As the activity of the State Seed Certification Agency assists the sale of certified seeds and is "in relation to any trade, commerce or business", its activity cannot be held to be a "charitable purpose" in terms of section 2(15).
The petitioner-assessee was registered under the State Society Registration Act to carry on the functions of the certification agency under the Seeds Act, 1966 in the Andhra Pradesh State. The petitioner used to certify the Seeds which met the minimum seeds certification standards as per the Indian Minimum Seed Certification Standards, 1988. The petitioner collected a fee for providing certification as the process of certification involved technical and scientific evaluation of the seeds, although the fee collected by it was enough to enable it to sustain its activities and did not result in much profit to it. However, CCIT rejected the approval in his case for exemption under section 10(23C)(iv).
On appeal, the High Court held in favour of revenue as under:
1) The term "advancement of any other object of general public utility" used in Section 2(15) of the Act includes all objects to promote the welfare of the public, particularly when the object is to promote or protect the interest of a particular trade or industry;
2) The activity of the petitioner would fall within "advancement of any other object of general public utility" but in view of the fact that certification of seeds by the petitioner facilitated trade, commerce or business in the certified seeds by the client of the petitioner, the proviso to section 2(15) would come into operation; and
3) The petitioner's activity assisted the sale of certified seeds and was "in relation to any trade, commerce or business", therefore, its activity couldn’t be regarded as "charitable purpose".
In view of the above, the rejection by CCIT of the petitioner’s application for approval under section 10(23C)(iv) was upheld - Andhra Pradesh State Seed Certification Agency v. CCIT [2012] 28 taxmann.com 288 (Andhra Pradesh)
Editor’s Note – In a recent ruling of Bureau of Indian Standards vs. DGIT(E) [2012] 27 taxmann.com 127 (DELHI), the Delhi High Court held otherwise - that performing any regulatory function can’t be enfolded within the proviso to Section 2(15) to construe it as service ‘in relation to trade, commerce or business’ so as to exclude it from the scope of "charitable purpose". The ruling in Bureau of Indian Standards (Supra) has not been considered in the instant case.
The petitioner-assessee was registered under the State Society Registration Act to carry on the functions of the certification agency under the Seeds Act, 1966 in the Andhra Pradesh State. The petitioner used to certify the Seeds which met the minimum seeds certification standards as per the Indian Minimum Seed Certification Standards, 1988. The petitioner collected a fee for providing certification as the process of certification involved technical and scientific evaluation of the seeds, although the fee collected by it was enough to enable it to sustain its activities and did not result in much profit to it. However, CCIT rejected the approval in his case for exemption under section 10(23C)(iv).
On appeal, the High Court held in favour of revenue as under:
1) The term "advancement of any other object of general public utility" used in Section 2(15) of the Act includes all objects to promote the welfare of the public, particularly when the object is to promote or protect the interest of a particular trade or industry;
2) The activity of the petitioner would fall within "advancement of any other object of general public utility" but in view of the fact that certification of seeds by the petitioner facilitated trade, commerce or business in the certified seeds by the client of the petitioner, the proviso to section 2(15) would come into operation; and
3) The petitioner's activity assisted the sale of certified seeds and was "in relation to any trade, commerce or business", therefore, its activity couldn’t be regarded as "charitable purpose".
In view of the above, the rejection by CCIT of the petitioner’s application for approval under section 10(23C)(iv) was upheld - Andhra Pradesh State Seed Certification Agency v. CCIT [2012] 28 taxmann.com 288 (Andhra Pradesh)
Editor’s Note – In a recent ruling of Bureau of Indian Standards vs. DGIT(E) [2012] 27 taxmann.com 127 (DELHI), the Delhi High Court held otherwise - that performing any regulatory function can’t be enfolded within the proviso to Section 2(15) to construe it as service ‘in relation to trade, commerce or business’ so as to exclude it from the scope of "charitable purpose". The ruling in Bureau of Indian Standards (Supra) has not been considered in the instant case.
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