TaxTMI 
TaxTMI 
2024 (9) TMI 515
X X X X Extracts X X X X
X X X X Extracts X X X X
....) read with section 144B of the Act. 2. The revenue has taken the following grounds of appeals: - 2.1 ITA 3175/Mum/2023 (A.Y. 2018-19) 1. Whether, on the facts and in the circumstances of the case and in law, the d.CIT(A) was justified in allowing the benefit of exemption u/s 11 &12 of the I,T, Act, 1961 to the assesses, ignoring the fact that the objects of the assesses falls under the category of "advancement of any other object of general public utility" and the activities are clearly in the nature of providing services in relation to trade, business and commerce in lieu of fees and total receipts of the assessee from such activities which are more than 20% of total receipts, hence the proviso to section 2(15) of the IT. Act is applicable and the assessee is not entitled to exemption u/s 11 of the Act in view of the provisions of section 13(8) of the I.T, Act,1961?". 2. Whether, on the facts and in the circumstances of the case and in law the Ld.,CIT(A) is right in allowing the exemption u/s 11 of the Act to the assessee whose case squarely falls under the under the proviso (i) to section 2(15) of the Act with respect to the advancement of any other....
X X X X Extracts X X X X
X X X X Extracts X X X X
....stified in allowing the benefit of exemption u/s 11 & 12 of the IT, Act, 1961 to the assessee, ignoring the fact that the objects of the assessee falls under the category of "advancement of any other object of general public utility" and the activities are clearly in the nature of providing services in relation to trade, business and commerce in lieu of fees and total receipts of the assessee from such activities which are more than 20% of total receipts, hence the proviso to section 2(15) of the IT. Act is applicable and the assessee is not entitled to exemption u/s 11 of the Act in view of the provisions of section 13(8) of the I.T. Act, 1961?". 2. Whether, on the facts and in the circumstances of the case and in law the Ld.CTT(A) is right in allowing the exemption u/s 11 of the Act to the assessee whose case squarely falls under the under the proviso (i) to section 2(15) of the Act with respect to the advancement of any other object of general utility, as the The Gem and Jewellery Export Promotion Council act of conducting exhibitions being in the nature of trade and commerce. When such activities have been held as trade or commerce in the APEC case judgement of the Sup....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts. The assessee filed return of income for both the assessment years declaring total income at Nil by claiming the exemption under section 11 of the Act. The notice under section 143(2) was issued and the assessment was completed by ascertaining the total income at Rs. 173,38,88,333/-. The Ld.AO has rejected the claim under section 11 and entire profit is taken as business income amount to Rs. 16,18,59,964/-. The additions are made as following heads, discarded asset amount to Rs. 28543/- and loss on sale of asset Rs. 22,728, prior period expenses Rs. 35,15,598/- and addition under section 56(2)(vii)(v) read with section 50C amount to Rs. 79,62,000/- which works out total amount to Rs. 17,33,88,833/-. Being aggrieved, the assessee filed an appeal before the Ld.CIT(A). After considering the assessee's submission, the exemption under section 11 is considered and the entire addition is deleted. Ld. CIT(A) has considered the Proviso to section 2(15) as argued in the case charitable activity in the nature of "general public utility" (in short, 'GPU') adjudicated by determining the scope of GPU in the definition of charitable purpose. Considering the above provision, Ld.CIT(A) allowed t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... are kept in the record (in short, 'APB'). The Ld.AR argued vehemently and first placed that the assessee is a promotion council and membership fees received from the members. The assessee used to arrange exhibitions all over the world for promoting the jewellery and the business of gems and jewellery. Accordingly, the assessee arranged the exhibitions in India and outside India. No sale was occurred during the exhibition arranged by the assessee. Considering the financial report, the Ld.AR has drawn our attention in APB page 107- 109 about the financial statement related to assessee's activity in exhibition in India. The financial statements are reproduced as below:- 8. The Ld.AR further argued that the assessee is not taking any benefit of no business transaction. This is the promotion of business and trading all over India. The issue was already agitated before the ITAT, Mumbai Bench. The Ld.AR drew out attention in the assessee's own case the order was passed by the co-ordinate bench of ITAT, Mumbai bearing ITA No.752/Mum2017 & 989/Mum/2019 Date of pronouncement 31/01/2023. The relevant paragraphs are reproduced below: - 5.10. In the instant year a assessee of promo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ny 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 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‟. adjudicated by the determining the scope of the phrase "general public utility" (GPU) in the definition of "charitable purposes" primarily o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e matter travel before the CIT(A), he confirmed the action of the AO. Aggrieved by this the assessee preferred further appeal before the ITAT. The Hon'ble ITAT Mumbai, vide its order dated 31.01.2023 in ITA No. 752/MUM/2017 for A.Y.2012-13 and ITA No.989/MUM/2019 for A.Y.2013-14 has decided the matter in favour of the assessee and allowed the benefit of the section 11 and 12 to the assessee. While disposing off this appeal the Hon'ble ITAT has held as follows: "5.12 The proviso to section 2(15) is attracted in case charitable activity in the nature of 'general public utility', adjudicated by the determining the scope of the phrase "general public utility" (GPU) in the definition of "charitable purposes" primarily on the grounds that the institutions were carrying on trade, commerce or business for consideration, which does not qualify as GPU under the provisions of the Act as amended by Finance Act (FA), 2008 read with subsequent amendments. 5.13 Before the Hon'ble Supreme Court (Supra), in the cases of most of the entities, there is no dispute as to the activities involved in the appeal qualified as GPU‟s within the meaning of the t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ption provided the quantitative limit (of not exceeding 20%) under second proviso to section 2(15) for receipts from such profits, is adhered to. 5.13 Before the Hon'ble Supreme Court (Supra), in the cases of most of the entities, there is no dispute as to the activities involved in the appeal qualified as GPU's within the meaning of the term "charitable purposes", but the dispute was in respect 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." 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 Philosophy of Mahatma Gandhi through museum and exhibition for a nominal cost is ipso facto not a business. Similarly, the Hon'ble Sup....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... specified in trust deed. Further the assessee submitted that this view is fortified by the decision of Hon'ble Gujrat High Court in the case of CIT (Exemption) v. Bochasanwasi Shri Akshar Purshottam Public Charitable Trust (409 ITR 591) where it was held that lack of declaration in Form no. 10 regarding specific purpose for which funds were being accumulated by the assessee trust would not be fatal to the exemption claimed u/s 11(2) of the Act. The Hon'ble Supreme Court has dismissed SLP filed by the department in the above case and has upheld the findings of the Hon'ble Gujrat High Court. Considering the facts of the case and also the rulings cited above, alternate addition made by the assessee by denying the benefit of section 11(2) is not in accordance with the act and hence addition made by the assessing officer is deleted. Ground No.5(a):"The assessee has challenged the action of the AO that Prior Period expenses of Rs. 35,15,598/-. The AO has not made any elaborate discussion as to why the same is disallowed. Addition made without adequate discussion has been objected by the assessee. I am of the view that as all the expenditure were incurred by....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y thousand rupees, the stamp duty value of such property as exceeds such consideration:" 25. Thus, the said provisions are not applicable in the case of the Appellant and on this ground alone, the addition made by the Assessing Officer ought to be deleted. 26. It is further submitted that the Assessing Officer did not give an opportunity to the appellant to provide an explanation for the above difference in purchase consideration. This constitutes a violation of the principles of natural justice. 27. The Assessing Officer failed to appreciate that the property, being a 49 years old depleted building, was a distress sale. The appellant obtained a valuation report from an approved valuer determining the fait market value of the property at Rs. 3,27,54,750/- which is marginally higher than the amount paid by the appellant. The Assessing Officer without considering these factual aspects erroneously invoked Section 56(2)(vii)(b) of the Act and made the addition of Rs. 79,62,0007-." Submission made by the assessee was examined in this regard. The AO invoked the provisions of Section 56(2)(vii)(b) of the IT Act which is applicable only for individuals a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... being no markup on consideration charged from the exporter, therefore in the broad principles laid down by the Hon'ble Supreme Court, the activity is beyond the purview of either trade, commerce and business or activity of rendering services in relation to trade, commerce or business. Further the ITAT has held that assessee is not hit by the proviso to section 2(15) of the Act as far as activity of conducting or participating in exhibitions within India or overseas. Respectfully following the decision of the respective jurisdictional ITAT the A.O is directed to grant the benefit of section 11 and 12 as per provisions of law. Grounds of appeal are allowed in favour of the assessee." (Emphasis supplied) 10. The Ld. AR placed that the issue related prior period adjustment is squarely covered by the order of the co-ordinate bench of ITAT, Mumbai Bench in assessee's own case bearing ITA No.3158 & 3159/Mum/2023 date of pronouncement 25/04/2024 which is as under: - "Ground No. 7: Claim of prior period of expenditure of Rs. 8,40,895/- 19. During the course of assessment the AO has disallowed prior period expenses of Rs. 8,40,895/-. 20. However, the Id.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....suitable orders under section 263 of the Act." The Ld.DR also relied on the order of the Hon'ble High Court of Gujarat in the case of CIT (Exemptions) vs Bachasanwasi Shi Akshar Purshottam Public Charitable Trust (2019) 102 taxmann.com 122 (Guj). The Ld.AR further argued and placed that the issue is squarely covered by the order of the co-ordinate bench of ITAT, Mumbai Bench and the order of the Hon'ble High Court of Gujarat was duly considered. 12. The Ld. AR invited our attention in the relevant paragraph of the orders bearing ITA No.3158 & 3159/Mum/2023 in assessee's own case. The relevant paragraphs are reproduced below: - Ground No. 6: 16. During the course of assessment the assessing officer has made alternative disallowance u/s 11(2) of the Act holding that specific detail of objects for which the surplus was accumulated is not specified in the form no. 10 filed by the assessee, therefore, AO has denied the accumulation u/s 11(2) of the Act. 17. However, the ld. CIT(A) has deleted the said disallowance made by the assessing officer. The relevant extract of the decision of ld. CIT(A) is reproduced as under: "Ground No. 5: During the c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rding specific purpose for which funds were be accumulated by the assessee trust would not be fatal to the exemption claimed u/s 11(2) of the Act. Further the Hon'ble Supreme Court has dismissed the SLP filed against the aforesaid decision of the Hon'ble High Court. We have also perused the copy of Board Resolution dated 18.08.2015 filed at the appellate proceedings as per which the surplus is accumulated for the specified purposes in accordance with the provision of Sec. 11 sub-section (2) of the Act In the light of the above facts and circumstances we don't find any infirmity in the decision of ld. CIT(A), therefore, this ground of appeal of the revenue is also dismissed. Ground No. 7: Claim of prior period of expenditure of Rs. 8,40,895/-: 19. During the course of assessment the AO has disallowed prior period expenses of Rs. 8,40,895/-. 20. However, the ld. CIT(A) held that assessee is entitled to the benefit of Sec.11 of the Act and all the expenditure were incurred by the assessee towards the object of trust. The AO has not brought any contrary material to demonstrate that assessee has not incurred the expenditure for the object of the trust, therefo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....actions during its activities. We rely on the orders of our co- ordinate bench of ITAT, Mumbai in assessee's own case. Accordingly, we restrict the revenue for rejecting the exemption which the assessee is entitled to get as per the registration U/s 12A of the Act. We are not intervening in the impugned appeal order. The assessee is eligible for the benefit of exemption U/s 11 of the Act in impugned assessment year. 14. The Ld.DR respectfully relied on the judgement of the Hon'ble Calcutta High Court in the case of DIT (Exemption) vs Trustees of Singhania Charitable Trust (supra). In our respectful observation, that is distinguished from our case. In our considered view, we are not intervening the impugned appeal order of the assessee 15. Considering the above, the grounds of the revenue are dismissed. ITA 3175/Mum/2023: A.Y. 2018-19 16. The facts and circumstances are identical, the decision arrived at above in case ITA No. 3176/Mum/2023 applies mutatis mutandis to this appeal also. 17. In the result, appeals of the revenue in ITA nos. 3175 & 3176/Mum/2023 are dismissed. Order pronounced in the open court on 26th day of June, 2024. ============= Document 1 T....