AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2017 (3) TMI 1334
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the AO of addition of voluntary contributions and training programme fee which was not received by the appellant. 6. The appellant craves leave of add or modify or amend any substitute any other grounds of appeal at the time of hearing. 2. The brief facts of this case as narrated by the revenue authorities are that the Assessee Association namely Fertiliser Association of India (FAI) is a non-profit and non-trading company representing mainly the fertiliser manufacturers, distributors, importers, equipment manufacturers, research institutes and suppliers of inputs. It is registered under section 25 of the Companies Act, 1956. The assessee filed its return showing NIL income along with the Audit Report in Form No. 10B and Form No. 10 on 28.09.2010. Later on, the case was selected for scrutiny under CASS under section 143(2) of the I.T. Act, 1961 vide notice dated 14.09.2010 and later on a questionnaire under section 142(1)of the I.T. Act, calling for the books of account along with the bills, vouchers regarding expenditures incurred and evidence for having earned the income from different heads, were produced and verified by the Assessing Officer. Thereafter, the AO completed ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s been availing exemption u/s 11(1) of the Act, since the year 1994. 5.2 It was further submitted that the proviso to section 2(15) was inserted by the Finance Bill, 2008. The then the Hon'ble Finance Minister while piloting the Finance Bill 2008 mentioned in his speech, the purpose of inserting the proviso which is reproduced below for reference: "I once again assure the House that genuine charitable organization will not in any way be affected. The CBDT will, following the usual practice, issue explanatory circular containing guidelines for determining whether an entity is carrying on any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business. Whether the purpose is a Charitable purpose will depend on the totality of the facts of the case. Ordinarily, Chambers of Commerce and similar organizations rendering services to their members would continue to be regarded as "advancement of any other object of general public utility. " 5.3 The assessee's counsel further submits there is no change in the activities of the business of the assessee and therefore must be allowed the exemption u/s 11(1) o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uence in the present case of the assessee in view of the aforesaid authoritative and binding judgment of the jurisdictional High Court. The assessee submits that there is nothing on record to indicate that its activities are driven by profit motive or the assessee is carrying out any activities outside its registered objects. There is infact no violation of section 11, 12 and 13 of the Act by the assessee. It is further asserted that mere charging of fee by the assessee for holding seminars or training would not ipso facto alter the nature of activities carried out by it. The fee charged is only for the objects mentioned above as the assessee conducts various seminars, training program, workshops, research as well as give awards to various persons of excellence to create awareness, impart knowledge about the fertilizers and do all endeavours to improve the soil fertility by improving the quality of the fertilizer which helps in producing the better quality food grains for the nation at large. Thus, the dominant object of the assessee is to help in overcoming the challenges faced by the fertilizer industries as well as the agriculturist in order to promote the agriculture. The said ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sel of the assessee that the judgment relied upon by the AO of the Hon'ble Andhra Pradesh High Court in the case of Andhra Pradesh State Seed Certification Agency dated 29.12.2012 cannot be relied upon as the Hon'ble Jurisdictional High Court in ITPO Case (Supra) disagreed with the view taken in the aforesaid judgment. 5.11 In view of the facts and circumstances of the present case, it was stated that the activities of the assessee are not hit by the proviso to section 2(15) of the Act and therefore the assessee must be allowed the exemption under section 11 of the Act. In support of the aforesaid arguments advanced by the Ld. Counsel of the assessee, he draw our attention towards the aims and objects of the society; relevant provisions of section 2(15) of the I.T. Act, 1961 and filed the copy of the judgement rendered by the Hon'ble Delhi High Court in the case of India Trade Promotion Organization vs. Director General of Income Tax (Exemptions) & Others passed in WP(C) No. 1872/2013 dated 22.1.2015; Copy of ITAT, Delhi decision dated 20.2.2015 in the case of ADIT vs. Indian Medical Association passed in ITA No. 4291/Del/2012 and the copy of the Judgement rendered by the Hon'ble ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h preparation with other materials. v. To study and introduce Fertilizer Industries in India schemes of standardization in commercial practices in manufacture and to improve same and extend use of fertilizers. vi. To construct develop and use scientific, chemical and agricultural experimental and other laboratories, plant and machinery and workshops and to employ all kinds of scientists, economists, chemists, agriculturists, engineers, mechanics, technical and other experts in connection therewith. vii. To make known to members and others upon such terms as the association may determine the results thereof all research discoveries, patents, and investigations made in connection with the above objects and to render services in connection therewith to the members and others and to charge thereof or not, as the association may in any case determine. 7.2 We further find that Section 2(15) of Income Tax Act, 1961 read as under:- "charitable purpose" includes relief of the poor, education, [yoga,] medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advanc....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... a charitable purpose. If the object and purpose of the institution is charitable, the fact that the institution collects certain charges, does not alter the character of the institution." This court in ICAI (II) (supra) held:- "67. The expressions "trade", "commerce" and "business" as occurring in the first proviso to section 2(15) of the Act must be read in the context of the intent and purport of section 2(15) of the Act and cannot be interpreted to mean any activity which is carried on in an organised manner. The purpose and the dominant object for which an institution carries on its activities is material to determine whether the same is business or not. The purport of the first proviso to section 2(15) of the Act is not to exclude entities which are essentially for charitable purpose but are conducting some activities for a consideration or a fee. The object of introducing the first proviso is to exclude organizations which are carrying on regular business from the scope of "charitable purpose". The purpose of introducing the proviso to Section 2(15) of the Act can be understood from the Budget Speech of the Finance Minister while introducing the Finance Bill 2008. The r....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the said decision, it is apparent that merely because a fee or some other consideration is collected or received by an institution, it would not lose its character of having been established for a charitable purpose. It is also important to note that we must examine as to what is the dominant activity of the institution in question. If the dominant activity of the institution was not business, trade or commerce, then any such incidental or ancillary activity would also not fall within the categories of trade, commerce or business. It is clear from the facts of the present case that the driving force is not the desire to earn profits but, the object of promoting trade and commerce not for itself, but for the nation - both within India and outside India. Clearly, this is a charitable purpose, which has as its motive the advancement of an object of general public utility to which the exception carved out in the first proviso to Section 2(15) of the said Act would not apply. We say so, because, if a literal interpretation were to be given to the said proviso, then it would risk being hit by Article 14 (the equality clause enshrined in Article 14 of the Constitution). It is well-settle....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o any statutory mandate that a charitable institution falling under the last clause should be wholly, substantially or in part must be funded by voluntary contributions. No such requirement has been pointed out or argued. A practical and pragmatic view is required when we examine the data, which should be analyzed objectively and a narrow and coloured view will be counterproductive and contrary to the language of Section 2(15) of the Act." 58. In conclusion, we may say that the expression "charitable purpose", 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 Sec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....activities, including the sale of tickets and sale of publications are an inherent part of the main object of the petitioner. It is clear from the facts of the case that profit making is not the driving force or objective of the petitioner. It is registered under Section2 5 of the Companies Act, 1956, which specifically applies to entities which intend to apply their profits, if any, or other income in promoting their objects and prohibits, the payment of any dividend to its members. This makes it clear that nay income generated by the petitioner does not find its way into the pockets of any individuals or entities. It is to be utilized fully for the purposes of the objects of the petitioner. 45. To be clear, if an activity in the nature of trade, commerce or business is carried on and it generates income, the fact that such income is applied for charitable purposes, would not make any difference and the activity would nonetheless not be regarded as being carried on for a charitable purpose. We have seen that by virtue of Section 25 of the Act, the petitioner is enjoined to plough back its income in furtherance of its object and the declaration of dividends is prohibited. If a li....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the peculiar facts and circumstances of the case which we have brought out in great detail in the earlier part of this order, we hold that the departmental grounds have no merit and deserve to be dismissed. 8. In the result, the appeal of the Revenue is dismissed." 7.5 We further note that the Hon'ble Supreme Court in the case of CIT Vs. Andhra Chamber of Commerce, 55 ITR 722 has observed as under:- "10. The principal objects of the assessee are to promote and protect trade, commerce and industries and to aid, stimulate and promote the development of trade, commerce and industries in India or any part thereof. By the achievement of these objects, it is not intended to serve merely the interests of the members of the assessee. Advancement or promotion of trade, commerce and industry leading to economic prosperity ensures for the benefit of the entire community. That prosperity would be shared also by those who engage in trade, commerce and industry but on that account the purpose is not rendered any the less an object of general public utility. It may be remembered that promotion and protection of trade, commerce and industry cannot be equated with promotion and protection of act....