“proviso to section 2(15)”
The decision most relied on for proviso to section 2(15) is ACIT v. Ahmedabad Urban Development Authority (143 Taxmann.com 278), cited in 390 judgments on BharatTax.
Leading authorities on proviso to section 2(15)
If activities for the advancement of general public utility are carried on as a business, income from such activities is not exempt under Section 11, even if the profits are utilized for the main charitable object. The argument that profits from general public utility activities can be ploughed back to charity to maintain exemption is not a good law.
An institution engaged in the advancement of general public utility retains its charitable character and eligibility for exemptions under Section 11 or approval under Section 10(23C)(iv) provided profit is not its predominant motive, even if it generates incidental surpluses or collects fees.
A 'trade' is primarily defined as the exchange of goods for goods or money, and secondarily as a business carried on with a view to profit. The term 'business' is more comprehensive than 'trade', encompassing manufacturing activities.
The broad definition of 'business' should not be applied when interpreting the proviso to Section 2(15) of the Income-tax Act, 1961, as the object and purpose of the section must be considered.
Development authorities can continue to be regarded as existing for a 'Charitable Purpose' under Section 2(15) of the Income Tax Act, even after the introduction of the proviso to that section. The contention that such authorities automatically lose their charitable status due to the proviso is incorrect.
An institution carrying out charitable objects, such as education or advancement of general public utility, does not lose its Section 11 exemption merely by collecting fees for activities like campus placements or educational guidance, as this does not constitute carrying on a business.
Activities of a trust established for the advancement of general public utility do not constitute a 'business' activity if undertaken without private motive, thus qualifying for exemption under Section 11 read with Section 2(15), even when charging fees or receiving consideration.
If a charitable organization's dominant activity is not business, then any incidental or ancillary activity performed to achieve its main object will also not be considered 'business,' even if it generates income, provided the primary activity is not driven by a profit intent.
