TaxTMI 
TaxTMI 
2021 (5) TMI 745
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....ant for exemption under s.11, s.12, s.12A and s.13 of the Act. 1.2 The learned CIT(A) erred on facts and in law in not considering he alternative claim of the appellant for deduction/ exemption made under s.44A of the Act. 2.0 Misappreciation of facts: The learned CIT(A) erred on facts and in law in wrongfully appreciating that the appellant was claiming deduction in respect of expenses against interest from banks and not appreciating that expenses were not claimed as "deduction" from any particular income, but the expenses represented application" of income." 3. The facts in brief are that the assessee filed the return of income on 25.11.2014 accompanying therewith the income and expenditure account, Balance sheet and Audit Report declaring total income of Rs. 40,32,933/-. Pertinent to state that the assessee is registered u/s 12A of the Act vide registration No. INS/10496/ dated 08.04.1974. The case was selected for the scrutiny and statutory notices were duly issued and served upon the assessee. The AO in Para 4 of the assessment order noted that in earlier years, the assessee's activities were hit by proviso to section 2(15) of the Act. According t....
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....09-10 onwards, the assessee trust was not entitle to exempted as it is an institution which conducts on activity in nature of business and also charge fee or coordination. It was earning huge profits in systematic and organized manners and therefore, it was not an institute existing for charitable purpose under the revised proviso to Section 2(15) of the I.T Act. Thirdly, the assessee trust institute has been earning huge income from Stall rental charges, bunting & banners, sponsorship income, directory advertisement, Exhibition Entry ticket Collection etc. 4.5 To decide the above issue, it is necessary to examine section 2(15) after the amendment with effect from 1st April 2008. The relevant provision read as under: "Section 2 definition- 2(15) "Charitable purpose" includes relief of the poor, education, medical relief, preservation of environment (including watersheds, 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. 4.6 The assessee is an institution which carries on charitable activities in the nature of education or adv....
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....herefore, for the broad development of the nation / society, a strict and positive vigils is required so that the provision can be saved from its misuse in any manner. No activity can be carried on efficiently, properly unless and until it is carried out on a business principle but it does not mean that the provision is misused in any manner under the grab of charity and any institution be allowed to become richer and richer under the grab of charity by making it a non-tax payable organization. A charitable institution provides services for charitable purposes free of cost and not for a gain. 4.12 It may also be stated that the concept of charity is necessarily altruistic in nature and involved the idea of benefit to others. The essence of charity is that the person(s) doing charity exclude themselves from the benefits of the charity. Non exclusion of contributors to 'charity' fund from the benefits arising out of that is nothing but serving the interest of self in an organized manner. In fact the entire scheme of Sec. 11 to 13 and particularly sec. 13(1)(c) and 13(3) is based on this basic principle or essence of 'charity'. Thus in a case of even ....
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....erials and to organize and promote welfare activities amongst them." 6. A perusal of the objects of the assessee shows that the assessee is not carrying of any activity of business in nature which is hit by the proviso to section 2(15) of the Act, for the sake of convenience the proviso to section 2(15) of the Act is extracted as under:- "2. In this Act, unless the context otherwise requires,- ......................................... ........................ (15) "charitable purpose" includes relief of the poor, education, yoga, medical relief, preservation of environment (including watersheds, 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....
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....cord, as well as the judicial pronouncements pressed into service by them. The ld. Authorised representative for the assessee (for short "A.R") vehemently submitted that the case of the assessee trust was not hit by the "proviso‟ to Sec. 2(15) of the Act, and thus, was duly eligible for ITA No.6896/Mum/2019 A.Y.2016-17 6 Confederation of Real Estate Developers Association of India Vs. ACIT(Exemption)-1(1) ITA No.2815/Mum2018 A.Y.2014-15 Confederation of Real Estate Developers Association of India Vs. CIT(A)-3 claim of deduction envisaged in Sec. 11 of the Act. In order to buttress his aforesaid claim the ld. A.R took us through the facts of the case and drew support from a host of judicial pronouncements to which our attention was drawn during the course of hearing of the appeal. Accordingly, it was submitted by the ld. A.R that both the lower authorities by misconceiving the factual position had wrongly concluded that the activities of the assessee trust were hit by the "proviso‟ to Sec. 2(15) of the Act. As such, it was submitted by the ld. A.R that the lower authorities backed by their erroneous view had wrongly declined the assessee‟s claim for deduction u/s 1....
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....aking such activity or activities, of that previous year. As per the aforesaid post-amended definition of the term "charitable purpose", "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. However, an exception to the application of the aforesaid exclusion has been provided by the legislature by way of a "Provision" that has been made available on the statute vide the Finance Act, 2015 w.e.f A.Y 2016-17. As per the "Proviso" to Sec. 2(15), if 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 is undertaken by the assessee in the course of actual carrying out of its object of advancement of its object of general public utility AND the aggregate receipts from such activity ....
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....like publishing books or holding program on yoga or other programs as part of actual carrying out of the objects which are of charitable nature were being put to hardship due to first and second proviso to section 2(15). 4.3 The activity of Yoga has been one of the focus areas in the present times and international recognition has also been granted to it by the United Nations. Therefore the provisions of the Income-tax Act have been amended to include 'yoga' as a specific category in the definition of charitable purpose on the lines of education. 4.4 In order to ensure appropriate balance between the object of preventing business activity in the garb of charity and at the same time protecting the activities undertaken by the genuine organization as part of actual carrying out of the primary purpose of the trust or institution, the definition of "charitable purpose‟ in the Income-tax Act has been amended to provide 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 r....
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.... of general public utility" carries out 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, the same irrespective of the nature of use or application, or retention, of the income from such activity, would take such "advancement of any other object of general public utility" beyond the meaning of "charitable purpose" as provided in Sec. 2(15) of the Act. But then, the legislature had provided an exception, as per which, if the activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; AND (ii) the aggregate receipts from such activity or activities, during the previous year, do not exceed twenty percent of the total receipts of the trust or institution ITA No.6896/Mum/2019 A.Y.2016-17 10 Confederation of Real Estate Developers Association of India Vs. ACIT(Exemption)-1(1) ITA No.2815/Mum2018 A.Y.2014-15 Confederation of Real Estate Developers Association of India Vs. CIT(A)-3 undertaking such activity or activities of that previous year, then such trust or institution would no....
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....A.Y.2014-15 Confederation of Real Estate Developers Association of India Vs. CIT(A)-3 for its all member associations, having 21 State chapters, 220 city chapters and 20,000 members, it can safely be held to be for the benefit of a particular section of the public and not for any specified individual. Accordingly, the view taken by the lower authorities that as the assessee trust was set up for providing facilities to a limited group of people and not for the benefit of the general public at large, therefore, it could not be held to be a trust set up for advancement of any other object of general public utility cannot be sustained and is herby vacated. 8. As is discernible from the orders of the lower authorities, we find, that they had observed that the activities of the assessee trust, viz. (i). offering of services in relation to trade and business of construction industry in lieu of fees, cess or other consideration; and (ii). receipt of interest on income accumulated in form of term deposits with banks, were in the nature of commercial activities. It was observed by the lower authorities that as the assessee was carrying on activities which were in the nature of comme....
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....to be referred to, and thus, are reproduced as under : "a) To act as a group of associations/federations functioning at national and state level and with the object to address the national issues relating to real estate sector and better standard for its all member associations. b) To encourage fraternity, feelings of co-operation and mutual help among the members of the confederation in respect of the subjects connected with the common good of trade, industry and profession of building, construction and development of funds. c) To encourage adoption and promotion of fair business practices according to an ethical code of fair business practices and to maintain efficiency, dignity and integrity of the confederation." Now, for the attainment of its aforesaid objects, viz. to act as a group of associations/federations functioning at national and state level with an object to address the national issues relating to real estate sector and better standard for its all member associations; to encourage fraternity, feelings of co-operation and mutual help among the members of the confederation in respect of the subjects connected with the common good of ....
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.... activity or activities during the said year do not exceed 20% of its total receipts. But then, it is not the case of the assessee before us that its activities albeit in the nature of trade, commerce or business, are however less than 20% of its total receipts. In fact, the claim of the assessee throughout had been that as its activities do not fall within the realm of either trade, commerce or business or any activity ITA No.6896/Mum/2019 A.Y.2016-17 14 Confederation of Real Estate Developers Association of India Vs. ACIT(Exemption)-1(1) ITA No.2815/Mum2018 A.Y.2014-15 Confederation of Real Estate Developers Association of India Vs. CIT(A)-3 of rendering any service in relation to any trade, commerce or business, it would thus not be hit by Sec. 2(15) of the Act. As neither of the aforesaid terms, viz. trade, commerce or business are defined in the Income-tax Act, 1961, therefore, we shall construe them as per their dictionary meaning for resolving the controversy before us, viz. (i). "trade‟ : the action of buying and selling goods and services; (ii). "commerce‟ : the activity of buying and selling, especially on a large scale. (iii)."business‟ : a commercial a....
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....assessee trust. As such, it was submitted by the ld. A.R that mere generation of surplus from the aforesaid activities would not ipso facto mean that the assessee was carrying on activities in the nature of trade, commerce or business. Insofar the amount of surplus generated in the hands of the assessee was concerned, it was submitted by the assessee that the same had to be considered in the backdrop of the size of the association which had 21 State chapters, 220 city chapters and 20,000 members. The aforesaid factual position so averred by the ld. A.R was not rebutted by the departments counsel before us. 11. We have deliberated at length on the issue under consideration and find substantial force in the claim of the ld. A.R that the activities of the assessee trust could not be brought within the meaning of trade, commerce or business. As observed by us hereinabove, the holding of convention by the assessee trust, and the resultant receipts therein generated by it, say participant fees, sponsorship fees (from advertisers) etc., were clearly in the nature of activities that were carried out by the assessee with the sole intent of attaining the object for....
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.... organization as part of actual carrying out of the primary purpose of the trust or institution. In fact, a similar issue had came up before the Tribunal in the case of Fragrance and Flavours Associaton of India. Vs. DDIT(E)-1(2), Mumbai, ITA No. 5453/Mum/2015 for A.Y 2011-12. In the said case, the objects of the assessee trust was to promote co-operation and friendly feeling amongst the persons, firms and companies engaged in or connected with the Fragrance and Flavours Trade and Industry in India, and also, to promote and safeguard the interest of the Trade and Industry. As the amounts received by the assessee from the various activities which were carried out by it for the benefit of its members and in furtherance of its objects, viz (i). Subscription received; (ii). Sale of publications ; (iii). Fafai Journal ; (iv). Workshop & Conference; (v). Bangalore Seminar; and (vi) Directory receipts, were held by the A.O/CIT(A) as receipts in lieu of activities which were in the nature of trade, commerce or business ITA No.6896/Mum/2019 A.Y.2016-17 17 Confederation of Real Estate Developers Association of India Vs. ACIT(Exemption)-1(1) ITA No.2815/Mum2018 A.Y.2014-15 Confederat....
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....d as being for charitable purpose, as a result whereof the assessee stood disentitled for claim of exemption under Sec. 11 of the Act. We find that the assessee had declined that it was carrying on any commercial activities, and had rather by referring to its activities which had been taken cognizance of by the A.O, viz. (i). Subscription received; (ii). Sale of publications ; (iii). Fafai Journal ; (iv). Workshop & Conference; (v). Bangalore Seminar; and (vi) Directory receipts, submitted that the said respective activities were for the furtherance of the general public utility object of the assessee, which by no means could be construed as commercial activities. 10. We have deliberated on the observations of the lower authorities and find that the A.O had concluded that the assessee was carrying on commercial activities, primarily for the reason that it had generated substantial revenue from the seminar held at Bangalore. We have given a thoughtful ITA No.6896/Mum/2019 A.Y.2016-17 18 Confederation of Real Estate Developers Association of India Vs. ACIT(Exemption)-1(1) ITA No.2815/Mum2018 A.Y.2014-15 Confederation of Real Estate Developers Association of India Vs....
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....ia. We further find that the assessee was not by way of a regular and systematic activity carrying on such seminars, and as observed by us hereinabove, the seminar at Bangalore was the only international seminar held by the assessee trust. We are further of the considered view that no such inextricable nexus between the receipt of sponsor fees by the assessee and display of the products of the sponsors does emerge, on the basis of which the same could safely be characterised as a commercial activity. 11. We are of the considered view that the fact that holding of the seminar at Bangalore by the assessee was in furtherance of the dominant object of the assessee, viz. empowerment, betterment and creating awareness amongst the industrialists of the Fragrance and Flavours industry, and display of the products of the sponsors can safely be concluded to be for furtherance of and in the interest of the members of the trade. We are unable to persuade ourselves to be in agreement with the view of the A.O that as the products of the sponsors were displayed at the seminar held at Bangalore, therefore, on the said stand alone basis the assessee was to be held to have carried on commer....
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....had been emphasized by the revenue as the primary reason for concluding that the assessee was carrying on commercial activities, could thus be held as such and brought within the sweep of the first proviso of Sec. 2(15). We further find that the Hon'ble High Court of Madras in the case of Director of Income Tax (Exemption) Vs. The Chartered Accountant Study Circle (2012) 250 CTR 70 (Mad), had the occasion to deliberate on the scope and gamut of the first proviso of Sec. 2(15) in the case of an asseseee trust whose objects among other things was to conduct periodical meetings on professional subjects. The High Court observed that the publishing and sale of books, booklets etc. on professional subjects related to audit and not on any other subject by the assessee. The sale of the books was primarily made to the members of the society, as well as made available to the general public, with the aim to help the society to get better, well-equipped and skilled set of Chartered Accountants for maintaining audit quality, which however could not be construed as a trade or commerce or business. Thus, the High Court observed that the activities of the assessee- trust in publishing and sell....
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....d purpose for which the institute was established, i.e., professional excellence and promotion of accountancy as a preferred profession, and to sharpen the skills and knowledge of the members of Institute who would attend the courses/lectures etc., therefore, the activities of providing coaching classes or undertaking campus placement interviews for a fee were in relation to the main object of the assessee institute, which could not be held to be trade, business or commerce. The High Court while concluding as hereinabove, had observed as under: After going through the provisions of the ICAI Act and the Regulations framed therein as well as various activities carried on by the petitioner, we are of the view that the petitioner institute does not carry on any business, trade or commerce. The activity of imparting education in the field of accountancy and conducting courses both at pre-qualification as well as post-qualification level are activities in furtherance of the objects for which the petitioner has been constituted. Activities of providing coaching classes or undertaking campus placement interviews for a fee are in relation to the main object of the....
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.... motive to earn profit, which though we are not oblivious would not conclusively determine as to whether an activity is in the nature of a trade, commerce or business, but then, the same undoubtedly remains a crucial factor for characterising an activity, as one. We find that the surplus arising to the assessee is only incidental and ancillary to the dominant object of the assessee, viz. advancement and development of the Fragrance and Flavours industry in India. We further find that the surplus generated by the assessee trust was utilized only for the purpose of feeding its dominant object, and no part of such surplus was distributed amongst its members. We have deliberated on the records pertaining to the nature of the activities of the assessee trust, and have observed that the generation of the surplus in its hands is merely a by-product of its main object, which had incidentally resulted in the course of furtherance of its dominant object, viz. advancement and development of the Fragrance and Flavors industry in India. We are further of the view that as the international seminar at Bangalore was held by the assessee for the very first time, and the assessee was not ho....
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.... same revealed, that the activities of the assessee trust were backed by a profit motive, we are afraid does not find favour with us. As pointed out by the ld. A.R, and rightly so, the term deposits of Rs. 13.65 crores referred to by the A.O were the term deposits accumulated by the assessee trust over a period of 15 years i.e since the year 1999, and therefore, merely on the ground of having such huge term deposits the assessee‟s entitlement towards claim of deduction u/s 11 of the Act could not have been denied. In fact, we are in agreement with the claim of the ld. A.R, that as per clause (iii) of Sec. 11(5) of the Act, deposit of money in any account with a scheduled bank is one of the prescribed form and mode of depositing the money referred to in clause (b) of sub-section (2) to Sec. 11. Accordingly, not being able to persuade ourselves to subscribe to the view taken by the A.O that as the assessee over the years had invested surplus aggregating to Rs. 13,65,13,524/- in term deposits with the banks, it was thus be concluded that it was working with a profit motive, we vacate the said observation. ITA No.6896/Mum/2019 A.Y.2016-17 23 Confederation of Rea....