TaxTMI 
TaxTMI 
2022 (2) TMI 975
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....iven in the memorandum and the definition of charitable purpose in the section 2(15) of the Act in the following table: Sr. No Object as given in memorandum Relevant Charitable purpose mentioned in section 2(15) and if any actual activity undertaken 1. To inculcate and promote new social values, secularism and national integration and spread a humane, self-reliant and rational outlook on life. Advancement of General Public utility 2. To perpetuate the memory of late Shri Jawaharlal Nehru by undertaking educational social cultural medical relief and other charitable activities for the welfare of children and especially weaker sections of the community. No systematic education by normal schooling has been undertaken by the assessee. No activities related to medical relief are undertaken by assessee. The rest of the objects can be termed as Advancement of General Public utility. 3. To promote the cause of education, art, culture and communal harmony and to undertake scientific, statistical and other research in social and other sciences and technology for the advancement and emancipation of our countrymen. No systematic education by normal sch....
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.... to section 2(15). Not incidental as hall was used by outside agencies mostly. No separate books of accounts maintained. 4. Compensation received for providing art persons throughout the year 9,77,850 At the most as General Public utility. It is in the nature of business and rendering services to trade, commerce of parties. Hit by first proviso to section 2(15). Not incidental as gallery was used by outside agencies mostly. No separate books of accounts maintained. 5 Compensation received for a providing Hall of harmony for 126 outsider conferences throughout the year 7,61,800 At the most as General Public utility. It is in the nature of business and rendering services to trade, commerce of parties. Hit by first proviso to section 2(15). Not incidental as hall was used by outside agencies mostly and that too for commercial purposes/conference s/meetings No separate books of accounts maintained. 6 Compensation received for providing lecture hail for various 258 outsiders functions throughout the year 5,59,277 At the most as General Public utility. It is in the nature of business and rendering services to trade, commerce of parties. Hit by....
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....rst proviso to section 2(15); it has no more charitable purpose. Hence it is not income derived from property "held for charitable purpose". Hence cannot be claimed as exempt. 4. During assessment proceedings, the assessee was asked why receipts of the assessee should not be taxed denying exemption claimed u/s.11 of the Act vide letter dated 25/02/2013. In response, assessee submitted vide letter dated 6.3.2013 that basic objects of the Centre or to inculcate and promote Indian arts, educate children in the field of science, arts, history and social response by Centre not only educates people at large but about astronomy through professional astronomers but also generate interest in physics the Centre also conduct exhibitions to exhibit the art of poor artists, coming from remote parts of India and thus provides relief to the artists in the form of sale of their art as well as promoting their skills. It also conducts various competitions which include rowing competitions/poetry/painting and match fees for children including physically challenged children, thereby educating them and improving their artistic skills. All these activities are in the nature of education as well as re....
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....the same and files service tax returns in respect of income earned this way. 10.3 It is giving its space for commercial exhibitions providing auditorium where there is outsiders programs like meetings, corporate functions, conferences, renting its gallery for professional artists letting its gallery theatre for outside theatre and media companies, providing dubbing units for outside media and theatre companies etc. considering its frequency, nature and volume of activities it can be said that its activities are in the nature of business and rendering services in relation to business and commerce of other parties like other commercial companies whose products are exhibited at its space and media companies and commercial entertaining companies whose shows etc are organized at its premises. Hence it is hit by provisions of proviso to section 2(15) of IT act 1961. 10.4. Assessee's argument that it is undertaking educational activities and activities of relief to poor is stretching the things to unrealistic limits in the light of of fact of what actually it is doing as its major activity. It claims that it is educating people in astronomy and in, enriching the cult....
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....any objection on admission of additional grounds. Based on the submissions of Assessing Officer, Ld.CIT(A) admitted the additional grounds and decided the issues. The detailed submissions of the assessee are reproduced below: "During the assessee proceedings, the appellant made following submissions: Kindly refer to the aforesaid matter in which the written submission was made by the appellant Trust vide its submission dated 6" February 2016. Further the Additional Grounds were also filed. Consequently your predecessor was pleased to call for a Remand Report from the Learned AO on the Additional Grounds. During the course of the remand report proceedings we have also made written Submission to the AO. The Learned AO has already submitted the remand report in compliance to directions of your predecessor. As there are quite a few submissions been made in this case, thus as desired by your good-self we are submitting a Consolidated Written Submission herein under: 1) This is an appeal by the Appellant against the orders of DCIT(E) Mumbai. 2) Briefly stated, assessee, the appellant trust filed total income at NIL. The Assessee claimed exempt....
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....fined as: The wealth of knowledge acquired by an individual after studying particular subject matters or experiencing life lessons that provide an understanding of something. Source - www businessdictionary com Education is the process of facilitating leaning, or the acquisition of knowledge, skills, values, beliefs, and habits. Educational methods include Storytelling, discussion, teaching, training, and drrected research. Education frequently takes place under the guidance of educators, but learners may also educate themselves. Education can take place in formal or informal settings and any experience that has a formative effect on the way one thinks, feels, or acts may be considered educational. Source - wikipedia. With reference to the promotion of educational activities undertaken by Nehru Centre, it has been stated that there is no systematic education by normal schooling method. It is submitted that apart from imparting instructions in a@ class room of a school following a prescribed syllabus, there are other methods of imparting education as well. Science, be it physics, chemistry or biology, can best be taught through demonstrations in a laborato....
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....s a unique exhibition, the like of which is nowhere else in India. It is not a mere exhibition. It is a vibrant class room where India's history of five thousand years is taught in the most lucid and intelligible manner. Students from Standards VIII to X doing projects on Indian history visit the Discovery of India Exposition and spend hours studying a particular period with which they may be dealing. One can get transported to the Harappan and Aryan civilizations and can witness the empires of the Mauryas, the Mughals and the British. One can walk along the rugged and invincible forts of the Marathas and one can relive the freedom movement and the dawn of independence. If this is not education what else is? (Over 2 lakh people visited the exposition during the year). Details of the educational activities carried out by Nehru Centre are attached as (Enclosure A) to this submission. it has been clarified above how Nehru Centre's activities do not fall under the category of advancement of any other object of general public utility. It is now clarified that no activity of Nehru Centre falls under the category of trade, commerce or business nor is it related to trade,....
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....er are not trade, commerce or business. It further held that ICAI providing funds to ICAI Accounting Research Foundation would not violate Section 13 of the Act - Institute of Chartered Accountants of India vs. DIT(E) (2013) 35 140 (Delhi). 2) Ground of Appeal No. 2 : The Assessing Officer erred in taking the view that the receipts from hiring of property of the centre are not an income derived from property held under trust. There is no denying of the fact that the properties held by the Appellant Trust are all properties held under Trust. Hence any income arising from such properties are income derived from property held under trust for charitable purposes and hence exempt u/s 11(1) of the Act. The Appellant Trust does not hold any business undertaking and hence the provisions of Section 11(4) of the Act are not applicable. Here also the decision of the Hon. Delhi High Court sighted above is relevant and we rely upon the same. Hence, the income derived from hiring of the property held under trust continues to be exempt from tax. 3) Ground of Appeal No. 3 : The Assessing Officer erred in taking the view that the receipts (compensation c....
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....ness motive in the operation of the Trust. Hence, the AO erred in holding otherwise. 7) Ground of Appeal No.7 : Without prejudice to the foregoing, fhe Assessing Officer erred in law in taking the view that the activities carried out by the trust are in the nature of commercial activity as it charges service tax on the compensation and the hiring charges. Charging of service tax is stipulated as per the provisions of Section 64 of the Finance Act, 1994 which are entirely different and not-related to the provisions of the section of Income Tax Act 1961 applicable to the charitable trust. The Service Tax is applicable to a Charitable Trust in case of services which are availed of. That by itself cannot make the activities of the trust as commercial activity. A charitable trust has also to deduct tax at source from several payments including salary to staff as required by the Provisions of Income Tax Act. That by itself cannot make the income of the Trust taxable. 8) General The AO has grossly erred in not allowing all the expenses of the Appellant trust including capital expenditure amounting to Rs..1,22,28,971/ as application of income co....
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....rs. It is true that principles of res judicata are not applicable to the income tax proceedings. But, at the same time it is also true that principles of consistency have to be followed while deciding the tax matters. In the case of International tractors Ltd., the Hon'ble Delhi High Court (397 ITR 696) has held that deductions allowed in the earlier assessment years should not be withdrawn unless the circumstances have changed. The Hon'ble Allahabad High Court in the matter of Zazsons export Ltd. (397 ITR 400) has held as under: In order to maintain consistency, a view, which had been accepted in an earlier order ought not to be disturbed unless there was any material to justify the Department to take a different view of the matter." While deciding the appeal, the Hon'ble Court had taken note of the proceedings of the earlier AY.s. As the rule of consistency has not followed without bringing distinguishing features of the year under appeal, as compared to the facts of the earlier years, so, in our opinion the order of the FAA cannot be endorsed on this count. A.Y. 2009-10 Assessment Order u/s 143(3) received, total income assessed as NIL. (En....
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....st and admittedly the auditorium was incidentally let out to outsiders for commercial purpose. It thus cannot be said that such letting our would fall within the first proviso to section 2(15) of the Ac. [Emphasis supplied] (b) Shri Vile Parle Kelvani Mandal 378 ITR 593 (Bom) which held as under:- "The educational institutions require funds. The Income is generated form giving various halls and properties of the educational institution on rental only on Saturdays and Sundays and on public holidays when they are not required for educational activities then, this cannot be said to be a business which is not incidental to attain the objects of the trust. This being merely an incidental activity and the income derived form it is used for the educational institute and not for any particular person, separate books of account are also maintained, then, this income cannot be brought to tax. This conclusion is also not perverse and given the facts and circumstances which are undisputed". [Emphasis supplied] We again rely upon the recent Bombay ITAT judgment in the Case of SH - Trust, wherein at para 6 it is stated - "We find that the main objecti....
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.... past, such activities had been found to be incidental to the objects of the trust. Secondly, the donation received during the year had been utilised in the assessment year 2009-10 for achieving the object of the trust. However, the bank interest received was continued and, then, there was a deficit. It was in these circumstances that the argument was canvassed that the fees collected for training women were only to meet the cost of expenses for providing them food items. Their accommodation and other facilities were free of cost, The Tribunal found that the trust may be set up for advancement of any other object of general public utility but that would not cease fo be charitable purposes because the activities in which the trust was involved could not be termed as carrying on of trade, commerce or business, that the activity undertaken did not partake of the character of trade, commerce or business nor of rendering of any service in relation thereto but was only to teach or impart skills and to instill confidence that the produced goods or articles were sold. To that extent also deficit had occurred. The Tribunal took a view that occasional sales or the trust's own fund generation....
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....of the Trust, could maintain and made addition in to the Trust property only on account of income received from the letting out of the trust assets. JUDGMENT OF JURISDICTIONAL TRIBUNAL IS BINDING We submit that the Jurisdictional Bombay High court in the case of Bank of Baroda Vs H.C. Srivastava 256 ITR 385 held that "decision of jurisdictional Tribunal is binding on the lower authorities including the AO. Accordingly, we submit the recent judgment of Mumbai ITAT in the case of Shri Sanmukhanand Fine Arts and Sangeetha Sabha supra is binding in the case of the appellant and should be followed accordingly DEDUCTION U/S 11 CANNOT BE DENIED IF REGISTRATION U/S 12A HAS NOT BE REVOKED We submit that the assesse has been granted registration u/s 12A of the Act and it was not revoked, so the AO is not entitled to declare the activities of the trust as non-charitable, even otherwise also it is not a case of the AO that the activities of the trust are non-charitable. (i) The Gujarat High Court in the case of Ahmedabad Urban Development Authority 335 ITR 575 held as under: "Thus granting the registration u/s 12AA, therefore, cann....
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....n, irrespective of the nature of use or application, or retention of the income from such activity. 2. The following implications arise from this amendment - 2.1 The newly inserted proviso to section 2(15) will not apply in respect of the first three limbs of section 2(15), i.e., relief of the poor, education or medical relief. Consequently, where the purpose of a trust or institution is relief of the poor, education or medical relief, it will constitute 'charitable purpose' even if it incidentally involves the carrying on of commercial activities. [Emphasis supplied] 2.2. 'Relief of the poor' encompasses a wide range of objects for the welfare of the economically and socially disadvantaged or needy. It will, therefore, include within its ambit purposes such as relief to destitute, orphans or the handicapped, disadvantaged women or children, small and marginal farmers, indigent artisans or senior citizens in need of aid. Entities who have these objects will continue to be eligible for exemption even if they incidentally carry on a commercial activity, subject, however, to the conditions stipulated under section 11(4A) or the seventh proviso to section 10(....
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....ic utility' is a question of fact. if such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled to claim that its object is charitable purpose. In such a case, the object of 'general public utility' 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. Assessees, 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 or the rendering of any service in relation to any trade, commerce or business. (ii) Kindly note the para no, 2.1 of that circular specifically states that when the case is covered under first three limbs i.e. Relief to the poor, Education & Medical the proviso of section 2(15) will have no effect. We submit that the case of the appellant is covered under the first limb as the main object of the appellant Tru....
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....he benefit of section 11. Here, we would like to refer to the case of Ahmedabad Urban Development Authority (396 [TR 323) of the Hon'ble Gujarat High Court wherein the court has held as under: "The introduction of the proviso to section 2(15) of the Income-tax Act, 1961, by virtue of the Finance Act, 2008 was directed to prevent the unholy practice of pure trade, commerce and business entities from masking their activities and portraying them in the garb of an activity with the object of a general public utility. It is 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. The expressions trade, commerce and business as occurring in the first proviso to section 2(15) must be read in the context of the intent and purport of section 2(15) of the Act and cannot be interpreted to mean any activity which is carried on in an organized manner. The purport of the first proviso to section 2(15) of the Act is not to exclude entities which are essentially for charitable purposes but are conducting some activities for a consideration or a fee. The test which has, therefor....
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....ivity which is carried on in an organised manner. The purpose and the dominant object for which an institution carried on its activities is maternal to determine whether the same is business or not. The purport of the first proviso to section 2(15) of the Act is not to exclude entities which are essentially for charitable purpose but are conducting some activities for a consideration or a fee. The object of introducing the first proviso is to exclude organisations which are carrying on regular business from the scope of 'charitable purpose". The expression "business", "trade" or "commerce" as used in the first proviso must, thus, be interpreted restrictively and where the dominant object of an organisation is charitable any incidental activity for furtherance of the object would not fall within the expression "business", "trade" or "commerce". In light of the above discussion, we decide the first ground of appeal in favour of the assessee. AS we have allowed first ground of appeal, so, we hold that Gs.AO 2.4 and 5 have become infructuous. Hence we are not adjudicating them. We submit the aforesaid judgment squarely covers the case of the appellant as the appellant....
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....n cases which enjoyed exemption but were in reality the same were carrying out commercial / business activities, and not paying any Taxes. The GOI and FM's intention to Amend provisions of Sec 2 (15) by Financial Act 2008, was to bring to tax certain "Nature of General Public Utility Service", (GPUS), which under the GARB of "Charitable Purpose" and having obtained exemption U/S 12 A, were in reality carrying out mainly or predominantly Business or Commercial Activities and not Charitable Activates. To book such Assessees, Amendment was introduced in the Act. Prior to Ass yr 2009 -10, no dispute was there between the |T Department and the Assessee regarding taxability of its Receipts. The AO always respected the exemption granted by CIT & enjoyed by the Assessee. THE ASSESSEE IS APPROVED BY THE COUNCIL OF SCIENTIFIC AND INDUSTRIAL RESEARCH THE PRESCRIBED AUTHORITY FOR PURPOSES OF CLAUSE II OF SUBSECTION 1 OF SECTION 35 OF THE INCOME TAX ACT 1961 VIDE NOTIFICATION NO. S.0.1323 DATED MAY 07 1974. ENCLOSURE-B This shows that the Revenue Authorities have acknowledged that Nehru Centre imparts Scientific and Industrial Research related education S....
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....d the activities carried on by the assessee that 'the predominant activity of the assessee has been to run Nehru Planetarium', 'Discovery of India Hall' and organise the Painting and Photographic Exhibitions' and organize seminars on the history of India and Nehruvian thoughts from time to time. It appears from the records that the AO has tried to define the word 'education' in narrow terms whereas 'education' is a very wide term which covers not only the skills and information imparted in schools and colleges but also covers the entire field of any institution which disseminates 'information and skills' not only offline but online as well and that is also not confined to basic education like languages, sciences and history and geography, but also encompasses the entire gamut of universe. For example, running of the planetarium and exhibition about astronomy is a living example of teaching different facets of astronomy by a live demonstration of the universe through a film on a semicircular dome in darkness and then exhibiting various historical facts in the field of astronomy by displaying photographic exhibits and cardboards with information is an exercise similar to imparting kn....
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.... a nominal fee and government has also given it a grant in aid running into crores of rupees for running the institution and this institution and its activities are also recognized by the Govt Of India and Govt Of Maharashtra. In nutshell, it is established beyond doubt that the assessee was established for the dissemination of knowledge which is equivalent to imparting knowledge in the field of Astronomy and Science and History and this activity has been carried on by it during the assessment year under reference as evident from the page 5 to 16 of the 39" Annual Report for the year ended 31% March 2010. Further, on this subject, the analysis of the proviso to section 2(15), the Finance Minister's speech in the Parliament and CBDTs clarification as discussed by the Hon'ble High Court of Gujarat in the case of Sabarmati Ashram Gaushala Trust 362 ITR 539 is mentioned herein below: a "4. Term "Charitable Trust" is defined in Section 2(15) of the Act which includes the relief to the poor, education, medical relief, preservation of environment; including watersheds, forests and wildlife and preservation of monuments or places or objections of artistic or historic inter....
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....e an explanatory circular containing guidelines for determining whether any 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". 6. In consonance with such assurance given by the Finance Minister on the floor of the House, CBDT issued a Circular No. 11 of 2008 dated 19th December 2008 explaining the amendment as under:- 3. The newly inserted proviso to section 2(15) will apply only to entities whose purpose is advancement of any other object of general public utility i.e., the fourth limb of the definition of charitable purpose contained in section 2(15). Hence, such entities will not be eligible for exemption u/s 11 or u/s 10(23C) of the Act if they carry on commercial activities. Whether such an entity is ca....
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....ory provisions, as explained in the speech of Finance Minister and the CBDT Circular, is that the activity of a trust would be excluded from the term charitable purpose if it is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business for a cess, fee and/or any other consideration. It is not aimed at excluding the genuine charitable trusts of general public utility but is aimed at excluding activities in the nature of trade, commerce or business which are masked as charitable purpose. 8. Many activities of genuine charitable purposes which are not in the nature of trade, commerce or business may still generate marketable products. After setting off of the cost, for production of such marketable products from the sale consideration, the activity may leave a surplus. The law does not expect the Trust to dispose of its produce at any consideration less than the market value. If there is any surplus generated at the end of the year, that by itself would not be the sole consideration for judging whether any activity is trade, commerce or business - particularly if generating surplus is wholly incident....
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....ion 2(15) will not apply in the assessee's case despite the fact that the objects of the trust are only in the nature of "advancement of any other object of general public utility". 3. The appellant prays that the order of the Commissioner of Income Tax (Appeals)-1, Mumbai be set aside and that of the Assessing Officer be restored. 4. The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary." 10. In the above grounds of appeal revenue is aggrieved with the finding given by the Ld.CIT(A) on proviso to section 2(15) of the Act and the contention of the revenue is that the object of the trust is only in the nature of advancement of any other object of the general public utility. 11. Before us, Ld. DR vehemently argued and relied on the finding of the Assessing Officer and submitted that the object of the assessee will fall in the category of advancement of any other object of the general public utility. The operations carried on by the assessee are in the nature of commerce or business specially looking into the proportion of receipts from such activities. Therefore, the activities carried on by the assessee are not exe....
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....form of organizing various workshop/lectures/Conferences apart from providing the certificate course. It is also fact on record that assessee is also carrying out activities such as Annual Exhibitions for poor artists and exhibitions held in the hall of Arts, the Nehru Center also organizes programs on Music and Culture etc., it is also submitted that Council of Scientific and Industrial Research has approved the assessee's trust for the purpose of section 35(1) of Clause (ii) of the Act. 14. We also observe from the record that Assessing Officer has accepted that some of the activities assessee undertakes in the field of education and it spent some income on these activities. Therefore, Assessing Officer has not disputed the fact that assessee is engaged in the activities of Education and relief to poor. We are in agreement with the findings of the Ld.CIT(A) that the term education should be understood in common parlance and should not be mixed up with the mode of giving education. With the advancement in technology the education can be provided on electronic gadgets also. Therefore, we do not find any reason why assessee should not be treated as engaged for imparting education....