TaxTMI 
TaxTMI 
2022 (7) TMI 786
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....on 27-7-2020 and 28-12-2020 i.e. during the outbreak of Covid 19 pandemic. That being the case, we condone the impugned delay for this precise reason alone. 3. Coming to merits, we find that assessee's identical grievance in both these appeals is that it is entitled for section 11 exemption in entirety which has been disallowed in the corresponding assessments but accepted in part to the extent of "mutuality" benefit only in the CIT(A)'s order. The Revenue's endeavour in both of its cross appeals is that the assessee nowhere fulfill the three monetary conditions of being a "mutual" organization in light of Bangalore Club Vs. CIT ) (2013 350 ITR 209 (SC). 4. We have given our thoughtful consideration to the foregoing rival contentions. We note during the course of hearing the issue of assessee's entitlement for section 11 exemption under the provisions of the Act is indeed a recurring one all along, This tribunal's co-ordinate bench order dated 03-09-2020 in ITA No. 2338 and 2339/PUN/2016 for A.Y. 2011-12 and 2012-13 has decided the same against the department as under: "4. There are two basic questions to be adjudicated in both these appeals (i) w....
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....e assessee, the aggregate value of the receipts during the year exceed Rs. 10 Lakhs and therefore, the constraints or restrictions placed under the first proviso i.e. advancement of object of general public utility shall not be a charitable purpose, if it involves activity of trade, commerce or business etc. and these are being examined with reference to the nature of activities of the assessee, receipts and the statements of accounts of the trust to find out whether the receipts of the assessee are in the nature mentioned in the first proviso to section 2(15) or not. On such examination, it is found that the trust had shown income of Rs. 11,18,546/- from exhibition activity. The examination of the statements of account and other information prima facie indicated that most of the receipts of the assessee are in the nature mentioned in the first proviso to section 2(15) of the Act. 5.3 Before the Assessing Officer, the assessee has contended that they are engaged in the activity in the nature of object of general public utility and it is nonprofit making organization and its objects as mentioned in the constitution are purely of charitable in nature and none of the activiti....
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....ereafter, as per the detailed reasoning in his order, the Ld. CIT(Appeals) upheld the order of the Assessing Officer stating that though the Assessing Officer cannot cancel the registration of the assessee trust, however, he can withdraw the exemption and accordingly, the exemption u/s. 11 of the Act for both the assessment years as denied by the Assessing Officer, was upheld by the Ld. CIT(Appeals). 7. At the time of hearing, the Ld. AR of the assessee vehemently argued that the assessee trust has got registration u/s. 12A of the Act and the certificate is placed at Page 19 of the paper book. Thereafter, referring to the objects of the assessee trust placed at page 20 onwards of the paper book, he drew our attention to Clause (vii) therein. For ready reference, the same is extracted as under: "(vii) To improve and elevate the technical and general knowledge of persons engaged in or about to be engaged in the building trade or any employment, in connection therewith by arranging lectures, conducting classes, exhibition, meetings, seminars etc and to award certificate or distinction and medals, trophies and prizes and also institute and establish or to held in esta....
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....een brought to bring in the tax net the entities operating on commercial lines and are claiming exemption on their income u/s. 11 of the Act. Thus, the amendment is not applicable to the institutions like assessee which are charitable institutions right from its inception. The Ld. AR of the assessee also drew our attention to Circular No. 11 of 2008 dated 19th December, 2008 and in Para 3 of this circular, it is clearly mentioned that such entities will not be eligible for exemption u/s. 11 or section 10(23C) of the Act if they are carrying on commercial activities. Thus, the exemption is to be denied only to the entities which are carrying on commercial activities and the circular is also not applicable to the case of the assessee. That further for any charitable trust, it is not practicable to incur expenses on all the objects of the trust in every year. Merely because, in this year, there were no expenses for weaker section of the society i.e. labour class and their family, it does not prove that the assessee trust is profit making organization. On the contrary, the assessee is working for the business community of Pune which is also within the objects of the assessee trust and ....
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.... 9.2 The Ld. AR vehemently submitted that the assessee trust is not charging any subscription from people attending the exhibitions and conducting exhibition activities is only for furtherance of the object of the trust specifically mentioned in Clause (vii) as per Memorandum of Objects. We have considered the entire submissions of the Ld. AR as placed on record. 9.3 That before us, the Ld. DR could not place on record any evidence that the assessee trust was collecting subscriptions nor could point out from the order of the Assessing Officer or Ld. CIT(Appeals) that they have conducted any examination or verification of facts to come to conclusion that the assessee trust was charging subscriptions or that it was working for profit. It is therefore, the case of allegation without any evidence and proof. The Ld. DR also could not place on record any evidence or case laws wherein at a given particular year, for all objects of the charitable trust, expenses have to be incurred. Therefore, in this case, during the year under consideration, if no expenditure has been incurred for the upliftment of labour classes which is one of the object of the assessee trust, it does no....
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.... to carrying on any activity in the nature of business, trade or commerce or rendering of services in business, trade or commerce so as to attract the proviso to section 2(15). For that we will venture to examine the actual activities carried out by the assessee during the year, which can be traced from the income side of the assessee's Income and expenditure account, a copy of which is available on page 59 of the paper book. First item is Annual membership subscription amounting to Rs. 1.81 crore. This comprises of annual membership subscription and admission fees. The Ld. AR submitted that the assessee has 46 regular members who pay annual fees of Rs. 7.50 lac and there are roughly 350 temporary members who pay @ Rs. 50,000/- per annum. No carrying on of any business can be inferred from receipt of annual membership subscription by the assessee, which is a regular feature ab initio. Next item is Technical literature publications receipt amounting to Rs. 1.93 lac. This was stated to be receipt of some amount for bringing out publications in relation to the automobile industry etc. This amount received for publication of some technical literature concerning the automobile indus....
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.... of growth of the automobile industry in India which is an object of general public utility. The activities of the assessee in organizing seminars and conferences, etc. can be seen de hors its main object of general public utility so as to bring the case within the ambit of first proviso to section 2(15). Even if there has generated some excess of receipts over expenses in doing these activities, the same is a normal incidence of the activity of promotion of automobile industries and cannot be characterized as doing any business etc. or rendering of any services in connection with business etc. Since the AO has denied the benefit of sections 11 and 12 on the ground that the assessee did not fall within the scope of charitable purpose defined in section 2(15) of the Act because of carrying on or rendering of any services in business, trade and commerce, which in our considered opinion is not a correct interpretation of the provision, we direct to grant such benefit to the assessee. The impugned order is overturned pro tanto." 11. Similarly, in the case of Assistant Commissioner of Income Tax Vs. Mahratta Chamber of Commerce Industries and Agriculture (supra.), the Pune Benc....
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..... We say so, because, 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, as pointed out above, in Arun Kumar case (supra). We further find that the Hon'ble Gujarat High Court in the case of Sabarmati Ashram Gaushala Trust (supra) has held as under: "Important elements of application of proviso to Section 2(15) are that entity should be involved in carrying on activities of any trade, commerce or business or any activities of rendering service in relation to any trade, commerce or business, for a cess or fee or any other consideration. Activity of a trust would be excluded from term "charitable purpose" if it is engaged in any activity in 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 genuine charitable trusts of general public ....