2016 (6) TMI 802 - AT - Income Tax

Denial of benefit of sections 11 and 12 - object of carrying on the activity which resulted into income - income from Seminar and conferences - Held that - The assessee has been set up as a body of Indian Automobile Manufacturers with a view to improve and protect the environment and safety of automobile vehicles and also to work towards the growth of automobile industry in India. All the ancillary objects are directed towards the attainment of principal objects in a meaningful manner. The assessee is annually organizing Auto Expo, which is a trade fair confined to automobile industry. The automobile manufacturers give advertisements of their products which is the major source of receipts from Auto Expo apart from sale of tickets. Since all the manufacturers of automobiles are the members of the assessee society and the Auto Fair is organized displaying various products of automobiles, being the object for which the assessee was set up, it cannot be described as carrying on business, trade or commerce. The next major item is Seminars and conferences against which receipt of ₹ 1.85 crore has been shown. The assessee held four seminars/conferences, namely, SIAM Annual Session, Technical seminar, AOTS Kaizen/MTP Programme and WHTC-August, 2009. Total receipts from these four conferences/seminars has totaled to ₹ 1.85 crore. The major item of receipt is ₹ 1.59 crore from SIAM Annual Session , the details of which are available on page 89 of the paper book. As perusing these receipts above, it emerges that these are largely sponsorship amounts received from automobile companies. Details of expenses incurred on seminars and conferences have been set out on page 106 of the paper book. These details reveal that for some conferences, income is higher than the expenses, while for others, it is vice versa. Above narration of the activities actually undertaken by the assessee transpires that these are aimed at the overall promotion of the automobile sector. Even if there has resulted some surplus in organizing these conferences and seminars etc., it cannot be said that the assessee carried out any trade, commerce or business or rendering any service in relation to any trade, commerce or business. It is manifest that none of the activities undertaken by the assessee was pursued with the prior object of earning income. Au contraire, all such activities were performed with the prior object of promotion 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 - Decided in favour of assessee

Summary

Issues Involved:
1. Denial of benefit under sections 11 and 12 of the Income-tax Act, 1961.
2. Interpretation and application of the amended provisions of section 2(15) of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Denial of benefit under sections 11 and 12 of the Income-tax Act, 1961:
The assessee society, registered under section 12A(a) and enjoying exemptions under section 80G, was denied benefits under sections 11 and 12 for the assessment year 2009-10. The Assessing Officer (AO) observed income from seminars, conferences, statistical information, and Auto Expo 2008, totaling ?3.02 crore, and deemed these activities non-charitable under the amended section 2(15). The CIT(A) upheld this denial, leading to the assessee's appeal.

2. Interpretation and application of the amended provisions of section 2(15) of the Income-tax Act, 1961:
The crux of the dispute centers on whether the activities of the assessee fall within the amended definition of "charitable purpose" under section 2(15). The amendment specifies that "advancement of any other object of general public utility" is not charitable if it involves trade, commerce, or business activities for a fee. The Tribunal examined the assessee's Memorandum of Rules and Regulations, which emphasized aims such as environmental protection, safety, and sustainable growth of the automobile industry.

The Tribunal noted that the assessee's principal and ancillary objects were aligned with general public utility. It highlighted that the proviso to section 2(15) distinguishes between activities aimed at earning income and those furthering charitable objects. The Tribunal referenced the Delhi High Court's rulings in the Institute of Chartered Accounts of India and India Trade Promotion Organization cases, which clarified that incidental income from activities aligned with charitable objectives does not negate the charitable status.

The Tribunal scrutinized the assessee's income sources, including membership subscriptions, technical literature publications, interest from banks, and receipts from Auto Expo and seminars. It concluded that these activities were not pursued with the primary intent of earning income but were integral to the assessee's charitable objectives of promoting the automobile industry and environmental protection.

Conclusion:
The Tribunal found that the AO and CIT(A) misinterpreted the proviso to section 2(15). It held that the assessee's activities, despite generating surplus, were in furtherance of its charitable objectives and did not constitute trade, commerce, or business. Consequently, the Tribunal directed the restoration of benefits under sections 11 and 12 to the assessee, overturning the impugned order.

Final Judgment:
The appeal was allowed, and the order pronounced in open court on 06.06.2016.