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TMI Blog2024 (6) TMI 979X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue had come up in appeal before the Tribunal against acceptance of the assessee s claim of being a charitable society and direction of the Ld. CIT(A) to the Ld. AO to compute the income of the assessee in accordance with the provisions of section 11 to 13 which would include accumulation as per section 11(1)(a) and section 11(2) of the Act as established in the reply of the assessee that the prime objective of the society is to encourage Information Technology in the country and the charges received for certification of the entities carrying on activities related to information technology are not directly in the nature of business. Further, the assessee has established that the income generated from this activity is not applied for any individual benefit or transfer to the benefit of any particular person, entity or group of persons but the application is for the benefit of public at large. This amply proves that the Ld. AO accepted the claim of the assessee that the assessee is a charitable society. It was in the backdrop of such a finding of the Ld. AO that the Ld. CIT(A) arrived at the conclusion that the income of the assessee has to be computed in accordance with the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's claim of depreciation tantamount to a double deduction since the assessee has already claimed deduction of its capital expenditure being a trust. The Ld. CIT(A) relied upon numerous decisions wherein it has been held that in the case of a charitable trust whose income is exempt under section 11, its claim of depreciation cannot be said to be double benefit. Moreover, the decision of Hon'ble Supreme Court in Escorts Ltd. 199 ITR 43 relied upon by the Ld. AO is inapplicable to a situation where, depreciation is claimed by a charitable trust in determining percentage of funds applied for the purposes of charitable objects as held by the Hon'ble P H High Court in CIT vs. Market Committee, Pipli (2011) 330 ITR 16 relied upon by the Ld. CIT(A). The Ld. CIT(A) has taken notice of sub- section (6) of section 11 inserted by the Finance Act, 2014 w.e.f. 1.4.2015 which has now put restriction on claim of depreciation. The amendment is only prospective applicable to AY 2015-16 and subsequent years and not to case of the assessee in which AY involved is 2012-13. We endorse the findings of the Ld. CIT(A) and hold that the grievance of the Revenue is not sustainable in so far as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omes have been considered under the head income from other sources . This was not acceptable to the Ld. AO for the reasons given by him in para 4.1 to 4.5 of the assessment order. Hence in para 4.6 the Ld. AO concluded that the plea of the assessee that it is not indulging in business activities is not maintainable and all income except interest income is treated as income from business or profession. Accordingly, the Ld. AO completed the assessment on 30.03.2014 on total income of Rs. 87,35,69,830/- under section 143(3) of the Act. 13. Before the Ld. CIT(A) the issue for consideration was whether the income of the assessee society is to be assessed under section 11 of the Act or under the head business . The Ld. CIT(A) noticed the facts in brief, history and objectives of the assessee (STPI); the reasons assigned by the Ld. AO for treating all income except interest income as income from business and the decision of Hon ble Delhi High Court in Bureau of Indian Standards vs. DGIT (Exemption) (2012) 27 taxmann.com 127 (Delhi) relied upon by the assessee wherein the Hon ble Delhi High Court held that the activities of the sovereign nature and that are executed as the arm and on the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 1860, was formed under the then Department of Electronics (the present Department of Information Technology), Ministry of Communications and Information Technology, Government of India on 5th June, 1991 with an objective to implement STP/EHTP scheme, set-up and manage infrastructure facilities and provide other services like technology assessment and professional training. 5.1.5.1.3 The objectives of the Software Technology Parks of India are: to promote the development and export of software and software services including Information Technology (IT) enabled services/ Bio- IT (b)to provide statutory and other promotional services to the exporters by implementing Software Technology Parks (STP Electronics and Hardware Technology Parks (EHTP) Schemes and other such schemes which may be formulated and entrusted by the Government from time to time (c) to provide data communication services including value added services to IT/IT enabled Services (ITFS) related industries (d) to promote micro, small and medium entrepreneurs by creating conducive environment for entrepreneur ship in the field of IT/ITES. In particular, Cl.6 of the MOA reads: 6. Title to the properties and Restraint on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting various decisions on the business activity and defining the business u/s 2(13) of the IT act 1961 has stated that the assessee scanning on the activity of business. The assessee to counter the discussion has quoted the decision in the case of Institute of chartered accountant of India (supra) wherein the Hon'ble court has concluded that an activity incidental and ancillary to the attainment of the main objective of the Society cannot be considered as business for the purpose of proviso to section 2(15) of the IT act, 1961. Further the assessee has also mentioned the decision in the case of Indian Trade Promotion Organisation (supra) wherein the Hon'ble court again has concluded in para 48 of the decision: An activity would be considered business' if it is undertaken with a profit motive, but in some cases, this may not be determinative. Normally, the profit motive test should be satisfied, but in a given case activity may be regarded as a business even when profit motive cannot be established/proved. In such cases, there should be evidence and material to show that the activity has continued on sound and recognized business principles and pursued with reasonable co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, is profit making, whether its activities are directly in the nature of trade, commerce or business or indirectly in the rendering of any service in relation to any trade, commerce or business, then it would not be entitled to claim its object to be a 'charitable purpose'. On the flip side, where an 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 cannot but be regarded as an institution established for charitable purposes. The contention carved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve the following findings in para 11 thereof which is reproduced below:- 11. We have given our careful thought to the rival submissions and perused the material available in the records. The grievance of the Revenue contained in ground 2 and 5 relate to assessee's claim of exemption under section 11 of the Act. It is an undisputed fact that the assessce is a registered society under section 12A of the Act since past more than 25 years. During assessment proceedings the Ld. AO required the assessee to explain under which limb of the section 2(15) of the Act, the case of the assessee falls and to show cause why income be not treated as business income. The assessee made a lengthy submission dated 13.3.2015, relying therein, interalia on the decision of Hon'ble Delhi High Court in India Trade Promotion Organisation vs. D.G.I.T (Exemptions) (2015) 53 taxmann.com 404 (Delhi). On consideration of the above submission of the assessee the Ld. AO recorded the finding at page 14 of the order that it is established in the reply of the assessee that the prime objective of the society is to encourage Information Technology in the country and the charges received for certification of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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