AI Drafter 
TaxTMI 
TaxTMI 
2018 (6) TMI 208
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....Its main programs are Sustainability & Environment, Technology & Market Development and Communications.Environment and Sustainability program focuses on identifying, understanding and managing environmental issues that may impact the Zinc industry, through regulatory affairs and research programs; and Zinc deficiency issues in human health and crop nutrition. The main aim of Technology and Market development program is to develop usage of zinc through R&D.Communication program ensures that key messages about Zinc are disseminated globally through its websites, publications, newsletters, press releases, interviews, video conferences, seminars and training courses. 2.1 The Applicant received the permission of the Reserve Bank of India, vide letter dated May 6, 2013, to establish a Liaison Office inIndia, which plays an important role in educating the importance of zinc in fertilizers so that the likelihood of Zinc based fertilizers being subsidized would increase, as Zinc deficiency is a wide spread problem in agricultural soilscausing decreased crop productivity and nutritional quality, and this requires change of policy. The LO plays an important role in increasing the level of ....
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....able or would be rendered by the association for only a select number of members and would definitely not be available for all the members. The services which have been alleged by Revenue to fall within the purview of 'specific services'within the meaning of section 28(iii) of the Act are in fact services being carried out by the Applicant in the ordinary course of its activities which are available to all its membersand are at the core of its objects for which it was formed. Further, it is not correct that all the activities performedby the applicant result in rendering of 'specific services' to its members, as suggested by the Revenue. Revenue has not been ableto bring to light any instance where any 'specific service' is being performed by the Applicant for any of its member. The 'Membership Brochure' of the Applicant depicts that the activities carried out by the Applicant are meant for its members. 4.2 With regard to communication materials the Applicant states that publishing of communication materials is an important part of meeting the Applicant's objectives, and are available to all members and do not involve any special service.It is providing services in the nature of....
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....rine of mutuality to tax as income the receipts from rendering of specific services by a trade, professional or similar association. However, there has to be an existence of profit motive for such doctrine to apply which is not present in the case of the Applicant. Therefore, in the absence of profit motive, the provisions of Section 28(iii)are not applicable to the Applicant's case. The decision in the case of CIT v. South Indian Films Chamber of Commerce [1981] 129ITR 22 (Madras) has been cited in support. 4.8 On the issue of Mutuality, the Revenue has submitted that IZA organized the International Zinc Galvanizing Conference in New Delhi, India in July 2014. It collected the participation fees from participants. However, the RBI had granted the aforesaid approval subject to the condition that the statutory auditor of the LO certifies that such funds have been fully spent on meeting the expenses of the Conference and the LO did not make any profits from the same. Besides, the collection of subscription fees from the participants in India is not in conformity with the principle of mutuality, which prohibits transactions with outside parties in lieu of money. With the receipt of....
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....n such account. The decision in the case of SCOPE (supra) has been subsequently affirmed by the Hon'ble Supreme Court wherein the Special Leave Petition of the revenue was dismissed in [2010] 328 ITR (Stat) 10. 4.12 It is further submitted that the fact that the RBI has never found any irregularity / made any adverse observations in the conduct of the LO's operations in India also points to the fact that all the activities being done by the LO in India are in conformity with its mandate and objectives as approved by the RBI. 4.13 The Revenue has placed reliance on the decision of the Hon'ble Supreme Court in the case of CIT v. Royal Western India Turf Club Ltd. [1953] 24 ITR 551 (SC) in support of its argument. However, the Applicant submits that the facts of this case are completely different. Royal Western India Turf Club Ltd. was an incorporated company with the objective of, inter alia, to carry on the business of a Race Course Company and of hotel-keepers, tavern keepers etc. Further, the character of charges made by the assessee on members was similar to that of charges made on non-members, in return for same or similar facilities given to both in course of one and same....
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....ourt in CIT vs. West Godavari District Rice Millers' Assn, [150 ITR 394]; Punjab and Haryana High Court in CIT vs. Northern India Assn. [180 ITR 160]: and Calcutta High Court in CIT vs. Indian Paper Assn. [209 ITR 28]. 7. With regard to the Revenue's assertion that the operations of the LO constitute a Permanent Establishment ('PE') of the Applicant in India and thus would be taxable under the India-Belgium Tax Treaty, the Applicant states that the principle of mutuality is satisfied in the Applicant's case in view of the available jurisprudence. It is a settled law that once the principle of mutuality is found to be satisfied by an entity, it cannot be said that such an entity is carrying on any 'business' and where there is no 'business', a PE cannot be considered. 8. We have considered the submissions of the Revenue with reference to the questions raised before us, the observations of the Revenue, and the Applicant's response to the same. 8.1 The Applicant is registered as an 'International Non-Profit Association', and helps sustain long-term global demand for Zinc by creating awareness about the key end uses of Zinc, conducting programmes on its sustainability and envi....
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....ic services performed or for some specific members. 8.3 Other services also, like Representation and Technical Expertise; training and networking opportunities, technical and marketing materials, organizing conferences and workshops; and Commercial listing etc, are performed in fulfillment of its objects for the members in the normal course and there is nothing special about these services nor are they for any specific set of members as contemplated under section 28(iii) of the Act. 8.4 Since the LO in India has been set up on a not-for-profit basis, as is the parent organization in Belgium, we are of the view that the profit, if any, as stated by the Revenue is only in the nature of surplus that would incidentally occur at the end of the financial year, being the difference of the receipts over expenditure. This does not acquire the nature of profit, as contemplated under the Act, since the receipts are from the execution of objects that are not in the nature of business, nor intended to be so. Secondly, such surplus, if any, is ploughed back into the organization, again to be utilized for the same objects, as enumerated earlier. This is the real test in not-for-profit organ....
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....troversies; convene and hold conference and organize seminars; arrange training programmes; undertake research projects; etc. etc. Itwas stipulated that if there should be dissolution of the society, society's debt and liabilities and property shall not be paid to or distributed among the members of the society but shall be given or transferred to some other institution or institutions having similar objects. The Society had income from rental income from the use of convention centre from members and nonmembers; and other premises given to the member; License fee from non-members by letting out the premises; Interest income from bank deposits; and from members' contributions and surplus etc. Against the Revenue's contention that all receipts except the members' contribution were taxable, the Hon'ble High Court held as under: 'The membership of the society is open to public sector enterprises of Central/State Governments. It is, thus, formed for the benefit of its members, which are public sector enterprises. It is not indulging in any 'commercial activities' in traditional sense, but is catering to the needs of its members. In its building at Lodhi Road, New Delhi, it has ....
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....carry on the business of a Race Course Company and of hotel-keepers, tavern keepers, licensed victuallers and refreshment purveyors. This is distinguishable from the facts of the Applicant, which is a not-for-profit organization, and which is not doing any business. 8.6.1 We also do not agree with the Revenue's contention that whether the applicant has an intention to earn profit or not is not relevant when the term business is to be interpreted, since its activities for promotion of zinc; holding conference and trainings for advocacy of zinc, developing new markets, defending the present usage of zinc and providing market opportunities to the members; rendering technical expertise to various member entities etc. point towards running of business activity. Where the principle of mutuality operates,and the profits cannot be distributed, but can only be utilized for the benefit of members and confined to the objects of the organization, receipts or income cannot be brought to tax. We have stated above that the on the facts of the case, the Applicant's activities are on the principle of mutuality, and it is not created for doing business or earning profits. 8.7 In the other case....