ACIT, Jaipur V. SHRI PANCHYATI DHARAMSHALA, Jaipur

ITA 809/JPR/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5581 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 29-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIJAY GOEL C A DHK
• Keywords: Depreciation; Charitable institution; Capital expenditure
• Section: 143(3); 14A; 12A; 12; 11

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA-@ ITA NOS. 809/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2010-11 . ASSISTANT. COMMISSIONER OF INCOME TAX, CIRCLE -1, JAIPUR. CUKE VS. M/S. SHRI PANCHYATI DHARAMSHALA, NEAR RAILWAY STATION, STATION ROAD, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AAATP 2585 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI KAILASH MANGAL (JCIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY S BY : SHRI VIJAY GOEL (C.A.) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 03.12.2015. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 01/01/2016. VKNS'K@ ORDER PER SHRI LALIET KUMAR, J.M. THE PRESENT APPEAL FILED BY THE REVENUE IS ARISING FROM THE ORDER DATED 01.08.2013 PASSED BY THE LEARNED CIT (A)-I, JAIPUR FOR THE A.Y. 2010-11. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- (1) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND LAW, THE LD. CIT (A) WAS JUSTIFIED IN ALLOWING THE EXEMPTION UN DER SECTION 11 & 12 TO THE ASSESSEE IGNORING THE FACTS THAT ASSESSEE TRUST IS INVOLVED IN COMMERCIAL ACTIVITIES, HIT BY FIRST PROVISO TO SECT ION 2(15) R.W.S. 13(8) OF THE I.T. ACT. 2 ITA NO. 809/JP/2013 A.Y. 2010-11 ACIT VS. M/S. SHRI PANCHYATI DHARAMSHALA (2) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT (A) WAS JUSTIFIED IN DIRECTING TO ALLOW THE CAPITAL EXPENDITURE AS THE ASSESSEE TRUST IS NOT ENTITLED TO EXEMPTION UNDER S ECTION 11 & 12. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A TRUST REGISTERED UNDER SECTION 12A(A) OF THE I.T. ACT, 1961. IT HAS FILED RETURN O F INCOME ON 20.09.2010 DECLARING NIL INCOME FOR THE YEAR UNDER CONSIDERATION. THE CASE WAS SCRUTINIZED UNDER SECTION 143(3) OF THE IT ACT. THE ACTIVITIES OF THE TRUS T ARE PERFORMED WITHIN THE MUNICIPAL LIMITS OF JAIPUR. THE ASSESSEE IS ENGAGED IN CHARIT ABLE ACTIVITY OF RUNNING A DHARAMSHALA AND RECEIPT OF RENT IS IN THE NATURE OF MAINTENANCE CHARGES AND IS INCIDENTAL TO THE MAIN ACTIVITY OF TRUST. DURING A SSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ACTIVITIES OF THE ASSESSEE TRUST, ITS CHAR ITABLE PURPOSE IS THAT OF ADVANCEMENT OF GENERAL PUBLIC UTILITY. THE AO PLACING RELIANCE ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. PARAMHANS ASHRAM TRUST (2009) 184 TAXMAN 204 (RAJ.) OBSERVED THAT THE CHARITABLE PURPOSE OF THE ASSESSEE SOCIETY IS THAT OF ADVANCEMENT OF GENERAL PUBLIC UTILITY. THUS, THE AO VIDE ORDER SHEET ENTRY DATED 31.01.2013 REQUIRED THE ASSESSEE TO EXPLAIN AS TO W HY IN VIEW OF THE AMENDED PROVISIONS OF SECTION 2(15), APPROPRIATE ACTION U/S 13(8) BE NOT TAKEN. IN RESPONSE, THE LD. COUNSEL OF THE ASSESSEE VIDE HIS SUBMISSION DAT ED 08.02.2013 FURNISHED THE EXPLANATION. THE REPLY OF THE ASSESSEE WAS CONSIDE RED BY THE AO BUT COULD NOT FIND IT ACCEPTABLE. THE AO OBSERVED THAT AS PER THE AMENDE D PROVISIONS OF THE INCOME TAX ACT, 1961, ANY TRUST OR SOCIETY REGISTERED U/S 12A OF THE IT ACT HAVING ADVANCEMENT OF GENERAL PUBLIC UTILITY AS ITS CHARITABLE PURPOSE AN D HAS RECEIPTS MORE THAN RS. 10 LACS 3 ITA NO. 809/JP/2013 A.Y. 2010-11 ACIT VS. M/S. SHRI PANCHYATI DHARAMSHALA FROM ANY ACTIVITY IN THE NATURE OF BUSINESS, COMMER CE, ETC. SHALL NOT BE ENTITLED FOR EXEMPTION FROM TAXATION. THEREFORE, THE AO FORFEIT ED THE EXEMPTION U/S 11 & 12 OF THE IT ACT FOR THE A.Y. 2010-11 ON THE INCOME EARNED BY THE ASSESSEE OF RS. 68,45,354/- (RS. 68,28,254/- AS COLLECTION FROM TRAVELERS AND R S. 17,100/- AS ADVERTISEMENT INCOME) AND AFTER ALLOWING EXPENSES TO THE TUNE OF RS. 41,1 7,572/- ADDED THE BALANCE AMOUNT OF RS. 27,27,782/- TO THE INCOME OF THE ASSESSEE. T HE AO HAS ALSO NOT ALLOWED CAPITAL EXPENDITURE TO THE TUNE OF RS. 72,35,233/- ON THE G ROUND THAT HE HAS FORFEITED THE EXEMPTION, BUT ALLOWED THE DEPRECIATION TO THE EXTE NT OF RS. 7,45,149/-. 3. BEING AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE CARRIED THE MATTER BEFORE LD. CIT (A), WHO ALLOWED THE CLAIM OF THE ASSESSEE AFTE R DISCUSSING THE MATTER AT LENGTH IN PARA 4 TO 6 OF HIS ORDER. THE LD. CIT (A) OBSERVED THAT THE FIRST AND SECOND PROVISO TO SECTION 2(15) COME INTO PLAY ONLY WHEN THE ACTIVITY BEING CARRIED OUT BY THE ASSESSEE IS IN THE NATURE OF TRADE, COMMERCE OR BUSINESS. HE ALSO PLACED RELIANCE ON THE CBDTS CIRCULAR NO. 11 OF 2008 DATED 19.12.2008 WHICH EXPL AINS THE RATIONALE OF BRING THIS AMENDMENT. AFTER GOING THROUGH THE CIRCULAR, THE L D. CIT (A) OBSERVED THAT EXEMPTION SHALL NOT BE AVAILABLE TO THE ENTITIES WHO ARE ENGA GED IN COMMERCIAL ACTIVITIES IN THE GARB OF CHARITY, BUT IN THE PRESENT CASE UNDER CONS IDERATION THE MATTER REMAINS TO BE DECIDED IS WHETHER THE ASSESSEE IS ENGAGED IN COMME RCIAL ACTIVITIES OR NOT. IN THIS REGARD, THE LD. CIT (A) PLACED RELIANCE ON THE JUDG MENT OF HONBLE DELHI HIGH COURT REPORTED IN 133 ITR 470 WHEREIN IT HAS BEEN HELD TH AT FOR ANY ACTIVITY TO BE DEFINED AS BUSINESS, PROFIT MOTIVE IS AN IMPORTANT FACTOR. P ROFIT MOTIVE MAY NOT BE THE SOLE CRITERIA FOR AN ACTIVITY TO BE DEFINED AS BUSINESS BUT NEVERTHELESS IT IS AN IMPORTANT 4 ITA NO. 809/JP/2013 A.Y. 2010-11 ACIT VS. M/S. SHRI PANCHYATI DHARAMSHALA CRITERIA, PARTICULARLY WHEN IT IS A CASE OF A TRUST OR SOCIETY AND IT IS WITH REFERENCE TO A FISCAL STATUTE. IN THE PRESENT CASE IT IS SEEN THAT THE SOCIETY IS REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 1860 AND IS NOW GOVERNE D BY THE RAJASTHAN SOCIETY REGISTRATION ACT, 1958. SEC. 14A OF THIS ACT PROVID ES THAT UPON DISSOLUTION OF THE SOCIETY ALL THE ASSETS SHALL GO TO THE STATE GOVERNMENT. AP ART FROM THIS, IT MAY ALSO BE NOTED THAT THE TERMS OF THE SOCIETY CLEARLY PROVIDE THAT ALL THE MOVEABLE AND IMMOVABLE PROPERTY, IN PRESENT OR IN FUTURE, SHALL BELONG TO THE SOCIETY AND ALL THE SAVINGS OF INCOME AND EXPENDITURE ACCOUNT SHALL BE UTILIZED FO R THE DEVELOPMENTAL WORK OF THE SOCIETY. CLAUSE 4(C) OF THE SOCIETYS CONSTITUTION READS AS UNDER :- ** X BL LALFKK DH PY&VPY LAIFRR TKS BL LE; EKSTWN GS VKSJ HKFO'; ESA GKSXH] OKS LKJH LALFKK DH GKSXH RFKK BLDH VKENUH LS TKS CPR GK SXH OG LC LALFKK DS FODKL DK;KSZ ESA [KPZ DH TK LDSXH A** THE LD. CIT (A) OBSERVED THAT THERE DOES NOT APPEAR TO BE ANY PROFIT MOTIVE IN TH E CASE OF THE ASSESSEE AS THE EXCESS OF INCOME OVER EXPEND ITURE CANNOT BE DISTRIBUTED AMONGST ITS MEMBERS EITHER IN THE COURSE OF ITS ACT IVITY OR IN THE EVENT OF ITS DISSOLUTION. THEREFORE, ONE OF THE IMPORTANT INGREDIENTS FOR TRE ATING THE ACTIVITY OF THE APPELLANT AS BUSINESS I.E. , PROFIT MOTIVE IS MISSING IN THIS CA SE. SINCE THERE IS NO PROFIT MOTIVE INVOLVED, THE ACTIVITIES CARRIED OUT BY THE APPELLA NT CANNOT BE DESCRIBED AS BUSINESS. IN SUCH A SITUATION, AS EXPLAINED BY CBDT VIDE ITS CIR CULAR (SUPRA), THERE WOULD BE NO APPLICATION OF PROVISO TO SECTION 2(15). 5 ITA NO. 809/JP/2013 A.Y. 2010-11 ACIT VS. M/S. SHRI PANCHYATI DHARAMSHALA 4. THE LD. CIT (A) ALSO PLACED RELIANCE ON THE JUDG MENT OF HONBLE SUPREME COURT IN THE CASE OF ADDL. CIT VS. SURAT ART SILK CLOTH M FG. ASSOCIATION, 121 ITR 1 (SC) WHEREIN IT IS HELD THAT WHAT IS IMPORTANT IN THE CASE OF TRUST OR INSTITUTI ON IS THE PRIMARY OR DOMINANT PURPOSE. IF THE DOMINANT PURPOSE IS CHA RITABLE, ANOTHER OBJECT WHICH BY ITSELF MAY NOT BE CHARITABLE, WOULD NOT PREVENT THE TRUST OR INSTITUTION FROM BEING A VALID CHARITY. THE LD. CIT (A) AFTER GOING THROUGH THE TARIFF RA TE OF ROOM RENT CHARGED BY THE ASSESSEE OPINED THAT THE CHARGES ARE VERY NOMINAL S TARTING FROM A MERE RS. 40/- AND IT INDICATES THAT NO PROFIT MOTIVE IS INVOLVED. HE, CO NSIDERING ALL THE LEGAL AND FACTUAL POSITION, HELD THAT PROVISO TO SECTION 2(15) IS NOT ATTRACTED IN THIS CASE AND DISALLOWANCE OF EXEMPTION U/S 11 & 12 IS UNJUSTIFIED. THUS HE DI RECTED THE AO TO ASSESS THE SOCIETY AS PER PROVISIONS OF SECTION 11 & 12 AND GRANT THE REQUISITE EXEMPTION. 4.1. IN RESPECT OF DENIAL OF CLAIM OF CAPITAL EXPEN DITURE AMOUNTING TO RS. 72,35,233/-, THE LD. CIT (A) ALLOWED THE CLAIM OF THE ASSESSEE B Y OBSERVING AS UNDER :- 6. I HAVE CONSIDERED THE FACTS OF THE CASE. THE CAPITAL EXPENDITURE MADE BY THE APPELLANT HAS BEEN DISALLOWED BY THE AO ON THE GROUND THAT THE APPELLANT WAS NOT ENTITLED TO EXEMPTION U/S 11 & 12. HOWEVER, AS HAS BEEN HELD ABOVE, THE APPELLANT IS ENTITLED TO EXEMP TION UNDER THESE SECTIONS. THEREFORE, THE DISALLOWANCE OF CLAIM OF T HE CAPITAL EXPENDITURE AS APPLICATION OF INCOME ALSO APPEARS TO BE UNCALLE D FOR AND IS, ACCORDINGLY, DELETED. 5. NOW THE REVENUE IS BEFORE US. 5.1. THE LD. D/R SUPPORTING THE ORDER OF THE A.O. P RAYED THAT THE ORDER OF LD. CIT (A) BE SET ASIDE AND THAT OF THE AO BE CONFIRMED. 6 ITA NO. 809/JP/2013 A.Y. 2010-11 ACIT VS. M/S. SHRI PANCHYATI DHARAMSHALA 5.2. ON THE OTHER HAND, THE LD. A/R OF THE ASSESSEE VEHEMENTLY SUPPORTED THE ORDER OF THE LD. CIT (A) AND REQUESTED THAT THE ORDER OF LD. CIT (A) MAY BE CONFIRMED. 5.3. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE SOCIETY BEING REGISTERED IS GO VERNED BY THE PROVISIONS OF SOCIETIES REGISTRATION ACT, 1860 AND NOW THE RAJASTHAN SOCIET IES REGISTRATION ACT, 1958 REGULATES THE AFFAIRS OF THE SOCIETIES ESTABLISHED FOR CHARIT ABLE PURPOSES. THE AO NOTED THAT THE ACTIVITIES OF THE ASSESSEE TRUST, ITS CHARITABLE PU RPOSE IS THAT OF ADVANCEMENT OF GENERAL PUBLIC UTILITY. THE AO PLACING RELIANCE ON THE DEC ISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. PARAMHANS ASHRAM TRUST (2009) 184 TAXMAN 204 (RAJ.) OBSERVED THAT THE CHARITABLE PURPOSE OF THE ASSESSE E SOCIETY IS THAT OF ADVANCEMENT OF GENERAL PUBLIC UTILITY. THUS, THE ASSESSEE WAS REQU IRED TO EXPLAIN AS TO WHY IN VIEW OF THE AMENDED PROVISIONS OF SECTION 2(15), APPROPRIAT E ACTION U/S 13(8) BE NOT TAKEN. ON THE EXPLANATION FURNISHED BY THE ASSESSEE, THE AO W AS NOT SATISFIED. THEREFORE, HE FORFEITED THE EXEMPTION ALLOWABLE TO THE ASSESSEE T RUST U/S 11 & 12 OF THE IT ACT BY APPLYING FIRST PROVISO TO SECTION 2(15) READ WITH S ECTION 13(8) OF THE IT ACT, 1961. THE AO HAS ALSO NOT ALLOWED CAPITAL EXPENDITURE ON THE GROUND THAT SINCE HE HAS FORFEITED THE EXEMPTION. THE LD. CIT (A) ALLOWED THE CLAIM OF THE ASSESSEE FOR THE REASONS GIVEN IN PARA 4 TO 4.3 OF HIS ORDER AS UNDER :- 4. I HAVE CONSIDERED SUBMISSIONS OF THE APPELLANT AND HAVE ALSO GONE THROUGH THE ASSESSMENT ORDER. IT IS SEEN THAT THE A O HAS DISALLOWED THE EXEMPTION ON THE GROUND THAT MAINTAINING OF DHARAMS HALA WAS AN ACTIVITY OF ADVANCEMENT OF GENERAL PUBLIC UTILITY AND WAS, T HEREFORE, HIT BY THE 7 ITA NO. 809/JP/2013 A.Y. 2010-11 ACIT VS. M/S. SHRI PANCHYATI DHARAMSHALA AMENDED PROVISIONS OF SECTION 2(15) AS ITS RECEIPTS EXCEEDED THE MAXIMUM LIMIT OF RS. 10 LACS AS MENTIONED IN THE PR OVISO. 4.1 IT IS, HOWEVER, NOTICED THAT THE FIRST AND SECO ND PROVISO TO SECTION 2(15) COME INTO PLAY ONLY WHEN THE ACTIVITY BEING C ARRIED OUT BY THE ASSESSEE IS IN THE NATURE TRADE, COMMERCE OR BUSIN ESS. THIS IS ALSO OBVIOUS FROM CBDTS CIRCULAR NO. 11 OF 2008 DATED 1 9.12.2008 WHICH EXPLAINS THE RATIONALE OF BRINGING THIS AMENDMENT. THIS CIRCULAR READS AS UNDER :- .. THE NEWLY INSERTED PROVISO TO SECTION 2(15) WILL AP PLY ONLY TO ENTITIES WHOSE PURPOSE IS ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY I.E. THE FOURTH LIMB OF THE DEFINITION OF CHARITABLE PURPOSE CONTAINED IN SECTION 2(15). HE NCE, SUCH ENTITIES WILL NOT BE ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OR UNDER SECTION 10(23C) OF THE ACT IF THEY CARRY ON COMMERCIAL ACTI VITIES. WHETHER SUCH AN ENTITY IS CARRYING ON AN ACTIVITY IN THE NA TURE OF TRADE, COMMERCE OR BUSINESS IS A QUESTION OF FACT WHICH WI LL BE DECIDED BASED ON THE NATURE, SCOPE, EXTENT AND FREQUENCY OF THE ACTIVITY. THERE ARE INDUSTRY AND TRADE ASSOCIATIONS WHO CLAIM EXEMPTION FROM TAX U/S 11 ON THE GROUND THAT THEIR OBJECTS ARE FOR CHARITABLE PURPOSE AS THESE ARE COVERED UNDER ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. UNDER THE PRINCIPLE OF MUT UALITY, IF TRADING TAKES PLACE BETWEEN PERSONS WHO ARE ASSOCIATED TOGE THER AND CONTRIBUTE TO A COMMON FUND FOR THE FINANCING OF SO ME VENTURE OR OBJECT AND IN THIS RESPECT HAVE NO DEALINGS OR RELA TIONS WITH ANY OUTSIDE BODY, THEN ANY SURPLUS RETURNED TO THE PERS ONS FORMING SUCH ASSOCIATION IS NOT CHARGEABLE TO TAX. IN SUCH CASES, THERE MUST BE COMPLETE IDENTITY BETWEEN THE CONTRIBUTORS AND THE PARTICIPANTS. THEREFORE, WHERE INDUSTRY OR TRADE ASSOCIATIONS CLA IM BOTH TO BE CHARITABLE INSTITUTIONS AS WELL AS MUTUAL ORGANI ZATIONS AND THEIR ACTIVITIES ARE RESTRICTED TO CONTRIBUTIONS FROM AND PARTICIPATION OF ONLY THEIR MEMBERS, THESE WOULD NOT FALL UNDER THE PURVIEW OF THE PROVISO TO SECTION 2(15) OWING TO THE PRINCIPLE OF MUTUALITY. HOWEVER, IF SUCH ORGANIZATIONS HAVE DEALINGS WITH N ON-MEMBERS, THEIR CLAIM TO BE CHARITABLE ORGANIZATIONS WOULD NO W BE GOVERNED 8 ITA NO. 809/JP/2013 A.Y. 2010-11 ACIT VS. M/S. SHRI PANCHYATI DHARAMSHALA BY THE ADDITIONAL CONDITIONS STIPULATED IN THE PROV ISO TO SECTION 2(15). IN THE FINAL ANALYSIS, HOWEVER, WHETHER THE ASSESSE E HAS FOR ITS OBJECT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY IS A QUESTION OF FACT. IF SUCH ASSESSEE IS ENGAGED IN ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINE SS OR RENDERS ANY SERVICE IN RELATION TO TRADE, COMMERCE OR BUSIN ESS, IT WOULD NOT BE ENTITLED TO CLAIM THAT ITS OBJECT IS CHARITABLE PURPOSE. IN SUCH A CASE, THE OBJECT OF GENERAL PUBLIC UTILITY WILL B E ONLY A MASK OR A DEVICE TO HIDE THE TRUE PURPOSE WHICH IS TRADE, COM MERCE OR BUSINESS OR THE RENDERING OF ANY SERVICE IN RELATIO N TO TRADE, COMMERCE OR BUSINESS. EACH CASE WOULD, THEREFORE, BE DECIDED ON ITS OWN FACTS AND NO GENERALIZATION IS POSSIBLE. A SSESSEES, WHO CLAIM THAT THEIR OBJECT IS CHARITABLE PURPOSE WIT HIN THE MEANING OF SECTION 2(15), WOULD BE WELL ADVISED TO ESCHEW ANY ACTIVITY WHICH IS IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR THE RENDERING OF ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR B USINESS. IT IS, THUS, CLEAR FROM THIS CIRCULAR THAT EXEMPTIO N SHALL NOT BE AVAILABLE TO THE ENTITIES WHO ARE ENGAGED IN COMMER CIAL ACTIVITIES IN THE GARB OF CHARITY. THE ISSUE, THEREFORE, IS AS TO WHE THER THE APPELLANT IS ENGAGED IN COMMERCIAL ACTIVITIES OR NOT. 4.2. AS EXPLAINED BY DELHI HIGH COURT (133 ITR 470) , FOR ANY ACTIVITY TO BE DEFINED AS BUSINESS, PROFIT MOTIVE IS AN IMPOR TANT FACTOR. PROFIT MOTIVE MAY NOT BE THE SOLE CRITERIA FOR AN ACTIVITY TO BE DEFINED AS BUSINESS BUT NEVERTHELESS IT IS AN IMPORTANT CRITER IA, PARTICULARLY WHEN IT IS A CASE OF A TRUST OR SOCIETY AND IT IS WITH REFEREN CE TO A FISCAL STATUTE. IN THE PRESENT CASE IT IS SEEN THAT THE SOCIETY IS REG ISTERED UNDER THE SOCIETIES REGISTRATION ACT, 1860 AND IS NOW GOVERNE D BY THE RAJASTHAN SOCIETY REGISTRATION ACT, 1958. SEC. 14A OF THIS AC T PROVIDES THAT UPON DISSOLUTION OF THE SOCIETY ALL THE ASSETS SHALL GO TO THE STATE GOVERNMENT. APART FROM THIS, IT MAY ALSO BE NOTED THAT THE TERM S OF THE SOCIETY CLEARLY PROVIDE THAT ALL THE MOVEABLE AND IMMOVABLE PROPERT Y, IN RESENT OR IN FUTURE, SHALL BELONG TO THE SOCIETY AND ALL THE SAV INGS OF INCOME AND 9 ITA NO. 809/JP/2013 A.Y. 2010-11 ACIT VS. M/S. SHRI PANCHYATI DHARAMSHALA EXPENDITURE ACCOUNT SHALL BE UTILIZED FOR THE DEVEL OPMENTAL WORK OF THE SOCIETY. CLAUSE 4(C) OF THE SOCIETYS CONSTITUTION READS AS UNDER :- ** X BL LALFKK DH PY&VPY LAIFRR TKS BL LE; EKSTWN GS VKSJ HKFO'; ESA GKSXH] OKS LKJH LALFKK DH GKSXH RFKK BLDH VKENUH LS TKS CPR GK SXH OG LC LALFKK DS FODKL DK;KSZ ESA [KPZ DH TK LDSXH A** HENCE, THERE DOES NOT APPEAR TO BE ANY PROFIT MOTIV E IN THE CASE OF THE ASSESSEE AS THE EXCESS OF INCOME OVER EXPENDITU RE CANNOT BE DISTRIBUTED AMONGST ITS MEMBERS EITHER IN THE COURS E OF ITS ACTIVITY OR IN THE EVENT OF ITS DISSOLUTION. THEREFORE, ONE OF THE IMPORTANT INGREDIENTS FOR TREATING THE ACTIVITY OF THE APPELLANT AS BUSIN ESS I.E., PROFIT MOTIVE IS MISSING IN THIS CASE. SINCE THERE IS NO PROFIT MOT IVE INVOLVE, THE ACTIVITIES CARRIED OUT BY THE APPELLANT CANNOT BE DESCRIBED AS BUSINESS. IN SUCH A SITUATION, AS EXPLAINED BY CBDT VIDE ITS CIRCULAR ( SUPRA), THERE WOULD BE NO APPLICATION OF PROVISO TO SECTION 2(15). 4.3. MOREOVER, AS HELD BY THE APEX COURT IN THE CAS E OF SURAT ARTS SILK (121 ITR 1), WHAT IS IMPORTANT IN THE CASE OF TRUST OR INSTITUTION IS THE PRIMARY OR DOMINANT PURPOSE. IF THE DOMINANT PURPOS E IS CHARITABLE, ANOTHER OBJECT WHICH BY ITSELF MAY NOT BE CHARITABL E, WOULD NOT PREVENT THE TRUST OR INSTITUTION FROM BEING A VALID CHARITY . IT IS NOTED IN THIS CASE THAT THE CHARGES FOR THE ROOM ARE VERY NOMINAL, STA RTING FROM A MERE RS. 40/-. THIS ALSO INDICATES THAT THERE IS NO PROFIT M OTIVE INVOLVED IN THIS CASE. CONSIDERING ALL THE LEGAL AND FACTUAL POSITIO N, IT IS APPARENT THAT THE DOMINANT MOTIVE IN THIS CASE IS NOT EARNING PROFIT BUT TO DO CHARITY IN THE FORM OF PUBLIC SERVICE BY PROVIDING ACCOMMODATION T O THE COMMON MAN AT AFFORDABLE RATES. THE ACTIVITIES OF THE ASSESSEE, T HEREFORE, CANNOT BE CHARACTERIZED AS BUSINESS ACTIVITIES. HENCE, PROVIS O TO SECTION 2(15) IS NOT ATTRACTED IN THIS CASE AND, THEREFORE, THE DISALLOW ANCE OF EXEMPTION U/S 11 & 12 IS UNJUSTIFIED. THE AO IS, ACCORDINGLY, DIREC TED TO ASSESS THE SOCIETY 10 ITA NO. 809/JP/2013 A.Y. 2010-11 ACIT VS. M/S. SHRI PANCHYATI DHARAMSHALA AS PER THE PROVISIONS OF SECTION 11 & 12, AND GRANT THE REQUISITE EXEMPTION. AFTER ANALYZING THE VARIOUS DETAILS FURNISHED AND C ONSIDERING THE VARIOUS JUDGMENTS OF HONBLE SUPREME COURT AND HONBLE HIGH COURTS MADE AVAILABLE ON RECORD AND THE FACTUAL POSITION, WE DO NOT FIND ANY INFIRMITY IN T HE ORDER OF LD. CIT (A). THEREFORE, WHILE CONFIRMING THE ORDER OF LD. CIT (A), WE DISMI SS THE REVENUES APPEAL. 6. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 01/01/2016. SD/- SD/- VH-VKJ-EHUK YFYR DQEKJ (T.R. MEENA) (LALIET KUMAR) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 01/01/2016 DAS/ VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE ACIT, CIRCLE-1, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- M/S. SHRI PANCHYATI DHARAMSHALA, JA IPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDRVIHY@ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 809/JP/2013) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR 11 ITA NO. 809/JP/2013 A.Y. 2010-11 ACIT VS. M/S. SHRI PANCHYATI DHARAMSHALA