TaxTMI 
TaxTMI 
2016 (4) TMI 651
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....ion is predominantly a mutual association and non charitable objects and the object of mutual benefits are contradictory to each other. According to him u/s. 11 of the Act as a charitable trust and principles of mutuality are mutually exclusive of each other. In the mutual association the members subscribe for the primary purpose of benefiting themselves, while in a charitable institution people subscribe for charitable object without any expectation in return. In the case of the assessee, the members have contributed only for the purpose of their own benefit and for acquiring certain amenities. Therefore, the assessee is treated as mutual association and not as charitable institution. Accordingly, he denied exemption u/s. 11 of the Act in view of the proviso to section 2(15) of the Act as introduced w.e.f. 01.04.2009 by the Finance Act, 2008. Aggrieved, assessee preferred appeal before CIT(A), who also confirmed the action of AO and after considering the submissions of the assessee he held as under: "4.6. I have carefully considered the facts of the case, submissions of the appellant and the assessment order. I find that the appellant trust is basically engaged in running private....
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....ncome of the previous year of the person in receipt thereof if the provisions of the first proviso to clause (15) of section 2 become applicable in the case of such person in the said previous year. " In view of the income of the appellant exceeding Rs.l0 lacs as per the proviso to section 2(15), the appellant is covered by the quantum limit of section 2(15) and 13(8) of the Act. Since the activities of the appellant have been held to be business the provisions of Section 13(8) of the Act will also come into play and the income of the Appellant will not be eligible to any of the benefits of section 11 or 12 of the Act. On a combined reading of both the aforesaid sections, it is clear that the Appellant is not eligible to the benefits of Section 11 or 12 of the Act. I hold that the AO has rightly denied the exemption u/s 11 and confirm the order of the Assessing Officer that the Appellant is not entitled to the benefits of Section 11 of the Act. Ground No. 1 raised by the Appellant is accordingly dismissed." Aggrieved, now assessee is in second appeal before Tribunal. 4. We have heard rival submissions and gone through facts and circumstances of the case. Briefly stated and adm....
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....tion till Asst. Year 2008-09. The exemption u/s. 11 of the Act was withdrawn w.e.f. Asst. Year 2009-10 i.e. the year under consideration for the reason that a proviso is added by the Finance Act, 2008 w.e.f. 01.04.2009 i.e. for and from Asst. Year 2009-10 wherein the definition of charitable purpose was amended so as to provide that "the advancement of any other object of general public utility" would not be charitable purpose if it involves carrying on any activity in the nature of trade, commerce or business or any activity or 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". Before us, ld. counsel for the assessee referred to para 3.1 and 3.2 of Circular No. 11 of 2008 vide F. No. 134/34/2008-TPL dated 19.12.2008. Ld. counsel for the assessee relied on the recent decision of Coordinate bench of ITAT, Chennai in the case of Japanese Chamber of Commerce & Industry Vs. director of Income Tax (exemptions) (2014) 99 DTR 145 (Tribunal orders) wherein it was interpreted the circular vide para 6, which reads as under: "6. A pe....
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....bject of 'general public utility' will be only a mask or a. device to hide the true purpose which is trade, commerce or business or the rendering of any service in relation to trade, commerce or business. Each case would, therefore, be decided on its own facts and no generalization is possible. Assessees, who claim that their object is 'charitable purpose' within the meaning of s. 2(I5), would be well advised to eschew any activity which is in the nature of trade, commerce or business or the rendering of any service in relation to any trade, commerce or business." A conjoint reading of the circular and the objects of the assessee-society would show that the aims and objects of the society are not hit by the newly introduced proviso to sub-so (I5) of s. 2 of the Act. The assessee is charging admission fee and monthly subscription fee from its members. Apart from this, the assessee is also accepting grants and special contributions, admission/registration fee for seminars/conferences conducted by the society. The assessee is not charging any fee for the services rendered by it. The fees charged by way of admission fee, monthly subscription, admission and registratio....
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....Promotion of trade, commerce and industry between India and Japan will undoubtedly benefit the Indian public at large. Therefore, the Director of IT (Exemptions) is not justified in saying that the Indian public or a segment thereof will not be benefited by the activities of the society." In view of this categoric findings of the Delhi Bench of the Tribunal, we hold that the benefits of the activities of the trust are not confined to select segment but would flow to larger section of society." 6. Finally, Ld. counsel for the assessee relied on the coordinate bench decision of ITAT, Kolkata in the case of Indian Chamber of Commerce Vs. ITO in ITA No.1491 & 1284/K/2012 for AT 2008-09 & 2009-10 dated 02.12.2014, wherein it has been held as under: "33. From the Memo Explaining the provisions of Finance Bill 2008 & CBDT Circular dated 19-12-2008, what will be position of an entity engaged in the 'advancement of any other object of general public utility', whether the same will be hit by commercial activities in view of the newly inserted proviso to section 2(15) of the Act or not? The proviso was introduced with the sole aim of bringing into ambit of taxation such entities which we....
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....ords in the proviso are "trade, business or commerce". The activities which are undertaken by the institute should be in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business. We will analyse the term "business" from the definition of the term 'business' as defined in section 2(13) of the act and whether assessee's activities falls within the terminology of "business". The term "Business" read as under:- "2. Definitions: ... ... ... (13) "business" includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture". The word "Business" is of large and infinite import. Section 2(13) defines business to include any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. The intention of the legislature is to make the definition extensive as the term "includes" has been used. The legislature has deliberately departed from giving a definite import to the term "business" but has made reference to several other general terms like "trade", "commerce", "manufacture" and "adventure or concern in the natur....
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....etc. Whether a person 'carries on a business' in a particular commodity must depend upon the volume, frequency, continuity and regularity of transactions of purchase and sale in a class of goods and the transactions must ordinarily be entered into with a profit motive (Board of Revenue v. A. M. Ansari (1976) 38 STC 577 (Supreme Court); (1976) scc 512). Such profit motive may, however, be statutorily excluded from the definition of 'business' but still the person may be 'carrying on business." Further in para 30 of the same judgment, it is stated thus: "30. In our view, if the main activity was not 'business', then the connected, incidental or ancillary activities of sales would not normally amount to 'business' unless an independent intention to conduct 'business' in these connected, incidental or ancillary activities is established by the Revenue. It will then be necessary to find out whether the transactions which are connected, incidental or ancillary are only an infinitesimal or small part of the main activities. In other words, the presumption will be that these connected, incidental or ancillary activities of sales are not 'business' and the onus of proof of an independen....
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....ncidental, ancillary and connected activities and whether the same were carried out predominantly with a profit motive. The AO and CIT(A) in their orders relied upon the following judicial decisions: * Barendra Prasad Ray v. Income-tax Officer (129 ITR 295) SC * Commissioner of Income-tax v. Dharma Reddy (A) (73 ITR 751) SC * Sole Trustee, Loka Shikshana Trust v. Commissioner of Income-tax (101 ITR 234 SC) We have already discussed the case law of Hon'ble Delhi High Court in the case of PHD Chamber of Commerce & Industry(Supra), wherein very categorically held that activities and services performed for a fee or against a payment, by a trade, professional or similar association, such as a chamber of commerce and industry could not be held to be "business" in nature carried out with a profit motive. From all the above what thus transpires is that it is the primary or dominant purpose of the institution, which must be charitable. Where the main activity is "charitable" then the activities which are incidental or ancillary to the main activity, even if carried out for profit, would not mitigate or change the "charitable" character of the institution. Thus in the cases of....
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.... 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 promotion development and protection of trade and commerce which is an object of general public utility, it can never be the case that it is engaged in "business, trade or commerce" or in any "service in relation to business, trade or commerce." The individual nature and purpose ....
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....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 1948-49 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 general public utility, but nothing contained in clause (i) or clause (ii) shall operate to exempt from the provisions of this Act part of the income from property held under a trust or other legal obligation for private religious purposes which does not ensure ....
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....mmerce 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 Higi 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 which the trust exists has to be considered. The Chief Commissioner has not doubted the genuineness of the trust or the fact that it is conducting a hospital." Thus from all the above it is seen that though the definition of "charitable" purpose unde....