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TMI Blog2011 (4) TMI 864X X X X Extracts X X X X X X X X Extracts X X X X ..... not justified in refusing registration under section 12A(a) of the Act. 3. Because the Director of Income-tax (Exemptions) has not appreciated the facts and circumstances of the case and has arbitrarily refused registration. 4. Because the Director of Income-tax (Exemptions) has not justified in passing a consolidated order under section 12AA(1)(b) and under section 80G, both order should have been passed independently. ITA No. 3183/Delhi/2008 1. Because on a proper consideration of facts and circumstances of the case, the Director of Income-tax (Exemptions) was not justified in refusing registration under section 12A(a) of the IT Act, 1961, which order is contrary to facts, bad in law and be quashed. 2. Because the appellant society existing solely for charitable purposes, the Director of Income-tax (Exemptions) was not justified in refusing registration under section 12A(a) of the Act. 3 Because the Director of Income-tax (Exemptions) has not appreciated the facts and circumstances of the case and has arbitrarily refused registration. 4. Because the Director of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee is engaged in a commercial activity vide which trade fair has been organized. The assessee has taken space on rent by making of payment of licence fee of Rs. 1,25,00,000 and it has incurred exhibition expenses of Rs. 52,42,998. It has also incurred several other expenses relating to organizing of exhibitions. Thus, the income has been earned by giving space to any one who was desiring to participate in the exhibition. Fair charges of Rs. 2,50,65,900 have been earned from various parties who have participated in the exhibition. It has also earned advertisement revenue of Rs. 1,45,000 and, thus, the total revenue earned is Rs. 2,54,17,927. The service tax of Rs. 4,23,065 has been paid and a profit of Rs. 43,63,858 has been earned. Then, learned DIT (E), making reference to the proviso inserted in section 2(15) w.e.f. assessment year 2009-10 and after narrating the said proviso, has observed that w.e.f. assessment year 2009-10, a charitable institution engaged in the activity being advancement of any other project of public utility can neither carry on any trade, commerce nor business or can provide any service in relation to any trade, commerce or business for a fee, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Maintains regular books of account : P.B establishes it; 5. Constituted/registered as trust/society under law of the land : P.B. establishes it, 6. Donations made after 31-3-1992 and fund/institution approved by CIT : NA. 7. Fund/institution approved under clause (vi), above, for FY 2007-08 : NA 6. He further submitted that charitable purpose as found in section 2(15) also covers "advancement of any other object of general public utility." He submitted that the assessee being engaged in the activity of promoting the produce and services of its members/participants which is an aim and object of general public utility which falls within the ambit of 'charitable activity' as defined in section 2(15) of the Act. He submitted that the case of the assessee is at par with those of PHDCCI, FICCI, ASSOCHAM, etc. and, hence, its application for registration could not be rejected on the ground that the assessee does not carry out charitable activity. He also made reference to Circular No. 416 dated 11th April, 1985 wherein it has been specified that if the assessee satisfied all the five conditions listed in section 80G(5) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Public Enterprises (SCOPE) [2010] 186 Taxman 142 (Delhi). (ii) Greater Kailash-II Welfare Association v. DIT (E) [2007] 18 SOT 563(Delhi) (TM). (iii) Aggarwal Mitra Mandal Trust v. DIT (E) [2007] 106 ITD 531 (Delhi). (iv) Samaj Kalyan Parishad v. ITO [2007] 11 SOT 632/105 ITD 29 (Delhi) (SB). (v) DIT v. Mitsui & Co. Environmental Trust [2008] 303 ITR 111/167 Taxman 43 (Delhi) (vi) DIT (E) v. Japan Chamber of Commerce & Industry in India [2009] 308 ITR 76/180 Taxman 104 (Delhi). (vii) Dy. CIT v. Beer Shiva Educational Social Welfare Society [2007] 11 SOT 737/107 ITD 403 (Delhi). (viii) M.P. Madhyam v. Jt. CIT [2004] 89 TTJ (Indore) 770. (ix) Dy. CIT v. Cosmopolitan Education Society [2000] 244 ITR 494 (Raj.). (x) CIT v. Ahmedabad Rana Caste Association [1983] 140 ITR 1 (SC). (xi) CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC). (xii) Bharat Diamond Bourse [2003] 126 Taxman 365 (SC). (xiii) P.C. Raja Ratnam Institution v. Muncipal Corporation of Delhi [1990] 181 ITR 354 (SC). (xiv) N.N. Desai Charitable Trust v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir work. In turn, nation earns lot of foreign exchange for the value of material exported. The society represents there exporters members to the Govt. and seek relief in policies to protect the interest of large community involved these activities. It provides a common platform for exporters as well as buyers through organized exhibitions to promote the Indian products. It also held conferences and meetings to promote Indian handicrafts items in the world and design and seek suitable amendments in the national policies. In view of the above, society propose to under take following activities. 1. To represent Indian Handicrafts society, who earn their living hood through their art to the Govt. 2. to represent exporters for making policies to promote exports of Indian Handicrafts. 3. To organize exhibitions to provide international platform for exporters and buyers. 4. To organize meetings, conferences and seminars to develop new avenues policies for the promotion of export. 5. To assist the exporters in the development of the products as per international standards for easy access ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lating to organizing the exhibition. Thus, during the financial year 2007-08, the assessee has not incurred any expenditure on its object stated in the Memorandum of Association. Rather, for earning income it has organized exhibition out of which profit of Rs. 33,56,226.30 has been earned. Similarly, accounts for financial year 2008-09 (assessment year 2009-10) are filed at pages 27-36 of the paper book. In that year also the assessee has carried out the activity of organizing the exhibition. 14. It is the case of learned DIT (E) that the activity of the assessee of organizing the exhibition is nothing but a commercial activity as the assessee is taking space on rent by making payment of the licence fee and it is incurring expenditure on organization of exhibition. The space is given to any one who wants to participate in the exhibition. This activity of the assessee is systematic and organized and is, thus, a commercial activity. We find that this observation of DIT (E) is correct according to the facts of the case. Carrying on activity of organizing exhibition, in the manner the assessee has carried it, is a commercial activity. No doubt, for the purpose of attaining the objects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or information from the applicant which he thinks necessary to satisfy himself about the genuineness of activities of the institution and he is also empowered to make inquiries in that regard and it is only after such satisfaction he will either accept the claim of the assessee or reject the same. Thus, it is not a formality that the concerned authority merely on the basis of objects of the trust will grant the certificate of registration. If he is not satisfied with the genuineness of the activities, then, he can refuse the grant of registration. Learned DIT (E) in the present case has clearly found that the assessee has carried out commercial activity of organizing the exhibition and such activity of the assessee is systematic and organized. No material has been placed before learned DIT (E) to prove that the assessee in the fulfilment of its object has applied any income earned from organizing exhibition. Thus, it can be safely concluded that the assessee has not carried out any charitable activity either in this or the subsequent year. 16. Here, it will be relevant to mention the provision of section 11(4A). Section 11 regulates income from property held for charitable or re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure incurred to earn the total receipt. The entire receipts cannot be considered as income and expenditure incurred to earn those receipts cannot be considered as application of income for the purpose of attaining the objects. In fact, according to the facts of the case, no part of the income has been applied by the assessee for attainment of its objects. In other words, the assessee has not applied any part of its net income on the objectives stated in the memorandum of association which are claimed to be of charitable purpose which are "in advancement of any other object of general public utility." Therefore, it cannot be said that the assessee has started the process of undertaking charitable activities. Therefore, the assessee does not fulfil the criteria laid down in sections 12AA and 12A read with section 11 of the Act. 18. Therefore, though technically the objects of the assessee may fall within the ambit of "advancement of any other object of general public utility" as described in section 2(15) as it existed prior to assessment year 2009-10, but its claim even for assessment year 2008-09 is premature as it did not start its charitable activity in that year. Here, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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