19. CIT vs. National Internet Exchange of India; [2019]
417 ITR 436 (Del.) Date
of order: 9th January, 2018 A.Y.:
2009-10
Charitable
purpose – Exemption u/s 11 of ITA, 1961 – Assessee entitled to allocate domain
names providing basic services of domain name registration charging annual
subscription fees and connectivity charges – Activity in nature of general
public utility – Fees charged towards membership and connectivity charges –
Incidental to main objects of assessee – Assessee entitled to exemption
The
assessee was granted registration u/s 12A of the Income-tax Act, 1961 from the
A.Y. 2004-05. The assessee was engaged in general public utility services. He
was the only nationally designated entity entitled to allocate domain names to
its applicants who sought it in India. It was also an affiliate national body
of the Internet Corporation for assigned names and numbers and authorised to
assign ‘.in’ registration and domain names according to the Central
Government’s letter dated 20th November, 2004. It provided basic
services by way of domain name registration for which it charged subscription
fee on annual basis and also collected connectivity charges.
The AO was
of the opinion that the subscription fee and the fee charged by the assessee
towards various services provided by it were in the nature of commercial
activity and fell outside the charitable objects for which it was established
and denied exemption u/s 11 of the Act.
The Commissioner (Appeals) held that the assessee had been incorporated
without any profit motive, that the nature of services provided by the assessee
were of general public utility and that the services provided were towards
membership and connectivity charges which were only incidental to the main
objects of the assessee. The Tribunal confirmed the order of the Commissioner
(Appeals).
On appeal
by the Revenue, the Delhi High Court upheld the decision of the Tribunal and
held as under:
‘(i) The assessee had been incorporated without
any profit motive. The services provided by the assessee were of general public
utility and were towards membership and connectivity charges and were
incidental to its main objects. The assessee (though not a statutory body)
carried on regulatory work.
(ii) Both the appellate authorities had
concluded that the assessee’s objects were charitable and that it provided
basic services by way of domain name registration for which it charged
subscription fee on an annual basis and also collected connectivity charges. No
question of law arose.’
