TaxTMI 
TaxTMI 
2016 (10) TMI 550
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....the principle of resjudicata where it is settled that the principles of resjudicata is not applicable in general in the case of income tax proceedings. 3. That on the facts and circumstances of the case the CIT(A) has erred in law in granting relief without appreciating the fact that interpretation of 1st proviso to section 2(15) was required to be taken up together with the restriction laid down in the 2nd proviso below section 2(15) for the relevant assessment year. 4. That on the facts and circumstances of the case the CIT(A) has erred in granting relief by adopting an interpretation which itself did not appreciate, analyse or examine the presence, usage and meaning of the word ' shall' in the first proviso of section 2(15) of the I.T.Act, 1961. 3. The brief facts of the case are that the assessee is an Association of various industrialists formed in the year 1925 for the development of trade, industries and commerce. The membership of the chamber comprises several of the largest corporate groups in the country, with business operations all over the country and abroad. The assessee is a non-profit making company incorporated under section 25 of the companies....
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....and restrictive proviso thereto duly considered vide para 33 of the order (supra) memorandum explaining the Finance Bill, 2008 as also CBDT circular no. 11 of 2008 dated 19.12. 2008, and examined various facts of the meaning of the word 'business' as also the income tax history of ICC and prominent judicial decisions. For better appreciation on the issue, the observation of Hon'ble Tribunal, to quote, was as under: "35. ...... The activities of conducting environment management centre, meetings, conferences and seminar and issuance of certificate of origin, being the activities stated to be 'services in relation to trade, commerce or business 'were all well covered by the main object being fully connected, incidental and ancillary to the main purpose and were connected solely for the empowerment, betterment and for creating of awareness amongst the industrialists in order to being about the development of trade and industries in India. Further it is to be noticed that the memorandum has also specifically authorised 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....
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....rds and reads as under: "3(a) To promote and protect the trade, commerce and industries and in particular the trade, commerce and industries in or with which Indians are engaged or concerned." The activities of conducting Environment Management Centre, Meetings, Conferences & Seminar and issuance of Certificate of Origin, being the activities stated to be "services in relation to trade, commerce or business" were all well covered by the main object being fully connected, incidental and ancillary to the main purpose and were conducted solely for the empowerment, betterment and for creating awareness amongst the industrialists in order to bring about the development of trade and industries 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 o....
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....ion to the said section amply revels that the theory of dominant purpose has always, all through the years, been upheld to be the determining factor laying down whether the Institution is Charitable in nature or not. Where the main object of the Institution was "charitable" in nature, then the activities carried out towards the achievement of the said, being incidental or ancillary to the main object, even if resulting in profit and even if carried out with non members, were all held to be "charitable" in nature. Hon'ble Apex Court in the earliest case of Andhra Chamber of Commerce (supra) had clearly laid out the principle that if the primary purpose of an Institution was advancement of objects of general public utility, it would remain charitable 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....
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.... being a charitable purpose viz. promotion, protection and development of trade, commerce and industry, there being no motive to earn profits, the respondent was not engaged in any activity in the nature of business or trade, and, if any income arose from such activity, it was only incidental or ancillary to the dominant object for the welfare and common good of the country's trade, commerce and industry, and its income was, therefore, exempt from tax under s.11 of the IT Act, 1961" Again reiterating the dominant purpose theory, the Hon'ble SC in the case of Sai Publication Fund (supra) laid out as follows: "... If the main activity is not business, then any transaction incidental or ancillary would not normally amount to "business" unless an independent intention to carry on "business" in the incidental or ancillary 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 "busin....
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.... association from specific services performed for its members will be brought to charge under the head "profits and gains of business or profession". The underlying idea behind s. 28(iii) is that there must be a business from which income is derived and that in the course of such business specific services must be rendered for its members. The concept behind s.28(iii) is to cut at the mutuality principle being relied on in support of a claim for exemption, when the assessee was actually deriving income or making profits as a result of rendering specific services for its members in a commercial way. The reason for the introduction of Section 28(iii) of Act, to ignore the principle of mutuality and reach the surplus arising to the mutual association and this is clear from the fact that these provisions are confirmed to services performed by the association "for its members". Such income would either be charged as business income or under the residual head, depending upon the question whether the activities of the association with the non-members amount to a business or otherwise. Section 28(iii) constitutes certain income of the association to be business income without affecting the....