TaxTMI 
TaxTMI 
2021 (10) TMI 1055
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..../2018 are being reproduced hereunder: 1. "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 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 o....
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....rit. Conscious of this fact the ld. Sr. DR in all sincerity could at best place reliance upon the assessment 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 ....
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....participating in the annual exhibitions. It has been argued that on the contrary, free art materials are supplied to 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 ....
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....eceipt from Gallery Rent /Sale of Painting ( In Rs. ) Expenses Incurred (Amount in Rs. ) 2013-14 25,49,582/ - 2,00,43,106/ - 2012-13 38,41,025/ - 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....
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....lly free of cost. Not only this, the artist who come from outside Delhi are provided free boarding and lodging in addition to reimbursement of travelling expenses incurred by them for visit 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....
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....f the Income Tax Act. It has also been brought to my notice that for the immediately preceding assessment year 2011-12 I have accepted in principle the contention of the appellant that it is not driven by profit motive and, thus, is entitled to exemption u/s. 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 p....
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....t exhibitions and societies in India and abroad; (d) To act as the Central Organizations of Arts and Crafts in India; (e) To do all such law full things as are incidental or conducive to the attainment of above objects and any other objects of arts and literature not mentioned above." 4. The Assessing Officer asked the assessee to explain 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 con....
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....resent 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; (ii) 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, 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 g....
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....usiness entities from masking their activities and portraying them in the garb of an activity in the object of a general public utility but was not designed to hit at those institutions, which had the advancement of the objects of general public utility at their hearts and were charity institutions. 8. Accordingly considering the legal position as found settled with respect to interpretation of proviso of Section 2(15) of the Act in the case of India Trade 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 Reve....
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....provisions applicable on facts will result, however the fact remains that confronting the facts to the assessee before applying the statutory provisions in no way can be said to cause any inconvenience to the Revenue and on the other hand advances the cause of justice having prevailed. Once an order is passed after giving due opportunity to the assessee no grievance can then be said to subsist. On a reading of the impugned order, it is evident that without hearing the assessee the Ld. Commissioner has decided the issue on the basis of the decision of the position of law as considered in Director of Income Tax (Exemption) Vs. Girdharilal Shewnarain Tantia Trust [ (1993) 199 ITR 215 (Cal.) and in the case of B.N. Gamadia Parsi Hunnarshala Vs. Asstt. DIT (Exemption) [ (2002) 77 TTJ 274 (Mum.), however, without hearing the assessee. Accordingly, without commenting upon the correctness, of the conclusions drawn addressing the procedural shortcoming only, we deem it to appropriate to set aside the orders of the Ld. First Appellate Authority to this extent and restore the issue back to the file of the CIT(A) with a direction to give a specific opportunity to the assessee to make its submi....