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TMI Blog2021 (10) TMI 1051X X X X Extracts X X X X X X X X Extracts X X X X ..... collected or received by the assessee, it would not lose its character of having been established for a charitable purpose. The dominant activity of the assessee was to be examined. If it was not business, trade or commerce then any such incidental or ancillary activity would also not fall within the categories of business, trade or commerce. Hon ble Allahabad High Court in CIT V/s Lucknow Development Authority [ 2013 (9) TMI 570 - ALLAHABAD HIGH COURT] has held that where a trust is carrying on its activities for the fulfillment of its aims and objectives which are of charitable in nature with no motive to earn profit and in the process, earns some profit, the same would not be hit by proviso to Section 2(15). Thus, it is fairly settled legal position that it is the pre-dominant objective which would be relevant to examine the applicability of proviso to Sec.2(15). The Ld. CIT(A) after examining the primary objects of the assessee as well as the purpose for which it was established, came to a conclusion that the primary objective was charitable in nature and collection of fees was not to earn profit. Therefore, the assessee did not cease to be charitable in character so as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from engaging into trade and business related activities. Therefore these trusts which are pursuing the residuary category objects under charitable purpose are debarred from having any trade or business related activity. 5. The ld CIT(A) ought to have followed the decision of Hon ble ITAT, Panaji Bench in the case of Entertainment Society of Goa V. CIT(2013) 34 Taxmann.com 210. 6. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(Appeals) may be set aside and that of the Assessing Officer be restored. After considering rival submissions, our adjudication would be as given in succeeding paragraphs. 4.1 The material facts are that the assessee is a registered entity u/s 25 of The Companies Act, 1956. It holds valid registration u/s 12AA since the year 2005 and hitherto allowed exemption u/s 11 / 12 as applicable to a charitable trust. However, Ld. AO denied the same in this year by holding that the assessee collected maintenance charges, track rent and earned income from other sources which would be in the nature of commercial receipts and therefore, the activities were hit by proviso to Sec. 2(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining the true nature of assessee s activities. Finally, the assessee was held to be entitled for deduction u/s 11 / 12 with the observations that fees collected by the assessee from member-units was to meet the expenditure while providing general utility service to the units of the industrial estates towards electricity, road, drainage, water etc. Further, the ultimate control of the assessee was with the Government and accounts were subjected to audit as per Government procedures and there was no element of profit motive at all. The relevant findings were as under: - 4.6. As far as the collection of fees from the member-units is concerned, is relevant to refer to the observations made by the Hon ble High Court of Gujarat in the case of Ahmedabad Urban Development Authority vs ACIT(Exemptions) [(393 ITR 323) (Guj)j which are as follows: Considering the aforesaid facts and circumstances and mare particularly, considering the fact that the assessee in a statutory body - Urban Development Authority constituted under the provisions of the Act, constituted to carry on! the object and purpose of Town Planning Act and collects regulatory fees for the object of the Acts: no services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on would not render such institution 'non-charitable'. An organization or institution which is functioning for development and maintenance of industrial infrastructure cannot be considered to be involved in activities in the nature of trade, business, or commerce. More so, when the major portion of the funds are provided by the Government and the day to day expenditure is met from the fees collected from the industrial units located in the industrial estate - the prime beneficiaries. Whether an object is of general public utility has to be determined having regard to the particular circumstances under which an institution exists and operates. An object would be of general public utility if it defines a section of public or the residents of a particular locality, provided the class of beneficiaries is well defined as in the case of the appellant. It is an undisputed fact that the appellant was involved in infrastructure project that included provision of water supply, roads, sewerage, street lights etc., and the activity of development and maintenance of such infrastructural projects has to be considered to be an activity aimed at achieving the object of general public ut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o claim its objective to be charitable in nature. On the other hand, if the institution is not driven primarily by a desire or motive to earn profits, but to do charity through the advancement of an object of general public utility, it would be an institution established for charitable purposes. It was also observed that merely because a fee or some other consideration is collected or received by the assessee, it would not lose its character of having been established for a charitable purpose. The dominant activity of the assessee was to be examined. If it was not business, trade or commerce then any such incidental or ancillary activity would also not fall within the categories of business, trade or commerce. Although the revenue s Special Leave Petition [SLP] against the same has been admitted by Hon ble Supreme Court (84 Taxmann.com 283), however, there is no stay on the operation of this judgment and the same is very well applicable to the facts of present case. The Hon ble Court, in the course of stated judgment, has elaborately considered its own decisions rendered in: - (i) Institute of Chartered Accountants of India V/s DGIT (347 ITR 99; 19/09/2011) (ii) Bureau of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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