TaxTMI 
TaxTMI 
2021 (10) TMI 224
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....e case of assessee as it had rendered services in relation to commercial activity for which fees were charged. For this issue the assessee has raised the following grounds: - "Denial of exemption under section 1 of the Income-tax Act, 1961 (the Act) 1. The CIT(A) erred in confirming the action of the Income-tax Officer (Exemptions)-1(1), Mumbai (hereinafter referred to as the ITO) in denying exemption under section 11 of the Act. Applicability of the proviso to section 2(15) of the Act. 2. The CIT(A) erred in holding that proviso to section 2(15) of the Act was applicable to the appellant as it had rendered services in relation to a commercial activity for which fees were charged. 3. The CIT(A) erred in holding that the appellant had not brought any evidence which proved that activities carried out by it were non-commercial and without profit motive. 4. The CIT(A) erred in holding that the appellant is engaged in doing regular business activities which are in the nature of "business" and "commerce" by arranging seminars, collecting fees from participants, interest income and sale of publications and hence the objects of the appellant are....
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....ppeal, the ITAT vide its common order dated 15.01.2016 has remanded the matter to the file of the ITO to decide the issue afresh considering that it had re-stored the assessee's registration under section 12A of the Act. The ITAT also heard the appeal of the assessee against the DIT(E)'s order cancelling 12A registration, the ITAT held that for cancellation of registration under section 12AA(3) of the Act, the provisions of section 2(15) of the Act cannot be brought into play and accordingly set- aside the order of the DIT(E) and directed him to re-store the registration. 6. The CIT(A) confirmed the action of the AO and not consider the assessee's charitable institution for the purposes of section 2(15) of the Act. He stated that the activities of Trust would be hit by first and second proviso under section 2(15) of the Act. For this, he recorded the following finding in Para 4.3 as under:- "4.3 Decision on Ground Nos. 1 to 3 I have carefully considered the contentions of the AO and arguments of appellant and case laws relied before me in order to decide whether the appellant is eligible for exemption u/s 11 of the Act, the following issues are required to ....
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....way of arranging seminars, collecting participation fees from the participants, interest income and sale of publications. Thus, it can be said that the appellant is carrying on activity in the nature of commerce and the objects of the appellant is not to be considered as for charitable purpose. It is pertinent to discuss what is stated in the Memorandum while explaining the provisions of the Finance Bill, 2008 the Legislative intent behind the amendment as below' lt has been noticed that a number of entities operating on commercial lines are claiming exemption on their income either under section 10(23C) or section 11 of the Act on the ground that they are' charitable institutions. This is based on the argument that they are engaged in the 'advancement of an object of general public utility' as is included in the fourth limb of the current definition of 'charitable purpose'. Such a claim, when made in respect of an activity carried out on commercial lines, is contrary to the intention of the provision. With a view to limiting the scope of the phrase 'advancement of any other object of general public utility', it is proposed....
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.... the earlier categories The Larger Bench of the Supreme Court in the case of Surat Art Silk Cloth Mfgrs. Association (supra) has approved the observations of J Ben rendered in the above case, though the judgment was overruled. The above observations therefore hold importance to understand the concept of charity. Similarly, the provision u/s 11 (4A) which provides that the provisions of section 11 would apply to any business income if it is incidental to the attainment of the objects of the trust. The Proviso inserted in 2008 has also not been amended. In this situation, the only conclusion or interpretation of the amendment is that the reiteration of the existing or prevailing principle, that any commercial activity under the garb of charitable activity would only be affected and for that purpose, one has to look into the dominant object of the Trust. the manner and form in which the objects are achieved Needless to say, the concept of charity as explained by the Supreme Court in the case of Sole Trustee, Lok Shikshana Trust (supra) has to be kept in mind The only meaning that can be drawn is that the amendment does not apply to every income from business that is ....
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....s cricket as a public utility, is to be taxed for sale of television rights, tickets, advertisement, other institutions like chambers and association (e.g. CII, FICCI) will be liable to pay tax for renting their facilities to non-members A thorough analysis of the above shows the intent of legislation to curb the practice of claiming exemption on the pretext of carrying out objects of general public utility and thereby taking the benefit of exemption in respect of business carried out in the mask of charity. The proviso mentions that advancement of object of general public utility shall not be a charitable purpose if it involves the carrying 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. In the case under consideration, the appellant has rendered services in relation to a commercial activity for which fee has been charged and thus, is hit by this provision The Very Concept of Charity denotes altruistic thought and act....
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....r incident to the raising of money for the Association, including brokerage and commissions for obtaining applications for or taking, placing or underwriting Debentures or Debenture Stock. 8. The assessee has also drew our attention to clause 4 and clause 8 of the Memorandum and Article of Association, which is enclosed at assessee's paper book. The relevant Clause 4 of the MOA provides that the income and property of the Association whensoever derived shall be applied solely towards the promotion of the objects of the Association and no portion thereof shall be paid or transferred directly or indirectly by way of dividend or bonus or otherwise howsoever by way of profit to the persons who at any time are or have been members of the Association or to any person claiming through any of them. Further, Clause 8 of the MOA provides that on winding up, the surplus property remaining after satisfaction of all the debts, shall not be paid or distributed among the members, but shall be transferred to some other institution or institutions having similar objects similar to the objects of the Association which is to be determined by the members of the Association. 9. From the reading o....
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....he aforesaid cases. Genuine charitable organizations will not in any way be affected. I once again assure the House that genuine charitable organizations will not in any way be affected. The CBDT will, following the usual practice, issue an explanatory circular containing guidelines for determining whether an entity is carrying on 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. Whether the purpose is a charitable purpose will depend on the totality of the facts of the case. Ordinarily, Chambers of Commerce and similar organizations rendering services to their members would not be affected by the amendment and their activities would continue to be regarded as "advancement of any other object of general public utility" (Emphasis supplied,)" 12. From a perusal of the FM's speech it is apparent that the intent behind the amendment was that only such entities which are carrying on regular trade, commerce or business would not fall within the definition of the term 'charitable purpose. It was never intended to affect genuine charitable organizations in any way. The learn....
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....al validity of the proviso to section 2(15) of the Act, held that the proviso to section 2(15) of the Act has to read in the manner indicated by them. The High Court while in arriving at its conclusion held as under: "If the dominant activity of the institution was not business, trade or commerce, then any such incidental or ancillary activity would also not fall within the categories of trade, commerce or business. Ills clear from the facts of the present case that the driving force is not the desire to earn profits but, the object of promoting trade and commerce not for itself but for the nation - both within India and outside India. Clearly, this is a charitable purpose, which has as its motive the advancement of an object of general public utility to which the exception carved out in the first proviso to Section 2(15) of the said Act would not apply. We say so, because, if a literal interpretation were to be given to the said proviso, then it would risk being hit by ArtIcle 14 (the equality clause enshrined in Article 14 of the Constitution). it Is well-settled that the courts should always endeavour to uphold the Constitutional validity of a provision and, in doing so....
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....rce and manufacturers of India and in particular trade, commerce and manufacturers of the Bombay presidency and hence is entitled to exemption under section 11 of the Act. 17. The learned Counsel for the assessee explained the brief facts with reference to the income scheme of the assessee which are as under:- a. Certificate of origin fees - Rs. 2,81,06,980/- The appellant has been authorized by the Ministry of Commerce, Government of India to issue Non-Preferential Certificates of Origin in accordance with Article II of International Convention relating to Simplification of the Custom Formalities. The schedule of fees is prescribed by the Ministry of Commerce. This service is mainly availed of by member companies of the Chamber. b. Secretarial Fees- Rs. 5;00,000/- The appellant provides secretarial services to the associations who are members or are associated with it. Secretarial fees are charged to cover the cost of providing services viz. organizing meetings, preparation of accounts, filing income tax and TDS returns, service tax and other related work. This activity is in pursuance of Object no. 21 of the appellant; namely "to do....
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.... g. Sale of in house publications - Rs. 3,90,269/- This is with reference to the Object no. 5. of the appellant, "To collect and circulate statistics and other information relating to trade, commerce and manufactures," The appellant brings out reports and studies which are used for presentation to the government, members and other interested individuals from the member organizations. Some of these reports are given out to the applicants on a cost basis. The appellant also provides e-information to its members about the latest changes in law etc. at a nominal cost. The membership directory in a published form and a Table listing is also offered for sale on cost basis. 18. The learned counsel for the assessee before us explained that the appellate orders for earlier years i.e. AYs 2009-10, 2010-11 and 2011-12 cannot be followed for the assessment year under consideration because the benefit of the decision of the Delhi High Court in India Trade Promotion Organization (supra) was not available before the CIT(A) while passing the order and the CIT(A) in para 5.3.12 and 5.3.14 of its order dated 19.12.2014 for AYs 2010-11 and 2011-12 respectively has held that the ....