TaxTMI 
TaxTMI 
2019 (9) TMI 1003
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....ication against the intimation u/s 143(1) denying exemption claimed by the assessee u/s. 11 of the Act. 3. The brief facts of the case are that the appellant is a company, formed in June, 1893 as a non-profit organization for encouraging, promoting and protecting trade & industries in India, particularly in the state of West Bengal. In its return of income for the relevant year the appellant had shown income from rent derived from its members as well as nonmembers. Besides, the appellant also disclosed income for rendering secretarial and allied services to various trade organizations who were members. According to Ld. AR the appellant always claimed itself to be an organization pursuing charitable objects of general public utility and therefore qualified for exemption u/s 11 of the Act. He submitted that till AY 1973/74, the appellant's claim for the exemption u/s 11 was never disputed. He further submitted that even though the appellant always claimed the exemption u/s 11, no certificate of registration as a charitable institution was obtained till 1973 because the extant provisions of the Act as were in force till 1973,did not contain any provision requiring charitable instit....
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....Indian Chamber of Commerce Vs CIT (101 ITR 796), the AO as well as the Ld. CIT(A) therefore denied the exemption u/s 11. The Ld. AR brought to our attention that even though the assessment orders for the AYs 1974/75 and 1975/76 were passed after insertion of Section 12A in the Ac and the CIT had not granted registration despite application being filed, the exemption was not denied on the ground that the appellant was not granted registration by the Ld. CIT u/s 12A of the Act. Being aggrieved by the orders denying exemption u/s 11, the matter was carried in appeal to this Tribunal and the coordinate Bench in its order dated 18.06.1980 in ITA Nos. 1585 & 1586/Kol/1979, which is available at Pages 7 to 13 of the paper book, was pleased to grant exemption taking note of the judicial pronouncement rendered by the Hon'ble Supreme Court in the case of Surat Arts & Silk Cloth Manufacturers Association (121 ITR 01). The ld. AR drew to our attention to the decision of this Tribunal in which the coordinate Bench took note of the fact that the appellant was providing executive machinery and secretarial services to various trade associations whose offices were located in the appellant's prem....
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....owever, from AY 2010-11 onwards the AO denied the exemption only on the ground that the assessee was not having a registration certificate u/s. 12A. It is noted that for the AY 2011-12, the appellant filed return of income u/s 139 on 29.09.2011 claiming exemption u/s 11 of the Act which was denied in the intimation issued u/s 143(1) dated 28.03.2013. Aggrieved by the said intimation, the appellant moved an application u/s 154 before the AO on 24.12.2013. In the order dated 17.11.2016, the AO rejected the application on the ground that in absence of any registration certificate u/s 12A of the Act the appellant's claim would not come under the purview of mistake apparent from record u/s 154 of the Act. Aggrieved by this order, the appellant preferred an appeal before the Ld. CIT(A) who dismissed the same by holding that the AO was justified in not allowing the benefit of exemption u/s 11 in absence of any registration certificate u/s 12A. Besides he also held that the activities of the appellant did not come within the purview of Section 2(15) which was substantially amended by the Finance Act, 2008. Being aggrieved by the orders of the lower authorities, the appellant is now in a....
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....of registration under Section 12Aof the Act, the Commissioner was obliged to consider only whether the objects for which the Trust or institution was established, were charitable in nature and nothing more was required to be ascertained. We find that the coordinate Bench of this Tribunal while deciding the appeal of the appellant for AY 1974-75 had taken note of the objects of the appellant as incorporated in its Memorandum of Association, which were as follows: (1) To promote and protect the trade, commerce and manufactures of India and in particular the trade, commerce and manufactures of Calcutta. (2) To watch over and protect the general commercial interests of India or any part thereof and the interests of persons engaged in trade, commerce or manufactures in India and in particular in Calcutta. (3) To consider all the question connected with trade, commerce and manufactures. (4) To collect and circulate statistics and other information relating to trade, commerce and manufactures. (5) To promote and oppose legislative and measures affecting trade, commerce and manufactures. (6) To adjust controversies between members of th....
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....icult for persons in charge of a trust or institution to so carry on the activity that the expenditure balances the income and there is no resulting profit. That would not only be difficult of practical realisation but would also reflect unsound principle of management. We, therefore, agree with Beg' J. when he said in Sole Trustee, LokaShikshana Trust's case [1975] 101 ITR 234, 256 (SC) that : 'If the profits must necessarily feed a charitable purpose under the terms of the trust, the mere fact that the activities of the trust yield profit will not alter the charitable character of the trust. The test now is, more clearly that in the past, the genuineness of the purpose tested by the obligation created to spend the money exclusively or essentially on charity'." 8. We find that while deciding the appeals of the appellant for the AYs 1974-75 & 1975-76, this Tribunal took note of the fact that the ratio laid down by the Hon'ble Supreme Court in the case of Indian Chamber of Commerce (supra) was no longer a good law in view of the later judgment of the Hon'ble Supreme Court in the case of CIT Vs Surat Arts & Silk Cloth Manufacturers Association (supra) and ....
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....at the assessee association is a Charitable Institution, duly registered as such u/s. 12A of the Act, carrying on its main object of development of trade, industries and commerce. The main objects for which the association came into existence, are clearly set out in clause 3 of the Memorandum of Association which duly records and reads as under: "3(a) To promote and protect the trade, commerce and industries and in particular the trade, commerce and industries in or with which Indians are engaged or concerned" The activities of conducting Environment Management Centre, Meetings, Conferences & Seminar and issuance of Certificate of Origin, being the activities stated to be "services in relation to trade, commerce or business" were all well covered by the main object being fully connected, incidental and ancillary to the main purpose and were conducted solely for the empowerment, betterment and for creating awareness amongst the industrialists in order to bring about the development of trade and industries in India. Further it is to be noticed that the Memorandum has also specifically authorized the Chamber "to do all other things as may be conductive to the develop....
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....ally changed the position of law and thus the principle of consistency did not apply. But we are of the view that a detailed reading of the various judicial decisions through the years, interpreting the definition of "charitable purpose" as laid out in section 2(15) of the Act and also the definition of "business" in relation to the said section amply revels that the theory of dominant purpose has always, all through the years, been upheld to be the determining factor laying down whether the Institution is Charitable in nature or not. Where the main object of the Institution was "charitable" in nature, then the activities carried out towards the achievement of the said, being incidental or ancillary to the main object, even if resulting in profit and even if carried out with non members, were all held to be "charitable" in nature. Hon'ble Apex Court in the earliest case of Andhra Chamber of Commerce (supra) had clearly laid out the principle that if the primary purpose of an Institution was advancement of objects of general public utility, it would remain charitable even if an incidental or ancillary activity or purpose, for achieving the main purpose, was profitable in nature.....
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....f any activity for profit within the meaning of s.2(15) and that the assessee was entitled to exemption under s 11(1)(a) " Again the Hon'ble Apex Court in the case of Federation of Indian Chambers of Commerce & Industry (supra) held that "that the dominant object with which the Federation was constituted being a charitable purpose viz. promotion, protection and development of trade, commerce and industry, there being no motive to earn profits, the respondent was not engaged in any activity in the nature of business or trade, and, if any income arose from such activity it was only incidental or ancillary to the dominant object for the welfare and common good of the country's trade, commerce and industry, and its income was, therefore, exempt from tax under s.11 of the IT Act, 1961" Again reiterating the dominant purpose theory, the Hon'ble SC in the case of Sai Publication Fund (supra) laid out as follows: "... If the main activity is not business, then any transaction incidental or ancillary would not normally amount to "business" unless an independent intention to carry on "business" in the incidental or ancillary activity is establi....
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....ition to be sustained by not challenging the ordered, it would not be at all appropriate to allow the position to be changed in a subsequent year. " 37. Now coming to application of section 28(iii) of the Act. We find that section 28(iii) of the Act provides that the income derived by a trade, professional or similar association from specific services performed for its members will be brought to charge under the head "profits and gains of business or profession". The underlying idea behind s. 28(iii) is that there must be a business from which income is derived and that in the course of such business specific services must be rendered for its members. The concept behind s.28(iii) is to cut at the mutuality principle being relied on in support of a claim for exemption, when the assessee was actually deriving income or making profits as a result of rendering specific services for its members in a commercial way. The reason for the introduction of Section 28(iii) of Act, to ignore the principle of mutuality and reach the surplus arising to the mutual association and this is clear from the fact that these provisions are confirmed to services performed by the association "for i....
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....n 2(15) of the Act w.e.f 01/04/2009, though the restrictive first proviso was inserted therein. Accordingly, in the given facts of the case as discussed above in detail, the assessee association's primary purpose was advancement of objects of general public utility and it would remain charitable even if an incidental or ancillary activity or purpose, for achieving the main purpose was profitable in nature. Hence, assessee is not hit by newly inserted proviso to section 2(15) of the Act. This issue of assessee's appeal is allowed." 9. Since the facts of the appellant's case are admittedly analogous to the facts involved in the case of Indian Chamber of Commerce (supra), we hold that no material change took place in the legal position even after the amendment was brought in Section 2(15) by the Finance Act, 2008. We therefore do not find merit in the findings of the Ld. CIT(A) that the assessee would not be eligible for exemption u/s 11 because it is primarily set up with the object of promoting trade & commerce. Since we find that the objects and the activities of the appellant were for charitable purpose, then there should be no reason for the Revenue to reject the appel....