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TMI Blog2016 (5) TMI 146X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be applied towards the promotion of the objects subject nevertheless in respect of the expenditures of grants or donations made with any specific conditions as may be imposed from the donors. No portion of the income and property of the society shall be paid or transferred, directly or indirectly, by way of dividends, bonus or otherwise or by way of profits to any persons who at any time are or have been members of the society or to any of them or to any persons claiming through them or any of them provided that nothing herein contained shall prevent the payment in good faith of remuneration to any members or other persons in return for any services rendered to the Institute. In our opinion, the Society is doing its activities as per its aims and objectives and working for a good cause and not earning any profit. Thus the registration u/s. 12A granted to the Applicant forthwith. - Decided in favour of assessee X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax Act, 1961 and the Applicant is not eligible for registration u/s. 12 of the Act. As its gross receipts are more than the income as stipulated in 2nd proviso to section 2(15), the applicant's application for registration u/s. 12A is liable to be rejected. Accordingly, the Ld. DIT(E) rejected the Application for registration u/s. 12A vide impugned order dated 30.9.2013 passed u/s. 12AA(1)(b) r.w.s. 12A of the I.T. Act, 1961. For the sake of clarity, the operative portion of the Ld. DIT(E)'s order dated 30.9.2013 vide para no. 3 to 7 at pages 1 to 7 is reproduced hereunder:- "3. The applicant society was created on 4th day March, 2002 various aims and objects. Some of them are given below :- i) To promote the advancement of welding/ cutting & Hard facing and related technologies and allied sciences while the society may decided/ from time to time. ii) To facilitate exchange of ideas/ information/ development/ etc. amongst members/ by organising lecture workshops/ seminars/ symposia; conferences and development programme/ publish periodicals, books, journals, and magazines/ and develop software and educational proqrammes, video films and training packages relating to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / participation subscription 24,21,279 26,59,880/- 9,07,205/- 3. Support / sponsorship 24,22,692/- 10,50,650/- 22,24,300/- 4. Advertisement 1,62,000/- 4,65,200/- 8,10,000/- 5. Share income from collaboration 3,43,607/- 1,16,748/- 5,95,665/- 5.1 After going through the details filed by the applicant, it was noted that the applicants activities fall within the ambit of Advancement of any other object of general public utility and the applicant is charging fees for its services. As the nature of the activities carried out by the applicant were found to be in the nature of business, the applicant was given an opportunity to explain as to why its application be not rejected in view of the proviso to section 2(15) of the Income Tax Act. 5.2 In response to the same, the applicant filed its reply vide letter dated 25.9.2013. 5.3 The applicant has submitted as under :- " the assessee society is directly engaged in imparting education in a specialized field of welding technology through a wide spectrum of means and media. A detained note on the activities, structure, method of education and the achievements are enumerated herein below ;- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to which every acquisition of further know/edge constitutes education." Similarly, Gujarat High Court in the case of Sorabji Nusserwanji Parekh 66 Taxman 411 held that the element of imparting education to the students or element of normal schooling where there are teachers and taught must be present and as to fall within the meaning of education. 6. The activity of the applicant on the contrary falls in the last limb i.e. advancement of any other object of general public utility, In this regard, a reference is made to the definition of 'charitable purpose' as given in section 2(15) of the Income Tax Act, 1961, which reads as under: 2 (15)"Charitable purpose' includes relief of the poor, education, medical relief, [preservation. of environment (including watersheds, forest and wildlife) and preservation of monuments or places or objects of artistic or historic interest/ and the advancement of any other object of general public utility: Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business or any activit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t an activity from being a business if if in any other respect it plainly was. 6.3 Keeping in view the facts of the case, the activity being carried out by the applicant is held to be in the nature of 'business' as the applicant. 6.4 Thus, it is held that the activities of .the applicant fall under the category of GPU and are in the nature of business. The receipts of the applicant for the period ending as on 31/03/2013 are ₹ 56,08,255/-, the break-up of which is (i) Structured course subscription of ₹ 10,71,085/-; (ii) Seminar and delegate / participation subscription at ₹ 907205/-; (iii) supports / sponsorship ₹ 22,24,300/-; and (iv) Share income from collaboration at ₹ 5,95,665/-. Thus, the applicant's case clearly comes under the proviso to se~ of the Income Tax Act, 1961 and the applicant is not eligible for registration u/s. 12 of the Act. As its gross receipts are more than the income as stipulated in 2nd proviso to section 2(15), the applicant's applicant for registration u/s. 12A liable to be rejected. 7. In view of the above facts, application filed for grant of Registration u/s. 12A of the Income Tax Act, 1961 is her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted the fact that the activities of the appellant intends to upgrade the skills of the interested people in trade and students in the field of welding for which it is running regular courses, distance learning courses and entered into MOU with various Universities. The Ld DIT(E) has drawn inference from the fact that a certain fee is charged for such activity which is in the nature of business and therefore does not merit status of charitable activity. The conclusion drawn by the Ld DIT(E) is entirely misplaced, incorrect and not based on complete facts of the case and is bad in law. He further stated that the society does not work for any gains or profits of its members or any specific class of people. He further stated that the Ld. DIT(E) was not justified in rejecting the application for registration u/s. 12A of the I.T. Act, 1961 vide order passed u/s. 12AA(1)(b) of the I.T. Act, 1961, without understanding the facts and details submitted. To support this contention, he relied upon Hon'ble Supreme Court judgment in the case of Sole Trustee Loka Shikshana Trust 101 ITR 234. In view of above, he requested that order of the Ld. DIT(E) may be set aside and applicant may be grante ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on them such rights and privileges, as may seem expedient. vii. To approach, negotiate, confer with and/or act in any advisory capacity Government, Municipal and Local Authorities, and various economic segments/industries with respect To the objects covered by this Memorandum with a view to offer consultancy / advice to industry and other segments of the country's economy. viii. To give awards, scholarships, fellowships, and grants to individuals/teams of professionals and organisations in regard to specific projects in various spheres of welding & related technology directly or in association with other professional organisations having similar objectives. ix. To amalgamate with, affiliate to, become a member of, to subscribe to, and to communicate and co-operate with any other Scientific Society / company and other concerned bodies and promote measures for the furtherance of mutual objects and to promote any Company or Association or Society or Institution for the purpose of acquiring all or any of the property, rights and liabilities of this Society, or for any other purpose which may be directly or indirectly calculated to benefit this Society or to carry out its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essary. j) do all such lawful acts, deeds or things as are incidental or conducive to attainment of the objects. 7.1 We also reproduce the relevant portion of the Rules & Regulations of the Society relating to source of income and utilization of funds. i) The main sources of income of the Society will be membership fee, donations, royalties, government grants, savings from conferences / workshops, seminars, course fees, sale of publication etc. ii) The income and property of the Society, however, derived, shall be applied towards the promotion of the objects subject nevertheless in respect of the expenditures of grants or donations made with any specific conditions as may be imposed from the donors. No portion of the income and property of the society shall be paid or transferred, directly or indirectly, by way of dividends, bonus or otherwise or by way of profits to any persons who at any time are or have been members of the society or to any of them or to any persons claiming through them or any of them provided that nothing herein contained shall prevent the payment in good faith of remuneration to any members or other persons in return for any services rendered to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... table' purpose" has been discussed at length by various courts. The Hon'ble Supreme Court in the case of "Sole Trustee LOka Shikshana Trust" 101 ITR 234 has held as under:- "…."charitable purpose" which is only indicated but not defined by section 2(15) of the Act? It is true that charity does not necessarily exclude carrying on an activity which yields profit, provided that profit has to be used up for what is recognized as charity. The very concept of charity denotes altruistic though and action. Its object must necessarily be to benefit others rather than one's self. Its essence is selflessness. In a truly charitable activity any possible benefit to the person who does the charitable act is merely incidental or even accidental and immaterial. The action which flows from charitable thinking is not directed towards benefiting one's self, it is always directed at benefiting others. It is this direction of though and effort and not the result of what is done, in terms of financially measurable gain, which determines that it is charitable. This direction must be evident and obligatory upon the trustee from the terms of a deed of trust before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iety is actively engaged in the above activity through its systematic class room / distance learning programmes symposiums, seminars etc. However, it also maintains linkages with universities and other educational institutions to collaborate in imparting education on the specialized subject relate to welding and issue certificates to candidates for completion of the course. After perusing the copies of the agreement with various recognized universities such as Annamalai University for Distance Learning programmes, Sri Rama Krishna Tiruchirappalli for Diploma in fabrication engineering for undergraduates science students it was found that that no fees is charged from the students and almost 160 students have been trained so far, VIT University Vellore etc. through structured and well defined courses. This Society does not work for any gains or profits of its members or any specific class of people. The activities carried for the benefit of the public at large and reaches out to the weakest section of the society in skill and capacity building of the youth in the unorganized sector. 7.6 It is pertinent to mention here that the Ld. DIT(E) in the impugned order has specifically mentio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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