TaxTMI 
TaxTMI 
2023 (10) TMI 1229
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....ls of educational institutions related to the society while confirming the addition. 3. On the facts and circumstances of the case and in law the Ld. CIT (A) grossly failed in appreciating that expenses incurred are not in the nature of brand promotion but was incurred for the purpose of conference held teachers and ex- students whereby deliberations were made for possible method of education and development of students which is the basic objective of trust. He also grossly failed in considering supporting filed during the course of appeal.." 2. The assessee is a society registered under the Societies Registration Act 1973 on 07.10.1986. The assessee was granted registration u/s 12AA on 30.09.2009 as stated by the AO in the assessment order. The assessee filed its return of income on 26.03.2012 declaring total income at nil after claiming exemption u/s 11 & 12 of the Act. The scrutiny assessment u/s 143(3) was passed on 28.02.2014 at the return income. Thereafter, the assessment order was revised by the CIT(E) vide order dated 14.03.2017 passed u/s 263 of the Act on the issue of expenditure of Rs. 98,45,124/- on account of Vaman Drishti Shivir as the AO allowed the clai....
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.... page no. 9 to 32 of the paper book. He has explained that during the previous year relevant to assessment year under consideration the assessee society has completed 25 years of its existence and to celebrate the successful completion a programme was arranged in the name of "Vaman Drishti Shivir" on 11th, 12th and 13th of November' 2011. In this event there was large gathering of teachers, principals, alumni's of the affiliated schools, from all over the Madhya Pradesh, at Indore. In this celebration program more than 10,000 teachers and principals of all the schools including ex-teachers and principals have participated. This program was inaugurated by Chief Minister of MP and various dignitaries graced this occasion. In this program deliberations were made on various topics by renowned educationist, intellectuals etc. Coping of brochure of events along with list of speakers are filed at page no. 36 to 42 of the paper book. He has submitted that in this program all the arrangements for seminars, conferences, meetings, stay of participants and food etc. was made and the total expense for such program was Rs. 98,45,124/-. In this program around 10,000 Teachers, Principals and other....
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....e details which means to educate and train the teachers to equip them with global knowledge with all details of every sector and therefore objects of shivir was formulated as under :- (a).To create sense of belongingness among the teachers and the students. (b). To upgrade teacher's knowledge about new developments in teaching areas of all fields including skill and personality development particularly for character building and practical field knowledge whereby the students can grow as good character citizen and independent entrepreneur rather than for developing themselves as service person. 3.3 Our attention is drawn to the fact that the schedule of events shows that there were serious deliberations made by dignitaries and teachers on improving the quality of education on various subjects, how new techniques could be inculcated in education sector, how to make education more easy and accessible, and improve skill development and how education methods can be reformed looking to the new avenues etc. It is also noteworthy to mention here that the basic thinking to formulate the Education policy considering the latest changes, character building, skill developme....
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....roportionate expenditure incurred by the assessee for providing education to students. This is one time expenditure incurred and not recurring nature therefore, the said expenditure cannot be regarded as application of income for charitable purpose as provided u/s 11(1) of the Act. He has relied upon the orders of the authorities below. 5. We have considered the rival submissions as well as relevant material on record. The AO has disallowed the claim of the assessee in para 6 & 7 as under: "6. The above submissions of the assessee have been considered but not found acceptable. It is noted that such expenditure has been booked during the year on account of organizing Shivir/Seminar. Such expenses are huge and not proportionate to the direct expenses incurred by the assessee on providing education to students. It is further seen that such expenses are incurred one time during the year and not of recurring nature. This is not incurred directly for the purpose/object of providing education to the students. Hence the same expenses claimed during the year are not allowable as application for charitable purposes. 7. In view of the above facts and circumstances, the ex....
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.... The assessee has produced audited accounts and specifically the separate account of this expenditure duly audited by the auditor placed at page no. 31 of the paper book. The details of all expenditure incurred during this period of shivir have been examined by the auditor and the assessing officer has not pointed out any error or defect in the separate account maintained by the assessee. 5.2 The Mumbai bench of the Tribunal in case of Institute of Marine Engineers (I) vs. Assistant Director of Income-tax Exemption II(1) Mumbai (supra) has considered the issue of holding conference, seminar to educate its members is incidental to the object of the trust or not. The relevant part of is reproduced as under: "14. The moot question for our determination is whether the assessee is pursuing its objects as per the provisions of section 2(15) of the IT Act, i.e., relief for poor, education, medical relief and advancement of any other object of general public utility and is entitled to exemption under section 11 of the IT Act. We have already noted the primary and main objects of the assessee. It is clear from the objects that the promotion of scientific development of marine en....
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....ssee to hold such meetings wherein funds are collected which will go a long way in attaining its objects. There is no material to show that the assessee had violated any of its objects in carrying out such activities. The Technical meetings and seminars were held in order to educate its members regarding the new technology and also to enable the marine engineers to meet and facilitate inter-change of ideas amongst the members. The brochure published in such meetings is circulated amongst its members and also amongst persons connected with marine engineering, which is again in furtherance of its objects of carrying on the activity of advancing the object of general public utility. The factum of making profit from such meetings does not mean that the assessee was carrying on business. The Apex Court, in the case of Surat Art Silk Cloth Mfrs. Association (supra), have held as under : "The test which has not to be applied is whether the predominant object of the activity involved in carrying out the object of general public utility is to subserve the charitable purpose or to earn profit. Where profit-making is the predominant object of the activity, the purpose, though an obje....
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.... fees from members. In addition, the assessee has received voluntary donations from members and various industries. The assessee is also holding examination as approved by the Director General of Shipping. Some of the surplus funds received by the assessee are used for publishing its monthly journal MER(I) which is circulated to its members free of cost. The said journals are also circulated amongst various educational institutions and shipping companies. During the year under consideration, the cost of publishing and distribution of these journals was Rs. 6,24,600 against which the assessee had earned income on sale of journals of Rs. 94,150 only. The funds to meet the cost of publishing and distribution of these journals are utilized out of surplus funds available with the assessee. Thus, the cumulative activity carried on by the assessee trust are in furtherance of its objects and are entitled to exemption under section 11 of the IT Act. 17. We further find that the nature of business activities of the assessee are same as carried on from year to year and has been accepted by the Income-tax Department for the preceding years. We also agree with contentions of the author....
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....ding trade fairs, exhibitions and conferences was in the nature of trade or business and therefore in terms of the proviso introduced by the Finance Act, 2008 in Section 2(15) of the Act, the said activity could not be regarded to be charitable in nature and consequently therefore the benefit of Section 11 was not available to the appellant. We however find that since inception of the appellant it has been conducting the foregoing activities in furtherance of the objects of the company and in all the past assessments such activities were considered to be charitable in nature. We find that there was no material change in the factual matrix of the appellant's case though the change was brought about in Section 2(15) by introduction of proviso therein. On careful perusal of proviso to Section 2(15) it is noted that the object of advancement of general public utility is not be considered as charitable in nature if it involves carrying of any activity in nature of trade, commerce or business or any activity of rendering any service in relation to trade, commerce or business, for a cess or fee or other consideration. From the language employed by the Legislature while enacting the sa....
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....that the activities of holding fairs, exhibitions and conferences were incidental or ancillary to the attainment of the main objects for which the appellant-institution was created and registered u/s. 12AA of the Act. In view of the foregoing facts we are of the considered opinion that the benefit of Section 11 could not be denied to the appellant only because it realized net surplus from activities which were undertaken in the pursuit of attaining main object of the organization which was considered to be charitable in nature by the Department itself at the time when registration u/s 12AA was granted and in the past assessments the benefit of Section 11 was also extended in respect of the self-same activities. 8. In this regard we note that the issue involved in the present appeal is covered by the majority opinion of the Hon'ble Supreme Court in Addl. CIT vs Surat Art Silk Cloth Manufacturers Association (1980) 121 ITR 1. Even though the decision of the Hon'ble Supreme Court was rendered in the backdrop of provisions of the IT Act, 1961 prior to introduction of the proviso in Section 2(15) of the Act yet in our considered opinion the judicial principles laid down....
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....in nature. Accordingly, in view above, we are inclined to provide the relief to the assessee on the basis of consistency as there is no change in the objects and activities of the society. In this connection, we rely in the case of Radhasoami Satsang vs. CIT (1992) 193 ITR 321 where the Hon'ble Supreme Court has held as under:- "There is no dispute that the properties of the assessee are also recorded in the name of the Sabha (Central Council) and there is no personal interest claimed by the Sant Satguru in such property. Over the years the Satguru has never claimed any title over, or beneficial interest in, the properties and they have always been utilised for the purpose of the religious community. Even if the trust was revocable, the property was not to go back to the Satguru on revocation. The constitution and the byelaws on record indicate in cl. 1(b) that where the property was given to the SantSatguru, it was intended for the common purpose of furthering the objects of the Sant Satguru and the Central Council had the authority to manage the property. Clause 9 of the document stipulated that the properties would vest in the trust and cl. 25 provided that....
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....impugned order u/s 263 of the Act is treating the activities of the assessee as commercial in nature in terms of the clause of section 2(15) i.e. 'advancement of any other object of general public utility'. However we find that as per the proviso to section 15 along with the speech of the Finance Minister and CBDT circular number 11 of the 2008 dated 19^th December 2008 make it clear that only the institution carrying on commercial activities are intended to be covered by the proviso, not the genuine charitable institutions. The activity will be deemed to be in the nature of trade, commerce or business only if the same is carried on with the intention to earn profit. The Courts in the series of decision have held that it is an activity carried on in a systematic manner with a view to earn profit, which will be termed as "business". Accordingly in order to hold that the activity is in the nature of trade, commerce or business there should be profit motive. If during the course of carrying out any activity on non-commercial lines, some profit is received by the trust, which is incidental to the activities of the trust, the same shall not be construed to be activity i....
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....Vs. ITO(Supra), wherein it was held that the activities of the assessee are charitable in nature. The relevant portion of the order is reproduced below:- "30. Hence in view of all the above, concluding this issue we hold that the purpose for which the assessee association, i.e. the Indian Chamber of Commerce was established is a charitable purpose within the meaning of s. 2(15) of the Act. The assessee is carrying out the said activities which are incidental to the main object of the Association and which are conducted only for the purpose of securing the main object which is the advancement and development of trade and commerce and industry in India. The activities are not in the nature of business and there is no motive to earn profit. The income arising to the assessee is only incidental and ancillary to the dominant object for the welfare and common good of the country's trade, commerce and industry. The profits earned are utilized only for the purpose of feeding its dominant object and no part of such profit is distributed amongst its members. Profit making is not the object of the assessee. Profit is merely a by product which result incidentally in the p....
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....r that the alleged activities were all merely incidental to the main object of the assessee and the predominant object of the association being the promotion development and protection of trade and commerce which is an object of general public utility, it can never be the case that it is engaged in "business trade or commerce" or in any "service in relation to business, trade or commerce. The individual nature and purpose of the specific activities, it is stated that the activities held by AO and the (A) to be business in nature, were as follows:- a) Meetings, Conference & Seminars b) Environment Management Centre c) Fees for Certificate of origin 38. In view of the above decision, we are of the considered view that in the given facts and detailed reading of the various judicial decisions through the years, interpreting the definition of "charitable purpose" as laid out in sec. 2(15) of the Act and also the definition of "business" in relation to the said section amply reveals that the theory of dominant purpose has always, all through the years, been upheld to be the determining factor laying down whether the institutions Charitable in nature or....
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.... upon the trustees as incidental to the carrying out of the purpose. For instance, cl. 3(v) enables the establishment and support of associations, institutions, funds, trusts and convenience calculated to benefit the employees and their dependents, for making provision for grant of pension and allowances, etc. The framing of such employee benefit scheme is essential and necessary for the proper functioning of the organisation and is incidental to the carrying out of the purpose for which it is constituted. If the primary or dominant purpose of a trust or institution is charitable, any other object which is merely ancillary or incidental to the primary or dominant purpose, would not prevent the trust or the institution from being a valid charity. Likewise, cl.3(z1) and (z2) which permit the establishment of a trust or trusts, appointment of trustees thereof from time to time and the vesting of funds or surplus income or any property of the assessee in the trustees, are nothing but powers conferred on them for the proper financial management of the affairs of the trust which are incidental or ancillary to the main purpose of the trust.--Addl. CIT vs. Surat Art Silk Cloth Manufacturer....
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....n and development of trade, commerce, and industry in India, it was an object of general public utility and income derived from activities for advancing the dominant object was exempt under s. 11." 9. Since the factual matrix of the appellant's case for the AY 2012-13 is identical with that involved in AY 2011-12, we have no hesitation in holding that the ratio laid down in the decision of the coordinate Bench of this Tribunal holds good and applies to the year under consideration as well. Applying the said decision we hold that the appellant's activity of holding trade fairs, exhibitions and conferences was not in the nature of trade, commerce or business and therefore there was no violation of Section 2(15) of the Act. Accordingly we hold that the lower authorities were legally unjustified in not granting the appellant the benefit of Section 11 of the Act. 10. We also note that during the relevant year the gross receipts from the activities of holding trade fairs, exhibitions and conferences from members and non-members together totalled Rs. 3,94,70,967/-. There against the expenditure incurred was Rs. 3,03,60,941/- resulting in surplus of Rs. 91,10,026/....
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....of the institution/trust are incidental to the main object of the institution and therefore, cannot be held as activities of trade or commerce. Similarly the Hon'ble Gujarat High Court in case of DIT(E) vs. Ahmedabad Management Association (supra) has held in fara 5.6 to 5.8 as under: "5.6 Now applying the ratio of the decision of the Division Bench of this Court in the case of Gujarat State Co-operative Union (Supra) reproduced hereinabove and the activities of the assessee such as Continuing Education Diploma and Certificate Programme; Management Development Programme; Public Talks and Seminars and Workshops and Conferences etc., we are in complete agreement with the view taken by the tribunal that the activities of the assessee is educational activities and/or is in the field of education. 5.7 Now in view of the aforesaid finding that the activities of the assessee is in the field of education, whether the assessee is entitled to exemption under Section 11 of the Act or not and whether in the facts and circumstances of the case the assessee can be denied exemption under Section 11 of the Act relying upon and/or considering the proviso to Section 2(15) of the Ac....
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....emption under Section 11 of the Act. 5.8 In the present case, as observed hereinabove and rightly held by the tribunal, the activities of the assessee would fall within the definition of "charitable purpose" as per Section 2(15) of the Act and, therefore, would be entitled to exemption under Section 11 of the Act." 5.6 The activities of assessee continuing Education Diploma and Certificate Programme; Management Development Programme; Public Talks and Seminars and Workshops and Conferences are held to be fall in the realm of education which is charitable as per section 2(15) of the Act. In the case of assessee the activity of organizing the shivir which is in the nature of seminar, conference and lectures on the education and therefore, an aid to the main object of the assessee. Neither the AO nor the Ld. CIT(A) has disputed that the shivir organized by the assessee is for the purpose of education to the students and children as well as training for the teachers. The Ld. CIT(A) has dismissed the appeal of the assessee in para 8 to 8.3 as under: "8. I have carefully considered the action of the Assessing Officer and the submissions of the appellant. I find that t....