INCOME TAX ACT, 1961

--Exemption under section 1)923C)(iv)--Public charitable institution Charitable purpose under section 2(15)--Assessee (petitioner) was established to Act as a certification agency under section 8 of the Seeds Act, 1966 and it certificate seeds which meet the minimum seeds certification standards as per the Indian minimum seeds certification standard 1988. It is asserted by the assessee that its basic duty has to see that quality seeds were supplied to agriculturists; that it was a non-profit, self sustains organization created by government and was surviving on the certification charges levied for technical and scientific services rendered by it to the seeds producers/growers and agricultures. The assessee submitted Form No. 56 for renewal of approval under section 10(23C)(iv) the CCIT reacted assessee's application inter alia on the ground that activities of assessee agency were not in nature of advancement of any objects of general public utility. Held: Rightly so. After amendment of section 2(15) incorporating proviso the forth lim as to the advancement of 'any other object of general public utility' will no longer remain as charitable purpose if it involve any activity in the nature of trade commerce or business. The rejection of application for approval under section 10(23C)(iv) was in order.

After the amendment by incorporating a proviso to section 2(15), the fourth limb as to the advancement of 'any other object of general public utility' will no longer remain as charitable purpose, if it involves carrying on of: (a) any activity in the nature of trade, commerce or business; (b) any activity of rendering any service in relation to any trade, commerce or business for a cess or a fee or any other consideration, irrespective of the nature of use or application or retention of the income from such activity. The first limb of exclusion from charitable purpose under clause (a) will be attracted, if the activity pursued by the institution involves any trade, commerce or business. But the situation contemplated under the second limb (clause (b)) stands entirely on a different pedestal, with regard to the service in relation to the trade, commerce or business mentioned therein. To put it more clear, when the matter comes to the service in relation to the trade, commerce or business, it has to be examined whether the words 'any trade, commerce or business' as they appear in the second limb of clause (b) are in connection with the service referred to the trade, commerce or business pursued by the institutions to which the service is given by the assessee. If the said words are actually in respect of the trade commerce or business of the assessee itself, the said clause (second limb of the stipulation under clause (b) is rather otiose. Since the activity of the assessee involving any trade commerce or business, is already excluded from the charitable purpose by virtue of the first limb (clause (a)) itself, there is no necessity to stipulate further, by way of clause (b), adding the words 'or any activity of rendering any service in relation to any trade, commence or business. As it stands so, giving a purposive interpretation to the statute, it may have to be read and understood that the second limb of exclusion under clause (b) in relation to the service rendered by the assessee, the terms 'any trade, commerce or business refer to the trade, commerce or business pursued by the recipient to whom the service is rendered. [Para] The 1st respondent had rightly rejected the application of the petitioner for approval under section 10 (23C) (iv) of the Act on the ground that petitioner has not rendered its services directly to the farmers but is rendering its services directly to its clients/agents who are engaged in trading of the certified seeds with profit motive and therefore its activities are not for the 'advancement of any other object of general public utility' and hence not for 'charitable purpose' in view of second limb of the first proviso to section 2 (15). [Para 25