TaxTMI 
TaxTMI 
2017 (5) TMI 537
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.... 4. That the Ld. AO/ CIT(A) erred in interpreting the amendment to section 2(15) of the Act applicable from 01.04.2009 made through Finance Act, 2008. 5. The Ld. CIT(A) erred in upholding the action of the A.O. invoking the first proviso to section 2(15) of the Act against the appellants. 6. The Ld. A.O./CIT(A) erred in interpreting the terms "trade, commerce and business" in the facts of the present case and thereby holding the appellant to be engaged in any trade, commerce or business for non public/non charitable purposes. 7. That the addition made by the Ld. A.O. and confirmed by the CIT(A) is contrary to law. 8. That the Ld. CIT(A) has erred in confirming the action of denial of exemption under section 11(1) and 11(1)(d) of the Act. 9. That the Ld. CIT(A) erred in facts and law in confirming the action of the assessing income of the appellant at Rs. 3,42,30,880/- against income shown as nil return filed. 10. That the assessee reserves the right to amend, delete, add, substitute, modify or alter anyone or more of the grounds of appeal of the time of hearing. 2. The brief facts of the case are that the return of income for A.Y. 2011-12 was filed on 27.09.2011 decl....
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....nts of annual seminar and the assessee is not engaged in any trade, commerce or business. The AO went on to discuss the amendment to Section 2(15) & the meaning of trade/business/commerce. Charitable Trusts with general object of public utility are required to eschew any activity which is in the nature of any trade, commerce or business or the rendering of any service in relation to any trade, commerce or business to remain charitable and to continue to claim benefits of Section 11 & 12 of the I.T Act. The phrase used in Section 2(15) is "irrespective of the nature of use or application, or retention of the income from such activity." It is evident that the fee collected by the assessee from its non-members amounting to Rs. 59,60,335/- is essentially carrying the characteristics of trade/business/commerce. The assessee has also generated surplus of Rs. 2,61,95,214/- from its activities. It was observed that all the activities undertaken by the assessee include element of rendering services in lieu if which it is charging fee. Hence, the charity is also questionable in the instant case. Since the activities of the assessee falls under the last limb of Section2(15) of the I.T Act, th....
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....he Tribunal's dated 27.3.2017 passed in assessee's own case in ITA No. 1325/Del/2015 relevant for the preceding assessment year i.e. 2010-11. After perusing the aforesaid documents/records, we find force in the contention raised by the Ld. Counsel of the Assessee that the issues involved in the present appeals are similar and identical to assessee's own case for the preceding assessment year 2010-11, hence, the issues involved in the present appeals are squarely covered by the Tribunal's order dated 27.3,2017, as aforesaid, passed in ITA No. 1325/Del/2015 (AY 2010-11) in assessee's own case. For the sake of convenience, we are reproducing hereunder the relevant para no. 7 to 8 mentioned at page no. 8 to 23 of the aforesaid Tribunal's order dated 27.3.2017. "7. We have heard the rival submissions and perused the relevant records. We find that the assessee was denied the benefit under section 11 and 12 of the Act solely for the reason of amendment in section 2(15) of the Act. It was noted that neither the AO nor the CIT(A) have pointed out any particular object which is violated by the assessee in the relevant A.Y. It is further not pointed out as to under which clause of section 1....
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....ny 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 advancement of any other object of general public utility: [Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of 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, 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, unless- (i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and (ii) the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent of the total receipts, of the trust or institution undertaking such activity or....
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....es 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 relevant extract to the Speech is as under:- '....... "Charitable purpose" includes relief of the poor, education, medical relief and any other object of general public utility. These activities are tax exempt, as they should be. However, some entities carrying on regular trade, commerce or business or providing services in relation to any trade, commerce or business and earning incomes have sought to claim that their purposes would also fall under "charitable purpose". Obviously, this was not the intention of Parliament and, hence, I propose to amend the law to exclude the aforesaid cases. Genuine charitable organizations will not in any way be affected.' The expressions "business", "trade" or "commerce" as used in the first proviso must, thus, be interpreted restrictively and where the dominant object of an organisation i....
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....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-settled that the courts should always endeavour to uphold the Constitutional validity of a provision and, in doing so, the provision in question may have to be read down, as pointed out above, in Arun Kumar (supra). 54. It would be pertinent to reiterate that Section 2(15) is only a definition clause. Section 2 begins with the words, "in this Act, unless the context otherwise requires". The expression "charitable purpose" appearing in Section 2(15) of the said Act has to be seen in the context of Section 10(23C)(iv). When the expression "charitable purpose", as defined in Section 2(15) of the said Act, is read in the context of Section 10(23C)(iv) of the said Act, we would have to give up the strict and literal interpretation sought to be given to the expression "charitable purpose" by the revenue. With respect, we do not agree with th....
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....nning 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 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 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 ....
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....ome 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 literal interpretation is to be given to the proviso, then it may be concluded that this fact would have no bearing on determining the nature of the activity carried on by the petitioner. But we feel that in deciding whether any activity is in the nature of trade commerce or business, it has to be examined whether there is an element of profit making or not. Similarly, while considering whether any activity is one of rendering any service in relation to any trade, commerce or business, the element of profit making is also very important." 7.2.16 In the absence of any adverse finding in regard to the activities of the trust we find that the department's case has no merits. In the course of hearing it was submitted by the Ld. Sr. DR on query that the registration till date has not been withdrawn. The date of the assessment order....
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....fit 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 activities and interests merely of persons engaged in trade, commerce and industry. ..... 11. In the promotion of trade, commerce and industries of India the public is vitally interested and if by the activities of the assessee that object is achieved, it would be within the meaning of Section 4(3)(i) of the Act an advancement of an object of general public utility. In enacting the last paragraph of Section 4(3) the legislature has used language of great amplitude. "Charitable purpose" includes not only relief of the poor, education and medical relief alone, but advancement of other objects of general public utility as well. The clause is intended to serve as a special definition of the expression "charitable purpose" for the Act: it is again inclusive and not exhaustive or exclusive. Even if the object or purpose may not be regarded as....