TaxTMI 
TaxTMI 
2020 (7) TMI 505
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....find that assessee is a non-profit organisation registered u/s. 25 of the Companies Act, 1956. It is an apex industry association representing the entire value chain of textile and clothing sector. It is constituted by member associations, members and corporate members and young entrepreneurs group. Member associations covering all the geographical area of India nominate their selected members to the executive committee of the confederation. All textile companies which are members of these associations automatically become the members of the confederation. 3.1. We find that the assessee is registered u/s.12A of the Act and was accordingly, claiming exemption u/s.11 of the Act which was granted by the ld. AO up to A.Y.2012-13. For the A.Y.2013-14 also, the assessee claimed exemption u/s.11 of the Act in the return of income filed on 28/09/2013 claiming the deficit of Rs. 8,40,487/- to be carried forward to subsequent years. As per the Memorandum of Articles of Association of the assessee, the following are the primary objects for which the assessee was formed:- • To promote and protect trade, commerce and industries of India in general and more particularly in respec....
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....f the young entrepreneurs in the industry. The Group provides a forum for interaction among these new players in the industry and supports the activities of ICMF and the industry. • Confederation has also constituted sub-committees on Market Access, Investment and Skill Development for monitoring the developments and activities relating to the respective subjects and to give focused attention to topical issues facing its members and provide proper feedback to government. 3.3. The following restrictive clauses were specifically mentioned in the Memorandum of Articles of Association with regard to the application of income and property of the assessee confederation:- • Clause V(1) of the MOA, the Confederation is bound to apply income and the property when so ever derived shall be applied solely for the promotion of its objects as set forth in the memorandum. • Clause V(2) - No portion of the income or property aforesaid shall be paid or transferred, directly or indirectly, by way of dividend, bonus or otherwise by way of profit, to persons who, at any time, are to have been members of the Confederation or to any one or more of them or to any....
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....d not be applicable to the assessee at all. To support its contentions, the assessee placed reliance on various decisions of various Tribunals across the Country and various High Courts decisions before the ld. CIT(A). We find that assessee had also given individual explanation for each of the aforesaid nature of income received from non-members as under before the ld. CIT(A):- Re: Interest Income - Rs. 1,46,64,431/- 1. At the outset, we invite your Honour‟s attention to the fact that the aforesaid income received is to reduce the Appellant‟s costs which have to be increased while trying to achieve its objectives mentioned hereinabove in para 04 (page Nos.02 & 03) of the compilation. 2. Further a break-up of the interest income received by the Appellant is as under:- Particulars Amount (in Rs.) On Fixed Deposits with Body Corporates 99,00,481 On Fixed Deposits with Banks 45,30,274 On Savings Account with Bank 1,32,276 On Fixed Deposit of CITI‟s Export Promotion Fund with Bank 1,01,400 Total 1,46,64,431/- 3. Here we have been instructed to point out that to invest the money of the Appellant ....
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....duce the Appellant‟s costs which have to be incurred while trying to achieve its objectives mentioned hereinabove in para 04 (page Nos.02& 03 of the compilation) and hence exemption u/s.11 ought to be granted on the aforesaid receipts. 5. Re: Exchange Grain - Rs. 12,118/- 1. The Appellant conducts seminars / conferences and arranges executive training programmes in order to : • encourage and promote a friendly feeling and unanimity among commercial men on all subjects involving their common good. • Promote and protect the trade, commerce and manufacturers of India and in particular the trade, commerce and manufacturers of the Cotton Textile Industry. The representational functions of the Appellant relating to providing a channel of communication with government and other regulators and to improve the efficiency and working of members, etc. are also carried out through seminars, conference, training and exhibitions. The participation fees meet the costs. The role and objective of the seminars is also to bring together the members on a common platform on mutually relevant topics. In this case also, the participation ....
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....deration, the Appellant had, as it had consistently been doing for the past several years and had been allowed, claimed the addition to fixed assets of Rs. 3,94,295/- as an application of its income u/s.11(1)(a) of the ITA - a copy of the statement showing computation of total income for the year is forwarded herewith-refer "Appendix-L" (refer page No.243 of the compilation) • However, while assessing the total income, exemption u/s.11 has not been granted to Appellant and the receipts from non-members have been taxed in terms of the impugned Order. • While doing so, no expenditure has been allowed as a deduction by the Assessing officer and simultaneously the Assessing Officer has also made an addition of Rs. 3,94,295/- being addition made to fixed assets claimed as application of income for the year by the Appellant. • The starting point of the assessed income considered by the Assessing Officer in the impugned Order is income received from non-members and no deduction whatsoever has been granted against the same and hence the addition made to the total income vis-à-vis the addition to fixed assets is erroneous. In view of th....
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....o prove or to even doubt that activities of the assessee are existing for the purpose of making profits and that such profits were in turn distributed to its members. We find from the perusal of the orders of the lower authorities that nowhere they had pointed out that assessee activities involved in the nature of trade, commerce or business or activity of rendering any service in relation to any trade, commerce or business and in consideration of which a cess or fee has been received by the assessee. Hence, we hold that assessee's case does not fall within the ambit of proviso to Section 2(15) of the Act. We find that the ld. DR vehemently placed reliance on the orders of the lower authorities. We find that the Co-ordinate Bench of this Tribunal had adjudicated an identical issue under similar facts and circumstances in the case of All India Rubber Industries Association vs. Additional Director of Income Tax (Exemptions), Mumbai reported in 173 ITD 615 dated 12/10/2018 for the A.Yrs. 2011-12 to 2013-14, wherein it was held as under:- "10. We have carefully considered the rival submissions. Before we proceed to address the specific objections raised by the Assessing Office....
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....lities and machinery for the settlement of disputes by arbitration. ................................................................................................................................... (j) To publish an official journal of the Association giving prominence to the aims, objects and activities and for the spread of knowledge and information relating to the Natural Rubber, Synthetic Rubber and Latex Goods Industry and Trade generally and to print and publish any advertisements, newspapers, periodicals, books, lectures or pamphlets that may be deemed desirable. .................................................................................................................................. (v) And generally to do all such other things as may be deemed incidental or conducive to the attainment of the above objects or any of them." 11. The Memorandum of Association also prescribes by way of clause 4 that income and property of the association whensoever derived shall be applied solely towards the promotion of the objects of the Association as set forth in this Memorandum of Association and no portion thereof shall be paid or tra....
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....f general public utility goes to the root of the whole problem. The advancement of an object of benefit to the public or a section of the public is distinguished from an individual or a group of individual would be of charitable purposes. This view was taken in the case of CIT vs Ahmedabad Rana Cast Association 140 ITR 1 (SC). The expression "object of general public utility" in sec. 2(15) prima facie includes all objects which permits the welfare of the general public. It cannot be said that a purpose would cease to be charitable if it includes taking of steps for the promotion of trade, commerce or manufacture. An object beneficial to a section of the public is an object of general public utility. To serve a charitable purpose, it is not necessary that the object must benefit the whole of mankind. It is sufficient if the intention is to benefit a section of the public. This view was taken by the jurisdictional High Court in the case of CIT vs Western India Chambers of Commerce Ltd. 13 ITR 67 (Bom.). The decision of the Gujarat High Court relied upon by the revenue authorities is not relevant in the facts of the present case. In that case distribution of property amongst members w....
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....or retention of such income from such activity. The aforesaid proviso has been invoked by the Assessing Officer to say that as assessee‟s objects were of general public utility, and since in the course of carrying on its objects, it was receiving charges from its members as well as nonmembers, the activities could no longer be treated as charitable. In this context, one has to examine the import of the proviso inserted to Sec. 2(15) of the Act. Pertinently, the assessee continues to enjoy recognition u/s 12A of the Act; and, in any case, de hors the proviso to Sec. 2(15) of the Act, there is no dispute by the Revenue that the objects of the assessee fall within the scope of Sec. 2(15) of the Act on account of the same being in the nature of "advancement of any other objects of general public utility". Therefore, one has to examine as to whether the insertion of proviso to Sec. 2(15) of the Act would render the activities of the assessee to be of noncharitable purpose. The Hon'ble Delhi High Court in the case of India Trade Promotion Organisation (supra) as well as in the case of Institute of Chartered Accountants of India (supra) have extensively examined the nature and s....
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....y activity is one of rendering any service in relation to any trade, commerce or business, the element of profit making is also very important. (iii) The meaning of the expression "charitable purposes" has to be examined in the context of "income", because, it is only when there is income the question of not including that income in the total income would arise. Therefore, merely because an institution, which otherwise is established for a charitable purpose, receives income would not make it any less a charitable institution. Whether that institution, which is established for charitable purposes, will get the exemption would have to be determined having regard to the objects of the institution and its importance throughout India or throughout any State or States. (iv) Merely, because an institution derives income out of activities which may be commercial, that does, in any way, affect the nature of the Institution as a charitable institution if it otherwise qualifies for such a character. (v) Merely because a fee or some other consideration is collected or received by an institution, it would not lose its character of having been established for a charit....
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....then it would not be entitled to claim its object to be a 'charitable purpose'. On the flip side, where an institution is not driven primarily by a desire or motive to earn profits, but to do charity through the advancement of an object of general public utility, it cannot but be regarded as an institution established for charitable purposes. (emphasis supplied)" 16. From the perusal of the aforesaid, what stands out is that in order to invoke the proviso to Sec. 2(15) of the Act, it is imperative for the Revenue to establish that there is an element of profit motive in the activities of the assessee. Notably, the fact that some of the activities carried out by an entity involving charging of fee, etc. have resulted in a surplus could not ipso facto be determinative of the fact that there was an element of profit motive. 17. At this point, we may also refer to the judgment of the Hon'ble Bombay High Court in the case of Shree Nasik Panchvati Panjrapole (supra). Though the said judgment is with regard to the registration u/s 12A of the Act, but the parity of reasoning laid down by the Hon'ble Bombay High Court in context of proviso to Sec. 2(15) of ....
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.... In fact, in para 6 of the assessment order, a portion of the submissions furnished by the assessee have been reproduced wherein assessee specifically asserted that dissemination of information and publication of magazine relating to Rubber industry in India and developments abroad was a substantive activity carried out, which was for the charitable purpose of promoting the interests of Rubber industry and trade. Therefore, in view of the aforesaid discussion, in our view, the Assessing Officer erred in invoking proviso to Sec. 2(15) of the Act to treat the activities of the assessee as being non-charitable specifically considering the fact that no material or evidence has been led to show that there was any profit motive in carrying out such activities. Pertinently, there is no rebuttal at any stage to the assertions of the assessee that its activities in the instant years are similar to the activities in the past years. 19. Therefore, in view of the aforesaid discussion, we set-aside the order of CIT(A) and direct the Assessing Officer to allow the exemption u/s 12A of the Act to the assessee. 20. Before parting, we may also advert to the stand of the Assessing....
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....on [1982] 138 ITR 585/ 14 Taxman 224 (Mad.) Industrial Association Add. CIT v. Madras Jewellers and Diamond Merchants Association [1981] 129 ITR 214 (Mad.) Jewellers and Diamond Merchants Add. CIT v. Automobile Association of Southern India [1981] 127 ITR 370/5 Taxman 77 (Mad.) Automobile owners The predominant intention theory was applied in these decisions and it was found that none of these associations worked for a profit and they were essentially associations established for the protection of interests of businessmen carrying on a particular trade." 21. In fact, the Hon'ble Delhi High Court specifically considered the receipts derived by a Chamber of Commerce and Industry for performing specific services to its members. The following discussion in the order of the Hon'ble Delhi High Court would show that such income was found to be entitled for benefits of Sec. 2(15) r.w.s. 11 of the Act provided, of course, there was no profit element in such services. " 15. CIT vs. Andhra Commerce of Chamber (supra) introduced the possibility of some of the trade, professional or other similar association being entitled to the exempt....