9911796707
TMI Blog2012 (11) TMI 891X X X X Extracts X X X X X X X X Extracts X X X X ..... puted that the activities of BIS fall into the last limb of definition of charitable activity as envisaged u/s 2(15) of I.T. Act i.e. 'advancement of object of general public utility. 13. ...While deciding whether any assessee is engaged in trade or commerce or is rendering any service in relation to any trade and commerce, status and importance of the assessee are irrelevant considerations. That BIS is a body corporate incorporated by an Act of the Parliament and is managed by the very senior officers of Govt. of India are not valid grounds for taking a decision with regard to commercial activities carried on by the organization. There are a large number of government and semi-government organizations including Public Sector Undertakings where the shares are held by the government and the management and administration also vest with government officers. The profits of such organizations are treated as taxable like any other private entities engaged in trade and commerce. 15. The activities carried out by BIS fulfill all the attributes of business as BIS awarded the licenses under the various product certification schemes for which a fee or consideration is charged. These license ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onform to the standards prescribed by the Central Government. The BIS's argument was that merely because there is a charge, its activities cannot be said to be commercial; an intention to make profits is essential, which is lacking in this case. This Court's attention was drawn to Sections 22 and 23 of the BIS Act to convey the sovereign nature of the BIS. Section 26, BIS Act was highlighted to indicate the power of search and seizure, akin to those of investigative agencies of the government. To support his contentions, counsel relied on the decisions cited as Commissioner of Income Tax v. APSRTC, 151 (ITR) 1 and The Institute of Chartered Accountants of India and Anr v. The Director General of Income Tax (Exemptions) and Ors., Writ Petition (Civil) No. 1927 of 2010, decided on 19.09.201 ("ICAI case", in short). 4. The revenue defended the impugned order contending that since the BIS collected license fee from those who were using the certification given by it, its activities were not charitable, and were instead commercial. Reliance was placed on the amended proviso to section 2(15) of the Act to contend that the BIS was engaged in "business activity" disentitling it from the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich are followed by a general category. The categories "relief of the poor," "education," "medical relief" etc, are specific categories, and these are followed, in the end, by the general category of "advancement of any other object of general public utility". The purpose is to not restrict the application of the definition to just the enumerated categories, but instead, extend it to all these activities which advance objects of general public utility. The first proviso carves out an exception which excludes advancement of any other object of general public utility from charitable purpose to the extent that it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity. 7. The impugned order dated 24.2.2012 passed by the respondent indicates that it was undisputed that the BIS's activities advance objects of general public utility. However, in these proceedings before this Court, the contrary was argued by the revenue. This Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... processes on such terms and conditions as may be mutually agreed upon; * appoint agents in India or outside India for the inspection, testing and such other purposes as may be prescribed; * establish branches, offices or agencies in India or outside; * inspect any article or process, at such times and at such places as may be prescribed in relation to which the Standard Mark is used or which is required to conform to the Indian Standard by this Act or under any other law irrespective of whether such article or process is in India or is brought or intended to be brought into India from a place outside India; * coordinate activities of any manufacturer or association of manufacturers or consumers engaged in standardisation and in the improvement of the quality of any article or process or in the implementation of any quality control activities; * perform such other functions as may be prescribed." 8. A plain reading of the above clarifies that the designated functions of the BIS fall under the category of "advancement of object of general public utility". The narrow question that, therefore, remains to be answered is whether it is involved in either carrying on of any acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny activity for profit. If the "object" of the trust or institution was to carry out object of general public utility and this was the primary or dominant purpose and not carrying on any activity for profit, the same would satisfy the requirements of Section 2(15) as it existed. It was immaterial whether members had benefitted from some of the activities. The aforesaid observations of the Supreme Court in the said case and other cases will be relevant only for determining and deciding the question whether the trust or institution is carrying on any business." 10. This view is based on settled law; [Ref. Addl CIT v. Surat Art Silk Cloth Mfrs. Association [1980] 121 ITR 1; CIT v. Ahmedabad Rana Caste Association, (1983) 140 ITR 1 (SC); Commissioner of Sales Tax v. Sai Publication Fund, (2002) 4 SCC 57]. Here, the expressions in the proviso are "trade, business or commerce". The activities that are undertaken by the assessee/entity should be in the nature of trade, commerce or business or an activity of rendering any service in relation to any trade, commerce or business. The three terms "trade", "commerce" or "business" have been interpreted by the Supreme Court and other courts in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me that the Appellants were right in their case to accept that "The expression business, it is accepted, represents economic activity". It is not necessarily sufficient (though it may often be sufficient in different contexts) that money is paid and a benefit obtained, performing on behalf of the state this licensing function is not the carrying on of a business. In relation to the Directive, the tribunal said: "Any regulatory activity carried out under a statutory power for the purpose of protecting the public by supervising and maintaining the standard of practitioners in, for example, the Financial Services field fall on the other side of the line from economic activities. In the present case, I agree that that is entirely right and the same goes for "business" in the context of these three Statutes." 13. In view of the above discussion, it cannot be said that the BIS is involved in any carrying on trade, commerce or business. BIS is a statutory body established under the BIS Act and was brought into existence "for the harmonious development of the activities of standardisation, marking and quality certification of goods". This was, and has been, its primary and pre-dominant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ote law reform etc. shows that the body is constituted under Section 6 of the Advocates Act, 1961 to benefit the public at large by having on its rolls, advocates who are not only competent in law but who are respectable and proper persons to belong to the noble profession of lawyers; the said activities have been held for the advancement of general public utility within the meaning of Section 2(15) of the Act. In CIT v. Ahmedabad Rana Caste Association [1983] 140 ITR 1 (SC), the Supreme Court held that the expression "any other object of general public utility" prima facie include all objects which promote the welfare of the general public. It cannot be said that a purpose would cease to be charitable even if public welfare is intended to be served. If the primary purpose and the predominant object are to promote the welfare of the general public the purpose would be charitable purpose. 16. What survives to be determined is whether any of BIS's activities fall within the latter and larger category of "involved in the carrying on of any activity of rendering any service in relation to any trade, commerce or business". The expressions "any activity," "rendering any service" and "in ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
