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TMI Blog2015 (8) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... mmerce (1964 (10) TMI 19 - SUPREME Court) had clearly laid out the principle that if the primary purpose of an Institution was advancement of objects of general public utility, it would remain charitable even if an incidental or ancillary activity or purpose, for achieving the main purpose, was profitable in nature. In our view the basic principle underlying the definition of "charitable purpose" remained unaltered even on amendment in the section 2(15) of the Act w.e.f. 01/04/2009, though the restrictive first proviso was inserted therein. Accordingly, in the given facts of the case as discussed above in detail, the assessee association's primary purpose was advancement of objects of general public utility and it would remain charitable even if an incidental or ancillary activity or purpose, for achieving the main purpose was profitable in nature. Hence, assessee is not hit by newly inserted proviso to section 2(15) of the Act - Decided in favour of assessee. - ITA No. 1192/Mds/2014 - - - Dated:- 26-6-2015 - Chandra Poojari, AM And Challa Nagendra Prasad, JM,JJ. For the Appellant : Mr P Radhakrishnan, JCIT For the Respondent : Mr R Vijayaraghavan, Adv. ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he nature of trade, commerce or business and therefore applying proviso to section 2(15) of the Act, the assessee was denied exemption under section 10(23C)of the Act. On appeal, Commissioner of Income Tax (Appeals) held that assessee's activities are covered by last limb of the definition under section 2(15) of the Act i.e. any other objects of general public utility and is not involved in any activity in the nature of trade, commerce or business. The Commissioner of Income Tax (Appeals) held that denial of exemption under section 2(15) and section 10(23C)(iv) of the Act is not based on proper appreciation of facts. Against this order, the Revenue is in appeal before us. 4. Departmental Representative vehemently supports the order of the Assessing Officer. 5. Counsel for the assessee submits that an identical issue has been decided by the co-ordinate Bench of this Tribunal in the case of M/s. The Southern India Chamber of Commerce Industry Vs. JCIT in ITA Nos.2733 2734/Mds/2014 dated 17.04.2015 holding that the association is not hit by amended provisions of section 2(15) of the Act and the assessee association is entitled for exemption under section 11 of the Act. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms of sec.l0(23C)(iv) of the Act. Sec.10(23C)(iv) reads as under: (23C) any income received by an person on behalf of... (iv) any other fund or institution established for charitable purposes which may be approved by the prescribed authority, having regard to the objects of the fund or institution and its importance throughout India or through out any State or States; or 4.5 The assessee also applied for registration u/s 12AA of the Act vide its letter dated 20.05.1997. While rejecting the application, the DIT(E), Chennai in his order in No.DIT(E) NO.2(64)j97-98 dated 12.11.1997 declared that the assessee will claim exemption u/s 10(23C)(iv) of the Act and not under the general sections of 11 12A of the Act. 4.6 In view of the above facts, the appellant continues to enjoy exemption u/s 10(23C)(iv) of the Act. For the AY 2010-11, the AO was of the opinion that the appellant is not eligible for exemption u/s 10(23C)(iv) of the Act as the appellant has not satisfied the basic condition of established for charitable purpose . According to the AO, the appellant was neither established for charitable purpose nor doing any activity in the nature of charity. 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness. Certification fees are collected from members for their benefit only which are useful for availing customs duty benefit from the Government of India. Other receipts such as interest of deposits, sale of publications, bulletin revenue, etc. are only incidental in nature and are not in the nature of commercial activity. Grant in Aid is received from the Government of India every year for expenditure relating to exhibitions abroad, publicity abroad, seminar in India, buyer seller meet, etc. The various activities detailed by the assessing officer in the assessment order do not reveal any commercial activity and all the activities are aimed at assisting the exporters in their business activities. The earning of surplus by the appellant led the Assessing Officer to the conclusion that its activities are purely on commercial lines. The AO's findings throughout the assessment order on the contrary, strengthens the stand of the appellant that it has been carrying on activities which are in the nature of any object of general public utility. In view of the above discussion, I am of the considered view that the appellant's activities are covered by the last limb of the definiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 10. As could be seen from the above observations of the Hon'ble High Court that if the dominant and prime object 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 rendering of any service in relation to its any trade, commerce or business, then the assessee would not able to claim its object to be charitable purposes. On the other hand, where the institution is not driven primarily by a desire or motive to earn profits but to do charity through advancement of object of general public utility, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Kolkata Bench of this Tribunal in the case of India Chamber of Commerce Vs. ITO (supra), we find that the issue in appeal is squarely covered by the said decision, as the Tribunal had elaborately considered the activities of the assessee in that case which is similar to that of the assessee in the present appeal and the Tribunal held that assessee is a charitable organization and the receipts collected by the assessee are only incidental to carry on its charitable objects and therefore, assessee is not hit by newly inserted proviso to section 2(15) of the Act. The decision of Hon'ble Supreme Court relied on by the Departmental Representative in the case of Indian Chambers of Commerce Vs. CIT (supra) was also considered by the Kolkata Bench of this Tribunal in ITA Nos.1491 1284/Kol/2012 dated 2.12.2014 in deciding the appeals, wherein the Tribunal observed as under:- 35. In view of the above we thus now turn to examine and analyse in full details the particular facts of the present case. That the assessee association is a Charitable Institution, duly registered as such u/s. 12A of the Act, carrying on its main object of development of trade, industries and commerce. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 1985-86 to 2007-08 exemption u/s 11 of the Act was allowed. Now, having extensively with the newly amended section 2(15) of the Act and its absolute inapplicability to the case of assessee supported by various judicial decisions, we will discuss this issue We find that CIT(A) without appreciating that the basis principle underlying the definition of charitable purpose remained unaltered, and on amendment in the section 2(15) of the Act w.e.f. 01/04/2009, whereby the restrictive first proviso was inserted therein, lower authorities held that the same substantially changed the position of law and thus the principle of consistency did not apply. But we are of the view that a detailed reading of the various judicial decisions through the years, interpreting the definition of charitab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrying 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 follows:- (i) That 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 a 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) Again the Hon'ble Apex Court in the case of Federation of Indian Chambers of Commerce Industry (supra) held that that the dominant object with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame 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, 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 ordered, it would not be at all appropriate to allow the position to be changed in a subsequent year. 37. Now coming to application of section 28(iii) of the Act. We find that section 28(iii) of the Act provides that the income derived by a trade, professional or similar association from specific se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 clearly laid out the principle that if the primary purpose of an Institution was advancement of objects of general public utility, it would remain charitable even if an incidental or ancillary activity or purpose, for achieving the main purpose, was profitable in nature. In our view the basic principle underlying the definition of charitable purpose remained unaltered even on amendment in the section 2(15) of the Act w.e.f. 01/04/2009, though the restrictive first proviso was inserted therein. Accordingly, in the given facts of the case as discussed above in detail, the assessee association's primary purpose was advancement of objects of general public utility and it would remain charitable even if an incidental or ancillary activity or purpose, for achieving th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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