9911796707
TMI Blog2014 (12) TMI 256X X X X Extracts X X X X X X X X Extracts X X X X ..... n remains unchanged, any action by revenue to the contrary to what was taken earlier, is not justified - in view of facts remaining same and also legal position being the same, in the face of the history, dominant object for which assessee association was constituted, being a charitable one i.e. promotion and protection of trade, commerce and industries and particularly trade, commerce and industries in or with which Indian are engaged or concerned, any income arising from activity is exempt u/s 11 of the Act. In assessee’s own case as decided in Commissioner of Income-Tax, West Bengal II Versus Indian Chamber Of Commerce [1970 (9) TMI 13 - CALCUTTA High Court] - the expression “any other object of general public utility” u/s 2(15) does not expressly refer to trade or business, for a normal connotation of “general public utility” would not directly include trade or business - the word used in this new law is “activity” and not trade or business - Normally, a trade or business is always with profit or with profit motive, though no doubt, under some recent statutes as in the Sales Tax Act, the new concept of business without profit is being introduced - as defined in section 2(15) po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly slowed to the appellant since the AY 1984-85. 2. That on the acts and the circumstances of the case of the appellant the Ld. CIT(A) erred in confirming the allegation of the Ld. AO that the appellant's activities of conducting the Environment Management Centers, meetings, conferences & seminars and the Issuance of Certificate of Origin were all in the nature of business carried on systematically and continuously with a motive to earn profit from the same. 3. That on the acts and the circumstances of the case of the appellant and in law, the Ld. CIT(A) erred in holding that decision of the Hon'ble Delhi HC dated 19th September, 2011, in the case of DIT (Exemptions) Vs Institute of Chartered Accountants of India and that the case of The Institute of Chartered Accountants of India in Write Petition 1927 of 2010 are not applicable to the case of the appellant in as much the facts of the said case are different from the case of the appellant. 4. That on the acts and the circumstances of the case of the appellant the Ld. CIT(A) erred in holding that the appellant's activities of conducting the Environment Management Centers, meetings, conferences & seminars and the Issuance of Cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te and protect the trade, commerce and industries and in particular the trade, commerce and industries in or with which Indians are engaged or concerned." It was further claimed that the objects of advancement of trade and commerce, being objects for "advancement of any other general public utility", the assessee falling within the ambit of definition "charitable purpose" as laid out u/s.2(15) of the Act. Accordingly, it claimed exemption from income arising out of its activities under the provisions of section 11 of the Act. 4. The assessee filed its return of income for the year under consideration i.e. A.Y. 2008-09 being a charitable institution eligible for exemption u/s. 11 of the Act on 13.10.2008 declaring NIL total income. During assessment proceedings AO noted that certain activities of the assessee were clearly in the nature of business activities and thus issued a show-cause notice, as to why the following receipts credited in the income and expenditure account were not to be treated as in the nature of business receipts? Environment Management Centre (including sponsorship of ₹ 33,37,328/-) ₹ 44,63,456/- Meeting, conference, & seminars (including sponso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court in the case of assessee was reversed by Constitutional Bench of the Supreme Court by majority decision in the case of Addl.CIT v. Surat Art Silk Cloth Manufacturers Association (1980) 121 ITR 1 (SC). He further stated that law laid down by Apex Court in the case of Surat Art Silk Cloth Manufacturers Association (supra), the Larger Bench of the Supreme Court in the case of Commissioner of Income-tax v. Federation of Indian Chambers of Commerce & Industry (1981)130 ITR 186 took the view that the activities of Chamber of Commerce, the assessee, was charitable in nature falling u/s 2(15) of the Act. He narrated facts that the aforesaid judgment of Hon'ble Supreme Court in the case of assessee pertained to A.Y 1964-65, wherein the definition of charitable purpose was different from the one applicable for AY 2008-09, Vide Finance Act, 1983 w.e.f. 1.4.1984 the words "not involving the carrying on of any activity for profit" were omitted. He argued that the decision in the case of assessee by Hon'ble Calcutta High Court and Hon'ble Supreme Court were rendered prior to the amendment brought in by Finance Act, 1984 when "not carrying on any activity for profit" was consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee is therefore covered under the definition of 'charitable purpose' both under the old and new section 2(15) as amended by Finance Act, 1983 and applicable for A.Y. 2008-089. Thus, other conditions u/s. 11 being satisfied, the income of the assessee for A.Y. 2008-09 is exempt from tax under sec. 11 of the Act. 6. But CIT(A) held that AO was right in invoking provisions of section 11(4A) and in denying exemptions u/s 11 of the Act. CIT(A) held that since assessee is engaged in the systematic and continuous activities with a motive to earn profit and the activities involved were on commercial lines, thus the A.O was right in holding that assessee was engaged in carrying out activities, which were in the nature of business. CIT(A) dismissed the appeal of the assessee, even though reliance placed on the decisions of the Hon'ble Delhi High Court in the case of Institute of Chartered Accountants of India (supra) and in the case of The Institute of Chartered Accountants of India & Anr. (supra) on the ground that the facts of these cases were different from the facts of assessee. Further, CIT(A) noted that the assessee has not been able to show that the activities of environment manageme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll started his arguments from inception of this association that assessee association since 1925 till A.Y. 1963-64 was incurring losses and loss returns were filed. In the year 1963 relating to the A.Y. 1964-65, assessee return surplus of ₹ 1,58,690/-. And gross receipts comprised of arbitration fees of ₹ 4,792/, fees from certificate of origin ₹ 4,552/, miscellaneous receipts ₹ 208 and share of income from M/s Calcutta Licensed Measures. Assessee after deducting expenses of ₹ 47,641/- net surplus of ₹ 1,58,690 was arrived at. The assessee claimed that it was entitled to exemption u/s 11 of the Act. It was claimed that assessee was a company for a 'Charitable purpose" within the meaning of section 2(15) of the Act and thus it was entitled to the exemption u/s. 11 of the Act. It was contended that the AO taking into consideration the definition of "Charitable Purpose" as provided in Sec. 2(15) of the Act, the words "not involving the carrying on of any activity of profit" held that the activities of the assessee constitutes activities for profit and hence the surplus received from these sources were taxable. On appeal before Appellate Assistant Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to what constitutes "business" , held that the DIT(Exemption) was not justifying in holding that ICAI was carrying on business by holding coaching classes and programmes for which fees were charges. It was held that the same was not like doing business and therefore, the appeal of Revenue was dismissed. In view of the above, Ld. counsel for the assessee stated that the issue now stands covered in favour of assessee by the decision of Hon'ble Supreme Court in the case of Surat Art Silk Cloth Manufacturer Association (supra) and also by the decision of Hon'ble Delhi High Court in the case of Institute of Chartered Accountants of India (supra). He also argued on other aspects also, which we will deal with. 8. On the other hand, Ld. SR-DR heavily relied on the orders of the lower authorities and also relied on the decision of Hon'ble Supreme Court in assessee's own case, i.e. Indian Chambers of Commerce (supra). 9. We have heard rival submissions and gone through facts and circumstances of the case. Facts narrated in para 2&3 are undisputed. Hence, we need not to repeat the same. We have noted the provision of section 2(15) of the Act, relevant to A.Y 1964- 65, laying down the defi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the attainment of the above objects or any of them." Thus, it being the case, it was an institution with "charitable purpose", it was eligible for exemption of its income under the provisions of section 11 of the Act but AO held that in the definition of "charitable purpose" in section 2(15) of the Act, the words "not involving the carrying on of any activity for profit" had been introduced and as, the aforesaid activities of the assessee was for profit, the surplus received from these sources were taxable. On appeal before AAC, the order of the AO was confirmed. On second appeal, Tribunal allowed relief by relying on the decision of Hon'ble Supreme Court in the case of Andhra Chamber of Commerce (supra), wherein it was held that advancement or promotion of trade, commerce and industry was an object of "general public utility" and also it was held that if the primary purpose of any association/body was the advancement of objects of general public utility, it would remain charitable even if an incidental or ancillary activity giving rise to income was carried on. 10. Revenue preferred appeal before Hon'ble Calcutta High Court wherein (decision in favour of revenue) held in its deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e wide expression "any other object of general public utility" under section 2(15) would include objects for promotion of trade or commerce without any profit motive as coming well within charitable purpose. The present amendment introduced by the Income-tax Act, 1961, by adding the words "not involving the carrying on of any activity for profit" was to put this wholesome limitation upon any and every object of general public utility of various description becoming a charitable purpose and thereby qualifying for exemption. It is to be noticed that the word used in this new laws is "activity" and not trade or business. Normally, a trader or business is always with profit or with profit motive, though, no doubt, under some recent statutes as in the Sales Tax Act, the new concept of business without profit is being introduced." 11. Hon'ble Supreme Court affirming the decision of the Calcutta High Court held in its decision Indian Chamber of Commerce (supra) that: (from head note) "that the activities of the chamber being activities carried on for profit, in the absence of any restriction in its memorandum and articles of association against the making of profit from those activitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "education" in section 2(15) of the Income-tax Act, 1961, connotes the process of training and developing the knowledge, skill, mind and character of students by normal schooling, and has not been used in the wide and extensive sense according to which every acquisition of further knowledge constitutes education. (ii) Ordinarily, profit motive is a normal incident of business activity and if the activity of a trust consists of the carrying on of a business and there are no restrictions on its making profit, the court would be well justified in assuming, in the absence of some indicating to the contrary, that the object of the trust involves the carrying on of an activity for profit. (iii) It would be contrary to all rules of construction to ignore the import of the newly added words "not involving the carrying on of an activity for profit" and construe the definition in section 2(15) of the Act of 1961, as if the newly added words merely qualify and affirm the position as it obtained under the definition given in the 1922 Act. Per beg J.-(i) It is permissible to refer to the speech of the Finance Minister in moving the proposed amended definition as an aid to correct interpretat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve the carrying on of any activity for profit would be satisfied in profit-making was not the real object. The theory of dominant or primary object of the trust had, therefore, been treated to be the determining factor, even in regard to fourth head of charity i.e. advancement of any other object of general public utility, so as to make the carrying on of the business activity merely ancillary or incidental to the main object. Facts in the case before Supreme Court were that assessee, a company incorporated under the Companies Act, 1913, after certain vital amendments in its memorandum of association, was registered under s. 25 of the Companies Act, 1956. Its objects as amended were: "(a) to promote commerce and trade in art silks yarn, raw silk, cotton yarn, art silk cloth, silk cloth and cotton cloth; (b) to carry on all and any of the business of art silks yarn, raw silk, cotton yarn, as well as art silk cloth, silk cloth and cotton cloth, belonging to and on behalf of its members; (c) to obtain import licences for import of art silk yarn, raw silk, cotton yarn, and other raw materials as well as accessories required by its members for the manufacture of art silk, silk and co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the dominant or primary purpose of the assessee was to promote commerce and trade in art silk yarn, raw silk, cotton yarn, art silk cloth, silk cloth and cotton cloth as set out in clause (a) and the objects specified in clauses (b) to (e) were merely powers incidental to the carrying out of that dominant and primary purpose; (ii) that the dominant or primary purpose of the promotion of commerce and trade in art silk, etc., was an object of public utility not involving the carrying on of any activity for profit within the meaning of s. 2(15); and that the assessee was entitled to exemption under s. 11(1)(a): Per Bhagwati, Untwalia and Tulzapurkar JJ: …. (ii) Where the main or primary objects are distributive, each and every one of the objects must be charitable in order that the trust or institution may be upheld as a valid charity. But if the primary or dominant purpose of a trust or institution is charitable, another object which by itself may not be charitable but which is merely ancillary or incidental to the primary or dominant purpose would not prevent the trust or institution from being a valid charity. (iii) Though the objects specified in clauses (b) to (e) w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition that the purpose should not involve the carrying on of any activity for profit would be satisfied if profit-making is not the real object. (viii) It is not at all necessary that there must be a provision in the constitution of the trust or institution that the activity shall be carried on no-profit no-loss basis or that profit shall be prescribed. Even if there is no such express provision, the nature of the charitable purpose, the manner in which the activity for advancing the charitable purpose is being arrived on and the surrounding circumstances may clearly indicate that the activity is not propelled by a dominant profit motive. (i) The restrictive clause in s. 2(15) must be read with "the advancement of any other object of general public utility" and not "object of general public utility". (ii) The requirement of s. 2(15) is satisfied where there is either a total absence of the purpose of profit-making or it is so insignificant compared to the purpose of advancement of the object of general public utility that the dominating role of the latter renders the former unworthy of account. If the profit-making purpose holds a dominating role or even constitutes an equal comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ikshana Trust v. CIT [1975] 101 ITR 234 (SC) disapproved. Observations of Beg J. in Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 IT 234 (SC) approved. Per Bhagwati, Untwalia and Tulzapuarkar JJ: (i) It is only the particular question of law on which there is a conflict of decisions in the High Courts that can referred by the Tribunal directly to the Supreme Court under s. 257 and the Supreme Court cannot travel beyond the particular question of law which has been referred to it on account of the conflict. The true meaning of the last ten words in s 2(₹ 15), viz., "not involving the carrying on of any activity for profit", is that when the purpose of a trust or institution is the advancement of an object of general public utility, it is that object of general public utility and not its accomplishment or carrying out which must not involve the carrying on of any activity for profit. So long as the purpose does not involve the carrying on of any activity for profit, the requirement of the definition would be met and it is immaterial how the monies for achieving or implementing such purpose are found, whether by carrying on an activity for profit or not. 16. With par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 'derived from property held under trust wholly for charitable purpose' may still forfeit the claim to exemption in respect of such takings or incomes as may come to it from pursuing any activity for profit. Notwithstanding the possibility of obscurity and of dual meanings when the emphasis is shifted from 'advancement' to 'object' used in section 2(15), we are clear in our minds that by the new definition the benefit of exclusion from total in is taken away where in accomplishing a charitable purpose the institution engages itself in activities for profit. The Calcutta decisions are right in linking activities for profit with advancement of the object. If you want immunity from taxation, your means of fulfilling charitable purposes must be unsullied by profitmaking ventures. The advancement of the object of general public utility must not involve the carrying on of any activity for profit. If it does, you forfeit. The Kerala decisions fall into the fallacy of emphasizing the linkage between the objects of public utility and the activity carried on. According to that view, whatever the activity, if it is intertwined with, wrapped in or entangled with the object of charitable purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al public utility This view clearly supports the construction canvassed on behalf of the revenue for our acceptance, but, with the greatest respect to the learned judges who decided the Indian Chamber of Commerce case [1975] 101 ITR 796 (SC), we think, for reasons already discussed, that this view is incorrect and we cannot accept the same. There is, however, one comment which is necessary to be made whilst we are on this point and that arises out of certain observations made by this court in Sole Trustee, Loka Shikshana Trust's case [₹ 975] 101 ITR 234 as well as Indian Chamber of Commerce's case [1975] 101 ITR 796. It was said by Khanna J. in Sole Trustee, Loka Shikshana Trust's case : " … if the activity of a trust consists of carrying on a business and there are no restrictions on its making profit, the court would be well justified in assuming in the absence of some indication to the contrary that the object of the trust involves the carrying on of an activity for profit." And to the same effect, observed Krishna Iyer J. in Indian Chamber of Commerce's case [1975] 101 ITR 796, 804 (SC) when he said : 'An undertaking by a business organization is ordinarily assu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he quantum of income is not test in itself. It may be the result of an activity permissible under a truly charitable purpose for, as has been observed, a profitable activity in working out the charitable purpose is not excluded. I am unable to agree, with respect, with all that has fallen from H.R. Khanna and A.C. Gupta JJ. in Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234 (SC) that the terms of the trust must impose restrictions on masking profits, otherwise the purpose of the trust must be regarded as involving the carrying on of a profit-making activity. On the contrary, I find myself in agreement with Beg J. to the extent that he says, in the same case, that it is the genuineness of the purpose, that it is truly charitable, which determines the issue. It seems necessary to me that a distinction must constantly be maintain between what is merely a definition of "charitable purpose" and the powers conferred or working out or fulfilling that purpose. While the purpose and the powers must correlate, they cannot be identified with each other. Reference may, of course, be made to the nature and with of the powers as evidence of the charitable or non-charitable nature of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead note) "that the income derived by the respondent from the activities, such as holding the Indian Trade Fair and sponsoring the Conference of the Afro-Asian Organisation, were for the advancement of the dominant object and purpose of the Federation, viz., promotion, protection and development of trade, commerce and industry in India, and were exempt from tax under s. 11(1)(a) read with s. 2(15)." Surat Art Silk Cloth Manufactures Association (supra) applied. Held also, that the clauses in the respondents memorandum enabling it (i) to establish and support or aid the establishment of associations, institutions, funds or trusts for the convenience of its employees, (ii) to establish trusts of its surplus income or property, and (iii) to undertake and execute trusts or undertakings which may seem to the Federation desirable, were merely powers incidental or ancillary to the main purpose of the Federation. Per Sen J: "(i) One should have thought that the correct was to approach the question of interpretation of s. 2(15) was to give the words used by Parliament the ordinary meaning in the English language and if, consistently with the ordinary meaning, there was a choice betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15) "charitable purpose" includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility ;" The above situation, wherein exemption u/s 11 of the Act was granted and continued till AY 2007-08 but in the present AY 2008-09, AO denied exemption u/s 11 of the Act and CIT(A) upheld the action of the AO. In AY 2008-09, AO alleged that the income of the assessee from the said activities were "business income" and thus it was not entitled to exemption u/s 11 of the Act in view of the provisions of section 11(4A) not being fulfilled. Assessee before us filed copies of assessment orders from AY 1985-86 till AY 2007-08, which are as under: - Assessment Order u/s. 143(3)/11/263/143(3)/13(1)(d) dated 30/03/1992 passed for the AY 1985-86 (copy enclosed at pages 47-55 of assessee's paper book) - Assessment Order u/s 143(3)/11/13(1)(d)/254/143(3)/11 dated 30/03/94 passed for the AY 1986-87 (copy enclosed at pages 56-58 of assessee's paper book) - Order of ITAT in assessee's case for A.Y 1985-86, 1986-87, 87-88, 1988-89 and 1990-91(copies enclosed at pages 59-72 of assessee's paper book) - Assessment Order u/s 143(3)/11 dated 24/03/94 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n such a situation, it would be relevant to quote the decision of Hon'ble Apex Court in the case of Radhasoami Satsang v. Commissioner of Income-tax 193 ITR 321 (SC) wherein it was held that: "… … (ii) That, in the absence of any material change justifying the Department to take a different view from that taken in earlier proceedings, the question of the exemption of the assessee appellant should not have been reopened. Strictly speaking, res judicata does not apply to income-tax proceedings. Though, each assessment year being a unit, what was decided in one year might not apply in the following year; where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year." From the above said case, it is clear that in a situation where the factual and legal position remains unchanged, as in the case of an assessee, any action by revenue to the contrary to what was taken earlier, is not justified. Thus, concluding the above, in view of facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rth limb of definition of charitable purpose u/s 2(15) of the Act "advancement of any the object of general public utility" as its objects, as laid down in the Memorandum and Articles of Association, were "to promote and protect the trade, commerce, and industries of India, and, in particular, the trade, commerce and industries in or with which Indians are engaged or concerned … and (e) to do all other things as may be conducive to the development of trade, commerce and industries or incidental to the attainment of the above objects or any of them." The objects of assessee, for which the association came into existence, are clearly set out in clause 3 of the Memorandum of Association which reads as under: 3(a) To promote and protect the trade, commerce and industries and in particular the trade, commerce and indust5ries in or with which Indians are engaged or concerned." The activities of conducting Environment Management Centre, Meetings, Conferences & Seminar and issuance of the Certificate of Origin, were all connected, incidental and ancillary to the main purpose of charity and were conducted solely for empowerment, betterment and for creating awareness amongst industr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s transaction must be between two persons. Business is not as unilateral act. It is brought about by a transaction between two or more persons. And lastly, the business activity usually involves a twin activity. There is usually an element of reciprocity involved in a business transaction. Thus a continuous activity with profit motive or capable of producing profits, gains, benefits, advantages or livelihood was held to be one of the main criterions of "business". Further the concept of "profit motive" was examined by Hon'ble Supreme Court, in the State of Gujarat versus Raipur Manufacturing Company (1967) 19 STC 1 (SC), wherein it was stated that business is normally with the object of making profit. An activity as business, there must be a course of dealings either actually continued or contemplated to be continued with profit motive and not for sport or pleasure. The expression "profit motive" does not postulate or intends that profit must, in fact, be earned. Nor does the expression cover a mere desire to make some monetary gain out of transaction or a series of transactions. It predicates a motive which pervades the transaction(s) effected by the person in the curse of his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accomplish their main objects would not, normally, amount to business, unless an independent intention to conduct 'business' in these connected, incidental or ancillary activities is established by the revenue. In view of the above, we are of the view what clearly transpires in the case of the assessee is that the main object being a charitable activity and not an activity carried out for the purposes of profit, the incidental activities being the activities which were carried out solely for furtherance of and to accomplish the main objects of development of trade and commerce, which would not in any case amount to "business". 23. The assessee before us explained individual nature and purpose of the specific activities, it is stated that the activities held by AO and CIT(A) to be business in nature, were as follows: (a) Meetings, Conferences & Seminars (b) Environment Management Centre (c) Fees for Certificate of origin Firstly, discussing Seminars and Conferences held by assessee association it is stated that the pursuit of its objectives of development of trade and commerce, is to organize and conduct various conferences, seminars and workshops for the benefit of business an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees is collected. The sponsorships provided are utilized towards meeting the costs of the seminars and the surplus generated out of such activities is retained by the Association for purposes of meeting its charitable objects. 24. Now coming to the "Environment Management Centre", it was stated by assessee that the same is a chapter to look after all the areas related to industrial safety, environment friendliness and hazard management. The "Indian Chamber of Commerce Environment Management Centre" (ICC-EMC), set up with the prime objective of facilitating business and industry to meet their environmental responsibilities has one major goal: "to promote environment management for enhancing competitiveness and efficiency in business and industry in order to ensure a cleaner, safer and healthier environment for the society at large." While facilitating the above, the ICC-EMC has been enabling industry to work towards implementing effective energy conservation practices, managing environmental hazards and mitigating risks related to their day to day operation. This is essential taking into consideration the damage to the Environment done by unregulated/ill informal industries. As a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said Certificate or Origin is required to accompany each export of physical goods. Due to the widespread network of the Chamber of Commerce community, in most countries, Chambers of Commerce were seen as the organizations which could be allowed to issue certificates of origin. As such, seen as "competent authorities", Chambers began to more wide spread issue non-preferential certificates of origin. Thus in India the assessee association, the Indian Chamber of Commerce was duly authorized by the Directorate General of Foreign Trade and Ministry of Commerce, Govt. of India to issue Non-preferential Certificate of Origin to the exporters. Exporters are required to submit formal application attaching with the same, copies of the relevant Bills, Challan and LCs. The assessee has been efficiently providing this service at a nominal charge and with utmost efficiency to improve their efficiency in serving their business community at the instance of the Government and as directed by the Government. This is not an activity by choice but by compulsions of the Government. The charges are simply to cover the expenses relating to such issue of the certificates and for covering the maintenance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... large question bank for which no separate cost was charged. "The students registered for chartered accountancy are also provided on-line guidance through institute's own Website. At a very nominal cost, these services are provided to the students. The institute also provides computer training to the students registered with it, at a very low fee" ITAT, therefore, held that the ICAI was not doing any "business: by running coaching classes. Accordingly, the order passed by the DI under section 263 of the Act was cancelled. The DI filed an appeal before the Hon'ble Delhi High Court where one of the questions of law arose for consideration before the Delhi High Court was:- "Whether the ITAT was justified in the eyes of law in the facts and circumstances of the present case in passing the impugned order that running of the coaching classes is a business activity and, therefore, is in violation of the provisions of Income-tax Act as also supported by judgment of the Patna High Court cited in 208 ITR 608?' The Court held that - the purpose and object to do business is normally to earn and is carried out with a profit motive; in some cases the absence of profit motive may not be determ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the Tribunal is justified in taking the view that the assessee, which is a chamber of commerce and industry, is carrying on business activities which require compliance with the conditions of Section 114A). In CIT, Madras v. Andhra Chamber of Commerce (1965) 55 ITR 722, it was held by the Supreme Court that advancement or promotion of trade, commerce and industry leading to economic prosperity enured for the benefit of the entire community; that prosperity would be shared also by those who engaged in trade commerce and industry, but on that account the purpose was not rendered any the less an object of general public utility. Echoing these sentiments another Bench of equal strength of the Supreme Court in Commissioner of Income Tax, New Delhi v. Federation of Indian Chambers of Commerce and Industries, New Delhi (1981) 130 ITR 186 held that where the main objet of the assessee was the promotion, protection and development of trade, commerce and industry in India, its income from conducting a trade fair, rent for space allotted and sale of entry and gate tickets, fees for arbitration etc. would be exempted from tax under Section 11 read with Section 2(15) of the Act … ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is a profit motive which drives the carrying on of the activity. … … … … 12. In most of the cases, the services are performed in the true spirit of service to the members of the association (such as a chamber of commerce) and the fees charged are so calculated or fixed that it merely covers the costs incurred by the association in rendering the service. Since accuracy in matching the costs and the fees charged cannot be maintained consistently, there can arise a surplus. The mere arising of a surplus does not clothe the activity of performing the services for the members with a profit motive, which is essential in business. It has been observed by the Supreme Court in Surat Art Silk (supra) that where profit making is the predominant object of the activity, the purpose, though an object of general public utility would cease to be a charitable purpose it was held as follows:- 'But where the predominant object of the activity is to carry out the charitable purpose and not to earn profit, it would not lose its character of a charitable purpose merely because some profit arises from the activity. The exclusionary clause does not require that the activit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de objects for promotion of trade or commerce without any profit motive as coming well within charitable purpose. The present amendment introduced by the Income-tax Act, 1961, by adding the words "not involving the carrying on of any activity for profit" was to put this wholesome limitation upon any and every object of general public utility of various description becoming a charitable purpose and thereby qualifying for exemption. It is to be noticed that the word used in this new law is "activity" and not trade or business. Normally, a trade or business is always with profit or with profit motive, though no doubt, under some recent statutes as in the Sales Tax Act, the new concept o business without profit is being introduced." Further, Hon'ble Supreme Court while echoing Calcutta High Court, referred to these activities generating surplus in the context of Calcutta High Court judgment. So neither Calcutta High Court nor Supreme Court ever said that the Chamber is carrying on any business for the purpose of earning profit in an organized manner. What they said was in view of definition of charitable purpose as defined in section 2(15) post amendment in 1961 Act that "activity not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken by assessee were business activity carried on with a profit motive and therefore, there was no need to maintain separate books of account for such activities. The generation of income is not conclusive test for determining the charitable nature of the activities. Further, in connection to the reference made by the A.O in his Remand Report to the decision of the Supreme Court in the case of FICCI, it is stated here that here that in FICCI, the Supreme Court had clearly laid out that 'the income derived by the respondent from the activities, such as holding the Indian Trade Fair and sponsoring the Conference of the Afro-Asian Organization, were for the advancement of the dominant objet and purpose of the Federation, viz., promotion, protection and development of trade, commerce and industry in India, and were exempt from tax under s. 11(1)(a) read with s. 2(15)' Thus, it was clearly held that the incidental activities were well covered by the section 2(15) of the Act and were thus "charitable" in nature. In such an eventuality, the application of the section 11(4A) which applies only to business activities stands absolutely negated. 30. Hence in view of all the above, conclud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances of the case of the appellant the Ld. CIT(A) erred in confirming the allegation of the Ld. AO that the appellant was hit by the first proviso to section 2(15) of the Income Tax Act inserted w.e.f. 01/04/2009, inasmuch as the appellant was allegedly involved in the rendering of service in relation to any trade, commerce or business, for cess or fee or any other consideration. 4. That on the acts and the circumstances of the case of the appellant the Ld. CIT(A) erred in confirming the allegation of the Ld. AO that the appellant's activities of conducting the Environment Management Centres, meetings, conferences & seminars and the Issuance of Certificate of Origin were all in the nature of business carried on systematically and continuously with a motive to earn profit from the same. 5. That on the acts and the circumstances of the case of the appellant the Ld. CIT(A) erred in holding that the reliance placed by the Ld. AO on the decision of the Hon'ble Supreme Court in the appellant's own case viz. Indian Chamber of Commerce Vs CIT (191 ITR 796 S.C) was justified as the appellant did not get the said judgment reversed by filing a review petition before the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business, 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;" The rationale for bringing this proviso can be understood by referring to the relevant portion of the Memorandum explaining the provisions in the Finance Bill, 2008 reported in 298 ITR (St) 2000-01 which reads as under: (Clause 3) "It has been noticed that a number of entities operating on commercial lines are claiming exemption on their income either under section 10(23C) or section 11 of the Act on the ground that they ware charitable institutions. This is based on the argument that they are engaged in the "advancement of an object of general public utility" as is included in the fourth limb of the current definition of "charitable purpose". Such a claim when made in respect of an activity carried out on commercial lines is contrary to the intention of the proviso. With a view to limiting the scope of the phrase "advancement of any other object of general public utility", it is proposed to amend section 2(15) so as to provide that "the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incidentally involves the carrying on of commercial activities. 2.2 'Relief of the poor' encompasses a wide range of objects for the welfare of the economically and socially disadvantaged or needy. It will, therefore, include within its ambit purposes such as relief to destitute, orphans or the handicapped, disadvantaged women or children, small and marginal farmers, indigent artisans or senior citizens in need of aid. Entities who have these objects will continue to be eligible for exemption even if they incidentally carry on a commercial activity, subject, however, to the conditions stipulated under section 11(4A) or the seventh proviso to section 10(23C) which are that i) the business should be incidental to the attainment of the objectives of the entity, and ii) separate books of account should be maintained in respect of such business. Similarly, entities whose object is 'education' or 'medical relief' would also continue to be eligible for exemption as charitable institutions even if they incidentally carry on a commercial activity subject to the conditions mentioned above. 3. The newly inserted proviso to section 2(15) will apply only to entities whose purpose is 'advanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ho claim that their object is 'charitable purpose' within the meaning of Section 2(15), would be well advised to eschew any activity which is in the nature of trade, commerce or business or the rendering of any service in relation to any trade, commerce or business. 33. From the Memo Explaining the provisions of Finance Bill 2008 & CBDT Circular dated 19-12-2008, what will be position of an entity engaged in the 'advancement of any other object of general public utility', whether the same will be hit by commercial activities in view of the newly inserted proviso to section 2(15) of the Act or not? The proviso was introduced with the sole aim of bringing into ambit of taxation such entities which were engaged in commercial activities. Here, we need to appreciate the concept of an "entity engaged in commercial activities". In very simple words, any entity whose main or dominant object is commercial can only be said to be a commercial entity. An entity whose main purpose is undoubtedly charitable in nature without an iota of commerciality in it cannot be said to be engaged in commercial activity. Also we need to note that another point that emerges from the above is that whether an e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finitions: … … … (13) "business" includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture" The word "Business" is of large and infinite import. Section 2(13) defines business to include any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. The intention of the legislature is to make the definition extensive as the term "includes" has been used. The legislature has deliberately departed from giving a definite import to the term "business" but has made reference to several other general terms like "trade", "commerce", "manufacture" and "adventure or concern in the nature of trade, commerce and manufacture". The term "business" has been explained by various judicial decisions and the landmark decision of the Hon'ble Supreme Court of India in the case of CST v. Sai Publication Fund [2002] 258 ITR 70 interpreted the word 'business' under section 2(5-A) of the Bombay Sales Tax Act, 1959 as follows:- "… No doubt, the definition of "business" given in Section 2(5-A) of the Act even without profit motive is wide enough to include any tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carrying on business." Further in para 30 of the same judgment, it is stated thus: "30. In our view, if the main activity was not 'business', then the connected, incidental or ancillary activities of sales would not normally amount to 'business' unless an independent intention to conduct 'business' in these connected, incidental or ancillary activities is established by the Revenue. It will then be necessary to find out whether the transactions which are connected, incidental or ancillary are only an infinitesimal or small part of the main activities. In other words, the presumption will be that these connected, incidental or ancillary activities of sales are not 'business' and the onus of proof of an independent intention to do 'business' in these connected, incidental and ancillary sales will rest on the department. If, for example, these connected, incidental or ancillary transactions are so large as to render the main activity infinitesimal or very small, then of course the case would fall under the first category referred to earlier." (emphasis supplied." Further, Hon'ble Supreme Court in this very same case held as under: "… … This decision is directly on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lhi High Court in the case of PHD Chamber of Commerce & Industry(Supra), wherein very categorically held that activities and services performed for a fee or against a payment, by a trade, professional or similar association, such as a chamber of commerce and industry could not be held to be "business" in nature carried out with a profit motive. From all the above what thus transpires is that it is the primary or dominant purpose of the institution, which must be charitable. Where the main activity is "charitable" then the activities which are incidental or ancillary to the main activity, even if carried out for profit, would not mitigate or change the "charitable" character of the institution. Thus in the cases of many professional institution whose main activity is not "business", the connected incidental or ancillary activities of sales carried out in furtherance of and to accomplish their main objects would not, normally, amount to business, unless an independent intention to conduct 'business' in these connected, incidental or ancillary activities is established by the revenue. The test, therefore, to be applied is whether the activity which is pursued is ancillary to a dominan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority of the receipts in the said activities were out of the sponsorships and donations. The expenses incurred on the said activities as and when incurred were all separately debited to the said accounts and the balance was shown as surplus over receipts. Thus in view of the above it is clear 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, Conferences & Seminars (b) Environment Management Centre (c) Fees for Certificate of origin Facts relating to these activities are discussed in detail in para 23 to 25 of this order above, which need not be repeated. 36. From facts in entirety, now the question arises is whether principle of consistency will apply or not? From AY 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the primary object." In connection to the above case it is laid out the said case dealt with the assessment of the assessee in the A.Ys 1948-49 to wherein relevant to the said AYs 948-49 to 1952-53, by the last paragraph of sub-section (3) of the IT Act, 1922", charitable purposes" was defined as "… .. In this sub-section "Charitable purpose" includes relief of the poor, education, medical relief and the advancement of any other object of general public utility, but nothing contained in clause (i) or clause (ii) shall operate to exempt from the provisions of this Act part of the income from property held under a trust or other legal obligation for private religious purposes which does not enure for the benefit of the public." The adding of the words "not involving the carrying on of any activity for profit: was introduced by the Income tax Act, 1961. Hon'ble Apex court in the earliest decision in the case of Surat Art Silk Cloth Manufacturers Association (Supra) held the theory of dominant or primary object of the trust to be the determining factor so as to take the carrying on of the business activity merely ancillary or incidental to the main object. It was held as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the activities of the members/enrolled chartered accountants. A very narrow view had been taken that the Institute was holding coaching classes and that this amounted to business." Again, Hon'ble Bombay Higi Court in the WP of Baun Foundation Trust (Writ Petition No. 1206 of 2010 in the High Court of judicature At Bombay 27 March 2012) it was held that "4… It is a well settled position in law that the dominant nature of the purpose for which the trust exists has to be considered. The Chief Commissioner has not doubted the genuineness of the trust or the fact that it is conducting a hospital." Thus from all the above it is seen that though the definition of "charitable" purpose under section 2(15) has undergone changes, the principle underlying the same has remained the same. In context of the above, with regard to the "principle of consistency" it would be of relevance here to quote the decision of the Apex Court in the case of Radhasoami Satsang v. Commissioner of Income-tax (193 ITR 321 SC) wherein it was held that: "…. (ii) That, in the absence of any material change justifying the Department to take a different view from that taken in earlier proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d there is no profit motive. Thus, assessee being a charitable Institution carrying on the object of promotion and development of trade and commerce and which is not involved in the carrying on of any activity in the nature of "business", the said section 28(iii) of the Act does not apply. 38. In view of the above discussion, 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 section 2(15) of the Act and also the definition of "business" in relation to the said section amply revels that the theory of dominant purpose has always, all through the years, been upheld to be the determining factor laying down whether the Institution is Charitable in nature or not. Where the main object of the Institution was "charitable" in nature, then the activities carried out towards the achievement of the said, being incidental or ancillary to the main object, even if resulting in profit and even if carried out with non members, were all held to be "charitable" in nature. Hon'ble Apex Court in the earliest case of Andhra Chamber of Commerce (supra) had ..... X X X X Extracts X X X X X X X X Extracts X X X X
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