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TMI Blog2011 (9) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... ut examining the concept of business has held that the institute was carrying on business as coaching and programmes were held by them and a fee is being charged for the same On the basis of the findings recorded in the order dated 29th March 2010, under section 263 of the Act, it is not sufficient to hold that the institute is carrying on business. - the order passed by the appellant under Section 263 of the 1961 Act can not be sustained and was, therefore, rightly upset and set aside by the Tribunal. - I.T.A. No. 869/2011 - - - Dated:- 19-9-2011 - Sanjiv Khanna, J. Abhishek Marath, Standing Counsel for the Appellant N.K. Poddar, Sr. Adv. with Pramod Dayal, Adv. for the Respondent JUDGMENT Sanjiv Khanna, J 1. Director of Income Tax (Exemption) has filed the present appeal under Section 260A of the Income Tax Act, 1961 (1961 Act, for short). It is submitted that the following questions of law arise for consideration:- A. Whether ITAT was justified in the eyes of law in the facts and circumstances of the present case in passing the impugned order ignoring that the DIT(E) has passed the order u/s 263 of the Act because the AO had not made neces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10, held that the power under Section 263 of the 1961 Act was wrongly exercised and the appellant was not justified in giving the directions on the two grounds relied upon by him. 7. Before us, the appellant has raised and questioned the findings of the ITAT on the first ground i.e. in respect of coaching classes, whether the same amounts to business and whether separate books of accounts were required to be maintained by the institute. 8. As far as scope of Section 263 of the 1961 Act is concerned, there is merit in the contention of the appellant that the observations made by the Tribunal in the impugned order are somewhat ambiguous and contradictory. This does not, however, justify interference and framing of question of law. The scope and ambit of the said provision was examined by the Supreme Court in Malabar Industrial Co. Ltd. vs. CIT, [2000] 243 ITR 83 (SC), Commissioner of Income Tax versus Max India Ltd. [2007] 295 ITR 282 (SC) CIT vs. Ralson Industries Lt. [2007] 288 ITR 322 (SC) and the question thereto is well-settled. The jurisdiction under section 263 can be exercised when (i) when order of the Assessing Officer is erroneous and (ii) it should be prejudicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as per section 11(4A) of the Income Tax Act. The assessee has not maintained separate books for such income. Therefore, it has clearly violated the provisions of Income Tax Act and the order of the AO has become erroneous as it is prejudicial to the interest of revenue." 12. In the operative portion, the appellant had given the following directions to the Assessing Officer:- "Therefore, keeping in view the facts of the case, the order passed by the DDIT(E), Trust Circle-IV, Delhi has been found to be erroneous as it is prejudicial to the interest of revenue within the meaning of section 263 of the Income Tax Act. Accordingly, the order passed by the AO in this case on 21.08.2007 is hereby set aside. The AO is directed to re-assess the income of the assessee in view of the discussions made as above as per law." 13. What is clear from the above is that the appellant had given a categorical finding that the institute is conducting coaching classes. It was held by the appellant that the receipts from these coaching classes were business income and, therefore, the institute was required to maintain separate books of accounts as per Section 11(4A) of the 1961 Act. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complying for membership of the institute, shall be required to attend a course on general management and communication skill or any other course as maybe specified in council from time to time. For this purpose, the council is to arrange funds for this purpose, the institute is also conducting classes for chartered accountancy students registered with it. We found that these classes for chartered accountancy students registered with it. We found that these classes are conducted for which classes are provided to the students registered with the institute to train and is discharting its statutory function as required by the Parliament, which does not amount to any commercial activity. From the detailed brochure, we also found that institute provides a comprehensive study package including large question bank for which no separate cost is charged from the students. The board of studies also provides a CD for self-assessment and model test papers. Expenditure is being incurred for preparation of the study package, CD etc., salary of the faculty and other professionals, printing and stationery, research and development etc. The students registered for charged accountancy are also provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 263 of the Act. It may be noticed here that the term 'business' has been elucidated and explained by the Supreme Court in State of Andhra Pradesh vs. H. Abdul Bakhi and Bros., AIR 1965 SC 531. The term 'business', is a word of large and infinite import but it represents an activity carried on continuously in an organized manner with a said purpose and with a view to earn profit. 18. The Supreme Court in Director of Supplies and Disposal versus Member, Board of Revenue AIR 1967 SC 1826 observed: "15. ...To regard an activity as business there must be a course of dealings, either actually continued or contemplated to be continued with a profit motive; there must be some real and systematic or organised course of activity or conduct with a set purpose of making profit. To infer from a course of transactions that it is intended thereby to carry on business, ordinarily there must exist the characteristics of volume, frequency, continuity and system indicating an intention to continue the activity of carrying on the transactions for a profit. But no single test or group of tests is decisive of the intention to carry on the business. It must be decided in the circumsta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness. In this view, the activity of the Trust in bringing out publications and selling them at cost price to spread message of Saibaba does not make it a dealer under Section 2(11) of the Act. 12. This Court in State of T.N. v. Board of Trustees of the Port of Madras (1999) 4 SCC 630 after referring to various decisions in regard to "business" and "carrying on business" in paras 15 and 16 has stated thus: (SCC p. 640) "15. Now the definition of 'business' in Section 2(d) and in most of the sales tax statutes is an inclusive definition and includes 'trade or business or manufacture etc.' This itself shows that the legislature has recognized that the word 'business' is wider than the words 'trade, commerce or manufacture etc.' The word business though extensively used is a word of indefinite import. In taxing statutes, it is normally used in the sense of an occupation, a profession - which occupies time, attention and labour of a person, normally with a profit motive and there must be a course of dealings, either actually continued or contemplated to be continued with a profit motive and not for sport or pleasure (State of A.P. v. H. Abdul Bakhi and Bros. AIR 1965 SC 531). Ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t it could not be said to be "carrying on business" merely because for the above purposes, it established a brick kiln and sold surplus bricks and scrap at cost price without intending to make profit or gain. Having regard to main activities and its objects, it was held that the educational society was not established "to carry on business" and the sale of bricks was held not excisable to sales tax. Chagla, C.J. pointed out that it was not merely the act of selling or buying etc. that constituted a person a "dealer" but the "object" of the person who carried on the activities was important. It was further stated that it was not every activity or any repeated activity resulting in sale or supply of goods that would attract sales tax. If the legislature intended to tax every sale or purchase irrespective of the object of the activities out of which the transaction arose, then it was unnecessary to state that the person must "carry on business" of selling, buying etc. 16. In para 33 of the same judgment, this Court has referred to various decisions to consider whether one is a "dealer" or carries on "business" and the nature and object of activity. The said para reads thus: (SCC p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The aim of education was the creation of a well-educated, healthy, young generation imbued with a rational and progressive outlook of life. On this reasoning, it was held that Aligarh University was not 'carrying on business' and the sale of food at the dining halls was not liable to tax. Likewise after the amendment of the definition of 'business' question arose in Indian Institute of Technology v. State of U.P. (1976) 38 STC 428 (All) with respect to the visitors' hostel maintained by the Indian Institute of Technology where lodging and boarding facilities were provided to persons who would come to the Institute in connection with education and the academic activities of the Institute. It was observed that the statutory obligation of maintenance of the hostel which involved supply and sale of food was an integral part of the objects of the Institute. Nor could the running of the hostel be treated as the principal activity of the Institute. The Institute could not be held to be doing business. Similarly, in the case of a research organization, in Dy. Commr. (C.T.) v. South India Textile Research Assn. (1978) 41 STC 197 (Mad) which was purchasing cotton and selling the cotton yar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether a particular person is a "dealer" and whether he carries on "business", are the matters to be decided on facts and in the circumstances of each case." 20. The purpose and object to do business is normally to earn and is carried out with a profit motive; in some cases the absence of profit motive may not be determinative. The appellant has given no such finding as far as the activities of the institute are concerned. The appellant without examining the concept of business has held that the institute was carrying on business as coaching and programmes were held by them and a fee is being charged for the same. On the basis of the findings recorded in the order dated 29th March 2010, under section 263 of the Act, it is not sufficient to hold that the institute is carrying on business. In these circumstances, we do not think that the order passed by the appellant under Section 263 of the 1961 Act can be sustained and was, therefore, rightly upset and set aside by the Tribunal. 21. In view of the facts and circumstances stated above, we do not think any question of law arises in the present appeal and the same is accordingly dismissed. No costs. - - TaxTMI - TMITax - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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