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TMI Blog2015 (7) TMI 209X X X X Extracts X X X X X X X X Extracts X X X X ..... , AO without examining the issue in proper perspective has abruptly concluded that assessee is not entitled to exemption u/s 11 of the Act only because proviso to section 2(15) was introduced w.e.f. 01/04/09. In our view, proviso to section 2(15) of the Act will not apply automatically to every trust or institution irrespective of the fact, whether the dominant object of the trust or institution is charitable purpose or earning profit. When in the present case assessee is registered as charitable institution and there is no change in the aims and objects of assessee in the impugned AY and the activities of assessee over the years remains the same, the proviso to section 2(15) cannot be applied to assessee to deny exemption u/s 11 of the Act. - Decided in favour of assessee. - ITA Nos. 33 & 339/Hyd/2015 - - - Dated:- 3-7-2015 - Shri B. Ramakotaiah And Shri Saktijit Dey,JJ. For the Petitioner : Shri B. Rajaram For the Respondent : Shri C.S. Subramanyam Shri V. Sivakumar ORDER Per Saktijit Dey, J. M. These two appeals by the department are against separate orders of ld. CIT(A), Hyderabad pertaining to AYs 2009-10 and 2010- 11. ITA No. 33/Hyd/2015 for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ociety as assessee is predominantly engaged in construction of temple, which is not amongst its objects. He, therefore, called upon assessee to show cause as to why the claim of exemption u/s11 shall not be denied. In response to the query raised by AO, it was submitted by assessee as under: i) Lord Jagannath is a symbol of Odisha culture and heritage. Culture and heritage are interlinked and interwined with the religious sentiments of the people. Both cannot be separated from each other. ii) In order to promote Odisha Culture among the residents of Hyderabad and Andhra Pradesh, for which the society was established, there was an immediate need to bring in a symbol of Odisha Culture to Hyderabad. The Jagannath Temple, which is a replica of the Lord Jagannath Temple of Puri, Orissa is a symbol of Odisha Culture. iii) The main aim of the assessee is not to promote religion but to promote Odisha Culture and construction and operation of the Temple cannot be isolated activities to promote Odisha culture. iv) Although the construction and maintenance of the Jagannath Temple was not included in the objects of the Trust, the object of the society was amended. v) The societ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c are ancillary and incidental to the main objects of assessee, hence, cannot be considered to be commercial activities. He submitted that receipts from such activities is utilized for construction of temple, which is a charitable activity. 5. Ld. CIT(A) after considering the submissions of assessee in the context of facts and materials on record found that in assessee s own case for preceding AYs, ld. CIT(A) has decided the issue in favour of assessee by holding that assessee being engaged in temple construction activity is entitled for exemption u/s 11, which was also confirmed by ITAT, Hyderabad Bench. She observed that there is no doubt that assessee was engaged in construction of Jagannadha Temple for the last three years and for this purpose assessee has raised monies through donations, by renting out hall etc. However, it was observed by ld. CIT(A) that in view of the principle laid down by Hon ble AP High Court in case of CIT Vs. Social Services Centre (supra) and the decision of ITAT in assessee s own case, the activity of assessee in constructing a temple falls under charitable activity. Accordingly, she held that exemption u/s 11 cannot be denied to assessee. She obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of proviso to section 2(15) of the Act, assessee looses its character of trust having been established for charitable purpose as it has earned income by engaging in commercial activities. As far as allegation of AO that construction of temple by assessee is neither in accordance with aims and objects of assessee nor charitable activity is concerned, it has to be rejected at the threshold in view of the decision of the coordinate bench in assssee s own case in AYs 2006- 07, 2007-08 and 2008-09 in ITA Nos. 894 895/Hyd/13 and 1067/Hyd/12, dated 06/06/14 wherein the coordinate bench agreed with the ld. CIT(A) that construction of Jagannadha Temple is not only in furtherance of the aims and objects of assessee society but, is also a charitable activity. In view of the aforesaid, we do not find any merit in the submissions of the ld. DR that construction of Jagannadha Temple is not a charitable activity. As far as the second reason for denying exemption u/s 11 is concerned, it is the allegation of AO that as assessee was involved in commercial activity by generating income by letting out function hall, selling souvenir, etc, it is not eligible for exemption in view of the proviso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acuum, but, has to be read along with the exemption provisions. That being the case, a literal interpretation to the proviso to section 2(15) cannot be given if the objects of the exemption provisions are to be given full effect. The Hon ble Delhi High Court in case of Indian Trade Promotion Organisation Vs. director General of Income-tax (E), 371 ITR 333 while interpreting the effect of proviso to section 2(15) of the Act, after analyzing a number of decisions of the Hon ble Supreme Court as well as different high courts observed that the only thing which is required to be examined is whether the trust or institution has been established for charitable purposes. The fact that it derives income does not in any way detract from the position that it is not an institution established for charitable purposes. The Hon ble High Court observed that merely because assessee derives rental income, income out of sale of tickets and sale of publications and income out of leasing out food and beverages outlets in the exhibition grounds does not, in any way, affect the nature of trust as a charitable institution, if, it otherwise qualifies for such a character. It was further observed by the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of advancement of any other object of general public utility and that exception is limited to activities in the nature of trade, commerce or 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. In both the activities, in the nature of trade, commerce or business or the activity of rendering any service in relation to any trade, commerce or business, the dominant and the prime objective has to be seen. If the dominant and the prime objective of the institution, which claims to have been established for charitable purposes, is profit making, whether its activities are directly in the nature of trade, commerce or business or indirectly in the rendering of any service in relation to any trade, commerce or business, then it would not be entitled to claim its object to be a charitable purpose . On the flip side, where an institution is not driven primarily by a desire or motive to earn profits but to do charity through the advancement of an object of general public utility, it cannot but be regarded as an institution established for charitable purposes. 8.2 If we apply the aforesaid principles ..... X X X X Extracts X X X X X X X X Extracts X X X X
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