TaxTMI 
TaxTMI 
2023 (1) TMI 1346
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....der: The Appellant appeals against the impugned order dated 11.11.2016 passed by the Commissioner of Income-tax (Appeals)-1, Mumbai (the CIT(A)) (received by it on 12.12.2016), under section 253 of the Income-tax Act (the Act), on the following amongst other grounds each of which is in the alternative and without prejudice to any others: 1. Whether the CIT(A) erred in upholding the action of the learned Assessing Officer (AO) in denying the Appellant's claim for exemption under section 11 of the Act and thereby assessing it on a total income of Rs.21,78,74,270/-. 2. Whether the CIT(A) ought to have held that the object of general public utility pursued by the Appellant did not involve 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 and, therefore, proviso to section 2(15) of the Act had no application to its case. 3. Whether the CIT(A) ought to have held that activities of the Appellant in the form of organising exhibitions, trade fairs and receipt of membership fees and subscription from its members or grant-inaid from the Gov....
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....ory notices under the Income-tax Act, 1961 (in short, the 'Act') were issued and complied with. In the scrutiny proceedings, the Assessing Officer observed receipts from membership, subscription fees, grants from Government of India, income from publication, exhibitions, award functions etc. Regarding the activity of conducting exhibitions, the Assessing Officer was of the view that it was a commercial activity, which prima-facie falls in the nature of trade or business, in view of expression "Business" having wide meaning in fiscal statues. He also inferred profit motive to the assessee based on the fact that term deposits placed with the banks at the end of the year was of Rs.33,20,71,475/- giving rise to interest of Rs.6,13,47,543/-. According to the Assessing Officer, the assessee was generating huge profit year after year from its activities. The learned Assessing Officer referred to amendment to the definition of charitable purpose to section 2(15) of Act with effect from 01/04/2009, wherein it is prescribed that advancement of any other object of the General Public Utility (GPU) shall not be a charitable purpose if it involves the carrying on of any activity in the nature of....
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....nder section 11 of that unless conditions stipulated therein and other relevant provisions in this behalf are fulfilled by the assessee. The reliance placed by the assessee on the order of first appellate authority and the Tribunal for assessment year 2009-10 and 201011 was not found to be relevant by him in view of the proviso to section 2(15) of the Act and rejected the plea of the assessee of application of rule of consistency. The Ld. CIT(A) finally upheld the action of the Assessing Officer for: (i) disallowance of benefit under section 11 of the Act in respect of the income including income from exhibition, in view of express provision of section 13(8) of the act. (ii) denial of carryforward of deficitby in the year under consideration, holding that facts of the assessment year 2004-05, where the ITAT allowed such carryforward, are different 3.3 Aggrieved with denial of benefit of provisions of section 11 and carryforward of deficit, the assessee is before the Tribunal by way of raising grounds as reproduced above. 4. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record including the pa....
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....rendering services in relation to trade, commerce or business. 5.1 In this regard, the ld. consul of the assessee has brought our attention to the historical background leading to establishing of the assessee organisation. Prior to the assessee came into existence, the role of promotion of the export of gems and jewellery products was with the Director General of Foreign Trade (DGFT) i.e. an organisation under the control of Ministry of Commerce and Industry, Government of India. As a part of export promotion, the trade exhibitions used to be conducted by the DGFT and said conducting of exhibitions by DGFT continued till the assessee came into existence in the year 1966. 5.2 Further, the ld. counsel of assessee referred to copy of certificate of incorporation (PB-13), according to which the company i.e. the Gem and Jewellery Export Promotion Council (GJEPC) has been incorporated under section 25 of the Companies Act, 1956 on 27/04/1966 as company limited by guarantee. In the memorandum of association (PB: 15 -22) main objects (clause 3a); ancillary objects (clause 3b) and other objects (clause 3c) have been mentioned. As per clause 3(a) of memorandum of association, mai....
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.... issues calendars for each year, wherein it approves the exhibitions for gems and jewellery product. The Ld. Counsel referred to copy of such approval for overseas exhibitions and domestic exhibitions placed at paperbook pages 182 to 186 and 187 to 203 respectively. A copy of such approval of international exhibition and domestic exhibition available on pages 185 to 186 and 187 is reproduced as under : International Exhibition : "F.No. 12/32/2011-EP(G&J) Government of India Ministry of Commerce & Industry Department of Commerce EP(G&J) Division New Delhi, 13th December, 2011. To 1. Shri Raiv Jain Chairman, Gem & Jewellery Export Promotion Council Mumbai 2. Chairman-cum-Managing Director MMTC Limited, New Delhi 3. Shri Nirmal Sinha Chairman, HHEC of India Limited NOIDA Subject: Calendar of Overseas Exhibitions for the year 2012. Sir, I am directed to inform that the following Calendar exhibitions in Gem & Jewellery Products has been approved by the Department of Commerce for the calendar year 2012: Month GJEPC MMTC HHEC Jan....
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....Commerce has approved the proposal of Gem & Jewellery Export Promotion Council (GJEPC) for organizing "India Show coinciding with the "India international Jewellery Show (IJS) 2011° from 4-8 August, 2011 at NSE Complex, Goregaon (East), Mumbai 2. The Gem & Jewellery exporters from Domestic Tariff Area (DA)/Export Processing Zones/Export Oriented Units (EOUs)/Special Economic Zones (SEZs) shall participate in the Show and display precious metal Jewellery both plain & studded; loose gemstones and diamonds. This is a "Trade Only Show where international exhibitors will be participating alongwith domestic exhibitors. 3. It is, therefore, requested that necessary instructions may be issued to the respective Commissioners of Customs in Delhi and Mumbai for allowing foreign exhibitors participating in IIJS 2011 for temporary import of gems & jewellery and jewellery making machinery under ATA Carnet Convention/Temporary Import Bond for display at the Show. 4. This issues with the approval of Joint Secretary (Gems and Jewellery)." 5.4. The ld. counsel also referred to the foreign trade policy for the period from 27/08/2009 to 31/03/2014 issued by t....
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.... exemption allowed by the ld CIT(A), which is evident from the following grounds of appeal raised by the Revenue for appeal filed before the ITAT in ITA no. 5757/Mum/2015 for AY 2009-10 and ITA No. 5756/Mum/2015 for AY 2010-11: "Grounds of appeal before ITAT by revenue in ITA No. 5757/Mum/2015 for AY 2009-10: "Whether on the facts of the case and in law the ldCITCA) erred in allowing the appeal of the assessee on account of disallowing depreciation on fixed assets of Rs. 53,50,582/- in contravention of the decision of Escorts Ltd. Vs. UOI 199 ITR 43 wherein it was held that since section 11 of the Income Tax Act provides for deduction capital expenditure incurred on assets acquired for the objects of the trust as application and does not specifically & expressly provide for double deduction on account of depreciation on the same very assets acquired from such capital expenditure, no deduction shall be allowed us.32 for the same or any other previous year in respect of that asset as it amounts to claiming a double deduction. 2 Whether, on the facts and in the circumstances of the case and in law theldCIT(A)erred in allowing the depreciation, when the Delhi....
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....sion of Hon'ble jurisdiction High Court in ITA No. 1113 of 2010. The relevant finding of the Hon'ble High Court is reproduced as under: "1. The office objections are overruled. Basically two questions are raised by the revenue in this appeal, which read as under- (1). Whether on the facts and circumstances of the case and in law the Tribunal was right in holding that the assessee has fulfilled" the conditions as laid down -u/s.11(4A) of the IT Act 1961 and is" therefore entitled for exemption us. 11 of the I.T.. Act, 1961?.. (2). Whether on the facts and circumstances of the case and in law the Tribunal was right in directing the AO to set off the deficit of earlier years to the surplus of this year and consider such adjustment as application of income for charitable purpose?" 2. As regards, the first question raised by the revenue is concerned, the Tribunal has recorded the finding as follows:- "We have heard the rival submissions, perused the orders of the lower authorities and the materials available on record. The assessee is a council approved by the Govt. as "jem and jewellery export promotion council. From the name itself it is se....
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....rted in 247 I.T.R. 785, the decision of the Tribunal holding that the assessee has fulfilled all the conditions of Section 11(4A) of the Income Tax Act cannot be faulted. Moreover, the Tribunal has recorded finding of fact that the assessee has maintained separate books of account in respect of exhibition activity. In this view of the matter, the first question raised by the revenue cannot be entertained." 5.9 We find that the Hon'ble High Court has noted the facts recorded by the ITAT regarding of objects of the assessee and conducting of exhibition for achieving that object, necessary approval obtained for conducting those exhibitions form Govt. of India in the back ground of import /export policy of Govt. of India. In the light of those facts, the Hon'ble High Court declined the question of law raised challenging eligibility of exemption u/s 11 of the Act. 5.10. In the instant year are also, the fact of main object of the assessee of promoting the export of gems and jewellery remained the same. In the year under consideration, the assessee has claimed the organising and participating in exhibitions and trade fair as the core activity of the assessee and sine qu....
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...., 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, unless- (i). such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility?5; and (ii). the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year;]] Section 13(8) (8) Nothing contained in section 11 or section 12 shall operate so as to exclude any income from the total income of the previous year of the person in receipt thereof if the provisions of the first proviso to clause (15) of section 2 become applicable in the case of such person in the said previous year.] 5.12 The proviso to section 2(15) is attracted in case charitable activity in the nature of 'general public utility'. The issues adjudicated by the Hon'ble Supreme Court are related to determining the scope of the phr....
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....ee that the carrying on of the activity is not for profit". 171. Therefore, pure charity in the sense that the performance of an activity without any consideration is not envisioned under the Act. If one keeps this in mind, what Section 2(15) emphasizes is that so long as a GPU's charity's object involves activities which also generates profits (incidental, or in other words, while actually carrying out the objectives of GPU, if some profit is generated), it can be granted exemption provided the quantitative limit (of not exceeding 20%) under second proviso to Section 2(15) for receipts from such profits, is adhered to. 172. Yet another manner of looking at the definition together with Sections 10(23) and 11 is that for achieving a general public utility object, if the charity involves itself in activities, that entail charging amounts only at cost or marginal mark up over cost, and also derive some profit, the prohibition against carrying on business or service relating to business is not attracted - if the quantum of such profits do not exceed 20% of its overall receipts. 173. It may be useful to conclude this section on interpretation....
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....nd the insertion of Section 13(8). This was Parliaments' emphatic way of saying that generally no commercial or business or trading activity ought to be engaged by GPU charities but that in the course of their functioning of carrying out activities of general public utility, they can in a limited manner do so, provided the receipts are within the limit spelt out in Clause (ii) of the proviso to Section 2(15)." 5.15 Thus, the Hon'ble Supreme Court has laid down principle giving the example of 'Gandhi Peace Foundation' that where in the process of dissemination of Philoshopy of Mahatama Gandhi through museum and exhibition for a nominal cost is ipso facto not a business. Similarly, the Hon'ble Supreme Court has held that services of low-cost hostel, providing of marriage halls or supply of blood bank for nominal markup is not in the nature of business. 5.16.In the light of above principles, the Hon'ble Supreme Court has given specific finding in respect of the trade promotion bodies, Councils etc, while dealing the facts of the Apparel Export Promotion Council (AEPC). The relevant finding of the Hon'ble Supreme Court (supra) is reproduced as under: "D....
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....clear trading objects: "(b) To carry on all and any of the business of Art Silk Yarn, Raw Silk, Cotton Yarn as well as Art Silk f loth, Silk Cloth and Cotton Cloth belonging to and on behalf of the members. ********* ********** (e) To buy and sell and deal in all kinds of cloth and other goods and fabrics belonging to and on behalf of the Members." This court, nevertheless, held that since the predominant object of the assessee was trade promotion, while furthering it, the fact that some trading occurred, leading to income, did not preclude the assessee from claiming tax exemption. 202. In the opinion of this court, the change in definition in Section 2(15) and the negative phraseology - excluding from consideration, trusts or institutions which provide services in relation to trade, commerce or business, for fee or other consideration - has made a difference. Organizing meetings, disseminating information through publications, holding awareness camps and events, would be broadly covered by trade promotion. However, when a trade promotion body provides individualized or specialize....
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....es are charged, are to improve business functioning of garment exporters. Furthermore, market surveys and market intelligence, especially country specific activities, aimed at catering to specified exporters, or specified class of exporters, is also service in relation to trade, commerce or business. 205. In the circumstances, it cannot be said that AEPC's functioning does not involve any element of trade, commerce or business, or service in relation thereto. Though in some instances, the recipient may be an individual business house or exporter, there is no doubt that these activities, performed by a trade body continue to be trade promotion. Therefore, they are in the "actual course of carrying on" the GPU activity. In such a case, for each year, the question would be whether the quantum from these receipts, and other such receipts are within the limit prescribed by the sub-clause (ii) to proviso to Section 2(15). If they are within the limits, AEPC would be - for that year, entitled to claim benefit as a GPU charity. (iv) Non-statutory bodies - ERNET, NIXI and GS1 India 206. ERNET is a not-for profit society, set up under the aegis of the U....
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....tal to the development of online educational and research platforms. For these reasons, it is held that the impugned judgment, which upheld the ITAT's order, does not call for interference 209. The Revenue has appealed the decision of Delhi High Court in which the National Internet Exchange of India (NIXI) was held to be a GPU category charity. The materials on record show that NIXI was established in 2003 under the aegis of the Ministry of Information Technology of the Union Government for the promotion and growth of internet services in India, to regulate the internet traffic, act as an internet exchange, and undertake ".in" domain name registration. Concededly, NIXI, is a not for profit, and is barred from undertaking any commercial or business activity. Its object is to promote the interests of internet service providers and internet consumers in India, improve quality of internet service, save foreign exchange, and carry on domain name operations. It is bound by licensing conditions - which include the prohibition from altering its memorandum, without the prior consent of the Union Government. According to the submissions made on NIXI's behalf, it charges annual membe....
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....regulatory bodies, trade organizations and bodies, sports bodies and organizations, trusts, etc were considered by the court, and dealt with in the judgment. Para 253 recorded the court's summary of conclusions in relation to each such trust, charity or organization. 3. It was urged on behalf of the revenue, that the clarification it seeks is necessary, because in Para 253 H and in Para 254, it has been precluded from examining the facts and assessing the concerned assessment years, in relation to the assesses in these appeals. It was urged that the conclusions recorded in the judgment and those in the said two paragraphs, preclude it from dealing with the assessments of parties before this court and, furthermore, the dismissal of the revenue's appeals will preclude an examination of the merits for these assesses in future, as well. 4. A plain reading of the conclusions recorded in Para 253 (A)(B)(C) (D) and (E) would disclose that this court consciously recorded its findings, with the intent of finally deciding the issues, for various organizations- in relation to the assessment years in question, - whereas in Para 253 (F), the court remitted the matter f....
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....see has further claimed expenditure on advertisement for exhibition amounting to Rs.1,78,37,641/-. Thus, we find that in the year under consideration there is net loss of Rs.1,60,55,079/- from the activity of exhibitions conducted by the assessee within and outside India. In the immediately preceding assessment year the expenses on exhibitions were of Rs.77,09,23,044/-as compared to revenue or income of Rs.70,79,56,744/-. The assessee has further incurred expenditure on advertisement for exhibitions and thus there was a net loss from the consideration charged by the assessee for conducting said exhibitions or trade fair. Details of exhibition revenue and expenses submitted by the assessee for assessment year 2011-12 to 2015-16 is reproduced as under: The Gem & Jewellery Export Promotion Council (A Company Limited by Guarantee and not having share capital) Summary of Income and expenditure from exhibitions activities Particulars FY 2010-11 FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 AY 2011-12 AY 2012-13 AY 2013-14 AY 2014-15 AY 2015-16 Gross Receipts 1,00,57,19,583 1,16,02,21,024 1,3....
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....efore the disallowance of exemption claimed by the assessee made by the Assessing Officer and the finding of the Ld. CIT(A) on the issue in dispute are set aside and matter restore back to grant benefit of section 11 and 12 as per provisions of law. The ground No. 1 to 4 of the appeal of the assessee are accordingly allowed for statistical purposes. 6. The ground Nos. 5 and 6 have been raised by the assessee as alternative grounds. Since we have already allowed the main grounds of the appeal of the assessee on the issue on dispute, therefore, these alternative grounds are rendered as infructuous and accordingly same are dismissed. 7. The issue raised in ground No. 7 to 8 of the appeal are consequent to the issue of exemption under section 11 of the Act, which we have already allowed in favour of the assessee for statistical purpose, accordingly both the grounds also stand allowed in favour of the assessee for statistical purposes. 8. The ground Nos. 9 in 10 of the appeal of the assessee relate to the issue of claim of carryforward of deficit of earlier years. 8.1 We find that issue of claim of carryforward of deficit of earlier years has been allowed t....
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....s directed to allow the claim of the assessee of carryforward of the deficit following the finding of the Hon'ble jurisdiction High Court (supra). The ground No. 9 and 10 of the appeal of the assessee are allowed for statistical purposes. 9. The issue in dispute raised in appeals for assessment year 201314 and 2014-15, being identical to issue in dispute raised in appeal for assessment year 2012-13, therefore following our finding for assessment year 2012-13, the grounds raised in assessment year 2013-14 and 2014-15 are decided mutatis mutandis. 10. In the result, all the appeals of the assessee are allowed for statistical purposes. Order pronounced in the open Court/under Rule 34(4) of the ITAT Rules, 1963 on 31/01/2023. ============= Document 1 86 Strengthening the Indian Gems & Jewellery Industry The Council organises strategic initiatives that support the industry as it matures into a world-class player. These serve as platforms to integrate the Indian industry and encourage the latest trends and practices. Events such as Jewellery Week, Gem & Jewellery Trade Fairs in India and Awards are held annually. The US, Signature and W jewe....
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....rld's attention is focused on "INDIA", and the industry is fast progressing to be world's "Jewellery Hub". Document 2 India International Jewellery Show (IIS) GIEPC to the global trade fraternity immediately after the 2011 August 4-8, 2011, Bombay Exhibition and Convention Center Mumbai 4-g The 25th edition of India International Jewellery Show, the biggest and the most effective platform for the Indian jewellery industry, bosted 1700+ stalls and 850 exhibitors from India and abroad and showcased gold jewellery, diamonds, color stones, diamond jewellery, silver jewellery, pearls and other allied categories More than 35000+ visitors from India and abroad attended the show which witnessed an astounding 24 percent increase in visites' registration as compared to the previous year, which included trade buyer delegations from countries The 28th edition of IJS 2011 was inaugurated by Shri P.K. Chaudhery, Special Secretary, Ministry of Commerce and Industry, Government of ladia in the presence of Guest of Honour HE. Ahmed Bin Salayem, Executive Chairman, Dubai Multi Commodity Centre, alongside Shri Amp Wadhawan, Joi....
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....hich is a jewellery centric show, presents ladia's finest in top-of-the-line jewellery design and manufacturing The eshibition has been conceptualized to represent and showcase the very best that ladia has to offer in terms of design, enftsmanship and quality. This exclusive platform saw participation from 450 of India's leading, hand-picked companies who displayed the choicest in products and design Signature IIJS 2012 grew to more than double its stee this year. The planned expansion of the show has enabled more than 100 new exhihitoes to take part. The Signature Clab, which houses the country's top-most jewellery manufacturers, was presented with even greater exclusivity The show had almost 6000 international and national visitors CHREMONY CHIEF GUEST MS. VARDA SHINE CEO Diamond Trading Company (C) Visitors from Middle East and Asia together contributed around 0% of the total international visitors. The event alse saw participation from Europe and Latin America There were four international Pavilions from Israel, Turkey Belgium and Thailand, and 12 international delegations Representatives from both domestic....