TaxTMI 
TaxTMI 
2015 (8) TMI 170
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....ties which conform to the objects of the assessee society. 3. Brief facts are that assessee is a company registered under section 25 of the Companies Act. The main objects of the assessee are to support, protect, maintain increase and promote export leather articles and products and byeproducts of leather industry. The Council for Leather Exports is an autonomous non-profit company registered under Indian Companies Act entrusted with export promotion activities and development of Indian leather industry. CLE is apex body of 2400 Members rapidly growing Indian leather industry. CLE's activities are multiple and directed towards assisting its members in extending their global reach thereby increasing their exports. In the course of assessment proceedings, the Assessing Officer noticed that assessee received member subscription, certification fee, sale of publications, interest on deposits, bulletin revenue etc. He also noticed that assessee is incurring expenses towards salary and staff related expenses, administrative expenses, expenses on codec activities. Analyzing these expenses and income, the Assessing Officer was of the view that assessee is not doing any multiple activit....
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....ws across the globe, organizing buyer-seller meets in India and abroad besides B2B meets in focus countries; Offering technical, marketing and design assistance to Indian exporters in terms of design inputs, product development, branding and marketing; Inviting key resource personnel for fairs, seminars and lectures for exchange of information, knowledge ideas and strategies." 7. The Assessing Officer while completing the assessment proceedings noticed that assessee has received entrance membership subscription, certification fee, bulletin revenue, interest on deposits etc. and has incurred various expenses towards salaries and staff related expenses, administrative expenses, net expenses of codec activities and there was surplus of ` 2.45 crores out of income of ` 6.65 crores. The Assessing Officer was of the view that assessee is not doing any charitable activity and the activities of the assessee are in the nature of trade, commerce or business and he applied proviso to section 2(15) of the Act and denied exemption under section 10(23C)(iv) of the Act. On appeal, the Commissioner of Income Tax (Appeals) held that denial of exemption under section 2(15) and 10(23C)(iv) of the ....
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.... charitable purpose u/s 2(15) of the Act. The definition of charitable purpose u/s 2(15) of the Act is an inclusive definition and covers in its ambit any activity which is in the nature of general public utility. General public utility does not mean that it should cover the whole population. It is sufficient if it covers a distinct group of population irrespective of caste, creed, religion, etc. In this case, the beneficiaries are exporters of leather goods for whose benefits, the appellant company has been working. For this purpose only, the CBDT granted exemption u/s 10(23C)(iv) of the Act and the exemption granted continues till date. Moreover, while rejecting the application of the appellant, the DIT(E), Chennai also declared that the appellant can claim exemption under specific provision of se.10(23C)(iv) of the Act. Moreover Circular No.11/2008 dated 19.12.2008 clarifies that the newly inserted proviso to sec.2(15) will apply only to entities whose purpose is advancement of any other object of general public utility. Such entities will not be eligible for exemption u/s 11 or u/s 10(23C) of the Act if they carry on commercial activities. Whether such an entity is carrying on ....
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....General of Income Tax(Exemptions) & Others (2015) TIOL 227-HC-DEL-IT, the Delhi High Court held as under:- "58. In conclusion, we may say that the expression "charitable purposes" as defined in Section 2(15) cannot be construed literally and in absolute terms. It has to take colour and be considered in the context of Section 10(23C)(iv) of the said Act. It is also clear that if the literal interpretation is given to the proviso to Section 2(15) of the said Act, then the proviso would be at risk of running fowl of the principle of equality enshrined in Article 14 of the Constitution India. In order to save the Constitutional validity of the proviso, the same would have to be read down and interpreted in the context of Section 10(23C)(iv) because, in our view, the context requires such an interpretation. The correct interpretation of the proviso to Section 2(15) of the said Act would be that it carves out an exception from the charitable purpose of advancement of any other object of general public utility and that exception is limited to activities in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business for....
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....the limb of object of general public utility and hence not entitled to exemption under section 11 of the Act in view of the amendment to section 2(15) of the Act. Counsel submits that various charges received are incidental to carry on its objects and therefore exemption under section 11 cannot be denied. Counsel for the assessee submits that places reliance on the recent order of Kolkata Bench of this Tribunal in the case of Indian Chamber of Commerce Vs. ITO(Exemption) in ITA No.1491 & 128/Kol/2012 dated 2.12.2014 for the assessment years 2008-09 & 2009-10. Referring to the said decision of this Tribunal, counsel submits that an identical issue has come up before the Kolkata Bench wherein it was held that receipts reported by the assessee for meetings, conferences, seminars, environment management centre, fees for certificate of origin is not in the nature of business and is incidental to carry on the objects of the assessee. Therefore, in view of the above decision, counsel submits that denying exemption under section 11 to the assessee charitable organization is not justified. 4. Departmental Representative vehemently supports the orders of lower authorities. He places relianc....
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....es in India. Further it is to be noticed that the Memorandum has also specifically authorized the Chamber "to do all other things as may be conductive to the development of trade, commerce and industries, or incidental to attainment of the above objectives or any of them." Thus it was only for the purpose of securing its primary aims of proper development of business in India that the assessee was taking the said ancillary steps. The said activities were not carried out independent of the main purpose of the association of the institution being the development and protection of trade. There was no independent profit motive in any of the said activities. The surplus arising out of the same was merely incidental to the main object to charity. The majority of the receipts in the said activities were out of the sponsorships and donations. The expenses incurred on the said activities as and when incurred were all separately debited to the said accounts and the balance was shown as surplus over receipts. Thus in view of the above it is clear that the alleged activities were all merely incidental to the main object of the assessee and the predominant object of the association being the pr....
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....aritable even if an incidental or ancillary activity or purpose, for achieving the main purpose, was profitable in nature. It was laid out by the Court that, "That if the primary purpose be advancement of objects of general public utility, it would remain charitable even if an incidental entry into the political domain for achieving that purpose, e.g. promotion of or opposition to legislation concerning that purpose, was contemplated." It was only for the purpose of securing its primary aims that it was mentioned in the memorandum of association that the Chamber might take steps to urge or oppose legislative or other measures affecting trade, commerce or manufactures. Such an object ought to be regarded as purely ancillary or subsidiary and not the primary object." In connection to the above case it is laid out the said case dealt with the assessment of the assessee in the A.Ys 1948-49 to wherein relevant to the said AYs 8-49 to 1952 -53, by the last paragraph of sub-section (3) of the IT Act, 1922", charitable purposes" was defined as ".... In this sub-section "Charitable purpose" includes relief of the poor, education, medical relief and the advancement of any other object of ....
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....illary activity is established. In such cases, the onus of proof of an independent intention to carry on "business" : connected with or incidental or ancillary sales will rest on the Department. Thus, if the main activity of a person is not trade, commerce etc., ordinarily incidental or ancillary activity may not come within the meaning of "business". In the recent decision which deals specifically with the newly amended section 2(15) of the Act, in the case of Institute of Chartered Accountants of India v. Director General of Income -tax (Exemptions) [2012] 347 ITR 0099 Del HC, laying down the very same principle it was again laid: "that the fundamental or dominant function of the Institute was to exercise overall control and regulate the activities of the members/ enrolled chartered accountants. A very narrow view had been taken that the Institute was holding coaching classes and that this amounted to business." Again, Hon'ble Bombay High Court in the WP of Baun Foundation Trust (Writ Petition No. 1206 of 2010 in the High Court of judicature At Bombay 27 March 2012) it was held that "4... It is a well settled position in law that the dominant nature of the purpose for whi....
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....rged as business income or under the residual head, depending upon the question whether the activities of the association with the nonmembers amount to a business or otherwise. Section 28(iii) constitutes certain income of the association to be business income without affecting the scope of the exemption under Section 11. Section 2(15) which incorporates the definition of "charitable purposes" simply shows that several mutual associations may also fall within the definition. The receipts derived by a chamber of commerce and industry for performing specific services to its members, though treated as business income under Section 28(iii) would still be entitled to the exemption under Section 11r.w.s. 2(15) of the Act, provided there is no profit motive. Thus, assessee being a charitable Institution carrying on the object of promotion and development of trade and commerce and which is not involved in the carrying on of any activity in the nature of "business", the said section 28(iii) of the Act does not apply. 38. In view of the above discussion, we are of the considered view that in the given facts and detailed reading of the various judicial decisions through the years, interpreti....