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TMI Blog2007 (9) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of clerical, officers and specialist officers cadre in banks, financial institutions and other organizations. For this purpose, they carried out detailed job analysis, identify and develop suitable selection tools, conduct confidential printing of test material, make arrangements for conducting examinations, assess test papers and finalize results of written test and shortlist candidates for interview by their clients. They also handle recruitment projects on turnkey basis right from release of advertisement, receipt of applications, scrutiny of construction of test items, conduct of examinations and processing of final results. They charge a fee on per candidate basis to each user organization for the services rendered by them. During investigations carried out by central excise officers, the appellants furnished a list of nine heads under which amounts were received by them, out of which the following three heads were identified as being chargeable to service tax as manpower recruitment agency as defined in Section 65(40) of the Finance Act, 1994 :- (i) Test material fees and testing fees received for entry-level test for public sector banks and central financial institut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench of the apex court was whether the association (SASMIRA) was carrying on activity which could be treated as an object of general public utility not involved in any profit and was therefore charitable in nature under the provisions of Section 2(15) of the Income-tax Act, 1961. The main object of SASMIRA was to promote commerce and art silk, cotton etc. To supplement the main object, SASMIRA was undertaking the activity of obtaining licences for import of foreign yarn and quotas for purchase of indigenous yarn. The income-tax department contended that the aforesaid activity was an activity for profit and, therefore, SASMIRA was not a charitable organization entitled to exemption from payment of income-tax. This contention was negatived by the apex court which held that the object of SASMIRA was one of general public utility. The relevant extracts from the apex court's judgment are reproduced below :- "The test which has, therefore, now to be applied is whether the predominant object of the activity involved in carrying out the object general public utility is to sub-serve the charitable purpose or to earn profit. Whether profit making is predominant object of the activity, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which it affords. As against this, the evidence or finding do not disclose that any profit was made by the newspaper or press before 1918 and it is at least certain that neither was founded for private profit whether to the testator or any other person. By the terms of the trust it is not to be carried on for profit to any individual. it cannot in their Lordships', opinion be regarded as an element necessarily present in any purpose of general public utility; that it should provide something for nothing or for less than it costs or for less than the ordinary price. An eleemosynary element is not essential even in the strict English view of charitable uses [ CIT v. University College of North Wales, (1909) 5 Tax Cases 408, 414]. There seems to be no solid distinction to be taken under the phrase "general public utility" between a school founded by a testator but charging fees to its pupils and a paper founded by a testator and sold to its readers. The purpose of providing the poor or the community in general with some useful thing without price or at a low price may doubtless be in itself a purpose of general public utility. But if another object be independently in itself of gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... organizations other than member banks, viz, for Colgate and Narsi Monjee Institute of Management Studies and thus, in view of the profit earned by them from the above activity, they would be a commercial concern. However, the activity undertaken by the appellants is well within the scope of their object clause which includes rendering of assistance to banks and financial institutions in the areas of personnel such as recruitment, selection, placement etc. Further, this activity was undertaken only with a view to minimise costs/fees charged to member banks and in any event the profit earned from the aforesaid activity has been ploughed back for the purpose/running of the organization itself as is brought out from the income and expenditure account at page 170 of the paper book. Surplus has been used for the object of the organization itself and not for the purpose of distribution of profits to its members. Moreover, in the case of CCE v. Employ Me, 2006 (4) S.T.R. 303, the Tribunal has held that the respondent was not a manpower recruitment agency leviable to service tax for the reason that it was not a commercial concern, even though it was collecting some fees from youth for emp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this contention as well as other contentions as seen from paragraphs 5.1,5.2 and 6 of the decision reproduced hereunder :- "5.1 The appellant's main contention is that BCCI does not satisfy the statutory definition of advertising agency, as contained in Section 65(2) of Finance Act, 1994. For fulfilling the criteria of advertising agency, the same has to be a commercial concern, engaged in providing any service connected with the advertisement. It has been primarily argued that BCCI is a Government body for control of cricket in India and stands exempted from payment of income-tax under Section 12 of Income-tax Act, 1961 as a charitable institution. The same is not established with the purpose of making profit and neither it has declared any dividend to its shareholders, trustees, and/or members and ploughs back the surplus, if any, for the purpose and object of the organization. As such, the same has to be considered as a charitable organization. Even if in the process some profits are made by it, as held by Hon'ble Supreme Court in case of Addl., CIT v. Surat Art Silk Cloth Manufacturers Association reported in 121 ITR 1 (SC), the same still re mains a charitable organisa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcial Concern' does not stand defined under the Act. As such, for understanding the scope of the above expression, help has to be taken from other sources. ……….. Though, the above decision was rendered not in the context of the disputed issue, and the dispute before Hon'ble Supreme Court was on altogether different point, the finding Of status of BCCI, as arrived at by Hon'ble Apex Court cannot be ignored. The Hon'ble Supreme Court was dealing with an issue as to whether the telecasting right of Cricket Association which are commercial in nature are protected by fundamental guarantee of freedom of speech, and expression enshrined under Article 19(1)(a) of the Constitution. It was in that context that Hon'ble Supreme Court held that the BCCI is not a commercial concern in nature. In the present dispute also, the advertising agency is the one which is a "commercial concern" engaged in the various activities of the advertising. As already observed, the expression - commercial concern - does not stand defined in the act and as such, support can be derived from the above decision. The Hon'ble Supreme Court having held the same organization i.e. BCCI though, in a different context, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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