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TMI Blog2016 (7) TMI 812X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Act, 1961 vide order dated 08.06.1992. The assessee filed its return of income on 01.10.2009 declaring income of Rs..48,75,933/- and claiming exemption under section 11 of the Act. The return filed by the assessee was processed under section 143(1) of the Act. The case of the assessee was selected for scrutiny and notice under section 143(2) of the Act was issued. After considering the details, the assessment was completed under section 143(3) of the Act determining the total income of Rs..20,07,632/-. During the course of assessment proceedings, the Assessing Officer found that the assessee was in receipt of fees for the issue of certificate of origin. The Assessing Officer also found that the assessee has in receipt of rental income, interest on fixed deposits, miscellaneous income, etc. The Assessing Officer was of the opinion that the income of the trust was earned from the activities, which are of general public utility other than charitable, medical or educational activities and hence observed that the same is covered by proviso to section 2(15) of the Act. The Assessing Officer was also of the opinion that there was no concept of mutuality in this case as the assessee ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e orders of authorities below. Admittedly, the assessee is a charitable institution. The assessee was denied exemption under section 11 of the Act on the ground that the assessee was in receipt of fees for issuance of certificate of origin for the assessment year under consideration and hit by the proviso to section 2(15) of the Act. Similar issue has come up for consideration before the Kolkata Benches of the Tribunal in the case of Indian Chamber of Commerce v. ITIO, Exemptions (supra), wherein, the Tribunal has observed and held 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. T hat 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." T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 "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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 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 inci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge 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 services performed for its members will be brought to charge under the head "profits and gains of business or profession" The underlying idea behind s. 28(iii) is that there must be a business from which income is derived and that in the course of such business specific services must be rendered for its members. The concept behind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature. 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 11 I.T.A. No.164/M/15 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. This issue of assessee's appeal is allowed." 7. By following the above decision of the Kolkata Benches of the Tribunal, the Coordinate Bench of the Tribunal in the case of The Southern I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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