Meaning of “Any activity in nature of”

The meaning of any activity in nature of under section 2(15) of the Income Tax Act is not defined in the act itself. But we can take guidance from decisions by various high courts. Here are excerpts of courts orders in which the Hon’ble Income Tax Appellate Tribunal tried to explain the meaning of any activity in nature of.

Meaning of any activity in nature of defined by court

The phrase ‘any activity in nature of ‘ used in section 2(15) of the Income Tax Act came up before various high courts as detailed under :

The phrase ‘any activity in nature of ‘ used in section 2(15) of the Income Tax Act came up before Hon’ble ITAT-PANJI in Entertainment Society of GOA vs. CIT [2013] 34 taxmann.Com 210/59 SOT 103 (URO)/23 ITR (Trib.) 635 (Panaji) and it explained.

Meaning : The words used in the proviso are ‘carrying on of any activity in the nature of trade, commerce or business’ and not the words ‘carrying on trade, commerce or business’. Using the words ‘any activity in the nature of’ prior to ‘trade, commerce or business’ has a specific meaning while interpreting the proviso. These words cannot be ignored. This mandates that the institution need not actually be carrying on trade, commerce or business but the activity carried on by it are to be similar to trade, commerce or business.

The profit motive is required while an institution is carrying on trade, commerce or business. The use of words ‘carrying on any activity in the nature of trade, commerce or business’ will mean that there need not be profit motive in carrying on the activity by the institution. The legislature is fully aware of that an institution, which is incorporated for charitable purpose, cannot have profit motive.

Section 2(15) of the Income Tax Act

(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 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; and

(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;

In this article, you can get guidance from high courts on the meaning of any activity in nature of under section 2(15) of the Income Tax Act.

Updated up to Finance Act 2021