Madras H.C : the Tribunal was right in directing to grant the assessee the renewal of its approval under section 80G of the Act without considering the material fact that the activities of the assessee are not as per section 2(15) of the Act ?

High Court Of Madras

Director of Income-tax (Exemptions) vs. Chartered Accountants Study Circle

Section : 80G

D. Murugesan And P.P.S. Janarthana Raja, JJ.

Tax Case (Appeal) No. 593 Of 2011

February 13, 2012

JUDGMENT

D. Murugesan, J. – This tax case appeal is filed by the Revenue, raising the following substantial question of law :

“Whether, on the facts and in the circumstances of the case, the Tribunal was right in directing to grant the assessee the renewal of its approval under section 80G of the Act without considering the material fact that the activities of the assessee are not as per section 2(15) of the Act ?”

2. The assessee-trust is a society known as “The Chartered Accountants Study Circle”. The aims and objects of the society, among other things, are as follows :

“(a) to conduct periodical meetings on professional subjects ;

(b) to publish books, booklets, etc., on professional subjects ;

(c) to organise seminars, conventions, conferences, etc., as may be deemed fit from time to time ;

(d) to make representation to the Central and State Governments, public and professional institutions, etc., on matters involving professional and social problems ;

(e) to receive and collect any subscriptions, gifts and donations, either in cash or in kind or acquire by any other lawful ways and means and spend the same in fulfilment of all or any of the aims and objects of the society. The income and properties of the society shall be applied solely for the promotion and fulfilment of the aims and objects of the society, provided if any donor intends that his donation shall be applied to the attainment of any particular object or objects of the society, such donation shall be spent towards the promotion of that particular object or objects only ; and

(f) to grant scholarships, financial and other assistance and awards to deserving persons for educational purposes, as may be decided by the committee.”

3. The assessee-trust filed an application in Form 10G to the Director of Income-tax (Exemptions), Chennai, for grant of renewal under section 80G of the Income-tax Act. The said request was rejected on the ground that the assessee was publishing and selling books of professional interest to be used as a reference material by the general public as well as the professionals in respect of bank audit, tax audit, etc., and its activities are commercial in nature and will fall within the amended provision of section 2(15) of the Income-tax Act. Being aggrieved by the said order, the assessee preferred an appeal to the Income-tax Appellate Tribunal.

4. Considering the materials placed before it, the Tribunal found that inasmuch as the assessee was conducting courses and seminars and was also publishing and selling books of professional interest, those activities could only be construed as a part of on-going education of chartered accounts, which, in turn, would necessarily help the society to get better, well-equipped and skilled set of chartered accountants for maintaining audit quality. With that finding, the Tribunal allowed the appeal and held that the assessee was entitled to approval under section 80G of the Act.

5. On a challenge to the said order, Mr. T. Ravikumar, learned standing counsel for the Revenue, would submit that in terms of the first proviso to section 2(15) of the Income-tax Act, in the event the activities of the trust involve 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, it shall not be construed to be a charitable purpose. Hence, the assessee in question shall not fall within the definition of section 2(15) of the Act.

6. We have considered the above submission. The provisions of section 2(15) of the Income-tax Act read as under :

“2.(15) ‘charitable purpose’ includes relief of the poor, education, 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 :

Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is (ten lakh rupees) or less in the previous year ;”

7. In terms of clause (15) of section 2 of the Act, a charitable purpose includes the relief of the poor, education, 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. If the activities are in the advancement of any other object of general public utility, such activities can be called as “charitable purpose”. However, in terms of the first proviso to clause (15) of section 2 of the Act, if the trust 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, such activities shall not be a charitable purpose. The question, therefore, is whether the publication of books of professional interest to be used as a reference material by the general public including the professionals in respect of bank audit, tax audit, etc., would be construed to be a charitable purpose.

8. The objects of the assessee-trust, as referred to above, are, among other things, to conduct periodical meetings on professional subjects and to achieve the said objects, the assessee is publishing books, booklets, etc., on professional subjects, and selling the same only on the subjects related to audit and not on any other subject. Consequently, those books are primarily sold only to the members of the society. Of course, the books are also made available for sale to the general public aiming to help the society to get better, well-equipped and skilled set of chartered accountants for maintaining audit quality.

9. In our opinion, such activities of the assessee-trust cannot be construed to be one of trade or commerce or business and it would only be a charitable in nature. Therefore, it cannot be held that the activities of the assessee-trust in publishing and selling books of professional interest, which are meant to be used as a reference material even by the general public as well as the professionals in respect of bank audit, tax audit, etc., cannot be construed to be one of commerce in nature. The finding of the Tribunal in this regard requires no interference.

10. That apart, under section 12AA of the Income-tax Act, while considering the application, the officer has to satisfy about the genuineness of activities of the trust or the institution and for that reason, he may also make such enquiries as he deem it necessary in that behalf. In the given case, there is nothing to doubt about the genuineness of the activities of the assessee trust in question.

11. Accordingly, we find no merit to entertain the appeal on the question raised and the same is dismissed. No costs.

[Citation : 347 ITR 321]

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