The Amritsar Improvement Trust., Amritsar. V. The Asstt. Commissioner of Income Tax, Amritsar.

ITA 92/ASR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8928 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 23-11-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 13-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Charitable institution; Opportunity of being heard; Principle of natural justice
• Section: 143(3); 234B; 12AA; 68; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH; AMRITSAR BEFORE SH. A.D. JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER ITA NOS. 91 & 92(ASR)/2014 ASSESSMENT YEARS:2008-09 & 2010-11 PAN: AMRITSAR IMPROVEMENT TRUST, VS. ASSTT.COMMR. OF INC OME TAX, AMRITSAR. CIRCLE-V, AMRITSAR. (APPELLANT) (RESPONDENT) APPELLANT BY:SH.SALIL KAPOOR, ADV. RESPONDENT BY:SMT. RATINDER KAUR, DR DATE OF HEARING: 23/11/2015 DATE OF PRONOUNCEMENT: 01/01/2016 ORDER PER A.D. JAIN, JM; THESE ARE THE ASSESSEES APPEAL FOR THE ASSESSMENT YEARS 2008-09 & 2010-11, AGAINST DIFFERENT ORDERS, EACH DATED 12. 12.2013, PASSED BY THE LD. CIT(A), AMRITSAR. THE ISSUES INVOLVED IN BO TH THE APPEALS ARE SIMILAR AND SO, BOTH THESE APPEALS ARE BEING DISPOS ED OF TOGETHER BY THIS COMMON ORDER. 2. IN ITA NO. 91(ASR)/2014, FOR THE AY 2008-09, THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS: 1. THE ASSESSMENT ORDER PASSED U/S 143(3) AND THE ADDITIONS/DISALLOWANCE MADE BY THE AO ARE ILLEGAL B AD IN LAW AND WITHOUT JURISDICTION. 2. THAT IN VIEW OF THE FACT AND CIRCUMSTANCES OF TH E CASE, THE NOTICE ISSUE BY THE CIT(A) FOR ENHANCEMENT OF INCO ME IS ILLEGAL AND BAD IN LAW. 3. THAT IN VIEW OF THE FACT AND CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN ENHANCI NG THE INCOME BY MAKING THE ADDITION OF RS.6,58,59,246/- O N ACCOUNT OF EXCESS OF INCOME OVER EXPENDITURE, WHICH IS ITA NOS.91 &92(ASR)/2014 2 ILLEGAL, BAD IN LAW AND WITHOUT JURISDICTION. THE ENHANCEMENT ITSELF IS ILLEGAL, BAD IN LAW AND WITHO UT JURISDICTION. 4. THAT THE AO/CIT(A) FAILED TO APPRECIATE THAT THE APPELLANT TRUST HAS TAKEN OVER THE PUNJAB GOVT. ON AND W.E .F. 12.04.2007 AND IT CONTINUED TO BE CUSTODIAN OWNER O F THE ASSESSEE TRUST TILL 31.03.2008 AND THE INCOME HAS B EEN WRONGLY AND ILLEGAL ASSESSED IN THE HANDS OF THE AS SESSEE. 5. THAT IN VIEW OF THE FACT AND CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLD THE DISALLOWANCE THE EXEMPTION U/S 11 OF THE ACT ON THE GROUND THAT THE ACTIVITIES CARRIED OUT BY THE ASSESSEE APP ELLANT IS NOT FOR CHARITABLE PURPOSE AS PER SECTION 2(15) OF THE ACT. IN ANY CASE, IT IS WRONGLY HELD HAT THE ASSESSEE TRUST IS NOT ENTITLED TO EXEMPTION U/S 11 OF THE ACT. 6. THAT IN VIEW OF THE FACT AND CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) HAS ERRED IN LAW IN MAKING THE AD-HOC ADDITION/DISALLOWANCE OF RS.2,88,41,750/- AND IN TH E HANDS OF THE TRUST ASSESSEE AS THE SAME IS TAKEN OVER BY THE PUNJAB GOVT. 7. THAT IN VIEW OF THE FACT AND CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) HAS ERRED IN LAW IN MAKING THE AD-HOC ADDITION/DISALLOWANCE OF RS.2,88,41,750/- BY TREATI NG IT STATUS AS AOP WHEREAS THE ASSESSEE IS A TRUST. THE SAME IS WRONGLY AND ILLEGALLY UPHELD BY THE CIT(A). 8. THE ADDITIONS/DISALLOWANCES MADE ARE UNJUST, UNL AWFUL, WITHOUT JURISDICTION AND ARE ALSO HIGHLY EXCESSIVE. THE LD. CIT(A) HAS WRONGLY & ILLEGALLY UPHELD THE ADDITION OF RS.2,88,41,750/- AND ENHANCED THE INCOME BY/TO RS.6,58,59,246/-. 9. THE ADDITIONS MADE AND THE OBSERVATIONS MADE ARE UNJUST, UNLAWFUL AND BASED ON MERE SURMISES AND CONJECTURES . THE ADDITIONS MADE CANNOT BE JUSTIFIED BY ANY MATERIAL ON RECORD AND ARE ALSO HIGHLY EXCESSIVE. 10. THAT THE EXPLANATION GIVEN EVIDENCE PRODUCED, MATERIAL PLACED AND AVAILABLE ON RECORD HAS NOT BEEN PROPER LY CONSIDERED AND JUDICIALLY INTERPRETED AND THE SAME DO NOT JUSTIFY THE ADDITIONS/ALLOWANCES MADE. ITA NOS.91 &92(ASR)/2014 3 11. THAT THE IMPUGNED ASSTT. ORDER AND CIT(A) ORDER S PASSED ARE AGAINST THE PRINCIPLES OF NATURAL JUSTICE AND THE S AME HAVE BEEN PASSED WITHOUT AFFORDING REASONABLE AND ADEQUA TE OPPORTUNITY OF BEING HEARD. 12. THAT THE INTEREST U/S 234B HAS BEEN WRONGLY AND ILLEGALLY CHARGED AS THE APPELLANT COULD NOT HAVE FORESEEN TH E DISALLOWANCES/ADDITIONS MADE AND COULD NOT HAVE INC LUDED THE SAME IN CURRENT INCOME FOR PAYMENT OF ADVANCE T AX. THE INTEREST CHARGED UNDER VARIOUS SECTIONS IS ALSO WR ONGLY WORKED OUT. 3. IN ITA NO. 92(ASR)/2014, FOR THE AY 2010-11, THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS: 1. THE ASSESSMENT ORDER PASSED U/S 143(3) AND THE ADDITIONS/DISALLOWANCE MADE BY THE AO ARE ILLEGAL B AD IN LAW AND WITHOUT JURISDICTION. 2. THAT IN VIEW OF THE FACT AND CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLD THE DISALLOWANCE UNDER SECTION11 OF THE ACT ON THE GROU ND THAT THE ACTIVITIES CARRIED OUT BY THE ASSESSEE IS NOT F OR CHARITABLE PURPOSE AS PER SECTION 2(15) OF THE ACT. IN ANY CAS E IT IS WRONGLY HELD THAT THE ASSESSEE TRUST IS NOT ENTITLE D TO EXEMPTION U/S 11 OF THE ACT. 3. THAT IN VIEW OF THE FACT AND CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN MAKING THE ADDITION/DISALLOWANCE OF THE EXPENSE UNDER THE HEAD OF WORK BILL OF RS.15,55,47,181/- ON THE GROUND THAT THE SA ID EXPENSE IS CAPITAL IN NATURE NOT REVENUE IN NATURE . THE SAME IS WRONGLY AND ILLEGALLY UPHELD BY THE CIT(A ). 4. THAT IN VIEW OF THE FACT AND CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) HAS ERRED IN LAW IN MAKING THE ADDITION OF RS.76,27,744/- BY DISALLOWING THE DEDUCTION ON THE GROUND THAT THE ASSESSEE HAS NOT PAID/DEPOSITED THE SAID A MOUNT IN EMPLOYEES PROVIDENT FUND BEFORE THE DUE DATE OF FIL ING OF RETURN U/S 139(1) O F THE ACT. THE SAME IS WRONGLY AND ILLEGALLY UPHELD BY THE CIT(A). 5. WITHOUT PREJUDICE AND IN THE ALTERNATIVELY THE A O/CIT HAS FAILED TO APPRECIATE THAT THE BALANCE OF RS.76,27,7 44/- IN ITA NOS.91 &92(ASR)/2014 4 THIS ACCOUNT WAS OUT OF OPENING BALANCE AND NO DISA LLOWANCE WAS CALLED FOR. 6. THE ADDITIONS/DISALLOWANCES MADE ARE UNJUST, UNL AWFUL, WITHOUT JURISDICTION AND ARE ALSO HIGHLY EXCESSIVE. THE LD. CIT(A) HAS WRONGLY & ILLEGALLY UPHELD THE ADDITION OF RS.16,31,74,925/- . 7. THE ADDITIONS MADE AND THE OBSERVATIONS MADE ARE UNJUST, UNLAWFUL AND BASED ON MERE SURMISES AND CONJECTURES . THE ADDITIONS MADE CANNOT BE JUSTIFIED BY ANY MATERIAL ON RECORD AND ARE ALSO HIGHLY EXCESSIVE. 8. THAT THE EXPLANATION GIVEN EVIDENCE PRODUCED, M ATERIAL PLACED AND AVAILABLE ON RECORD HAS NOT BEEN PROPER LY CONSIDERED AND JUDICIALLY INTERPRETED AND THE SAME DO NOT JUSTIFY THE ADDITIONS/ALLOWANCES MADE. 9. THAT THE IMPUGNED ASSTT. ORDER AND CIT(A) ORDERS PASSED ARE AGAINST THE PRINCIPLES OF NATURAL JUSTICE AND THE S AME HAVE BEEN PASSED WITHOUT AFFORDING REASONABLE AND ADEQUA TE OPPORTUNITY OF BEING HEARD. 10. THAT THE INTEREST U/S 234B HAS BEEN WRONGLY AND ILLEGALLY CHARGED AS THE APPELLANT COULD NOT HAVE FORESEEN TH E DISALLOWANCES/ADDITIONS MADE AND COULD NOT HAVE INC LUDED THE SAME IN CURRENT INCOME FOR PAYMENT OF ADVANCE T AX. THE INTEREST CHARGED UNDER VARIOUS SECTIONS IS ALSO WR ONGLY WORKED OUT. 4. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE STATES AT THE BAR THAT GROUND NO.5 IN ITA NO.91(ASR)/2014 FOR AY 2008-09 A ND GROUND NO.2 IN ITA NO. 92(ASR)/2014 FOR THE AY 2010-11 PERTAIN TO ONE AND THE SAME ISSUE, I.E., THE ASSESSEES CHALLENGE TO THE CIT(A) S ACTION IN DISALLOWING EXEMPTION U/S 11 OF THE I.T.ACT TO THE ASSESSEE, O N THE GROUND THAT THE OBJECTS OF THE ASSESSEE ARE NOT FOR CHARITABLE PUR POSES AS PER SECTION 2(15) OF THE ACT. ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE, FOR THE ASSESSMENT YEARS 2009-10 AND 2011-12, VIDE ORDER DA TED 10.09.2015, THE ITAT HAD DECIDED THIS ISSUE IN FAVOUR OF THE A SSESSEE, UNDER SIMILAR FACTS AND CIRCUMSTANCES. ITA NOS.91 &92(ASR)/2014 5 5. THE LD. DR, ON THE OTHER HAND, PLACED RELIANCE O N THE IMPUGNED ORDER. 6. THE GRIEVANCE OF THE ASSESSEE BY WAY OF GROUND N O. 5 FOR THE AY 2008-09 AND GROUND NO.2 FOR THE AY 2010-11, UNDER S IMILAR FACTS AND CIRCUMSTANCES, STANDS ANSWERED IN FAVOUR OF THE ASS ESSEE BY THE ITAT, VIDE ORDER DATED 10.09.2015, FOR THE ASSESSMENT YEA RS 2009-10 AND 2011-12. THE CIT(A)S ORDER FOR THE ASSESSMENT YEAR 2008-09 IS DATED 12.12.2013 AND CIT(A)S ORDER FOR AY 2010-11 IS ALS O DATED 12.12.2013. THE LD. CIT(A) THUS, OBVIOUSLY DID NOT HAVE THE BEN EFIT OF THE ITAT ORDER DATED 10.9.2015. 7. IN THE ITAT ORDER FOR THE ASSESSMENT YEARS 2009- 10 AND 2011-12, IT HAS BEEN HELD AS FOLLOWS: 14. BEFORE WE ADDRESS OURSELVES TO THE FACTS OF THIS CASE, LET US ANALYSE THE RELEVANT LEGAL PROVISIONS. SECTION 2 (15), WHICH DEFINES 'CHARITABLE PURPOSES' THOUGH IN AN INCLUSIVE RATHER THAN AN EXHAUSTIVE MA NNER, HAD A RATHER QUITE EXISTENCE, UNAFFECTED BY THE FREQUENT AMENDMENTS TO THE INCOME TAX ACT 1961, TILL 1 ST APRIL 1984. VIDE FINANCE ACT, 2013, AND W ITH EFFECT FROM 1 ST APRIL 1984, THE WORDS 'NOT INVOLVING THE CARRYING ON ANY ACTIVI TY FOR PROFIT' WERE DELETED FROM SECTION 2(15) , AND, WITH THIS AMENDMENT, THIS DEFINITION WAS AS FOLLOWS: 'CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF, AND THE ADVANCEMENT OF ANY OTHER OBJECT OF G ENERAL PUBLIC UTILITY: 15. VIDE FINANCE ACT, 2008, THE WORDS 'PRESERVAT ION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTORIC INTEREST)', WERE AD DED AND, ON A MORE RELEVANT NOTE, A NEW PROVISO (I.E. FIST PROVISO) WAS ADDED TO THIS P ROVISION, CARVING OUT AN EXCEPTION IN THE CASES OF 'ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL UTILITY', AND, BY THE IMMEDIATELY FOLLOWING FINANCE ACT 2009, THERE WAS YET ANOTHER PROVISO (I.E. SECOND PROVISO) INTRODUCED TO CARVE OUT AN EX CEPTION FROM THE EXCEPTION ITSELF. IN ESSENCE, THE EFFECT OF THESE PROVISOS WA S THAT EVEN WHEN AN ASSESSEE WAS PURSUING 'A CHARITABLE PURPOSE' IN THE EVENT OF ADV ANCEMENT OF ANY OTHER OBJECT OF PUBLIC UTILITY' IT WOULD CEASE TO BE FOR CHARITABLE PURPOSES IF IT INVOLVES (A) CARRYING ON AN ACTIVITY IN THE NATURE OF TRADE, COM MERCE OR BUSINESS; OR (B) RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COM MERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF NAT URE OF USE OR APPLICATION OR RETENTION OF THE INCOME FROM SUCH ACTIVITY. HOWEVER , THESE PROVISIONS ARE NOT TO APPLY WHEN THE ACTIVITIES ARE SUCH A MODEST SCALE T HAT THE VALUE OF RECEIPTS IN RESPECT OF THE SAME ARE LESS THAN RS 25 LAKHS. THES E TWO PROVISOS, AS THEY STAND NOW, ARE AS FOLLOWS: ITA NOS.91 &92(ASR)/2014 6 PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT O F GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT I NVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE O R BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO A NY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERAT ION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY; PROVIDED FURTHER THAT THE FIRST PROVISO SHALL NOT A PPLY IF THE AGGREGATE VALUE OF THE RECEIPTS FROM THE ACTIVITIES REFERRED TO THEREIN IS TWENTY FIVE LAKH RUPEES OR LESS IN THE PREVIOUS YEAR.' 16. EXPLAINING THE SCOPE OF THESE PROVISIONS, A COORDINATE BENCH OF THIS TRIBUNAL, IN THE CASE OF HIMACHAL PRADESH ENVIRONME NT PROTECTION AND POLLUTION CONTROL BOARD VS CIT [(2010) 9 ITR TRIB 2 04 (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 ASSESSEE IS TO RECEI VE ANY PAYMENT FOR ANYTHING DONE FOR TRADE, COMMERCE OR BU SINESS, THE ASSESSEE WILL BE HIT BY THE SAID PROVI SO.IT MAY BE RECALLED THAT ELABORATING THE SCOPE OF THIS AMENDMENT, CBDT, VIDE CIRCULAR NO. 11, DT. 19TH DEC., 2008 [(2009) 221 CTR (ST) 1], HA S OBSERVED AS FOLLOWS : '3. THE NEWLY AMENDED S. 2(15) WILL APPLY ONLY TO THE ENTITIES WHOSE PURPOSE IS 'ADVANCEMENT OF ANY OTHER OBJECT OF GENE RAL PUBLIC UTILITY' I.E., THE FOURTH LIMB OF DEFINITION OF 'CHARITABLE PURPOS E' 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 I N THE NATURE OF TRADE, COMMERCE OR BUSINESS IS A QUESTION OF FACT WHICH WI LL BE DECIDED BASED ON THE NATURE, SCOPE, EXTENT AND FREQUENCY OF ACTIVIT Y. 3.1 THERE ARE INDUSTRY AND TRADE ASSOCIATIONS WHO C LAIM EXEMPTION FROM TAX UNDER S. 11 OR ON THE GROUND THAT THEIR OBJECTS ARE FOR CHARI TABLE PURPOSES AS THESE ARE COVERED UNDER THE 'ANY OTHER OBJECT OF PUBLIC UTILITY'. 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 SOME VENTURE OR OBJECT, AND IN THI S RESPECT HAVE NO DEALINGS OR RELATIONS WITH ANY OUTSIDE BODY, THEN T HE SURPLUS RETURNED TO SUCH PERSONS IS NOT CHARGEABLE TO TAX. THEREFORE, WHERE INDUSTRY OR TRADE ASSOCIATIONS CLAIM BOTH TO BE CHARITABLE INSTITUTIO NS AS WELL AS MUTUAL MEMBERS, THESE WOULD NOT FALL UNDER THE PURVIEW O F S. 2(15) OWING TO THE ITA NOS.91 &92(ASR)/2014 7 PRINCIPLE OF MUTUALITY. HOWEVER, IF SUCH ORGANIZATI ONS HAVE DEALINGS WITH THE NON-MEMBERS, THEIR CLAIM FOR CHARITABLE INSTITU TION 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 U TILITY' IS A QUESTION OF FACT. IF SUCH ASSESSEE IS ENGAGED IN ANY ACTIVITY I N THE NATURE OF TRADE, COMMERCE OR BUSINESS OR RENDERS ANY SERVICE IN CONN ECTION TO TRADE, COMMERCE OR BUSINESS, IT WOULD NOT BE ENTITLED TO CLAIM THAT ITS OBJECT IS FOR CHARITABLE PURPOSES. IN SUCH A CASE, THE OBJECT OF 'GENERAL PUBLIC UTILITY' WILL ONLY BE A MASK OR A DEVICE TO HIDE THE TRUE P URPOSE WHICH IS TRADE, COMMERCE, OR BUSINESS OR RENDERING OF ANY SERVICE I N RELATION TO TRADE, COMMERCE OR BUSINESS. EACH CASE WOULD, THEREFORE, HAVE TO BE DECIDED ON ITS OWN FACTS, AND GENERALIZATIONS ARE NOT POSSIBLE . AN ASSESSEE WHO CLAIMS THAT THEIR OBJECT IS 'CHARITABLE PURPOSE' WITHIN TH E MEANING OF S. 2(15) WOULD BE WELL ADVISED TO ESCHEW ANY ACTIVITY WHICH IS IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR RENDERING OF ANY SE RVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS. (EMPHAS IS, 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, WHETHER THE ASSESSEE HA S, AS ITS OBJECT, ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY IS ESSE NTIALLY A QUESTION OF TO BE DECIDED ON THE FACTS OF THE ASSESSEE'S OWN CASE AND WHERE O BJECT OF GENERAL PUBLIC ACTIVITY IS ONLY A MASK OR DEVICE TO HIDE THE TRUE PURPOSE O F TRADE, BUSINESS OR COMMERCE, OR RENDERING OF ANY SERVICE IN RELATION THERETO, THE ASSESSEE CANNOT BE SAID TO BE ENGAGED IN A CHARITABLE ACTIVITY WITHIN MEANINGS OF S. 2(15) OF THE ACT. AS A COROLLARY TO THIS APPROACH ADOPTED BY TAX ADMINISTR ATION, IN OUR CONSIDERED VIEW, IT CANNOT BE OPEN TO LEARNED CIT TO CONTEND THAT WH ERE AN OBJECT OF GENERAL PUBLIC UTILITY IS NOT MERELY A MASK TO HIDE TRUE PURPOSE O R RENDERING OF ANY SERVICE IN RELATION THERETO, AND WHERE SUCH SERVICES ARE BEING RENDERED AS PURELY INCIDENTAL TO OR AS SUBSERVIENT TO THE MAIN OBJECTIVE OF 'GENE RAL PUBLIC UTILITY', THE CARRYING ON OF BONA FIDE ACTIVITIES IN FURTHERANCE OF SUCH O BJECTIVES OF 'GENERAL PUBLIC UTILITY' WILL ALSO BE HIT BY THE PROVISO TO S. 2(15) . 15. AS CBDT RIGHTLY PUTS IT, SWEEPING 'GENER ALIZATIONS ARE NOT POSSIBLE' AND 'EACH CASE WILL HAVE TO DECIDED ON ITS FACTS'. THE QUESTI ON THEN ARISES WHETHER ON THE PRESENT SET OF FACTS IT CAN BE SAID THAT THE ASSESS EE 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 LONG AS THE OBJECT OF GENERAL PUBLIC UTILITY IS NOT MERELY A MASK TO HIDE TRUE PURPOSE OR RENDERING OF ANY SERVICE IN RELATION THERETO, AND WHERE SUCH SERVICES ARE BEING RENDERED AS PURELY INCIDENTAL TO OR ITA NOS.91 &92(ASR)/2014 8 AS SUBSERVIENT TO THE MAIN OBJECTIVE OF 'GENERAL PU BLIC UT ILITY', THE CARRYING ON OF BONAFIDE ACTIVITIES IN FURTHERANCE OF SUCH OBJECTIV ES OF 'GENERAL PUBLIC UTILITY' CANNOT BE HIT BY THE PROVISO TO S. 2(15) . BY THE FINANCE ACT 2015, THESE TWO PROVISOS ALSO STAND SUBSTITUTED, WITH EFFECT FROM 1 ST APRIL 2016, A NEW PROVISO TO SECTION 2(15) . THIS NEW PROVISO IS AS FOLLOWS: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT O F GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT IN VOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR B USINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRES PECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME F ROM SUCH ACTIVITY, UNLESS-- (I) SUCH ACTIVITY IS UNDERTAKEN IN THE COUR SE OF ACTUAL CARRYING OUT OF SUCH ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY; AND (II) THE AGGREGATE RECEIPTS FROM SUCH ACTIVITY OR A CTIVITIES DURING THE PREVIOUS YEAR, DO NOT EXCEED TWENTY PER CENT. OF TH E TOTAL RECEIPTS, OF THE TRUST OR INSTITUTION UNDERTAKING SUCH ACTIVITY OR A CTIVITIES, OF THAT PREVIOUS YEAR 18. IT MAY BE NOTED THAT WHILE THE EARLIER PROVIS O SIMPLY STATED THAT EXCLUSION FROM 'CHARITABLE PURPOSES' WILL COME INTO PLAY 'IF IT INVOLVES THE CARRYING ONOF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION T O ANY TRADE, COMMERCE OR BUSINESS ',THE REQUIREMENT OF EXCLUSION CLAUSE EXTE NDS EVEN TO SITUATIONS ' IN WHICH SUCH ACTIVITY IS UNDERTAKEN IN THE COURSE OF ACTUAL CARRYING OUT OF SUCH ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUB LIC UTILITY'. IN OTHER WORDS, THE EXCLUSION CLAUSE, BY PROVISO TO SECTION 2 (15), WAS EARLIER TRIGGERED BY 'INVOLVEMENT IN ANY ACTIVITY IN THE NA TURE OF TRADE, COMMERCE OR BUSINESS ETC' BUT, POST FINANCE ACT 2015 AMENDMENT, IT WILL BE TRIGGERED EVEN IF 'SUCH AN ACTIVITY IN THE NATURE O F TRADE, COMMERCE OR BUSINESS ETC IS UNDERTAKEN INMTHE COURSE OF CARRYIN G OUT SUCH ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY'. 19. THIS SUBSTITUTION OF PROVISO TO SECTION 2(15) , IN OUR CONSIDERED VIEW, MAY BE VIEWED AS REPRESENTING A PARADIGM SHIFT IN T HE SCOPE OF THE EXCLUSION CLAUSE. 20. THE PARADIGM SHIFT IS THIS. SO FAR AS THE SCO PE OF EARLIER PROVISOS IS CONCERNED, THE CBDT ITSELF HAS, DEALING WITH AN ASS ESSEE PURSING ' THE ADVANCEMENT OF ANY OBJECT OF GENERAL PUBIC UTILITY' , OBSERVED THAT 'IF SUCH ITA NOS.91 &92(ASR)/2014 9 ASSESSEE IS ENGAGED IN ANY ACTIVITY IN THE NATURE O F TRADE, COMMERCE OR BUSINESS OR RENDERS ANY SERVICE IN CONNECTION TO TR ADE, COMMERCE OR BUSINESS, IT WOULD NOT BE ENTITLED TO CLAIM THAT IT S OBJECT IS FOR CHARITABLE PURPOSES' BECAUSE 'IN SUCH A CASE, THE OBJECT OF 'G ENERAL PUBLIC UTILITY' WILL ONLY BE A MASK OR A DEVICE TO HIDE THE TRUE PURPOSE WHICH IS TRADE, COMMERCE, OR BUSINESS OR RENDERING OF ANY SERVICE I N RELATION TO TRADE, COMMERCE OR BUSINESS.' THE ADVANCEMENT OF ANY OBJEC TS OF GENERAL PUBLIC UTILITY AND ENGAGEMENT IN TRADE, COMMERCE AND BUSIN ESS ETC. WERE THUS SEEN AS MUTUALLY EXCLUSIVE IN THE SENSE THAT EITHER THE ASSESSEE WAS PURSUING THE OBJECTS OF GENERAL PUBLIC UTILITY OR P URSUING 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 PURSING THE OBJ ECTS OF GENERAL PUBLIC UTILITY AS ALSO ENGAGED IN TRADE, COMMERCE OF BUSIN ESS ETC. IN THE NEW PROVISO, HOWEVER, EVEN WHEN THE ASSESSEE IS ENGAGED IN THE ACTIVITIES IN THE 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 PURPOSES ONLY WHEN ' THE AGGREGATE RECEI PTS FROM SUCH ACTIVITY OR ACTIVITIES DURING THE PREVIOUS YEAR , DO NOT EXC EED TWENTY PER CENT OF THE TOTAL RECEIPTS, OF THE TRUST OR INSTITUTION UNDERTA KING SUCH ACTIVITY OR ACTIVITIES, OF THAT PREVIOUS YEAR '. IN OTHER WORDS , EVEN WHEN THE ACTIVITIES ARE IN THE COURSE OF ADVANCEMENT OF ANY OTHER OBJEC T OF GENERAL PUBLIC UTILITY, BUT IN THE NATURE OF TRADE, COMMERCE OR BU SINESS ETC, THE PROVISO SEEKS TO EXCLUDE IT ONLY WHEN THE THRESHOLD LEVEL O F ACTIVITY IS NOT SATISFIED. WHETHER SUCH A STATUTORY PROVISION STAND S THE LEGAL SCRUTINY OR NOT IS ANOTHER ASPECT OF THE MATTER, AND THAT IS NO NE OF OUR CONCERN AT PRESENT ANYWAY, IT IS BEYOND DOUBT THAT THE NEW PRO VISO, WITH EFFECT FROM 1 ST APRIL 2016, SEEKS TO EXCLUDE, FROM THE SCOPE O F SECTION 2(15) , THE SITUATIONS IN WHICH EVEN IN THE COURSE OF PURSUING ADVANCEMENT OF ANY OBJECTS OF GENERAL PUBLIC UTILITY WHEN ANY ACTIVITI ES IN THE NATURE OF TRADE, COMMERCE OR BUSINESS ETC 'IS UNDERTAKEN IN THE COUR SE OF ACTUAL CARRYING OUT OF SUCH ADVANCEMENT OF ANY OTHER OBJECT OF GENE RAL PUBLIC UTILITY', UNLESS, OF COURSE, THE ACTIVITY LEVEL REMAINS WITHI N THE THRESHOLD LIMIT I.E. RECEIPTS FROM SUCH ACTIVITIES 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 SECTION 2(15) IS EFFECTIVE FROM THE ASSESSMENT YEAR 2016-17, IN OUR CONSIDERED VIEW, THESE PROVISIONS ARE ONLY P ROSPECTIVE IN EFFECT. 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 UNDER TAKEN IN THE COURSE OF ACTUAL CARRYING OUT OF ADVANCEMENT OF ANY OBJECT OF GENERA L PUBLIC UTILITY, TILL THE END OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2 016 -17, THE ACTIVITIES WILL CONTINUE TO BE COVERED BY THE SCOPE OF SECTION 2 (15). AS WE HOLD SO, WE MAY ITA NOS.91 &92(ASR)/2014 10 ONLY REFER TO THE OBSERVATIONS OF A FIVE MEMBER BEN CH OF HON'BLE SUPREME COURT, IN THE CASE OF CIT VS VATIKA TOWNSHIPS PVT LTD [(20 14) 367 ITR 466 (SC)], AS FOLLOWS: 31. OF THE VARIOUS RULES GUIDING HOW LEGISL ATION HAS TO BE INTERPRETED, ONE ESTABLISHED RULE IS THAT UNLESS A CONTRARY INTENTION APPEARS, LEGISLATION IS PRESUMED NOT TO BE INTENDED TO HAVE A RETRO SPECTIVE OPERATION. THE IDEA BEHIND THE RULE IS THAT A CURRENT LAW SHOUL D GOVERN CURRENT ACTIVITIES. LAW PASSED TODAY CANNOT APPLY TO THE EVENTS OF THE PAST. IF WE DO SOMETHING TODAY, WE DO IT KEEPING IN VIEW THE LAW OF TODAY AND IN FORCE AND NOT TOMORROW'S BACKWARD ADJUSTMENT OF IT. OUR B ELIEF IN THE NATURE OF THE LAW IS FOUNDED ON THE BED ROCK THAT EVERY HUMAN BEING IS ENTITLED TO ARRANGE HIS AFFAIRS BY RELYING ON THE EXISTING LAW AND SH OULD NOT FIND THAT HIS PLANS HAVE BEEN RETROSPECTIVELY UPSET. THIS PRIN CIPLE OF LAW IS KNOWN AS LEX PROSPICIT NON RESPICIT: LAW LOOKS FORWARD NOT BACKWARD. ................ .......................... 33. WE WOULD ALSO LIKE TO POINT OUT, FOR THE SAKE O F COMPLETENESS, TH AT WHERE A BENEFIT IS CONFERRED BY LEGISLATION, THE RU LE AGAINST A RETROSPECTIVE CONSTRUCTION IS DIFFERENT. ................ 34. .............. IN THE INSTANT CASE, THE PROVISO ADDED TO SECTION 113 OF THE ACT IS NOT BENEFICIAL TO THE ASSESSEE. ON THE CONTR ARY, IT IS A PROVISION WHICH IS ONEROUS TO THE ASSESSEE. THEREFORE, IN A C ASE LIKE THIS, WE HAVE 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 PRECEDENTS AND THE CBDT INSTRUCTION S IN THE CONTEXT OF THE LEGAL POSITION WHEN THE WORDS 'NOT INVOLVING THE CARRYING ON ANY ACTIVITY FOR PROFIT' [I.E. CBDT INSTRUCTION NO. 1024 DATED 7 TH NOVEMBER 1976 AND HON'BLE SUPREME COURT'S JUDGMENTS IN THE CASES OF LOK SHIKSHAN TRUS T VS CIT (SUPRA) INDIAN CHAMBER OF COMMERCE & ORS VS CIT (SUPRA)], IT MAY A LSO BE APPROPRIATE TO BRIEFLY DEAL WITH THE RELEVANT DEVELOPMENTS. THE CB DT INSTRUCTION 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, E DUCATION, MEDICAL RELIEF AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT. 2. IN THE DEFINITION OF 'CHARITABLE PURPOSE' THE EX PRES SION 'NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT' WAS ADDED I N THE 1961 ACT. THE SIGNIFICANCE OF THIS EXPRESSION HAS BEEN EXAMINED BY THE SUPREME COURT IN THE GREAT DETAIL IN THE CASES OF SOLE TRUSTEE, LOK SHIKSHANA TR UST VS. CIT (1975) 101 ITR 234 ( SC) ITA NOS.91 &92(ASR)/2014 11 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 PURP OSE THE INSTITUTION ENGAGES ITSELF IN ACTIVITIES FOR PROFIT.' THE SUPREME COURT EMPHASISED THAT IF IN THE ADVANCE MENT OF THE OBJECTS OF GENERAL PUBLIC UTILITY A TRUST RESORTS TO CARRYING ON OF ANY ACTIVITY FOR PROFIT, THEM NECESSARILY S. 2(15) CANNOT CONFER EXEMPTION. IN LOK SHIKSHANA TRUST, T HEIR LORDSHIPS KHANNA, J. AND GUPTA, J. OBSERVED: 'ORDINARILY, PROFIT MOTIVE IS A NORMAL INCIDENT OF BUSINESS ACTIVITY AND IF THE ACTIVITY OF A TRUST CONSISTS OF CARRYING ON OF A BU SINESS AND THERE ARE NO RESTRICTIONS ON ITS MAKING PROFIT, THE COURT WOULD BE WELL JUSTI FIED IN ASSUMING IN THE ABSENCE OF SOME INDICATION TO THE CONTRARY THAT THE OBJECT OF THE TRUST 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 UTI LITY IS COVERED BY THE DEFINITION OF 'CHARITABLE PURPOSE' OR NOT IS: (A) IS THE OBJEC T OF THE ASSESSEE ONE OF GENERAL PUBLIC UTILITY? (B) DOES THE ADVANCEMENT OF THE OBJ ECT INVOLVE ACTIVITIES BRINGING IN MONEYS? (C) IF SO, ARE SUCH ACTIVITIES UNDERTAKE N, (I) FOR PROFIT, OR (II) WITHOUT PROFIT? IT WAS OBSERVED BY THE SUPREME COURT THAT I F (A) AND (B) ARE ANSWERED AFFIRMATIVELY, AND CL. (I) IS ALSO ANSWERED AFFIRMATIVELY, THE CLAIM FOR E XEMPTION COLLAPSES AND THE BENEFIT OF S. 11 WILL NOT BE AVAILABLE TO THE ENTIRE INCOME. HOWEVE R, IF SUCH ACTIVITY IS UNDERTAKEN WITHOUT PROFIT MOTIVE, THE O BJECT WILL BE CHARITABLE PURPOSE WITHIN THE MEANING OF S. 2(15) . 4. THESE TWO DECISIONS OF THE SUPREME COURT MAY KIN D LY BE BROUGHT TO THE NOTICE OF THE OFFICERS WORKING IN YOUR CHARGE. YOU MAY ALS O KINDLY DIRECT THEM TO CARRY OUT A REVIEW OF THE COMPLETED CASES IN THE LIGHT OF THE PRONOUNCEMENT OF THE SUPREME COURT AND TAKE REMEDIAL ACTION WHEREVER CAL LED FOR AND FEASIBLE. A REPORT INDICATING THE RESULT OF THE REVIEW MAY PLEA SE BE SENT 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 CHAMBER OF COMMERCE DECISION AN D THE MAJO RITY VIEWS, EXPRESSED BY HON'BLE JUSTICE KHANNA AND HON'BLE JUS TICE GUPTA, IN THE CASE OF LOK SHIKSHAN TRUST) DID NOT MEET THE APPROVAL OF A LARGER BENCH OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS SURAT ART SILK CLOTHES MANUFACTURERS ASSOCIATION [(1980) 121 ITR 1 (SC)]. WHILE DOING SO , HON'BLE 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 OUT OF CERTAIN OBSERVATI ONS MADE BY THIS COURT IN SOLE TRUSTEE, LOKA SHIKSHANA TRUST'S CASE (SUPRA) AS WEL L AS INDIAN CHAMBER OF COMMERCE'S CASE (SUPRA). IT WAS SAID BY KHANNA J. I N SOLE TRUSTEE, LOKA SHIKSHANA TRUST'S CASE : '...IF THE ACTIVITY OF A T RUST CONSISTS OF CARRYING ON A ITA NOS.91 &92(ASR)/2014 12 BUSINESS AND THERE ARE NO RESTRICTIONS ON ITS MAKIN G PROFIT, THE COURT WOULD BE WELL JUSTIFIED IN ASSUMING IN THE ABSENCE OF SOME I NDICATION 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 ORGANISATION IS ORDIN ARILY ASSUMED TO BE FOR PROFIT UNLESS EXPRESSLY OR BY NECESSARY IMPLICATION OR BY ELOQUENT SURROUNDING CIRCUMSTANCES THE MAKING OF PROFIT STANDS LOUDLY NE GATIVED...A PRAGMATIC CONDITION, WRITTEN OR UNWRITTEN, PROVED BY A PROSCR IPTION OF PROFITS OR BY LONG YEARS OF INVARIABLE PRACTICE OR SPELT FROM SOME STR ONG SURROUNDING CIRCUMSTANCES INDICATIVE OF ANTI-PROFIT MOTIVATION SUCH A CONDITI ON WILL NULLIFY FOR CHARITABLE PURPOSE.' NOW, WE ENTIRELY AGREE WITH THE LEARNED JUDGES WHO DECIDED THESE TWO CASES THAT ACTIVITY INVOLVED IN CARRYING OUT THE CHARITABLE PU RPOSE MUST NOT BE MOTIVATED BY A PROFIT OBJECTIVE BUT IT MUST BE UNDERTAKEN FOR TH E PURPOSE OF ADVANCEMENT OR CARRYING OUT OF THE CHARITABLE PURPOSE. BUT WE FIND IT DIFFICULT TO ACCEPT THEIR THESIS THAT WHENEVER AN ACTIVITY IS CARRIED ON WHICH YIELD S PROFIT, THE INFERENCE MUST NECESSARILY BE DRAWN, IN THE ABSENCE OF SOME INDICA TION TO THE CONTRARY, THAT THE ACTIVITY IS FOR PROFIT AND THE CHARITABLE PURPOSE I NVOLVES THE CARRYING ON OF AN ACTIVITY FOR PROFIT. WE DO NOT THINK THE COURT WOUL D BE JUSTIFIED IN DRAWING ANY SUCH INFERENCE MERELY BECAUSE THE ACTIVITY RESULTS IN PROFIT. IT IS IN OUR OPINION NOT AT ALL NECESSARY THAT THERE MUST BE A PROVISION IN THE CONSTITUTION OF THE TRUST OR INSTITUTION THAT THE ACTIVITY SHALL BE CARRIED ON N O 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, THE MANNER IN WHICH THE ACTIVIT Y FOR ADVANCING THE CHARITABLE PURPOSE IS BEING CARRIED ON AND THE SURROUNDING CIR CUMSTANCES MAY CLEARLY INDICATE THAT THE ACTIVITY IS NOT PROPELLED BY A DO MINANT PROFIT MOTIVE. WHAT IS NECESSARY TO BE CONSIDERED IS WHETHER HAVING REGARD TO ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DOMINANT OBJECT OF T HE ACTIVITY IS PROFIT MAKING OR CARRYING OUT A CHARITABLE PURPOSE. IF IT IS THE FOR MER, THE PURPOSE WOULD NOT BE A CHARITABLE PURPOSE, BUT, IF IT IS THE LATTER, THE C HARITABLE 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 HON'BLE SUPREME COURT WAS RENDERED, THAT THE WORDS 'NOT INVOLVING THE CARRYING 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. 1024 (SUPRA) AND ON HON 'BLE SUPREME COURT DECISIONS IN THE CASES OF INDIAN CHAMBER OF COMMERC E (SUPRA) AND LOK SHIKSHAN SANSTHAN (SUPRA) IS DEVOID OF ANY LEGALLY SUSTAINAB LE MERITS. THESE DECISIONS ARE NO LONGER GOOD LAW, THE RELEVANT PROVISION IN THE C ONTEXT OF WHICH THE DEC ISIONS WERE GIVEN DOES NO LONGER EXIST ON THE STATUTE, AND THE JUDICIAL PRECEDENT, 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 CENTR AL BOARD OF DIRECT TAXES EXPLAINING THE AMENDMENTS MADE BY THE FINANCE ACT 1983, DROPPING OF THE WORDS ITA NOS.91 &92(ASR)/2014 13 'NOT INVOLVING THE CARRYING ON ANY ACTIVITY FOR PRO FIT' DID NOT REPRESENT ANY PARADIGM SHIFT OR SUBSTANTIVE AMENDMENT IN LAW INAS MUCH AS THIS AMENDMENT WAS STATED TO BE ONLY CONSEQUENTIAL TO SIMILAR RESTRICT ION NOW UNDER SECTION 11 ITSELF. IT WAS EXPLAINED, IN THE AFORESAID CIRCULAR, AS FOLLOW S: AMENDMENT OF THE DEFINITION OF 'CHARITABLE PURPOSE' --SEC. 2(15) 8. UNDER S. 2(15) OF THE IT ACT, 'CHARITABLE PURPOSE' INCLUDES RELIE F OF THE POOR, EDUCATION, MEDICAL RELIEF AND THE ADVANCEMENT OF AN Y OTHER OBJECT OF GENERAL PUBLIC UTILITY NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT. SEC. 3(A) OF THE FINANCE ACT HAS OMITTED THE WORDS 'NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT' FROM THE DEFINITION. THIS AMEN DMENT IS CONSEQUENTIAL TO THE AMENDMENT MADE IN S. 11 OF THE IT ACT BY S. 6(B) OF THE FINANCE ACT WHEREUNDER PROFITS AND GAINS OF BUSINESS I N THE CASE OF CHARI TABLE OR RELIGIOUS TRUSTS AND INSTITUTIONS WILL NOT BE ENTITLED TO EXEMPTION UNDE R THAT SECTION EXCEPT IN CASES WHERE THE BUSINESS 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. 1984-85 AND SUBSEQUENT YE ARS. 27. THE CORRESPONDING AMENDMENT WAS INSERTION OF SECTION 11 (4A ). THIS SECTION, AS IT WAS ORIGINALLY INTRODUCED, IS SET OUT BELOW, FOLLOWED BY CBDT CIRCULAR'S (SUPRA) EXPLANATION ABOUT THE NATURE OF THIS AMENDM ENT: SECTION 11 (4A)- AS INSERTED BY THE FINANCE ACT 1983 (4A) SUB-SECTION (1) OR SUB- SECTION (2) OR SUB-SECTION (3) OR SUB-SECTION (3A) SHALL NOT APPLY IN RELATION TO ANY INCOME, 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 PRINTING AND PUBLICATION O F BOOKS OR PUBLICATION OF BOOKS OR IS OF A KIND NOTIFIED BY THE CENTRAL GOVERNMENT IN THIS BEHALF IN 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 A RE MAINTAINED BY THE TRUST OR INSTITUTION IN RESPECT OF SUCH BUSINESS CBDT CIRCUL AR 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 RELATI NG TO EXEMPTION OF INCOME DERIVED FROM PROPERTY HELD UNDER TRUST FOR CHARITABLE OR RE LIGIOUS PURPOSES; OR OF SUB-S. (2) THEREOF RELATING TO ACCUMULATION OF SETTING APART O F SUCH INCOME FOR APPLICATION TO SUCH PURPOSES; OR THE CONNECTED PROVISIONS OF SUB-S S. (3) AND 3(A) OF THE SAID SECTION WILL NOT APPLY IN RELATION TO PROFITS AND G AINS OF BUSINESS. THIS PROVISIONS WILL APPLY IRRESPECTIVE OF WHETHER THE PROFITS 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 EXEMP TION HAS, HOWEVER, BEEN MADE IN RELATION TO PROFITS AND GAINS OF BUSINESS IN 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 PUBLICATI ON OF BOOKS OR PUBLICATION OF BOOKS OR THE BUSINESS IS OF A KIND NOTIFIED BY THE CENTRAL GOVERNMENT IN THIS BEHALF IN THE OFFICIAL GAZETTE; ITA NOS.91 &92(ASR)/2014 14 (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. 19.2 THE EXCEPTIONS MENTIONED UNDER (A) AND (B) ABO VE WILL NOT BE AVAILABLE UNLESS SEPARATE BOOKS OF ACCOUNT ARE MAINTAINED BY THE TRUST OR INSTITUTION IN RESPECT OF 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 ACT (WHICH RESTRICTED THE EXEMPT ION OF BUSINESS INCOME IN THE CASE OF CHARITABLE TRUSTS AN D INSTITUTIONS FOR THE RELIEF OF THE POOR, EDUCATION OR MEDICAL RELIEF, ONLY IN CASES WH ERE THE BUSINESS IS CARRIED ON THE COURSE OF THE ACTUAL CARRYING OUT OF A PRIMARY PURPOSE OF THE TRUST OR INSTITUTION) HAS BEEN OMITTED. 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. 10 OF THE IT ACT, AND AS SUCH, PROFITS DERIVED BY ANY TRUST, INSTITUTION, ASSOCIATION, ETC. REFERRED TO I N CLS. (21) , (22), (22A), (23), (23A), (23B) (23BB)AND (23BC) WILL CONTINUE TO BE EXEMPT F ROM 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 ARE NOT EXEMPT UNDER S. 11 OF THE IT ACT WILL BE CHARGED TO INCOME-TAX AS IF SUCH PROFITS AND GAINS (INCLUDING ANY OTHER INCOME, IF ANY, WHICH IS ALSO NOT EXEMPT UNDER S. 11 ) WERE THE INCOME OF ANY ASSOCIATION OF PERSONS. 19.5 THE AFORESAID AMENDMENTS TAKE EFFECT FROM 1ST APRIL, 1984 AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASST. YR. 198 4-85 AND SUBSEQUENT YEARS. [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, A S REFLECTED IN THE ABOVE CIRCULAR, INASMUCH AS THIS LIMITATION DID NOT, AS P ER HON'BLE MADRAS HIGH COURT IN THE CASE OF THANTHI TRUST VS CBDT [(1995) 213 ITR 6 39 (MAD)], APPLY TO THE INCOME DERIVED FROM PROPERTY HELD UNDER THE TRUST F OR CHARITABLE PURPOSES. 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 Y ET 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 TRUS T OR AN INSTITUTION, BEING PROFITS AND GAINS OF BUSINESS, UNLESS THE BUSINESS IS INCID ENTAL TO THE ATTAINMENT OF THE OBJECTIVES OF THE TRUST OR, AS THE CASE MAY BE, INS TITUTION, AND SEPARATE BOOKS OF ACCOUNT ARE MAINTAINED BY SUCH TRUST OR INSTITUTION IN RESPECT 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 C IRCULAR NO 642 DATED 15 TH DECEMBER 1992 [(1993) 199 ITR (ST) 7] STATED AS FOL LOWS: CBDT CIRCULAR NO. 621 DATED 19 TH DECEMBER 1991 [(1 992 195 ITR (ST) 154 @165] 15.8 IN ORDER TO BRING EXEMPTION OF CHARITABL E OR RELIGIOUS TRUSTS IN LINE WITH THE CORRESPONDING PROVISIONS IN SECTION 10(23C)(IV) OR (V) OF SUB-SECTION (4A) OF SECTION 11 HAS BEEN AMENDED TO PERMIT TRUST AND INSTITUTIONS TO CARRY OUT BUSINESS ACTIVITIES IF THE BUSINESS ACTIVITIES ARE INCIDENTAL TO THE ATTAINMENT OF ITS OBJECTIVE. THE CHARITABLE OR RELIGIOUS TRUST WILL N O LONGER LOSE COMPLETE EXEMPTION ITA NOS.91 &92(ASR)/2014 15 FROM INCOME -TAX. HOWEVER, THE PROFITS AND GAINS FR OM SUCH BUSINESS ACTIVITY WILL BE SUBJECTED TO TAX. CBDT CIRCULAR NO 642 DATED 15 TH DECEMBER 1992 [(19 93) 199 ITR (ST) 7 @7] IN PARTIAL MODIFICATION TO PARA 15.8 (AS EXTRACTED ABO VE) OF THE CIRCULAR NO. 621, DT. 19TH DEC., 1991 ISSUED FROM F. NO. 133/389/91 -TPL, IT IS CLARIFIED THAT ACCORDING TO THE 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 W ILL NOT BE LIABLE TO TAX IF THE BUSINESS IS INCIDENTAL TO TH E ATTAINMENT OF THE OB JECTIVES OF THE TRUST OR INSTITUTION, AS THE CASE MAY BE. IN ADDITION, SEPARATE BOOKS OF ACCOUNT ARE TO BE MAINTAINED BY THE TRUST OR INSTITUTION IN RESPECT OF SUCH BUSINES S. INCOME OF ANY OTHER BUSINESS WHICH IS NOT INCIDENTAL TO THE ATTAINMENT OF THE OB JECTIVES 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 O BJECTIVES OF THE TRUST IS CONCERNED, THE LEGAL POSITION ALWAYS WAS THAT, AS L ONG 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 T HE LAW PREVAILING AS AT THE POINT OF TIME IN THE CONTEXT O F WHICH HON'BLE SUPREME COURT'S FIVE JUDGE BENCH HAD DELIVERED THE JUDGMENT IN THE CASE CIT VS SURAT ART SILK CLOTHES MANUFACTURERS ASSOCIATION (SUPRA). IN THE S AID CASE, THEIR LORDSHIPS HAD, INTER ALIA, HELD, BY MAJORITY VIEW, THAT 'WHAT IS N ECESSARY TO BE CONSIDERED IS WHETHER HAVING REGARD TO ALL THE FACTS AND CIRCUMST ANCES 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 P URPOSE, BUT, IF IT IS THE LATTER, THE CHARITABLE CHARACTER OF THE PURPOSE WOULD NOT B E LOST'. OF COURSE, AS THE LAW WAS SO LAID DOWN, THE SCHOOL OF THOUGHT TO THE EFFE CT 'HOWEVER, IF THE OBJECT OF THE TRUST IS ADVANCEMENT OF AN OBJECT OF GENERAL PU BLIC UTILITY AND IT CARRIED ON ANY ACTIVITY FOR PROFIT, IT IS EXCLUDED FROM THE AMBIT OF CHARITABLE PURPOSE DEFINED IN S. 2(15) ' WAS ARTICULATED IN THE SAID ORDER BUT THAT WAS PA RT OF THE MINORITY VIEW STATED BY JUSTICE A P SEN, AS HE THEN WAS. HIS LORD SHIP DID PROCEED TO OBSERVE, AS IS THE STAND TAKEN BY THE AUTHORITIES BELOW, AS FOL LOWS: '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 FALLING UNDER ANY OF THE FIRST THREE HEADS OF CHARITY, VIZ. , 'RELIEF OF THE POOR', 'EDUCATION' AND 'MEDICAL RELIEF' IT MAY ENGAGE IN ANY ACTIVITY FOR PROFIT, AND THE PROFITS WOULD NOT BE TAXABLE IF THEY WERE UTILIZ ED FOR THE PRIMA RY OBJECT OF THE TRUST. IN OTHER WORDS, THE BUSINESS CARRIED ON BY THEM IS INCIDENTA L OR ANCILLARY TO THE PRIMARY OBJECT, VIZ., RELIEF OF THE POOR, EDUCATION AND MED ICAL RELIEF. TO ILLUSTRATE, A CHARITABLE HOSPITAL HOLDING BUILDINGS ON TRUST MAY RUN A NURSING HOME. THE PROFITS OF THE NURSING 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 OF THE TRUST. THE CONCEP T OF 'PROFITS TO FEED THE CHARITY', THEREFORE, IS APPLICABLE ONLY TO THE FIRS T THREE HEADS OF CHARITY AND NOT THE FOURTH. IT WOULD BE ILLOGICAL AND, INDEED, DIFFICUL T TOAPPLY THE SAME CONSIDERATION ITA NOS.91 &92(ASR)/2014 16 TO INSTITUTIONS WHICH ARE ESTABLISHED FOR CHARITABL E PURPOSES OF ANY OBJECT OF GENERAL PUBLIC UTILITY. ANY PROFIT - MAKING ACTIVIT Y LINKED WITH AN OBJECT OF GENERAL PUBLIC UTILITY WOULD BE TAXABLE. THE THEORY OF THE DOMINANT OR PRIMARY OBJECT OF THE TRUST CANNOT, THEREFORE, BE PROJECTED INTO THE FOURTH HEAD OF CHARITY, VIZ., 'ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL P UBLIC UTILITY', SO AS TO MAKE THE CARRYING ON OF A BUSINESS ACTIVITY MERELY ANCILLARY OR INCIDENTAL 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 T AKEN BY THE AUTHORITIES BELOW CANNOT BE SUSTAINED IN LAW. ASSUMING THAT ALL THE A LLEGATIONS OF THE ASSESSING OFFICER, WITH RESPECT TO PRESENCE TO PROFIT MOTIVE IN ACTIVITIES OF THE ASSESSEE ARE CORRECT, SINCE THESE ACTIVITIES WERE CARRIED OUT WI TH THE LARGER AND PREDOMINANT OBJECTIVE OF GENERAL PUBLIC UTILITY. IT IS ONLY WHE N, TO USE THE WORDS OF THE CBDT CIRCULAR CITED EARLIER IN THIS ORDER AND THE BENEFI CIAL 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 OTH ER 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 N OT EVEN THE CASE OF REVENUE AUTHORITIES THAT THE ACTIVITIES OF THE TRUSTS DO NO T SERVE THE OBJECTS OF THE GENERAL PUBLIC UTILITY BUT THE CASE IS CONFINED TO THE STAN D THAT THESE ACTIVITIES HAVE BEEN CARRIED OUT IN SUCH A MANNER AS TO MAKE PROFIT AND NO ACTIVITIES DIRECTLY OF ANY GENERAL PUBLIC UTILITY ARE CARRIED OUT. THE REGISTR ATION GRANTED TO THE ASSESSEE EVIDENCES THAT THE OBJECTS OF THE ASSESSEE TRUST WE RE ADVANCEMENT OF OBJECTS OF GENERAL PUBLIC UTILITY, AND THERE IS NOTHING TO DEM ONSTRATE ANY PARADIGM SHIFT FROM THIS FUNDAMENTAL POSITION. THE ALLEGATION IS ONLY O F THE PROFIT MAKING BUT THAT DOES NOT OBLITERATE THE OVERALL OBJECTS OF GENERAL PUBLI C UTILITY. AS REGARDS 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 MAINTAIN ED BY THE ASSESSEE TRUST MEET THIS REQUIREMENT AS WELL. OF COURSE, WE WILL DEAL W ITH THE ISSUE OF ACTIVITIES BEING IN THE NATURE OF 'PROFIT MAKING ACTIVITIES' A LITTL E LATER, BUT, SUFFICE TO SAY, THAT ON THE ADMITTED FACTS OF THIS CASE, SO FAR PERIOD PRIO R 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. 32. TURNING ONCE AGAIN TO THE AMENDMENTS BROUGHT ON THE STATUE WITH EFFECT FROM 1ST APRIL 2009, WE HAVE TO UNDERSTAND THAT THERE AR E THE TWO MUTUALLY EXCLUSIVE SITUATIONS IN WHICH BUSINESS ACTIVITIES ARE CARRIED OUT BY THE ASSESSE TRUST - ONE, IN WHICH '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 ETC' [REFERRED TO IN THE CBDT CIRCULAR NO. 11 DATED 19 TH DECEMBER 2008 ISSU ED AT THE POINT OF TIME WHEN FIRST PROVISO TO SECTION 2(15) WAS INTRODUCED] ; AND - SECOND, IN WHICH ANY ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR BUSI NESS ETC ARE 'UNDERTAKEN IN THE COURSE OF ACTUAL CARRYING OUT OF SUCH ADVANCEMENT O F ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY', [INSERTION OF NEW PROVISO TO REPLA CE FIRST AND SECOND PROVISO TO ITA NOS.91 &92(ASR)/2014 17 SECTION 2(15) - EFFECTIVE 1 ST APRIL 2016 I.E. ASSESSMENT YEAR 20 16- 17]. AS FOR THE FIRST CATEGORY, POST 1 ST APRIL 2009 AMENDMENT, THI S CATEGORY CANNOT BE TREATED AS COVERED BY SECTION 2(15) BUT THEN THAT'S NOT THE CASE BEFORE US. IT IS NOT, AND IT CANNOT BE, THE CASE THAT THE GOVERNMENT FORMED THES E TRUSTS BY LEGISLATING THE PUNJAB TOWNS IMPROVEMENT ACT 1922 BECAUSE IT WANTED TO CARRY ON THE BUSINESS AS COLONIZER OR DEVELOPER. THEREFORE, BY NO STRETCH OF LOGIC, FORMATION OF TRUSTS CAN BE SAID TO A MASK OR DEVICE TO HIDE THE TRUE PU RPOSE OF THE DOING BUSINESS. THE CASE OF THE REVENUE AT BEST IS THAT THE MANNER IN W HICH THE ACTIVITIES ARE CARRIED OUT IS OF A PROFIT SEEKING ENTITY THAT A BUSINESS INHER ENTLY IS. IN OTHER WORDS, THUS, THE CASE OF THE REVENUE IS THAT THE ACTIVITIES IN THE N ATURE OF TRADE, COMMERCE AND BUSINESS ARE CARRIED OUT FOR ADVANCEMENT OF OBJECTS OF GENERAL PUBLIC UTILITY. THIS SITUATION AT BEST FALLS IN THE SECOND CATEGORY. HOW EVER, THESE CASES, FOR THE DETAILED REASONS SET OUT ABOVE, THE EXCLUSION OF TH ESE CASES FROM SECTION 2(15) IS ONLY EFFECTIVE 1 ST APRIL 2016, I.E. ASSESSMENT YEA R 2016-17. THE LAW IS WELL SETTLED BY A FIVE JUDGE BENCH OF HON'BLE SUPREME CO URT, 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 EFF ECT UNLESS IT IS SPECIFICALLY LEGISLATED TO BE SO. IN OUR CONSIDERED VIEW, THEREF ORE, THIS AMENDMENT CANNOT BE TREATED AS CLARIFICATORY OR RETROSPECTIVE IN EFFECT . IN VIEW OF THESE DISCUSSIONS, EVEN POST INSERTION OF PROVISO TO SECTION2(15) BUT BEFORE 1 ST APRIL 2016, WHEN BUSINESS ACTIVITIES ARE CARRIED BY THE ASSESSEE TRU ST 'IN THE COURSE OF ACTUAL CARRYING OUT OF SUCH ADVANCEMENT OF ANY OTHER OBJEC T OF GENERAL PUBLIC UTILITY', THE BENEFIT OF SECTION 11 READ WITH SECTION 2 (15) CANNOT BE DECLINED. NOTHING, THEREFORE, TURNS ON THE ASSESSEE CARRYING OUT, EVEN IF THAT BE ACTUALLY SO, ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR BUSINESS ETC AS LONG AS THESE ACTIVITIES ARE CARRIED OUT IN THE COURSE OF ACTUAL CARRYING OUT OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. THE PLANNED DEVELOPMENT OF CITIES AND TOWNS IS AN OBJECT OF GENERAL PUBLIC UTILITY, AND THAT IS AN OBJECT CO NSISTENTLY FOLLOWED BY THE ASSESSEE IN ALL ITS ACTIVITIES. FOR THIS SHORT REAS ON ALONE, THE STAND OF THE AUTHORITIES 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 ASSESSEE HAS SOLD RESIDENTIAL AND COMMERCIAL UNITS AND RESIDENTIAL AND COMMERCIAL LANDS 'JUST TO EARN PROF IT' 34. THIS PROFITEERING, AS LEARNED DEPARTMENTAL REPR ESENTATIVE PUTS IT, IS THE CORE ISSUE IN THESE APPEALS. AS WE DEAL WITH THIS ASPECT OF THE MATTER, WE MAY REPRODUCE THE FOLLOWING WRITTEN SUBMISSIONS FILED B Y LEARNED DEPARTMENTAL REPRESENTATIVES: A: IN ALL IMPROVEMENT TRUST CASES IT IS SUBMITTED T HAT THE LEARNED COUNSEL NAMELY SHRI Y.K. SOOD, CA AND SHRI J.S. BHASHI, ADVOCATE H AVE ARGUED THESE APPEALS . MY COUNTER -SUBMISSIONS ARE AS UNDER :- IT IS SUBMITTED THAT THERE ARE TWO SITUATIONS I.E. A) WHERE THE ASSESSEE'S ARE RENDERING GENERAL PUBLI C UTILITY SERVIC ES AND IN RENDERING SUCH SERVICES AND DUE TO EXIGENCY OF REND ERING SUCH SERVICE SOME SURPLUS (NOT PROFIT) RESULTS SUCH ASSESSEE ARE NOT HIT BY THE PROVISO TO SECTION 2(15) ITA NOS.91 &92(ASR)/2014 18 EVEN IF RENDERING OF SUCH SERVICES PARTAKE THE CHAR ACTER OF TRADE, COMMERCE OR BUSINESS OR RENDERING SERVICES IN RELATION TO ANY T RADE COMMERCE OR BUSINESS. B) WHERE THE ASSESSEE HAVE THE OBJECTIVE OF RENDERI NG GENERAL PUBLIC UTILITY SERVICES BUT FOR DOING SO THEY FIRST EARN INCOME BY ENGAGING THEMSELVES IN ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR BUSI NESS OR RENDERING ANY SERVICE IN RELATION TO ANY TRADE AND THEN APPLY SUCH INCOME TO THE CHARITABLE OBJECTS. WHEREAS IN THE FORMER SITUATION, REGISTRATION UNDER SECTION 12AA WOULD BE ALLOWABLE AND ALSO THE EXEMPTION UNDER SECTION 11 & 1 2 BUT FOR THE LATTER SITUATION, NO SUCH PRIVILEGE WOULD BE ALLOWED AS DO ING OF TRADE, COMMERCE OR BUSINESS OR RENDERING ANY SERVICE IN RELATION TO TR ADE 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 JUDGEMENTS RELIED UPON BY SHRI Y.K. SOOD, CA THE JUDGEMENT AT S.NO.1 TO 5, 7, 10, 11,14, 15, 16, 17 & 18 FALLEN IN THE FORMER CATEGORY AND THE JUDGE MENT AT S. NO.9 HAD NOT BEEN PRESSED BY SHRI SOOD. THE JUDGEMENT AT S.NO.12 PERT AINS TO PRE -AMENDED PROVISIONS OF SECTION 2(15) AND IS THUS NOT APPLICABLE. AS REGARDS THE JUDGEME NT AT S.NO.6 & 13, THE SAME RUN COUNTER TO THE JUDGEMENT OF THE JURISDICTIONAL TRIBUNAL'S ORDER IN THE CASE OF JAMMU DEVELOPMENT A UTHORITY WHICH HAS BEEN CONFIRMED BY THE J&K HIGH COURT AND THE SLP FILED B Y THE ASSESSEE HAS ALSO BEEN DISMISSED BY THE HON'BLE SUPREME COURT. IT IS PERTI NENT 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 S UCH INCOME IS APPLIED FOR CHARITABLE PURPOSES, WOULD NOT MAKE ANY DIFFERENCE AND THE ACTIVITY WOULD NONETHELESS NOT BE REGARDED BEING CARRIED ON FOR A CHARITABLE PURPOSE.' THIS FINDING OF THE HON'BLE DELHI HIGH COURT CLEARL Y SUPPORTS THE CAUSE OF THE REVENUE AS THE PRECISE NATURE OF THE ACTIVITIES IS THE SAME AS ARTICU LATED BY THE HON'BLE DELHI HIGH COURT IN THE ABOVE PARAGRAPH. IT 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 TAX AT, 1961 AND WHEN READ IN ITS TO TALITY, THE JUDGEMENT SUPPORT THE CASE OF THE REVENUE AS IT SQU ARELY SUPPORTS A CASE WHERE THE INTENTION IS TO DO CHARITY BY ACTIVITIES WHICH MAY EMBARK UPON ANY TRADE COMMERCE OR BUSINESS OR RENDERING ANY SERVICE IN TH E NATURE OF TRADE, COMMERCE OR BUSINESS AND NOT THAT INCOME ACCRUES DUE TO THE EXIGENCY OF UNDERTAKING GENERAL PUBLIC UTILITY 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 HELD BY THE HON'BLE TRIBUNAL MUMBAI 'C' BENCH THAT ASSESSEE IS AN AGENT OF THE GOVERNMENT AND DOES NOT HOLD ANY INDEPENDENT EN TITY WHEREAS THE TRUSTS ARE A CORPORATE BODY AND HAVE PERPETUAL SUCCESSION AND CO MMON SEAL AND CAN SUE AND BE SUED IN ITS NAME AS PER SECTION 3 OF THE PUNJAB TOWN IMPROVEMENT TRUST ACT, 1922. IN VIEW OF THIS DIFFERENCE ALSO, THE SAID JUD GMENT IS NOT APPLICABLE TO THIS CASE. ITA NOS.91 &92(ASR)/2014 19 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 LI KE A BUILDER TO EARN MONEY I.E. IT PURCHASES (ACQUIRES) PROPERTY AND DIVIDES THE SA ME INTO PLOT OR BUILD THE SAME AND SELLS THE PLOT OR THE BUILDINGS WHICH IT RAISES BOTH BY WAY OF RESERVE PRICE (RESIDENTIAL BUILDINGS OR PLOTS) AND COMMERCIAL PLO TS OR COMMERCIAL BUILDINGS BY AUCTION. THERE IS ABSOLUTELY NO DOUBT THAT WHEN LAN D OR BUILDINGS ARE PUT ON AUCTION BY THE TRUST, THE INTENT IS TO MAKE MAXIMUM PROFIT AND WHE N IT SELLS RESIDENTIAL PLOTS OR RESIDENTIAL BUILDINGS, IT SELL S 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 WOULD BE SEEN FROM THE ANNE XURE AT PAGE 9 OF THE PAP ER BOOK FILED BY SHRI Z.S. BHASIN, ADVOCATE WHICH INCL UDES 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 HUGE ELEMENT OF PROFIT IN THE GARB OF CONSERVANCY CHARGES FOR FIVE YEARS @ 10% OF THE TOTAL RESERVE P RICE AND ALSO PROVISION FOR UNFORESEEN CHARGES @ 15% OF THE RESERVE PRICE SO DE TERMINED. IT IS PERTINENT TO MENTION HERE THAT ALL THE UNFORESEEN CHARGES HAVE A LREADY BEEN CONTEMPLATED IN THE COMPUTATION OF RESERVE PRICE UNDER THE HEAD 'OV ERHEAD CHARGES' AT SUB -PARA (V) WHERE PROVISION FOR 'OTHER PUBLIC UTILITY' HAS ALREADY BEEN 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 GURM UKHI SCRIPT AND ITS ENGLISH TRANSLATION AS UNDER :- 'IT IS WORTH MENTIONING HERE THAT IMPROVEMENT TRUST GETS NO GRANT FROM THE GOVERNMENT. TRUST GETS ITS INCOME FROM SALE OF PLOT S/SHOPS/COMMERCIAL SITES ONLY. OTHER THAN THIS, THE TRUST HAS NO OTHER ADDITIONAL SOURCE O F INCOME. THE TRUST SPENDS THE INCOME GENERATED OUT OF THE SAID ACTIVIT IES ON THE PUBLIC UTILITY SERVICES.' IT CLEARLY SHOWS THAT THERE IS ADMISSION THAT THE T RUST WITH THE INTENTION OF PROVIDING PUBLIC UTILITY SERVICES FIRST DOES BUSINE SS OF PURCHASE AN D 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 HIGH PITCHED FIGURE AND ALSO PUTTING THE COMMERCIAL PLOTS AND COMMERCIAL BUILDING ON AUCTION, IT SPENDS ON SU CH PUBLIC UTILITY SERVICES WHICH IS EMINENTLY HIT BY THE PROVISO TO SECTION 2(15) OF THE INCOME TAX ACT, 1961. IT CLEARLY FALSIFIES THE CLAIM OF MR. BHASIN THAT TRUSTS HAVE INCOME FROM OTHER SOURCES AS CONTEMPLATED IN SECTION 68 OF THE ACT. THIS SHOWS THAT THE GOVERNMENT DOES NOT GIVE TO TRUSTS WHAT IT ITSELF H AS ASSURED THE TRUSTS IN THE ACT. IT MAY FURTHER BE MENTIONED THAT TRUSTS ARE NOT AGE NT OF THE STATE AS IF IT WERE SO, THERE WOULD NOT HAVE BEEN ANY PROVISION AS SECTION 70 IN THE ACT WHICH EMPOWERS THE STATE GOVERNMENT TO ATTACH THE RENTS AND OTHER INCOME OF THE TRUST. AIT IS SUBMITTED THAT THE FACTUM OF THE TRUSTS MAKING EXOR BITANT PROFIT IS BEST ELUCIDATED FROM THE WAY THE IMPROVEMENT TRUST PATHANKOT HAS SO LD A PLOT OF LAND TO INCOME TAX DEPARTMENT. THE PRICE IT HAD INFORMED TO THE DE PARTMENT IN 2011 WAS RS.5,03,30,800/- BUT IN THE YEAR 2014, THE PRICE FO R THE SAME PLOT WAS INTIMATED AT ITA NOS.91 &92(ASR)/2014 20 RS.10,43,65,946/-. THUS IN A PERIOD OF THREE YEAR A ND A HALF, IT HAD MORE THAN DOUBLED THE PRICE OF ITS PLOT MEASURING 60.35 MARLA S. AN AFFIDAVIT OF SHRI CHARAN 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 AMOUNTS TO ROBBING PETER TO PAY PAUL AND SURELY SUCH AN ACT IVITY CANN OT 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 SUBMIT TED THE ABOVE APPEALS HAVE BEEN RESTORED BY THE HON'BLE 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 HON'BLE PUNJAB & HA RYANA HIGH COURT HAS DIRECTED THE TRIBUNAL TO ADJUDICATE THE ISSUE REGARDING THE NATURE OF ACTIVITIES OF THE APPELLANT TRUST WHETHER THEY ARE IN THE NATURE OF C HARITABLE WITHIN THE MEANING OF SECTION 2(15) OF THE ACT IN RESPECT OF ASSESSMENT YEARS IN QUEST ION 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 ARE N OT IN THE NATURE OF CHARITABLE FOR MULTIPLE REASONS, I.E. A. THE ASSESSEE TRUST IS ENG AGED IN THE SALE AND PURCHASE OF PROPERTIES WITH A COMMERCIAL MOTIVE. FIRST, IT PURC HASES LANDED PROPERTIES INCLUDING PLOTS AND SELLS THE PLOT IN TWO CATEGORIE S I.E. RESIDENTIAL AND COMMERCIAL. THE RESIDENTIAL PLOTS ARE SOLD AT RESERVE PRICE WHI CH 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 IMP ROVEMENT (UTILISATION OF LAND AND ALLOTMENT OF PLOTS) RULES, 1983 (COPY ALRE ADY SUBMITTED IN JALANDHAR IMPROVEMENT TRUST'S 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 ALL OTTEES THE SAME IS FOR RESIDENCE PURPOSES. THUS, IT IS CLEAR TH AT THIS ACTIVITY 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 POSS IBLE AND IF THE BIDDERS DO RAISE THE BID BEYOND THE RESERVE PRICE, THE AUCTION IS CANCEL LED. THUS, IT IS CLEAR THAT IN THIS ACTIVITY ALSO NO CHARITY IS INVOLVED. RELIANCE IN THIS REGARD IS PLACED ON THE JUDGEMENT OF THE HON'BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF ANDHRA PRADESH STATE SEED CERTIFICATION AGENC Y V CHIEF COMMISSIONER OF INCOME TAX & OTHERS REPORT 83 DTR 0023 (COPY ENCLOSED FOR KIND PERUSAL). IN THIS JUDGEMENT, THE HON'BLE 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 THE CLIENTS WHO FINALLY CARRY OUT TRADE OR COMMERCE IN CERTIFIED SEEDS. THUS, PETITIONER HAD RENDERED ITS SERVICES NOT DIRECTLY TO FARMERS B UT WAS RENDERING ITS SERVICES DIRECTLY TO ITS CLIENTS/AGENTS W HO ARE ENGAGED IN TRADING OF THE CERTIFIED SEEDS WITH PROFIT MOTIVE. ACTIVITIES OF THE PETITIONER HAD NOT INDICTED INVOLVEMENT OF ANY CHARITABLE ACTIVITY OR ADVANCE OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. ITA NOS.91 &92(ASR)/2014 21 FUNCTIONING OF THE PETITIONER WAS AKIN TO A CORPORA TE PROFIT EARNING SERVICE PROVIDER.' THE TRUST ALSO SELLS PLOTS AND BUILDING FOR COMMERC IAL PURPOSES TO PERSONS WHO DO BUSINESS FOR THEIR OWN GAIN AND LIKEWISE THE TRU ST CANNOT BE SAID TO BE DOING ANY ACTIVITY OF CHARITABLE NAME AS ITS ACTIVITIES F ALL, STRUCO SENSU, IN THE SAME DOMAIN AS THE ACTIVITIES OF THE ANDHRA PRADESH STAT E SEED CERTIFICATE AGENCY (SUPRA) FALL. ITS ACTIVITY OF SELLING PLOT AND BUIL DING FOR RESIDENCE TO PERSONS THOUGH FOR THE ALLOTTEE IT MAY NOT FOR COMMERCIAL P URPOSE BUT TH E WAY THE TRUST FIXES ITS RESERVE PRICE AS DISCUSSED ABOVE, IT IS C LEAR THAT THE 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 WELL COMMERCIAL PLOTS OR BUILDINGS, IT INCLUDES IN ITS COST ALL THE AMENITIES WHICH IT PROMISES TO THE PEOPLE INCLUDING ALL DEVELOPMENT CHARGES LIKE ROADS, SEWERAGE, WATER SUPPLY, STORM WATER DRAINAGE , STREET LIGHTING AND LOCAL DISTRIBUTION SYSTEM AND UNJUSTIFIED COST AS PER ROU GH COST ESTIMATE OF PUNJAB STATE ELECTRICITY BOARD AND ALSO PROVISION FOR LANDSCAPIN G AND FURTHER INCREASED BY OVERHEAD CHARGES AS MENTIONED AT PARA 2 & 3 OF THE ANNEXURE. THUS, IT IS CLEAR THAT THE TRUST PROVIDES NO AMENIT Y WHICH I S THE SOLE CLAIM OF THE ASSESSEE TRUST. IT MAY BE SUBMITTED THAT THIS ANNEX URE HAS ALREADY BEEN BROUGHT TO THE NOTICE OF THE HON'BLE BENCH IN THE CASE OF J ALANDHAR IMPROVEMENT TRUST IN ITA NO.402/ASR/2014. NOW COMING TO THE TWO DECISIONS WHICH THE HON'BL E BENCH ASKED THE UNDERSIGNED TO COMMENT UPON. IT IS SUBMITTED IN THE CASE OF STOCK EXCHANGE AHMEDABAD V ASSISTANT COMMISSIONER OF INCOME TAX RE PORTED AT 74 ITD 0001, IT MAY BE SUBMITTED THAT AS DISCUSSED ABOVE, THERE IS NO ELEMENT OF CY PRESS INVOLVED IN THE ACTIVITIES OF THE TRUST. IT MAY BE MENTIONED HERE THAT THE MOST DISTINGUISHABLE FEATURE IS THE TRUST IS IT IS RENDE RING NO GENERAL PUBLIC UTILITY AS WHATEVER PUBLIC UTILITY SERVICE IT IS PROVIDING, IT FIRST RECOVERS ITS COST FROM THE BUYERS AS DISCUSSED ABOVE. FURTHER, IT IS SUBMITTED THAT THE DECISION IN THE CASE OF ITO VS. TRILOK TIRATH VIDYAVATI CHUTTANI CHARITABLE TRUST OF CHANDIGARH 'B' BENCH REPORTED AT 90 ITD 569 DOES NOT HOLD GOOD FOR TWO REASONS: THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE ABOV E ORDER HAD RESTORED THE ISSUE TO THE BENCH BEING WELL AWARE OF THE FACT THA T THE TRUST HAD BEEN GRANTED REGISTRATION BY THE BENCH. THE HIGH COURT CLEARLY D ID NOT HOLD THAT ONCE THE REGISTRATION IS GRANTED, EXEMPTION UNDER SECTION 11 CANNOT BE DEN IED TO THE ASSESSEE ON THE GROUND THAT IT WAS NOT A CHARITABLE INSTITUTION. IF THIS DECISION OF THE TRIBUNAL IS TO PREVAIL THEN RESTORATION OF THE ISSUE TO THE TRIBUNAL BY THE HIGH COURT WOULD BECOME REDUNDANT. IT IS SUBMITTED THAT SUBMISSIONS MADE IN TH E CASE OF JALANDHAR IMPROVEMENT TRUST AND OTHER TRUST DURING THE COURSE OF HEARING OF TRU STS' CASES ARE ALSO PRESSED INTO SERVICE IN THESE APPEALS. IN VIEW OF THE ABOVE SUBM ISSIONS, IT IS PRAYED THAT THE ISSUE MAY KINDLY BE DECIDED IN FAVOUR OF THE REVENU E.' 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 NECESSARILY IMPLY PROFIT MOTIVE IN ACTIVITIES OF TH E ASSESSEE TRUST. WHAT I S IMPORTANT IS THE MOTIVE OR PREDOMINANT OBJECT OF TH E ACTIVITIES. AS WE DO SO, WE ITA NOS.91 &92(ASR)/2014 22 MAY ONLY MAKE A NOTE OF THE FOLLOWING OBSERVATIONS MADE BY A COORDINATE BENCH DECISION IN THE CASE OF DEVKI DEVI FOUNDATION VS DI T [(2015) 56 TAXMANN.COM 56 (DELHI)]: 29..............................THE SOUL OF CHARITY IS BENEVOLENCE AND GENEROSITY TOWARDS OTHERS AND THE COMMUNITY AT LARGE. OF COURS E, IT IS IMPORTANT AS TO WHAT ARE THE ACTIVITIES OF A CHARITABLE INSTITUTION BUT WHAT IS EVEN MORE IMPORTANT IS WHAT IS THE PREDOMINANT MOTIVATION FOR SUCH ACTIVIT IES. NO ACTIVITY, BY ITSELF, COULD BE CHARITABLE IN NATURE WHEN IT IS DOMINATED AND TRIGGERED BY ECONOMIC GREED. THERE IS NO DIFFERENCE IN WHAT A SOLDIER AND A MERCENARY DOES, BOTH USE BULLETS TO DEFEND THEIR INTERESTS, BUT WHILE A SOLD IER D OES IT OUT OF PATRIOTISM, A MERCENARY DOES IT FOR MONETARY GAIN. THE ACTION IS THE SAME, AND YET MOTIVATION FOR THE ACTIONS ARE SO MATERIALLY DIFFERENT THAT TH E CHARACTER OF ACTIVITY IS ALTOGETHER CHANGED. CLEARLY, UNDERLYING MOTIVE AND TRIGGER FOR DOING W HAT A PERSON DOES IS, IS IMPORTANT FOR DETERMINING WHETHER SUCH AN ACTION IS IN THE COURSE OF BUSINESS OR CHARITY. WHAT IS REALLY, THEREFORE, REQUIRED TO BE CAREFULLY EXAMINED, IN ORDER TO FIND WHETHER AN ACT OF THE INSTITUTION IS CHARITABL E OR NOT, IS NOT ONLY TO ASSESS THE WORK BEING DONE BY THE INSTITUTIONS, WHICH CLAIM TO BE PURSUING CHARITABLE ACTIVITIES, BUT ALSO THE ECONOMIC DYNAMICS AND MOTI VATIONS OF SUCH ACTIVITIES. 36. LEARNED DEPARTMENTAL REPRESENTATIVE HAS POINTED OUT THAT THE COMMERCIAL PLOTS AND UNITS ARE AUCTIONED OFF WHICH SHOWS THAT THE IDEA IS TO MAKE MAXIMUM PROFITS BUT WHAT HE CLEARLY OVERLOOKS IS THE FACT T HAT SINCE IT IS NOT A DESIRABLE STATE OF AFFAIRS FOR THE STATE TO SUBSIDIZE BUSINESSES, A ND TO ENSURE HIGHEST DEGREE OF TRANSPARENCY IN MAXIMISING RETURNS FROM PUBLIC ASSE TS, COMPETITIVE BIDDING FOR COMMERCIAL 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 TRUSTS AND THAT, BY ITSELF, DOES NO T MAKE THE FUNCTIONING OF THE IMPROVEMENT TRUST A COMMERCIAL VENTURE. IT IS ALSO IMPORTANT THAT THIS USE OF BIDDING PROCESS IS ONLY IN THE CONTEXT OF COMMERCIA L UNITS ETC. THE DEVELOPMENT OF COMMERCIAL AREAS IS IN THE INTEREST OF PLANNED G ROWTH OF AN AREA AND WHEN SUCH COMMERCIAL AREAS DEVELOP, ALL THE STAKEHOLDERS IN T HE DEVELOPMENT OF THAT AREA BENEFIT. IN ORDER OF THIS BENEFIT TO THE COMMON CAU SE, IT IS NOT NECESSARY THAT THE BUSINESSMEN, BUYING SUCH UNITS, MUST ALSO BENEFIT. THE DENIAL OF ANY ADVANTAGE, AT THE COST OF GENERAL PUBLIC, TO THE BUSINESS ENTI TIES BUYING THE COMMERCIAL AREAS, IN OUR CONSIDERED VI EW, DOES NOT AMOUNT TO AN DEFE ATING AN OBJECT OF GENERAL PUBLIC UTILITY. IN THIS CONTEXT, IT IS IMPORTANT TO UNDERSTAND THE BENEFIT FROM DEVELOPING COMMERCIAL AREAS, WHICH IS FOR PUBLIC GO OD, AND BENEFIT TO THE BUSINESS PERSONS IN BUYING THESE UNITS FROM THE ASS ESSEE TRUST, WHICH CAN ONLY BE FOR THE GOOD OF BENEFIT OF THESE ENTREPRENEURS. AS FOR THE SALE OF RESIDENTIAL UNITS, IT IS AN ADMITTED POSITION THAT IN TERMS OF THE PUN JAB TOWN IMPROVEMENT (UTILIZATION OF LAND AND ALLOTMENT OF PLOTS) RULES, 1983, THERE IS A FORMULAE ON THE BASIS OF WHICH THE PRICE IS WORKED OUT. LEARNED DEPARTMENTAL REPRESENTATIVE DOES NOT DISPUT E 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 UNFORESEEN CH ARGES @ 15% OF TOTAL RESERVE PRICE. FIRSTLY, EVEN IF THIS ALLEGATION ABOUT PRESE NCE OF THE TWO ELEMENTS ONLY TO MAXIMIZE THE PROFIT BE TAKEN AS CORRECT, IT IS IMPO RTANT TO BEAR IN MIND THE FACT ITA NOS.91 &92(ASR)/2014 23 THAT THIS IS NOT THE PRESENCE OF PROFIT ELEMENT IN THE ACTIVITIES WHICH VITIATES CHARITABLE CHARACTER OF THE ACTIVITIES BUT IT IS TH E 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 INSTRUCTION NO. 102 4 (SUPRA), IT HAS BEEN STATED THUS: 'ORDINARILY PROFIT MOTIVE IS A NORMAL INCIDEN T OF BUSINESS ACTIVITY AND IF THE ACTIVITY OF A TRUST CONSISTS OF CARRYING ON OF A BU SINESS AND THERE ARE NO RESTRICTIONS ON ITS MAKING PROFIT, THE COURT WOULD BE WELL JUSTI FIED IN ASSUMING 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 P RESENCE OF THESE TWO ITEMS DOES NOT SHOW THAT THE UNDERLYING OBJECT OF INCLUDING TH ESE TWO ITEMS IN THE FORMULA WAS PROFIT MAXIMISATION. THE INCLUSION FOR PROVISIO N FOR UNFORESEEN CHARGES, IN OUR UNDERSTANDING, IS A FAIR AND CONSERVATIVE APPRO ACH TO ENSURE THAT THE COSTS INCURRED BY THE ASSESSEE TRUST ARE RECOVERED FROM T HE END BUYERS OF THE RESIDENTIAL UNITS OR LAND. THE ELEMENT OF CHARITY IS NOT IN GIV ING AWAY THE RESIDENTIAL UNITS AT SUBSIDIZED OR LOW PRICES BUT IN PURSING THE OBJECT OF ADVANCEMENT OF OBJECT OF GENERAL PUBLIC UTILITY IN PLANNED DEVELOPMENT OF TH E ARE IN ACCORDANCE WITH THE POLICIES OF THE STATE GOVERNMENT. 37. A LOT OF EMPHASIS HAS BEEN MADE BY THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE FACT THAT NOTHING, OR VERY LITTLE, HAS BEEN DONE BY THE TRUSTS FOR THE POOR PEOPLE BUT WHAT THIS ARGUMENT OVERLOOKS IS THAT THE ASSESSEE TRUST IS NOT GRANTED REGISTRATION UNDER SECTION 2 (15) FOR IMPLEMENTING POVERTY ALLEVIATION PROGRAMS OR DOING OTHER ACTS OF CHARITY BUT IT IS GRANTED REGIS TRATION BECAUSE WHAT IT IS PURSUING, BY FOLLOWING THE STATE GOVERNMENT POLICIE S FOR PLANNED DEVELOPMENT OF CITY, IS ADVANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTILITY. PURSUING AN OBJECT OF GENERAL PUBLIC 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 ASSESSEE TRUSTS A RE PERCEIVED TO BE, THAT NO MATTER WHAT THESE AGENCIES DO, THERE IS STILL LOT L EFT TO BE DONE. JUST BECAUSE THESE AGENCIES COULD HAVE DONE MORE, SUCH EXPECTATIONS, N O MATTER HOW LEGITIMATE, DO NOT OBLITERATE T HE WORK DONE BY THESE AGENCIES AND THE ROLE PLAYED BY THESE AGENCIES FOR PUBLIC GOOD IN FURTHERANCE OF ADVANCEM ENT OF OBJECTS OF GENERAL PUBLIC UTILITY. 38. LEARNED DEPARTMENTAL REPRESENTATIVE HAS ALSO PO INTED OUT THAT THE ASSESSEE TRUSTS DONOT GET ANY GRANT FROM THE STATE GOVERNMEN T WHICH SHOWS THAT FIRST THEY MAKE PROFITS FROM LAND DEALS AND THEN USE THE INCOM E SO EARNED FOR THE PUBLIC CAUSES STATED. IT IS FOR THIS REASON, ACCORDING TO THE LEARNED DEPARTMENTAL REPRESENTATIVE, THAT THE ASSESSEE TRUST CANNOT BE S AID TO BE ANYTHING OTHER THAN A BUSINESS SIMPLICITOR. ON THE CONTRARY, ACCORDING TO THE LEARNED DEPARTMENTAL REPRESENTATIVE, IT IS LIKE ROBBING PETER TO PAY PAU L. WE ARE UNABLE TO SHARE THESE PERCEPTIONS OF THE LEARNED DEPARTMENTAL REPRESENTAT IVE. AN OBJECT OF GENERAL PUBLIC UTILITY DOES NOT NECESSARILY REQUIRE THAT TH E ACTIVITIES OR THE BENEFICIARIES MUST BE FUNDED OR SUBSIDIZED BY THE STATE . AS LONG AS BROADER PUBLIC CAUSE IS SERVED, WHETHER BY THE STATE FUNDING OR BY EFFICIENT REGULATION OF THE AFFAIRS, IT IS AN OBJEC T OF GENERAL PUBLIC UTILITY. IT IS ALSO IMPORTANT TO BEAR IN MIND THAT COSTS OF PROPER DEVE LOPMENT OF AREA ARE ALSO COSTS ITA NOS.91 &92(ASR)/2014 24 INCIDENTAL TO THE PLOTS AND UNITS SOLD BY THE ASSES SEE AND, THEREFORE, THESE TWO THINGS SHOULD NOT BE SEEN IN ISOLATION. AS FOR THE SPECIFIC INSTANCE OF INORDINATE HIKE IN PRICES WITHIN A SHORT PERIOD OF THREE AND A HALF YEARS, WE ARE UNABLE TO COMMENT UPON THE SAME AS FULL FACTS RELATING THERET O ARE NOT ON RECORD. THAT ASPECT, HOWEVER, FOR THE DETAILED REASONS SET OUT A BOVE, 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 (C HANDIGARH)] , IT IS A CASE IN WHICH THERE IS NO MENTION ABOUT SELLING THE RESI DENTIAL UNITS AND PLOTS 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 ASPECT, AND THAT IS A CRUCIAL ASPECT HAVING BEARING ON THE CONCLUSIONS. 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, THUS, DERIVES NO ADVANTAGE FROM THIS JUDICIAL PRECEDENT. AS REGARDS THE DECISION OF THE COORDINAT E BENCH IN THE CASE OF AMRITSAR IMPROVEMENT TRUST (SUPRA), ON WHICH SO MUCH RELIANC E HAS BEEN PLACED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE, IT IS ALREADY SET ASIDE BY HON'BLE JURISDICTIONAL HIGH COURT. AS A MATTER OF FACT, IN THE COURSE OF PROCEEDINGS BEFORE HON'BLE HIGH COURT IN THE CASES OF OTHER IMPROVEMEN T TRUSTS, LEARNED COUNSEL FOR THE REVENUE HAS FAIRLY ACCEPTED THAT THE DECISIONS OF THE TRIBUNAL, FOLLOWING THE AFORESAID DECISION, ARE REQUIRED TO BE SENT BACK TO THE TRIBUNAL FOR FRESH DETERMINATION 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 T HE BENEFIT OF SECTION 11 READ WITH SECTION 2(15) TO THE ASSESSEE, AND IN HOLDING THAT THE ASSESSEE TRUST WAS HOSHIARPUR, PATHANKOT, BHATINDA, JALANDHARHAR, AMRI TSAR AND, MOGA IMPROVEMENT NOT COVERED BY ADVANCEMENT OF ANY OBJECT OF GENERAL PUBLIC UTILITY. WE, THEREFORE, DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOW ANCE OF EXEMPTION OF RS 65,20,690. THE ASSESSE GETS THE RELIEF ACCORDINGLY. GRIEVANCES OF THE ASSESSEE ARE UPHELD. 8. THE FACTS FOR THE ASSESSMENT YEARS 2008-09 AND 2 010-11 HAVE NOT BEEN SHOWN TO BE ANY DIFFERENT FROM THOSE FOR THE ASSESSMENT YEARS 2009-10 AND 2011-12. FOR THE ASSESSMENT YEARS 2008 -09 AND 2010-11, THE ISSUE CONCERNING GROUND NO.5 IN ITA NO.91(ASR)/ 2014 FOR AY 2008- 09 AND GROUND NO.2 IN ITA NO.92(ASR)/2014 FOR AY 20 10-11 IS REMITTED TO AO, TO BE DECIDED AFRESH IN ACCORDANCE WITH LAW, IN VIEW OF THE TRIBUNAL ORDER (SUPRA) DATED 10.09.2015, IN THE ASS ESSEES CASE FOR THE ASSESSMENT YEARS 2009-10 AND 2011-12. ITA NOS.91 &92(ASR)/2014 25 9. IN VIEW OF THE ABOVE, THE OTHER ISSUES RAISED I N THESE APPEALS ARE NOT BEING GONE INTO AT THIS STAGE. 10. IN THE RESULT, BOTH THE APPEALS ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 01/01/ 20 16. SD/- SD/- (T.S. KAPOOR) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 01/01/2016 /SKR/ COPY OF ORDER FORWARDED TO: 1. THE ASSESSEE:AMRITSAR IMPROVEMENT TRUST, AMRIUTS AR. 2. THE ACIT, CIR.V, ASR. 3. THE CIT(A), ASR. 4. THE CIT, ASR. 5. THE SR. DR, ITAT, ASR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH: AMRITSAR.