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TMI Blog2019 (11) TMI 644X X X X Extracts X X X X X X X X Extracts X X X X ..... citizens, women etc. Therefore, the last limb general public utility clearly defined in section 2(15) and being more specific will be applicable in the instant case and has been rightly invoked by the Assessing officer. Whether the activities of the assessee corporation involves carrying on of activities in the nature of trade, commerce or business or any activity of rendering of services in relation to any trade, commerce or business for a cess, fee or any other consideration and the proviso to section 2(15) - As per the Assessing officer, the activities of the assessee corporation are commercial in nature for the reason that it is running buses and charging fare from the passengers and it is not providing free services to the public. CIT(A) referred to the decision of India Trade Promotion Corporation vs UOI [ 2015 (1) TMI 928 - DELHI HIGH COURT] wherein it was held that the dominant and prime objective of the Institution has to be seen. Where the dominant and prime objective is profit making, it would not be entitled to claim its objects to be charitable purposes and where the institution is not driven primarly by a desire or motive to earn profit but to do charity th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... donation application, we find that there is is a reasonable cause for delay in filing the present appeals. Hence, delay is hereby condoned and the appeals are admitted for adjudication. 3. In ITA No. 885/JP/2018, the assessee has taken the following grounds of appeal as under:- 1. On the facts and in the circumstances of the case Ld. DCIT Circle-05, Jaipur as well as Ld. CIT(A) erred in holding that the activities of appellant is not covered under the general public utility and relief to poor without appreciating the entire activities and object and accordingly, withdrawal of exemption u/s 11 may kindly be quashed. 2. On the facts and in the circumstances of the case, Ld. DCIT Circle-05 Jaipur as well as Ld. CIT(A) erred in holding that the activities of appellant is covered under business in spite of carrying activity on nominal price to assisting general public without any profit motive, and hence the withdrawal of exemption u/s 11 of the I.T. Act, 1961 is unjustified and may kindly be quashed. 4. Briefly stated, the facts of the case are that the assessee corporation provides road transportation services i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the ld. CIT(A) who has confirmed the said findings of the Assessing Officer. Against the said findings of the ld CIT(A), the assessee is now in appeal before us. 6. During the course of hearing, the ld. AR submitted that assessee is a State government owned corporation providing transportation services and registered u/s 12AA of IT Act 1961. In the assessment u/s 143(3), the ld AO withdrawn the exemption u/s 11 after holding that assesee is not entitled to be registered in view of amended provision u/s 2(15) of the IT Act 1961. The ld AR drawn our reference to the provision u/s 2(15) of the I.T. Act, 1961 (amended w.e.f 01.04.2009) which reads as under: '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: 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eneral public utility than still the activities of Corporation does not qualify the test of running trade, commerce or business activity for fee for the following reasons: 1. Object of Corporation is to provide competitive services of passenger transportation to general public at large and poor and needy persons and to various poor part of society in specific against subsidized price. RSRTC also provide the transportation services in those rural areas where private buses operators don't even bother to go. 2. The charges of fare are fixed only for the purpose of continuity of its operation and for the purpose of making corporation going concern. The assessee is incurring losses as its recovery of operation cost is less than 100% from passenger fare. 3. Commercial activity for fee or cess means the business for money making. Corporation is the state government undertaking. It is a service organ of the state and it functions in public interest for relief to poor and to provide transportation facility in distant interior after providing all amenities even after bearing losses. 4. The assessee corporation filed retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e CBDT circular 11 of 2008 dated 19.12.2008 make it clear that only the institution carrying on commercial activities with the intention to earn profit are intended to be in the nature of trade, commerce and business. This view was again upheld by Gujarat High Court in case of Director of Income Tax vs Sabarmati Ashram Trust 362 ITR 539. 12. It was further submitted that in case of State Of Andhra Pradesh vs Andhra Pradesh State Road dated 17 August, 1988, it was held that APSRTC does not carry on any business except to provide transport service to the people Where the primary activity of the corporation itself cannot be treated as a business activity From the foregoing, we have no hesitation to hold that the activities of the corporation do not constitute business within the meaning of section 2(1)(bbb) of the Andhra Pradesh General Sales Tax Act and, therefore, it cannot be said to be a dealer within the meaning of section 2(1)(e) of the Act . 13. It was further submitted that the issue has also been covered by Jurisdictional High Court decision in case of CIT Jodhpur vs. Jodhpur Development Authority and CIT Bikaner vs. Urban Improvement Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the purpose of road development. 16. It was submitted by the ld AR that the activity of corporation was not carried on with the object of making profit was made abundantly clear by provision of sec 30 of the Act. The amount left over after utilization for the purpose set out in section 30 was to made over to the State Government for the purpose of road development. The amount handed over to the State Government did not become part of the general revenues of the state but was impressed with obligation that is should be utilized only for the purpose for which it was entrusted, viz., road development. 17. It was accordingly submitted by the ld AR that calling the activities of the assesee as normal business activities is totally incorrect and without any evidently value. The objects of assesee are charitable in nature and as such it had been claiming its income if any as exempt u/s 11 of IT Act 1961 and the order of the lower authorities should accordingly be set-aside. 18. Per contra, the ld. DR is heard who has relied on the findings of the AO and the ld. CIT(A) and our reference was drawn to the findings of ld CIT(A) which reads ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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; Provided further that first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is twenty five lakh rupees or iess in the previous year. 7.2.1. The present definition in section 2(15) was substituted by Finance Act 2008 with effect from 1-4-2009 and first proviso was added to state that the advancement of any other object of general public utility will cease to be a charitable purposes if it involves any trade commerce or business. Preservation of environment and preservation of monuments or places of historical or artistic interest have also be added to the definition implying that these are now taken out of the category of general public utility 7.2.2. Second proviso to section 2(15) added by Finance Act 2010 with effect from 1-4-2009 provides an exception to the application of first proviso if the turnover from the activity of trade, commerce or business does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r that if the literal interpretation is given to the proviso to Section 2(15) of the said Act, then the proviso would be at risk of running foul of the principle of equality enshrined in Article 14 of the Constitution India. In order to save the Constitutional validity of the proviso, the same would have to be read down and interpreted in the context of Section 10(23C)(iv) because, in our view, the context requires such an interpretation. The correct interpretation of the proviso to Section 2(15) of the said Act would be that it carves out an exception from the charitable purpose of advancement of any other object of general public utility and that exception is limited to activities in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business for a cess or fee or any other consideration. In both the activities, in the nature of trade, commerce or business or the activity of rendering any service in relation to any trade, commerce or business, the dominant and the prime objective has to be seen. If the dominant and prime objective of the institution, which claims to have been established for charitable purposes, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant i.e. Rajasthan State Road Transport Corporation, established to run buses and providing service to general public, however, these activity cannot be regarded as Charitable purpose as defined in sec. 2(15) as discussed above. The appellant's claim that it incurred huge loss while providing service to general public at lowest fare, does not support in any case that its activity are of Charitable purpose. The Corporation was not established with aim that it would incur loss, merely charging of low fare is not only the reason for loss, there may be many other various viz. management, that adversely affected business of Corporation. The appellant's reliance on the decision of Hon'ble ITAT Bangalore in the case of Karnataka State Road Transport Corporation dated 20-02-2015 is misplaced. In the case of Karnataka State Road Transport Corporation, the issue of rejection of registration u/s. 12A was under consideration whereas in the instant case, no such issue is under consideration. In light of the above discussion, it is clear that activities being carried out are not charitable in view of amended provisions of section 2(15). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g fare from the passengers and it is not providing free services to the public. The ld CIT(A) referred to the decision of the Hon ble Delhi High Court in case of India Trade Promotion Corporation vs UOI wherein it was held that the dominant and prime objective of the Institution has to be seen. Where the dominant and prime objective is profit making, it would not be entitled to claim its objects to be charitable purposes and where the institution is not driven primarly by a desire or motive to earn profit but to do charity through the advancement of an object of general public utility, it can be regarded as an institution established for charitable purposes. The ld AR has further referred to the decision of the Hon ble Rajasthan High Court in case of Jodhpur Development Authority and Urban improvement Trust, Bikaner wherein similar legal proposition has bee laid down. However, when it comes to finding on facts in the instant case, the ld CIT(A) merely held that since its receipts from activities which are commercial in nature exceeds the prescribed threshold, the assessee corporation will be not a charitable corporation. We therefore find that there is no finding by the AO or the l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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