WPC 185/2009 Page 1 of 10 * IN THE HIGH COURT OF DELHI AT NEW DELHI + Writ Petition (Civil ) No. 185/2009 International Commission on Irrigation And Drainage ....Petitioner Through Mr. Ajay Vohra, Ms. Kavita Jha & Mr. Somnath Shukla, Advocates. VERSUS Union of India & Anr. …..Respondents Through Mr. R.N. Singh & Mr. A.S. Singh Advocates for respondent No. 1. Mrs. P.L. Bansal, Sr. Advocate with Mr. Deepak Anand for respondent 2. CORAM: HON’BLE THE CHIEF JUSTICE HON'BLE MR. JUSTICE SANJIV KHANNA ORDER % 14.02.2011 SANJIV KHANNA, J. International Commission for Irrigation and Drainage (the petitioner, for short) is a society registered under the Societies Registration Act, 1860 with the aim and mission to stimulate and promote the development of arts, sciences and techniques of WPC 185/2009 Page 2 of 10 engineering, agriculture, economics, ecology and social science in managing water and land resources for irrigation, drainage, flood control and river training applications, including research and development and capacity building, adoption of comprehensive approaches and day to day techniques for sustainable agriculture in the world. The main objectives of the petitioner society are as under:- “(a) Planning, financing, socio-economic and environmental aspects of irrigation, drainage, flood control and undertakings for the reclamation and improvement of lands as well as the design, construction and operation of appurtenant engineering works including dams, reservoirs, canals, drains and other related infrastructure for storage, conveyance, distribution, collection and disposal of water. (b) Planning, financing, socio-economic and environmental aspects of schemes for river training and behavior, flood control and protection against sea water intrusion of agricultural lands as well as the design, construction and operation of appurtenant works except such matters as relate to design and construction of large dams, navigation works and basic hydrology; WPC 185/2009 Page 3 of 10 (c) Research and development, training and capacity building in areas related to basic and applied science, technology, management, design, operation and maintenance of irrigation, drainage, flood control, river training improvement and land reclamation. (d) Facilitation of international in put required by the developing countries, particularly the low income countries lagging in the development of irrigation and drainage. (e) Promotion of the development and systematic management of sustained irrigation and drainage systems; (f) Pooling of international knowledge on the topics related to irrigation, drainage and flood control and making it available worldwide; (g) Addressing of international problems and challenges posed by irrigation, drainage and flood control works and promoting evolution of suitable remedial measures; (h) Promoting savings in use of water for agriculture; (i) Promoting equity including gender equity between users and beneficiaries of irrigation, drainage and flood control systems; (j) Promotion of preservation and improvement of soil and water quality of irrigated lands.” WPC 185/2009 Page 4 of 10 2. The petitioner has membership network of 106 countries and in each country there is a national committee. At the headquarter there is an International Executive Council (IEC for short) which is the highest administrative and policy making body which meets every year in a member country. Since June, 1950, the petitioner’s headquarter called Central Office are located at New Delhi. It is stated that on an average 64 countries are active and make regular payment of annual subscription fee which is calculated on the basis of area irrigated annually and protected by drainage and flood control works in the country and country’s annual subscription to the United Nations as percentage of its total expenditure. Members of the petitioner society are kept abreast of the latest techniques in the field of irrigation, drainage, environmental impacts, flood management etc. through petitioner’s publications and conferences. The petitioner holds International Congress once every three years and one regional conference in one of the regions. The petitioner appoints general reporters, experts etc. on voluntary basis who prepare summary WPC 185/2009 Page 5 of 10 reports and write technical papers. Several workshops, sessions, symposia and seminars are held. The petitioner, it is stated, brings out highly informative and special publications. 3. On 10th December, 2007, the petitioner filed an application in Form No. 56 for grant of exemption under Section 10(23C)(iv) of the Income Tax Act 1961 (Act, for short) for the assessment year 2008-09 and onwards. The petitioner submitted accounts for the assessment years 2003-04 to 2005-06. The petitioner also furnished a note on activities carried out during last 3 years and a separate note was filed with regard to objects as well as activities undertaken by them. It was stated that the petitioner is/was a not for profit organization and is not mandated as per the main objects to charge any fee or consideration for consultancy services. In other words the petitioner was not carrying on any trade, business or commerce. 4. By the impugned order dated 16th October, 2008, the application filed by the petitioner has been rejected and it has been held that the petitioner cannot be granted exemption under Section 10 (23C)(iv) of the Act. Director General of the Income Tax in the said order has WPC 185/2009 Page 6 of 10 observed that as per its constitution, the petitioner society was charging fee from members and participants for services and participation in congresses/conferences held by it and had received fee for services as per accounts filed by it for financial years 2003-04 and 2005-06. Learned Director General, in this connection has relied on the proviso to Section 2(15) of the Act, which reads:- “Charitable purpose” includes relief of the poor education, medical relief, 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 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.” 5. The aforesaid proviso was introduced from assessment year 2009-10 w.e.f. 1.4.2009. Relying upon the said proviso, the application has been rejected for the following reasons:- WPC 185/2009 Page 7 of 10 “4. In light of above amendment the submission of the applicant was considered. The amendment to section 2(15) not only speaks about carrying on any activity in the nature of trade, commerce and business but it also includes any activity in the nature of trade, commerce and business but it also includes any activity of rendering any services in relation to any trade, commerce and business for a cess or fee or any other consideration. In this case as the assessee is charging fee for services for Congress/Conference etc. it is clearly covered under the proviso of Section 2(15) applicable w.e.f. 01.04.2009, the period covered under the application of the Institution. Thus the applicant cannot be considered charitable in view of the amendment u/s 2(15) of the I.T. Act. The institutions which are not charitable in nature cannot be granted approval u/s 10(23C)(iv) of the I.T. Act.” 6. Learned counsel for the petitioner has submitted that the proviso is not applicable as for the proviso to apply it has to be first held that the entity was carrying on any activity in nature of trade, commerce or business. The words “trade, commerce or business” have been interpreted by the Supreme Court in various judgments. It is accordingly submitted that by no stretch, the activities or the objects of the petitioner show and disclose that they were carrying on “trade, commerce or business”. It is further stated that under the second part WPC 185/2009 Page 8 of 10 of the proviso, charging of cess, fee or consideration can result in disqualification but only when it is paid for rendering any service in relation to any “trade, commerce or business”. 7. It is noticeable that this aspect and contention has been adverted to in first part of paragraph 4 of the impugned order which has been quoted above. However, the Director General of Income Tax (Exemption) has in second part of paragraph 4 held that the petitioner is covered by proviso 2(15) applicable w.e.f. 1.4.2009. However, the Director General has neither discussed nor given any reasons why and on what basis he has reached the conclusion that the petitioner is/was involved in any activity in nature of “trade, commerce or business” which is sine qua non for the proviso to apply. The concept and words “trade, commerce or business” and their contours have not been examined. The Director General has also not examined the nature and character of the activities of the petitioner and whether they can be classified as “trade, commerce or business”. The expression “any activity in nature of trade, commerce or business” is required to be interpreted. WPC 185/2009 Page 9 of 10 8. The second part of the proviso as per the petitioner indicates that charging of fee, cess or consideration is not a disqualification under Section 2(15). It becomes a disqualification under the said Section when cess, fee or consideration is charged for rendering services in relation to any “trade, commerce or business”. The Director General has not examined the said contention and interpreted the second part of the proviso to Section 2(15). There is thus, a vaccum in the order. The plea and contention of the petitioner on interpretation of second part of the proviso to Section 2(15) has not been considered and answered. Depending upon the interpretation, the activities of the petitioner have to be examined and then decided whether or not the second part of the proviso to Section 2(15) is attracted. The other question is whether any subscription paid by the members States/Countries for attending a conference can be regarded as fee, cess or other consideration. 9. For the aforesaid reasons, we set aside the impugned order dated 16th October, 2008 and remand the matter to the Director General of Income Tax (Exemption) for fresh decision in accordance with law. The Director General will keep in mind the observations made WPC 185/2009 Page 10 of 10 above and will not be influenced by the earlier order. It is clarified that this Court has not expressed any opinion as to whether or not the petitioner is carrying on any activity in nature of “trade, commerce or business” or whether the subscription by the member countries can be regarded as cess, fee or other consideration and whether cess, fee or consideration are/were paid for rendering services in relation to any “trade, commerce or business”. 10. The writ petition is accordingly partially allowed to the extent indicated above. To curtail any further delay, it is directed that the petitioner will appear before the Director General of Income Tax (Exemption), Delhi on 7th March, 2011 on 2.30 PM when a further date of hearing will be fixed. In the facts of the case, there will be no order as to costs. SANJIV KHANNA, J. CHIEF JUSTICE February 14, 2011 kkb