISIONS MADE IN SUB- S. (4A) OF S. 11, CL. (BB) OF S. 13(1) OF THE IT AC T (WHICH RESTRICTED THE EXEMPTION OF BUSINESS INCOME IN THE CASE OF CHARITABLE TRUSTS AND INSTITUTIONS FOR THE RELIEF O F THE POOR, EDUCATION OR MEDICAL RELIEF, ONLY IN CASES WHERE TH E BUSINESS IS CARRIED ON THE COURSE OF THE ACTUAL CARRYING OUT OF A PRIMARY PURPOSE OF THE TRUST OR INSTITUTION) HAS BEEN OMITT ED. 19.3 IT IS RELEVANT TO NOTE THAT THE PROVISIONS OF NEW SUB-S. (4A) OF S.11 DO NOT OVERRIDE THE PROVISIONS OF S. 1 0 OF THE IT ACT, AND AS SUCH, PROFITS DERIVED BY ANY TRUST, INS TITUTION, ASSOCIATION, ETC. REFERRED TO IN CLS. (21), (22), ( 22A), (23), (23A), (23B) (23BB) AND (23BC) WILL CONTINUE TO BE EXEMPT FROM INCOME TAX. 19.4 THE FINANCE ACT HAS ALSO AMENDED S. 164 OF THE IT ACT TO CLARIFY THAT PROFITS AND GAINS OF BUSINESS WHICH AR E NOT EXEMPT UNDER S. 11 OF THE IT ACT WILL BE CHARGED TO INCOME-TAX AS IF SUCH PROFITS AND GAINS (INCLUDING ANY OTHER I NCOME, IF ANY, WHICH IS ALSO NOT EXEMPT UNDER S. 11) WERE THE INCOME OF ANY ASSOCIATION OF PERSONS. A19.5 THE AFORESAID AME NDMENTS TAKE EFFECT FROM 1ST APRIL, 1984 AND WILL, ACCORDIN GLY, APPLY IN RELATION TO THE ASST. YR. 1984-85 AND SUBSEQUENT YE ARS. [SECS. 6, 7 AND 37 OF THE FINANCE ACT] 28. HOWEVER, THE JUDICIAL INTERPRETATION ASSIGNED T O THE ABOVE AMENDMENT WAS NOT IN CONSONANCE WITH THE UNDERSTANDING OF THE CBDT, AS REFLECTED IN THE ABOV E CIRCULAR, INASMUCH AS THIS LIMITATION DID NOT, AS PER HONBLE MADRAS HIGH COURT IN THE CASE OF THANTHI TRUST VS CBDT [(1995) 213 ITR 639 (MAD)], APPLY TO THE INCOME DERIVED FROM PROPERTY HELD UNDER THE TRUST FOR CHARITABLE PURPOS ES. TO THAT EXTENT, PARAGRAPH 13.1 OF THE ABOVE CIRCULAR WAS HE LD TO INCONSISTENT WITH SECTION 11(4A). THIS UNCERTAINTY DID NOT LAST LONG AS THERE WAS YET ANOTHER AMENDMENT IN SECTION 11, AND THE NEW SUB SECTION 4A WITH EFFECT FROM 1 ST APRIL 1992, WHICH WAS TO SUBSTITUTE FOR THE THEN EXISTING SUB SECTION 4A, PROVIDED AS FOLLOWS: (4A) SUB-SECTION (1) OR SUB-SECTION (2) OR SUB-SECT ION (3) OR SUB-SECTION (3A) SHALL NOT APPLY IN RELATION TO ANY INCOME OF A TRUST OR AN INSTITUTION, BEING PROFITS AND GAINS OF BUSINESS, UNLESS THE BUSINESS IS INCIDENTA L TO ITA NOS. 476 & 477(ASR)/2016 ASST YEARS: 2012-13& 2013-14 17 THE ATTAINMENT OF THE OBJECTIVES OF THE TRUST OR, A S THE CASE MAY BE, INSTITUTION, AND SEPARATE BOOKS OF ACC OUNT ARE MAINTAINED BY SUCH TRUST OR INSTITUTION IN RESP ECT OF SUCH BUSINESS. 29. EXPLAINING THIS AMENDMENT IN LAW, THE CBDT CIRC ULAR NO. 621 DATED 19 TH DECEMBER 1991 [(1992 195 ITR (ST) 154], READ WITH CIRCULAR NO 642 DATED 15 TH DECEMBER 1992 [(1993) 199 ITR (ST) 7] STATED AS FOLLOWS: CBDT CIRCULAR NO. 621 DATED 19 TH DECEMBER 1991 [(1992 195 ITR (ST) 154 @165 ] 15.8 IN ORDER TO BRING EXEMPTION OF CHARITABLE OR RELIGIOUS TRUSTS IN LINE WITH THE CORRESPONDING PRO VISIONS IN SECTION 10(23C)(IV) OR (V) OF SUB-SECTION (4A) OF S ECTION 11 HAS BEEN AMENDED TO PERMIT TRUST AND INSTITUTIONS TO CA RRY OUT BUSINESS ACTIVITIES IF THE BUSINESS ACTIVITIES ARE INCIDENTAL TO THE ATTAINMENT OF ITS OBJECTIVE. THE CHARITABLE OR RELIGIOUS TRUST WILL NO LONGER LOSE COMPLETE EXEMPTION FROM INCOME- TAX. HOWEVER, THE PROFITS AND GAINS FROM SUCH BUSINESS A CTIVITY WILL BE SUBJECTED TO TAX. CBDT CIRCULAR NO 642 DATED 15 TH DECEMBER 1992 [(1993) 199 ITR (ST) 7 @7 ] IN PARTIAL MODIFICATION TO PARA 15.8 (AS EXTRACTED ABOVE) OF THE CIRCULAR NO. 621, DT. 19TH DEC., 1991 ISSUED FROM F . NO. 133/389/91-TPL, IT IS CLARIFIED THAT ACCORDING TO T HE PROVISIONS OF SECTION 11(4A) OF THE INCOME-TAX ACT, AS AMENDED THROUGH THE FINANCE (NO. 2) ACT, 1991, WITH EFFECT FROM 1ST APRIL, 1992, PROFITS AND GAINS OF BUSINESS IN THE CASE OF A TRUST OR INSTITUTION WILL NOT BE LIABLE TO TAX IF THE BUSINESS IS INCIDENTAL TO THE ATTAINMENT OF THE OBJECTIVES O F THE TRUST OR INSTITUTION, AS THE CASE MAY BE. IN ADDITION, SEPAR ATE BOOKS OF ACCOUNT ARE TO BE MAINTAINED BY THE TRUST OR INSTIT UTION IN RESPECT OF SUCH BUSINESS. INCOME OF ANY OTHER BUSIN ESS WHICH IS NOT INCIDENTAL TO THE ATTAINMENT OF THE OBJECTIV ES OF THE TRUST OR INSTITUTION WILL NOT BE EXEMPT FROM TAX . 30. THE ABOVE DISCUSSIONS CLEARLY SHOW THAT SO FAR AS MAKING PROFITS FROM A BUSINESS ACTIVITY INCIDENTAL TO THE ATTAINMENT OF OBJECTIVES OF THE TRUST IS CONCERNED, THE LEGAL POSITION ALWAYS WAS THAT, AS LONG AS SEPARATE BOOKS OF ACCOUNTS HAVE BEEN MAINTAINED BY THE ASSESSEE, THE SAME WERE EXEMPT FROM TAX UNDER SECTION 11. THERE IS NO SUBSTANTIVE CHANGE IN LAW VIS--VIS THE LAW PREVAIL ING AS AT ITA NOS. 476 & 477(ASR)/2016 ASST YEARS: 2012-13& 2013-14 18 THE POINT OF TIME IN THE CONTEXT OF WHICH HONBLE S UPREME COURTS FIVE JUDGE BENCH HAD DELIVERED THE JUDGMENT IN THE CASE CIT VS SURAT ART SILK CLOTHES MANUFACTURERS ASSOCIATION (SUPRA). IN THE SAID CASE, THEIR LORDSHIPS HAD, INTER ALIA, HELD, BY MAJORITY VIEW, THAT WHAT IS NECESSARY TO BE CONSIDERED IS WHETHER HAVING REGARD TO ALL THE F ACTS AND CIRCUMSTANCES OF THE CASE, THE DOMINANT OBJECT OF THE ACTIVITY IS PROFIT MAKING OR CARRYING OUT A CHARITABLE PURPOSE. IF IT IS THE FORMER, THE PURPOS E WOULD NOT BE A CHARITABLE PURPOSE, BUT, IF IT IS TH E LATTER, THE CHARITABLE CHARACTER OF THE PURPOSE WOU LD NOT BE LOST . OF COURSE, AS THE LAW WAS SO LAID DOWN, THE SCHOOL OF THOUGHT TO THE EFFECT HOWEVER, IF THE OBJECT OF THE TRUST IS ADVANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTILITY AND IT CARRIED ON ANY ACTIVITY FOR PROFIT, IT IS EXCLUDED FROM THE AMBIT OF CHARITABLE PURPOSE DEFIN ED IN S. 2(15) WAS ARTICULATED IN THE SAID ORDER BUT THAT WAS PART OF THE MINORITY VIEW STATED BY JUSTICE A P SEN , AS HE THEN WAS. HIS LORDSHIP DID PROCEED TO OBSERVE, AS IS THE STAND TAKEN BY THE AUTHORITIES BELOW, AS FOLLOWS: WITH RESPECT, I VENTURE TO SAY THAT IF AN OBJECT O F GENERAL PUBLIC UTILITY IS ENGAGED IN AN ACTIVITY FOR PROFIT , IT CEASES TO BE A CHARITABLE PURPOSE AND, THEREFORE, THE INCOME IS NOT EXEMPT UNDER S. 11(1)(A). IN CASE OF A TRUST FALLIN G UNDER ANY OF THE FIRST THREE HEADS OF CHARITY, VIZ., 'RELIEF OF THE POOR', 'EDUCATION' AND 'MEDICAL RELIEF' IT MAY ENGAGE IN A NY ACTIVITY FOR PROFIT, AND THE PROFITS WOULD NOT BE TAXABLE IF THEY WERE UTILIZED FOR THE PRIMARY OBJECT OF THE TRUST. IN OT HER WORDS, THE BUSINESS CARRIED ON BY THEM IS INCIDENTAL OR ANCILL ARY TO THE PRIMARY OBJECT, VIZ., RELIEF OF THE POOR, EDUCATION AND MEDICAL RELIEF. TO ILLUSTRATE, A CHARITABLE HOSPITAL HOLDIN G BUILDINGS ON TRUST MAY RUN A NURSING HOME. THE PROFITS OF THE NU RSING HOME OWNED AND RUN BY THE TRUST WILL BE EXEMPT UNDER S. 11(4), BECAUSE THE BUSINESS IS CARRIED ON BY THE TRUST IN THE COURSE OF THE ACTUAL CARRYING OUT OF THE PRIMARY PURPOSE O F THE TRUST. THE CONCEPT OF 'PROFITS TO FEED THE CHARITY', THERE FORE, IS APPLICABLE ONLY TO THE FIRST THREE HEADS OF CHARITY AND NOT THE FOURTH. IT WOULD BE ILLOGICAL AND, INDEED, DIFFICUL T TO APPLY THE SAME CONSIDERATION TO INSTITUTIONS WHICH ARE ESTABL ISHED FOR CHARITABLE PURPOSES OF ANY OBJECT OF GENERAL PUBLIC UTILITY. ANY PROFIT-MAKING ACTIVITY LINKED WITH AN OBJECT OF GEN ERAL PUBLIC UTILITY WOULD BE TAXABLE. THE THEORY OF THE DOMINAN T OR PRIMARY OBJECT OF THE TRUST CANNOT, THEREFORE, BE P ROJECTED INTO THE FOURTH HEAD OF CHARITY, VIZ., 'ADVANCEMENT OF A NY OTHER ITA NOS. 476 & 477(ASR)/2016 ASST YEARS: 2012-13& 2013-14 19 OBJECT OF GENERAL PUBLIC UTILITY', SO AS TO MAKE TH E CARRYING ON OF A BUSINESS ACTIVITY MERELY ANCILLARY OR INCIDENT AL TO THE MAIN OBJECT. IN FACT, IF ANY OTHER VIEW WERE TO PREVAIL, IT WOUL D LEAD TO AN ALARMING RESULT DETRIMENTAL TO THE REVENUE. 31. CLEARLY, THEREFORE, SO FAR AS PRE INSERTION OF EXPLANATIONS TO SECTION 2 (15), I.E. PRIOR TO 1 ST APRIL 2009, IS CONCERNED, THE STAND TAKEN BY THE AUTHORITIES BELOW CANNOT BE SUSTAINED IN LAW. ASSUMING THAT ALL THE ALLEGATIONS OF THE ASSESSING OFFICER, WITH RESPECT TO PRESENCE TO PROF IT MOTIVE IN ACTIVITIES OF THE ASSESSEE ARE CORRECT, SINCE THESE ACTIVITIES WERE CARRIED OUT WITH THE LARGER AND PREDOMINANT OB JECTIVE OF GENERAL PUBLIC UTILITY. IT IS ONLY WHEN, TO USE THE WORDS OF THE CBDT CIRCULAR CITED EARLIER IN THIS ORDER AND THE B ENEFICIAL IMPACT OF WHICH HAS THE BINDING FORCE ON THE FIELD AUTHORITIES UNDER SECTION 119 OF THE ACT, THE ASSESSING OFFICER FINDS THAT THE INCOME IS INCOME OF ANY OTHER BUSINESS WHICH IS NOT INCIDENTAL TO THE ATTAINMENT OF THE OBJECTIVES OF T HE TRUST OR INSTITUTION THAT THE SUCH AN INCOME WILL NOT BE EXEMPT FROM TAX . THERE IS NO FINDING TO THAT EFFECT BY ANY OF THE AUTHORITY BELOW. IN ANY CASE, IT IS NOT EVEN T HE CASE OF REVENUE AUTHORITIES THAT THE ACTIVITIES OF THE TRUS TS DO NOT SERVE THE OBJECTS OF THE GENERAL PUBLIC UTILITY BUT THE CASE IS CONFINED TO THE STAND THAT THESE ACTIVITIES HAVE BE EN CARRIED OUT IN SUCH A MANNER AS TO MAKE PROFIT AND NO ACTIV ITIES DIRECTLY OF ANY GENERAL PUBLIC UTILITY ARE CARRIED OUT. THE REGISTRATION GRANTED TO THE ASSESSEE EVIDENCES THAT THE OBJECTS OF THE ASSESSEE TRUST WERE ADVANCEMENT OF OBJECTS O F GENERAL PUBLIC UTILITY, AND THERE IS NOTHING TO DEMONSTRATE ANY PARADIGM SHIFT FROM THIS FUNDAMENTAL POSITION. THE ALLEGATION IS ONLY OF THE PROFIT MAKING BUT THAT DOES NOT OBLI TERATE THE OVERALL OBJECTS OF GENERAL PUBLIC UTILITY. AS REGAR DS THE MAINTENANCE OF THE SEPARATE BOOKS OF ACCOUNTS FOR T HE BUSINESS ACTIVITIES PURSUED BY THE ASSESSEE TRUST, SINCE ALL THE ACTIVITIES OF THE ASSESSEE TRUST ARE SAID TO BE OF THE BUSINESS NATURE, THE BOOKS OF ACCOUNTS MAINTAINED B Y THE ASSESSEE TRUST MEET THIS REQUIREMENT AS WELL. OF C OURSE, WE WILL DEAL WITH THE ISSUE OF ACTIVITIES BEING IN THE NATURE OF PROFIT MAKING ACTIVITIES A LITTLE LATER, BUT, SUF FICE TO SAY, THAT ON THE ADMITTED FACTS OF THIS CASE, SO FAR PERIOD P RIOR TO 1 ST APRIL 2009 IS CONCERNED AND FOR THE REASONS SET OUT ABOVE, THE BENEFIT OF SECTION 11 READ WITH SECTION 2(15) COULD NOT HAVE BEEN DECLINED AT ALL. ITA NOS. 476 & 477(ASR)/2016 ASST YEARS: 2012-13& 2013-14 20 32. TURNING ONCE AGAIN TO THE AMENDMENTS BROUGHT ON THE STATUE WITH EFFECT FROM 1 ST APRIL 2009, WE HAVE TO UNDERSTAND THAT THERE ARE THE TWO MUTUALLY EXCLUSIVE SITUATION S IN WHICH BUSINESS ACTIVITIES ARE CARRIED OUT BY THE ASSESSEE TRUST ONE, IN WHICH THE OBJECT OF GENERAL PUBLIC UTILITY WILL ONLY BE A MASK OR A DEVICE TO HIDE THE TRUE PURPOSE WHIC H IS TRADE, COMMERCE, OR BUSINESS ETC [REFERRED TO IN THE CBDT CIRCULAR NO. 11 DATED 19 TH DECEMBER 2008 ISSUED AT THE POINT OF TIME WHEN FIRST PROVISO TO SECTION 2(15) WAS INT RODUCED]; AND SECOND, IN WHICH ANY ACTIVITIES IN THE NATUR E OF TRADE, COMMERCE OR BUSINESS ETC ARE UNDERTAKEN IN THE COURSE OF ACTUAL CARRYING OUT OF SUCH ADVANCEMENT OF ANY OTHE R OBJECT OF GENERAL PUBLIC UTILITY , [INSERTION OF NEW PROVISO TO REPLACE FIRST AND SECOND PROVISO TO SECTION 2(15 )- EFFECTIVE 1 ST APRIL 2016 I.E. ASSESSMENT YEAR 2016-17]. AS FOR T HE FIRST CATEGORY, POST 1 ST APRIL 2009 AMENDMENT, THIS CATEGORY CANNOT BE TREATED AS COVERED BY SECTION 2(15) BUT THEN THA TS NOT THE CASE BEFORE US. IT IS NOT, AND IT CANNOT BE, THE CA SE THAT THE GOVERNMENT FORMED THESE TRUSTS BY LEGISLATING THE P UNJAB TOWNS IMPROVEMENT ACT 1922 BECAUSE IT WANTED TO CAR RY ON THE BUSINESS AS COLONIZER OR DEVELOPER. THEREFORE, BY NO STRETCH OF LOGIC, FORMATION OF TRUSTS CAN BE SAID T O A MASK OR DEVICE TO HIDE THE TRUE PURPOSE OF THE DOING BUSINE SS. THE CASE OF THE REVENUE AT BEST IS THAT THE MANNER IN W HICH THE ACTIVITIES ARE CARRIED OUT IS OF A PROFIT SEEKING E NTITY THAT A BUSINESS INHERENTLY IS. IN OTHER WORDS, THUS, THE C ASE OF THE REVENUE IS THAT THE ACTIVITIES IN THE NATURE OF TRA DE, COMMERCE AND BUSINESS ARE CARRIED OUT FOR ADVANCEMENT OF OBJ ECTS OF GENERAL PUBLIC UTILITY. THIS SITUATION AT BEST FALL S IN THE SECOND CATEGORY. HOWEVER, THESE CASES, FOR THE DETAILED RE ASONS SET OUT ABOVE, THE EXCLUSION OF THESE CASES FROM SECTIO N 2(15) IS ONLY EFFECTIVE 1 ST APRIL 2016, I.E. ASSESSMENT YEAR 2016-17. THE LAW IS WELL SETTLED BY A FIVE JUDGE BENCH OF HO NBLE SUPREME COURT, IN THE CASE OF VATIKA TOWNSHIP PVT LTD (SUPRA), THAT, FOLLOWING THE MAXIM LEX PROSPICIT NON RESPICI , THE LAW, PARTICULARLY WITH RESPECT TO A REQUIREMENT WHICH IS MORE ONEROUS ON THE ASSESSEE, CANNOT BE TREATED AS RETROSPECTIVE IN EFFECT UNLESS IT IS SPECIFICALLY L EGISLATED TO BE SO. IN OUR CONSIDERED VIEW, THEREFORE, THIS AMENDME NT CANNOT BE TREATED AS CLARIFICATORY OR RETROSPECTIVE IN EFF ECT. IN VIEW OF THESE DISCUSSIONS, EVEN POST INSERTION OF PROVIS O TO SECTION2(15) BUT BEFORE 1 ST APRIL 2016, WHEN BUSINESS ACTIVITIES ARE CARRIED BY THE ASSESSEE TRUST IN THE COURSE OF ACTUAL CARRYING OUT OF SUCH ADVANCEMENT OF ANY OTHE R OBJECT OF ITA NOS. 476 & 477(ASR)/2016 ASST YEARS: 2012-13& 2013-14 21 GENERAL PUBLIC UTILITY, THE BENEFIT OF SECTION 11 READ WITH SECTION 2 (15) CANNOT BE DECLINED. NOTHING, THEREFO RE, TURNS ON THE ASSESSEE CARRYING OUT, EVEN IF THAT BE ACTUALLY SO, ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR BUSI NESS ETC AS LONG AS THESE ACTIVITIES ARE CARRIED OUT IN THE COU RSE OF ACTUAL CARRYING OUT OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. THE PLANNED DEVELOPMENT OF CITIES A ND TOWNS IS AN OBJECT OF GENERAL PUBLIC UTILITY, AND THAT IS AN OBJECT CONSISTENTLY FOLLOWED BY THE ASSESSEE IN ALL ITS AC TIVITIES. FOR THIS SHORT REASON ALONE, THE STAND OF THE AUTHORITI ES BELOW MUST BE HELD TO BE UNSUSTAINABLE IN LAW. 33. WE MUST, HOWEVER, ALSO DEAL WITH THE FUNDAMENTA L ALLEGATION OF THE REVENUE AUTHORITIES THAT THE ASSE SSEE HAS SOLD RESIDENTIAL AND COMMERCIAL UNITS AND RESIDENTI AL AND COMMERCIAL LANDS JUST TO EARN PROFIT 34. THIS PROFITEERING, AS LEARNED DEPARTMENTAL REPRESENTATIVE PUTS IT, IS THE CORE ISSUE IN THESE APPEALS. AS WE DEAL WITH THIS ASPECT OF THE MATTER, WE MAY REPR ODUCE THE FOLLOWING WRITTEN SUBMISSIONS FILED BY LEARNED DEPA RTMENTAL REPRESENTATIVES: A: IN ALL IMPROVEMENT TRUST CASES IT IS SUBMITTED THAT THE LEARNED COUNSEL NAMELY SHR I Y.K. SOOD, CA AND SHRI J.S. BHASHI, ADVOCATE HAVE ARGUED THESE APPEALS . MY COUNTER-SUBMISSIONS ARE AS UNDER :- IT IS SUBMITTED THAT THERE ARE TWO SITUATIONS I.E. A) WHERE THE ASSESSEES ARE RENDERING GENERAL PUBLIC UTILITY SERVICES AND IN RENDERING SUCH SERVICES AND DUE TO EXIGENCY OF RENDERING SUCH SERVICE SOME SURPLUS (NOT PROFIT) RESULTS SUCH ASSESSEE ARE NOT HIT BY THE PR OVISO TO SECTION 2(15) EVEN IF RENDERING OF SUCH SERVICES PA RTAKE THE CHARACTER OF TRADE, COMMERCE OR BUSINESS OR RENDERING SERVICES IN RELATION TO ANY TRADE COMMERC E OR BUSINESS. B) WHERE THE ASSESSEE HAVE THE OBJECTIVE OF RENDERING GENERAL PUBLIC UTILITY SERVICES BUT FOR DOING SO TH EY FIRST EARN INCOME BY ENGAGING THEMSELVES IN ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR RENDERING ANY SERVICE IN RELATION TO ANY TRADE AND THEN APPLY SUC H INCOME TO THE CHARITABLE OBJECTS. ITA NOS. 476 & 477(ASR)/2016 ASST YEARS: 2012-13& 2013-14 22 WHEREAS IN THE FORMER SITUATION, REGISTRATION UNDER SECTION 12AA WOULD BE ALLOWABLE AND ALSO THE EXEMPT ION UNDER SECTION 11 & 12 BUT FOR THE LATTER SITUATION, NO SUCH PRIVILEGE WOULD BE ALLOWED AS DOING OF TRADE, COMMERCE OR BUSINESS OR RENDERING ANY SERVICE IN RELATION TO TRADE COMMERCE OR BUSINESS NOT TREATED AS CHARITABLE ACTIVITIES WITH THE INSERTION OF PROVISO TO SECTION 2(15) OF THE INCOME TAX ACT, 1961. VIEWED IN THIS CONTEXT, IT IS SUBMITTED THAT OUT OF THE EIGHTEEN JUDGMENTS RELIED UPON BY SHRI Y.K. SOOD, C A THE JUDGEMENT AT S.NO.1 TO 5, 7, 10, 11,14, 15, 16, 17 & 18 FALLEN IN THE FORMER CATEGORY AND THE JUDGEMENT AT S. NO.9 HAD NOT BEEN PRESSED BY SHRI SOOD. THE JUDGEM ENT AT S.NO.12 PERTAINS TO PRE-AMENDED PROVISIONS OF SE CTION 2(15) AND IS THUS NOT APPLICABLE. AS REGARDS THE JUDGEMENT AT S.NO.6 & 13, THE SAME RUN COUNTER TO T HE JUDGEMENT OF THE JURISDICTIONAL TRIBUNALS ORDER IN THE CASE OF JAMMU DEVELOPMENT AUTHORITY WHICH HAS BEEN CONFIRMED BY THE J&K HIGH COURT AND THE SLP FILED B Y THE ASSESSEE HAS ALSO BEEN DISMISSED BY THE HONBLE SUPREME COURT. IT IS PERTINENT TO MENTION HERE IN THE CASE OF INDIA TRADE PROMOTION VS. DGIT (EXEMPTIONS) , IT HAS BEEN EXPRESSLY MENTIONED: 45. TO BE CLEAR, OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS IS CARRIED ON AND IT GENERATES INCOME, THE FACT THAT SUCH INCOME IS APPLIED FOR CHARITABLE PURPOSES, WOULD NOT MAKE ANY DIFFERENCE AND THE ACTIVITY WOULD NONETHELESS NOT BE REGARDED BEIN G CARRIED ON FOR A CHARITABLE PURPOSE. THIS FINDING OF THE HONBLE DELHI HIGH COURT CLEARL Y SUPPORTS THE CAUSE OF THE REVENUE AS THE PRECISE NA TURE OF THE ACTIVITIES IS THE SAME AS ARTICULATED BY THE HONBLE DELHI HIGH COURT IN THE ABOVE PARAGRAPH. I T IS FURTHER SUBMITTED THAT AT PARA 58, THE COURT HAS OBSERVED THAT THE PROVISIONS OF SECTION 2(15) NEED TO BE READ DOWN BUT SUCH READING HAS BEEN CONTEMPLATED IN THE CONTEXT OF SECTION 10(23C)(IV) OF THE INCOME TA X AT, 1961 AND WHEN READ IN ITS TOTALITY, THE JUDGEMENT SUPPORT THE CASE OF THE REVENUE AS IT SQUARELY SUPP ORTS A CASE WHERE THE INTENTION IS TO DO CHARITY BY ACTI VITIES WHICH MAY EMBARK UPON ANY TRADE COMMERCE OR BUSINESS OR RENDERING ANY SERVICE IN THE NATURE OF TRADE, COMMERCE OR BUSINESS AND NOT THAT INCOME ACCRUES DU E ITA NOS. 476 & 477(ASR)/2016 ASST YEARS: 2012-13& 2013-14 23 TO THE EXIGENCY OF UNDERTAKING GENERAL PUBLIC UTILI TY ACTIVITIES. IT IS FURTHER SUBMITTED THE JUDGEMENT IN THE CASE O F CITY & IND. DEV. CORP. OF MAHARASHTRA VS. ACIT REPORTED AT S. NO.2 IS PROJECT SPECIFIC AND FURTHER IT HAS BEEN HE LD BY THE HONBLE TRIBUNAL MUMBAI C BENCH THAT ASSESSEE IS AN AGENT OF THE GOVERNMENT AND DOES NOT HOLD ANY INDEPENDENT ENTITY WHEREAS THE TRUSTS ARE A CORPORA TE BODY AND HAVE PERPETUAL SUCCESSION AND COMMON SEAL AND CAN SUE AND BE SUED IN ITS NAME AS PER SECTION 3 OF THE PUNJAB TOWN IMPROVEMENT TRUST ACT, 1922. IN VI EW OF THIS DIFFERENCE ALSO, THE SAID JUDGMENT IS NOT APPLICABLE TO THIS CASE. IT IS FURTHER SUBMITTED THAT THE TRUSTS DO NOT GET ANY GRANT IN AID FROM THE STATE GOVERNMENT. THE TRUSTS HAVE TO FIRST DO BUSINESS LIKE A BUILDER TO EARN MO NEY I.E. IT PURCHASES (ACQUIRES) PROPERTY AND DIVIDES T HE SAME INTO PLOT OR BUILD THE SAME AND SELLS THE PLOT OR THE BUILDINGS WHICH IT RAISES BOTH BY WAY OF RESERV E PRICE (RESIDENTIAL BUILDINGS OR PLOTS) AND COMMERCI AL PLOTS OR COMMERCIAL BUILDINGS BY AUCTION. THERE IS ABSOLUTELY NO DOUBT THAT WHEN LAND OR BUILDINGS ARE PUT ON AUCTION BY THE TRUST, THE INTENT IS TO MAKE MAXI MUM PROFIT AND WHEN IT SELLS RESIDENTIAL PLOTS OR RESID ENTIAL BUILDINGS, IT SELLS THE SAME AT RESERVE PRICE. IT IS SUBMITTED THAT RESERVE PRICE SO FIXED IS FIXED IN S UCH A MANNER A MAY TAKE WITHIN ITS SWEEP HUGE PROFIT A WO ULD BE SEEN FROM THE ANNEXURE AT PAGE 9 OF THE PAPER BO OK FILED BY SHRI Z.S. BHASIN, ADVOCATE WHICH INCLUDES THE FOLLOWING : A) CONSERVANCY CHARGES FOR 5 YEARS @ 10 PERCENT PER MONTH PER ACRE. B) PROVISIONS FOR UNFORESEEN CHARGES @ 15% PER CENT OF TOTAL RESERVE PRICE A COMPUTED AS PER THE SAID ANNEXURE. THIS CLEARLY SHOWS THAT EVEN THE RESERVE PRICE AT W HICH RESIDENTIAL PLOTS OR BUILDINGS ARE SOLD, THERE IS H UGE ELEMENT OF PROFIT IN THE GARB OF CONSERVANCY CHARGE S FOR FIVE YEARS @ 10% OF THE TOTAL RESERVE PRICE AND ALS O PROVISION FOR UNFORESEEN CHARGES @ 15% OF THE RESER VE PRICE SO DETERMINED. IT IS PERTINENT TO MENTION HE RE THAT ALL THE UNFORESEEN CHARGES HAVE ALREADY BEEN ITA NOS. 476 & 477(ASR)/2016 ASST YEARS: 2012-13& 2013-14 24 CONTEMPLATED IN THE COMPUTATION OF RESERVE PRICE UN DER THE HEAD OVERHEAD CHARGES AT SUB-PARA (V) WHERE PROVISION FOR OTHER PUBLIC UTILITY HAS ALREADY BE EN CONSIDERED. IT IS FURTHER SUBMITTED THAT ALONG WITH COPY OF THE PUNJAB TOWN IMPROVEMENT (UTILISATION OF LAND AND ALLOTMENT OF PLOTS) RULES, 1983, SHRI BHASIN HAS APPENDED A REPORT DATED 04.06.2015 WHICH IS IN GURMUKHI SCRIPT AND ITS ENGLISH TRANSLATION AS UNDE R :- IT IS WORTH MENTIONING HERE THAT IMPROVEMENT TRUST GETS NO GRANT FROM THE GOVERNMENT. TRUST GETS ITS INCOME FROM SALE OF PLOTS/SHOPS/COMMERCIAL SITES ON LY. OTHER THAN THIS, THE TRUST HAS NO OTHER ADDITIONAL SOURCE OF INCOME. THE TRUST SPENDS THE INCOME GENERATED OUT OF THE SAID ACTIVITIES ON THE PUBLIC UTILITY SERVICES. IT CLEARLY SHOWS THAT THERE IS ADMISSION THAT THE T RUST WITH THE INTENTION OF PROVIDING PUBLIC UTILITY SERV ICES FIRST DOES BUSINESS OF PURCHASE AND SALE OF LANDED PROPERTY LIKE A BUILDER AND AFTER EARNING AS HUGE P ROFIT S POSSIBLE I.E. BY PUTTING THE RESERVE PRICE AT A H IGH PITCHED FIGURE AND ALSO PUTTING THE COMMERCIAL PLOT S AND COMMERCIAL BUILDING ON AUCTION, IT SPENDS ON SU CH PUBLIC UTILITY SERVICES WHICH IS EMINENTLY HIT BY T HE PROVISO TO SECTION 2(15) OF THE INCOME TAX ACT, 196 1. IT CLEARLY FALSIFIES THE CLAIM OF MR. BHASIN THAT TRUS TS HAVE INCOME FROM OTHER SOURCES AS CONTEMPLATED IN SECTIO N 68 OF THE ACT. THIS SHOWS THAT THE GOVERNMENT DOES NOT GIVE TO TRUSTS WHAT IT ITSELF HAS ASSURED THE TRUST S IN THE ACT. IT MAY FURTHER BE MENTIONED THAT TRUSTS A RE NOT AGENT OF THE STATE AS IF IT WERE SO, THERE WOULD NO T HAVE BEEN ANY PROVISION AS SECTION 70 IN THE ACT WHICH EMPOWERS THE STATE GOVERNMENT TO ATTACH THE RENTS A ND OTHER INCOME OF THE TRUST. AIT IS SUBMITTED THAT THE FACTUM OF THE TRUSTS MAKI NG EXORBITANT PROFIT IS BEST ELUCIDATED FROM THE WAY T HE IMPROVEMENT TRUST PATHANKOT HAS SOLD A PLOT OF LAND TO INCOME TAX DEPARTMENT. THE PRICE IT HAD INFORMED T O THE DEPARTMENT IN 2011 WAS RS.5,03,30,800/- BUT IN THE YEAR 2014, THE PRICE FOR THE SAME PLOT WAS INTIMATE D AT RS.10,43,65,946/-. THUS IN A PERIOD OF THREE YEAR AND A HALF, IT HAD MORE THAN DOUBLED THE PRICE OF ITS PLO T ITA NOS. 476 & 477(ASR)/2016 ASST YEARS: 2012-13& 2013-14 25 MEASURING 60.35 MARLAS. AN AFFIDAVIT OF SHRI CHARA N DASS, ACIT, PATHANKOT IS ENCLOSED IN SUPPORT OF THI S FACT. IF THIS IS THE WAY THE TRUST DOES CHARITY BY WAY OF DEVELOPING CITIES AND TOWN THEN CERTAINLY, IT AMOUN TS TO ROBBING PETER TO PAY PAUL AND SURELY SUCH AN ACTIVI TY CANNOT BE CLOTHED AS CHARITABLE ACTIVITY. IN VIEW OF ABOVE, IT IS PRAYED THAT THE APPEALS OF THE ASSESSEE BE DISMISSED B: IN THE CASE OF AMRITSAR IMPROVEMENT TRUST IT IS SUBMITTED THE ABOVE APPEALS HAVE BEEN RESTORE D BY THE HONBLE PUNJAB & HARYANA HIGH COURT TO THE TRIBUNAL VIDE ITS ORDER IN ITA NO.100 OF 2014 (O&M) DATED 06.08.2014 AS PER THE DIRECTIONS CONTAINED IN PARA 8 OF THE ORDER. IT IS SUBMITTED THAT THOUGH THE HONBLE PUNJAB & HARYANA HIGH COURT HAS DIRECTED THE TRIBUNAL TO ADJUDICATE THE ISSUE REGARDING THE NATURE OF ACTIVI TIES OF THE APPELLANT TRUST WHETHER THEY ARE IN THE NATU RE OF CHARITABLE WITHIN THE MEANING OF SECTION 2(15) OF T HE ACT IN RESPECT OF ASSESSMENT YEARS IN QUESTION OR NOT, KEEPING IN VIEW THE ARGUMENTS RAISED BY THE LEARNED COUNSEL FOR THE APPELLANT-ASSESSEE. IT IS SUBMITTED THAT THE ACTIVITIES OF THE TRUST AR E NOT IN THE NATURE OF CHARITABLE FOR MULTIPLE REASONS, I.E. A. THE ASSESSEE TRUST IS ENGAGED IN THE SALE AND PURCHASE OF PROPERTIES WITH A COMMERCIAL MOTIVE. FI RST, IT PURCHASES LANDED PROPERTIES INCLUDING PLOTS AND SELLS THE PLOT IN TWO CATEGORIES I.E. RESIDENTIAL AND COMMERCIAL. THE RESIDENTIAL PLOTS ARE SOLD AT RESE RVE PRICE WHICH IS FIXED BY INCLUDING ABNORMAL PROFITS IN THE GARB OF : A) CONSERVANCY CHARGES FOR 5 YEARS @ 10% PER MONTH PER ACRE B) PROVISIONS OF UNFORESEEN CHARGES @ 15% PER CENT OF TOTAL RESERVE PRICE IS COMPUTED AS PER THE ANNEXURE TO THE PUNJAB TOWN IMPROVEMENT (UTILISATION OF LAND AN D ALLOTMENT OF PLOTS) RULES, 1983 (COPY ALREADY SUBMI TTED ITA NOS. 476 & 477(ASR)/2016 ASST YEARS: 2012-13& 2013-14 26 IN JALANDHAR IMPROVEMENT TRUSTS CASE IN ITA NO.402/ASR/2014). IT IS CLEAR THAT THE RESIDENTIAL PLOTS/BUILDINGS AR E SOLD WITH PROFIT MOTIVE AND THUS PARTAKE THE COMMERCIAL CHARACTER THOUGH FOR THE ALLOTTEES THE SAME IS FOR RESIDENCE PURPOSES. THUS, IT IS CLEAR THAT THIS AC TIVITY IS COMMERCIAL ACTIVITY FOR THE ASSESSEE TRUST. THE TRUST SELLS THE PLOTS/BUILDINGS BY WAY OF OPEN AUCTION WITH A FIXED RESERVE PRICE AND TRIES TO GET AS MUCH AS PROFIT AS IS POSSIBLE AND IF THE BIDDERS DO RAISE THE BID BEYOND THE RESERVE PRICE, THE AUCTION IS CANCELLED. THUS, IT IS CLEAR THAT IN THIS ACTIVITY ALSO NO CHARITY IS INVOLVED. RELIANCE IN THIS REGARD IS PLACED ON THE JUDGEMENT OF THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE O F ANDHRA PRADESH STATE SEED CERTIFICATION AGENCY V CH IEF COMMISSIONER OF INCOME TAX & OTHERS REPORT 83 DTR 0023 (COPY ENCLOSED FOR KIND PERUSAL). IN THIS JUDGEMENT, THE HONBLE COURT HAS HELD :- THAT THE PETITIONER WAS ENGAGED IN CERTIFYING THE VARIETIES OF SEEDS GROWN BY THE CLIENTS WHO FINALLY CARRY OUT TRADE OR COMMERCE IN CERTIFIED SEEDS GROWN BY T HE CLIENTS WHO FINALLY CARRY OUT TRADE OR COMMERCE IN CERTIFIED SEEDS. THUS, PETITIONER HAD RENDERED ITS SERVICES NOT DIRECTLY TO FARMERS BUT WAS RENDERING ITS SERVICES DIRECTLY TO ITS CLIENTS/AGENTS WHO ARE ENG AGED IN TRADING OF THE CERTIFIED SEEDS WITH PROFIT MOTIV E. ACTIVITIES OF THE PETITIONER HAD NOT INDICTED INVOL VEMENT OF ANY CHARITABLE ACTIVITY OR ADVANCE OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. FUNCTIONING OF THE PETI TIONER WAS AKIN TO A CORPORATE PROFIT EARNING SERVICE PROV IDER. THE TRUST ALSO SELLS PLOTS AND BUILDING FOR COMMERC IAL PURPOSES TO PERSONS WHO DO BUSINESS FOR THEIR OWN G AIN AND LIKEWISE THE TRUST CANNOT BE SAID TO BE DOING A NY ACTIVITY OF CHARITABLE NAME AS ITS ACTIVITIES FALL, STRUCO SENSU, IN THE SAME DOMAIN AS THE ACTIVITIES OF THE ANDHRA PRADESH STATE SEED CERTIFICATE AGENCY (SUPRA ) FALL. ITS ACTIVITY OF SELLING PLOT AND BUILDING FO R RESIDENCE TO PERSONS THOUGH FOR THE ALLOTTEE IT MAY NOT FOR COMMERCIAL PURPOSE BUT THE WAY THE TRUST FIXES ITS RESERVE PRICE AS DISCUSSED ABOVE, IT IS CLEAR THAT THE ITA NOS. 476 & 477(ASR)/2016 ASST YEARS: 2012-13& 2013-14 27 ACTIVITY IS COMMERCIAL IN NATURE FOR THE TRUST AND NOT CHARITABLE. IT IS FURTHER PERTINENT TO MENTION HERE THAT WHEN T HE TRUST FIXES THE RESERVE PRICE FOR RESIDENTIAL AS WE LL COMMERCIAL PLOTS OR BUILDINGS, IT INCLUDES IN ITS C OST ALL THE AMENITIES WHICH IT PROMISES TO THE PEOPLE INCLU DING ALL DEVELOPMENT CHARGES LIKE ROADS, SEWERAGE, WATER SUPPLY, STORM WATER DRAINAGE, STREET LIGHTING AND L OCAL DISTRIBUTION SYSTEM AND UNJUSTIFIED COST AS PER ROU GH COST ESTIMATE OF PUNJAB STATE ELECTRICITY BOARD AND ALSO PROVISION FOR LANDSCAPING AND FURTHER INCREASED BY OVERHEAD CHARGES AS MENTIONED AT PARA 2 & 3 OF THE ANNEXURE. THUS, IT IS CLEAR THAT THE TRUST PROVIDES NO AMENI TY WHICH IS THE SOLE CLAIM OF THE ASSESSEE TRUST. IT MAY BE SUBMITTED THAT THIS ANNEXURE HAS ALREADY BEEN BROUG HT TO THE NOTICE OF THE HONBLE BENCH IN THE CASE OF JALANDHAR IMPROVEMENT TRUST IN ITA NO.402/ASR/2014. NOW COMING TO THE TWO DECISIONS WHICH THE HONBLE BENCH ASKED THE UNDERSIGNED TO COMMENT UPON. IT IS SUBMITTED IN THE CASE OF STOCK EXCHANGE AHMEDABAD V ASSISTANT COMMISSIONER OF INCOME TAX REPORTED AT 74 ITD 0001, IT MAY BE SUBMITTED THAT AS DISCUSSED ABO VE, THERE IS NO ELEMENT OF CY PRESS INVOLVED IN THE ACT IVITIES OF THE TRUST. IT MAY BE MENTIONED HERE THAT THE MO ST DISTINGUISHABLE FEATURE IS THE TRUST IS IT IS RENDE RING NO GENERAL PUBLIC UTILITY AS WHATEVER PUBLIC UTILITY S ERVICE IT IS PROVIDING, IT FIRST RECOVERS ITS COST FROM TH E BUYERS AS DISCUSSED ABOVE. FURTHER, IT IS SUBMITTED THAT THE DECISION IN THE CASE OF ITO VS. TRILOK TIRATH VIDYA VATI CHUTTANI CHARITABLE TRUST OF CHANDIGARH B BENCH REPORTED AT 90 ITD 569 DOES NOT HOLD GOOD FOR TWO REASONS: THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE ABOV E ORDER HAD RESTORED THE ISSUE TO THE BENCH BEING WEL L AWARE OF THE FACT THAT THE TRUST HAD BEEN GRANTED REGISTRATION BY THE BENCH. THE HIGH COURT CLEARLY DID NOT HOLD THAT ONCE THE REGISTRATION IS GRANTED, EXEMPTION UNDER SECTION 11 CANNOT BE DENIED TO THE ASSESSEE ON THE GROUND THAT IT WAS NOT A CHARITABLE INSTITUTION. IF THIS DECISION OF THE TRIBUNAL IS T O PREVAIL ITA NOS. 476 & 477(ASR)/2016 ASST YEARS: 2012-13& 2013-14 28 THEN RESTORATION OF THE ISSUE TO THE TRIBUNAL BY TH E HIGH COURT WOULD BECOME REDUNDANT. IT IS SUBMITTED THAT SUBMISSIONS MADE IN THE CASE O F JALANDHAR IMPROVEMENT TRUST AND OTHER TRUST DURING THE COURSE OF HEARING OF TRUSTS CASES ARE ALSO PRE SSED INTO SERVICE IN THESE APPEALS. IN VIEW OF THE ABOV E SUBMISSIONS, IT IS PRAYED THAT THE ISSUE MAY KINDLY BE DECIDED IN FAVOUR OF THE REVENUE. 35. WHILE DEALING WITH THE PROFIT MOTIVE ALLEGATION OF THE REVENUE AUTHORITIES, IT IS ESSENTIAL TO APPRECIATE THE DIFFERENCE THAT PROFIT ON SALE DOES NOT ESSENTIALLY AND NECESS ARILY IMPLY PROFIT MOTIVE IN ACTIVITIES OF THE ASSESSEE TRUST. WHAT IS IMPORTANT IS THE MOTIVE OR PREDOMINANT OBJECT OF TH E ACTIVITIES. AS WE DO SO, WE MAY ONLY MAKE A NOTE OF THE FOLLOWI NG OBSERVATIONS MADE BY A COORDINATE BENCH DECISION IN THE CASE OF DEVKI DEVI FOUNDATION VS DIT [(2015) 56 TAXMANN.COM 56 (DELHI)] : 29THE SOUL OF CHARITY IS BENEVOLENCE AND GENEROSITY TOWARDS OTHERS AND THE COMMUNITY AT LARGE. OF COURSE, IT IS IMPORTANT AS TO WHAT ARE TH E ACTIVITIES OF A CHARITABLE INSTITUTION BUT WHAT IS EVEN MORE IMPORTANT IS WHAT IS THE PREDOMINANT MOTIVATIO N FOR SUCH ACTIVITIES. NO ACTIVITY, BY ITSELF, COULD BE CHARITABLE IN NATURE WHEN IT IS DOMINATED AND TRIGG ERED BY ECONOMIC GREED. THERE IS NO DIFFERENCE IN WHAT A SOLDIER AND A MERCENARY DOES, BOTH USE BULLETS TO D EFEND THEIR INTERESTS, BUT WHILE A SOLDIER DOES IT OUT OF PATRIOTISM, A MERCENARY DOES IT FOR MONETARY GAIN. THE ACTION IS THE SAME, AND YET MOTIVATION FOR THE ACTI ONS ARE SO MATERIALLY DIFFERENT THAT THE CHARACTER OF A CTIVITY IS ALTOGETHER CHANGED. CLEARLY, UNDERLYING MOTIVE A ND TRIGGER FOR DOING WHAT A PERSON DOES IS, IS IMPORTA NT FOR DETERMINING WHETHER SUCH AN ACTION IS IN THE COURSE OF BUSINESS OR CHARITY. WHAT IS REALLY, THEREFORE, REQ UIRED TO BE CAREFULLY EXAMINED, IN ORDER TO FIND WHETHER AN ACT OF THE INSTITUTION IS CHARITABLE OR NOT, IS NOT ONLY TO ASSESS THE WORK BEING DONE BY THE INSTITUTIONS, WHI CH CLAIM TO BE PURSUING CHARITABLE ACTIVITIES, BUT ALS O THE ECONOMIC DYNAMICS AND MOTIVATIONS OF SUCH ACTIVITIE S. 36. LEARNED DEPARTMENTAL REPRESENTATIVE HAS POINTED OUT THAT THE COMMERCIAL PLOTS AND UNITS ARE AUCTIONED O FF WHICH SHOWS THAT THE IDEA IS TO MAKE MAXIMUM PROFITS BUT WHAT HE ITA NOS. 476 & 477(ASR)/2016 ASST YEARS: 2012-13& 2013-14 29 CLEARLY OVERLOOKS IS THE FACT THAT SINCE IT IS NOT A DESIRABLE STATE OF AFFAIRS FOR THE STATE TO SUBSIDIZE BUSINES SES, AND TO ENSURE HIGHEST DEGREE OF TRANSPARENCY IN MAXIMISING RETURNS FROM PUBLIC ASSETS, COMPETITIVE BIDDING FOR COMMERC IAL UNITS IS A SAFE OPTION, AND THAT THE USE OF BIDDING PROCESS IS JUSTIFIED FOR THE LARGER CAUSES. THE BIDDING PROCESS ENSURES TRANSPARENCY IN FUNCTIONING OF THE IMPROVEMENT TRUS TS AND THAT, BY ITSELF, DOES NOT MAKE THE FUNCTIONING OF T HE IMPROVEMENT TRUST A COMMERCIAL VENTURE. IT IS ALSO IMPORTANT THAT THIS USE OF BIDDING PROCESS IS ONLY IN THE CON TEXT OF COMMERCIAL UNITS ETC. THE DEVELOPMENT OF COMMERCIAL AREAS IS IN THE INTEREST OF PLANNED GROWTH OF AN AREA AND WH EN SUCH COMMERCIAL AREAS DEVELOP, ALL THE STAKEHOLDERS IN T HE DEVELOPMENT OF THAT AREA BENEFIT. IN ORDER OF THIS BENEFIT TO THE COMMON CAUSE, IT IS NOT NECESSARY THAT THE BUSI NESSMEN, BUYING SUCH UNITS, MUST ALSO BENEFIT. THE DENIAL OF ANY ADVANTAGE, AT THE COST OF GENERAL PUBLIC, TO THE BU SINESS ENTITIES BUYING THE COMMERCIAL AREAS, IN OUR CONSID ERED VIEW, DOES NOT AMOUNT TO AN DEFEATING AN OBJECT OF GENERA L PUBLIC UTILITY. IN THIS CONTEXT, IT IS IMPORTANT TO UNDER STAND THE BENEFIT FROM DEVELOPING COMMERCIAL AREAS, WHICH IS FOR PUBLIC GOOD, AND BENEFIT TO THE BUSINESS PERSONS IN BUYING THESE UNITS FROM THE ASSESSEE TRUST, WHICH CAN ONLY BE FO R THE GOOD OF BENEFIT OF THESE ENTREPRENEURS. AS FOR THE SALE OF RESIDENTIAL UNITS, IT IS AN ADMITTED POSITION THAT IN TERMS OF THE PUNJAB TOWN IMPROVEMENT (UTILIZATION OF LAND AND ALLOTMENT OF PLOTS) RULES, 1983, THERE IS A FORMULA ON THE BASIS OF WHICH THE PRICE IS WORKED OUT. LEARNED DEP ARTMENTAL REPRESENTATIVE DOES NOT DISPUTE THAT ASPECT BUT HE ALLEGES PROFIT MOTIVE EMBEDDED IN THIS FORMULA AS SHOWN BY ADJUSTMENTS FOR (A) CONSERVANCY CHANGES FOR 5 YEARS @ 10% PER MONTH PER ACRE; AND (B) PROVISION FOR UNFORESEE N CHARGES @ 15% OF TOTAL RESERVE PRICE. FIRSTLY, EVEN IF TH IS ALLEGATION ABOUT PRESENCE OF THE TWO ELEMENTS ONLY TO MAXIMIZE THE PROFIT BE TAKEN AS CORRECT, IT IS IMPORTANT TO BEAR IN MIN D THE FACT THAT THIS IS NOT THE PRESENCE OF PROFIT ELEMENT IN THE ACTIVITIES WHICH VITIATES CHARITABLE CHARACTER OF THE ACTIVITI ES BUT IT IS THE ABSENCE OF RESTRICTIONS ON MAKING PROFITS WHICH VITIATES THE CHARITABLE CHARACTER OF THE ACTIVITIES. IN THE INDIAN CHAMBER OF COMMERCE (SUPRA), WHICH HAS BEEN RELIED UPON BY THE ASSESSING OFFICER AND REFERRED TO IN CBDT IN STRUCTION NO. 1024 (SUPRA), IT HAS BEEN STATED THUS: ORDINARILY PROFIT MOTIVE IS A NORMAL INCIDENT OF BUSINESS ACTIVITY AN D IF THE ACTIVITY OF A TRUST CONSISTS OF CARRYING ON OF A BUSINESS AND THERE ARE NO RESTRICTIONS ON ITS MAKIN G ITA NOS. 476 & 477(ASR)/2016 ASST YEARS: 2012-13& 2013-14 30 PROFIT, THE COURT WOULD BE WELL JUSTIFIED IN ASSUMI NG IN THE ABSENCE OF SOME INDICATION TO THE CONTRARY THAT THE OBJECT OF THE TRUST INVOLVES THE CARRYING ON OF AN ACTIVITY FOR PROFIT. . THAT APART, MERE PRESENCE OF THESE TWO ITEMS DOES NOT SHOW THAT THE UNDERLYING OBJECT OF INCLUDI NG THESE TWO ITEMS IN THE FORMULA WAS PROFIT MAXIMISATION. T HE INCLUSION FOR PROVISION FOR UNFORESEEN CHARGES, IN OUR UNDERSTANDING, IS A FAIR AND CONSERVATIVE APPROACH TO ENSURE THAT THE COSTS INCURRED BY THE ASSESSEE TRUST ARE R ECOVERED FROM THE END BUYERS OF THE RESIDENTIAL UNITS OR LAN D. THE ELEMENT OF CHARITY IS NOT IN GIVING AWAY THE RESIDE NTIAL UNITS AT SUBSIDIZED OR LOW PRICES BUT IN PURSING THE OBJE CT OF ADVANCEMENT OF OBJECT OF GENERAL PUBLIC UTILITY IN PLANNED DEVELOPMENT OF THE ARE IN ACCORDANCE WITH THE POLIC IES OF THE STATE GOVERNMENT. 37. A LOT OF EMPHASIS HAS BEEN MADE BY THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE FACT THAT NOTHIN G, OR VERY LITTLE, HAS BEEN DONE BY THE TRUSTS FOR THE POOR PE OPLE BUT WHAT THIS ARGUMENT OVERLOOKS IS THAT THE ASSESSEE T RUST IS NOT GRANTED REGISTRATION UNDER SECTION 2 (15) FOR IMPL EMENTING POVERTY ALLEVIATION PROGRAMS OR DOING OTHER ACTS OF CHARITY BUT IT IS GRANTED REGISTRATION BECAUSE WHAT IT IS PURSU ING, BY FOLLOWING THE STATE GOVERNMENT POLICIES FOR PLANNED DEVELOPMENT OF CITY, IS ADVANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTILITY. PURSUING AN OBJECT OF GENERAL PUBLI C UTILITY DOES NOT NECESSARILY INVOLVE MORE NOTICEABLE DIRECT ACTS OF CHARITY DRIVEN BY COMPASSION AND BENEVOLENCE. THERE IS SO MUCH TO BE DONE BY THE GOVERNMENT AGENCIES, AS THESE ASSESS EE TRUSTS ARE PERCEIVED TO BE, THAT NO MATTER WHAT THE SE AGENCIES DO, THERE IS STILL LOT LEFT TO BE DONE. JUST BECAUS E THESE AGENCIES COULD HAVE DONE MORE, SUCH EXPECTATIONS, N O MATTER HOW LEGITIMATE, DO NOT OBLITERATE THE WORK DONE BY THESE AGENCIES AND THE ROLE PLAYED BY THESE AGENCIES FOR PUBLIC GOOD IN FURTHERANCE OF ADVANCEMENT OF OBJECTS OF GE NERAL PUBLIC UTILITY. 38. LEARNED DEPARTMENTAL REPRESENTATIVE HAS ALSO PO INTED OUT THAT THE ASSESSEE TRUSTS DO NOT GET ANY GRANT F ROM THE STATE GOVERNMENT WHICH SHOWS THAT FIRST THEY MAKE P ROFITS FROM LAND DEALS AND THEN USE THE INCOME SO EARNED F OR THE PUBLIC CAUSES STATED. IT IS FOR THIS REASON, ACCORD ING TO THE LEARNED DEPARTMENTAL REPRESENTATIVE, THAT THE ASSES SEE TRUST CANNOT BE SAID TO BE ANYTHING OTHER THAN A BUSINESS ITA NOS. 476 & 477(ASR)/2016 ASST YEARS: 2012-13& 2013-14 31 SIMPLICITOR. ON THE CONTRARY, ACCORDING TO THE LEAR NED DEPARTMENTAL REPRESENTATIVE, IT IS LIKE ROBBING PET ER TO PAY PAUL. WE ARE UNABLE TO SHARE THESE PERCEPTIONS OF THE LEARNED DEPARTMENTAL REPRESENTATIVE. AN OBJECT OF GENERAL P UBLIC UTILITY DOES NOT NECESSARILY REQUIRE THAT THE ACTIV ITIES OR THE BENEFICIARIES MUST BE FUNDED OR SUBSIDIZED BY THE S TATE. AS LONG AS BROADER PUBLIC CAUSE IS SERVED, WHETHER BY THE STATE FUNDING OR BY EFFICIENT REGULATION OF THE AFFAIRS, IT IS AN OBJECT OF GENERAL PUBLIC UTILITY. IT IS ALSO IMPORTANT TO BEAR IN MIND THAT COSTS OF PROPER DEVELOPMENT OF AREA ARE ALSO C OSTS INCIDENTAL TO THE PLOTS AND UNITS SOLD BY THE ASSES SEE AND, THEREFORE, THESE TWO THINGS SHOULD NOT BE SEEN IN I SOLATION. AS FOR THE SPECIFIC INSTANCE OF INORDINATE HIKE IN PRI CES WITHIN A SHORT PERIOD OF THREE AND A HALF YEARS, WE ARE UNAB LE TO COMMENT UPON THE SAME AS FULL FACTS RELATING THERET O ARE NOT ON RECORD. THAT ASPECT, HOWEVER, FOR THE DETAILED R EASONS SET OUT ABOVE, DOES NOT AFFECT OUR CONCLUSION ANYWAY. 39. AS FOR THE DECISION OF THE COORDINATE BENCH IN THE CASE OF THE PUNJAB URBAN DEVELOPMENT AUTHORITY VS CIT [(2006) 103 TTJ 988 (CHANDIGARH)] , IT IS A CASE IN WHICH THERE IS NO MENTION ABOUT SELLING THE RESIDENTIAL UNITS AND PLO TS AT THE PRICE ON THE BASIS OF A FORMULAE LAID DOWN BY THE S TATUTE. IN THE PRESENT CASE, THERE IS NO DISPUTE ON THIS ASPEC T, AND THAT IS A CRUCIAL ASPECT HAVING BEARING ON THE CONCLUSIO NS. THERE WAS ALSO NO, AND COULD NOT HAVE BEEN ANY, OCCASION TO CONSIDER THE IMPACT, WHAT IS REFERRED TO AS KILL E FFECT, OF THE AMENDMENTS BY THE FINANCE ACT 2015. THE REVENUE, T HUS, DERIVES NO ADVANTAGE FROM THIS JUDICIAL PRECEDENT. AS REGARDS THE DECISION OF THE COORDINATE BENCH IN THE CASE OF AMRITSAR IMPROVEMENT TRUST (SUPRA), ON WHICH SO MUCH RELIANCE HAS BEEN PLACED BY THE LEARNED DEPARTMENTAL REPRESENTAT IVE, IT IS ALREADY SET ASIDE BY HONBLE JURISDICTIONAL HIGH CO URT. AS A MATTER OF FACT, IN THE COURSE OF PROCEEDINGS BEFORE HONBLE HIGH COURT IN THE CASES OF OTHER IMPROVEMENT TRUSTS , LEARNED COUNSEL FOR THE REVENUE HAS FAIRLY ACCEPTED THAT TH E DECISIONS OF THE TRIBUNAL, FOLLOWING THE AFORESAID DECISION, ARE REQUIRED TO BE SENT BACK TO THE TRIBUNAL FOR FRESH DETERMINA TION ON THE SCOPE OF PROVISIONS OF SECTION 2 (15). THE REVENUE, THUS, DERIVES NO ADVANTAGE FROM THIS JUDICIAL PRECEDENT E ITHER. 40. FOR THE REASONS SET OUT ABOVE, WE ARE OF THE CO NSIDERED VIEW THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN DECLINING THE BENEFIT OF SECTION 11 READ WITH SECTION 2(15) T O THE ASSESSEE, AND IN HOLDING THAT THE ASSESSEE TRUST WA S NOT COVERED BY ADVANCEMENT OF ANY OBJECT OF GENERAL PUB LIC UTILITY. ITA NOS. 476 & 477(ASR)/2016 ASST YEARS: 2012-13& 2013-14 32 WE, THEREFORE, DIRECT THE ASSESSING OFFICER TO DELE TE THE DISALLOWANCE OF EXEMPTION OF RS 65,20,690. THE ASSE SSE GETS THE RELIEF ACCORDINGLY. GRIEVANCES OF THE ASSESSEE ARE UPHELD. 41. IN THE RESULT, ITA NO. 496/ASR/ 2013 IS THUS AL LOWED IN THE TERMS INDICATED ABOVE. 7. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION O F THIS BENCH OF THE TRIBUNAL, DATED 10.09.2015, IN THE CASE OF HOS HIARPUR IMPROVEMENT TRUST VS. ITO (SUPRA), WHICH IS SQUAR ELY IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE, WE ALLOW THE GROUNDS OF APPEAL OF THE ASSESSEE. 8. AS REGARDS GROUND NO.5 TAKEN BY THE ASSESSEE WIT H REGARD TO THE ACTION OF THE LD. CIT(A) BY WHICH HE HAD CON FIRMED THE ADDITION MADE BY THE AO ON ACCOUNT OF VALUATION OF CLOSING STOCK, WE HAVE ALREADY HELD THE INCOME OF THE ASSESSEE TO BE ELIGIBLE FOR EXEMPTION U/S 11 OF THE ACT AND THEREFORE, THE ADD ITION SUSTAINED BY THE LD. CIT(A) HAS BECOME INFRUCTUOUS. THE ADDIT ION AS SUSTAINED HAS INCREASED THE INCOME, WHICH AGAIN WILL BE EXEMP T U/S 11 AND THEREFORE, THIS ADDITION IS ALSO INFRUCTUOUS. 7. THEREFORE, RESPECTFULLY FOLLOWING THE AFORESAID ORDER OF THE ITAT, AMRITSAR BENCH, IN ASSESSEES OWN CASE FOR THE ASST YEAR: 2008-09, PASSED IN ITA NO. 416/ASR/2013, DATED 02.06.2016, T HE PRESENT APPEAL OF THE ASSESSEE IS ALLOWED. FOLLOWING THE ABOVE SAID ORDER OF THE TRIBUNAL, TH E LD. CIT(A) HAS RIGHTLY ALLOWED RELIEF TO THE ASSESSEE AND WE DO NO T FIND ANY INFIRMITY IN THIS ORDER. 12. IN VIEW OF THE ABOVE, THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.08.2017 SD/- SD/- (N. K. CHOUDHRY) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 30.08.2017. /GP/SR. PS . COPY OF THE ORDER FORWARDED TO: ITA NOS. 476 & 477(ASR)/2016 ASST YEARS: 2012-13& 2013-14 33 (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER