2016 (5) TMI 38 - AT - Income Tax

Registration u/s 12A denied - nature of activity - profit motive - When the assessment is carried out by QCI, the assessed body is required to pay assessment fee to the assessee based on the cost incurred. - Held that - No hesitation in holding that the Assessing Officer was wrong in coming to a conclusion that the assessee activities are in the nature of trade, business or commerce or that the assessee was rendering any service in relation to such trade, business or commerce. The assessee has no profit motive and the fees collected for accreditation etc., is not for any activity which can be termed as business. As the assessee is not involved in any activity of trade, business or commerce or service in relation to trade, business or commerce, the provision to S.2(15) of the Act has wrongly been invoked by the A.O. In our view the Ld.CIT(A) has correctly appreciated the facts of this case and had applied the correct proposition of law to the facts of this case and granted relief to the assessee. Thus we uphold the order of the First Appellate Authority and dismiss this appeal of the Revenue. - Decided in favour of assessee.

Summary

Issues:
1. Whether the assessee is entitled to exemption under section 11 of the Income Tax Act for the Assessment Year 2009-10.
2. Applicability of the Proviso to Section 2(15) of the Act to the assessee's activities.
3. Interpretation of the judgment of the Hon'ble Delhi High Court in the case of Bureau of Indian Standards vs. DGIT (E) regarding public utility activities not being considered as trade, business, or commercial activities.
4. Analysis of the assessee's activities in relation to accreditation and certification services provided and the fees charged.

Issue 1 - Exemption under Section 11:
The appeal was filed by the Revenue against the order of the Ld. Commissioner of Income Tax (Appeals) denying exemption under section 11 of the Act for the assessee, a Society registered under the Societies Registration Act and Section 12A of the Income Tax Act. The Assessing Officer determined the total income of the assessee and denied exemption under section 11, leading to an appeal by the assessee before the Ld. C.I.T. (A).

Issue 2 - Proviso to Section 2(15):
The First Appellate Authority held that the Proviso to Section 2(15) does not apply to the assessee, citing a judgment of the Hon'ble Delhi High Court. The Revenue appealed this decision, leading to further examination of whether the Proviso to Section 2(15) is applicable to the assessee's activities.

Issue 3 - Interpretation of High Court Judgment:
The Tribunal analyzed the judgments of the Hon'ble Delhi High Court in cases related to public utility activities not constituting trade, business, or commercial activities. The Tribunal examined whether the activities of the assessee, including accreditation and certification services, fall under the ambit of trade, business, or commerce as per the legal interpretations provided by the High Court.

Issue 4 - Assessment of Assessee's Activities:
The Tribunal delved into the nature of the assessee's activities related to accreditation, certification, and improvement of health services. It was determined that the fees collected by the assessee were not indicative of profit motives or commercial activities. The Tribunal upheld the decision of the First Appellate Authority in granting relief to the assessee and dismissing the appeal of the Revenue.

In conclusion, the Tribunal upheld the order of the First Appellate Authority, dismissing the Revenue's appeal and affirming that the assessee's activities did not amount to trade, business, or commerce, thereby entitling the assessee to the exemption under section 11 of the Income Tax Act for the relevant assessment year.