9911796707
TMI Blog2019 (10) TMI 150X X X X Extracts X X X X X X X X Extracts X X X X ..... present case that the driving force is not the desire to earn profit, but the object is to promote, aid, foster and engage in the area of Environment Protection, abatement of pollution of various kinds such as water, air, solid, noise, vehicular etc. without limiting its scope. In short, the main object appears to be preservation and protection of environment. The Latin word utilis means useful, beneficial, equitable, available . Chambers Dictionary of English defines utility as useful: power to satisfy the wants of people in general: a useful thing, public utility: public service or a company providing such public service. According to New Oxford Dictionary of English (1998), as a Noun, utility is the status of being useful, profitable or beneficial. The words public utility or general public utility are not capable of a precise meaning. The question whether service is public utility or not has to be discharged in the context of different situations but it is, as considered infra, well settled that public utility means public purpose depending upon the context in which it is used in the statute or the Rules. Indeed, in some decisions, public utility is considered v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Sections 143(2) and 142(1) respectively of the Act along with the questionnaire was issued dated 24th June, 2011. The Assessing Officer called upon the respondent-assessee to make good its case that the assessee company could be said to be constituted for charitable purpose within the meaning of Section 2(15) of the Act. To put it in other words, the respondent-assessee was called upon to make good its case that the company is engaged in preservation of environment or carries on activities of general public utility. With respect to the activities of the company, the assessee pointed out the following to the Assessing Officer: The assessee is engaged in the activity of providing pollution control treatment for disposal of liquid and solid industrial waste. The company was incorporated on 19.10.1995 and subsequently converted into a company limited by shares, incorporated u/s. 25 of the Companies Act, 1956; i.e., a company which does not exist for earning the profit as such but exist for promotion of welfare and wellbeing of the society and people at large. The assessee company presently has been accorded registration u/s.12AA of the Income Tax Act by the Direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and control of Water pollution, Air pollution and Management Handling and Trans-boundary movement of Hazardous Waste discharged/generated by industries set up in the Industrial estate at Naroda, Vatva and Odhav by installation and operation of a Common Effluent Treatment Plant (CEPT) at Naroda and land fill site for solid waste at Odhav, Ahmedabad. The assessee was asked to justify its claim of exemption in the light of above referred legal and factual position and the definition of charitable activities u/s. 2(15) of the Act, as the assessee has reported that the company was brought into existence for the implementation of the directions of Hon'ble Gujarat High Court, but the main object as incorporate in the Memorandum of Association referred to above tells a difference story. It was also pointed out that the comparative Profit Loss accounts submitted by it in the statement of income total income supports of the objects of memorandum of Association. It was also pointed out that in the statement of total income, the assessee has claimed deduction of ₹ 6,00,75,143/- u/s.11, being the amount applied for charitable or religious purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the department and that the same has not been taken into consideration by the Director of Income Tax (Exemption), Ahmedabad while rejecting the assessee s claim. Accordingly, the ITAT vide its order dated 14/11/2006 in ITA No.2015/Ahd/2006, set aside the order and remitted back the matter to the file of the Director of Income Tax (Exemption), Ahmedabad with a direction to decide the matter afresh. Subsequently the same Director of Income Tax (Exemption), Ahmedabad i.e. Shri Ram Sanehi passed order u/s. 12AA of the Income Tax Act dated 4/7/2011 whereby registration under that Section is allowed to the assessee with effect from 21/12/2005. The same Director of Income Tax (Exemption), Ahmedabad i.e. Shri Ram Sanehi has accorded approval u/s. 80G(5) to the assessee vide order dated 23/7/2007. 8. The assessee submitted before the Assessing Officer that the registration granted under Section 12A of the Act and also the recognition under Section 80G(5) of the Act by the Director of Income Tax-(E), Ahmedabad would be binding to the Assessing Officer. The assessee asserted that the registration under Section 12A of the Act is sufficient to arrive at the conclusion th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. With respect to the objects of the assessee company, as mentioned in the Memorandum of Association at the time of incorporation of the company on 19th October, 1995, the Assessing Officer has observed has under; Vide para 2(a) of this office letter dated 16/11/2011, the assessee was requested to explain its claim of exemption and charitable activities of preservation of environment as defined u/s. 2(15) of the I.T. Act with reference to object as mentioned in the memorandum of Association, at the time of registration on 19/10/1995 of the company which are referred to para 5 above and with reference to the statement made by it that it was brought into existence pursuant to an order passed by Hon ble Gujarat High Court on 5th August, 1995 in Special Civil Application No.770 of 1995 for the work for pollution abatement and environmental protection, prevention and control of Water pollution, Air pollution and Management, Handling and Trans-boundary movement of Hazardous Waste discharged/generated by industries set up in the Industrial estate at Naroda, Vatva and Odhav by installation and operation of a Common Effluent Treatment Plant (CETP) at Naroda and land fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,16,946 Depreciation 1,05,72,696 1,10,86,334 1,26,18,427 1,39,66,450 Total Expenditure 4,81,29,896 4,75,41,722 5,01,63,902 3,88,21,912 Profit for the year 2,53,21,438 2,09,87,242 62,58,319 836236 Add Balance brought forward 4,07,88,644 1,98,01,402 1,35,43,083 20,44,236 Balance carried to balance sheet 6,61,10,082 4,07,88,644 1,98,01,402 12,08,000 This case has been received on transfer fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion on 19/10/1995. The above referred comparative profit and loss account is a proof to that effect. (15) Applicability of provisions contained in section 2(15), 11, 12 13 : Without prejudice to the above, the section 12 start with any voluntary contribution received by trust treated wholly for charitable or religious purposes or by an institution established wholly for such purposes not being contributions made with a specific directions that they shall form part of the corpus of the trust or institutions. Shall for the purpose of section 11 deemed to be income derived from property held under trust wholly for charitable or religious purposes and the provisions of that section and section 13 shall apply accordingly. Technically, none of the provisions contained in amended section 2(15), 11, 12 and 13 are complied in this case hence the claim of exemption of the assessee company is not entertainable. (16). Membership of the assessee company : Vide para 6(v) of letter dated 10/10/2011. the assessee was asked to clarify whether all the members of various Phases of GIDC. Naroda are its members or some selected or a class of members are its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ongly objects to your proposal to treat the surplus of ₹ 2,53,21,488/as profits by invoking the proviso to Section 2 (15) of the I.T. Act. Kindly take note that the proviso to Section 2(15) of the I.T. Act has no applicability at all to the facts of the assessee s case because the assessee has not carried out any activity in the nature of trade, commerce or business nor has it rendered any service to trade, commerce or business, as envisaged by you. At this juncture, it is relevant to mention here that as per the defining Section 2(15) of the I.T. Act introduced by the Finance Act, 2008 with effect fiom 1st April, 2009, charitable purposes includes relief of the poor, education, medical relief preservation of environment (including water sheds, forests and wild life) and preservation of monuments or places or projects of artistic or historic interest and the advancement of any other object of general public utility. It may kindly be appreciated that the assessee is engaged in preservation of environment. Therefore, the activities of the assessee in preservation of environment by abatement and controlling the pollution of air, water and soil is fully covered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the contention of the assessee is accepted, every factory nufacturing chemicals which are used for reduction or pollution will be eligible to be considered as activity within meaning of charitable purpose as defined in section 2(15) of the I.T. Act. (19) Role played by various local and state Government authorities like Gujarat Pollution Control Board, Gujarat, Ahmedabad Municipal Corporation, GIDC or any other authority granting permission for running as well as monitoring the business/industrial activity? Vide para 6(vii) of letter dated 10/10/2011, the assessee was asked to submit the detail of role played by various local and state Government authorities like Gujarat Pollution Control Board, Gujarat, Ahmedabad Municipal Corporation, GIDC or any other authority granting permission for running as well as monitoring the business/industrial activity. In response to the same the assessee vide para 6(vii) of letter dated 31/10/2011 submitted a copy of Provisional Consent Order (CCA) issued by Central Pollution Control Board on 12/10/2011 valid upto 19/04/2016. Vide this office letter dated 05/12/2011, it was communicated to the assessee that Central Pollution Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g financial penalty and closure of the units. The reply of the assessee was not found satisfactory hence vide this office letter dated 16/11/2011, it was communicated to the assessee that on going through the provisional order (CCA), consent referred to above, it is seen that it is issued in the name of M/s. Naroda Enviro project Ltd. (CEPT). It implies that if any of the member or beneficiary commits any default or violation of regulation, the GPCB will intimate you regarding such violation and penal action and may withdraw provisional order. The assessee was requested to please clarify the procedure followed by GPCB in case of default by any of the unit. The assessee was further asked to submit the detail of instances of violation by your members and beneficiaries during the period under consideration and three preceding years as you are acting as per the directions given by Hon'ble High Court of Gujarat. In response to the same the assessee company vide letter dated 5/12/20110 submitted that it is not aware of the procedure followed by the GPCB in case of default in the matter of pollution committed by any of the industrial unit as the act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... monitored by GPCB. Thus, actions are taken by GPCB including financial penalty and closure of the units. However it has tactfully avoided submitting the detail of violation detected by your good office committed by the industrial Units working in Naroda GIDC, i.e. located at Naroda, Odhav and Vatva and penal action taken by your good office. (4) It is requested to please supply the detail of violation of the provisions contained in The Water (Prevention Control of Pollution) Act 1974, The Air (Prevention Control of Pollution) Act 1981 and Hazardous Waste (Management, handling and Transboundry Movement) Rules 2008 framed under the E(P) Act 1986 by any of the industrial unit located in Naroda, Vatva or Odhav during financial year 2006-07, 2007-08 and 2008-09 and penal action if any taken by your good office either in person or through a representative duly authorized in this behalf on or before 30th November 2011. (5) This information is called for exercising the powers conferred upon undersigned u/s 133(6) of the Income Tax Act 1961, in the capacity of assessing officer of the Naroda Enviro Projects Ltd., Ahmedabad. (23) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rana treatment Plant. Finally, the Ahmedabad Municipal Corporation discharges it in river Sabarmati after pollution treatment in Pirana treatment Plant. (25) The sum total of the scrutiny is: (i) The assessee is carrying on business activity under the pretext of charitable activity. The incidental profit cannot be for all the years and not to the extent reflected in table given in the order ii) The objects specified in the Memorandum of Association are important but the same have to be considered with reference to the real practice adopted for running the activity i.e. whether it is charitable or for the purpose of making profit. The object included in definition of charitable purpose as defined in section 2(15) should be evidenced by Charity; otherwise even environment consultant will also claim exemption u/s.11 being a trust or a company u/s.25 (iii) The action is carried out for the benefit of members to discharge their onus of treatment of chemicals etc. with substantial charge with intention to earn profit under the shelter of section 25 of Company Act. (iv) Hence it is held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of treatment of various pollutants generated by industrial units. It is also not disputed by the A0 that the surplus generated is not distributed to its members/shareholders, etc; it is an established position that the appellant cannot lose exemption merely on the ground that it has made surplus as long as appellant is not generating surplus for private profit of the settler or any other person. I find that the AO has not made out a case that generation of surplus or profit making is the predominant object of the appellant. 4.4.2 The appellant company has submitted before me that it was incorporated with a sole object to comply with the directions of Hon'ble High Court of Gujarat in a PIL for the industries of Naroda GIDC for establishment in running of Common Effluent Treatment Plant and its storage and disposal facility at Odhav, Ahmadabad. The appellant company submitted that the project was set up under the directions and guidance of Hon'ble High Court of Gujarat and various local and state level agencies viz. Collector, GIDC, AMC, GPCB, etc. It was further submitted that as per the directions of the Hon'ble High Court of Gujarat, it was sine-qua- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble level as per the norms laid down by GPCB. It is not expected from the appellant to enforce membership of all industrial units around it where the appellant is located. 4.4.4 After evaluating the rival submissions, I am of the view that the activities of the appellant company squarely falls u/s.2(15) of the income~tax Act. The appellant company is clearly engaged in preservation of environment by controlling the extent of pollution caused by various industrial units in and around Odhav and Naroda area. It is a settled principle that the proviso to Section 2(15) is applicable to objects of ,general public utility. The same was also clarified vide CBDT Circular No. 11 dated 19.12.2008. Since the appellant company is directly engaged in preservation of environment as per Section 2(15), the proviso as pointed by the AO is not applicable in the instant case. Accordingly, the conclusion of the AO that the appellant company is not doing any charitable activity is not sustainable, as a result of which the claim of exemption u/s. 11 12 shall be available to the appellant 4.4.5 With regard to the AO's contention that the appellant is carrying out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g as assessee is not generating surplus for private profit of the settler or any other person. In this situation, Assessing Officer was not justified in holding that assessee was generating surplus or profit making was the predominant object of assessee. Assessee company was incorporated with a sole object to comply with directions of Hon'ble High Court of Gujarat in a PIL for industries of Naroda GIDC for establishment in running of Common Effluent Treatment Plant and its storage and disposal facility at Odhav, Ahmedabad. The project was setup under the directions and guidelines of Hon'ble High Court of Gujarat and various local and state level agencies viz. Collector, GIDC, AMC, GPCB, etc. As per directions of Hon'ble High Court of Gujarat, it was sine- qua-non for industrial units to become member of assessee company for meeting the pollution control parameters laid down by GPCB. The amount collected from the members varied depending upon the quantum of effluent, nature of effluent to be treated as well as other factors pertaining to pollutant of different kind coming from the industrial units. Thus, assessee is engaged in the activity of preservation of environment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... registered under Section 12A of the Act and has also been issued certificate for the purpose of Section 80G(5) of the Act weighed heavily with the Appellate Tribunal. The Tribunal took the view that the Company could be said to be engaged in the charitable activity of preservation of environment and even if the company cannot be said to be preserving the environment, its activities are towards the advancement of object of general public utility. The Tribunal also took the view that the case of the company does not fall within the proviso to Section 2(15) of the Act. 18. The Revenue, being dissatisfied with the order passed by the Appellate Tribunal is here before this Court with the captioned tax appeals. The captioned tax appeals are for the different assessment years starting from 2009-10. The following substantial questions of law have been framed by this Court while admitting the captioned tax appeals; [1] Whether on the facts and in the circumstances, the Income Tax Appellate Tribunal was justified in affirming the view of the Commissioner (Appeals) that the activities of the assessee fall within the ambit of Preservation of Environment as env ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se as defined under Section 2(15) of the Act. Ms. Bhatt submitted that the activities, in no manner, could be said to be for the purpose of preservation of environment. Ms. Bhatt pointed out that preservation of environment is one of the charitable purposes under Section 2(15) of the Act. The preservation of environment, as one of the charitable purposes, came to be inserted in Section 2(15) of the Act with effect from 1st April, 2009. According to Ms. Bhatt, in such circumstances, the CIT (A) and the ITAT committed a serious error in holding that the assessee falls within the definition of the term Charitable Purpose as defined under Section 2(15) of the Act. In other words, the submission of Ms. Bhatt is that the activities undertaken by the assessee company are, in no manner, towards the preservation of environment. Ms. Bhatt submitted that by treating the trade effluent of the polluting industries, the company cannot be said to be preserving the environment. According to Ms. Bhatt, to preserve, means to keep something in its original form or keep it in good condition. Ms. Bhatt gave an illustration the fossil was perfectly preserved for hundreds of years . On the other hand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the exemption shall have to be decided by the Assessing Officer at the time of the assessment. Ms. Bhatt pointed out that the Assessing Officer, upon examination of the activities of the assessee, declined to grant the benefit of exemption holding that the case of the assessee falls under Section 13(8) of the Act. Ms. Bhatt, in support of her submission, placed strong reliance on the decision of the Delhi High Court in the case of Sonia Gandhi vs. ACIT, reported in (2018) 407 ITR 594 and also on the decision of the Andhra Pradesh High Court in the case of Hyderabad Race Club vs Commissioner Of Income-Tax, reported in 1985 153 ITR 521 AP. 24. Ms. Bhatt, thereafter, submitted that the registration of the company under Section 12A of the Act will also not make the assessee automatically eligible to seek exemption under Section 11 of the Act. The eligibility or otherwise of exemption shall have to be decided at the time of the assessment. Ms. Bhatt, in support of her submission, has placed reliance on the following three decisions; (i) Gujarat State Board of School Textbooks vs. Asst. Commissioner of Income Tax, Gandhinagar Circle, reported in (2016) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, bonus or otherwise by way of profit to persons who at any time are or have been members of the said company or to any of them or to any person claiming through any one or more of them; 3. That no remunerations or other benefit in money or money s worth shall be given by the company to any of its members whether officers or servants of the company or not except payment of out-of-pocket expenses, reasonable and proper interest on money lent, or reasonable and proper rent on premises let to the company; 4. That no members shall be appointed to any office under the company which is remunerated by salary, fees or in any other manner not excepted by clauses (3) 28. Mr. Soparkar submitted that the main object of the company on its conversion as a Section 25 company is that of preservation of environment. The main object highlighted by Mr. Soparkar is as under; To engage in the business as manufacturers, dealers, importers, exporters, consignment agents, erectors, traders, consultants in all kinds of pollution treatment plaints/ equipments whether water pollution, air pollution, noise pollution without limiting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent assessee is issued license under Section 25 of the Companies Act, 1956, which requires the Respondent Assessee to apply its profits, if any, or other income in promoting its objects and prohibits payment of any dividend to its members. The main object of the Company on its incorporation as Section 25 Company is clearly that of preservation of environment. It is this Company with the aforesaid objective that is registered under Section 12AA. The only object with which the Respondent carries on its activity pertains to preservation of environment. (ii) Once the registration as a charitable institution is granted under Section 12AA of the Act, the grant of benefit of exemption of tax cannot be denied. The respondent relies on the following judgments: (a) (2000) 246 ITR 188 (para-B, 9, 10, 11, 17, 18) Hiralal Bhagwati Vs Commissioner of Income Tax (b) (2008) 14 SCC 169, Assistant Commissioner of Income Tax V/s. Surat City Gymkhana (c) (2013) 355 ITR 384 (para 7. 12), Agricultural Produce Market Committee Vs Income Tax Officer (iii) The Assessing Officer has erroneously gone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the residuary category of advancement of any other object of general public utility that is undertaken by the Respondent trust. The objects with which the Respondent assessee is incorporated, and its activity lead to only one conclusion that the Respondent assessee is engaged in the activity of preservation of environment and in nothing else. 31. In such circumstances, referred to above, Mr. Soparkar, the learned senior counsel, prays that there being no merit in the tax appeals, those be dismissed, the order passed by the ITAT be affirmed and the substantial questions of law framed by this Court may be answered against the Revenue and in favour of the assessee. ANALYSIS 32. Section 2(15) of the Act defines the term Charitable Purpose . The definition reads as under: 'Section 2(15):- charitable purpose includes relief of the poor, education, yoga, medical relief, preservation of environment (including watersheds, forests 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: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or business, or -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. 37. The second proviso to section 2(15) as newly inserted (w..e.f. 1-4-2009) by the Finance Act, 2010, further provides that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is -(between 1-4-2009 and 31-3-2012) ₹ 10 lakhs -(w.e.f. 1-4-2012) ₹ 25 lakhs or less in the previous year. 38. Legislative amendments.- I. The Finance Act, 1983-By section 3(a) of Act 11 of 1983, section 2(15) has been amended (w.e.f. 1-4-1984). II The Finance Act, 2008.-The scope and effect of the substitution (w.e.f. 1-4-2009) of section 2(15) by Act 18 of 2008, have been elaborated in the following portion of the departmental circular No. 1/2009, dated 27-3-2009, as under:- 'Streamlining the definition of charitable purpose .- 5.1 Sub-se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r object of general public utility. However, as per proviso to the section, 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 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. 4.2 Clause (15) of section 2 has been amended so as to provide that the preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest would be excluded from the applicability of the aforesaid proviso which is applicable to the advancement of any other object of general public utility . 4.3 Applicability:-These amendments have been made applicable with effect from 1st April, 2009 and will accordingly apply for assessment year 2009-10 and subsequent assessment years.. IV The Finance Act, 2010:--The scope and effect of the insertion (w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered as a charitable purpose. if 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. if receipts from such activities is above the specified limit in the previous year. 4.3 Second proviso to section 2(15) of the 1961 Act has been amended to provide that the specified monetary limit in respect of receipts from such activities shall be 25 lakh rupees instead of 10 lakh rupees. 4.4 Applicability.--This amendment has been made effective from [1st April. 20l2, and will, accordingly, apply in relation to the assessment year 2012-13 and subsequent years. Departmental circular.-1. Definition of Charitable purpose under section 2(15) of the Income-tax Act, 1961-reg- Section 2(15) of the Income-tax Act, 1961 ( the Act ), defines charitable purpose to include the following: (i) relief to the poor (ii) education (iii) medica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature or use of application, or retention, of the income from such activity. The intention is to limit the benefit to entities which are engaged in activities such as relief of the poor, education, medical relief and any other genuine charitable purpose, and to deny it to purely commercial and business entities which wear the mask of a charity. A number of Honourable Members have written to me expressing their concern on the possible impact of the proposal on Agricultural Produce Market Committees (APMC) or State Agricultural Marketing Boards (SAMB). Since there is no intention to tax such committees or boards, and in order to remove any doubts, I propose to insert a new clause (26AAB) in section 10 of the Income tax Act to provide exemption to any income of an APMC or SAMB constituted under any law for the time being in force for the purpose of regulating the marketing of agricultural produce. I once again assure the House that genuine charitable organisations will not in any way be affected. The CBDT will, following the usual practice, issue an explanatory circular containing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd thereby to reduce/ abate pollution. 3. To undertake activities, enter into treaties for substituting hazardous substances like Chioro Floura Carbon (CFC), Green House Gas (GHC) Reduction,Carbon Trading activities, Ozone Depleting substances or any other such future developments coming up to abate pollution of various kinds. 4. To stimulate amongst the members of the Company and public at large, thought and efforts towards the promotion and development of the efficient pollution control and to educate them in theory and practice and to exchange knowledge, experience and ideas on sound environment management principles and practices. 5. To formulate and implement demonstration projects aimed at providing total eco management planning by harnessing alternative sources, techniques of Cleaner Technologies with a objects to evolve long term plans based on the same and otter consultancy for the same. 6. To maintain for the members of the company liaison with organization/s interested in Pollution Control and Environment Management and such activities in furtherance of the objects of the Company such as Chamber of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Pollution Control and Cleaner Technologies and to identity and to encourage research; 17. To establish and to maintain a technical library and/or Information center and to collect and collate information regarding alternate Technology or Pollution Control and use of Resources; 18. To develop and support Centers of documentation. service. maintenance and supply of data including patent, literature, current status report etc. in the area of environment management; 19. To accept. purchase. receive. take on lease or hire or otherwise. acquire any movable or immovable property rights or privileges: and to borrow, raise or secure the payment of any money on such terms and conditions and on such security as may be deemed fit and proper provided they are not inconsistent with the objects of the Company; 20. To compile and maintain a register of qualified Consultants in the area of environment protection and to provide to the members of the Company and public at large, expert advice and service on specialized management problems; 21. To prepare, edit, print, publish, issue, and circulate books. maga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke or otherwise acquire and hold shares, stocks, debentures or other securities of any other Company having objects altogether or in part similar to those of the Company or carrying on any business capable of being conducted so as to directly to benefit the Company. 32. To subscribe or contribute or otherwise to assist or to guarantee money to charitable, benevolent, scientific, national, public, or any other useful institutions in their objects or purposes or for any exhibitions; 33. To appoint any Directors or Managers of any subsidiary company or of any other Company in which this Company is or may be Interested. 34. To establish, provide, maintain and conduct or otherwise subsidise, research, laboratories and experimental workshop for scientific and technical research and experiments and undertake and carry on with all scientific and technical research experiments and tests undertake and to promote studies and research both scientific and technical investigation and invention by providing subsidy or assisting laboratories, workshops, libraries, lectures. meetings and conferences and by providing the scientific or technical p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivities; 41. To establish and support or aid in the establishment and support of associations, institutions, funds, trusts and conveniences calculated to benefit employees or exemployees of the company or the dependants of such persons, and to grant pension and allowances to make payment towards insurance of such persons and generally to provide for superannuation benefits; 42. To procure the company to be registered or recognized in any part of India in the field of environment management; 43. To purchase or take by way of lease, sub-lease, gift, exchange, hire or otherwise acquire movable or immovable property and in particular any land, building, workshop, factories, laboratories, machinery, equipment, furniture, scientific records, experimental data. library etc. 44. To acquire real or leasehold estate and to purchase. or otherwise acquire or provide in any place in which any part of activities of the Company may from time to time be carried on, all such offices, warehouses, workshops, buildings. machineries, engines. plants and appliances as may be considered requisite tor the purpose of carrying on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Share Capital of the company will consist of ₹ 1.00.00.000/-(Rupees One Crore only) divided into 10,00,000 (Ten Lacs.) Equity shares of ₹ 10/-(Rupees Ten only) each. IX. True accounts shall be kept of all sums of money received and expended by the Company and the matters in respect of which such receipts and expenditure take place and of the property, credits and liabilities of the Company; and, subject to any reasonable restrictions as to the time and manner of inspecting the same that may be imposed in accordance with the regulations of the Company for the time being in force, the accounts shall be open to the inspection of the members. Once at least in every year, the accounts of the Company shall be examined and the correctness of the Balance-sheet and the Income and Expenditure Account ascertained by one or more property qualified Auditor/s. X. If upon a winding up or the dissolution of the Company, there are remains after the satisfaction of all the debts and liabilities, any property whatsoever, the same shall not be distributed amongst the members of the Company but, shall be given or transferred to such other Company having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the question whether the assessee is established for a charitable purpose or not must be examined independently with reference to the provisions of the Act. The registration of the assessee as a charitable institution under Section 12A of the Act, 1961 and the license granted to the assessee under s. 25 of the Companies Act are only relevant factors in reaching an appropriate conclusion. Unless the positive requirements of law are satisfied, the assessee, only by virtue of the above two events, cannot be regarded as a Charitable Institution. The objects, for which, the assessee is established either as a Society or as a Company should spell out any charitable purpose. 46. In the aforesaid context, it may be pertinent to refer to the decision of this High Court in the case of Hiralal Bhagwati v. Commissioner of Income Tax, [2000] 161 CTR (Guj) 401, wherein the Court has held as under: The registration of a charitable trust under section 12A is not an empty formality. This is apparent from the tenor of the provisions of section 12A. It requires that not only an application should be filed in the prescribed form, setting the details of the origin of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax Act constituting as a section of public and not a body of individuals? (B) Whether, on the facts and circumstances of the case, the Income Tax Appellate Tribunal was justified in law in holding that registration under Section 12-A was a fait accompli to hold the assessing officer back from further probe into the objects of the trust? 2. By the impugned order, the High Court dismissed the appeals, in limine, relying on a decision of the same Court in Hiralal Bhagwati v. CIT 2000 246 ITR 188, holding that the questions raised in the appeals are covered by the aforesaid decision. 3. Being dissatisfied by the order of the High Court, the Revenue has filed these appeals. 4. This Court, on 22-7-2002, granted leave in respect of Question B only. The appeals were not entertained in respect of Question A and it was noted that the appeals were rightly dismissed by the High Court insofar as Question A is concerned as the appellant did not challenge the correctness of the judgment in Hiralal Bhagwati. 5. On a perusal of the judgment of the Gujarat High Court in Hiralal Bhagwati we now find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act by the Commissioner of Income-tax, the assessment is sought to be reopened on the basis of revenue audit objection that the petitioner is not eligible for exemption for the aforesaid reasons. The grounds for reopening the assessment are clearly contrary to the settled legal position as laid down by this Court in the case of Hiralal Bhagwati v. Commissioner of Income Tax, (supra) as well as in the case of Ahmedabad Urban Development Authority v. Deputy Director of Income Tax (Exemption), wherein the Court has held that section 12AA of the Act lays down the procedure for registration in relation to the conditions for applicability of sections 11 and 12 as provided in section 12A of the Act. Therefore, once the procedure is complete as provided under sub-section (1) of section 12AA of the Act and a certificate is issued granting registration to the Trust or Institution, it is apparent that the same is a document evidencing satisfaction about: (1) genuineness of the activities of the trust or Institution, and (2) about the objects of the Trust or Institution. While framing the assessment order, it is not open to the Assessing Officer to ignore the certificate of registratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity of the claims made by the petitioner, has allowed the deduction under section 11 of the Act. Under the circumstances, the reopening of assessment appears to be based on a mere change of opinion, that too, the opinion of the Revenue Audit Party and not that of the Assessing Officer. 50. The ratio discernible from the aforesaid decision is that once the procedure is completed as provided under subsection (1) of Section 12AA of the Act and a certificate is issued granting registration to the trust or institution, it is apparent that the same is a document evidencing satisfaction about (i) the genuineness of the activities of the trust or institution and (ii) about the objects of the trust or institution. While framing the assessment order, it is not open to the Assessing Officer to ignore the certificate of registration granted under Section 12AA of the Act by the Director of Income Tax (Exemption). It is not permissible for the Assessing Officer to go behind the registration obtained by the assessee under Section 12AA of the Act. 51. The legislature has consciously used the word preservation . Preserve means, to keep something in its original f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while examining the data. The material on record should be analysed objectively. 55. The onus to prove that the objects are of charitable nature is on the assessee. 56. In our considered opinion, the principle of purposive interpretation of the provision has to be adopted and when such a construction is placed, it serves the legislative intent. 57. In this context we may refer to the decision in State of T.N. v. Kodaikanal Motor Union (P) Ltd., (1986) 62 STC 272 (SC): (1989) 3 SCC 91, wherein the Supreme Court, after referring to K.P. Varghese vs. Income Tax Officer and and Luke v. Inland Revenue Commissioner, (1964) 54 ITR 692 (HL); (1963) AC 557 (HL), observed thus:- The courts must always seek to find out the intention of the legislature. Though the courts must find out the intention of the statute from the language used, but language more often than not is an imperfect instrument of expression of human thought. As Lord Denning said it would be idle to expect every statutory provision to be drafted with divine prescience and perfect clarity. As Judge Learned Hand said, we must not make a fortress out of dictionar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d within the definition of charitable purposes . With effect from 01.04.2009, a new definition has been substituted, in that, if the advancement of object of general public utility involves carrying on 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 cess or fee or any other consideration, such activity shall not be a charitable purpose. Except the addition of the proviso, restricting the purport of the advancement of any other object of general public utility , there is not much difference in section 2(15) as it existed prior to 01.04.2009, and thereafter. After the amendment the preservation of environment including the watersheds, forest and wild life, and preservation of monuments or places/objects of artistic or historic interest are also included in the definition charitable purpose . Be that as it is, what is important is any institution or organization or entity for the advancement of object of general public utility is also considered as an institution or trust for charitable purpose. Section 11 exempts various categories of incomes as enumerated under section 11(1)(a) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd protect trade, commerce and industries, to aid, stimulate and promote the development of trade, commerce and industries, and to watch over and protect the general commercial interests of India , the Court held as under. The expression object of general public utility in Section 4(3) would 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 thereby if it includes the taking of steps to urge or oppose legislation affecting trade, commerce or manufacture. If the primary purpose be advancement of objects of general public utility, it would remain charitable even if an incidental entry into the political domain for achieving that purpose, e.g., promotion of or opposition to legislation concerning that purpose, is contemplated. 65. In Addl. Commissioner of Income Tax vs. Surat Art Silk, (1980) 121 ITR 1 (SC), a Constitution Bench of the Supreme Court interpreting the words not involving the carrying on of any activity for profit occurring in section 2(15) (as it existed), held that the test of predominant obje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the income of the APSRTC was exempt from income tax under section 4(3)(i). On a reference by the Income Tax Appellate Tribunal, the High Court answered the question in the affirmative in favour of the assessee. Following Trustees of the Tribune, the Supreme Court affirmed the High Court s view observing as under. It is admitted position, as pointed out by the High Court in its judgment under appeal, that no share capital has been raised under Section 23(2) and the entire capital has been provided by the government under Section 23(1) and the Government is only paid interest thereon under Section 28(1) just as interest would be paid on any money due as a debt. That the activity of the respondent Corporation is not carried on with the object of making profit is made abundantly clear by the provisions of section 30 under which, prior to the amendment of that section by the Amendment Act of 1959, the balance of income left, after utilization of the net profits for the purpose set out in section 30, was to be made over to the State Government for the purpose of road development and after the Amendment Act of 1959 is to be utilized for financing the expansion program ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is not established for charitable purposes. 68. In CIT vs. Market Committee, (2007) 294 ITR 563 (P H), the Punjab and Haryana High Court, after considering the provisions of the Punjab Agricultural Produce Markets Act, 1961 held that the market committee incorporated in terms of Section 18 of the Punjab Act is a body corporate and that its activities can be included within the definition of the term charitable purposes. It was also held that the exemptions under sections 10, 11 and 12 of the Act are independent of one another and merely because an assessee is not entitled to claim exemption under one of the aforesaid provisions that cannot ipso facto lead to the conclusion that the claim of the assessee cannot be considered for the grant of tax exemption in some other provisions of the IT Act. The relevant observations are as follows. It is apparent from the duties and responsibilities of the market committees, delineated in the foregoing two paragraphs, that a market committee, in the background of the provisions of the Markets Act, should be treated as a body, discharging legal obligation (s) within the meaning of Section 13(7) of the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to be deployed for the development of minor ports in Gujarat. It was registered as local authority under Section 3(31) of the General Clauses Act, 1897. Prior to 2002, it was availing exemption as local authority under Section 10(20) of the IT Act and, therefore, was not exigible to the income tax. After insertion of the explanation in Section 10(20), the expression local authority was confined to Panchayats, Municipality, Municipal Committee, District Board and Cantonment Board. Maritime Board did not come within the definition of local authority. They, therefore, made an application to the Commissioner for being registered as a charitable institution as defined under section 2(15). The Commissioner rejected the application. The Tribunal as well as the High Court of Gujarat held that the Maritime Board is a charitable institution. The Supreme Court, while construing Section 2(15) and Section 11(1), relied on the Andhra Chamber of Commerce (supra), Surat Art Silk (supra) and APSRTC (supra) and held that the Maritime Board is entitled to be registered as a charitable trust under Section 12A of the Act. The relevant observations are as follows. ; For the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, advancement of any object of benefit to the public or a section of the public as distinguished from benefit to an individual or a group of individuals would be a charitable purpose (CIT v. Ahmedabad Rana Caste Assn (1983) 140 ITR 1 (SC)). The said expression would 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. When an object is to promote or protect the interest of a particular trade or industry that object becomes an object of public utility, but not so if it seeks to promote the interest of those who conduct the said trade or industry (CIT v. Andhra Chamber of Commerce (1965) 55 ITR 722 (SC). If the primary or predominant object of an institution is charitable, any other object which might not be charitable but which is ancillary or incidental to the dominant purpose, would not prevent the institution from being a valid charity (CIT v. Surat Art Silk Cloth Manufacturers Assn (1980) 121 ITR 1 (SC) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 71) 82 ITR 704 (SC) and CIT vs. Ahmedabad Rana Caste Association (1983) 140 ITR 1 (SC) pointed out that the law recognises no purpose as charitable unless it is for a public charity. That is to say, a purpose must, in order to be charitable, be directed to the benefit of the community or a section of the community. The expression object of general public utility , however, is not restricted to the objects beneficial to the whole mankind. An object beneficial to a section of the public is an object of general public utility. The section of the community sought to be benefited must undoubtedly be sufficiently defined and identifiable ........ quality of a public or impersonal nature. 74. The apex Court in the case of Kamla Town Trust (supra), after considering the facts of that case, viz., the trust deed and the rectification agreement, expressed an opinion as under : ............. On the contrary it becomes clear on a close reading of relevant provisions of this clause that the objects are specific and charitable in nature. The beneficiaries are also clearly indicated. There is also no ambiguity about the trustees or the trust properties. Thus all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r millowners and users of motive power even when their interest are in conflict with the interests of their own trade or industry. If and when this happens, how can it be said that the respondent-association has carried out an object of general public utility ? General public is undoubtedly interested in trade, commerce or industry conducted by individuals, but it is surely not interested in protecting the personal interests of these individuals if they are in conflict with the interests of trade, commerce and industry. Therefore, when an object seeks to promote or protect the interests of a particular trade or industry, that object becomes an object of public utility, but not so, if it seeks to promote the interests of those who conduct the said trade or industry. 23. This distinction between the protection of the interests of individuals and the protection of interests of an activity, which is of general public utility, goes to the root of the whole problem, and, hence, the Supreme Court has pointedly referred to this problem in Commissioner of Income-tax v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC) at page 727 of the report by observing as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sses the attributes of a public or impersonal nature. If individuals, whose only common quality is their profession or vocation, can legitimately be invested with the attributes of a public nature, then every partnership, company or an association of persons can be an object of charity, and the trusts created for the benefit of such partnerships, companies and associations would be charitable trusts earning exemption under section 11. Absurdity of such a situation cannot be over-emphasised. 27. What is the exact nature of section of the public which can legitimately become an object of a charity, is considered by Lord Greene M.R. in Powell v. Compton [1945] 1 Ch 123, 129 (CA). In that case a bequest was made for the education of a small number of individual relatives of a testatrix. The question which arose was whether these individuals formed a section of the public so as to make the trust a charitable trust. Lord Greene M. R. held that the trust was not a valid trust, making the following observations : No definition of what is meant by a section of the public has, so far as I am aware, been laid down, and I certainly do not propose to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y majority that though the group of persons indicated was numerous, the nexus between them was employment by particular employers and, accordingly, the trust did not satisfy the test of a public benefit requisite to establish it as charitable. This principle has been approved by our Supreme Court and, therefore, the first part of the object clause (e) is also not found to be for general public utility within the meaning of section of section 2(15) of the Act. So far as the second part is concerned, Shri Kaji's contention was that a benevolent purpose is not necessarily a charitable purpose but if this clause is constructed liberally, it may be said that it embodies within it the object of public utility. Now, proceeding to clause (f) it contemplates promotion of good relation between the employers and the employees. So far as this object is concerned, the matter is concluded by the decision of the Supreme Court in the above referred case of Commissioner of Incometax v. Indian Sugar Mills Association [1974] 97 ITR 486 (SC), wherein the relevant clause which the court considered was to promote good relations between the employers and the employees . This clause was exactly simil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77. It is important to note that prior to the introduction of the Proviso to Section 2(15) of the Act, the assessee company was granted registration under Section 12A of the Act. From this, it is clear that prior to the introduction of the Proviso to Section 2(15) of the Act, the authority, upon due consideration of all the relevant aspects, arrived at the satisfaction that the assessee company was established for charitable purposes.. The company continues to be recognised as a charitable institution. The certificate issued under Section 12A, after due inquiry, is still in force. If the Proviso had not been introduced by virtue of the Finance Act, 2008 w.e.f 1st April, 2009, the assessee company would have been recognized as a charity and would have been recognized as an institution established for the purpose of advancement of an object of general public utility. The argument of the learned senior counsel on behalf of the Revenue is that in view of the introduction of the Proviso to Section 2(15), the assessee company is not entitled to seek exemption. The said proviso has two parts. The first part has reference to the carrying on of any activity in the nature of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the charitable purpose. The genesis of the birth of this company also needs to be looked into closely. The fact that the members of the assessee company are benefited is merely incidental to the carrying out of the main or primary purpose and if the primary purpose was charitable, the fact that the members of the assessed benefited or the subsidiary objects would not militate against its charitable character nor would it make the purpose any less charitable. 80. In the aforesaid context,, we could lay our hands on a very interesting decision of the Delhi High Court in the case of Addl. Commissioner of Income Tax, Delhi vs. Delhi Brick Kiln Owners Association, reported in 1981 (130) ITR 55. In the said case, M/s. Delhi Brick Kiln Owners Association was the respondent assessee. The association had obtained a license from the Central Government for its registration under Section 26 of the Indian Companies Act, 1913. The following were the objects of the company; (a) To promote, develop and protect the brick kiln trade, commerce and industries. (b) To watch and protect the interest of brick kiln owners, contractors, customers and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commerce, 1965 55 ITR 722, despite the fact that it pertained to the provisions of the Indian I.T. Act, 1922, was still good law as there was no change in the substantive provisions relating to the exemption of income from a trust in the I.T. Act, 1961. The Tribunal dismissed the appeal of the department. The department, being dissatisfied, preferred an appeal before the High Court. The High Court took notice of the fact that the Tribunal did not consider the matter relating to the dominant intention but construed the words not involving the carrying on of any activity for profit which had been added by the 1961, Act to the definition of the term charitable purpose . The High Court also took notice of the fact that the Tribunal held that an activity for profit would imply that there should be a profit motive in the activities of the assessed. In other words, the activities should be commercial in nature. Further, the motive to make profit should be in the integrated activity of the buying and disposal. The High Court of Delhi, while dismissing the appeal of the department, held as under; 12. The question referred for our opinion is dependent on the construction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f trade, commerce and industry and to watch over and protect the general commercial interests of India or any part thereof was clearly an object of general public utility. This was despite the fact that one of the objects included in the memorandum was the taking of steps to urge or oppose legislation affecting trade, commerce or manufacture, which by itself, might be considered non-charitable. However, as it was merely incidental to the dominant or primary object, it did not prevent the Andhra Chamber of Commerce from being a valid charity. Therefore, if the primary purpose was the advancement of an object of general public utility, it would remain charitable, even if an incidental entry into the political domain for achieving that purpose, such as promotion of or opposition to legislation concerning that purpose, was contemplated. Applying that very test, the Supreme Court held that the Surat Art Silk Cloth Manufacturers Association was also a valid charity. 17. The true meaning of the ten words not involving the carrying on of any activity for profit was held to be, that when the purpose of a trust or institution is the advancement of an object of general pub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion charitable purpose not in a vacuum, but in the specific context of Section 10(23C)(iv) of the said Act. As pointed out above, Section 10 deals with the incomes not included in total income. And, Section 10(23C)(iv) specifically deals with the income received by any person on behalf of, inter alia, an institution established for charitable purposes. We have to, therefore, examine the meaning of the expression charitable purposes in the context of Section 10(23C)(iv). Looking at the said expression from this stand point, it becomes clear that it has a reference to income. Because, it is only when such an institution has an income that the question of not including that income in its total income would arise. Therefore, merely because an institution, which otherwise is established for a charitable purpose, receives income would not make it any less a charitable institution. Whether that institution, which is established for charitable purposes, will get the exemption under Section 10(23C)(iv) would have to be determined by the prescribed authority having regard to the objects of the institution and its importance throughout India or throughout any State or States. There is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecourse to Section 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 way, the provisions of Section 10(23C)(iv) would not be available, either because it is not necessary or because it is blocked. The intention behind introducing the proviso to Section 2(15) of the said Act could certainly not have been to render the provisions of Section 10(23C)(iv) redundant. With this in mind, it is to be seen as to what is meant by the expressions trade , commerce or business . The word trade was considered by the Supreme Court in its decision in the case of Khoday Distilleries Ltd and Others v. State of Karnataka and Others: 1995 (1) SCC 574, whereby the Supreme Court held that the primary meaning of the word 'trade' is the exchange of goods for goods or goods for money . Furthermore, in State of Andhra Pradesh v. H. Abdul Bakhi and Bros: 1964 (5) STC 644 (SC), the Supreme Court held that ―the word business was of indefinite import and in a taxing statute, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ish defines utility as useful: power to satisfy the wants of people in general: a useful thing, public utility: public service or a company providing such public service. According to New Oxford Dictionary of English (1998), as a Noun, utility is the status of being useful, profitable or beneficial. 86. The Corpus Juris Secundum Volume 73 page 990 elucidates the following legal position. A public utility has been described as a business organization which regularly supplies the public with some commodity or service, such as electricity, gas, water, transportation or telephone or telegraph service. While the term has not been exactly defined, and, as has been said, it would be difficult to construct a definition that would fit every conceivable case, the distinguishing characteristic of a public utility is the devotion of private property by the owner or person in control thereof to such a use that the public generally, or that part of the public which has been served and has accepted the service, has the right to demand that the use or service, s long as it is continued shall be conducted with reasonable efficiency and under proper charges. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e exception carved out in the first proviso to Section 2(15) of the Act would not apply. 90. We may refer to and rely upon the decision of this Court in the case of Director of Income Tax (Exemption) vs. Sabarmati Ashram Gaushala Trust, reported in (2014) 44 taxmann.com 141 (Gujarat), wherein this Court was called upon to consider whether the activities of the respondent assessee-Sabarmati Ashram Gaushala Trust could be termed as charitable having regard to the object with which the trust was constituted. We may quote the relevant observations; What thus emerges from the statutory provisions, as explained in the speech of Finance Minister and the CBDT Circular, is that the activity of a trust would be excluded from the term charitable purpose if it is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business for a cess, fee and/or any other consideration. It is not aimed at excluding the genuine charitable trusts of general public utility but is aimed at excluding activities in the nature of trade, commerce or business which are masked as charitable purpose . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CBDT in its Circular No. 11/2008 dated 19 th December 2008 the proviso aims to attract those activities which are truly in the nature of trade, commerce or business but are carried out under the guise of activities in the nature of public utility . 91. Carrying on an 'activity in the nature of trade, commerce, or business' or rendering of any service in relation to trade etc. is sine qua non for taking away the character of charitable purpose. An activity in the nature of trade, commerce or business is always carried on with the prior object of earning income. What is relevant is the intention of the person before undertaking such activity. A line of distinction needs to be drawn between the activities undertaken by a society, otherwise satisfying the prescription .of section 2(15) 'prior to the insertion of proviso, which are aimed at earning income divorced from the objects for which it is charitable por una parte and the activities which are aimed at the attainment of the objects for which It was set up por otra parte. Whereas the former fall within the mandate of the proviso to section 2(15), the latter do not. The obvious reason is that the latt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lhi High Court in the Institute of Chartered Accounts of India v. Director General of Income-tax (Exemptions), 2013 358 lTR 91/217 Taxman 152/35 taxmann.com 140 (Delhi) , observed, while disposing of a writ petition, that holding interviews for fees for the purpose of campus placements of its students does not amount to carrying on a business so as to deny exemption u/s 11 of the Act. It further observed that if the object or purpose of an institution is charitable, the fact that the institution collects certain charges does not alter the character of the institution. The Delhi High Court further observed in para 67 that the purport of the first proviso to section 2(15) of the Act is not to exclude the entities which are essentially for charitable purpose, but are conducting some activities for a consideration or a fee. The object of introducing the first proviso is to exclude the organizations which are carrying on regular business from the scope of charitable purpose' . The High Court also noticed the purpose of introducing the proviso to section 2(15) of the Act from the Budget Speech of the Finance Minister while introducing the Finance Bill 2008 and reproduced the releva ..... X X X X Extracts X X X X X X X X Extracts X X X X
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