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ASSISTANT DIRECTOR OF INCOME-TAX (E) TC-II, NEW DELHI V/S INDIAN MEDICAL ASSOCIATION, decided on Friday, February 20, 2015.
[ In the Income Tax Appellate Tribunal Delhi, IT Appeal No. 4291 of 2012. ] 20/02/2015
Judge(s) : DIVA SINGH, JUDICIAL MEMBER & J.S. REDDY, ACCOUNTANT MEMBER
Advocate(s) : B.R.R. Kumar, Sr. DR. Ved Jain, Rano Jain.
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    Income Tax Appellate Tribunal Delhi Bench 'C'Diva Singh Judicial Member1. This is an appeal filed by the Revenue against the order dated 28.06.2012 of CIT(A)-XXI New Delhi pertaining to 2009-10 assessment year on the following grounds:—1. On the facts and in the circumstances of the case and in law the Ld.CIT(A) has erred in allowing the exemption u/s 11 of the I.T. Act.2. On the facts and circumstances of the case the ld. CIT(A) has failed to appreciate the fact the AO denied the claim of exemption to the assessee on the fact that assessee on the fact that assessee has not done any kind of medical relief and neither do the objects of the assessee authorize the assessee to extend any kind of medical relief by way of running of any hospitals nursing home or similar institutions.3. On the facts and circumstances of the case the ld. CIT(A) has failed to appreciate the fact that the claim of 'medical relief' was not taken by the assessee during the course of assessment proceedings and during the appellate proceedings this claim has been taken solely on the ground that the assessee is receiving fin support from Ministry of Health and Family Welfare which is wholly untenable.4. On the facts and circumstances of the case the ld. CIT(A) has failed to address the issue of endorsement money of Rs.1.7 crores received from 6 corporate entities on the basis of entirely commercial contracts by assessee used by more entities for advertorial purpose.5. On the facts and circumstances of the case the ld. CIT(A) has failed to appreciate the fact that the legal position in Asstt. Year 2009-10 is distinguishable from the earlier years in view of the amended provision to section 2(15) of the Act w.e.f. 01.04.2009.6. On the facts and circumstances of the case the ld. CIT(A) has erred in holding that no action for withdrawal of registration u/s 12AA has been initiated by DIT(E) because Finance Act 2012 has introduced a retrospective amendment w.e.f. 01.04.2009 which clearly lay down that such cancellation is in no way mandatory for denial of exemption u/s 11 & I2 of the Act.7. The appellant craves to add to alter or amend any ground of appeal raised above at the time of hearing.2. The relevant facts of the case are that the assessee returned a NIL income by way of filing its return on 29.09.2009 which was picked up for scrutiny after issuance of notice u/s 143(2) etc. The AO taking into consideration in para 2 of his order that the main object of the society was to promote and advance medical science and to promote improvement of public health and medical education in India further goes on to observe that the activities of IMA include holding of periodical meetings/conferences of the members and the medical profession in general to publish and circulate official journals conduct educational campaigns in India medical research etc. However on examining the details the AO was of the view that some of the receipts are arising out of commercial transaction with outsiders who are non-members of IMA. It was noticed that the assessee had received endorsement money of Rs. 1.87 crore for making endorsement of products of the following corporate entities:—(a) Pepsico Holding Pvt. Ltd.(b) Dabur India Ltd.(c) Reckitt Benckiser of India Ltd.(d) ICICI Prudential Life Insurance Co. Ltd.(e) Procter & Gamble Home Products Ltd.(f) Abbott India Ltd.2.1. As an illustration the AO considering only the agreements with M/s Pepsico & the requirements of section 2(15) of the Act was of the view that the judicially laid down tests for considering trade commerce and business which can be said to be satisfied by the following features of business namely nature of activity; profit motive; transaction between the two persons; frequency of transaction and twin activity requiring reciprocal activity between the two parties led to the conclusion that the nature of receipt is purely commercial. As a result thereof the taxable income of the assessee was determined at Rs.1 03 57 275/-.3. Aggrieved by this the assessee came in appeal before the First Appellate Authority. The facts available on record were summed up by the assessee and are extracted in the impugned order at page 3 & 4 and reproduced hereunder for ready-reference:—The brief facts leading to the present appeal are as under:—1. The appellant Indian Medical Association is a society registered under the Societies Registration Act of 1860. The main object of the society is to promote and advance medical science and to promote the improvement of public health and medical education in India. It is also registered under Section 12A of the Income Tax Act vide registration No. DLI(C)(I331)/1974-75.2. It has been engaged in the activities as stated in its object.3. It is maintaining regular books of account and filing its return regularly. It has been getting exemption under Section 11 read with Section 2(15) of the Act every year. The return for the assessment year 2009-10 was filed on 29th September 2009. The said return was accompanied by audited Balance Sheet and Profit and Loss Account. A copy of the return filed and the Balance Sheet is placed in the paper book.4. The case was selected for scrutiny. During the course of the assessment the Assessing Officer raised the issue that some of the receipts are arising out of commercial transaction with outsiders who are non-member of the society. In this regard he raised the issue of endorsement money of Rs.1.87 Crores from the various Corporates. On the basis of the analysis carried out of the agreement the Assessing Officer concluded that various clauses of the agreement are outright commercial in nature. Thereafter by referring to the proviso to Section 2(15) of the Act he has held that the income of the appellant is hit by this proviso and accordingly the appellant will not be eligible for exemption under Section 11 of the Act.5. The Assessing Officer has also made a reference to sponsorship income of Rs.7.87 Lac and rental income of Rs.73.15 Lac received from various tenants of the building. It is held that the rental agreement to be commercial and the receipt hit by proviso to Section 2(15) of the Act.6. On the basis of the above the Assessing Officer has held that the appellant is not entitled to exemption under Section 11 of the Act and has taxed the income of the appellant. The action of the Assessing Officer is against the facts on record and against the provisions of law as explained hereinafter.3.1. A perusal of the impugned order further shows that it was submitted inviting attention to section 11(1)(a) of the Act that it does not put any restriction on the nature of income. Section 2(24)(2a) it was submitted mandates that a voluntary contribution received by a trust is considered to be an income. Thus it was submitted that the nature of income in the hands of the assessee's trust is not a decisive factor for claiming exemption. The requirement of the section 11(1)(a) is that the trust is wholly for charitable purposes. Inviting attention to section 2(15) of the Act it was submitted that charitable purposes includes relief of the poor education medical relief and any other object of the general public utility. It was submitted that the proviso has been inserted by the Finance Act 2008 to provide for the last object i.e. advancement of any other object of general public utility and it 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. A combined reading of the main provision and the proviso it was submitted clearly show that firstly there is no restriction so far as the object is relief of the poor education medical relief. The proviso it was submitted does not apply to such activities. Further the proviso applies to any other object of public utility in case such public utility is being provided for a fee or cess. It is only when a trust claims that it is engaged in advancement of any other object of public utility and such activity is being provided for a cess or fee then only the proviso will come into operation and that too when such activity is in the nature of a trade commerce or business. In the case of the assessee it was submitted the facts are entirely different as the object and activity states that it is an institution created for medical services. The object clause it was submitted clearly states that it is engaged in the medical relief. The objective it was claimed is advancement of medical science so as to improve all public health. All the activities it was submitted are being carried out by the institution towards this aim only. The entire expenditure it was submitted is incurred in the cause of medical relief only.3.2 It was further submitted that if a charitable trust or society is engaged in all these three activities which is the case of the assessee society then it is irrelevant whether the nature of the income is from sponsorship endorsement rent or otherwise so long as the same is used for the purpose for which the institution has been established. In the case of the assessee it was submitted there is no such adverse finding by the Assessing Officer that it is engaged in any other activity which is not permissible. On going through the assessment order it was submitted it would be seen that all along the allegation of the Assessing Officer is the nature of the income which as explained is not relevant for the purpose of exemption under Section 11(l)(a). The voluntary contribution donation or contribution if applied towards charitable purpose cannot be a ground for withholding exemption. It was reiterated that it is not the nature of the income but it is the application of the income which is the decisive factor for granting exemption under Section 11(l)(a) of the Act. The Assessing Officer it was pointed has nowhere put any allegation about the application of the income and accordingly in the absence of the same the society is entitled for exemption which has been wrongly denied.3.3 It was also canvassed that it had been brought to the notice of the said authority that it is being supported by the Ministry of Health and Family Welfare by way of financial support. The financial support it was submitted is not provided by the Government to a body for commercial activities and it is only provided when the society is engaged in charitable activities which in the present case is medical that this financial support is being provided by the Government.3.4 We also deem it appropriate to extract from the impugned order following submissions of the assessee:—10. Without prejudice to above it is further submitted that the allegation of the Assessing Officer that the assessee is engaged in commercial activity is also wrong. It is not the case of the appellant society that by raising income through endorsement and sponsorship or rental income it is engaged in charitable activity. The case of the appellant society is that these are the sources from which it is generating income. These sources are independent of the activities it is carrying on. Even the proviso which has been inserted by Finance Act 2008 will not be applicable to such nature of income in the case of an assessee which is engaged in advancement of any other object of general public utility. This proviso comes into operation when the financing of any other object of general public utility which is being provided on a commercial line for a fee or cess. In this regard we will invite your honour's attention to the proviso to Section 2(15) again whereby it has been categorically stated that object of general public utility shall not be charitable if it involves the carrying on of any activity in the nature of trade commerce or business. The words used 'if it involves' has a reference to the object of general public utility. So the essence of this is that the object of general public utility per se involves carrying on activity in the nature of trade commerce or business. If the object of general public utility is independent of the source of income then that source of income whatever nature may be cannot be considered to be violative of the Section 2(15). In this regard the further words used the proviso that any activity of rendering any service for a cess or fee or any other consideration also supports the above interpretation. Thus the correct interpretation of the proviso is that any other object of general public utility should be it be nature of trade or commerce activity is being carried out for a cess or fee.3.5 It was reiterated that mobilizing of resources by way of sponsorship fee rental income endorsement etc has no co-relation with the activities of the trust which has been held to be charitable in nature. Thus to find fault with the source of income cannot be a valid to be a ground for denying necessary relief. The objection to the source it was submitted cannot be the basis as the object clause clearly states that the trust is engaged in the medical relief and advancement of medical science so as to improve all public health. All activities of the trust it was submitted are towards this end and the entire expenditure is being incurred in the cause of medical relief. It was submitted that there is no adverse finding that the trust is engaged in any other activity which is not permissible. The assessee it was submitted has not claimed exemption on the basis that it is making endorsement or getting sponsorship and endorsement is not being claimed as object of a general public utility. The case of the assessee is that it is engaged in promoting and advancement of medical science and improvement of public health and hence it falls within the meaning of charitable purposes irrespective of the proviso to section 2(15) of the Act. In view of the same it was requested that the exemption claimed u/s 11 be allowed.4. Considering the same the CIT(A) vide para 4.2 & 4.3 concluded the issue in favour of the assessee as under:—4.2 I have gone through the findings of the AO in the assessment order and written submission and paper book submitted by the Ld. AR of the appellant submitted from time to time. In this regard it is found that activities of the appellant remains same as it was in earlier years. Those years were also scrutinized u/s.143(3) of the IT Act and the AO has allowed exemption u/s.11 of the IT Act and has treated activities of the appellant as charitable under the meaning of section 2(15) of the IT Act. In this regard Ld. AR of the appellant has provided copy of scrutiny assessment order for A.Y. 2006-07 (order dated 5.12.2008) order for A.Y.2007-08 (order dated 24.12.2009) & for A.Y. 2008-09 (order dated 26.8.2012). How activities has changed in A.Y 2009-10 and the appellant is a non-charitable association is the main issue to be answered? In this regard I have gone through the findings of the AO in the assessment order wherein she has discussed in detail and relied on various case laws. But after careful consideration of the case laws it is found that those cases are not applicable on the facts of the case. Furthermore appellant has been able to demonstrate that it is engaged in promotion and advancement of medical science and improvement of the public health. Hence its activities falls within the meaning of section 2(15) of the IT Act. In support of its claim the appellant has produced various details which were perused by me and after careful consideration of the various details filed and placed on record issue is decided as under:—4.3 In this regard vide letter submitted on 26.6.2012 it has been informed by the appellant society that no notice have been received with regard to withdrawal of registration u/s.12AA of the IT Act. So as per finding of the AO in the assessment order that proposal has been moved to DIT(E) for withdrawal of exemption no action has been initiated by the DIT(E) against the appellant till date. Furthermore AO has not been able to demonstrate as to why activity of the appellant has become non-charitable in A.Y.2009-10 only when in previous three consecutive scrutiny assessments viz A.Y.2006-07 2007-08 & 2008-09 the findings of the AO is that appellant is doing charitable activities within the meaning of section 2(15) of the IT Act. Though there is amendment in the Act w.e.f A.Y.2009-10 it has been clarified by the CBDT vide circular No. 11/2008 dated 19.12.2008 wherein it has been emphasized that any activity done in relation of the poor education & medical relief will not be hit by the amendment in general. In that circular it has been clarified that each case would be decided on its on facts and no generalization is possible. So I found that by taking shelter of the amendment AO cannot hold that activity done by the appellant trust has become non-charitable because of the amendment in this section.5. Aggrieved by this the Revenue is in appeal before the Tribunal. The Ld. Sr. DR B.R.R.Kumar addressing the grounds raised submitted that the effective ground which needs adjudication is Ground No.-5 & 6 although all the grounds are being pressed. In reference to the same it was his submission that the conclusion arrived at in para 4.3 at page 11 by the CIT(A) was incorrect in law. Inviting attention to section 2(15) of the Act it was his submission that the finding of the CIT(A) that in the three consecutive years i.e 2006-07 to 2008-09 assessment years the assessee has been found to be doing charitable activities is of no relevance as section 2(15) of the Act has been amended w.e.f 2009-10 assessment year. The fact that the registration of the assessee it was submitted has not been withdrawn u/s 12AA it was his submission is also not a relevant criteria as it is not a pre-requisite for denying exemption which the AO in the assessment proceedings on facts has done. Inviting attention to the assessment order at page 9 it was his submission that a proposal for withdrawal of registration u/s 12AA had been moved to the DIT(Exemption) and on inquiry it was clarified that till date it has not been withdrawn. Inviting attention to the assessment order at page 2 it was his submission that the AO has given a finding that the receipts are arising out of commercial transaction with outsiders who are non-members of IMA. The agreement with Pepsico Holding Pvt. Ltd. it was submitted has been considered by the AO as an illustration and although all the other companies from whom endorsement money has been received it was accepted are no doubt pharmaceutical and health related companies but the facts remains that their contribution was not made for charitable purposes and was made for specific endorsement which would result in the sale of their products and thus the receipt of money would come in the category of profit motive activity wherein reciprocity is involved. Accordingly in these circumstances the impugned order on facts it was submitted deserves to be set aside. Inviting attention to the submissions advanced before the CIT(A) in para 9 extracted at page 7 of his order that the assessment is supported by financial support from the Ministry of Health and Family Welfare and consequently the assertion to the extent that the Trust be treated to be engaged in charitable activity it was submitted cannot be accepted as the Government of India grants various financial supports by way of subsidy donation etc. and all these are not necessarily for charitable purposes only. Thus simply because financial support is provided by the Government or its Ministry it was submitted it cannot be said to be for a charitable activity only.6. Ld. AR on the other hand inviting attention to the order dated 22.01.2015 in WP(C) 1872/2013 in the case of India Trade Promotion Organization v. DGIT (Exemptions) [2015] 53 taxmann.com 404 (Delhi) (copy filed) submitted that considering an identical claim of the assessee the Hon'ble High Court had an occasion to consider the requirements to section 2(15) of the Act in detail wherein the Hon'ble High Court was seized of a proposal for withdrawal of the exemption against which the assessee had come in writ proceedings before the Court. The assessee in the facts of that case it was submitted was engaged in the promotion of Trade and other such related activities in India which were claimed to be within the ambit of the expression with the advancement of any other object of general public utility as appearing in section 2(15) of the Act. The Revenue in the facts of that case proposed to deny exemption on the ground that the assessee had received income from sale of tickets and income from food and beverage outlets in Pragati Maidan and by way of allotting space and other amenities like water electricity to the traders to conduct their exhibitions etc. These activates were assailed to be not charitable activities. The Hon'ble High Court it was submitted held that the dominant purpose of the activity was promoting trade etc. for which purposes the assessee was provided over 123.50 acres at Pragati Maidan Complex @ Rs. 1/- per annum for initial five years by the Government which was specifically revised to Rs.6 lakh per annum and the same continued till date. The specific purpose for providing premium land it was pointed out was considered to be so as to enable the assessee to fulfil its object and thus there was a conscious decision not to charge commercial rate for the said land. This was done it was submitted the Hon'ble High Court held so as to facilitate the assessee to provide space for exhibitions seminars conferences and other trade promotion activities as a result of which the assessee was generating surplus. The assessee it was submitted was also as per the Revenue was found to be publishing a fair guide and the receipts generated were disclosed under the sale of publication. The Hon'ble High Court considering the Memorandum regarding delegated legislation and the amendment which took effect from 2009 alongwith the speech of the Hon'ble Minister of Finance on 29.02.2008 which is addressed in paras 15 to 17 of the said judgement and also considering the decisions in the case of ICAI v. DGIT (Exemptions) [2012] 347 ITR 99/[2011] 202 Taxman 1/13 taxmann.com 175 (Delhi); Bureau of Indian Standards v. DGIT (Exemptions) [2013] 212 Taxman 210/[2012] 27 taxmann.com 127 (Delhi); Institute of Chartered Accountants of India v. DGIT (Exemptions) [2013] 358 ITR 91/217 Taxman 152/35 taxmann.com 140 (Delhi) and GSI India v. DGIT (Exemptions) [2013] 219 Taxman 205/38 taxmann.com 364 (Delhi) concluded in paras 42-45 as under :—42. It is evident from Section 10(23C)(iv) of the said Act that if any income is received by any person on behalf of any other fund or institution established for charitable purposes which may be approved by the prescribed authority having regard to the objects of the fund or institution and its importance throughout any State or States such income shall not be included in the total income. Therefore what is necessary in the first instance is to establish that the income is received on behalf of a fund or institution established for charitable purposes. The first thing that needs to be satisfied therefore is that the institution must be established for 'charitable purposes'. Charitable purpose is defined in Section 2(15) as indicated above. It is an inclusive definition and includes relief of the poor education medical relief advancement of any other object of general public utility and preservation of environment (including watersheds forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest. Insofar as the present case is concerned we are concerned only with the advancement of any other object of general public utility which has been regarded as a residuary object. Rule 2C specifies the prescribed authority as the Chief Commissioner or the Director General to whom an application is to be furnished under Section 10(23C)(iv) or (v) by a fund trust or institution. The form of application has been specified as Form NO.56. Once such an application is made the prescribed authority [in this case the Director General of Income-tax (Exemptions)] has to determine the eligibility for granting approval to an institution for the purposes of exemption stipulated in Section 10(23C)(iv). We have noted that prior to the introduction of the proviso to Section 2(15) of the said Act the DGIT(E) had in fact granted such an exemption on 01.05.2008. But subsequently from assessment year 2009-10 onwards. by virtue of the order dated 23.02.2012 the exemption earlier granted was withdrawn. The said withdrawal of exemption was confirmed by the impugned order dated 23.01.2013 passed under Section 154 of the said Act by the respondent.43. From this it is clear that prior to the introduction of the proviso to Section 2(15) of the said Act there was no dispute that the petitioner was established for charitable purposes and therefore its income was not to be included in the total income and was therefore granted the benefit of exemption. We have already noted above while discussing the facts of the case that the income received by the petitioner is from the letting out of space sale of publications sale of tickets and leasing out food and beverages outlets in Pragati Maidan. The dominant and main object of the petitioner is to organise trade fairs/exhibitions in order to promote trade commerce and business not only within India but internationally. This is done through the organization of trade fairs including the annual international Trade Fair and other exhibitions. It is for this purpose that the space is let out to various entities during the said fairs and exhibitions. All these activities including the sale of tickets and sale of publications are an inherent part of the main object of the petitioner. It is clear from the facts of the case that profit making is not the driving force or objective of the petitioner. It is registered under Section 25 of the Companies Act 1956 which specifically applies to entities which intend to apply their profits if any or other income in promoting their objects and prohibits the payment of any dividend to its members. This makes it clear that any income generated by the petitioner does not find its way into the pockets of any individuals or entities. It is to be utilized fully for the purposes of the objects of the petitioner.44. It is an admitted position that had the proviso not been introduced by virtue of the Finance Act 2008 with effect from 01.04.2009 the petitioner would have beer recognized as a charity and would have been recognized as an institution established for the charitable purpose of advancement of an object of general public utility. The difficulty that has arisen for the petitioner is because of the introduction of the proviso to Section 2(15). The said proviso has two parts. The first part has reference to the carrying on of any activity in the nature of trade commerce or business. The second part has reference to any activity of rendering any service in relation to any trade commerce or business. Both these parts are further subject to the condition that the activities so carried out are for a cess or fee or any other consideration. irrespective of the nature or use or application or retention of the income from such activities. In other words. if. by virtue of a 'cess' or 'fee' or any other consideration income is generated by any of the two sets of activities referred to above the nature of use of such income or application or retention of such income is irrelevant for the purposes of construing the activities as charitable or not.45. To be clear if an activity in the nature of trade commerce or business is carried on and it generates income the fact that such income is applied for charitable purposes would not make any difference and the activity would nonetheless not be regarded as being carried on for a charitable purpose. We have seen that by virtue of Section 25 of the Act the petitioner is enjoined to plough back its income in furtherance of its object and the declaration of dividends is prohibited. If a literal interpretation is to be given to the proviso then it may be concluded that this fact would have no bearing on determining the nature of the activity carried on by the petitioner. But we feel that in deciding whether any activity is in the nature of trade commerce or business it has to be examined whether there is an element of profit making or not. Similarly while considering whether any activity is one of rendering any service in relation to any trade commerce or business the element of profit making is also very important.'6.1. Specific attention was invited to para 48 to 58:-'48. With this as to what is meant by the expressions trade commerce or business. The word trade was considered by the Supreme Court in its decision in the case of Khoday Distilleries Ltd. v. State of Karnataka: 1995 (1) SCC 574 whereby the Supreme Court held that the primary meaning of the word 'trade' is the exchange of goods for goods or goods for money. Furthermore in State of Andhra Pradesh v. H. Abdul Bakhi and Bros. 1964 (5) STC 644 (SC) the Supreme Court held that the word business W8S of indefinite import and in a taxing statute it is used in the sense of an occupation or profession which occupies time attention or labour of a person and is clearly associated with the object of making profit. This court in ICAI (I) (supra) held that while construing the term business as appearing in the proviso to Section 2(15) the object and purpose of the Section has to be kept in mind. It was observed therein that a very broad and extended definition of the term business was not intended for the purpose of interpreting and applying the first proviso to Section 2(15) of the Act so as to include any transaction for a cess fee or consideration. The Court specifically held that: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 continuity. There should be facts and other circumstances which justify and show that the activity undertaken is in fact in the nature of business.49. In Bureau of Indian Standards (supra) this court while considering whether the activities of the Bureau of Indian Standards (supra) in granting licences and trading certificates and charging of fee amounted to carrying on business trade or commerce held as under:73 . In these circumstances rendering any service in relation to trade commerce or business cannot in the opinion of the Court receive such a wide construction as to enfold regulatory and sovereign authorities set up under statutory enactments and tasked to act as agencies of the State in public duties which cannot be discharged by private bodies. Often apart from the controlling or parent statutes like the BIS Act these statutory bodies (including BIS) are empowered to frame rules or regulations exercise co-ercive powers including inspection raids; they possess search and seizure powers and are invariably Subjected to Parliamentary or legislative oversight. The primary object for setting up such regulatory bodies would be to ensure general public utility The prescribing of standards and enforcing those standards through accreditation and continuing supervision through inspection etc. cannot be considered as trade. business or commercial activity merely because the testing procedures or accreditation involves charging of such fees. It cannot be said that the public utility activity of evolving prescribing and enforcing standards. involves the carrying on of trade or commercial activity.50. In ICAI(II) (supra) while considering whether the activities of ICAI fell within the proviso to Section 2(15) as introduced with effect from 1-4-2009. this court after considering the Supreme Court decision in the case of Commissioner of Sales Tax v. Sai Publication Fund' (2002) 258 ITR 70(SC) held:Thus if the dominant activity of the assessee was not business then any incidental or ancillary activity would also not fall within the definition of business.51. This Court also observed in ICAI (II) (supra) that :6.4. .... It is not necessary that a person should give something for free or at a concessional rate to qualify as established for a charitable purpose. If the object and purpose of the institution is charitable the fact that the institution collects certain charges does not alter the character of the institution .... 'This court in ICAI (II) (supra) held:—'67. The expressions trade commerce and business as occurring in the first proviso to section 2(15) of the Act must be read in the context of the intent and purport of section 2(15) of the Act and cannot be interpreted to mean any activity which is carried on in an organised manner. The purpose and the dominant object for which an institution carries on its activities is material to determine whether the same is business or not. The purport of the first proviso to section 2(15) of the Act is not to exclude entities which are essentially for charitable purpose but are conducting some activities for a consideration or a fee. The object of introducing the first proviso is to exclude organizations which are carrying on regular business from the scope of charitable purpose. The purpose of introducing the proviso to Section 2(15) of the Act can be understood from the Budget Speech of the Finance Minister while introducing the Finance Bill 2008. The relevant extract to the Speech is as under:Charitable purpose includes relief of the poor education medical relief and any other object of general public utility. These activities are tax exempt as they should be. However some entities carrying on regular trade commerce or business or providing services in relation to any trade commerce or business and earning incomes have sought to claim that their purposes would also fall under charitable purpose. Obviously this was not the intention of Parliament and hence I propose to amend the law to exclude the aforesaid cases. Genuine charitable organizations will not in any way be affected.The expressions business trade or commerce as used in the first proviso must thus be interpreted restrictively and where the dominant object of an organisation is charitable any incidental activity for furtherance of the object would not fall within the expressions business trade or commerce.52. With regard to the Surat Art Silk case (supra) this court in ICAI (II) (supra) observed as under:69. In the case of Addl. CIT v. Surat Art Silk Cloth Mfrs. Association: [1980] 121 ITR 1 (SC) the Supreme Court held as under:—The test which has therefore now to be applied is whether the predominant object of the activity involved in carrying out the object of general public utility is to subserve the charitable purpose or to earn profit. Where profit making is the predominant object of the activity the purpose though an object of general public utility would cease to be a charitable purpose. But where the predominant object of the activity is to any out the charitable purpose and not to earn profit it would not lose its character of a charitable purpose merely be cause some profit arises from the activity.70. Although in that case the statutory provisions being considered by the Supreme Court were different and the utilisation of income earned is now not a relevant consideration in view of the express words of the first proviso to section 2(15) of the Act nonetheless the test of dominant object of an entity would be relevant to determine whether the entity is carrying on business or not. In the present case there is little doubt that the objects of the activities of the petitioner are entirely for charitable purposes.'Finally in ICAI(II) (supra) this court with reference to H. Abdul Bakhi & Bros. (supra) observed as under:—'71. Although it is not essential that an activity be carried on for profit motive in order to be considered as business but existence of profit motive would be a vital indicator in determining whether an organisation is carrying on business or not. In the present case the petitioner has submitted figures to indicate that expenditure on salaries and depreciation exceeds the surplus as generated from holding coaching classes. In addition the petitioner institute provides study material and other academic support such as facilities of a library without any material additional costs. The Supreme Court in the case of State of Andhra Pradesh v . H. Abdul Bakhi & Bros. (supra) held as under:'The expression business though extensively used a word of indefinite import in taxing statutes it is used in the sense of an occupation. or profession which occupies the time attention and labour of a person normally with the object of making profit. To regard an activity as business there must be a course of dealings either actually continued or contemplated to be continued with a profit motive. and not for sport or pleasure. (Underlining added)72. There is nothing on record to indicate the assertion of the petitioner that its activities are not fuelled by profit motive is incorrect. Absence of profit motive though not conclusive does indicate that the petitioner is not carrying on any business53. From the said decision it is apparent that merely because a fee or some other consideration is 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 we must examine as to what is the dominant activity of the institution in question. If the dominant activity of the institution was not business trade or commerce then any such incidental or ancillary activity would also not fall within the categories of trade commerce or business. It is clear from the facts of the present case that the driving force is not the desire to earn profits but the object of promoting trade and commerce not for itself but for the nation both within India and outside India. Clearly this is a charitable purpose which has as its motive the advancement of an object of general public utility to which the exception carved out in the first proviso to Section 2(15) of the said Act would not apply. We say so because if a literal interpretation were to be given to the said proviso then it would risk being hit by Article 14 (the equality clause enshrined in Article 14 of the Constitution). It is well-settled that the courts should always endeavour to uphold the Constitutional validity of a provision and in doing so the provision in question may have to be read down as pointed out above in Arun Kumar (supra).54. It would be pertinent to reiterate that Section 2(15) is only a definition clause. Section 2 begins with the words in this Act unless the context otherwise requires. The expression charitable purpose appearing in Section 2(15) of the said Act has to be seen in the context of Section 10(23C)(iv). When the expression charitable purpose as defined in Section 2(15) of the said Act is read in the context of Section 10(23C)(iv) of the said Act we would have to give up the strict and literal interpretation sought to be given to the expression charitable purpose by the revenue. With respect we do not agree with the views of the Kerala and Andhra Pradesh High Courts.55. It would be appropriate to also examine the observations of another Division Bench of this court in G.S.1 (supra). While considering Circular No.11 of 2008 issued by the CBDT to which a reference has been made earlier in this judgment the Division Bench held that it was evident from the said circular that the new proviso to Section 2(15) of the said Act was applicable to assesses who are engaged in commercial activities i.e. carrying on business trade or commerce in the garb of 'public utilities' to avoid tax liability as it was noticed that the object 'general public utility' was sometimes used as a mask or device to hide the true purpose which was 'trade commerce or business'. From this it is evident that the introduction of the proviso to Section 2(15) by virtue of the Finance Act 2008 was directed to prevent the unholy practice of pure trade commerce and business entities from masking their activities and portraying them in the garb of an activity with the object of a general public utility. It was not designed to hit at those institutions which had the advancement of the objects of general public utility at their hearts and were charity institutions. The attempt was to remove the masks from the entities which were purely trade commerce or business entities and to expose their true identities. The object was not to hurt genuine charitable organizations. And this was also the assurance given by the Finance Minister while introducing the Finance Bill 2008.56. In G.S.1 (supra) it was contended by the revenue that GS1 (India) had acquired intellectual property rights from GS 1 (Belgium) and thereafter received registration fees from third parties in India. This was sought to be equated to royalty payments. It was also contended that GS1 (India) had huge surpluses of receipts over expenditure and that payments were made to GS1 (Belgium). According to the revenue all this entailed that GS1 (India) was engaged in 'business trade or commerce'. The petitioner herein refuted this. In this backdrop this court asked the question - can it be said that the petitioner is engaged in activities which constitute business commerce or trade? While answering the said question the court held as under:21 .... As observed above legal terms trade commerce or business in Section 2(15) mean activity undertaken with a view to make or earn profit. Profit motive is determinative and a critical factor to discern whether an activity is business trade or commerce.'The court further held:—'22. Business activity has an important pervading element of self interest though fair dealing should and can be present whilst Charity or charitable activity is anti 'thesis of activity undertaken with profit motive or activity undertaken on sound or recognized business principles. Charity is driven by altruism and desire to serve others though element of self preservation may be present. For charity benevolence should be omnipresent and demonstrable but it is not equivalent to self sacrifice and abnegation. The antiquated definition of charity which entails giving and receiving nothing in return is outdated A mandatory feature would be; charitable activity should be devoid of selfishness or illiberal spirit. Enrichment of oneself or self gain should be missing and the predominant purpose of the activity should be to serve and benefit others. A small contribution by way of fee that the beneficiary pays would not convert charitable activity into business commerce or trade in the absence of contrary evidence. Quantum of fee charged economic status of the beneficiaries who pay. commercial value of benefits in comparison to the fee purpose and object behind the fee etc. are several factors which will decide the seminal question is it business?57. Ultimately in the context of the factual matrix of that case this court held that charging a nominal fee to use the coding system and to avail the advantages and benefits therein is neither reflective of the business aptitude nor indicative of the profit oriented intent'.The court further observed:—'Thus the contention of the revenue that the petitioner charges fee and therefore is carrying on business has to be rejected. The intention behind the entire activity is philanthropic and not to recoup or reimburse in monetary terms what is given to the beneficiaries. Element of give and take is missing but decisive element of bequeathing is present. In the absence of profit motive and charity being the primary and sole purpose behind the activities of the petitioner is perspicuously discernible and perceptible. The court also held:—27. As observed above fee charged and quantum of income earned can be indicative of the fact that the person is carrying on business or commerce and not charity but we must keep in mind that charitable activities require operational/running expenses as well as capital expenses to be able to sustain and continue in long run. The petitioner has to be substantially self sustaining in long-term and should not depend upon government in other words taxpayers should not subsidize the said activities which nevertheless are charitable and fall under the residuary clause - general public utility. The impugned order does not refer to any statutory mandate that a charitable institution falling under the last clause should be wholly substantially or in part must be funded by voluntary contributions. No such requirement has been pointed out or argued. A practical and pragmatic view is required when we examine the data which should be analyzed objectively and a narrow and Coloured view will be counter productive and contrary to the language of Section 2(15) of the Act.58. In conclusion we may say that the expression charitable purpose as defined in Section 2(15) cannot be construed literally and in absolute terms. It has to take colour and be considered in the context of Section 10(23C)(iv) of the said Act. It is also clear that if the literal interpretation is given to the proviso to Section 2(15) of the said Act then the proviso would be at risk of running fowl of the principle of equality enshrined in Article 14 of the Constitution India. In order to save the Constitutional validity of the proviso the same would have to be read down and interpreted in the context of Section 10(23C)(iv) because in our view the context requires such an interpretation. The correct interpretation of the proviso to Section 2(15) of the said Act would be that it carves out an exception from the 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.'6.2 Accordingly it was his submission that on facts the impugned order deserves to be upheld. Attention was invited to Paper Book page No-46 which contains the copy of Memorandum of Association Rules & Bye Laws of the assessee's society registered under the Societies Act XXI of 1868. Referring to page 53 it was submitted that the objects have been enshrined therein. It was also his submission that in the facts of the present case also the entire proceeds are ploughed back into the activities of the assessee's trust which has been held to be charitable.7. We have heard the rival submissions and perused the material available on record. It would be first appropriate to set out the relevant provision namely section 2(15) of the Act which we are required to take into consideration. The same is reproduced hereunder:—'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 twenty-five lakh rupees or less in the previous year;7.1 The aims and objects of the trust set out in page 53 in the Memorandum of Association are also reproduced for ready-reference :—III. OBJECTS1. To promote and advance medical and allied sciences in all their different branches and to promote the improvement of public health and medical education in India.2. To maintain the honour and dignity and to uphold the interest of the medical profession and to promote co-operation amongst the members thereof:3. To work for the abolition of compartmentalism in medical education medical services and registration in the country and thus to achieve equality among all members of the profession.7.2 The methods for attaining the objects in sub-clause set out in page 53 to 54 are reproduced hereunder:—IV. METHODSFor the attainment and furtherance of these objects the Association may—1. Hold periodical meetings and conferences of the members of the Association and the medical profession in general.2. Arrange from time to time congresses conferences lectures discussions and demonstrations on any aspect of the medical and allied sciences.3. Publish and circulate journal which shall be the official organ of the Association of a character specially adapted to the needs of the medical profession in India and which shall undertake publicity and propaganda work of the Association through its columns and publish other literature in accordance with the objects of the Association.4. Maintain a Library and an Association Office.5. Publish from time to time transactions and other papers embodying medical researches conducted by the members or under the auspices of the Association.6. Encourage research in medical and allied sciences with grants out of the funds of the Association by the establishment of scholarships prizes or rewards and in such other manner as may from time to time be determined upon by the Association.7. Conduct educational campaign amongst the people of India in the matter of public health and sanitation by cooperating whenever necessary with different public bodies working within the same object.8. Organise medical corps for providing medical relief during epidemics and in times of emergency.9. Consider and express its views on all questions and the laws of India or proposed legislation affecting public health the medical profession and medical education and initiate or watch over or take such steps and adopt such measures from time to time regarding the same as may be deemed expedient or necessary.10. Purchase take lease of or otherwise acquire hold manage let sell exchange mortgage or otherwise dispose of movable or immovable property of every description and all rights or privileges necessary or convenient for the purpose of the Association and in particular any land building furniture household or other effects utensils books newspapers periodicals instruments fittings appliances apparatus conveyance and accommodation as and when deemed necessary or desirable in the interest of the Association sell demise let hire out mortgage transfer or otherwise dispose of the same.11. Erect maintain improve or alter and keep in repair any buildings for purpose of the Association.12. Borrow or raise money in such manner as the Association my think fit and collect subscriptions and donations for the purpose of the Association.13. Invest any money of the Association not immediately required for any of its objects in such manner as may from time to time be determined by the Association.14. Assist subscribe to or co-operate or affiliate or be affiliated to or amalgamate with any other public body whether incorporated registered or not and having altogether or in part objects similar to those of the Association.15. Create or assist in creating Branches for any of the purposes aforesaid16. Do all such other things as are cognate to the objects of the Association or are incidental or conducive to the attainment of the above objects. (Emphasis in the present proceedings)7.3 In the facts of the present case since the Ld. Sr. DR inviting attention to only the agreement of Pepsico has canvassed that it cannot be related to any charitable activity as the other companies may be health related and pharmaceuticals companies we find on considering the copy of the specific agreement which is placed at pages 152 to 169 that the endorsement refers to Quaker Oats and Tropicana 100% fruit Juice and fortified drinks as set out in page 152. Per se we find no conflict if the assessee in the advancement of its aims and objects to promoting by improving public health if on research and analysis it propounds that there are significant health benefits to the uses of Oats or drinking fruit based fortified health drinks as opposed to aerted drinks having no health benefits. It is not the case of the Revenue that the endorsement of healthy nutrition is medically/scientifically incorrect. The assessee as per the mandate of its objects and the methods set out in Clause IV(2); (3)(5) (6); (7) and (16) has endorsed products on the claims of health and nutritional benefit the grievance of the Revenue appears to be misplaced. The above is notwithstanding the material fact considering the judicial precedent as laid down by the Jurisdictional High Court in ITPO case (cited supra) namely that the dominant purpose of the activity was to mobilize funds for charitable purposes and not for endorsing the products. In the absence of any adverse finding in regard to the activities of the trust we find that the department's case has no merits. In the course of hearing it was submitted by the Ld. Sr. DR on query that the registration till date has not been withdrawn. The date of the assessment order the record shows is 08.11.2011. The Ld. Sr. DR has also canvassed that the mere fact that the assessee has received financial support from the Ministry of Health and Family Welfare which fact it has been submitted does not mean that it is performing a charitable activity. On considering the judicial precedent cited we find that the Hon'ble High Court took into consideration in the facts of the ITPO that prime land was made available to the assessee to facilitate its objects of providing space on rent etc. for promotion of trade wherein the assessee apart from selling tickets etc was also providing food & beverage outlets and providing for water electricity etc in the facts of the present case admittedly financial support is also provided to the assessee trust whose activities have not been assailed to be contrary to the aims and objects and we find that mobilizing resources towards its aims and objects that too within the methods enshrined by the trust deed which are ploughed back by the society towards its aims & objects to our minds does not cause any grievance to the Revenue. It goes without saying that financial support from the Ministry of Health and Family Welfare to the assessee necessarily would be based on the functions performed by the said trust and would necessarily be monitored at each and every step and stage with adequate checks and balances and would not be allowed to be frittered away carelessly. Accordingly considering the judicial precedent cited and the arguments of the parties before the Bench and the peculiar facts and circumstances of the case which we have brought out in great detail in the earlier part of this order we hold that the departmental grounds have no merit and deserve to be dismissed.8. In the result the appeal of the Revenue is dismissed.