TaxTMI 
TaxTMI 
2019 (6) TMI 348
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....confirming the disallowance of Rs. 91,10,026/- holding the appellant-company as engaged in the activity of holding Fairs, Meetings, Conferences and Seminars in the nature of trade, commerce or business falling within the ambit of section 2(15) of the Act. 3. That, the Ld. C.LT.(A) while upholding disallowance of Rs. 91,10,026/- and thus denying the benefit of section 11 of the Act further erred and misdirected himself in not properly considering the principal objective of the appellant company behind holding of Fairs, Meetings, Conferences and Seminars and assuming such activities in lieu of sponsorship as in the nature of trade, commerce or business in spite of the fact there was no contravention of the provisions of sec.l1 in claiming such lawful claim. 4. That, on the facts and in the circumstances of the case, the Ld. C.LT.(A) erred and misdirected himself in treating corpus donation of Rs. 17,50,000/-, being in the form of Admission Fees from members, as not exempt u/s 11(1)(d) of the Act. 5. That, as the order of Ld. CIT(A) suffers from illegality and is devoid of any merit, the same should be quashed and your appellant be given such relief(s) as pr....
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....ctivities carried on by the appellant were no longer 'charitable' in nature as defined u/s. 2(15) of the Act and consequently therefore the appellant was not eligible to claim benefit of Section 11 of the Act. The AO accordingly computed the business income of the assessee after allocating the direct and indirect expenses on account of the said activity as under : Total Business receipts Rs. 3,94,70,967/- Less: Business expenses - direct Rs. 3,03,60,941/- Profit from business Rs. 91,10,026/- Aggrieved, assessee preferred an appeal before the Ld. CIT(A), who denied exemption u/s. 11 r.w.s. 13(8) of the Act and held that the assessee is engaged in the activity of holding fairs, meetings, conferences and seminars which wasin the nature of trade, commerce or business and therefore the activities of the appellant did not come within the ambit of section 2(15) of the Act. Aggrieved by the order of the Ld. CIT(A), assessee isnow in appeal before us. 5. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the appellant has been granted registration u/s 12AA of the Act since 1995 and onwards. Holding trade exhibitions....
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....proviso to Section 2(15) read with Section 13(8) and wrongly distinguishing the earlier decision of the Tribunal rendered in appellant's own case for earlier years. Per contra the Ld. DR appearing on behalf of the Revenue strongly supported the orders of the lower authorities. 6. After giving a thoughtful consideration to the rival submissions, material placed on record and the judicial precedents available on this subject, we note that in the appellant's case the lower authorities rejected appellant's claim for benefit of Section 11 primarily on the ground that the appellant was holding trade fairs, exhibitions and conferences and in respect of these activities received substantial sums from the participants who were both members of the appellant organization as well as non-members. In the opinion of the lower authorities the appellant activity of holding trade fairs, exhibitions and conferences was in the nature of trade or business and therefore in terms of the proviso introduced by the Finance Act, 2008 in Section 2(15) of the Act, the said activity could not be regarded to be charitable in nature and consequently therefore the benefit of Section 11 was not available to the ....
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....s etc. is to disseminate information about availability of affordable housing amongst emerging urban populous and to provide effective platform for holding interface amongst various stakeholders connected with development or urban infrastructure with Govt. agencies and general public for the development of civic infrastructure. We further note that the persons taking part in such fairs and making contributions are primarily members of the appellant-institution. It may be so that some of the non-members also participate in these fairs, exhibitions & conferences. However the non-members participating are not strangers but they are important stakeholders closely connected with real estate development industry and thus have important role in the development of civic infrastructure facilities. In this factual background we are of the considered view that the activities of holding fairs, exhibitions and conferences were incidental or ancillary to the attainment of the main objects for which the appellant-institution was created and registered u/s. 12AA of the Act. In view of the foregoing facts we are of the considered opinion that the benefit of Section 11 could not be denied to the app....
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.... exhibitions, films shows etc., and also establish laboratories, collect models and designs, etc.' Objects incidental or ancillary to the attainment of the main objects: '5) To organize conferences, exhibitions, film shows, seminars, tours, delegation, etc. in India and abroad and to nominate delegates and advisers and to take steps which may promote and support the construction industry, trade and profession.' The assessee-company was established with the aforesaid objects and the same were accepted by the Revenue while granting the registration u/s 12AAof the Act on 10.10.1995. Since the inception of the assessee-company the objects and activities remained same and which were accepted by the Revenue even under the assessment framed u/s 143(3)/147 of the Act consistently without holding the aforesaid activities as commercial in nature. Accordingly, in view above, we are inclined to provide the relief to the assessee on the basis of consistency as there is no change in the objects and activities of the society. In this connection, we rely in the case of Radhasoami Satsang vs. CIT (1992) 193 ITR 321 where the Hon'ble Supreme Court has held as unde....
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....nment (including water sheds, 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 : Provided further that first proviso shall not apply if the aggregate value of receipts from activities referred to therein is twenty-five lakh rupees or less in the previous year" The ld. CIT passed impugned order u/s 263 of the Act is treating the activities of the assessee as commercial in nature in terms of the clause of section2(15) i.e. 'advancement of any other object of general public utility'. However we find that as per the proviso to section 15 along with the speech of the Finance Minister and CBDT circular number ....
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.... of the appellant. 4. That on the acts and the circumstances of the case of the appellant the Ld. CIT(A) erred in holding that the appellant's activities of conducting the Environment management Centers, mettings, conferences & seminars and the issuance of Certificate of Origin were not incidental to the main object of the appellant which was charitable in nature." 9. From the above facts, we find that there was no question to decide before the then Hon'ble ITAT which is arising in the instant case whether the activities of the instant assessee are incidental/ ancillary to the main objects to the trade, commerce and industry or main objects are in the nature of trade, commerce and industry. Therefore, in our considered view the facts of the case are squarely applicable of case of Indian Chamber of Commerce Vs. ITO(Supra), wherein it was held that the activities of the assessee are charitable in nature. The relevant portion of the order is reproduced below:- "30. Hence in view of all the above, concluding this issue we hold that the purpose for which the assessee association, i.e. the Indian Chamber of Commerce was established is a charitable purpose withi....
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....ment of the above objectives or any of them."Thus it was only for the purpose of securing its primary aims of proper development of business in India that the assessee was taking the said ancillary steps. The said activities were not carried out independent of the main purpose of the association of the institution being the development and protection of trade. There was no independent profit motive in any of the said activities. The surplus arising out of the same was merely incidental to the main object to charity. The majority of the receipts in the said activities were out of the sponsorships and donations. The expenses incurred on the said activities as and when incurred were all separately debited to the said accounts and the balance was shown as surplus over receipts. Thus in view of the above it is clear that the alleged activities were all merely incidental to the main object of the assessee and the predominant object of the association being the promotion development and protection of trade and commerce which is an object of general public utility, it can never be the case that it is engaged in "business trade or commerce" or in any "service in relation to business, trade ....
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....tness of the interpretation of the exclusionary clause in the definition of 'charitable purpose' in s. 2(15) of the Act, there can be no doubt that the majority decision in the Addl. CIT vs. Surat Art Silk Cloth Manufactures Assn.(1979) 13 CTR (SC) 378 : (1980) 121 ITR 1 (SC) : TC23R.195 is binding on the Bench. Undoubtedly, the activities of the assessee in regard to holding of the Conference of the Afro-Asian Organisation in the relevant accounting year were for the advancement of the dominant object and purpose of the trust, viz., promotion, protection and development of trade, commerce and industry in India. The income derived by the assessee from such activities was exempt under r/w s.11(1)(a) s. 2(15). There is a distinction between the "purpose" of a trust and "powers" conferred upon the trustees as incidental to the carrying out of the purpose. For instance, cl. 3(v) enables the establishment and support of associations, institutions, funds, trusts and convenience calculated to benefit the employees and their dependents, for making provision for grant of pension and allowances, etc. The framing of such employee benefit scheme is essential and necessary for the proper fu....
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....profits", by suitable legislation, it was impermissible for this Court by a process of judicial construction to achieve the same result. It is wrong to think that all springs of charity in India will dry up if true effect is given to s. 2(15) in accordance with the minority judgment in the Surat Art Silk Cloth Manufacturers' Association's case. People who are truly charitable do not think of the tax benefits while making charities. One must realise that even the poor who do not pay income tax can be charitable and their charities made at great personal inconvenience are commendable indeed. One need not go in search of charitable persons amongst the taxpayers only. Still the majority view has got to be followed now. The main object of assessee being promotion, protection and development of trade, commerce, and industry in India, it was an object of general public utility and income derived from activities for advancing the dominant object was exempt under s. 11." 9. Since the factual matrix of the appellant's case for the AY 2012-13 is identical with that involved in AY 2011-12, we have no hesitation in holding that the ratio laid down in the decision of the coor....
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....nd that the surplus generated from holding the events was an unintended surplus which the contributor at the outset had agreed to appropriate as their contribution to 'Own Infrastructure Fund' of the appellant and therefore it was corpus in nature. Viewed from any angle therefore the surplus of Rs. 91,10,026/- was not bearing income character in the hands of the appellant and therefore the lower authorities were unjustified in assessing the same as business income of the appellant. For the reasons set out in the foregoing therefore the addition of Rs. 91,10,026/- is deleted and hence, Ground Nos. 1 to 3 are allowed. 13. The next ground of appeal of the assessee is against the action of the Ld. CIT(A) in confirming the action of the A.O. in treating the corpus donation of Rs. 17,50,000/- in the form of admission fees from its members as not exempt u/s 11(1)(d) of the Act. 14. Brief facts are that the appellant had created the membership admission fees of Rs. 17,50,000/- received by it as corpus funds to the reserve fund and claimed exemption u/s 11(1)(d) of the Act when confronted by the A.O. the appellant filed copies of letters of corpus donation received from member / entra....
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....riters to the Signet v. IRC [1886] 2 TC 257 (C Sess), the Court held that the entrance fees and subscriptions paid by entrants to a society or institution as a condition precedent to their membership and as the price of admission to the privileges and benefits of the society or institution are given under a contract and are not voluntary. In view of the Bombay High Court, membership and subscription amounts received by the assessee-trust/society from its members cannot be characterized as voluntary contribution within the meaning of the expression "fund" in section 12 of the Income-tax Act, 1961. 16. Thus there is a distinction between voluntary contribution and subscription. When a sum is paid in the nature of gift or a gratuitous payment to the trust without any consideration it would be considered as voluntary contribution. Subscription is not to be treated as voluntary contribution. 17. Voluntary contribution is an act not coupled with compulsion. One may contribute or one may not contribute. Therefore, it is rightly said that it is in the nature of a gift. But so far as subscription is concerned, it is with some compulsion. If one wants to become a member of ....
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.... of dividends, bonus or otherwise or by way of profits etc. For this, there were two sources about the funds for its activities, namely, grants made by the Government and subscriptions of its members. Section 4(3)(i) of the Income-tax Act, 1922 was for grant of exemption. Section 4(3)(i) reads as under :- "Subject to the provisions of clause ( C) of sub-section (1) of section 16, any income derived from property held under trust or other legal obligations wholly for religious or charitable purposes, in so far as such income is applied or accumulated for application to such religious or charitable purposes as relate to anything done within the taxable territories, and in the case of property so held in part only for such purposes, the income applied or finally set apart for application thereto." Thus income derived from property held under trust or other legal obligations came to be considered by the Court. In the instant case, we are not required to consider whether the assessee can be said to be a charitable trust or not as it is admitted position and not in question. But the question is only with regard to income derived from property held under trust i....
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....ade of the country. The object was held as charitable purpose, as defined in the Act. The Court held that the income which the company received from the two admitted sources, namely, grants from Government and subscriptions from its members, was income which it could not have received but for its business or organization and it would, therefore, be income derived from such business or organization, which as shown can be held to be the property of the company. The Division Bench further pointed out:- "We have already held that the property held under trust was the business or organization itself and whether we consider either of the two sources of income of this company, namely, the grant or the subscriptions from its members, both arose directly and substantially from that business or organization. If the organization had not existed, the grants would not have been paid to the company nor would the subscriptions have been received by the company. Therefore, even upon the construction put upon the word "derived" the income would be derived from the business or organization which we held was the property held under trust in this case." 23. It is in view of this, tha....