TaxTMI 
TaxTMI 
2016 (1) TMI 1024
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....nstitute a charitable one within the meaning of S.2(15), and the main source of its income, being by way of rental income received from the running of a functional hall, was of commercial nature, within the meaning of proviso to S.2(15). He accordingly, rejected the claim of the assessee for exemption under S.11 of the Act, and brought to tax the excess of income over expenditure as per Income and Expenditure Account of Rs. 47,34,150. Consequent to the disallowance of exemption u/s.11 of the Act, the Assessing Officer also disallowed an amount of Rs. 39,000 invoking the provisions of S.40A(3), and completed the assessment on a total income of Rs. 47,73,150 vide order of assessment dated 24.3.2014 passed under S.143(3) of the Act. 3. On appeal, the learned CIT(A) following the consistent view taken by the fist appellate authority in assessee's own case for preceding years, viz. Assessment year's 2008-09 to 2010-11, vide orders dated 30.3.2012, 14.10.2014 and 23.1.2015 respectively, allowed the claim of the assessee for exemption under S.11 of the Act. Consequent to the acceptance of the claim of the assessee for exemption under S.11, the learned CIT(A), observing that the ground ra....
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....dha Temple, which, according to AO, is neither in accordance with the aims and objects nor a charitable activity. The second reason is, after introduction of proviso to section 2(15) of the Act, assessee looses its character of trust having been established for charitable purpose as it has earned income by engaging in commercial activities. As far as allegation of AO that construction of temple by assessee is neither in accordance with aims and objects of assessee nor charitable activity is concerned, it has to be rejected at the threshold in view of the decision of the coordinate bench in assessee's own case in AYs 2006-07, 2007-08 and 2008-09 in ITA Nos. 894 & 895/Hyd/13 and 1067/Hyd/12, dated 06/06/14 wherein the coordinate bench agreed with the ld. CIT(A) that construction of Jagannadha Temple is not only in furtherance of the aims and objects of assessee society but, is also a charitable activity. In view of the aforesaid, we do not find any merit in the submissions of the ld. DR that construction of Jagannadha Temple is not a charitable activity. As far as the second reason for denying exemption u/s 11 is concerned, it is the allegation of AO that as assessee was involved in ....
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.... or main intention of the assessee is to earn profit. Further, definition of 'charitable purpose' as defined u/s 2(15) of the Act cannot be read in vacuum, but, has to be read along with the exemption provisions. That being the case, a literal interpretation to the proviso to section 2(15) cannot be given if the objects of the exemption provisions are to be given full effect. The Hon'ble Delhi High Court in case of Indian Trade Promotion Organisation Vs. director General of Income-tax (E), 371 ITR 333 while interpreting the effect of proviso to section 2(15) of the Act, after analyzing a number of decisions of the Hon'ble Supreme Court as well as different high courts observed that the only thing which is required to be examined is whether the trust or institution has been established for charitable purposes. The fact that it derives income does not in any way detract from the position that it is not an institution established for charitable purposes. The Hon'ble High Court observed that merely because assessee derives rental income, income out of sale of tickets and sale of publications and income out of leasing out food and beverages outlets in the exhibition grounds does not, in....
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....ion. 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 a cess or fee or any other consideration. In both the activities, in the nature of trade, commerce or business or the activity of rendering any service in relation to any trade, commerce or business, the dominant and the prime objective has to be seen. If the dominant and the prime objective of the institution, which claims to have been established for charitable purposes, is profit making, whether its activities are directly in the nature of trade, commerce or business or indirectly in the rendering of any service in relation to any trade, commerce or business, then it would not be entitled to claim its object to be a "charitable purpose". On the flip side, where an institution is not driven primarily by a desire or motive to earn profits but to do charity through the advancement of an object of g....