TaxTMI 
TaxTMI 
2019 (2) TMI 905
X X X X Extracts X X X X
X X X X Extracts X X X X
....raphics and drawing, giving awards to artists for their performance/s, organizing exhibitions on all India basis in the field of painting, drawing, sculpture and graphics and giving awards to deserving participants, publication of magazines and booklets and providing assistance to aged artists. The return of income for the year under consideration was filed declaring income at Rs. Nil. The case was selected for scrutiny and during the course of assessment proceedings the AO required the assessee society to explain its nature of activities and also to describe the method of earning the different kinds of income earned by it. Thereafter, after considering the submissions of the assessee, the AO required the assessee to further explain as to why the benefit u/s 11 and 12 of the Income Tax Act, 1961 (hereinafter referred to as 'The Act') should be allowed to the assessee in view of the amended Section 2(15) of the Act introduced with effect from 01.04.2009 relevant A.Y. 2009-10 as the activities of the society fell in the category 'advancement of an object of general public utility' and further as the income from art gallery and sale of paintings, considered to be business income, exce....
X X X X Extracts X X X X
X X X X Extracts X X X X
....by the appellant. 6. That the Ld. AO and CIT(A) has erred in not recognizing the fact the society is a charitable society and registered under section 12A of the Act and thus eligible to exemptions under section 11 and 12. 7. That the explanations filed and the materials available on records have not been properly considered and legally interpreted. The addition made cannot be justified with the material on record. Such action of assessing authority is in violation of rules of natural justice. 8. That the interest u/s 234B has been wrongly and illegally charged and the appellant denies its liability of interest to be charged under said sections. 9. That the assessing authority has erred in not giving the credit of tax paid or tax deducted at source and claimed by the Assessee as refund." 2.2 In assessment year 2010-11 (ITA no. 1448/Del/2015), the return was filed declaring an income of Rs. 1,01,29,716/- and in this year also the case was selected for scrutiny. In this year also the AO was of the view that the assessee was hit by the proviso to section 2(15) of the Act as the assessee was carrying out advancement of any other object of general ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Ld. CIT (A) and Ld. AO has erred in law and on facts in withdrawing the benefits of Section 11 and 12 and in making an addition of Rs. 1,86,02,167/- which is excess of income over expenditure as per Income & Expenditure A/c and assessing the income of the assessee on maximum marginal rate of taxation. The grounds given in the order by the assessing officer are vague, artbitrary and unrelated to the activities carried on by the appellant. 7. That the Ld. AO and Ld. CIT (A) has erred in not recognizing the fact the society is a charitable society and Registered under section 12AA of the act and thus eligible to exemptions under section 11 & 12. 8. That the explanations filed and the materials available on records have not been properly considered and legally interpreted. The addition made cannot be justified with the material on record. Such action of assessing authority is in violation of rules of natural justice. 9. That the appellant craves your honor's leave to add, alter, modify, change, substitute, withdraw any of the grounds of appeal at any stage of appellant proceedings." 3.0 The Ld. Authorised Representative submitted that the assessee's cas....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt dated 22.01.2015, the Hon'ble Delhi High Court, while upholding the constitutional validity of proviso to Section 2(15) of the Act, has laid down the strict and literal interpretation of the proviso to Section 2(15) of the Act. The Hon'ble Delhi High Court has held that mere receipt of fee or charge will not mean that the assessee is involved in any trade, commerce or business. In the case of India Trade Promotion Organisation, the Ld. DGIT (E) had passed an order stating that though the assessee was engaged in "the advancement of any other object of general public utility", as per s. 2(15) of the Act, its object could not be regarded as "charitable purposes" due to the new proviso to s. 2(15) and further that it was not eligible for exemption u/s 10(23C)(iv). It was held by the Ld. DGIT (E) that as the assessee had huge surpluses in banks, it had given its space for rent during Trade Fairs and Exhibitions, it had received income by way of sale of tickets and income from food and beverage outlets in Pragati Maidan, etc, the assessee was rendering service to a large number of traders and industrialists in relation to trade, commerce and business and was, therefore, hit by the exp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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. 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 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 rend....