For a charitable society that makes any profits their exemption claim is not determined on the basis of commercial nature of activities but by the final use of profits generated from its activities. In [2022] 447 ITR 99 (Del) the department held that the profits generated by the assessee by running the printing press and publishing the newspaper are not entitled to exemption vide proviso to section 2(15).
The Court however held that the assessee did not carry on any business, trade or commerce with the intent of earning and distributing profit as it found that the profits were employed for charitable activities only.
The High court further held that the object of introducing first proviso is to exclude organisations which are carrying on regular business with profit motive with intent to distribute the profit to the shareholders/owners and that it does not exclude entities which are essentially for charitable purpose but are con- ducting some activities for a consideration or a fee.
This what is key is the final use or distribution of profit.