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TMI Blog2016 (2) TMI 560X X X X Extracts X X X X X X X X Extracts X X X X ..... ent : Smt Nandita Kanchan, CIT-DR ORDER Per Sudhanshu Srivastava, Judicial Member This appeal of the assessee is directed against the order dated 26.3.2014 of the Ld. Director of Income Tax (Exemptions), New Delhi rejecting the assessee's application for grant of registration u/s 12AA of the Income Tax Act,1961. 2. Briefly, the facts of the case as borne out from the records, are that the assessee company has been promoted by National Skill Development Council (NSDC), All India Rubber Industries Association (AIRIA) and Automotive Tyre Manufacturer's Association (ATMA) and as per its Memorandum its objectives include complementing the vocational education system for the Rubber Industry Sector in meeting nationwide requirements of appropriately trained manpower in quantity and quality across all levels on a sustained and evolving basis. As per the Memorandum of Association of the assessee it is seen that it is a Company incorporated u/s 25 of the Indian Companies Act, 1956 and its main objects are as under :- 1. To initiate, carry out, execute, implement, aid and assist activities towards skill development in the Rubber sector in India ( Sector ) and meeting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t organisations for different projects. Ld. DIT (Exemptions) also observed that the assessee has been charging fees from the candidates for providing skill-labour courses and providing them certificates for which it had already received advances from the NSDC. Accordingly, as per the Ld. DIT (Exemptions), the assessee was a service provider and its activities were in the nature of business. Therefore, as per the Ld. DIT (Exemptions) the conditions for granting registration u/s 12AA were not satisfied and the application for registration was rejected. 4. The Ld. AR, referring to the objects of the company, submitted before us that the assessee company as a part of its activities carries out skill gap studies in various states to identify skill development needs in the rubber industry. Another of its activities is to establish Labour Market Information System (LMIS) as a one stop data and information source on the labour market to integrate and map the supply versus demand needs and further to assist in planning and delivery of training. Ld. AR further submitted that the assessee also develops National Occupation Standards (NOS) specifying the standard of performance that individu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that since these skill development councils have been granted registration u/s 12AA of the Act, the assessee company should also be granted registration on a similar footing. 6. Ld. DR, on the other hand, submitted that the Assessee Company works on a commercial business model and is not charitable per se. She submitted that the affiliation fee being charged by the assessee is also not regulated and is determined by the market forces. She also submitted that in the case laws referred to by the Ld. AR the assessee was itself imparting the training whereas in the present case the assessee has only outsourced the training activity and has just acted as a facilitator. She submitted that the DIT (Exemptions) has rightly denied the grant of registration and that no interference was called for in the said order. 7. We have considered the rival submissions and perused the order of the Ld. DIT (Exemptions) as well as other material on record. It is clear from the order of the Ld. DIT (Exemptions) that he has considered the assessee as a non charitable institution because as per him the activities of the assessee are commercial in nature and hence not eligible for registration u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject of general public utility is to sub serve the charitable purpose or to earn profit. Where profitmaking is the predominant object of the activity, the purpose, though an object of general public utility would cease to be a charitable purpose. But where the predominant object of the activity is to carry out the charitable purpose and not to earn profit, it would not lose its character of a charitable purpose merely, because some profit arises from the activity. The exclusionary clause does not require that the activity must be carried on in such a manner that it does not result in any profit. It would indeed be difficult for persons in charge of a trust or institution to so carry on the activity that the expenditure balances the income and there is no resulting profit. That would not only be difficult of practical realisation but would also reflect unsound principle of management . 8. In our opinion, the aforesaid principle laid down by the Hon'ble Apex court still holds good even after the introduction of proviso to section 2(15) by the Finance Act, 2008 with effect from April 1, 2009. The words any activity in the nature of trade, commerce or business or any activity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce it is not germane at the time of considering the issue of granting registration under section 12AA. This is so because, though, the first proviso to section 2(15) of the Act excludes any activity of the nature of trade, commerce or business from being considered to be a charitable purpose, but, the second proviso to section 2(15) restricts the application of first proviso only to such trusts and institutions having receipts from commercial activity exceeding a prescribed limit in a particular previous year. Therefore, the application of the proviso to section 2(15) has to be looked into in every assessment year. 10. During the course of hearing, it was also brought to our notice that some similar institutions having similar objects as that of the assessee company have been granted registration under section 12AA of the Act and copies of their registration certificates were available in the Paper Book. In our view if similar institutions having similar objects have been granted registration under section 12AA of the Income Tax Act, 1961, there is no justifiable reason as to why the assessee should be deprived from availing of such benefit. In the aforesaid facts and circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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