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TMI Blog2015 (6) TMI 248X X X X Extracts X X X X X X X X Extracts X X X X ..... 'of an activity with the object of a general public utility. It was not designed to hit at those institutions, which had the advancement of the objects of general public utility at their hearts and were charity institutions Thus respectfully following the above, we set aside the impugned order of the learned Director of Income-tax (Exemption), with a direction to grant registration to the assessee society under S.12A of the Act. - Decided in favour of assessee. - ITA No. 1598/Hyd/2012 - - - Dated:- 13-5-2015 - Shri G. C. Gupta And Shri P. M. Jagtap,JJ. For the Appellant : Shri A. V. Raghuram For the Respondent : Shri D. Sudhakar Rao DR ORDER Per P.M.Jagtap, Accountant Member : This appeal filed by the assessee is directed against the order of the learned Director of Income-tax(Exemption) Hyderabad dated 30.7.2012, whereby he refused to grant registration sought by the assessee under S.12A of the Act. 2. The assessee in the present case is an institution which was established in the year 1983 under the overall control of the Irrigation Department of Government of Andhra Pradesh. It was converted and registered as a society in the year 1992 u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the activities under participatory in irrigation management. It was submitted that WALAMTARI has decent infrastructure with class rooms and auditoriums for conducting classes and workshops/seminars. It was submitted that though the Government of Andhra Pradesh supports the institute through grants-in-aid, it earns sizeable portion of its income through capacity building services and through consultancies. It was submitted that the assessee society in consonance of its objectives organized various training for farmers at field training centres in the State. 3. After considering the submissions made by the assessee and the material placed on record before him, the learned Director of Income-tax(Exemption) noted that the assessee society was mainly functioning as a training institute for the purpose of training of various government officials in the field of water and land management and was also providing guidance to the farmers. He however, noted that the assessee at the same time was also rendering consultancy services to various organisations and earning substantial amount of income from the said activities. He held that although these services rendered by the assessee societ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l public utility, for grant of approval u/s. 10(23C)(iv) was denied exemption by the learned Director of Income tax ( Exemption), relying on the proviso to S.2(15). Hon'ble Delhi High Court however, directed the learned Director of Income tax ( Exemption) to grant such approval to the assessee under S.10(23C)(iv), after considering the purposes and effect of the proviso to S.2(15) of the Act, as inserted in the statute by the Finance Act, 2008 with effect from 1st April, 2009 elaborately. The relevant portion of the observations of Hon'ble Delhi High Court in this context is extracted hereunder from the head-note of the Report (114 DTR)- The proviso to s. 2(15) does not make any distinction between entities carrying on regular trade, commerce or business or providing services in relation to any trade, commerce or business on the one hand and genuine charitable organizations on the other. It must be remembered that the Court is construing the expression charitable purpose not in a vacuum, but in the specific context of s. 10(23C)(iv). Sec. 10 deals with the incomes not included in total income. And, 510(23C)(iv) specifically deals with the income received by any person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so, because, if the institution had no income, recourse to s. 10(23C)(iv) would not be necessary. And, if such an institution had an income, it would not, on the interpretation sought to be given by the Revenue, be qualified for being considered as an institution established for charitable purposes. So, either w?:y, the provisions of s. 10(23C)(iv) would not be available either because it IS not necessary or because it is blocked. Theintention behind introducing the proviso tos.2(q5) could certainly not have ben ro render teh provisions of s.10(23C)(iv) redundant. Merely because a fee or some other consideration is collected or received by an institution, it would not lose its character of having been estebtishea for a charitable purpose. It is also important to note that one must examine as to what is the dominant activity of the institution in question. If the dominant activity of the institution was not business, trade or commerce, then any such incidental or ancillary activity would also not fall within the categories of trade, commerce or business. It is clear from the facts of the present case that the driving force is not the desire to earn profits but, the object of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In order to save the Constitutional validity of the proviso, the same would have to be read down and interpreted in the context of s. 10(23C)(iv) because, the context requires such an interpretation. The correct interpretation of the proviso to s. 2(15) would be that it carves out an exception from the charitable purpose of advancement of any other object of general public utility and that exception is limited to activities 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. In both the activities, in the nature of trade, commerce or business or the activity of rendering any service in relation to any trade, commerce or business, the dominant and the prime objective has to be seen. If the dominant and prime objective of the institution, which claims to have been established for charitable purposes, is profit making, whether its activities are directly in the nature of trade, commerce or business or indirectly in the rendering of any service in relation to any trade, commerce or business, then it would not be entitled to claim its object to be a 'chari ..... X X X X Extracts X X X X X X X X Extracts X X X X
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