TaxTMI 
TaxTMI 
TaxTMI 
2021 (10) TMI 1055
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....the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in holding that the activities carried out by the assessee are in the field of charitable purpose as defined under section 2(15) of the I.T. Act, 1961 and are clearly hit by proviso to section 2(15) of the Act. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the activities carried out by the assessee are not in nature of trade business or commerce. 3. The appellant craves leave to add, to alter or amend any ground of appeal raised above at the time of hearing." 4. Addressing the issues raised in the two appeals filed by the assessee in both the years it is seen that the grounds raised are identical except for the difference in the amounts in the two years. Accordingly, grounds from ITA No. 1630/Del/2018 are reproduced hereunder for completeness: 1. "That the Ld. CIT(A) has erred in passing the order both in law and on facts. 2. On the facts and circumstances of the case and in law, the Ld. CIT(Appeals) has erred in giving directions in its appellate order to include a sum of Rs. 2,02,28,490/- (Rs. 2,43,32,550/-) as income to be taxed....
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....order and did not belabor the issue any further. 7. For the sake of completeness, we have taken note of the facts as emanating on a perusal of the record that the assessee society is claimed to be a leading society engaged in the promotion and development of Fine Arts and Crafts in India. It has been in existence since 1938 and is stated to have contributed in the field of development of arts and sculptures in India having eminent painters, sculptors etc. on its governing body. The Society is stated to be catering to the needs of the upcoming and not so established artists thus enabling them to display their skills etc. To promote these aims it is stated to hold exhibitions, organizes art camps, etc. It has also been stated that it gives financial assistance to old and needy artists; has been publishing news letter in the field of arts and sculpture during the last few decades. We find that as in the earlier years in the year under consideration also the Assessing Officer has observed that the assessee is renting out galleries to the artists for displaying their work and has thus concluded that the assessee is engaged in a business activity and held to be in violation of the statu....
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....the artists to paint giving live performances during the holding of art events held on the campus of the assessee Society. Apart from this, it has been argued that for the artists who come from out of station free boarding and lodging is also provided in addition to bearing their to and for travel costs for visiting these events. Substantial expenses are stated to be incurred by the Society for conducting these art events. These claims are found to be demonstrated on facts. 7.4. It has been explained before the tax authorities that the paintings which are made by these artists during the art event/annual exhibitions are left with the Society as these have been made from the materials supplied by the assessee society and this is referred to as the property of the Society. The primary reason for having these paintings with the assessee society, it has been explained, is to adjudge the winners amongst the participants and hence these paintings are kept aside. It has been explained that these paintings accumulate over the years, and as and when there is a shortage of space for storage of the same and/or on noticing deteriorations etc. in the paintings with the efflux of time, these ar....
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....8,41,025/ - 1,71,81,315/ - 2011-12 5,20,400/ - 1,78,26,000/ - 2010-11 9,75,071/ - 1,45,47,697/ - 7.8. We find that these submissions on facts remain un-assailed in the present proceeding. 7.9. Reverting back to the order we note that in the said factual background reliance was placed on the decisions of the Hon'ble Delhi High Court in the case of India Trade Promotion Organization vs. DIT (Exemption) & Others writ petition (C) 1872/2013 (judgment delivered on 22.01.2015) (P. No. 31-55), India International Centre Vs. Assistant Director of Income Tax by the Hon'ble ITAT Delhi - 'C' Bench (ITA No. 3124/Delhi/2014 and Dy. Director of Income Tax (Exemption) Delhi Vs. All India Football Federation (2015) 62 Taxman.com 362 (Delhi Tribunal). Taking strength from the ratio decidendi of these decisions it has been canvassed that if some incidental activities are carried out by a charitable organization whose dominant and prime objective is not a profit motive, the organization cannot be deemed to be pursuing non charitable objects and hence be considered to be existing for non-charitable purposes. 7.10. Considering the facts as elaborated hereinabove, we find ....
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....t to the annual event held by the society. After the competition is held the paintings made by these various artists are kept with the society amongst which the best paintings are given awards by the jury comprising group of artists. These paintings are kept and remain with the assessee for a very long time. When there is a dearth of further storage because of regular annual events held for such contests, the old paintings are sold in lots to clear space for further storage for paintings etc. received out of which the award winning paintings are selected. The paintings kept by the society are also deteriorated due to efflux of time and, thus, are sold in lots at a very reasonable price. The argument of the appellant's counsel is that paintings are not disposed off as a business but is only undertaken to prevent wastage of probable resources. The appellant has supplied the figures for the last three years showing the revenue from the letting out of galleries as well as sale of painting vis-à-vis the total expenses incurred by it for the promotion of objects of the society i.e. advancement of the object of art, culture and craft. These figures have been given at page 12 ....
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....11 & 12, though in that case barring rental income of Rs. 4,80,00,000/- from G.E. Groups of Companies, the receipts from renting of galleries and sale of paintings were less than Rs. 10 lacs, the threshold limit relevant for that assessment year under the second proviso to section 2(15) of the Income Tax Act. However, it is emphasized that regardless of the receipt during assessment year 2011-12, concurrence on principle has been given with regard to the fact that the overall objective/dominant purpose of the assessee-society is not to do business or earn income. ... Considering of the above said facts, arguments advanced by the appellant and the case laws relied upon by its counsels, I am inclined to accept their contention. I hold that the appellant should not be termed as a non-charitable organization under the first proviso to section 2(15) of the Income Tax Act as it is not primarily driven by profit motive, keeping in view the facts of the case discussed above. Therefore, the appellant shall be entitled to exemption u/s. 11/12 of the Income Tax Act. The relief of 15% statutory exemption as well as application of income is consequential because of my finding that the app....
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....ain as to why the benefit u/s. 11 & 12 of the Act in respect of the income should be allowed in view of the amended Section 2(15) of the Act introduced w.e.f. 01.04.2009 i.e. relevant to assessment year 2011-12 under consideration, since its activities fall in the category of "advancement of object of general public utility" and its income including rental income is in the nature of business, trade or commerce and the same income exceeds Rs. 10,00,000/-. Rejecting the various explanation given by the assessee and relying on the amended provisions of Section 2(15) of the Act and CBDT Circular No. 11/2008 dated 19.12.2008, the Assessing Officer held that the activities of the assessee society is not for charitable purpose and therefore, the income of the assessee is taxable. He noted that the assessee during the year under consideration has derived income under the following heads: "a. Rental Income : 4,80,00,000/- b. Interest Income : 2,10,45,261/- c. Income from Gallery Maintenance : 5,11,400/- d. Misc. Income : 3,01,587/- Total : 6,98,58,248/-" 7.11.2. The relevant and applicable aims and objects of the assessee Society from its Memorandum of Association were encapsuled....
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....al 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, the provision in question may have to be read down; (iii) Section 2(15) is only a definition clause. The expression "charitable purpose" appearing in Section 2 (15) of the said Act has to be seen in the context of Section 10(23C)(iv). When the expression "Charitable Purpose", as defined in Section 2(15) of the Act, is read in the context of Section 10(23C)(iv) of the said Act, we would have to give up the strict and literal interpretation sought to be given to the expression "charitable purpose" by the revenue. In conclusion, we may say that the expression "charitable purpose", as defined in Section 2(15) cannot be construed literally and in absolute terms. It has to take colour and be considered in the context of Section 10(23C)(iv) of the said Act. It is also clear that if the literal interpretation is given to the proviso to Section 2(15) of the said Act, then the proviso would be a....
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.... Promotion Organisation vs. DGIT (Exemption) (supra) the coordinate bench held that the benefit of exemption u/s. 11 & 12 of the Act could not be denied. We find that similar view has been followed right from 2009-10 assessment year till date. The decision of the ITAT in 2009-10 assessment year before the Hon'ble High Court wherein the Revenue failed in its appeal filed. In ITA No. 754/Del/2019 in its order dated 19th August, 2019 the Jurisdictional Court dismissed the appeal filed by the Revenue holding as under: "1. The Revenue is in appeal against an order dated 14th February, 2019 passed by the ITAT in ITA No. 1449/Del/2013 for the Assessment Year 2009-10. 2. The question sought to be urged by the Revenue is whether the ITAT erred in allowing relief to the Assessee, following the decision of this Court in India Trade Promotion Organisation Vs. DGIT(E) (2015) 371 ITR 333 (Del) and holding that merely because a small percentage of the income of the Assessee is from letting out of its premises and sale of paintings, the essential activity of the Assessee would not cease to be charitable for the purposes of Sections 11 and 12 of the Income Tax Act, 1961. 3. Having heard L....