INCOME TAX ACT, 1961

Section 11

Charitable trust - Exemption under section 11 - Charitable purpose - Applicability of proviso to section 2(15), where dominant activity not being trade or business or commerce

Assessee was engaged in the activity of providing pollution control treatment for disposal of liquid and solid industrial waste. AO took the view that the assessee company was not entitled to seek exemption under section 11 on the ground that the case of the assessee falls under sub-section (8) of section 13 and activities of assessee do not fall within the definition of term 'Charitable Purpose' as defined under section 2(15) and activities undertaken by the assessee company were not towards 'preservation of environment'. CIT(A) took the view that activities of the assessee company could be termed as charitable activities falling within the ambit of section 2(15). He also took into consideration the modified objects after the company was registered under section 25 of the Companies Act. The Tribunal inter alia held that assessee company was duly registered under section 12A and had also been issued certificate for the purpose of section 80G(5) weighted heavily with the Tribunal. The Tribunal also took, the view that the case of the company does not fall within the provisio to section 2(15).Held: It was not permissible for the AO to go behind the registration obtained by the assessee under section 12AA. Just because the members of the assessee-company, in the present case were being benefited and their statutory liability was being discharged by the assessee company, by itself, would not be sufficient to hold that the company could not be said to have been set up for charitable purpose. Merely because a fee or some other consideration was 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 one must examine as to what was the dominant activity of the institution in question. If the dominant activity of the institution was not business or trade or commerce, then any such incidental or ancillary activity would also not fall within the categories of the trade, commerce or business. It is clear from the facts of the present case that the driving force was not the desire to earn profit, but the object was 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. The object of general public utility would include all objects which promote the welfare of the general public even it includes taking up steps effecting trade, commerce or manufacture if the primary purpose was for advancement of objects of general public utility. In other words, any activity for the benefit of the public or a section of the public, as distinguished from the benefit to an individual or a group of individuals, would be charitable purpose as the object is for advancement of general public utility. The Tribunal is the last fact finding body. As a principle, this Court should not disturb the findings of fact in an appeal under section 260A unless the findings of fact are perverse.

Relied:Hiralal Bhagwati v. CIT (2000) 246 ITR 188 (Guj) : 2000 TaxPub(DT) 1345 (Guj-HC), Asstt. CIT v. Surat City Gymkhana (2008) 14 SCC 169, Agricultural Produce Market Committee v. ITO (2013) 355 ITR 384 (Guj) : 2012 TaxPub(DT) 583 (Guj-HC), Mathuram Agrawal v. State of Madhya Pradesh (1999) 8 SCC 667), Ahmedabad Urban Development Authority v. Dy. Director of Income Tax (Exemption), State of T.N. v. Kodaikanal Motor Union (P) Ltd. (1986) 62 STC 272 (SC) : (1989) 3 SCC 91, K.P. Varghese v. ITO and Luke v. Inland Revenue Commissioner (1964) 54 ITR 692 (HL) : (1963) AC 557 (HL), Keshavji Ravji and Co. v. CIT (1990) 183 ITR 1 (SC) : (1990) 2 SCC 231 : 1990 TaxPub(DT) 934 (SC), CIT v. Andhra Chamber of Commerce (1965) 55 ITR 722 (SC) : 1965 TaxPub(DT) 0190 (SC), Addl. CIT v. Surat Art Silk (1980) 121 ITR 1 (SC) : 1980 TaxPub(DT) 848 (SC), CIT v. Andhra Pradesh State Road Transport Corporation (1986) 159 ITR 1 (SC) : 1986 TaxPub(DT) 1395 (SC), CIT v. Agricultural Produce and Market Committee (2007) 291 ITR 419 (Bom) : 2007 TaxPub(DT) 1118 (Bom-HC), CIT v. Market Committee (2007) 294 ITR 563 (P&H) : 2007 TaxPub(DT) 1097 (P&H-HC), CIT v. Gujarat Maritime Board (2007) 295 ITR 561 (SC) : 2007 TaxPub(DT) 1557 (SC), CIT v. Ahmedabad Rana Caste Assn (1983) 140 ITR 1 (SC) : 1983 TaxPub(DT) 0334 (SC), CIT v. Federation of Indian Chambers of Commerce & Industry (1981) 130 ITR 186 (SC) : 1981 TaxPub(DT) 941 (SC), Ahmedabad Rana Caste Association v. CIT (1971) 82 ITR 704 (SC) : 1971 TaxPub(DT) 0389 (SC) and CIT v. Ahmedabad Rana Caste Association (1983) 140 ITR 1 (SC) : 1983 TaxPub(DT) 334 (SC), Addl. CIT, Delhi v. Delhi Brick Kiln Owners Association (1981) 130 ITR 55 (Del) : 1981 TaxPub(DT) 0546 (Del-HC), CIT v. Cochin Chamber of Commerce & Industry (1973) 87 ITR 83 (Ker) : 1973 TaxPub(DT) 190 (Ker-HC), India Trade Promotion Organization v. Director General of Income Tax (Exemptions) & Ors., Writ Petition (C) No. 1872 of 2013, decided on 22-1-2015 : 2015 TaxPub(DT) 623 (Del-HC), Hunter v. A.G. 1909 AC 323, Babu Bankya Thakur v. State of Bombay AIR 1960 SC 1203 and Jhandu Lal v. State of Punjab AIR 1961 SC 343, Director of Income Tax (Exemption) v. Sabarmati Ashram Gaushala Trust (2014) 44 taxmann.com 141 (Gujarat) : (2014) 362 ITR 539 (Guj) : 2014 TaxPub(DT) 1964 (Guj-HC), Gujarat Maritime Board (2007) 295 ITR 561 (SC) : 2007 TaxPub(DT) 1557 (SC) (see CIT v. Agricultural Market Committee (2011) 336 ITR 641 (AP) : 2012 TaxPub(DT) 0428 (Del-HC) and Institute of Chartered Accounts of India v. Director General of Income Tax (Exemptions) (2013) 358 ITR 91 (Del) : (2013) 217 Taxman 152/35 Taxmann.com 140 (Delhi) : 2013 TaxPub(DT) 2666 (Del-HC). Distinguished: ??????