TaxTMI 
TaxTMI 
TaxTMI 
2022 (2) TMI 503
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....ion 12A / 12AA of the Act? (ii) Whether the activity of the petitioner of setting up of museums, science parks, planetariums, interactive galleries, exhibits and other forms of dissemination of knowledge through informal means, at the behest of other public bodies or entities, be regarded as commercial in nature and within the periphery of the proviso to Section 2(15) of the Income Tax Act, 1961? (iii) Whether the Tribunal was justified in denying the exemption under Section 11 of the Act and its findings that the objects and the activities of the petitioner are commercial in nature and/or are done with the intent of earning profits are arbitrary, erroneous, contrary to law and perverse? 2. We have heard Mr. Pratyush Jhunjhunwala, Learned Senior Standing Counsel and Mr. Uttar Sharma, Learned Junior Standing Counsel for the appellant. 3. The assessee is a company registered under Section 25 of the Companies Act, 1956 and has been established by the National Council of Science Museum, Ministry of Culture, Government of India. The National Council of Science Museums herein after referred to as the Council is an institution formed by the Government of India for the purpose of dis....
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....the European and American countries but the assessee was the only Government agency working in India which had participated in the tender. The Appropriate authority of the RBI upon being satisfied that the assessee was the best organisation which could be entrusted with the task, awarded the tender to the assessee vide letter dated 08.06.2012. The assessee would state that the RBI museums and financial literacy center, was completed by the assessee with the state of art facilities interactive galleries, trained professional and was handed over to the Reserve Bank of India on 17.09.2018. On similar lines, Surat Municipal Corporation had awarded the task of establishing five galleries on textiles, astronomy, space, polar science and children learning activities, to educate the general public about the history of development of textiles, study of astronomy through the ages, understanding space travel, understanding Earth's poles and children's interactive gallery. The assessee is stated to have completed the project and the same has been handed over to the Surat Municipal Corporation and thrown open to the public. 5. The assessee filed its return of income for the assessment years un....
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.... learning among the public in an informal and easy manner. It is submitted that the tribunal had taken note of a letter sent by RBI dated 08.06.2012 in which it was stated that they have some concerns about the terms and conditions mentioned in the financial bill. It is submitted that the tribunal thoroughly misread the contents of the letter and the circumstances under which the RBI had addressed the assessee and the letter pertains to the terms of engagement of the assessee in the said project and it has nothing to do regarding dissemination of knowledge. It is further submitted that the tribunal and the authorities committed serious error in stating that the assessee is a contractor functioning in lieu of money and they are an agent engaged in commercial activity of construction of a museum for RBI. It is submitted that the tribunal failed to note that the dissemination of knowledge was being done by the assessee and RBI jointly as well as with the other organisations with whom the assessee has worked and completed projects and the tribunal thoroughly misunderstood the scope of the projects developed by the assessee. It is further submitted that the assessee is registered under ....
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....l dated 27.10.2011, it has been proved to the satisfaction of the Registrar of Companies that the assessee has been established for promoting objects of the nature specified in Section 25(1) (a) of the Companies Act and that it intends to apply its profit, if any, or other income in promoting its objects and to prohibit the payment of any dividend to its members. The licence granted under Section 25 has eight conditions attached to it of which one would state that the incumbent property of the assessee, whensoever derived shall be applied solely for promotion of the objects as set forth in its memorandum of association and no portion thereof 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, or have been members of the said company or to any of them or to any person claiming through anyone or more of them. There are other conditions which will also indicate that no remuneration or other benefits in money shall be given by the company to its members. The memorandum of association of the assessee company if perused shows the main objects to be pursued by the company. By way of illustration we qu....
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....-formal science education/program/activities and schemes. 15. To enter into collaboration with national and international agencies for development of museums/science centers/science activities. 16. To undertake establishment of network of dealers/agencies/franchises etc. for advancement of business. 10. Apart from the above main objects, there are objects, incidental or ancillary to the attainment of main objects. In the impugned order, the tribunal has referred to the incidental objects and missed out the main objects for which the assessee company had been established. This mistake committed by the tribunal has had an impact on the proceedings before it. Apart from the main objects, the incidental or ancillary objects, clause 5 of the memorandum imposes an absolute prohibition on the company to apply its income and property for any other purpose other than for promoting the objects set forth in the memorandum. No portion of the income or property can be paid or transferred directly or indirectly by way of dividend, bonus, etc. The assessee had submitted an application before the Director of Income Tax (Exemption) on the basis of the memorandum of association incorporating th....
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....f association. In fact, it has not even referred to the main objects but straightway proceeded to take note of the objects incidental or ancillary to the main objects. It is elementary principle that anything incidental or ancillary to the main object has to be read along with and in conjunction with the main object and the incidental objects cannot be read in isolation. This fundamental error committed by the tribunal has lead to a wrong decision by it. That apart the tribunal did not take note of the objects of the company which are not included in the main objects and the incidental or ancillary objects. Had an effort been taken by the tribunal to examine the same it would have been amply clear that the assessee company is a non-profit organisation established for the purpose of undertaking works for all kinds of museums/science centers etc. on turn-key basis which includes all activities incidental and ancillary to it. We had faulted the approach of the assessing officer. We say so because the assessing officer appears to have lost right of an important fact as to how a museum or a science center is established. It is a pity that the assessee has been reduced to the category of....
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....rator or a "keeper" of the heritage of the institution. The curator is a specialized person/organisation who has been entrusted with the onerous duty of taking charge of the content and interpretation of the heritage value. The role of the curator is a specialist work, they have the expertise to develop as to how the archives could be interpreted through various events. Neither RBI nor Surat Municipal Corporation had the expertise within them to establish the museum. They took a policy decision to do the same, realizing that it required the assistance of experts, awarded the work to the assessee. Thus the role of the assessee in conceptuating, developing and establishing the museum is that of a "museum curator" who develops interprets and explains the significance of the collections for the study and education of the public. Thus the assessing officer, CIT(A) and the tribunal erred in not addressing the larger perspective of the matter. It needs to be emphasized that museums play a very important and significant role in preserving culture and heritage to be recorded and remembered regardless of its future. Museums function as places for conservation research, education and entertai....
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....nt should act in coordination. A word caution was also added that the Court is not laying down a broad proposition that every company registered under Section 25 of the Act would be automatically entitled for registration under Section 12AA of the Act. But registration under Section 25 of the Companies Act is undoubtedly a relevant factor to be noted while considering an application for registration under Section 12AA of the Act as registration under Section 25 of the Companies Act recognises the main objectives of the company as a non-profit organisation. As noted above, this aspect of the matter has not been dealt with by the tribunal which in our opinion ought to have been and if taken into consideration the decision should lean in favour of the assessee. 15. The next aspect is as to whether the assessee company was engaged in educational activities. The tribunal would hold that it is only RBI which is educating the public by establishing the museum and the assessee is only a contractor. This aspect was dealt with in Thanthi Trust and after referring to various decisions of the Hon'ble Supreme Court it was held that the word "education" occurring in Section 2(15) of the Act has....