TaxTMI 
TaxTMI 
2021 (11) TMI 1024
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....11 is challenging the denial of exemption u/s.11 of the Income Tax Act, 1961 ('the Act' for short). The ground nos. 2 to 4 raised by the assessee for A.Y. 2010-11 are with regard to applicability of proviso to section 2(15) of the Act. 4. We have heard the rival submissions and perused the material available on record. At the outset, the ld. Authorised Representative (ld. AR for short) before us stated that these grounds are fully covered in favour of the assessee by the order of this Tribunal in assessee's own case for A.Y. 2009-10. He also stated that the ld. Assessing Officer (ld.A.O. for short) for all the years under consideration had apparently placed reliance on the findings recorded by his predecessor A.O. in A.Y. 2009-10. The ld. AR also submitted that even the ld. CIT(A) had relied on the order passed by his predecessor for A.Y. 2009-10, while disposing of the appeals for the A.Ys. 2010-11, 2011-12, 2012-13 and 2014-15, i.e., the years under consideration. 5. Both the parties mutually agreed before us that the facts together with the varied streams of income of the assessee that prevailed in the A.Y. 2009-10 are exactly identical to that prevailing in A.Ys. 2010-11,....
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....nder section 12A of the Act by order dated 22.09.1998. Upto and including the assessment year 2008-2009 the assessments were made granting exemption under section 11 of the Act. For the assessment year under consideration, the assessee filed its return of income on 30.09.2009 claiming exemption under section 11 of the Act. A copy of the computation of income and the audited financials for the assessment year under consideration is enclosed at pages 1 to 10 of the paper book of the assessee. The assessee's return was selected for scrutiny assessment. The ITO called for various details, which were submitted from time to time. Meanwhile the Director of Income-tax (Exemptions) Mumbai [in short DIT(E)] passed an order dated 16.12.2011 under section 12AA(3) of the Act withdrawing the registration under section 12A of the Act on the ground that the assessee is not covered under the term "charitable purpose" as defined in section 2(15) of the Act. The assessee filed an appeal before the Income-tax Appellate Tribunal (ITAT). 4. We noted the fact that the assessee received an assessment order dated 29.12.2011 passed by the ITO under section 143(3) of the Act wherein the ITO denied exe....
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.... relation to the trade and business of Bombay Presidency but is also accepting fees, cess or other consideration for providing such services The appellant is also accumulating the income and as such is also getting a good interest income on it. However, during the course of appellate proceedings, the appellant had totally failed to demonstrate and had not brought any documentary evidence on record which could prove that the activities are of non-commercial nature and without a profit motive. The 2nd question that needs to be answered is whether the 1st and 2nd Provisos to Sec.2(1 5) would apply to the appellant. As per the 15 proviso to Sec 2(15), the last limb of Sec.2(15) being the advancement of any other object of general Public Utility' shall not be regarded as 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 The 2nd proviso to Sec.2(15) states that the 1st proviso shall not app....
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....ing activity as under- 'It seems to me that a common concept or element of charity is shared by each of the four different categories of charity. It is true that charity does not necessarily exclude carrying on an activity which yield profit, provided that profit has to be used up for what is recognized as charity. The very concept of charity denotes altruistic thought or action. Its object must necessarily to benefit others rather than ones self. Its essence is selflessness In a truly charitable activity any possible benefit to the person who does the charitable act is merely incidental and immaterial. The action which flows from charitable thinking is not directed towards benefiting ones self. It is always directed at benefiting others. It is this direction and thought and effort and not the result of what is done, in terms of financially measurable gain, which determines that it is charitable. This direction must be evident and obligatory upon the trustee from the terms of a deed of trust before it can be held to be really charitable. We think that this governing idea of charity must qualify purpose of every category enumerated in section 2(15) of the Act 1961. We thin....
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....; will be only a mask or a device to hide the true purpose which is trade, commerce or business or the rendering of any service in relation to trade, commerce or business. Each case would, therefore, be decided on its own facts and no generalization is possible. Assessee, who claim that their object is 'charitable purpose" within the meaning of section 2(15), would be well advised to eschew any activity which is in the nature of trade, commerce or business. [Circular No. 11 of 2008, dated 19th December, 2008]. I had also gone through the order of A' Bench of ITAT, Chandigarh in the case of Chandigarh Lawn Tennis Association v. ITO(E), Chandigarh (ITA No.1382/CHD/2016) for AY 2013-14., wherein amendment to proviso to section 2(15) was thoroughly analysed and discussed. As per the clarification, the dealings of trade and industry associations with any nonmembers for activities in the nature of trade commerce or business would not qualify for tax exemption and would be liable to tax under section 28(iii) of the Act. Each case would, therefore, be decided on its own facts and no generalization is possible. The circular also cautions that the assessee, who claim that th....
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.... appeal nos. 1 to 3 are dismissed Aggrieved, assessee came in appeal before tribunal on this very issue. 7. We have heard the rival contentions and gone through the facts and circumstances of the case. We have noted the objectives of the assessee which inter alia are as under: a. to promote and protect the trade, commerce and manufacturers of India and in particular the trade," commerce and manufacturers of the Bombay Presidency; b. to consider all questions connected with trade, commerce and manufacture; c. to collect and circulate statistics and other information relating to trade, commerce and manufacture; d. to promote or oppose legislative and other measures affecting trade, commerce and manufacture; e. to communicate with Chambers of Commerce and other mercantile and public bodies throughout the world, and concert and promote measures for the protection of trade, commerce and manufacture and persons engaged therein; f. to arbitrate in the settlement of disputes arising out of commercial transactions between parties willing or agreeing to abide by the judgment and decision of the Association; g. to pay out of the fluids of the Association the costs, ....
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....rtistic 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 application, or retention, of the income from such activity. Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is ten lakh rupees or less in the previous year". 11. Further, learned counsel for the assessee invited our attention to the speech of Finance Minister and the relevant extract of the speech is reproduced hereunder:- "180. 'Charitable purpose' includes relief of the poor, education, medical relief and other object of general public utility. These activities are tax exempt, as they should be. However, some entities carrying on regular trade, commerce or business or providing services in relation to any tr....
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....iscussion before the Supreme Court in ACIT v. Surat Art Silk Cloth Manufacturers Association (121 ITR 1) (SC). The majority view was that the condition that the purpose should not involve the carrying on of any activity for-profit would be satisfied if profitmaking is not the real object. The theory or dominant or primary object of the trust has, therefore, been treated to be the determining factor, even in regard to the fourth bead of charity, viz the advancement of any other object of general public utility, so as to make the carrying on of business activity merely ancillary or incidental to the main object. Further, in CIT v. Federation of Indian Chambers of Commerce & Industries (130 ITR 186) (SC) a question was raised before the Supreme Court regarding the interpretation of the words "not involving the carrying on of any activity for profit" in the definition of "charitable purpose" contained in section 2(15) of the Act. 15. The learned Counsel for the assessee relied on the decision of Hon'ble Delhi High Court in the case of India Trade Promotion Organization V. DGIT(E) (371 ITR 333) (Del) and argued that the petitioner had challenged the constitutional validity of the pro....
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....f general public utility and that exception is limited to activities 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. In both the activities, in the nature of trade, commerce or business or the activity of rendering any service in relation to any trade, commerce or business, the dominant and the prime objective has to be seen. If the dominant and prime objective of the institution, which claims to have been established for charitable purposes, is profit making, whether its activities are directly in the nature of trade, commerce or business or indirectly in the rendering of any service in relation to any trade, commerce or business, then it would not be entitled to claim its object to be a 'charitable purpose On the flip side, where an institution is not driven primarily by a desire or motive to earn pro/its, but to do charity through the advancement of an object of general public utility, it cannot but be regarded as an institution established for charitable purposes. (para 58) 16. On applying the aforesaid tests laid down by the Delhi High Court....
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....d manufacturers of India and in particular the trade, commerce and manufacturers of the Bombay Presidency; consider all questions connected with trade, commerce and manufactures. The representational functions of the appellant relating to providing a channel of communication with government and other regulators and to improve the efficiency and working of members, etc. are also carried out through seminars, conferences, training and exhibitions. The participation fees meet the costs. The role and objective of the seminars is also to bring together the members on a common platform on mutually relevant topics. In this case also, the participation fees meet the costs of the seminars conducted many a times an external venues which entail heavy expenditure which is recovered by the amounts received on seminar & training programs and conference & exhibitions. f. Advertisements - Rs. 26,15,000/-. This is for meeting publication and other expenses towards the monthly Bombay Chamber Review newsletter of the Chamber which is circulated to its members only. Complimentary copies are sent to the government, consulates etc. and the cost of the publication are, met by the corporate ad....
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....ee or any other consideration ". The Tribunal in para 32 stated as under: "We have already discussed the facts above in ITA No1491/Kol/2012 for AY 2008-09, which are unchanged in this appeal also i.e. for AY 2009-10 but in view of amendment in Section 2(15) of the Act vide Finance Act 2008, w.e.f 01/04/2009, whereby new proviso was inserted and according to lower authorities the activities of assessee association of conducting Environment Management Centres, meetings, conferences & seminars and issuance of certificate of origin were all in the nature of "rendering of service in relation to business, for consideration" and falling under the last limb of charitable purpose, i.e. "advancement of any other object of general public utility", thus covered by the proviso to section 2(15) of the Act. In connection to the above it would be relevant to know the amended section 2(15,) of the Act in view of legislative intent behind such amendment......................... 20. We noted that the Tribunal after considering the proviso to section 2(15) of the Act and the CBDT Circular No. 11/2008 dated 19.12.2008 (which was issued pursuant to the proviso being inserted in the Act) held in....