TaxTMI 
TaxTMI 
2022 (8) TMI 126
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.... in upholding the action of LD. A.O. in rejecting plea of the appellant that it is a mutual organisation and has participation of only its members and therefore its income is exempt on principal of mutuality 3. That on the facts and in the circumstances of the case the Ld. CIT (A) is wrong, unjust and has erred in law in not accepting in entirety the contention of the appellant that life membership fees/corpus donation are receipts of capital nature not chargeable to tax and instead setting aside the addition for determination of capital and revenue component therein by the A.O 4. That the Ld. CIT(A) is further wrong and has erred in law in upholding disallowance of following expenses made by the Ld A.O (a) Employees contribution to PF u/s 36 (1) (va): Rs 19064 (b) Prior period expenses: : Rs. 16545 5. That on the facts and in the circumstances of the case the Ld CIT (A)is wrong, unjust and has erred in law in not allowing deduction w/s 80G in respect of donation of Rs 40072 disallowed by the Ld. A.O in assessment. 2.1 Apropos Ground No. 1 and 2 of the assessee, brief facts of the case are that the assessee in the status of AOP filed the return of income for the as....
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.... running a Janopyogi Bhawan, organizing Jewellery show etc. are in the nature of business or commerce. The A.O. therefore asked the assessee to explain as to why in view of amended provisions of Section 2 (15) appropriate action u/s 13 (8) be not taken. The assessee association filed its explanation which is reproduced in assessment order. The A.O. did not find reply of assessee association acceptable and after referring to provisions of Section 2 (15) & provisions of Section 13 (8) of 1. T. Act, 1961 held that the assessee society has received an amount of Rs. 14,49,500/- as advertisement receipts and Rs. 1,22,165/- as subscription for journal Gem World published by the society; Rs.25,95,083/- as receipt from room facility and tourists, Rs.9,09,447/- as receipt from occasion of marriage and other functions organized at Janupyogi Bhawan and Rs.2,02,56,000/- from participation charges and Rs.4,37,996/- from advertisement amongst other income earned during Jewelles Association Show. These income constitute commercial activity and thus provisions of the first proviso to clause (15) of Section 2 read with section 13 (8) become applicable and the plea that the activities are charitable ....
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....o not find any infirmity in the observation and findings of the AO. The denial of exemption u/s 11 of the Act by the AO is therefore confirmed. Ground nos. 1 and 2 raised by the appellant are accordingly dismissed." 2.3 Aggrieved by the order of the ld.CIT(A), the ld. AR of the assessee has prayed that the ld. CIT(A) has erred in denying the exemption u/s 11 of the Act for which the ld. AR of the assessee has filed the written submission on Ground No. 1 and 2 which are interconnected. ''(1)That on the facts and in the circumstances of the case the Ld. CIT (A) is wrong, unjust and has erred in law in confirming finding recorded by the Ld. A.O. that the appellant association is not entitled to exemption u/s 11 and 12 of the I.T. Act, 1961 as its income allegedly constitute commercial activity and therefore provisions of first proviso to clause (15) of Sec.2 r.w. Sec. 13 (8) becomes applicable to it. In this connection it is submitted that section 2 (15) of 1. T. Act, 1961 defines 'charitable purposes' though in an inclusive rather than an exhaustive manner. The section brought on statute book remained as it is till 1-4-1984. Vide Finance Act, 1983, and with effect from 1-4....
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....dvancement of any other object of general public utility" In other words, the exclusion clause, by proviso to section 2 (15), was earlier triggered by "involvement in any activity in the nature of trade. commerce or business etc" but, post Finance Act, 2015 amendment, it will be triggered even if "such an activity in the nature of trade, commerce or business etc. is undertaken in the course of carrying out such advancement of any other object of general public utility". This substitution of proviso to section 2 (15), is thus a paradigm shift in the scope of the exclusion clause. So far as the scope of earlier provisos is concerned, the CBDT in Circular No. 11 of 2008 dated 19-12-2008 itself has, dealing with an assessee pursuing "the advancement of any object of general public utility", observed that "if such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in connection to trade, commerce or business, it would not be entitled to claim that its object is for charitable purposes" because" in such a case, the object of general public utility' will only be a mask or a device to hide the true purpose which is trade, commerce. o....
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....lity, till the end of the previous year relevant to the assessment year 2016-17, the activities will continue to be covered by the scope of section 2 (15). The allegations of the Assessing Officer, that the activities of association from which receipts are there are in the nature of business or commerce is not correct, since these activities were carried out with the larger and predominant objective of general public utility. It is not even the case of Ld. A.O. that the activities of the trusts do not serve the objects of the general public utility but he is of the opinion that these activities are in the nature of business or commerce. The registration granted to the assessee evidences that the objects of the assessee trust were advancement of objects of general public utility, and there is nothing to demonstrate any shift from this fundamental position. The allegation is only of the business or commerce but that does not obliterate the overall objects of general public utility and the admitted facts of the case. In view of above position of law. even post insertion of proviso to section 2 (15) but before 1-4-2016, when business activities are carried by the assessee trust "....
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.... & Jewellery trade of its members not only within India but Internationally where visitors know and assess the development of trade and Janopyogi Bhavan is to later social needs of members of jewellery trade such as function place etc on nominal charges. However the dominant and main object of the assessee is pursuing object of advancement of general public utility. The association is registered under Non Trading Companies Act, 1960 which specifically applies to entities which intend to apply their surplus or other income in promoting their objects and prohibits the payment of any dividend to its Members, it was to be utilized fully for the purposes of objects of the assessee. The assessee association has been recognized from last many years as an institution established for charitable purpose and thus had been done having regards to the objects of the association and its importance through out India which is not even disputed by Ld. A.O. In view of the above assessee association is primarily and mainly carrying out its activity for advancement of any other object of general public utility and any activity by it even if regarded as business or commerce if such activity is undert....
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....ble High Court held that even though fee are charged by the petitioner Institute for providing coaching classes and holding interviews with respect of campus placement, the said activity cannot be stated to be rendering of service in relation to any trade, commerce or business an such activities are undertaken by the petitioner institute in furtherance of its main object which has held earlier are not trade, commerce or business In the present case also the main activity of the assessee is conducting of the cricket match which falls under the category of general public utility This fact is not disputed by the Revenue All these activities an ancillary to the main activity. Therefore, we are of the considered view that the Assessing Officer was not justified in declining the exemption. Further the Hon'ble Surat ITAT Bench, Surat in a very recent case ACIT Vs Surat Cricket Association 139 Taxmann.Com 182 held that " There is no dispute that the assessee is a registered society having object of promotion of cricket and other sports in State as well as national level. The assessee is also having valid registration under section 12A(a) of Income tax Act. The registration under sec....
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....ted from various activities undertaken in furtherance of various sports. It is also matter of fact that prior to the impugned assessment year the assessee was granted exemption under section 11 of the Act." The assessee's main dominant and prime objective was to promote sports, not desire to earn profits but, object of promoting sports for Nation, it was clearly a charitable purpose. The important elements of application of proviso are that the assessee should be involved in carrying on the activities of any trade, commerce or business or any activities of rendering service in relation to any trade, commerce or business, which is clearly missing in the present case Thus, the Tribunal affirmed the order of Id CIT(A), and the grounds of appeal raised by the revenue were dismissed THE HON'BLE ITAT MUMBAI BENCH 'B' in case of Board of Control for Cricket in India (BCCI) Vs PCIT, Central Charge, Mumbai (2021) 132 Taxmann.Com 132 Dated 02-11-2021 held: Whether merely because IPL tournament was structured in such a manner that made it more popular, entertaining, resulting in more sponsorships and greater mobilization of resources, basic character of activity of po....
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.... year 2007-08 onwards. However, consequent as the amendment of Section 2(15) the exemption was withdrawn. On a writ petition for quashing the order and also the first proviso to Section 2(15) Held, allowing the petition that it was clear from the faces of the case that profit making was not the driving force or adjective of the assessee. It was registered u/s 25 of the Companies Act, 1950, which specifically applies to entities which intend to apply their profits, if any, or other income in promoting the objects and prohibits the payment to any dividend to its members. This made it clear that any income generated by the assessee did not find its way into the pockets of any individuals or entities. It was to be utilized fully for the purposes of the objects of the assessee. Prior to the ending with effect from April 1, 2009, the assessee had been recognized as an institution established for charitable purpose and this had been done having regard to the objects of the institution and its importance throughout India''. The assessee Association also upto ad even for AY 2009-10 and in AY 2011-12 ) regarded as an institution established for charitable purposes and had grad exemptio....
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....received from advertisements, sale of books and periodicals, magazine subscription, interest income on fixed deposits and cumulative deposits, etc. was hit by amended proviso to section 2 (15). It was noted that Memorandum of Association of assessee prescribed that income and property of association whensoever derived would be applied solely towards promotion of objects of association and that no portion thereof would be paid directly or indirectly to members of association. Further, upon winding up or dissolution of association, surplus remaining after satisfaction of all debts and liabilities, if any, would not be paid or distributed amongst members of association but would be given to some other association or institution having similar objects - Whether there was no justification for Assessing Officer to hold that since objects of assessee sought to promote and project interest of a particular trade and industry, same lost character of being charitable-Held, yes-Whether on fact that some of activities carried out by an entity involving charging of fee, etc. had resulted in a surplus could not ipso facto be determinative of fact that there was an element of profit motive-Held, y....
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....Gem and jewellery journal is distributed free of cost to its members in order to acquaint them with new changes and development in such field. The cost of the journal is partly recovered from advertisement of the members of the association only. Gem and Jewellery Show is also organized once a year for the benefit of the gem and jewellery trade. The modus operandi is that Show is organized at a large secured placed which is hired by the Assocaiton and the hiring charges and other expenditure i.e. security, light, govt. permission etc. etc. are distributed to the total area available for exhibition and display of the products of the members. Small places / booths are allotted to the members for display their products and the association charges the amount by taking average cost of the place and other expenditure as mentioned above. A Journal is also published for the show and the association meets partly expenditure from advertisement of the members in the said journal. The ld. AR further submitted that the receipts under the Gem Bourse are from the interest on FDR of the amount deposited by the members or allotment of business spaces in the proposed Gem Bourse Scheme of the Rajastha....
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....d 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" The assessee association is an organization similar to Chamber of Commerce. Thus, the appellant i.e. The Jewellers Association fulfills the above criteria and, therefore. owning to principles to mutuality its income is exempt, and these would not fall under the purview of the proviso to section 2 (15) of 1. T. Act, 1961.'' 2.4 On the other hand, the ld. DR supported the order of the ld. CIT(A). 2.5 We have heard both the parties and perused the materials available on record. In this case, it is noted that the AO while making the assessment has denied the exemption u/s 11 of the Act to the assessee holding that the activities of the assesee are purely commercial in nature and the provision of the first proviso to clause (15) of Section 2 read with Section 13(8) become applicable and the plea that the activities are charitable cannot be accepted in view of the amended provisions of Section 2(15) of the Act. However, in first appeal, the ld. CIT(A) has confirmed the ....
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....usiness 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. It is, where an institution is not driven primarily by a desire or motive to earn profits but to do the advancement of an object of general public utility, it cannot be regarded as an institution not carrying out charitable purposes. During the course of argument, the ld. AR of the assessee emphasized that the institution is running a Dharam Kanta to provide authenticate weight slip of gem stone & jewellery for the members of trade on a nominal fees, publishing of Gems & Jewellery Journal is for updating the members of trade on latest developments and education about the trade and income is by subscription and advertisement in journal, the Jewellers Association Show is to give exhibition place for promotion of Gems & Jewellery trade of its members not only within India but Internationally where visitors know and assess the development ....
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....o some other association or institution having similar objects - Whether There was no justification for Assessing Officer to hold that since objects of assessee sought to promote and project interest of a particular trade and industry, same lost character of being charitable-Held, yes- Whether on fact that some of activities carried out by an entity involving charging of fee, etc. had resulted in a surplus could not ipso facto be determinative of fact that there was an element of profit motive-Held, yes -Whether, therefore, proviso to section 2 (15) could not be invoked in assessee's case" Taking into consideration the above facts, circumstances and case laws cited above, we feel that the issue raised by the assessee is fully covered by the decision of ITAT Mumbai Bench in the case of All India Rubber Industries Association vs ADIT(E), Supra. In this view of the matter, the above assessee association is primarily and mainly carrying out its activity for advancement of any other object of general public utility and any activity by it even if regarded as business or commerce if such activity is undertaken in the course of actual carrying out of such advancement of any other obj....