Association of State Road Transport vs. CIT (ITAT Delhi)

(i) 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 organized 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 expressions “business”, “trade” or “commerce” as used in the first proviso must, thus, be interpreted restrictively and where the dominant object of an organization is charitable any incidental activity for furtherance of the object would not fall within the expressions “business”, “trade” or “commerce”.

(ii) After going through the objects and activities of the assessee association it is clear that the assessee association did not carry on any “business”, “trade” or “commerce” with the main object of earning profit. The activity of imparting support services to State Road Transport Undertakings without any profit motive are being conducted in furtherance of the object for which assessee association had not constituted by the Government of India. The activities of providing laboratory test services and consultancy to the State Road Transport Undertakings of all over India cannot be held to be “trade”, “business” or “commerce” merely because some fee or charges are being received by the assessee association. Accordingly, even if some fees or charges are being charged by the assessee association for providing laboratory test services and consultancy services in accordance with its charitable objects, the activities cannot be held to be rendered in relation to any “trade” , “commerce” or “business” as such activities are undertaken by the assessee association in furtherance of its main objects which are undisputedly of charitable nature and which is not an activity of “trade”, “commerce” or “business” with main object of earning profit.

(iii) The first proviso to section 2(15) of the Act carves out and exception which excludes advancement of any object of general public utility from the scope of charitable purpose to the extent that it involves carrying on any activity in the nature of “Trade”, “Commerce” or “business” or any activity of rendering certain services in relation to any “trade”, “commerce” or “business” for a cess or fee or any other consideration, irrespective of the nature of the use or obligation or retention of income from such activity. Their lordship also held that the expression “trade”, “commerce” or “business”, as occurring in the first proviso of section 2(15) of the Act, must be read in the context of the intent in purported of Section 2(15) of the Act and cannot be interpreted to mean any activity which is carried on in an organized manner. Explaining the dominant of object of newly inserted proviso to section 2(15) of the Act, speaking for Jurisdictional High Court of Delhi, their lordship also held that the first proviso to section 2(15) of the act does not purported to exclude entities which are essentially for charitable purpose but are conducting some activities for a consideration or a fee and the object of introducing first proviso is to exclude organizations which are carrying on regular business from the scope of charitable purpose. It was also held that expression “business” “trade” or “commerce” as used in first proviso must, thus, we interpreted restrictively and where the dominant object and organization is charitable any incidental activity for furtherance of the object would not fall within the expression “business”, “trade” or “commerce”.