Rajasthan Nursing Council, Jaipur v. CIT(Exemption), Jaipur, Income Tax Appellate Tribunal, Judgment, Law, casemine.com

Precedent	Rule or Principle Cited For	Application by the Court in this Opinion
Sole Trustee, Lok Shikshana Trust v. CIT (1975) 101 ITR 234 (SC)	The principle that "education" connotes systematic instruction by way of normal schooling; not all modes of acquiring knowledge will be covered by "education".	Both parties cited the decision; the Tribunal noted the decision and the appellant argued systematic instruction existed; the respondent relied on it to argue the Council did not provide such instruction. The Tribunal considered the point in its analysis of whether the Council is an educational institution.
Assam State Text Book Production & Publication Corporation Ltd. (2009) 319 ITR 317 (SC)	The Court observed that state-controlled educational committees/boards constituted to implement educational policy should be treated as educational institutions.	The appellant relied on this authority to support educational status; the Tribunal recorded the reliance and noted the respondent's submission that the case had been set aside for de novo consideration and was decided under s.10(22), but still treated the decision as supporting state-controlled bodies being educational in appropriate circumstances.
Bodh Shiksha Samiti vs ACIT (Exemptions), Jaipur (ITA Nos. 590/591/592/JP/2018 dated 29.05.2019)	This case was cited by the parties; the provided text does not state the specific rule/principle taken from it.	The decision was listed among authorities relied upon by the appellant; the provided opinion does not set out a detailed application of this specific decision.
Bhartiya Siksha Samiti vs CIT (ITA No. 816/Del/2015 dated 16.10.2015)	This case was cited; the provided text does not specify the exact principle extracted.	Mentioned in the list of authorities relied upon by appellant; the opinion did not elaborate specific application beyond listing.
Queens Education Society vs CIT (2015) 372 ITR 699 (SC)	Listed as an authority on charitable/educational character; the specific principle as used in the opinion is not stated in detail in the provided text.	Cited among decisions supporting the appellant; the Tribunal did not set out a separate analysis of how this case altered the result beyond referencing the body of jurisprudence.
Green Area Education Trust v. DCIT (2016) 159 ITD 671 (Mumbai)	Cited as precedent in the context of educational/charitable status; specific principle not detailed in the opinion text.	Listed among authorities relied upon by appellant; no targeted application described in the provided text.
ADIT (Exemption) vs JeevanVidhya Mission (2015) 155 ITD 1150 (Assam)	Cited among authorities; the provided text does not specify the rule extracted.	Mentioned in the list of cases relied upon; the Tribunal's own reasoning drew on broader jurisprudence rather than specific discussion of this decision in the supplied text.
GS1 India v. DGIT (Exemptions) [2014] 360 ITR 138 (Delhi)	Explained a four-factor approach to classification under section 2(15), and guidance on fee/cess and whether activity is trade/business; discussed in some detail in the opinion.	The Tribunal relied on GS1's analytical approach (factors, profit motive test, and assessment of fee-based activities) as part of the jurisprudential framework for deciding whether the Council's activities amounted to business and whether the proviso applied.
Secondary Board of Education v. ITO (1972) 86 ITR 408 (Orissa)	Cited among authorities; the immediate principle as used in the opinion was not elaborated in the supplied text.	Listed in the authorities referenced by parties; no focused application set out in the opinion excerpt.
Katra Educational Society v. ITO [1978] 111 ITR 420 (All)	Cited among authorities; the specific rule in the context of the opinion is not detailed in the provided text.	Mentioned in the compilation of precedents relied upon by parties; the Tribunal considered the total jurisprudence rather than this case separately in the provided text.
Aditanar Educational Institution vs. Addl. CIT (1997) 224 ITR 310 (SC)	Listed as authority on charitable/educational status; precise principle not reproduced in the opinion extract.	Included in the list of cases relied upon; the Tribunal referenced the general body of case law when applying the dominant-purpose test.
Shavak Shiksha Samiti vs CIT (104 TTJ 127, Delhi)	Cited among educational/charitable decisions; the opinion text does not set out a bespoke principle from it.	Mentioned in the authorities relied upon; no discrete application appears in the provided excerpt.
Pinegrove International Charitable Trust vs Union of India [2010] 188 Taxman 402 (Punjab & Haryana)	Listed among authorities on charitable status; the provided text does not describe the rule cited.	Mentioned in the list of precedents; not separately analysed in the provided portions.
CIT vs Gujarat Maritime Board (2007) 295 ITR 561 (SC)	Clarified the scope of "advancement of any other object of general public utility" and held that if primary/predominant object is public welfare, it is a charitable purpose; incidental commercial activities do not defeat charitable status.	The Tribunal relied on the principle to observe that a predominant public welfare objective will qualify as charitable even if incidental income is earned; used this to support finding the Council's primary purpose is public utility/charitable.
Indian Chamber of Commerce vs. Commissioner of Income Tax (1975) 101 ITR 796	Listed as an authority; the specific principle quoted in the provided text is limited.	Mentioned in the roster of cases; the opinion relies on the broader jurisprudence rather than specific application set out in the supplied extract.
Addl. CIT vs Surat Art Silk Cloth Manufacturers' Assn. [1980] 121 ITR 1 / [1980] 2 SCC 31	Applied the dominant-purpose test: if primary/dominant purpose is charitable (or for public utility), ancillary objects—even if yielding income—do not prevent charitable character.	The Tribunal invoked the dominant-purpose principle illustrated by this decision to assess whether regulatory/ancillary fee-earning activities defeat charitable status.
CIT vs Bar Council of Maharashtra [1981] 130 ITR 28 (SC)	Held that a statutory Bar Council's dominant purpose was advancement of an object of general public utility (regulation of profession, protection of litigating public, legal aid etc.), and income was exempt accordingly.	The Tribunal extensively discussed and relied on this authority to demonstrate how statutory regulatory bodies may be classified as serving general public utility and that benefits to members can be incidental.
Bar Council of Rajasthan vs. CIT [1984] 147 ITR 720 (Raj)	Reiterated that a State Bar Council's dominant purpose is advancement of general public utility and that income from investments is exempt under s.11.	The decision was cited to reinforce the position that state-established regulatory bodies can qualify as bodies for public utility; the Tribunal treated it as supporting precedent.
Institute of Chartered Accountants of India vs DGIT (Exemptions) [2012] 347 ITR 99 (Delhi)	Held ICAI to be a statutory authority whose fundamental/dominant function was regulation of the profession and thus fell under advancement of an object of general public utility (not as an educational institute), and provided guidance on interpreting section 2(15) proviso and 'business'.	The Tribunal relied on the analytical framework and observations (profit motive test; regulation vs. education distinction) from ICAI decisions when examining whether RNC is regulatory or educational and whether fees amounted to business receipts disqualifying GPU status.
ICAI v. DGIT (Exemptions) [2013] 358 ITR 91 (Delhi)	Reiterated the 2012 findings on ICAI's dominant purpose being regulation and the ancillary nature of educational activities.	Cited as additional support for the jurisprudential position that statutory regulatory bodies' dominant regulatory functions point to GPU classification; used in the Tribunal's jurisprudential survey.
Bureau of Indian Standards v. DGIT (Exemptions) [2012] 27 taxmann.com 127 (Delhi)	Held BIS (a statutory/regulatory body) was carrying on charitable activities within s.2(15) and was entitled to exemption; emphasized that licensing/fee for certification does not convert sovereign/regulatory activity into trade/business if profit motive is absent.	The Tribunal cited BIS to support the proposition that statutory/regulatory bodies performing public regulatory functions—even where fees are charged—may still qualify as GPU/charitable when profit motive is absent and fees are incidental.
GS1 India vs DGIT (Exemptions) [2013] 38 taxmann.com 364 (Delhi)	Outlined factors to determine charitable status under residual clause of s.2(15): advancement of GPU, absence of trade/business/service-for-fee predicate, and the proviso's applicability; emphasized profit motive and the factual nature of evidence.	The Tribunal relied on GS1's framework (tests and factors) to scrutinize RNC's receipts and activities and to assess whether the proviso to s.2(15) applied.
India Trade Promotion Organization vs DGIT (Exemptions) [2015] 53 taxmann.com 404 (Delhi)	Discussed the import of the proviso to s.2(15), observed that receipt of income alone does not make an otherwise charitable institution non-charitable, and examined 'trade/business' in context of profit element.	The Tribunal cited the case for the proposition that deriving income does not ipso facto strip an institution of charitable character; used it to reject a literal approach which would render s.10(23C)(iv) redundant.
Khoday Distilleries Ltd. v. State of Karnataka [1995] 1 SCC 574	Referred to for the primary meaning of "trade" as exchange of goods for goods or for money.	Used by the Tribunal (via cited authorities) when discussing what constitutes trade/commercial activity under the proviso to s.2(15).
State of Andhra Pradesh v. H. Abdul Bakhi & Bros. [1964] 5 STC 644 (SC)	Quoted for the view that the word "business" is of indefinite import and in taxing statutes is used in the sense of an occupation or profession associated with making profit.	Cited in the jurisprudential exposition on the meaning of "business" for the purposes of s.2(15) proviso and profit-motive analysis.
Commissioner of Income Tax Jodhpur vs Jodhpur Development Authority (DB Income Tax Appeal No.63/12 dated 05.07.2016)	Rajasthan High Court held JDA (a statutory development authority) had predominant objects of public utility and incidental income did not defeat charitable character; reiterated dominant-purpose test.	The Tribunal relied on the Jodhpur Development Authority decision to support the view that a statutory body with primary public utility/regulatory functions remains charitable even if it generates incidental income used for statutory functions.

PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order of the ld. CIT(E), Jaipur dated 30.09.2019 wherein the assessee has taken the following grounds of appeals:- 1.The learned Commissioner of Income Tax (Exemptions), Jaipur has erred in law as well in facts in rejecting the application of Rajasthan Nursing Council for seeking registration U/s 12AA of the Income Tax Act, 1961 and holding that the applicant society cannot be held as charitable within the meaning of Sec.2(15) of the Income -tax Act, 1961.

2. The learned Commissioner of Income Tax (Exemptions), Jaipur has erred in law as well as in facts holding that the Council is not engaged in the charitable purpose of education, and that its activities fall under General Public Utility thereby attracting proviso to Sec. 2(15). ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E)

3. The learned Commissioner of Income Tax (Exemptions), Jaipur has erred in law as well as in facts in not providing proper opportunity of being heard to the appellant before passing the order.

2. Briefly the facts of the case are that the assessee-Council filed an application in Form No. 10A for seeking registration U/s 12AA of the IT Act. On receipt of the application and after going through the documents and explanations so called for, the ld. CIT(E) issued a show cause dated 05.09.2019 to the assessee-Council stating that the applicantCouncil is in receipt of direct income comprising mainly registration fees, counseling fees, examination fees, inspection fees, revaluation fees which form foremost part of the total income in each year stating from F.Y 2015-16 to F.Y 2017-18. It was further stated that the said income also describes the activities undertaken by the appellant-Council during the said period which is in the nature of general public utility and cannot be termed as charitable under the head education. Further, the ld CIT(E) referring to the proviso to Section 2(15) of the Act, stated that where the assessee is engaged in charitable activities under general public utility then it has to comply with proviso to Section 2(15) of the Act. It was stated by the ld. CIT(E) that while deciding the case where the business activities are visible, the predominant object test is to be applied and also the business activities should be in the course of actual carrying out of such general public utility i.e. such business activities should only be incidental to the charitable object and hence should not be the predominant or primary activities by itself. Accordingly, a show cause was issued to the assessee Council as to how impugned receipts are charitable receipts in the light of proviso to section 2(15) and the activities undertaken shall be assumed as charitable in nature and to explain why the application filed by you should not be rejected. In response, the assessee Council filed its submission contending that firstly, it is an educational institution and secondly, predominant object being charitable in nature, proviso to Section 2(15) is not applicable. The reply so filed by the assessee-Council was ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) considered however, the same was not found acceptable and the ld. CIT(E) rejected the application of the assessee-Council with following findings which are contained at para 3.1 of his order which read as under:-

03. Based on above discussion, it is clear that the activities of the applicant society are not charitable in nature as it is predominantly carrying out functions of a Regulatory Body consisting of registering nurses, midwives, health visitors & auxiliary nurse-midwives, recognize educational or instructions, schools, colleges for the purpose of training and to appoint examination bodies, lay down courses of training but does not train/ educate/ disseminate knowledge. The applicant is therefore not engaged in the "charitable purpose" of education, and hence its activities fall under "General Public Utility" thereby attracting Proviso to Sec. 2(15). The said proviso clearly states that such advancement of any other object of General Public Utility shall not be a charitable purpose if the assessee fails the conditions laid down in the Proviso. In the case of the assessee, it has been shown above that it fails on all conditions in the Proviso. Hence, the applicant society cannot be held as charitable within the meaning of Sec. 2(15) of the Income-tax Act, 1961. Based on above, I am satisfied that the applicant trust is not fit for registration and, therefore, registration u/s 12AA is rejected.

3. Against the rejection of its application seeking registration under section 12AA and the aforesaid order and findings of the ld. CIT(E), the assessee council is now in appeal before us.

4. During the course of hearing, the ld. AR submitted that the assessee, Rajasthan Nursing Council (RNC) was set up by the State Government under the Rajasthan Nursing, Midwives, Health Visitors and Auxiliary Nurse Midwives Registration Act. No. 9 of 1964, published in the Rajasthan Gazette dated March 28, 1964, for fulfillment of the aims and the objectives as laid down in the Act. It was submitted that the Council is directly governed by the State Government under the Department of Medical and Health. It was submitted that the qualifications offered by the Rajasthan Nursing Council are General ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) Nursing, Midwifery, Auxiliary Nursing Midwifery and Health Visitors, duly recognized by the Indian Nursing Council incorporated under The Indian Nursing Council Act, 1947. It was submitted that the major functions of the RNC as per the Act are as under:

i. Prescribing syllabus and curriculum for various nursing courses

ii. Conducting qualifying examination for the courses

iii. Registration and granting certificate to qualified persons to practice their profession.

iv. Granting recognition to the training institutions and periodical inspection there on, as the Council is governing authority of physical and clinical facilities in almost all the nursing courses conducted in the institution.

5. It was further submitted that as per Section 24 of the Act, the Council has been empowered to carry out the following activities:

(i) lay down the courses of training and to provide such training to nurses, midwives, health visitors and auxiliary nurse-midwives so as to qualify them for registration under the Act.

(ii) to prescribe the qualifying examinations

(iii) to hold all or any of such examination

(iv) to specify the various titles, degrees, diplomas or certificates

(v) to recognize education or instructional institutions, school, colleges etc for the purpose of training

(vi) to lay down the conditions on which such recognition may be made.

6. It was submitted that the Council consists of the following members which are the employees of the State Government, namely:

A) Ex-officio members

i) The director of medical and health services, Rajasthan State; ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) ii) The deputy director of medical and health services. Rajasthan State; iii) The medical superintendent SMS Hospital, Jaipur; iv) The assistant director of medical and health services, In-charge maternity and child welfare, Rajasthan State;

v) The chief nursing superintendent of the state nursing services, Rajasthan State; vi) The matron or the nursing superintendent, whoever is incharge of the nurse training, Mahatma Gandhi Hospital, Jodhpur; vii) The matron or the nursing superintendent, whoever is incharge of the nurse training at SMS Hospital, Jaipur viii) The matron or the nursing superintendent, whoever is incharge of the nurse training at P.B.M. womens Hospital, Bikaner and ix) The matron or the nursing superintendent, whoever is incharge of the nurse training General Hospital, Udaipur.

B) The State Government has further power to nominate six nominees related to health and medical.

7. It was submitted that Section 6 of the Act lays down that the term of office of members who shall continue as such long as they hold the office by virtue of which he is a member of the Council. It was submitted that in section 34 of the Act, it is mentioned that all the rules and regulations finally made under this Act shall be laid before the House of the State Legislature.

8. It was submitted that as per the order dated 10th April 2019 regarding establishment matter from the Medical & Health Department, Government of Rajasthan (administrative Department of the Council), it is clarified that The State Government has created and subscribed the council and fix the various fees/charges to cover the normal expenditure on operation and development of the amenities/ infrastructure to serve the society in better manner. It is ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) further mentioned at para 5 of the order that The revenue collected by the Council is primarily on authorization of the State Government and is to be retained by the Council for meeting the operations and future development expenses.

9. It was submitted that the Council is also the sole recognized body to regulate the profession of Nursing, Midwives, Health Visitors and Auxiliary Nurse Midwives in the State of Rajasthan through qualification courses.

10. It was submitted that as per section 32 of the Act, the State Government has the power to dissolve the Council. It is also very clear that being 100% Government entity, after dissolution the assets of the Council will vest in the Government of Rajasthan.

11. In view of the above it was submitted that the Council is established, owned and controlled by the State Government for Nursing education and regulation with no intent of profit and to promote nursing education for the welfare of the society.

12. It was further submitted that the Ld CIT(E) in his order has accepted that the Council is predominantly carrying out functions of a Regulatory Body consisting of registering nurses, midwives, health visitors & auxiliary nurse- midwives, recognize educational or instructions, schools, colleges for the purpose of training and to appoint examination bodies lay down courses of training etc but at the same time, the ld CIT(E) has contradicted himself by saying that the predominant purpose of the Council is carrying on any trade, commerce or business and the proviso to Section 2(15) is applicable. It was submitted that it is well established that the institution where the predominant object is charitable, the proviso to section 2(15) is not applicable upon it. This ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) principle has also been confirmed by various judgments of Tribunals, High Courts and the Supreme Court.

13. It was further submitted that the Ld CIT(E) has clearly admitted and confirmed that the core area of activities performed by the Council are maintenance of Registers of registered nurses, midwives, health visitors & auxiliary nurse-midwives and annual publication of names thereof, to lay down the courses of training, to prescribe the qualifying examinations, specify the various title, degrees, diplomas or certificates & recognize educational or instructions, schools, colleges for the purpose of training and to appoint examination bodies. It was undisputedly held that the Council is only a Regulatory Body and predominantly there is no profit motive. It was submitted that the activities performed by the Council are as per the Act and the core activities undertaken by the Council are towards achieving their predominant object of education. Further, it was submitted that there is no doubt to the fact that the Council is a body owned and governed by the State Government having the purpose to regulate educational institutions and to implement the Educational Policy of the State and the facts and circumstances of the case of Lok Sikshana Sansthan and Bar Council of Maharashtra are conceptually different from the facts of the present case.

14. It was further submitted that the Ld. CIT(E) has contradicted his earlier findings by wrongly terming the receipts from registration fees, counseling fees, examination fees, inspection fees, revaluation fees etc of the Council as business/ commercial receipts, while it was clearly held by the Ld. CIT(E) that the Council is clearly a general public utility institution. The Learned CIT has failed to mention the fact that the receipts are from the educational activities and are not commercial receipts. The predominant object of the Council is education and not earning profits. ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E)

15. It was submitted that the Council is an educational institution and secondly, the predominant object of the Council is education and the proviso to section 2(15) of the Income Tax Act is not applicable upon the Council.

16. It was submitted that the Council is a State - controlled Educational Body constituted to educate and implement the educational policy of the States and it is functioning as an educational institution. The functions of the Council are on similar footing as other professional Councils which conduct and regulates profession like Medical Council of India, Institute of Chartered Accountants of India, Institute of Company Secretary of India etc.

17. It was submitted that Section 26 of the Act empowers the Council to hold the qualifying examination for which they may have been recognized and to issue such certificates as may be specified in the order of their recognition. Further, Section 29 of the Act empowers the Council: (1) To call information from institution and require them: (a) To furnish reports, returns or other information as the Council may required to enable it to judge of the efficiency of the institution or training given therein, and (b) To provide facilities to enable any member of the Council (deputed by the Council) to be present at the examination to be held by any such institution (2) To inspect any such institution and may for the purpose appoint a sub-committee of not less than three or more than five members of the Council to inspect the same and submit a report in regard there under and provide the mode of their payment

18. It was submitted that the provisions of these sections clearly states that the Council is a Statutory Body meant for the regulation and for the proper education and training of nurses, midwives, health visitors and auxiliary ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) nurse-midwives, as their pre-dominant objective. The Council acts as a controller to the institutions providing the knowledge and training to the aspirants who wants the qualification in the field of nursing, midwifery, health visitor and auxiliary nursing-midwifery.

19. It was submitted that Section 25 of the Act empowers the State Government to prohibit unregistered nurses, midwives, health visitors and auxiliary nurse-midwives.

20. It was submitted that the Council is providing affiliation for the purpose of recognizing those institution to carry training and education of nurses, midwives, health visitors and auxiliary nurse-midwives, which the predominant object of the Council and not to earn revenue from Affiliation. The Council provides education including by way of affiliation, so that the modern system of education and benefits of private expertise are available to the students. Further, it is relevant to note that the institution affiliated with the Council are treated and granted exemption as educational institution, where they cannot provide education without affiliation and all exams are held & degree is awarded to the students by the Council.

21. It was submitted that the Ld. Commissioner has wrongly applied the decision of Honble Supreme Court in the case of Sole Trustee, Sole Trustee, Lok Shikshana Trust v. Cit, Mysore . (1975) 101 ITR 234(SC) where it was held that all kinds of acquiring knowledge will not come within the meaning of Education. What Education connotes is systematic instruction by way of normal schooling. Here we would like to mention that the Council, as per the Act follow and have systematic instruction for nursing education and also to regulate the educational institutions to implement the Educational Policy of the State. ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E)

22. It was submitted that the Honble Supreme Court in the case of Assam State Text Book Production and Publication Corporation Ltd. reported in (2009) 319 ITR 317 has mentioned in the similar circumstances that State controlled Educational Committees/Boards had been constituted to implement the educational policy of the States and consequently they should be treated as educational institutions.

23. Now coming to second contention that the predominant object of the Council is education and the proviso to section 2(15) of the Income Tax Act is not applicable upon the Council, our reference was drawn to Section 2(15) which defines the charitable purpose and reads as under: Charitable purpose includes relief of the poor, education, medical relief,preservation of environment (including watersheds, forests and wildlife) and reservation of monuments or places or objects or artistic or historic interest, and the advancement of any other object of General Public Utility. Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity."

24. It was submitted that the proviso to Section 2(15) makes it clear that if the assessee is engaged in charitable activities under General Public Utility (GPU) then it has to comply with the proviso mentioned in Section 2(15) of the Income-tax Act. The proviso to Section 2(15) was inserted to keep a check on the entities who have other objects of GPU and who use object of GPU as a mask or a device to hide the true purpose which is trade, commerce ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) or business or the rendering of any services in relation to trade, commerce or business.

25. The above proviso to Section 2(15) was amended by the Finance Act, 2015 w.e.f 01.04.2016. In this amendment, two conditions have been inserted for the case of GPU who are engaged in the activity in the nature of trade commerce and business. These are: (a) Such activities are undertaken in the course of actual carrying out of such advancement of any other object of GPU and (b) The aggregate receipts from such activity or activities during the previous year do not exceed 20% of the total receipt of the trust or institution undertaking such activity or activities of that previous year.

26. The explanatory note to the amendment read as under: Explanatory note to Finance Act, 2015 - In so far as the advancement of any other object of GPU is concerned, there is a need to ensure appropriate balance being drawn between the object of preventing business activity in the garb of charity and at the same time protecting the activities undertaken by the genuine organisation as part of actual carrying out of the primary purpose of the trust or institution."

27. In a nutshell, the meaning of the above proviso is that while deciding the case where business activities are visible, the predominant object test is to be applied and also the business activities should be in the course of actual carrying out of such GPU activities i.e. such business activities should only be incidental to the charitable object and hence should not be the pre-dominant or primary activity by itself.

28. It was submitted that it is now a well established law that where the predominant objects are charitable, the proviso to Section 2(15) of the Income Tax, 1961 is not applicable. It was submitted that the purpose of the Central/State Governments is to safeguard the interest of general public. Where a Government body is constituted to impart education, it cannot be ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) presumed that the purpose of constituting such institution is to earn profit. It was submitted that the various Courts and Tribunals have also held that where the predominant object is charitable, the proviso to section 2(15) of the Income Tax Act, 1961 is not applicable.

29. It was further submitted that as per the order received from the State Government (administrative department of the Council) dated 10th April 2019, where it is clearly mentioned that The State Government has created and subscribed the council and fix the various fees/charges to cover the normal expenditure on operation and development of the amenities/ infrastructure to serve the society in better manner. It is further mentioned at para 5 of the order that The revenue collected by the Council is primarily on authorization of the State Government and is to be retained by the Council for meeting the operations and future development expenses. It was submitted that there is thus no system of distribution of surplus in the Council and the surplus have to be utilized only for the purposes of the Council. The acid test to determine whether any institution is constituted for the purpose of earning profit or charity would be the manner in which the distribution of surplus is made among the members. Where the surplus is not distributed among the members but used for general public, such institution is only meant for charity. As per the Section 6 of the Act, the term of office of members shall be continue as such long as he holds the office by virtue of which he is a member of the Council. There cannot be any permanent member of the Council and that there could be no situation that a member can derive any benefit for himself or for the member of his family from the Council.

30. In support of aforesaid contentions, the reliance was placed on following judgements: Bodh Shiksha Samiti vs ACIT (Exemptions), Jaipur (ITA. No. 590, 591 & 592/JP/2018 dated 29.05.2019) ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) Bhartiya Siksha Samiti vs CIT (ITA No. 816/Del/2015 dated 16.10.2015). Queens Education Society vs CIT (2015) 372 ITR 699 (SC) Green Area Education Trust v. Deputy Commissioner of Income-tax, 5(2)(2), Mumbai (2016) 159 ITD 671 (Mum) ADIT (Exemption) vs JeevanVidhya Mission (2015) 155 ITD 1150 Assam State Text Book Production & Publication Corpn. Ltd. (2009) 319 ITR 317 (SC) GS1 India v.DGIT (Exemptions) [2014] 360 ITR 138(Del) Secondary Board Of education v. ITO (1972) 86 ITR 408 (Orissa) Katra Educational Society v. ITO [1978] 111 ITR 420 (All.) Aditanar Educational Institution vs. Addl. CIT (1997) 224 ITR 310(SC) Shavak Shiksha Samiti vs CIT 104 TTJ 127 (Del) Pinegrove International Charitable Trust vs Union of India [2010] 188 TAXMAN 402 (PUNJ. & HAR.) CIT vs Gujarat Maritime Board (2007) 295 ITR 561 (SC) Indian Chamber of Commerce vs. Commissioner of Income Tax (1975)101 ITR 0796 Add.CIT vs. Surat Silk Cloth Manufacturers Association [1980] 2 SCC 31

31. It was finally submitted that the predominant purpose and functions of the Council is Education, its a body constituted for the purpose of serving the society for education in Nursing & therefore eligible for registration as Education u/s 12AA of the Act. The Council is State owned and controlled for welfare of the Society and not for profit, the surplus from the activities of the Council is retained for meeting the operations and not distributed in any manner among the members of the Council. It is therefore also covered as General public utility and proviso to Section 2(15) is not applicable. ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E)

32. Per contra, the ld. CIT/DR, referring to the gazette notification dated 01.04.1964, submitted that the core area of activities performed by the assessee council are maintenance of registers of registered nurses, midwives, health visitors and auxiliary nurse-midwives and annual publication of names thereof, to lay down the courses of training, to prescribe the qualifying examinations, specify the various title, degrees, diplomas or certificates and recognize educational or instructions, schools, colleges for the purpose of training and to appoint examination bodies. It was accordingly submitted that appellant-council is only a Regulatory body. Further, the ld. CIT/DR referred to the decision of the Honble Supreme Court in case of CIT vs Bar Council of Maharashtra (1981) 130 ITR 28 wherein it was held that dominant purpose of an institution like the Bar Council is the advancement of the object of general public utility within the meaning of Section 2(15) of the Act. Further, referring to the Honble Supreme Court decision in case of Sole Trustee Lok shikshana Trust vs. CIT (1975) 101 ITR 234, it was submitted that the term education connotes systematic instruction by way of normal schooling and in the instant case, no such educational activities has been carried out by the appellant council so that it can be termed as an education institution. It was submitted that being a regulatory body, it only registers nurses, midwives, health visitors and auxiliary nurse-midwives, recognize institutions, schools and colleges for the purpose of training and it does not train/educate/disseminate any knowledge. Hence, it is apparent that all the activities performed or to be performed by the applicant council come under the limb of general public utility and is not covered under the limb education as defined U/s 2(15) of the Act. Further, the ld CIT/DR relied on the decision of Honble Bombay High Court in case of Director of Income-tax (exemptions) vs. Nation Safety Council (2008) 305 ITR 257 and decision of Honble Madras High Court in case of CIT(Addl.) vs. Automobile Association of India (1981) 127 ITR 730 in support of his contentions. ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E)

33. It was further submitted that the decision of Honble Supreme Court in case of Assam State Textbook Board, relied upon by the ld. Council, is not applicable since firstly, the Honble Supreme Court set aside the case to be considered de-nova by the AO and hence did not lay down any law, secondly the activities of the said education Board was different and thirdly, the said decision was rendered in the context of Section 10(22) of the Act. It was accordingly submitted that there is no infirmity in the finding of the CIT(E) that the activities of the appellant council cannot be termed as charitable under the category of education and its activities fall under the category of general public utility to which proviso to Section 2(15) of the Act is applicable.

34. Further referring to the proviso to Section 2(15) of the Act, it was submitted by the ld CIT/DR that the said proviso was inserted to keep a check on the entities who have other objects of general public utility and who used object of general public utility as a mask or a device to hide the true purpose which is trade, commerce or business or the rendering of any services in relation to trade, commerce or business. Further referring to the amendment by the Finance Act, 2015, it was submitted that the predominant object test is to be applied and the business activities should be in the course of actual carrying out of such general public utility and should only be incidental to the charitable object and hence should not be the predominant or primary activities by itself. It was further submitted that in the instant case, the activities carried out by the applicant council have been reflected in its Income & Expenditure accounts of various years. The applicant council is in receipt of direct Income comprising mainly registration fees, counselling fees, examination fees, Inspection fees, revaluation fees etc. Furthermore, the impugned receipts are forming predominant part of the total income in each of the years from F.Y 2015-16 to F.Y 2017-18. As such, the income which also describes its activities undertaken during the period from F.Y ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) 2015-16 to F.Y 2017-18 is of the nature of General public Utility (GPU). Further, the direct income shown in the I&E accounts comprises mainly registration fees, counselling fees, examination fees, Inspection fees, revaluation fees etc are of the nature of Business/commercial Receipts. It is pertinent to state that the income from such commercial activities is forming 100% for F.Y. 2015-16, 100% for F.Y. 2016-17 & 100% for F.Y. 2017-18 which is more than 20% i.e. in contravention to the provisions laid down in 1st proviso to Section 2(15). Hence, the applicant fails condition (b) of the proviso. Further, such commercial activities are not incidental but are pre-dominant activity of the applicant. Hence, the assessee also fails condition (a) of the proviso. Therefore, as per the proviso, such activity in the nature of advancement of an object of GPU shall not qualify as charitable activity. He accordingly supported the findings and the order of the ld CIT(E) and submitted that no interference is called for in the said order rejecting the application of the assessee council seeking registration under section 12AA and the appeal of the assessee council may thus be dismissed.

35. We have considered the rival contentions and perused the material available on record. The relevant provisions which are under consideration is Section 2(15) which defines the term charitable purpose and the same reads as under: 2(15) charitable purpose" includes relief of the poor, education, yoga, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility: Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity, unless

(i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility;

(ii) the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year.

36. The contentions advanced on behalf of the assessee Council is that firstly, it is an educational institution and therefore, clearly engaged in charitable purpose. Secondly, its predominant objective being education and not to earn profits, even where it is held to be a general public utility, the proviso to section 2(15) is not applicable. As against that, the contention raised on behalf of the Revenue is that the assessee Council is not engaged in the charitable purpose of education and is carrying out predominantly functions of a regulatory body and its activities fall under the category of general public utility and further, the proviso to section 2(15) is applicable as fees received are in nature of business receipts which forms substantial part of its total income and therefore, the assessee council cannot be held as charitable within the meaning of section 2(15) of the Act.

37. The expression charitable purpose has been interpreted by the Honble Supreme Court and Honble High Courts in a catena of decisions over a period of time and there is a rich jurisprudence which is available and can ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) be gainfully referred to. For the purposes of present discussion, we refer to some of these decisions including the decisions cited by the parties.

38. In case of CIT vs. Bar Council of Maharashtra [1981] 130 ITR 28, the Honble Supreme Court had an occasion to examine whether the Bar Council of Maharashtra could be taken to be a body intended to advance any object of general public utility falling within section 2(15) for the purposes of section 11 of the Income Tax Act. Looking at the preamble, nature and functions of the Bar Council of Maharashtra prescribed under the Advocate Act, 1961, it was held that the primary purpose and object of the Bar Council of Maharashtra is the advancement of object of General public utility. Hence, it is covered under section 2(15) of the Act and the relevant finding reads as under:- It may be noticed that whereas any object of general public utility was included in the definition of "charitable purpose" in the 1922 Act, the present definition has inserted the restrictive words "not involving the carrying on of any activity for profit" which qualify or govern the last head of charitable purpose. In CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 - a case decided by this Court under the 1922 Act, where the restrictive words were absent, this Court laid down that if the primary or dominant purpose of a trust or institution was charitable, any other object which by itself might not be charitable but which was merely ancillary or incidental to the' primary or dominant purpose would not prevent the trust or institution from being a valid charity. After the addition of the restrictive words in the definition in the 1961 Act, this Court in Addl. CIT v. Surat Art Silk Cloth Manufacturers' Association [1980] 121 ITR 1 affirmed that the aforesaid test of primary or dominant purpose of a trust or institution still holds good, that the restrictive words qualify "object" and not the advancement or accomplishment thereof, and that the true meaning of the restrictive words was that when the purpose of a trust or institution was the advancement of an object of general public utility, it was that object of general public utility and not its accomplishment or carrying out which must not involve the carrying on of any activity for profit. And applying these tests trading bodies like Andhra Chamber of Commerce and Surat ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) Art Silk Cloth Manufacturers' Association have been held to be institutions constituted with a view to advance an object of general public utility because their primary or dominant purpose was to promote and protect industry, trade and commerce, either generally or in certain commodities, even though some benefit through some of their activities did accrue to their members which was regarded as incidental and this Court held that the income derived from diverse sources by these institutions [rental income from property in the case of Andhra Chamber of Commerce and income from annual subscriptions collected from its members and commission of a certain percentage of the value of licences for import of foreign yarn and quotas for purchase of indigenous yarn obtained by the assessee from its members in the case of Surat Art Silk Cloth Manufacturers' Association) was exempt from tax liability under section 11. Reliance on English decisions would not be of much avail because the definition of "charitable purposes" as given in our Act, since it embraces "any other object of general public utility" goes further than the definition of charity to be derived from the English cases. Under English law of charity a trust is charitable only if it is within the spirit and intendment of the Preamble to the Statute of Elizabeth (43 Eliz. ch. 4) and all objects of general public utility are not necessarily charitable, some may, or some may not be, depending upon whether they fall within the spirit and intendment of the Statute of Elizabeth. Under our definition every object of general public utility would be charitable subject only to the condition imposed by the restrictive words inserted in the 1961 Act. Counsel for the revenue contended that the primary object or purpose with which the Bar Council of a State is constituted is to benefit the members of the legal profession inasmuch as under section 6(1)( d) it is an obligatory function of the State Bar Council to safeguard the rights, privileges and interests of the advocates on its roll and that other functions like promotion of law reform, conducting law seminars, etc., are incidental objects and the benefit to the public is remote or indirect or incidental and, therefore, the assessee-Council could not be regarded as a body in tended to advance the object of general public utility. It is impossible to accept this contention. It is clear that sub-section (1) lays down the obligatory functions while sub-section (2) indicates what are the optional or discretionary functions that could be undertaken by the State Bar Council and from amongst the obligatory functions it will be ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) wrong to pick out one and say it is the primary or dominant object or purpose. All the clauses of sub-section (1) will have to be considered in light of the main objective sought to be achieved as indicated in the Preamble. The functions mentioned in clauses (a) and ( b)of sub- section (1), namely, to admit persons as advocates on its roll and to prepare and maintain such roll, are clearly regulatory in character intended to ensure that persons with requisite qualifications who are fit and otherwise proper to be advocates are available for being engaged by the litigating public ; the function prescribed in clause (c) has been enjoined upon avowedly with the objective of protecting the litigating public from unscrupulous professionals by taking them to task for any misconduct on their part ; it is also one of the obligatory functions of a State Bar Council to promote and support measures for law reform as also to conduct law seminars and organise talks on legal topics by eminent jurists, obviously with a view to educate the general public; the function prescribed by clause (eee)is obviously charitable in nature, the same being to organise legal aid to the poor. Amongst these various obligatory functions one under clause (d) is to safeguard the rights, privileges and interests of the advocates on its roll and it is difficult to regard it as a primary or dominant function or purpose for which the body is constituted even this function apart from securing speedy discharge of obligations by the litigants to the lawyers ensures maintenance of high professional standards and independence of the Bar which are necessary in the performance of their duties to the society. In other words, the dominant purpose of a State Bar Council as reflected by the various obligatory functions is to ensure quality service of competent lawyers to the litigating public, to spread legal literacy, promote law reforms and provide legal assistance to the poor while the benefit accruing to the lawyer-members is incidental. It is true that sub- section (2) provides that a State Bar Council may constitute one or more funds for the purpose of giving financial assistance to organise welfare schemes for the indigent, disabled or other advocates ; but it is an optional or discretionary function to be undertaken by the Council. Apart from that, admittedly the assessee-Council has not so far constituted any such fund for the purpose specified in the instant case. As and when such a fund is constituted, a question may arise for consideration and the Court may have to decide whether the function so undertaken by a State Bar Council has become the dominant ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) purpose for which that Council is operating. Having regard to the Preamble of the Act and the nature of the various obligatory functions including the one under clause (d) enjoined upon every State Bar Council under section 6(1), it is clear that the primary or dominant purpose of an institution like the assessee-Council is the advancement of the object of general public utility within the meaning of section 2(75) and as such the income from securities held by the assessee- Council would be exempt from any tax liability under section 11.

39. A similar matter came up for consideration before the Honble Rajasthan High Court in case of Bar Council of Rajasthan vs. CIT [1984]

147 ITR 720 wherein the question for consideration before the Honble High Court was whether the Bar Council of Rajasthan could be taken to be a body intended to advance any object of general public utility and following the decision of Honble Supreme Court in case of Bar Council of Maharashtra (supra), it was held as under (head notes):- The dominant purpose of a State Bar Council, as reflected by its various obligatory functions, is to ensure quality service of competent lawyers to the litigating public, to spread legal literacy, promote law reforms and provide legal assistance to the poor, while the benefit accruing to the layer-members is incidental. The primary or dominant purpose of an institution like the State Bar Council is the advance of an object of general public utility within the meaning of s. 2(15) of the

I.T. Act, 1961, and as such the income from securities held by the Council would be exempt from income-tax under s. 11 of the I.T. Act, 1961. Therefore, the Bar Council of Rajasthan, a body corporate constituted under the Advocates Act, 1961, created for charitable purposes within the meaning of s. 2(15) of the Act is engaged in the advancement of law and the legal profession, which are objects of general public utility and as such the interest income received by the Council from its investments is exempt under s. 11 of the Act.

40. In case of Institute of Chartered Accountants of India vs. DGIT (Exemptions) [2012] 347 ITR 99, the issue which came up for consideration before the Honble Delhi High Court was whether Institute of Chartered Accountants of India (ICAI) is an institution which carries on charitable ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) activities in the nature of education or advancement of any other object of general public utility and it was held that ICAI is a statutory authority under Chartered Accountant Act and its fundamental or dominant function is to exercise overall control and regulate the activities of the members/enrolled Chartered Accountants and it cannot be regarded as an educational institute and it falls in the category of advancement of any other object of general public utility and the relevant finding reads as under (pages 105-108):- The petitioner-institute will fall under the sixth category, i.e., advancement of any other object of general public utility. The petitioner institute cannot be regarded as an educational institute as the petitioner's main or predominant objective is to regulate the profession of, and the conduct of, Chartered Accountants enrolled with them. The petitioner is a statutory authority under the Chartered Accountants Act, 1949 (the "CA Act") and its fundamental or dominant function is to exercise overall control and regulate the activities of the members/enrolled Chartered Accountants. This is apparent from the CA Act, and the regulations framed under the said Act.

7. The CA Act was enacted, as per the preamble, to make provisions for regulation of the profession of Chartered Accountants and for that purpose to establish an institute of Chartered Accountants. As per the statement of objects and purpose the enactment was to authorize incorporation of a autonomous professional body for the said purpose. The function and the object and purpose of the institute can be also gathered from section 15 of the CA Act, which prescribes functions of the Council. For the sake of convenience section 15 is reproduced below: "15. Functions of the Council.(1) The duty of carrying out the provisions of this Act shall be vested in the Council. (2) In particular, and without prejudice to the generality of the foregoing power, the duties of the Council shall include- (a) the examination of candidates for enrolment and the prescribing of fees therefor; ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) (b) the regulation of the engagement and training of a[articled and audit clerks]; (c) the prescribing of qualifications for entry in the Register; (d) the recognition of foreign qualifications and training for purposes of enrolment; (e) the granting or refusal of certificates of practice under this Act; (f) the maintenance and publication of a Register of persons qualified to practice as chartered accountants; (g) the levy and collection of fees from b[* * * *] members, examinees and other persons; (h) the removal of names from the Register and the restoration to the Register of names which have been removed;

(i) the regulation and maintenance of the status and standard of professional qualifications of c[members of the Institute]; (j) the carrying out, by financial assistance to persons other than members of the Council or in any other manner, of research in accountancy; (k) the maintenance of a library and publication of books and periodicals relating to accountancy; and

(l) the exercise of disciplinary powers conferred by this Act.

[a] Substituted for the words "articled clerks" by the Chartered Accountants (Amendment) Act (15 of 1959) S.13 (1-7-1959).

[b] Words "chartered accountants", omitted, ibid.

[c] Substituted for the words "chartered accountants", ibid." ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E)

8. Similarly, the functions of the Council can be gathered from section 30, which authorizes the Council to make regulations for the purpose of carrying out the objects of the CA Act. Sub-section 2 to section 30 authorises and permits regulations to be made in the matter of the standard and conduct of examinations; qualifications for entry of the name of any person in the register as its member; the conditions under which examination or training may be treated as equivalent to examination or training prescribed; manner in which and conditions for entry into the register of members; fee payable for membership of the institute and annual fee payable, training of articled and audit clerks, fixation of limits within which premium may be charged from the articled clerks etc, regulation and maintenance of the status and standard of professional qualifications of members of the institute etc. In CIT v. Bar Council of Maharashtra, [1981] 130 ITR 28, the Supreme Court had examined whether the Bar Council of Maharashtra, a body corporate established under the Advocates Act, 1961, qualifies and can be regarded as 'charitable institution' under the last limb of section 2(15) of the Act. Looking at the preamble, nature and functions of the Bar Council prescribed under the Advocates Act, 1961, it was held that the primary purpose and object of the Bar Council is the advancement of the object of general public utility and hence it is covered by section 2(15). However, with reference to the provisions that permitted constitution of one or more funds for the indigent, disabled or other Advocates and the effect thereof, the question was left open but it was held that even if such fund was constituted, question would be considered and the Court would have to decide whether the functions so undertaken had become the dominant purpose. No doubt, the petitioner holds classes and provides coaching facilities for candidates/articled and audit clerks who want to appear in the examinations and want to get enrolled as Chartered Accountants and as well as for members of the petitioner-institute who want to update their knowledge and develop and sharpen their professional skills, but this is not the sole or primary activity. The petitioner-institute may hold classes and give diploma/degrees to the members of their institute in various subjects but this activity is only an ancillary part of the activities or functions performed by the petitioner institute. This one or part activity by itself, does not mean that the petitioner is an educational ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) institute or is predominantly or exclusively engaged in the activity of education. The petitioner institute is engaged in multifarious activities of diverse nature, but the primary and the dominant activity is to regulate the profession of Chartered Accountancy. For this purpose it holds entrance examination and enrolls members. It regulates the conduct of its members, prescribes and fixes accountancy standards, etc. Thus, we uphold the impugned order dated 19th May, 2009 passed by the respondent to the extent it has been held that the petitioner institute is covered by the last limb of section 2(15) and is not an institute providing education but for reasons different than those ascribed in the said order.

41. The said issue again came up for consideration before the Honble Delhi High Court in case of ICAI vs. DGIT (Exemptions) [2013] 358 ITR 91 (Delhi) and the Honble Delhi High Court reiterated its earlier findings and held as under (page 110):- Although, this Court has held that the activities of the petitioner fell within the term "education", it was nonetheless held that the petitioner institute fell under the category of "advancement of any object of general public utility" as the petitioner is a statutory body constituted under the ICAI Act and its fundamental or dominant object was to exercise control and regulate the activities of Chartered Accountants in India. The relevant finding of this court is as under: "The petitioner-institute will fall under the sixth category, i.e., advancement of any other object of general public utility. The petitioner-institute cannot be regarded as an educational institute as the petitioner's main or predominant objective is to regulate the profession of, and the conduct of, Chartered Accountants enrolled with them. The petitioner is a statutory authority under the Chartered Accountants Act, 1949 ("the CA Act") and its fundamental or dominant function is to exercise overall control and regulate the activities of the members/enrolled chartered accountants. This is apparent from the CA Act and the regulations framed under the said Act." ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) This Court while dismissing the appeal (ITA no. 274/2012) preferred by the revenue under section 260A of the Act against the order dated 16.06.2011 passed by the Tribunal in relation to the Assessment year 2007-08 by its judgment dated 11.5.2012 held as under: "As held by this Court in its decision dated 19.9.2011 in Writ Petition No.1927/2010 entitled as Institute of Chartered Accountants of India v. DIT, Delhi and Others, the dominant purpose and objective of the Institute is to regulate the profession of chartered accountants in India and for this purpose it holds entrance examination, regulates the conduct of the members and prescribes and fixes the accountancy standards etc. No doubt, the assessee holds classes and provides coaching facilities for the members and articled clerks etc. who want to appear in the examination conducted by the Institute of Chartered Accountants, but these classes are not held for coaching or for appearance in an examination conducted by some other entity/body. Conducting of coaching classes is with the predominant object of maintaining and upholding the standards of the accountancy profession and in furtherance of the object and purpose for which the institute is established, i.e., professional excellence and promotion of accountancy as a preferred profession. Members of petitioner Institute attend courses/lectures etc. to sharpen their skill and knowledge. These are ancillary activities to the main activity performed and the object for which the institute has been established.

42. In case of Bureau of Indian Standards vs Director General of Income-tax (Exemptions) [2012] 27 taxmann.com 127 (Delhi), the Honble Delhi High Court held as under:

13. In view of the above discussion, it cannot be said that the BIS is involved in any carrying on trade, commerce or business. BIS is a statutory body established under the BIS Act and was brought into existence "for the harmonious development of the activities of standardisation, marking and quality certification of goods". This was, and has been, its primary and pre-dominant object. Even though it does take license fee for granting marks/certification, the same cannot be said to be done for the purpose of profit. If any profit/revenue is ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) earned, it is purely incidental. The BIS performs sovereign and regulatory function, in its capacity of an instrumentality of the state. Therefore, this Court has no doubt in holding that it is not involved in carrying any activity in the nature of trade, commerce or business.

14. In this context, the Supreme Court held, in CIT v. Gujarat Maritime Board [2007] 295 ITR 561/[2008] 166 Taxman 58 speaking about what constitutes "any other object of general public utility" that: "13. ...The said expression would prima facie include all objects which promote the welfare of the general public. It cannot be said that a purpose would cease to be charitable even if public welfare is intended to be served. If the primary purpose and the predominant object are to promote the welfare of the general public the purpose would be charitable purpose. When an object is to promote or protect the interest of a particular trade or industry that object becomes an object of public utility, but not so, if it seeks to promote the interest of those who conduct the said trade or industry [Commissioner of Income-Tax, Madras v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC)]. If the primary or predominant object of an institution is charitable, any other object which might not be charitable but which is ancillary or incidental to the dominant purpose, would not prevent the institution from being a valid charity Addl. Commissioner of Income-Tax, Gujarat v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 (SC)].

14. The present case in our view is equarely covered by the judgment of this Court in the case of Commissioner of Income-tax, A.P. v. Andhra Pradesh State Road Transport Corporation [1986] 159 ITR 1 (SC) in which it has been held that since the Corporation was established for the purpose of providing efficient transport system having no profit motive, though it earns income in the process, it is not liable to income- tax."

15. In a similar vein, the Allahabad High, in Bar Council of Uttar Pradesh v. CIT [1983] 143 ITR 584/12 Taxman 209 held that the object of the Bar Council, to safeguard the interests of its advocates, to assist disabled advocates, to see that advocates who misbehave are taken to task, to promote law reform etc. shows that the body is constituted under Section 6 of the Advocates Act, 1961 to benefit the public at ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) large by having on its rolls, advocates who are not only competent in law but who are respectable and proper persons to belong to the noble profession of lawyers; the said activities have been held for the advancement of general public utility within the meaning of Section 2(15) of the Act. In Ahmedabad Rana Caste Association (supra), the Supreme Court held that the expression "any other object of general public utility" prima facie include all objects which promote the welfare of the general public. It cannot be said that a purpose would cease to be charitable even if public welfare is intended to be served. If the primary purpose and the predominant object are to promote the welfare of the general public the purpose would be charitable purpose.

16. What survives to be determined is whether any of BIS's activities fall within the latter and larger category of "involved in the carrying on of any activity of rendering any service in relation to any trade, commerce or business". The expressions "any activity," "rendering any service" and "in relation to any trade, commerce or business" imply that the intention of the legislature was to make the latter part of the exception broad and inclusive. It seems that the exception (the first proviso) is intended to catch with its ambit any and all commercial activity, except what falls within the second proviso (which bars application of the exception in cases where the aggregate value of the receipts from the activities mentioned therein is less than ten lakh rupees in the relevant previous year). The Bureau, it would appear at the first blush, renders service in relation to trade, commerce or business by granting certification/quality marks in return of license fee. Apparently, Parliament intended to clarify that not all activities of State agencies (some of which might be set up to carry on trading and commercial activities) can be considered charitable. This can be gathered from the Notes on clauses attached to the Finance Bill, 2008: "Government feels that claim of status of 'charitable organisation' by the organisations carrying out activities on commercial lines is contrary to legislative intention. Finance Bill, 2008 seeks to amend section 2(15) w.e.f. April 1, 2009, by substituting existing definition with following definition: 'charitable purpose includes relief of the poor, education, medical relief and the advancement of any other object of general public utility: ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity." In these circumstances, "rendering any service in relation to trade, commerce or business" cannot, in the opinion of the Court, receive such a wide construction as to enfold regulatory and sovereign authorities, set up under statutory enactments, and tasked to act as agencies of the State in public duties which cannot be discharged by private bodies. Often, apart from the controlling or parent statutes, like the BIS Act, these statutory bodies (including BIS) are empowered to frame rules or regulations, exercise coercive powers, including inspection, raids; they possess search and seizure powers and are invariably subjected to Parliamentary or legislative oversight. The primary object for setting up such regulatory bodies would be to ensure general public utility. The prescribing of standards, and enforcing those standards, through accreditation and continuing supervision through inspection etc, cannot be considered as trade, business or commercial activity, merely because the testing procedures, or accreditation involves charging of such fees. It cannot be said that the public utility activity of evolving, prescribing and enforcing standards, "involves" the carrying on of trade or commercial activity.

17. In view of the above discussion, the Court is of opinion that the impugned order of the Director of Income Tax dated 24.2.2012 is contrary to law. It is hereby quashed. The respondents are directed to process the case of BIS and issue the exemption hitherto enjoyed by it, under Section 10 (23) of the Act, within 10 weeks from today. The Petition is allowed in the above terms; no costs.

43. In case of GS1 India vs Director General of Income-tax (Exemption) [2013] 38 taxmann.com 364 (Delhi), the Honble Delhi High Court has held as under: ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E)

14. A bare perusal of the main provision indicates that there are four main factors that need to be taken into consideration before classifying the activity of the assessee as "charitable" under the residuary category, i.e. "advancement of any other object of general public utility" under Section 2(15) of the Act. The four factors are (i) activity should be for advancement of general public utility (ii) activity should not involve any activity in the nature of trade, commerce and business (iii) activity should not involve rendering any service in relation to any trade, commerce or business (iv) activities in clause (ii) and (iii) should not be for fee, cess or other consideration and if for fee, cess or consideration the aggregate value of the receipts from the activities under (ii) and (iii) should not exceed the amount specified in the second proviso. The earlier test of business feeding or application of income earned towards charity because of the statutory amendment is no longer relevant and apposite.

15. In Institute of Chartered Accountants of India v. Director General of Income-tax (Exemptions) [2012] 347 ITR 99/[2011] 202 Taxman 1/13 taxmann.com 175 (Delhi) "charitable purpose" under residuary clause of section 2(15) was discussed and explained in the following words (page 108): 'The proviso applies only if an institution is engaged in advancement of any other object of general public utility and postulates that such an institute is not "charitable" if it is involved in carrying on any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business. The second part, "any activity of rendering any service in relation to any trade, commerce or business" obviously intends to expand the scope of the proviso to include services, which are rendered in relation to any trade, commerce or business. The proviso further stipulates that the activity must be for a cess or fee or any other consideration. The last part states that the proviso will apply even if the cess or fee or any other consideration is applied for a charitable activity/purpose. The proviso has to be given full effect to. Thus, even if cess, fee or consideration is used or utilized for charitable purposes, the proviso and the bar will apply. An institution will not be regarded as established for charitable purpose/activity under the last limb, if cess, fee or consideration is received for carrying on any activity in nature of trade, commerce or ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) business or for any activity of rendering of any service in relation to any trade, commerce or business, even if the consideration or the money received is used in furtherance of the charitable purposes/activities. In view of the first proviso, the decisions that the application of money/profit is relevant for determining whether or not a person is carrying on charitable activity, are no longer relevant and apposite. Even if the profits earned are used for charitable purposes, but fee, cess or consideration is charged by a person for carrying on any activity in the nature of trade, commerce or business or any activity of rendering of any service in addition to any trade, commerce or business, it would be covered under the proviso and the bar/prohibition will apply.' Scope of "Trade, Commerce or Business"

19. The final and determining factors, it was observed was consequential profit motive or purpose behind the activity and when an activity is trade, commerce or business was elucidated in Institute of Chartered Accountants of India v. Director-General of Income-tax (Exemptions) [2012] 347 ITR 99 (Delhi) in the following words (page 123): 'Section 2(15) defines the term charitable purpose. Therefore, while construing the term business for the said Section, the object and purpose of the Section has to be kept in mind. We do not think that a very broad and extended definition of the term business is intended for the purpose of interpreting and applying the first proviso to Section 2(15) of the Act to include any transaction for a fee or money. An activity would be considered "business" if it is undertaken with a profit motive, but in some cases this may not be determinative. Normally the profit motive test should be satisfied but in a given case activity may be regarded as business even when profit motive cannot be established/proved. In such cases, there should be evidence and material to show that the activity has continued on sound and recognized business principles, and pursued with reasonable continuity. There should be facts and other circumstances which justify and show that the activity undertaken is infect in the nature of business. The test as prescribe in Raipur Manufacturing Company (supra) and Sai Publications Fund (supra) can be applied. The six indicia stipulated ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) in Lord Fisher (supra) are also relevant. Each case, therefore, has to be examined on its own facts.'

20. Recently in another decision in WP(C) No. 1755/2012 titled Bureau of Indian Standards v. Director General of Income-tax (Exemptions) [2013] 212 Taxman 210/[2012] 27 taxmann.com 127 (Delhi) it was held that Bureau of Indian Standards (BIS) was carrying on charitable activities as described within the ambit of Section 2(15) and was entitled to registration/notification under Section 10(23C)(iv). We, however, note that there is one distinction between the present petitioner and BIS. BIS is a statutory authority created by Legislation and, therefore, their case and claim stands on a better footing but this does not imply that only statutory bodies can be treated as established for charitable purpose under Section 2(15) of the Act. Such contention has not been raised and cannot be sustained/accepted. Circular No. 11 of 2008 by the Central Board of Direct Taxes

21. It may be relevant to reproduce extract from Circular No. 11 of 2008 issued by the Central Board of Direct Taxes explaining the amendments to Section 2(15) of the Act. The relevant portion of the circular reads as under: "Section 2(15) of the Income Tax Act, 1961 ('Act') defines "charitable purpose" to include the following:

(i) Relief of the poor

(ii) Education

(iii) Medical relief, and

(iv) the advancement of any other object of general public utility.

2. An entity with a charitable object of the above nature was eligible for exemption from tax under section 11 or alternatively under section 10(23C) of the Act. However, it was seen that a number of entities who were engaged in commercial activities were also claiming exemption on the ground that such activities were for the advancement of objects of general public utility in terms of the fourth limb of the definition of ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) 'charitable purpose'. Therefore, section 2(15) was amended vide Finance Act, 2008 by adding a proviso ...

3. The newly inserted proviso to section 2(15) will apply only to entities whose purpose is advancement of any other object of general public utility' i.e. the fourth limb of the definition of 'charitable purpose' contained in section 2(15). Hence, such entities will not be eligible for exemption under section 11 or under section 10(23C) of the Act if they carry on commercial activities. Whether such an entity is carrying on an activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of the activity. 3.2 In the final analysis, however, whether the assessee has for its object 'the advancement of any other object of general public utility' is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled to claim that its object is charitable purpose. In such a case, the object of 'general public utility' will be only a mask or a device to hide the true purpose which is trade, commerce or business or the rendering of any service in relation to trade, commerce or business. Each case would, therefore, be decided on its own facts and no generalization is possible. Assessees, who claim that their object is 'charitable purpose' within the meaning of Section 2(15), would be well advised to eschew any activity which is in the nature of trade, commerce or business or the rendering of any service in relation to any trade, commerce or business." (Emphasis Supplied)

22. It is, evident from the Circular No. 11 of 2008 that the new proviso of Section 2(15) of the Act is applicable to the assessees who are engaged in commercial activities, i.e. carrying on business, trade or commerce, in the garb of "public utility" to avoid tax liability as it was noticed that object of "general public utility" was sometimes only a mask or device to hide the true purpose which was "trade, commerce or business." Discussion; Activities of the Petitioner and difference between business and charity ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E)

23. In the present case, "the business' is not held in trust and neither is "the business" feeding the charity. The very "act or activity of charity" as claimed by the petitioner is regarded by the revenue as nothing but business, trade or commerce. Money received, of course is used and utilized for the charitable activities. Four reasons are elucidated and propound in the impugned order to state that the petitioner is engaged in business, trade or commerce and aforesaid encapsulated in the impugned order. Petitioner has acquired intellectual property rights, receives fee from third parties, which is nothing but payment of royalty, there is huge surplus of receipts over expenditure (refer table reproduced in paragraph 7 above) and payment is made by the petitioner to GS1 Global Services, Belgium.

24. Can it be said that the petitioner is engaged in activities which constitute business, commerce or trade? As observed above, legal terms "trade, commerce, or business" in Section 2(15), means activity undertaken with a view to make or earn profit. Profit motive is determinative and a critical factor to discern whether an activity is business, trade or commerce.

25. Business activity has an important pervading element of self- interest, though fair dealing should and can be present, whilst charity or charitable activity is anti-thesis of activity undertaken with profit motive or activity undertaken on sound or recognized business principles. Charity is driven by altruism and desire to serve others, though element of self-preservation may be present. For charity, benevolence should be omnipresent and demonstrable but it is not equivalent to self-sacrifice and abnegation. The antiquated definition of charity, which entails giving and receiving nothing in return is outdated. A mandatory feature would be; charitable activity should be devoid of selfishness or illiberal spirit. Enrichment of oneself or self-gain should be missing and the predominant purpose of the activity should be to serve and benefit others. A small contribution by way of fee that the beneficiary pays would not convert charitable activity into business, commerce or trade in the absence of contrary evidence. Quantum of fee charged, economic status of the beneficiaries who pay, commercial value of benefits in comparison to the fee, purpose and object behind the fee etc. are several factors which will decide the seminal question, is it business? ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E)

26. The petitioner charges an initial registration fee of Rs. 20,000/- plus annual fee of Rs. 4,000/-, enhanced to Rs. 5,000/- from financial year 2006-07 onwards from third parties, who become subscribing members and are entitled to use the coding system, GS1. Revenue acknowledges that the petitioner enjoys monopoly and has exclusive rights to issue global bar coding system GS1 in India. However the petitioner is not dealing or treating the prized rights as a right, which is to be exploited commercially to earn or generate profits. A coding system of this nature if marketed on commercial lines with profit motive would amount to business but when the underlying and propelling motive is not to earn profits or commercially exploit the rights but "general public good" i.e. to promote and make GS1 coding system available to Indian traders, manufacturers, government etc, it will fail the test of business and meets the touchstone of charity. The petitioner is not directly or indirectly subjecting their activity to market mechanism/dynamics (i.e. demand and supply), rather it is motivated and prompted to serve the beneficiaries. This is not a case of commercial exploitation of intellectual property rights to earn profits but rather a case where a token fee has been fixed and payable by the user of the global identification system.

27. The petitioner does not cater to the lowest or marginalized section of the society, but Government, public sector and private sector manufacturers and traders. No fee is charged from users and beneficiaries like stockiest, whole sellers, government department etc. while a nominal fee is only paid by the manufacturer or marketing agencies i.e. the first person who installs the coding system which is not at all exorbitant in view of the benefit and advantage which are overwhelming. Any one from any part of the world can access the database for identification of goods and services using global standard. The fee is fixed and not product specific or quantity related i.e. dependent upon quantum of production. Registration and annual fee entitles the person concerned to use GS1 identification on all their products. Non levy of fee in such cases may have its own disadvantages and problems. Charging a nominal fee to use the coding system and to avail the advantages and benefits therein is neither reflective of business aptitude nor indicative of profit oriented intent.

28. Having applied the test mentioned above, including the criteria for determining whether the fee is commensurate and is being charged on ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) commercial or business principles, we find that the petitioner fulfills the charitable activity test. It is apparent to us that Revenue has taken a contradictory stand as they have submitted and accepted that the petitioner carries on charitable activity under the residuary head "general public utility' but simultaneously regards the said activity as business. Thus the contention of the Revenue that the petitioner charges fee and, therefore, is carrying on business, has to be rejected. The intention behind the entire activity is philanthropic and not to recoup or reimburse in monetary terms what is given to the beneficiaries. Element of give and take is missing, but decisive element of bequeathing is present. In the absence of "profit motive" and charity being the primary and sole purpose behind the activities of the petitioner is perspicuously discernible and perceptible.

29. Table relied on by the respondent and mentioned in paragraph 7 above tells a partial story. Only direct expenses incurred have been set off from the fee earned from registration and renewal. The activity of the petitioner involves promotion, propagation and spreading awareness and knowledge about global coding identification system GS1. The entire expenditure of the petitioner has to be taken into consideration and cannot be ignored. There are stipulations in Sections 11, 13 etc. of the Act to prevent misuse of or siphoning of funds, bar/prohibit gains to related persons, stipulations of time limits for use of funds, which are effective checks and curtail and deny benefit in cases of abuse. There is no such allegation or contention of the Revenue in the present case.

30. As observed above, fee charged and quantum of income earned can be indicative of the fact that the person is carrying on business or commerce and not charity, but we must keep in mind that charitable activities require operational/running expenses as well as capital expenses to be able to sustain and continue in long run. The petitioner has to be substantially self-sustaining in long-term and should not depend upon government, in other words taxpayers should not subsidize the said activities, which nevertheless are charitable and fall under the residuary clause "general public utility". The impugned order does not refer to any statutory mandate that a charitable institution falling under the last clause should be wholly, substantially or in part must be funded by voluntary contributions. No such requirement has ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) been pointed out or argued. A practical and pragmatic view is required when we examine the data, which should be analyzed objectively and a narrow and coloured view will be counter-productive and contrary to the language of Section 2(15) of the Act.

35. The second proviso, which refers to the aggregate value of receipt of activities of Rs. 10 lacs (now enhanced Rs. 25 lacs vide Finance Act 2011 with effect from 1.4.2012) or less in a previous year, cannot be invoked in the present case because the said provision will apply only if the institution covered by the last/residuary clause is involved or carrying on activity of rendering any service in relation to trade, commerce or business. Contention of the respondent, if accepted, would deny charitable status to a faintly moderate size institution under the last/residuary limb, when it charges even a token or insignificant amount from the beneficiaries, who gain significantly from the altruism and benevolence. A small charitable organization that receives token fee of more than Rs. 80,000/- a month or now Rs. 2,00,000/- per month approximately, would disqualify and lose their charitable status. The object of the proviso is to draw a distinction between charitable institutions covered by last limb which conduct business or otherwise business activities are undertaken by them to feed charity. The proviso applies when business was/is conducted and the quantum of receipts exceeds the specified sum. The proviso does not seek to disqualify charitable organization covered by the last limb, when a token fee is collected from the beneficiaries in the course of activity which is not a business but clearly charity for which they are established and they undertake.

44. In case of India Trade Promotion Organization vs Director General of Income-tax (Exemptions) [2015] 53 taxmann.com 404 (Delhi), the Honble Delhi High Court held as under:

44. It is an admitted position that had the proviso not been introduced by virtue of the Finance Act, 2008 with effect from 01.04.2009, the petitioner would have been recognized as a charity and would have been recognized as an institution established for the charitable purpose of advancement of an object of general public utility. The difficulty that has arisen for the petitioner is because of the introduction of the proviso to Section 2(15). The said proviso has two parts. The first part ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) has reference to the carrying on of any activity in the nature of trade, commerce or business. The second part has reference to any activity of rendering any service "in relation to" any trade, commerce or business. Both these parts are further subject to the condition that the activities so carried out are for a cess or fee or any other consideration, irrespective of the nature or use or application or retention of the income from such activities. In other words, if, by virtue of a 'cess' or 'fee' or any other consideration, income is generated by any of the two sets of activities referred to above, the nature of use of such income or application or retention of such income is irrelevant for the purposes of construing the activities as charitable or not.

45. To be clear, if an activity in the nature of trade, commerce or business is carried on and it generates income, the fact that such income is applied for charitable purposes, would not make any difference and the activity would nonetheless not be regarded as being carried on for a charitable purpose. We have seen that by virtue of Section 25 of the Companies Act, the petitioner is enjoined to plough back its income in furtherance of its object and the declaration of dividends is prohibited. If a literal interpretation is to be given to the proviso, then it may be concluded that this fact would have no bearing on determining the nature of the activity carried on by the petitioner. But, we feel that in deciding whether any activity is in the nature of trade, commerce or business, it has to be examined whether there is an element of profit making or not. Similarly, while considering whether any activity is one of rendering any service in relation to any trade, commerce or business, the element of profit making is also very important.

46. At this juncture, we may point out that we are in agreement with the argument advanced by Mr Syali that the proviso to Section 2(15) does not make any distinction between entities carrying on regular trade, commerce or business or providing services in relation to any trade, commerce or business on the one hand and genuine charitable organizations on the other. It must be remembered that we are construing the expression "charitable purpose" not in a vacuum, but in the specific context of Section 10(23C)(iv) of the said Act. As pointed out above, Section 10 deals with the incomes not included in total income. And, Section 10(23C)(iv) specifically deals with the income ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) received by any person on behalf of, inter alia, an institution established for charitable purposes. We have to, therefore, examine the meaning of the expression "charitable purposes" in the context of Section 10(23C)(iv). Looking at the said expression from this stand point, it becomes clear that it has a reference to income. Because, it is only when such an institution has an income that the question of not including that income in its total income would arise. Therefore, merely because an institution, which otherwise is established for a charitable purpose, receives income would not make it any less a charitable institution. Whether that institution, which is established for charitable purposes, will get the exemption under Section 10(23C)(iv) would have to be determined by the prescribed authority having regard to the objects of the institution and its importance throughout India or throughout any State or States. There is no denying that having regard to the objects of the petitioner and its importance throughout India in the field of advancement of promotion of trade and commerce, the petitioner would be entitled to be regarded as an institution which would qualify for that exemption. The only thing that we have to examine is - whether the petitioner had been established for charitable purposes? The fact that it derives income does not, in any way, detract from the position that it is an institution established for charitable purposes. Therefore, in our view, merely because the petitioner derives rental income, income out of sale of tickets and sale of publications or income out of leasing out food and beverages outlets in the exhibition grounds, does not, in any way, affect the nature of the petitioner as a charitable institution if it otherwise qualifies for such a character.

47. We have already noted that prior to the amendment being introduced with effect from 01.04.2009, the petitioner had been recognized as an institution established for charitable purpose and this had been done having regard to the objects of the institution and its importance throughout India. It is only because of this that the petitioner had been granted the exemption by the respondent for the period prior to assessment year 2009-10. Therefore, insofar as the receiving of income is concerned, that cannot be taken as an instance to deny the petitioner its status as an institution established for charitable purposes. Because, if that were to be so, then there would be no necessity to take recourse to Section 10(23C)(iv) for the benefit of an exemption. To put it plainly, if an institution established for ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) charitable purposes did not receive an income at all, then what would be the need for taking any benefit under Section 10(23C)(iv) of the said Act. Therefore, if a meaning is given to the expression "charitable purpose" so as to suggest that in case an institution, having an objective of advancement of general public utility, derives an income, it would be falling within the exception carved out in the first proviso to Section 2(15) of the said Act, then there would be no institution whatsoever which would qualify for the exemption under Section 10(23C)(iv) of the said Act. And, the said provision would be rendered redundant. This is so, because, if the institution had no income, recourse to Section 10(23C)(iv) would not be necessary. And, if such an institution had an income, it would not, on the interpretation sought to be given by the revenue, be qualified for being considered as an institution established for charitable purposes. So, either way, the provisions of Section 10(23C)(iv) would not be available, either because it is not necessary or because it is blocked. The intention behind introducing the proviso to Section 2(15) of the said Act could certainly not have been to render the provisions of Section 10(23C)(iv) redundant.

48. With this in mind, it is to be seen as to what is meant by the expressions "trade", "commerce" or "business". The word "trade" was considered by the Supreme Court in its decision in the case of Khoday Distilleries Ltd. v. State Of Karnataka [1995] 1 SCC 574, whereby the Supreme Court held that "the primary meaning of the word 'trade' is the exchange of goods for goods or goods for money". Furthermore, in State of Andhra Pradesh v. H. Abdul Bakhi & Bros. [1964] 5 STC 644 (SC), the Supreme Court held that "the word "business" was of indefinite import and in a taxing statute, it is used in the sense of an occupation, or profession which occupies time, attention or labour of a person, and is clearly associated with the object of making profit". This court, in Institute of Chartered Accountants of India's case (supra) held that, while construing the term "business" as appearing in the proviso to Section 2(15), the object and purpose of the Section has to be kept in mind. It was observed therein that a very broad and extended definition of the term "business" was not intended for the purpose of interpreting and applying the first proviso to Section 2(15) of the Act so as to include any transaction for a cess, fee or consideration. The Court specifically held that: ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) "An activity would be considered 'business' if it is undertaken with a profit motive, but in some cases, this may not be determinative. Normally, the profit motive test should be satisfied, but in a given case activity may be regarded as a business even when profit motive cannot be established/proved. In such cases, there should be evidence and material to show that the activity has continued on sound and recognized business principles and pursued with reasonable continuity. There should be facts and other circumstances which justify and show that the activity undertaken is in fact in the nature of business."

53. From the said decision, it is apparent that merely because a fee or some other consideration is collected or received by an institution, it would not lose its character of having been established for a charitable purpose. It is also important to note that we must examine as to what is the dominant activity of the institution in question. If the dominant activity of the institution was not business, trade or commerce, then any such incidental or ancillary activity would also not fall within the categories of trade, commerce or business. It is clear from the facts of the present case that the driving force is not the desire to earn profits but, the object of promoting trade and commerce not for itself, but for the nation - both within India and outside India. Clearly, this is a charitable purpose, which has as its motive the advancement of an object of general public utility to which the exception carved out in the first proviso to Section 2(15) of the said Act would not apply. We say so, because, if a literal interpretation were to be given to the said proviso, then it would risk being hit by Article 14 (the equality clause enshrined in Article 14 of the Constitution). It is well-settled that the courts should always endeavour to uphold the Constitutional validity of a provision and, in doing so, the provision in question may have to be read down, as pointed out above, in Arun Kumar case (supra).

54. It would be pertinent to reiterate that Section 2(15) is only a definition clause. Section 2 begins with the words, "in this Act, unless the context otherwise requires". The expression "charitable purpose" appearing in Section 2(15) of the said Act has to be seen in the context of Section 10(23C)(iv). When the expression "charitable purpose", as defined in Section 2(15) of the said Act, is read in the context of Section 10(23C)(iv) of the said Act, we would have to give up the strict and ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) literal interpretation sought to be given to the expression "charitable purpose" by the revenue. With respect, we do not agree with the views of the Kerala and Andhra Pradesh High Courts.

55. It would be appropriate to also examine the observations of another Division Bench of this court in G.S.1's case (supra). While considering Circular No.11 of 2008 issued by the CBDT, to which a reference has been made earlier in this judgment, the Division Bench held that it was evident from the said circular that the new proviso to Section 2(15) of the said Act was "applicable to assesses, who are engaged in commercial activities, i.e., carrying on business, trade or commerce, in the garb of 'public utilities' to avoid tax liability as it was noticed that the object 'general public utility' was sometimes used as a mask or device to hide the true purpose, which was 'trade, commerce or business'." From this, it is evident that the introduction of the proviso to Section 2(15) by virtue of the Finance Act, 2008 was directed to prevent the unholy practice of pure trade, commerce and business entities from masking their activities and portraying them in the garb of an activity with the object of a general public utility. It was not designed to hit at those institutions, which had the advancement of the objects of general public utility at their hearts and were charity institutions. The attempt was to remove the masks from the entities, which were purely trade, commerce or business entities, and to expose their true identities. The object was not to hurt genuine charitable organizations. And, this was also the assurance given by the Finance Minister while introducing the Finance Bill 2008.

45. In case of Commissioner of Income Tax Jodhpur vs Jodhpur Development Authority (DB Income Tax Appeal No. 63/12 dated 5.07.2016), the Honble Rajasthan High Court held as under:

27. From various decisions of the Honble Supreme Court discussed hereinabove, the settled position of law emerges is that if the primary or predominant object of an institution is charitable, any other object which might not be charitable but which is ancillary or incidental to the dominant purpose, may be involving element of profit, would not prevent the institution from being a valid charitable trust. ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E)

28. In the backdrop of settled position of law discussed hereinabove, adverting to the facts of the present case, indubitably, JDA is a statutory body constituted and established under the provisions of Section 3 of JDA Act with a main object to secure the integrated development of Jodhpur Region and for that purpose to discharge inter alia the functions of Urban Planning including preparation of Master Development Plan and Zonal Development plans; formulation and sanction of the projects and schemes for the development of Jodhpur Region or any part thereof; execution of the project and schemes directly by itself or through a local authority or other agency; coordinating execution of projects or schemes for the development of Jodhpur Region supervision or otherwise ensuring adequate supervision over the planning and execution of any project or scheme the expenses of which in whole or in part are to be met from Jodhpur Region Development Funds; preparing schemes and advising the concerned authorities, department and agencies in formulating and undertaking schemes for development of agriculture horticulture, forestry, dairy development, transport, communication, schooling, cultural activities, sports, medicine, tourism and similar other activities; to prepare Master Plan for traffic control and management; devise policy and programmes of action for smooth flow of traffic and matters connected therewith; undertaking housing activity in Jodhpur Region etc., are essentially the functions, which promote the welfare of the general public. Of course, while discharging the said functions, the JDA also discharges function to acquire, hold, manage and dispose of property movable or immovable as may be deemed necessary and also enters into contract, agreements or arrangements with any person or organization may deem necessary for performing its function and in this process, it might be earning income but the primary object of the JDA certainly does not involve any profit motive whatsoever. It is pertinent to note that as per the provisions of Section 51 of the JDA Act, for the purpose of discharging the statutory functions, "The Jodhpur Region Development Fund" is created to which all money received by the authority is credited including amount of contribution to be made by the State Government, such other money as may be paid to the authority by the State Government, Central Government or any other authority or agency by way of grant, loans advances or otherwise, income derived from premium on second and subsequent sale of vacant land, income from ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) levy on vacant land, all fees, costs and charges received by the JDA under the JDA Act or any other law for time being in force, all money received by the JDA from the disposal of land buildings and other property movable and immovable and other transactions including lease money, urban assessment development charges and other similar charges and all money received by way of rents and profits or in any other manner or from any other source. A fortiori, as per the mandate of Section 54 of the JDA Act, all property funds and other assets vesting in the JDA shall be held and applied by it for the purposes and subject to the provisions of the Act. Suffice it to say that the entire funds of the JDA is mandatorily required to be utilized for discharging the functions to achieve the object of integrated development of Jodhpur Region Thus, predominant object of the JDA being to secure the integrated development of the Jodhpur Region which is undoubtedly falls within the expression 'advancement of any other objects of general public utility' within the definition of Section 2(15) of the Act of 1961 and therefore, on account of profit being earned by it through some of the activities, undertaken by it, which are ancillary or incidental to the main object of general public utility, it does not cease to be charitable in character so as to render it ineligible to claim registration under Section 12A read with Section 12AA of the Act of 1961. As a matter of fact, it is not even the case of the Revenue that the object of general public utility sought to be achieved by constitution and establishment of the JDA as such, involve carrying on of any activity for profit and therefore, it is immaterial if some income is earned by ancillary and incidental activities, which as per the mandate of the relevant statute, is used for achieving or implementing such object. The genuineness of the activities of the JDA, which are regulated by the provisions of the JDA Act and the Rules made thereunder, cannot be doubted. Thus, the order passed by the ITAT holding the JDA, Jodhpur entitled for registration under Section 12A read with Section 12AA of the Act of 1961, does not suffer from any infirmity or illegality.

46. In light of aforesaid legal propositions laid down wherein the dominant purpose test has been reiterated by the Honble Courts and which continue to be valid, lets examine the facts of the present case to determine the dominant objectives and purpose of the assessee Council. ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E)

47. The assessee Council has been established by the Rajasthan Government under the Rajasthan Nursing Council Act, 1964 for the purpose of carrying out the provisions as so stated in the said Act. The preamble to the Act provides that the Act has been enacted by the Rajasthan State Legislature in the 50th year of Republic of India to provide for the registration of nurses, midwives, health visitors and auxiliary nurse-midwives in the state of Rajasthan. We now refer to the other relevant provisions of the said Act and the same are reproduced as under:

3. Establishment and incorporation of Council. - The State Government shall, by notification in the Official Gazette, establish a Council to be known as the Rajasthan Nursing Council for the purpose of carrying out the provisions of this Act and such Council shall be a body corporate, shall have perpetual succession and a common seal and may by the said name sue and be sued.

4. Constitution of the Council. - (1) The Council shall consist of the following members, namely: - (a) ex-officio members:

(i) the Director of Medical and Health Services, Rajasthan State;

(ii) the Additional Director of Medical and Health Services, Rajasthan Jaipur;]

(iii) the Medical Superintendent, Sawai Mansingh Hospital, Jaipur;

(iv) the State Family Welfare Officer, Rajasthan, Jaipur; ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E)

(v) the Chief Nursing Superintendent of the State Nursing Services, Rajasthan State;

(vi) the Matron or the Nursing Superintendent, whoever is incharge of the Nurses Training, Mahatma Gandhi Hospital, Jodhpur;

(vii) the Matron or the Nursing Superintendent, whoever is incharge of the Nursing Training at Sawai Mansingh Hospital, Jaipur; ,

(viii) the Matron or the Nursing Superintendent, whoever is incharge of Nurses Training, P.B. M. Women's Hospital, Bikaner, and

(ix) the Matron or the Nursing Superintendent, whoever is incharge of Nurses Training General Hospital, Udaipur. (b) Members nominated by the State Government:

(i) one Sister Tutor;

(ii) one Public Health Nurse;

(iii) one person representing the Railway Hospitals in the State of Rajasthan;

(iv) one members of the Trained Nurses Association of India, who must be resident in the State of Rajasthan;

(v) the Nursing Superintendent of Santokha Durlabhji Memorial Hospital, Jaipur; and

(vi) one person representing the Medical institution controlled by the Ajmer Diocesan Corporation Limited. (2) The Council shall co-opt in the prescribed manner two persons, possessing the prescribed qualifications considered to be specially ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) suited to advise the Council in relation to the business coming up before Provided that, if the Council fails so to co-opt persons as its members within three months from the date of its first meeting, State Government shall nominate such persons as members of the Council.

9. Registrar and staff. - (1) The Council shall appoint a Registrar and may appoint other officers and servants as it may consider necessary on such salary and other conditions of service as it may determine and every person so appointed shall be deemed to be a public servant within the meaning of Section 21 of the Indian Penal Code, 1860 (Central Act 45 of 1860). (2) The Registrar shall act as Secretary to the Council and shall perform such other duties as are assigned to him by this -Act or the rules or regulations made thereunder or as may be specially assigned to him by an order of the Council.

12. Orders for maintenance of registers. - (1) The Council shall, as soon as conveniently may be, after the commencement of this Act and from time to time as occasion may require, make orders for regulating the maintenance of- (a) a register of registered nurses, (b) a register of midwives, (c) a register of registered health visitors, and (d) a register of auxiliary nurse-midwives, arranged in several parts in which the persons to be registered shall be classified in keeping with their qualifications. ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) (2) Each of the said registers shall be kept in the form prescribed by the Council.

13. Persons entitled to be registered- The following persons shall be entitled to be registered under this Act, namely:-

(i) nurses, midwives, health visitors and auxiliary nurse-midwives who have undergone the course of training prescribed by the Council and have passed the prescribed examinations held by the Council and fulfil such further conditions as may be prescribed.

(ii) nurses, midwives, health visitors and auxiliary nurse-midwives holding corresponding certificates issued by authorities in other States in India and foreign Council if such certificates are recognised by the Indian Nursing Council;

(iii) nurses, midwives, health visitors and auxiliary nurse-midwives who are already in practice at the commencement of this Act and fulfil such conditions as may be prescribed.

14. Applications for registration- An application for registration by any of the persons mentioned in section 13 shall be made to the Registrar in the prescribed form and shall be accompanied with the prescribed fees.

15. Disposal of applications by Registrar- If the Registrar is satisfied, after holding in the prescribed manner such inquiry as he considers necessary, that the applicant for registration is entitled to be registered under section 13, he shall enter his name in the appropriate register. Provided that any application for registration made by a person whose case is not clearly governed by the provisions of this Act or of the rules, regulations or orders made thereunder may be referred for the decision of the Council. ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) (2) If the Registrar is not satisfied as aforesaid, he shall make an order rejecting the application for registration and refund the fee paid with it.

19. Prohibition of registration etc. - (1) The Council may prohibit the registration of any person as a nurse, midwife, health visitor or auxiliary nurse-midwife and, if such person is already so registered, may direct the removal of his name from the register on any of the following grounds, namely:- (a) that he has been convicted of any such offence as implies in the opinion of the Council any defect of character such as would render him unfit for duty; or (b) that he has been found by the Council to be guilty of an offence which, in its opinion, indicates professional incompetence, negligence or contravention of regulations, ordinarily included in the performance of his duty; or (c) that he has been found by the Council to be guilty of professional misconduct or infamous conduct in any professional respect; or (d) that there are defects in his character which, in the opinion of the Council, would render the entry or retention of his name on the register undesirable: Provided that no action shall be taken by the Council under this section until after due inquiry, at which the person concerned has been given a reasonable opportunity to be heard in his defence, the person concerned is found to be disqualified as specified in clause (a) or clause (b) or clause (c) or clause (d). (2) Any name removed from the register under sub-section (1) may afterwards be re-entered in the register and any order of prohibition of ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) registration passed under sub-section (1) may be withdrawn under the direction of the Council given by a majority of two thirds of the members present and voting at the meeting.

23. Preparation, publication and use of annual lists of nurses, health visitors and auxiliary nurse-midwives. - (1) The Registrar shall, in every year, on or before a date to be fixed in this behalf by the Council, cause to be prepared, printed and published in the prescribed manner lists in the prescribed form and specifying the prescribed particular, separately of:- (a) all registered nurses, (b) all registered midwives, (c) all registered health visitors, and (d) all registered auxiliary nurse-midwives. (2) In every proceeding it shall be presumed that any person whose name is entered in the latest of the lists published under sub-section (1) is a registered nurse or a registered midwife, or a registered health visitor or a registered auxiliary nurse- midwife, as the case may be: Provided that, in the case of a person whose name may have been entered in a register after the publication of a list under sub- section (1) and before the publication of a fresh list thereunder, a certified copy of such entry, signed by the Registrar, shall be evidence that such person is registered under this Act.

24. Powers of the Council. - The Council shall have and exercise, by making regulations and otherwise, the following powers, namely:- ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) (1) to lay down the courses of training and to provide such training to nurses, midwives, health visitors and auxiliary nurse-midwives so as to qualify them for registration under this Act: (2) to prescribe the qualifying examinations for such registration: (3) to hold all or any of such examinations; (4) to specify the various titles, degrees, diplomas or certificates which shall qualify the holders thereof for registration under this Act; (5) to recognise educational or instructional institutions, schools, colleges for the purpose of training in basic as well as post certificate/post graduate nursing, midwifery, health visitors and auxiliary nursing-midwifery courses and to appoint examining bodies, for the purpose of holding examinations for registration under this Act; (6) to lay down the conditions on which such recognition may be made; (7) to prohibit the issue to any person by any hospital, school or other similar institution which has not been approved or recognised under clause (5), of any certificate or document to show that such person is qualified to practise as a nurse, midwife, auxiliary nurse midwife or health visitor unless such person has been registered under this Act; (8) to adopt such measures and to do such acts as may be necessary for the furtherance of the object of this Act.

26. Recognised institutions etc. - Institutions, schools, hospitals, examining bodies and associations recognised by the Council under clause (5) of Section 24 and the regulations made thereunder shall be competent to train nurses, midwives, health visitors and auxiliary nurse- midwives, to send them for or to hold the qualifying examinations for ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) which they may have been recognised and to issue such certificates as may be specified in the order of their recognition.

27. Withdrawal of recognition. - The Council shall have powers for reasons to be recorded in writing to withdraw recognition from any institution referred to in Section 26.

29. Power of Council to call for information from institutions etc. - (1) The Council shall have power to call upon the governing body or authority of any recognised institution referred to in clause (5) of Section 24- (a) to furnish reports, returns or other information as the Council may require to enable it to judge of the efficiency of the institution or training given therein; and (b) to provide facilities to enable any member of the Council (deputed by the Council in this behalf) to be present at the examinations to be held by any such institution. (2) The Council shall have power to inspect any such institution and may for the purpose [appoint such number of inspectors whether from among members of the Council or otherwise as it deems necessary.]

30. Scale of fees. - (1) The Council shall, with the sanction of the State Government, fix the scale of fees payable in respect of all matters and proceedings provided for in this Act or the rules and regulations made thereunder and provide the mode of their payment. (2) Such fees shall be applied for the purpose of this Act and the rules and regulations made thereunder.

48. On perusal of aforesaid provisions, we find that Section 12 talks about maintenance of registers of registered nurses, midwives, health visitors and ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) auxiliary nurse midwives. Section 13 talks about the persons who are entitled to be registered. It talks about the persons who have undergone the course of training prescribed by the Council and have passed the prescribed examination held by the Council who shall be eligible for registration. It further talks about persons holding corresponding certificates by authorities in other states in India and even foreign Council if such certificates are recognized by the Indian Nursing Council. Section 14 talks about the persons seeking registration to apply to the Registrar in prescribed form along with prescribed fees and Section 15 talks about the registration of these persons and the powers of the Registrar to make enquires before he enters the name in the registers so maintained. Section 19 talks about the situations where the registration may be denied or where a person is already registered, to order for his name to be removed on account of professional misconduct, negligence etc. Section 23 talks about publication of list of such persons and a presumption that person so listed is a registered person with the Council and eligible to carry out their designated professional activity as so registered. We therefore find that these are primary and obligatory functions of the Council to admit persons as registered nurses, midwives, health visitors and auxiliary nurse midwives on its rolls who have the requisite training and have passed the qualifying examination and hold the necessary degrees/certificates. These are clearly regulatory in character intended to ensure that the person with requisite skill and qualifications and thus eligible to practice as nurses, midwives, health visitors and auxiliary nurse midwives in their respective domains are available for being engaged by the hospitals, nursing homes and public at large.

49. Further, we look at the provisions of Section 24 which talks about the powers of the Council. It talks about the power of the Council to lay down the courses of training and to provide such training to nurses, midwives, health visitors and auxiliary nurse-midwives so as to qualify them for ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) registration under this Act. It talks about the power of the Council to prescribe the qualifying examinations for such registration and to hold all or any of such examinations and to specify the various titles, degrees, diplomas or certificates which shall qualify the holders thereof for registration under this Act. It talks about the power of the Council to recognize educational or instructional institutions, schools, colleges for the purpose of training in basic as well as post certificate/post graduate nursing, midwifery, health visitors and auxiliary nursing-midwifery courses and to lay down the conditions on which such recognition may be made and subsequently withdrawn. We therefore find that these are again primary and obligatory functions of the Council right from deciding the course curriculum and the standards of various training courses, to recognition of educational and other institutions where such training courses can be conducted, to conduct of qualifying examination and finally to award of degrees/diplomas and certificates to qualified persons.

50. In overall analysis, we find that Rajasthan Nursing Council is a statutory authority established under the Rajasthan Nursing Council Act, 1964 consisting of ex-officio members who are officials of the health department, namely, Director of Medical Services, Medical Superintendent, Nursing Superintendent and other health officials and comes under the administrative control of Medical and health department, Government of Rajasthan and its primary and the dominant purpose as reflected by conjoint reading of various obligatory functions is to regulate the medical profession of registered nurses, midwives, health visitors and auxiliary nurse midwives in the state of Rajasthan and to ensure that these persons have undergone requisite training and have passed the qualifying examination and hold the necessary degrees/certificates and thus eligible to practice as nurses, midwives, health visitors and auxiliary nurse midwives in their respective domains and services of such persons are thus available to the hospitals, nursing homes and public ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) at large and qualify as involved in activities of general public utility and thus, charitable activities as so defined under section 2(15) of the Act.

51. Now, coming to the proviso to section 2(15), it is a settled position that the proviso applies only if an institution is engaged in advancement of any other object of general public utility and postulates that such an institution is not "charitable" if it is involved in carrying on any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business for a cess, fee or any other consideration. In other words, an institution will not be regarded as established for charitable purpose if cess, fee or other consideration is received for carrying on any activity in nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business.

52. An exception has however been carved out wherein it has been provided that the institution will still qualify as an institution established for charitable purposes where any such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility and the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year. The phrase such activity or activities carried out during the previous year refers to activity in nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business and such activities are undertaken in the course of main activities of general public utility. In other words, such activities are incidental, subservient to primary or dominant activity of general public utility and the measure to verify the same is the aggregate of receipts from such activities which cannot exceed 20% of total receipts of the institution. Therefore, where an institution is carrying out primary or dominant activities in the field of general public utility and in the ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) process of carrying out the same, it also carries out other incidental business activities and the receipt from such business doesnt exceed 20% of total receipts of the institution during the previous year, the institution will still qualify as an institution established for charitable purposes.

53. In the instant case, the ld CIT(E) has stated in his order that the activities carried out by the applicant council have been reflected in its Income & Expenditure accounts of various years. The applicant council is in receipt of direct Income comprising mainly registration fees, counselling fees, examination fees, Inspection fees, revaluation fees etc. Furthermore, the impugned receipts are forming predominant part of the total income in each of the years from F.Y 2015-16 to F.Y 2017-18. As such, the income which also describes its activities undertaken during the period from F.Y 2015-16 to F.Y 2017-18 is of the nature of General public Utility (GPU). Further, the direct income shown in the I&E accounts comprises mainly registration fees, counselling fees, examination fees, Inspection fees, revaluation fees etc are of the nature of Business/commercial Receipts. It is pertinent to state that the income from such commercial activities is forming 100% for F.Y. 2015-16, 100% for F.Y. 2016-17 & 100% for F.Y. 2017-18 which is more than 20% i.e. in contravention to the provisions laid down in 1st proviso to Section 2(15). Hence, the applicant fails condition (b) of the proviso. Further, such commercial activities are not incidental but are pre-dominant activity of the applicant. Hence, the assessee also fails condition (a) of the proviso. Therefore, as per the proviso, such activity in the nature of advancement of an object of GPU shall not qualify as charitable activity.

54. We are however unable to appreciate the aforesaid findings of the ld CIT(E) and find inherent contradiction therein. At first place, it has been stated that the activities carried out by the applicant council have been ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) reflected in its Income & Expenditure accounts of various years. In the Income & Expenditure accounts for financial years 2015-16, 2016-17, 2017- 18, we find that the applicant council has shown receipt of direct income comprising of registration fees, counselling fees, examination fees, Inspection fees, revaluation fees etc and there are corresponding expenditure of councelling charges, examination charges, inspection charges, etc. It has been admitted by the Revenue that such income receipts and expenditure describes its activities which are in the nature of General public Utility (GPU). At the same time, it has been stated (and that where the contradiction has happened) that same income receipts (100%) are of nature of Business/commercial receipts and thus, in contravention of 20% limit as provided in the proviso to section 2(15) and also are not incidental but pre-dominant activities of the institution. How can the same activity qualify and falls in both the categories i.e, an activity in the nature of general public utility and at the same time, qualify as business activity. Merely because the assessee council has charged certain fees as part of rendering its statutory function and to meet its administrative/operative expenses, the same cannot be said to be done for the purpose of profit. In its letter dated 10.04.2019, Government of Rajasthan, Ministry of Medical and Health Department has confirmed that the State Government has only created and subscribed the council and fix the various fees/charges to cover the normal expenditure on operations and development of the amenities/infrastructure to serve the society in better manner, all the revenue collected by the Council are on authorization of the State Government and is to be retained by the Council for meeting the operations and future development expenses. It is not even the case of the Revenue that such activities are carried out for the purposes of profit and the fees so charged are exorbitant and not commensurate with the activities so undertaken by the assessee council. The test of carrying out the activities in the nature of trade, ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) commerce or business is not satisfied in the instant case. As we have held above, the primary or dominant purpose of the assessee council is to regulate the medical profession of registered nurses, midwives, health visitors and auxiliary nurse midwives in the state of Rajasthan and to ensure that these persons have undergone requisite training and have passed the qualifying examination and hold the necessary degrees/certificates and thus eligible to practice as nurses, midwives, health visitors and auxiliary nurse midwives in their respective domains and services of such persons are thus available to the hospitals, nursing homes and public at large. Where as part of rendering of such activities, it recovers certain nominal fees to meet its operational and administrative expenses, the same will not disqualify it from being involved in activities of general public utility as the Courts have held that the proviso to section 2(15) does not seek to disqualify charitable organization covered by the last limb, when certain reasonable/nominal fee is collected from the beneficiaries in the course of activity which is not a business but clearly charity for which they are established and they undertake. We are therefore of the considered view that once it is held that the whole of the activities are in nature of general public utility and there are no separate business activities and no separate revenue streams from such business activities, the proviso to section 2(15) doesnt apply in the instant case and has been wrongly invoked by the ld CIT(E).

55. In light of above discussions and in the entirety of facts and circumstances of the case and respectfully following the decisions referred supra, we are of the considered view that the objectives of the assessee council falls in the category of general public utility and thus qualify as charitable purpose and given that there is no dispute on the genuineness of activities being carried out by the assessee council in furtherance of such ITA No. 1283/2019 Rajasthan Nursing Council vs. CIT(E) objectives, the order passed by the ld CIT(E) is hereby set-aside and he is directed to grant registration to the assessee Council u/s 12AA as so applied. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on01/09/2020. Sd/- Sd/- fot; iky jko foe flag ;kno (Vijay Pal Rao) (Vikram Singh Yadav) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 01/09/2020. *Santosh. vkns'k dh izfrfyfi vxzsfkr@Copy of the order forwarded to:

1. vihykFkhZ@The Appellant- Rajasthan Nursing Council, Jaipur.

2. izR;FkhZ@ The Respondent- CIT (E), Jaipur.

3. vk;dj vk;qDr@ CIT

4. vk;dj vk;qDr@ CIT(A)

5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur.

6. xkMZ QkbZy@ Guard File {ITA No. 1283/JP/2019} vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar

ITA 1283/JPR/2019

Rajasthan Nursing Council, Jaipur v. CIT(Exemption), Jaipur

Case Summary — ITA No. 1283/2019: Rajasthan Nursing Council vs. CIT(E), Jaipur

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant's (Rajasthan Nursing Council) Arguments

Respondent's (Revenue / CIT/DR) Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Rajasthan Nursing Council, Jaipur v. CIT(Exemption), Jaipur

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