Jaipur Development Authority vs. CIT (ITAT Jaipur)

Applying the above test, the Hon’ble Delhi High Court opined that a mere levy of fees is neither reflective of business aptitude nor indicative of profit oriented intent. The Hon’ble Delhi High Court held that when propelling motive is not to earn profit but general public good, the charitable entity will fail the business test and meet the touchstone of charity. The Hon’ble Delhi High Court further held that charging fees on IPR sense profit motive does not amount to commercial exploitation. Moreover, when the fees charged is commensurate based on commercial or business principles, the charity activity test is fulfilled. The Hon’ble
Delhi High Court ruled as primary and predominant activity is charitable in nature. The nominal fees charged are important for covering operational cost of the petitioner. Thus, keeping in view of the charitable activity test, it was held that business activity of the petitioner is integral to its charitable purpose and question of requirement of separate books of account for the business activity seems redundant. The Hon’ble Delhi High Court’s findings is squarely applicable in the case of the appellant. Further proviso to Section 2(15) of the IT Act has held by the Hon’ble ITAT, Mumbai Bench in the case of Indian Plastic Association (supra), is to cover those, which under the garb of general public utility carry on business on commercial activities to escape the liability under the Act gaining exemption U/s 11 of the Act, we also feel that this section applied on such type of trust or institution who get registration U/s 12A of the Act for claiming the exemption U/s 11 of the Act. The appellant is a government agency and engaged in the coordinate and planned development of Jaipur region and which is predominant object of it. The learned CIT also erred in applying the provisions of Section 293(c) of the Act, in this case, which applied withdrawal of approval granted under any provision of this Act, notwithstanding that a provision to withdraw such approval has not been specifically provided for in such provision. For cancellation of registration, the specific provision U/s 12AA is provided.