AI Drafter 
TaxTMI 
TaxTMI 
2017 (5) TMI 405
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....ts main object was "to consider all questions concerning the relations between the employers and employees in Southern India in order to protect the interest of employers engaged in trade, commerce, manufacture and industry of Southern India". As per the learned Assessing Officer apart from collecting annual subscription from members, the assessee had also collected delegate fees for seminars conducted by it, raised income through advertisements placed in a souvenir brought out by it and also had other miscellaneous income. The learned Assessing Officer was of the opinion that the assessee, though it was carrying on an object of general public utility activity, had aggregate receipts in the nature of fees which exceeded Rs. 10,00,000. The learned Assessing Officer was of the opinion that the assessee was hit by the second proviso of section 2(15) of the Act. He denied the exemption claimed by the assessee under section 11 of the Act. He treated the income, earned over the expenditure incurred, falling under the heads "building fund and general fund", as its total income after allowing the claim of depreciation. 3. Aggrieved, the assessee moved in appeal before the learned Commis....
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....ned authorised representative it was not rendering any service in relation to any trade, commerce or business for consideration. As per the learned authorised representative advertisement income earned by the assessee from its souvenir and delegate fees from seminars were incidental to the main object of the assessee-trust. The contention of the learned authorised representative was that object of the assessee-trust did not involve carrying on any such activity which could be considered as trade, commerce or business or any services related thereto. As per the learned authorised representative conducting seminars and bringing out souvenirs were all activities which were incidental to the main object of the trust, which was maintaining relationship between employers and employees in Southern India and promoting good feeling between them. The submission of the learned authorised representative was that the seminars conducted and the souvenirs issued and the activities akin to them were all incidental to the main object and was never the primary object of the assessee-trust. Reliance was placed by the learned authorised representative on the decision of the co-ordinate Bench in the ca....
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....d 31st March 2009 Income Subscriptions 17,22,744 17,03,028 Other income 6 15,73,822 20,13,213 32,96,566 37,16,241 Less : Expenditure 7 24,72,100 25,29,681 Depreciation 3 2,46,146 2,39,846 Excess of income over expenditure 5,78,320 9,46,714 Transferred to : Building fund 2,25,000 7,00,000 General fund 3,53,320 2,46,714 5,78,320 9,46,714 The expenditure incurred by the assessee which is given in schedule 7 also is relevant and details thereof as appearing in schedule 7 of its audited accounts is reproduced hereunder : Year ended 31st March 2010 Year ended 31st March 2009 Expenditure Electricity charges 41,942 43,444 Affiliation charges to employers federation of India 17,000 16,000 Subscription to the association 6,000 6,000 Establishment charges 13,02,693 13,22,4....
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....d support all appropriate schemes for the general improvement of employer-employee relations ; (iv) to promote and protect the interests of employers engaged in trade, commerce, manufacture and industries of Southern India in the areas of industrial relations ; (v) to advice employers on matters, relating to employer-employee relations, to assist them in the settlement of disputes and to represent or arrange for the representation of employers in any proceedings before Conciliation Officers, Conciliation Boards, Courts of Enquiry, Industrial Tribunals, Labour Court or any Court or other judicial or quasi-judicial body and any tripartite bodies or other statutory bodies; (vi) to reconcile controversies, if any, between members of the Federation ; (vii) to arbitrate in the settlement of disputes arising out of matters affecting the relationship of employers and employees, between parties agreeing to abide by the judgment of the Federation ; (viii) to negotiate on behalf of employers with trade unions and/or other employees' organisations ; (ix) to communicate with Chambers of Commerce, Employers Federations, Trade Unions and o....
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....ontribution from any national or international agency either by way of financial or other assistance, equipment, books etc., subject to any statutory provisions ; (xix) to undertake, collaborate with or assist others, measures for the promotion of family planning and welfare, health and hygiene and measures for pollution control and environmental improvement by way of education, propaganda, holding meetings, seminars etc., including setting up of centres in furtherance of the above ; and (xx) to do all the above activities in such a manner that the benefits will be available to all persons irrespective of caste, creed, religion, sex etc." In my opinion, none of the expenditure listed by me at paragraph 7 above could be considered as incurred in furtherance to any objects mentioned (supra). There might be some indirect nexus of a few heads of expenditure with the objects. However, chapter 4 of its annual report which gives the gist of the activities speaks predominantly of conferences like "labour law implications in the changed scenario" conducted on September 12, 2009, "employment laws-managements perspective" conducted on February 6, 2010, "building organisat....
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....g to the reliance placed by the assessee on the decision of the co-ordinate Bench in the case of Madras Chamber of Commerce and Industry (supra), fees received by the said Chamber was for issuing certificates of origin and for arbitration. The finding of the Tribunal was that such fees were incidental to the main activities of the Madras Chamber of Commerce and Industry (supra). The Tribunal had relied on the judgment of the Hon'ble jurisdictional High Court in the case of Madras Chamber of Commerce and Industry (supra). Their Lordships in the said case had held at paragraphs 3 and 4 of the judgment as under : "3. It was common ground before the Tribunal, as stated in paragraph 4 of the Tribunal's order, that the assessee, which was a society registered under the Societies Registration Act, was founded for the promotion and protection of trade and commerce and that, therefore, the objects of the assessee were of general public utility within the meaning of section 2(15) of the Act. The decision of the Calcutta High Court, which was followed by the Appellate Assistant Commissioner, and the decision of the Kerala High Court, which was followed by the Tribunal, were all c....
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....on and development of trade, commerce and industry without any motive to earn profits, any income from such activity could be considered as incidental or ancillary to the dominant object which was welfare and common good of the country's trade, commerce and industry. No doubt the Hon'ble Delhi High Court did hold that the basic principle underlying the definition of charitable purpose remained unaltered even after the amendment in section 2(15) of the Act through the Finance Act, 2010 with effect from April 1, 2009 through which the second proviso was inserted. All the other case law relied on by the assessee were on Chambers of Commerce or association of like nature and not a federation of employers. In the case before us, facts clearly bring out that conducting conference/seminar was not done as an incidental activity but during the relevant previous year it was the pre-dominant activity. In our opinion, it may not be appropriate to give an interpretation to section 2(15) of the Act which is not in consonance with the words used by the legislation, where the predominant activity carried on was akin to a business or trade or service in connection thereto. Section 2(15) of the ....