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TMI Blog2020 (9) TMI 290X X X X Extracts X X X X X X X X Extracts X X X X ..... onsisting of ex-officio members who are officials of the health department Activities carried out by the applicant council have been reflected in its Income Expenditure accounts of various years - applicant council has shown receipt of direct income comprising of registration fees, counselling fees, examination fees, Inspection fees, revaluation fees etc and there are corresponding expenditure of councelling charges, examination charges, inspection charges, etc - such income receipts and expenditure describes its activities which are in the nature of General public Utility (GPU) - same income receipts (100%) are of nature of Business/commercial receipts and thus, in contravention of 20% limit as provided in the proviso to section 2(15) and also are not incidental but pre-dominant activities of the institution. How can the same activity qualify and falls in both the categories i.e, an activity in the nature of general public utility and at the same time, qualify as business activity. Merely because the assessee council has charged certain fees as part of rendering its statutory function and to meet its administrative/operative expenses, the same cannot be said to be done ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein the assessee has taken the following grounds of appeals:- 1.The learned Commissioner of Income Tax (Exemptions), Jaipur has erred in law as well in facts in rejecting the application of Rajasthan Nursing Council for seeking registration U/s 12AA of the Income Tax Act, 1961 and holding that the applicant society cannot be held as charitable within the meaning of Sec.2(15) of the Income -tax Act, 1961. 2. The learned Commissioner of Income Tax (Exemptions), Jaipur has erred in law as well as in facts holding that the Council is not engaged in the charitable purpose of education, and that its activities fall under General Public Utility thereby attracting proviso to Sec. 2(15). 3. The learned Commissioner of Income Tax (Exemptions), Jaipur has erred in law as well as in facts in not providing proper opportunity of being heard to the appellant before passing the order. 2. Briefly the facts of the case are that the assessee-Council filed an application in Form No. 10A for seeking registration U/s 12AA of the IT Act. On receipt of the application and after going through the documents and explanations so called for, the ld. CIT(E) issued a show cause dated 05. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but does not train/ educate/ disseminate knowledge. The applicant is therefore not engaged in the charitable purpose of education, and hence its activities fall under General Public Utility thereby attracting Proviso to Sec. 2(15). The said proviso clearly states that such advancement of any other object of General Public Utility shall not be a charitable purpose if the assessee fails the conditions laid down in the Proviso. In the case of the assessee, it has been shown above that it fails on all conditions in the Proviso. Hence, the applicant society cannot be held as charitable within the meaning of Sec. 2(15) of the Income-tax Act, 1961. Based on above, I am satisfied that the applicant trust is not fit for registration and, therefore, registration u/s 12AA is rejected. 3. Against the rejection of its application seeking registration under section 12AA and the aforesaid order and findings of the ld. CIT(E), the assessee council is now in appeal before us. 4. During the course of hearing, the ld. AR submitted that the assessee, Rajasthan Nursing Council ( RNC ) was set up by the State Government under the Rajasthan Nursing, Midwives, Health Visitors and Auxiliary Nu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nursing superintendent, whoever is incharge of the nurse training, Mahatma Gandhi Hospital, Jodhpur; vii) The matron or the nursing superintendent, whoever is incharge of the nurse training at SMS Hospital, Jaipur viii) The matron or the nursing superintendent, whoever is incharge of the nurse training at P.B.M. women s Hospital, Bikaner and ix) The matron or the nursing superintendent, whoever is incharge of the nurse training General Hospital, Udaipur. B) The State Government has further power to nominate six nominees related to health and medical. 7. It was submitted that Section 6 of the Act lays down that the term of office of members who shall continue as such long as they hold the office by virtue of which he is a member of the Council. It was submitted that in section 34 of the Act, it is mentioned that all the rules and regulations finally made under this Act shall be laid before the House of the State Legislature. 8. It was submitted that as per the order dated 10th April 2019 regarding establishment matter from the Medical Health Department, Government of Rajasthan (administrative Department of the Council), it is clarified that The State Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , to prescribe the qualifying examinations, specify the various title, degrees, diplomas or certificates recognize educational or instructions, schools, colleges for the purpose of training and to appoint examination bodies. It was undisputedly held that the Council is only a Regulatory Body and predominantly there is no profit motive. It was submitted that the activities performed by the Council are as per the Act and the core activities undertaken by the Council are towards achieving their predominant object of education. Further, it was submitted that there is no doubt to the fact that the Council is a body owned and governed by the State Government having the purpose to regulate educational institutions and to implement the Educational Policy of the State and the facts and circumstances of the case of Lok Sikshana Sansthan and Bar Council of Maharashtra are conceptually different from the facts of the present case. 14. It was further submitted that the Ld. CIT(E) has contradicted his earlier findings by wrongly terming the receipts from registration fees, counseling fees, examination fees, inspection fees, revaluation fees etc of the Council as business/ commercial receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visitor and auxiliary nursing-midwifery. 19. It was submitted that Section 25 of the Act empowers the State Government to prohibit unregistered nurses, midwives, health visitors and auxiliary nurse-midwives. 20. It was submitted that the Council is providing affiliation for the purpose of recognizing those institution to carry training and education of nurses, midwives, health visitors and auxiliary nurse-midwives, which the predominant object of the Council and not to earn revenue from Affiliation. The Council provides education including by way of affiliation, so that the modern system of education and benefits of private expertise are available to the students. Further, it is relevant to note that the institution affiliated with the Council are treated and granted exemption as educational institution, where they cannot provide education without affiliation and all exams are held degree is awarded to the students by the Council. 21. It was submitted that the Ld. Commissioner has wrongly applied the decision of Hon ble Supreme Court in the case of Sole Trustee, Lok Shikshana Sansthan v. CIT (1975) 101 ITR 234(SC) where it was held that all kinds of acquiring knowledge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act, 2015 w.e.f 01.04.2016. In this amendment, two conditions have been inserted for the case of GPU who are engaged in the activity in the nature of trade commerce and business. These are: (a) Such activities are undertaken in the course of actual carrying out of such advancement of any other object of GPU and (b) The aggregate receipts from such activity or activities during the previous year do not exceed 20% of the total receipt of the trust or institution undertaking such activity or activities of that previous year. 26. The explanatory note to the amendment read as under: Explanatory note to Finance Act, 2015 - In so far as the advancement of any other object of GPU is concerned, there is a need to ensure appropriate balance being drawn between the object of preventing business activity in the garb of charity and at the same time protecting the activities undertaken by the genuine organisation as part of actual carrying out of the primary purpose of the trust or institution. 27. In a nutshell, the meaning of the above proviso is that while deciding the case where business activities are visible, the predominant object test is to be applied and also the business acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resaid contentions, the reliance was placed on following judgements: Bodh Shiksha Samiti vs ACIT (Exemptions), Jaipur (ITA. No. 590, 591 592/JP/2018 dated 29.05.2019) Bhartiya Siksha Samiti vs CIT (ITA No. 816/Del/2015 dated 16.10.2015). Queen s Education Society vs CIT (2015) 372 ITR 699 (SC) Green Area Education Trust v. Deputy Commissioner of Income-tax, 5(2)(2), Mumbai (2016) 159 ITD 671 (Mum) ADIT (Exemption) vs JeevanVidhya Mission (2015) 155 ITD 1150 Assam State Text Book Production Publication Corpn. Ltd. (2009) 319 ITR 317 (SC) GS1 India v.DGIT (Exemptions) [2014] 360 ITR 138(Del) Secondary Board Of education v. ITO (1972) 86 ITR 408 (Orissa) Katra Educational Society v. ITO [1978] 111 ITR 420 (All.) Aditanar Educational Institution vs. Addl. CIT (1997) 224 ITR 310(SC) Shavak Shiksha Samiti vs CIT 104 TTJ 127 (Del) Pinegrove International Charitable Trust vs Union of India [2010] 188 TAXMAN 402 (PUNJ. HAR.) CIT vs Gujarat Maritime Board (2007) 295 ITR 561 (SC) Indian Chamber of Commerce vs. Commissioner of Income Tax (1975)101 ITR 0796 Add.CIT vs. Surat Silk Cloth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limb of general public utility and is not covered under the limb education as defined U/s 2(15) of the Act. Further, the ld CIT/DR relied on the decision of Hon ble Bombay High Court in case of Director of Income-tax (exemptions) vs. Nation Safety Council (2008) 305 ITR 257 and decision of Hon ble Madras High Court in case of CIT(Addl.) vs. Automobile Association of India (1981) 127 ITR 730 in support of his contentions. 33. It was further submitted that the decision of Hon ble Supreme Court in case of Assam State Textbook Board, relied upon by the ld. Council, is not applicable since firstly, the Hon ble Supreme Court set aside the case to be considered de-nova by the AO and hence did not lay down any law, secondly the activities of the said education Board was different and thirdly, the said decision was rendered in the context of Section 10(22) of the Act. It was accordingly submitted that there is no infirmity in the finding of the CIT(E) that the activities of the appellant council cannot be termed as charitable under the category of education and its activities fall under the category of general public utility to which proviso to Section 2(15) of the Act is applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d order rejecting the application of the assessee council seeking registration under section 12AA and the appeal of the assessee council may thus be dismissed. 35. We have considered the rival contentions and perused the material available on record. The relevant provisions which are under consideration is Section 2(15) which defines the term charitable purpose and the same reads as under: 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: 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 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, unless- (i) such activity is underta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he definition of charitable purpose in the 1922 Act, the present definition has inserted the restrictive words not involving the carrying on of any activity for profit which qualify or govern the last head of charitable purpose. In CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 - a case decided by this Court under the 1922 Act, where the restrictive words were absent, this Court laid down that if the primary or dominant purpose of a trust or institution was charitable, any other object which by itself might not be charitable but which was merely ancillary or incidental to the' primary or dominant purpose would not prevent the trust or institution from being a valid charity. After the addition of the restrictive words in the definition in the 1961 Act, this Court in Addl. CIT v. Surat Art Silk Cloth Manufacturers' Association [1980] 121 ITR 1 affirmed that the aforesaid test of primary or dominant purpose of a trust or institution still holds good, that the restrictive words qualify object and not the advancement or accomplishment thereof, and that the true meaning of the restrictive words was that when the purpose of a trust or institution was the advancement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conducting law seminars, etc., are incidental objects and the benefit to the public is remote or indirect or incidental and, therefore, the assessee-Council could not be regarded as a body in tended to advance the object of general public utility. It is impossible to accept this contention. It is clear that sub-section (1) lays down the obligatory functions while sub-section (2) indicates what are the optional or discretionary functions that could be undertaken by the State Bar Council and from amongst the obligatory functions it will be wrong to pick out one and say it is the primary or dominant object or purpose. All the clauses of sub-section (1) will have to be considered in light of the main objective sought to be achieved as indicated in the Preamble. The functions mentioned in clauses (a) and ( b)of sub- section (1), namely, to admit persons as advocates on its roll and to prepare and maintain such roll, are clearly regulatory in character intended to ensure that persons with requisite qualifications who are fit and otherwise proper to be advocates are available for being engaged by the litigating public ; the function prescribed in clause (c) has been enjoined upon avowedl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eaning of section 2(75) and as such the income from securities held by the assessee- Council would be exempt from any tax liability under section 11. 39. A similar matter came up for consideration before the Hon ble Rajasthan High Court in case of Bar Council of Rajasthan vs. CIT [1984] 147 ITR 720 wherein the question for consideration before the Hon ble High Court was whether the Bar Council of Rajasthan could be taken to be a body intended to advance any object of general public utility and following the decision of Hon ble Supreme Court in case of Bar Council of Maharashtra (supra), it was held as under (head notes):- The dominant purpose of a State Bar Council, as reflected by its various obligatory functions, is to ensure quality service of competent lawyers to the litigating public, to spread legal literacy, promote law reforms and provide legal assistance to the poor, while the benefit accruing to the layer-members is incidental. The primary or dominant purpose of an institution like the State Bar Council is the advance of an object of general public utility within the meaning of s. 2(15) of the I.T. Act, 1961, and as such the income from securities held by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 15 of the CA Act, which prescribes functions of the Council. For the sake of convenience section 15 is reproduced below: 15. Functions of the Council.-(1) The duty of carrying out the provisions of this Act shall be vested in the Council. (2) In particular, and without prejudice to the generality of the foregoing power, the duties of the Council shall include- (a) the examination of candidates for enrolment and the prescribing of fees therefor; (b) the regulation of the engagement and training of a[articled and audit clerks]; (c) the prescribing of qualifications for entry in the Register; (d) the recognition of foreign qualifications and training for purposes of enrolment; (e) the granting or refusal of certificates of practice under this Act; (f) the maintenance and publication of a Register of persons qualified to practice as chartered accountants; (g) the levy and collection of fees from b[* * * *] members, examinees and other persons; (h) the removal of names from the Register and the restoration to the Register of names which have been removed; (i) the regulation and maintenance of the status and standard of profe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t would have to decide whether the functions so undertaken had become the dominant purpose. No doubt, the petitioner holds classes and provides coaching facilities for candidates/articled and audit clerks who want to appear in the examinations and want to get enrolled as Chartered Accountants and as well as for members of the petitioner-institute who want to update their knowledge and develop and sharpen their professional skills, but this is not the sole or primary activity. The petitioner-institute may hold classes and give diploma/degrees to the members of their institute in various subjects but this activity is only an ancillary part of the activities or functions performed by the petitioner institute. This one or part activity by itself, does not mean that the petitioner is an educational institute or is predominantly or exclusively engaged in the activity of education. The petitioner institute is engaged in multifarious activities of diverse nature, but the primary and the dominant activity is to regulate the profession of Chartered Accountancy. For this purpose it holds entrance examination and enrolls members. It regulates the conduct of its members, prescribes and fix ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribes and fixes the accountancy standards etc. No doubt, the assessee holds classes and provides coaching facilities for the members and articled clerks etc. who want to appear in the examination conducted by the Institute of Chartered Accountants, but these classes are not held for coaching or for appearance in an examination conducted by some other entity/body. Conducting of coaching classes is with the predominant object of maintaining and upholding the standards of the accountancy profession and in furtherance of the object and purpose for which the institute is established, i.e., professional excellence and promotion of accountancy as a preferred profession. Members of petitioner Institute attend courses/lectures etc. to sharpen their skill and knowledge. These are ancillary activities to the main activity performed and the object for which the institute has been established. 42. In case of Bureau of Indian Standards vs Director General of Income-tax (Exemptions) [2012] 27 taxmann.com 127 (Delhi), the Hon ble Delhi High Court held as under: 13. In view of the above discussion, it cannot be said that the BIS is involved in any carrying on trade, commerce or business. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imilar vein, the Allahabad High, in Bar Council of Uttar Pradesh v. CIT [1983] 143 ITR 584/12 Taxman 209 held that the object of the Bar Council, to safeguard the interests of its advocates, to assist disabled advocates, to see that advocates who misbehave are taken to task, to promote law reform etc. shows that the body is constituted under Section 6 of the Advocates Act, 1961 to benefit the public at large by having on its rolls, advocates who are not only competent in law but who are respectable and proper persons to belong to the noble profession of lawyers; the said activities have been held for the advancement of general public utility within the meaning of Section 2(15) of the Act. In Ahmedabad Rana Caste Association (supra), the Supreme Court held that the expression any other object of general public utility 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. 16. What survives to be determin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sked to act as agencies of the State in public duties which cannot be discharged by private bodies. Often, apart from the controlling or parent statutes, like the BIS Act, these statutory bodies (including BIS) are empowered to frame rules or regulations, exercise coercive powers, including inspection, raids; they possess search and seizure powers and are invariably subjected to Parliamentary or legislative oversight. The primary object for setting up such regulatory bodies would be to ensure general public utility. The prescribing of standards, and enforcing those standards, through accreditation and continuing supervision through inspection etc, cannot be considered as trade, business or commercial activity, merely because the testing procedures, or accreditation involves charging of such fees. It cannot be said that the public utility activity of evolving, prescribing and enforcing standards, involves the carrying on of trade or commercial activity. 17. In view of the above discussion, the Court is of opinion that the impugned order of the Director of Income Tax dated 24.2.2012 is contrary to law. It is hereby quashed. The respondents are directed to process the case of B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pply even if the cess or fee or any other consideration is applied for a charitable activity/purpose. The proviso has to be given full effect to. Thus, even if cess, fee or consideration is used or utilized for charitable purposes, the proviso and the bar will apply. An institution will not be regarded as established for charitable purpose/activity under the last limb, if cess, fee or consideration is received for carrying on any activity in nature of trade, commerce or business or for any activity of rendering of any service in relation to any trade, commerce or business, even if the consideration or the money received is used in furtherance of the charitable purposes/activities. In view of the first proviso, the decisions that the application of money/profit is relevant for determining whether or not a person is carrying on charitable activity, are no longer relevant and apposite. Even if the profits earned are used for charitable purposes, but fee, cess or consideration is charged by a person for carrying on any activity in the nature of trade, commerce or business or any activity of rendering of any service in addition to any trade, commerce or business, it would be covered und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stablished for charitable purpose under Section 2(15) of the Act. Such contention has not been raised and cannot be sustained/accepted. Circular No. 11 of 2008 by the Central Board of Direct Taxes 21. It may be relevant to reproduce extract from Circular No. 11 of 2008 issued by the Central Board of Direct Taxes explaining the amendments to Section 2(15) of the Act. The relevant portion of the circular reads as under: Section 2(15) of the Income Tax Act, 1961 ('Act') defines charitable purpose to include the following:- (i) Relief of the poor (ii) Education (iii) Medical relief, and (iv) the advancement of any other object of general public utility. 2. An entity with a charitable object of the above nature was eligible for exemption from tax under section 11 or alternatively under section 10(23C) of the Act. However, it was seen that a number of entities who were engaged in commercial activities were also claiming exemption on the ground that such activities were for the advancement of objects of general public utility in terms of the fourth limb of the definition of 'charitable purpose'. Therefore, section 2(15) was amende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the petitioner is regarded by the revenue as nothing but business, trade or commerce. Money received, of course is used and utilized for the charitable activities. Four reasons are elucidated and propound in the impugned order to state that the petitioner is engaged in business, trade or commerce and aforesaid encapsulated in the impugned order. Petitioner has acquired intellectual property rights, receives fee from third parties, which is nothing but payment of royalty, there is huge surplus of receipts over expenditure (refer table reproduced in paragraph 7 above) and payment is made by the petitioner to GS1 Global Services, Belgium. 24. Can it be said that the petitioner is engaged in activities which constitute business, commerce or trade? As observed above, legal terms trade, commerce, or business in Section 2(15), means activity undertaken with a view to make or earn profit. Profit motive is determinative and a critical factor to discern whether an activity is business, trade or commerce. 25. Business activity has an important pervading element of self- interest, though fair dealing should and can be present, whilst charity or charitable activity is anti-thesis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payable by the user of the global identification system. 27. The petitioner does not cater to the lowest or marginalized section of the society, but Government, public sector and private sector manufacturers and traders. No fee is charged from users and beneficiaries like stockiest, whole sellers, government department etc. while a nominal fee is only paid by the manufacturer or marketing agencies i.e. the first person who installs the coding system which is not at all exorbitant in view of the benefit and advantage which are overwhelming. Any one from any part of the world can access the database for identification of goods and services using global standard. The fee is fixed and not product specific or quantity related i.e. dependent upon quantum of production. Registration and annual fee entitles the person concerned to use GS1 identification on all their products. Non levy of fee in such cases may have its own disadvantages and problems. Charging a nominal fee to use the coding system and to avail the advantages and benefits therein is neither reflective of business aptitude nor indicative of profit oriented intent. 28. Having applied the test mentioned above, includi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to any statutory mandate that a charitable institution falling under the last clause should be wholly, substantially or in part must be funded by voluntary contributions. No such requirement has been pointed out or argued. A practical and pragmatic view is required when we examine the data, which should be analyzed objectively and a narrow and coloured view will be counter-productive and contrary to the language of Section 2(15) of the Act. 35. The second proviso, which refers to the aggregate value of receipt of activities of ₹ 10 lacs (now enhanced ₹ 25 lacs vide Finance Act 2011 with effect from 1.4.2012) or less in a previous year, cannot be invoked in the present case because the said provision will apply only if the institution covered by the last/residuary clause is involved or carrying on activity of rendering any service in relation to trade, commerce or business. Contention of the respondent, if accepted, would deny charitable status to a faintly moderate size institution under the last/residuary limb, when it charges even a token or insignificant amount from the beneficiaries, who gain significantly from the altruism and benevolence. A small charitable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not make any difference and the activity would nonetheless not be regarded as being carried on for a charitable purpose. We have seen that by virtue of Section 25 of the Companies Act, the petitioner is enjoined to plough back its income in furtherance of its object and the declaration of dividends is prohibited. If a literal interpretation is to be given to the proviso, then it may be concluded that this fact would have no bearing on determining the nature of the activity carried on by the petitioner. But, we feel that in deciding whether any activity is in the nature of trade, commerce or business, it has to be examined whether there is an element of profit making or not. Similarly, while considering whether any activity is one of rendering any service in relation to any trade, commerce or business, the element of profit making is also very important. 46. At this juncture, we may point out that we are in agreement with the argument advanced by Mr Syali that the proviso to Section 2(15) does not make any distinction between entities carrying on regular trade, commerce or business or providing services in relation to any trade, commerce or business on the one hand and genuine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he objects of the institution and its importance throughout India. It is only because of this that the petitioner had been granted the exemption by the respondent for the period prior to assessment year 2009-10. Therefore, insofar as the receiving of income is concerned, that cannot be taken as an instance to deny the petitioner its status as an institution established for charitable purposes. Because, if that were to be so, then there would be no necessity to take recourse to Section 10(23C)(iv) for the benefit of an exemption. To put it plainly, if an institution established for charitable purposes did not receive an income at all, then what would be the need for taking any benefit under Section 10(23C)(iv) of the said Act. Therefore, if a meaning is given to the expression charitable purpose so as to suggest that in case an institution, having an objective of advancement of general public utility, derives an income, it would be falling within the exception carved out in the first proviso to Section 2(15) of the said Act, then there would be no institution whatsoever which would qualify for the exemption under Section 10(23C)(iv) of the said Act. And, the said provision would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pursued with reasonable continuity. There should be facts and other circumstances which justify and show that the activity undertaken is in fact in the nature of business. 53. From the said decision, it is apparent that merely because a fee or some other consideration is collected or received by an institution, it would not lose its character of having been established for a charitable purpose. It is also important to note that we must examine as to what is the dominant activity of the institution in question. If the dominant activity of the institution was not business, trade or commerce, then any such incidental or ancillary activity would also not fall within the categories of trade, commerce or business. It is clear from the facts of the present case that the driving force is not the desire to earn profits but, the object of promoting trade and commerce not for itself, but for the nation - both within India and outside India. Clearly, this is a charitable purpose, which has as its motive the advancement of an object of general public utility to which the exception carved out in the first proviso to Section 2(15) of the said Act would not apply. We say so, because, if a li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y trade, commerce or business entities, and to expose their true identities. The object was not to hurt genuine charitable organizations. And, this was also the assurance given by the Finance Minister while introducing the Finance Bill 2008. 45. In case of Commissioner of Income Tax Jodhpur vs Jodhpur Development Authority (DB Income Tax Appeal No. 63/12 dated 5.07.2016), the Hon ble Rajasthan High Court held as under: 27. From various decisions of the Hon ble Supreme Court discussed hereinabove, the settled position of law emerges is that 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, may be involving element of profit, would not prevent the institution from being a valid charitable trust. 28. In the backdrop of settled position of law discussed hereinabove, adverting to the facts of the present case, indubitably, JDA is a statutory body constituted and established under the provisions of Section 3 of JDA Act with a main object to secure the integrated development of Jodhpur Region and for that purpose to discharge inter alia the functi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sposal of land buildings and other property movable and immovable and other transactions including lease money, urban assessment development charges and other similar charges and all money received by way of rents and profits or in any other manner or from any other source. A fortiori, as per the mandate of Section 54 of the JDA Act, all property funds and other assets vesting in the JDA shall be held and applied by it for the purposes and subject to the provisions of the Act. Suffice it to say that the entire funds of the JDA is mandatorily required to be utilized for discharging the functions to achieve the object of integrated development of Jodhpur Region Thus, predominant object of the JDA being to secure the integrated development of the Jodhpur Region which is undoubtedly falls within the expression 'advancement of any other objects of general public utility' within the definition of Section 2(15) of the Act of 1961 and therefore, on account of profit being earned by it through some of the activities, undertaken by it, which are ancillary or incidental to the main object of general public utility, it does not cease to be charitable in character so as to render it ine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Superintendent, Sawai Mansingh Hospital, Jaipur; (iv) the State Family Welfare Officer, Rajasthan, Jaipur; (v) the Chief Nursing Superintendent of the State Nursing Services, Rajasthan State; (vi) the Matron or the Nursing Superintendent, whoever is incharge of the Nurses Training, Mahatma Gandhi Hospital, Jodhpur; (vii) the Matron or the Nursing Superintendent, whoever is incharge of the Nursing Training at Sawai Mansingh Hospital, Jaipur; , (viii) the Matron or the Nursing Superintendent, whoever is incharge of Nurses Training, P.B. M. Women's Hospital, Bikaner, and (ix) the Matron or the Nursing Superintendent, whoever is incharge of Nurses Training General Hospital, Udaipur. (b) Members nominated by the State Government: (i) one Sister Tutor; (ii) one Public Health Nurse; (iii) one person representing the Railway Hospitals in the State of Rajasthan; (iv) one members of the Trained Nurses Association of India, who must be resident in the State of Rajasthan; (v) the Nursing Superintendent of Santokha Durlabhji Memorial Hospital, Jaipur; and (vi) one person representing the Medical institution controlled by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dwives who are already in practice at the commencement of this Act and fulfil such conditions as may be prescribed. 14. Applications for registration- An application for registration by any of the persons mentioned in section 13 shall be made to the Registrar in the prescribed form and shall be accompanied with the prescribed fees. 15. Disposal of applications by Registrar- If the Registrar is satisfied, after holding in the prescribed manner such inquiry as he considers necessary, that the applicant for registration is entitled to be registered under section 13, he shall enter his name in the appropriate register. Provided that any application for registration made by a person whose case is not clearly governed by the provisions of this Act or of the rules, regulations or orders made thereunder may be referred for the decision of the Council. (2) If the Registrar is not satisfied as aforesaid, he shall make an order rejecting the application for registration and refund the fee paid with it. 19. Prohibition of registration etc. - (1) The Council may prohibit the registration of any person as a nurse, midwife, health visitor or auxiliary nurse-midwife and, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e publication of a list under sub- section (1) and before the publication of a fresh list thereunder, a certified copy of such entry, signed by the Registrar, shall be evidence that such person is registered under this Act. 24. Powers of the Council. - The Council shall have and exercise, by making regulations and otherwise, the following powers, namely:- (1) to lay down the courses of training and to provide such training to nurses, midwives, health visitors and auxiliary nurse-midwives so as to qualify them for registration under this Act: (2) to prescribe the qualifying examinations for such registration: (3) to hold all or any of such examinations; (4) to specify the various titles, degrees, diplomas or certificates which shall qualify the holders thereof for registration under this Act; (5) to recognise educational or instructional institutions, schools, colleges for the purpose of training in basic as well as post certificate/post graduate nursing, midwifery, health visitors and auxiliary nursing-midwifery courses and to appoint examining bodies, for the purpose of holding examinations for registration under this Act; (6) to lay down the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that Section 12 talks about maintenance of registers of registered nurses, midwives, health visitors and auxiliary nurse midwives. Section 13 talks about the persons who are entitled to be registered. It talks about the persons who have undergone the course of training prescribed by the Council and have passed the prescribed examination held by the Council who shall be eligible for registration. It further talks about persons holding corresponding certificates by authorities in other states in India and even foreign Council if such certificates are recognized by the Indian Nursing Council. Section 14 talks about the persons seeking registration to apply to the Registrar in prescribed form along with prescribed fees and Section 15 talks about the registration of these persons and the powers of the Registrar to make enquires before he enters the name in the registers so maintained. Section 19 talks about the situations where the registration may be denied or where a person is already registered, to order for his name to be removed on account of professional misconduct, negligence etc. Section 23 talks about publication of list of such persons and a presumption that person so listed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ical Superintendent, Nursing Superintendent and other health officials and comes under the administrative control of Medical and health department, Government of Rajasthan and its primary and the dominant purpose as reflected by conjoint reading of various obligatory functions is to regulate the medical profession of registered nurses, midwives, health visitors and auxiliary nurse midwives in the state of Rajasthan and to ensure that these persons have undergone requisite training and have passed the qualifying examination and hold the necessary degrees/certificates and thus eligible to practice as nurses, midwives, health visitors and auxiliary nurse midwives in their respective domains and services of such persons are thus available to the hospitals, nursing homes and public at large and qualify as involved in activities of general public utility and thus, charitable activities as so defined under section 2(15) of the Act. 51. Now, coming to the proviso to section 2(15), it is a settled position that the proviso applies only if an institution is engaged in advancement of any other object of general public utility and postulates that such an institution is not charitable if i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Inspection fees, revaluation fees etc. Furthermore, the impugned receipts are forming predominant part of the total income in each of the years from F.Y 2015-16 to F.Y 2017-18. As such, the income which also describes its activities undertaken during the period from F.Y 2015-16 to F.Y 2017-18 is of the nature of General public Utility (GPU). Further, the direct income shown in the I E accounts comprises mainly registration fees, counselling fees, examination fees, Inspection fees, revaluation fees etc are of the nature of Business/commercial Receipts. It is pertinent to state that the income from such commercial activities is forming 100% for F.Y. 2015-16, 100% for F.Y. 2016-17 100% for F.Y. 2017-18 which is more than 20% i.e. in contravention to the provisions laid down in 1st proviso to Section 2(15). Hence, the applicant fails condition (b) of the proviso. Further, such commercial activities are not incidental but are pre-dominant activity of the applicant. Hence, the assessee also fails condition (a) of the proviso. Therefore, as per the proviso, such activity in the nature of advancement of an object of GPU shall not qualify as charitable activity. 54. We are however unab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve held above, the primary or dominant purpose of the assessee council is to regulate the medical profession of registered nurses, midwives, health visitors and auxiliary nurse midwives in the state of Rajasthan and to ensure that these persons have undergone requisite training and have passed the qualifying examination and hold the necessary degrees/certificates and thus eligible to practice as nurses, midwives, health visitors and auxiliary nurse midwives in their respective domains and services of such persons are thus available to the hospitals, nursing homes and public at large. Where as part of rendering of such activities, it recovers certain nominal fees to meet its operational and administrative expenses, the same will not disqualify it from being involved in activities of general public utility as the Courts have held that the proviso to section 2(15) does not seek to disqualify charitable organization covered by the last limb, when certain reasonable/nominal fee is collected from the beneficiaries in the course of activity which is not a business but clearly charity for which they are established and they undertake. We are therefore of the considered view that once it is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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