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TMI Blog2016 (4) TMI 651X X X X Extracts X X X X X X X X Extracts X X X X ..... embargo on earning profit from any of the activities of the Society. Profit is the essence of trade, commerce or business. When services are rendered without profit motive, the element of trade, commerce or business disappears from such activities. Therefore, it can be safely construed that the activities of the assessee are not hit by the newly added proviso to Section 2(15) of the Act. - Decided in favour of assessee - ITA No. 386/Mum/2013, ITA No. 1122/Mum/2013 - - - Dated:- 15-4-2016 - Shri R. C. Sharma, AM And Shri Mahavir Singh, JM For the Petitioner : Shri Sanjiv M. Shah For the Respondent : Shri vishwas Jadhav, DR ORDER Per Mahavir Singh, JM Both these appeals by assessee and revenue are directed against the order of CIT(A)-1, Mumbai in Appeal No. CIT(A)-1/IT-E2(71)/2011-12 vide order dated 30.11.2012. Assessment was framed by Asst. DIT(E)-II(1), Mumbai u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) for AY 2009-10 vide his order dated 26.12.2011. 2. First we take up ITA No. 386/Mum/2013 (assessee s appeal). The first issue in this appeal of assessee is against the order of the CIT(A) in confirming the action of A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... historic interest, and the advancement of any other object of general public utility: Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity 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, irrespective of the nature of use or application, or retention, of the income from such activity; 4.7 The above proviso to Sec.2(15) is added w.e.f. 2009-10. Several activities of the appellant have been found to be organized, systematic activities bearing the nature of trade and business activity. Earning of substantial fees in organized manner cannot be considered as being charitable activity. Hence, the appellant is covered by the amendment to the proviso to Section 2(15) of the Act since these activities are nothing but an advancement of an object of general public utility in the nature of rendering any service in relation to any trade, commerce or business, for a cess, fee or any other considerations. 4.8 Further, Section 13(8) of the Act, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Indian Union and the Republic of France; to consider questions connected therewith, to make representations to Governments, legislative bodies, chamber of Commerce and other authorities thereon. 3. To assist in the setting up of joint Ventures in India and in third countries in association with individuals, firms, companies and corporations of Indian and French nationality and do such things as may be necessary. 4. To promote, study, extend and advance the special interest of Indian subjects carrying on any industry or business in or with the republic of France and also the special interest so France subjects carrying on any industry or business in or with the Indian Union. 5. The assessee explained before us that Chamber is not engaged in giving relief to the poor, education or medical relief but is covered by the last limb of definition of charitable purpose as defined u/s. 2(15) of the Act i.e. the advancement of any other object of general public utility . During the course of assessment proceedings, the AO called for the details and assessee filed all the details including income and expenditure made by Chamber. The source of income of the assessee has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as these are covered under 'any other object of general public utility'. Under the principle of mutuality, if trading takes place between persons who are associated together and contribute to a common fund for the financing of some venture or object and in this respect have no dealings or relations with any outside body, then any surplus returned to the persons forming such association is not chargeable to tax. In such cases, there must be complete identity between Gthe contributors and the participants. Therefore, where industry or trade associations claim both to be charitable institutions as well as mutual organizations and their activities are restricted to contributions from and participation of only their members, these would not fall under the purview of the proviso to s. 2(15) owing to the principle of mutuality. However, if such organizations have dealings with non-members, their claim to be charitable organizations would now be governed by the additional conditions stipulated in the proviso to s. 2(15). 3.2 In the final analysis, however, whether the assessee has for its object 'the advancement of any other object of general public utility' is a qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uals, industrialists, scholars, tends to enlighten the faculties of the members which is to their ultimate benefit and may help them in becoming more evolved and better human beings. In fact, the Rajasthan High Court in CIT vs. Jodhpur Chartered Accountants Society (2002) 174 CTR (Raj) 504 : (2002) 258 ITR 548 (Raj) has held that organizing such seminars and conferences to educate people in different fields of knowledge is a charitable object of general public utility without any profit motive. Another objection raised in the-impugned order is that the benefit of the society would not be available to general public and are restricted to its members. The Delhi Bench of the Tribunal on this issue has held as under: 6. The Director of IT (Exemptions) is also not right in his view that the activities of the society are restricted to Japanese companies and Japanese Government Institutions who alone can become members of the society and, therefore, the Indian public at large is not benefited by the activities. It has to be remembered that the society has been formed to promote development of trade and commence between India and Japan and facilitate economic cooperation betw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. From the above facts, we are clear that the assessee has never been dominantly engaged in any commercial activities and is a Charitable Institution registered as such u/s 12A of the Act, set up for the promotion and protection of Indian business and industry. The main purpose of this Institution is promotion and protection of trade and commerce in the country and not to conduct any commercial activities. Further, it has also never been the contention of the revenue that the assessee is engaged in commercial activities but it is hit by the proviso to section 2(15) of the act and thus will be deemed to be engaged in commercial activities. What will be the position to an institution engaged in advancement of any other object of general public utility, which lays down that such an institute will be deemed to be not charitable if it is involved in carrying on any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business. According to us, part of the proviso being any activity of rendering any service in relation to any trade, commerce or business intends to expand the scope of the proviso to incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to carry on business in the incidental or ancillary activity is established. In such cases, the onus of proof of an independent intention to carry on business connected with or incidental or ancillary sales will rest on the Department. Thus, if the main activity of a person is not trade, commerce etc., ordinarily incidental or ancillary activity may not come within the meaning of business . To put it differently, the inclusion of incidental or ancillary activity in the definition of business presupposes the existence of trade, commerce etc. The definition of dealer contained in Section 2(11) of the Act clearly indicates that in order to hold a person to be a dealer he must carry on business and then only he may also be deemed to be carrying on business in respect of transaction incidental or ancillary thereto. We have stated above that the main and dominant activity of the Trust in furtherance of its object is to spread message. Hence, such activity does not amount to business . Publication for the purpose of spreading message is incidental to the main activity which the Trust does not carry on as business. In this view, the activity of the Trust in bringing out publi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case irrespective of the profit motive, it could not be said that the Trust either was dealer or was carrying on trade, commerce etc. The Trust is not carrying on trade, commerce etc., n the sense of occupation to be a dealer as its main object is to spread message of Saibaba of Shirdi as already noticed above. Having regard to all aspects of the matter, the High Court was right in answering the question referred by the Tribunal in the affirmative and in favour of the respondent-assessee. We must however add here that whether a particular person is a dealer and whether he carries on business , are the mattes to be decided on facts and in the circumstances of each case. 34. Thus from the above, the logical corollary which inexorably flows from a careful perusal of the above laid decision is that in the cases of many institutions / associations 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 est ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dental, ancillary and connected activities and whether the same were carried out predominantly with a profit motive. 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. The main objects for which the association came into existence, are clearly set out in clause 3 of the Memorandum of Association which duly records and reads as under: 3(a) To promote and protect the trade, commerce and industries and in particular the trade, commerce and industries in or with which Indians are engaged or concerned. The activities of conducting Environment Management Centre, Meetings, Conferences Seminar and issuance of Certificate of Origin, being the activities stated to be services in relation to trade, commerce or business were all well covered by the main object being fully connected, incidental and ancillary to the main purpose and were conducted solely for the empowerment, betterment and for creating awareness amongst t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efinition 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 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 clearly laid out the principle that if the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat 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 which the Federation was constituted being a charitable purpose viz. promotion, protection and development of trade, commerce and industry, there being no motive to earn profits, the respondent was not engaged in any activity in the nature of business or trade, and, if any income arose from such activity, it was only incidental or ancillary to the dominant object for the welfare and common good of the country s trade, commerce and industry, and its income was, therefore, exempt from tax under s.11 of the IT Act, 1961 . Again reiterating the dominant purpose theory, the Hon'ble SC in the case of Sai Publication Fund (supra) laid out as follows: If the main activity is not business, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. . 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 Cha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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