[ICAI Accounting Research Foundation v. DGIT
(Exemption), 226 CTR 27 (Del.)]
The petitioner-foundation was set up by the Institute of
Chartered Accountants of India (ICAI), the main object of the petitioner being
to make it an academy for imparting, spreading and promoting knowledge,
learning, education and understanding in the various fields relating to
profession of accountancy, like accounting, auditing, fiscal laws and policy,
corporate and economic laws and policies, economics, financial management,
financial services, capital and money markets, management information and
capital systems, management consultancy services and allied disciplines. The
petitioner’s application for exemption u/s.10(23C)(iv) of the Income-tax Act,
1961 was rejected stating that the petitioner-foundation did not qualify for
exemption.
On a writ petition filed by the foundation the Delhi High
Court directed the Director General of I.T. (Exemption) to grant exemption to
the petitioner-foundation and held as under :
“(i) The objective of the petitioner-foundation would
fall within the expression ‘education’, as appearing in the definition
u/s.2(15).
(ii) On the basis of the activities of the foundation,
there is not even an iota of doubt that the petitioner-foundation is
involved in education and, thus, meets the description of ‘charitable
institution’.
(iii) Services provided to various Government bodies were
the research projects which were given to the petitioner-foundation having
regard to its expertise in this field. Therefore, these activities per se
would not bring out the petitioner-foundation out of the ambit of S. 2(15).
It can be said that the activities amounted to ‘advancement of an object of
general public utility’, which also appears in the definition of charitable
purpose in S. 2(15).
(iv) The only aspect, in this backdrop, which needs to be
considered is as to whether charging of amount from the MCD, KMC, etc. for
undertaking these research projects would make the activity commercial.
Merely because some remuneration was taken by the petitioner-foundation for
undertaking these projects would not alter the character of these objects,
which remained research and consultancy work. The important test is the
application of the amount received from those projects. It is nowhere
disputed that the receipts are utilised by the petitioner-foundation for the
advancement of its objectives. It is clear that most of the amount received
qua these projects was spent on the project and surplus, if any, is used for
advancement of the objectives for which the petitioner-foundation is
established.
(v) The amended definition of ’charitable purpose’ would
not alter this position. No doubt, proviso to this definition clarifies that
advancement of any other object of general public utility will not be
treated as charitable purpose if it involves the carrying on of any activity
in the nature of trade, commerce or business. However, what is not
appreciated by the respondent No. 1 is that merely on undertaking those
research projects at the instance of the Government/local bodies, the
essential character of the petitioner-foundation cannot be converted into
the one which carries on trade, commerce or business or activity of
rendering any service in relation to trade, commerce or business.
(vi) The impugned order of the respondent No. 1 is,
accordingly, set aside. Direction/mandamus is given to the respondent No. 1
to accord requisite exemption to the petitioner-foundation u/s.10(23C)(iv).”
