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TMI Blog2019 (2) TMI 905X X X X Extracts X X X X X X X X Extracts X X X X ..... sking their activities and portraying them in the garb of an activity in the object of a general public utility but was not designed to hit at those institutions, which had the advancement of the objects of general public utility at their hearts and were charity institutions. After duly considering the objects of the assessee society, the settled legal position with respect to interpretation of proviso of Section 2(15) of the Act and respectfully following the ratio of the judgment of the Hon’ble Delhi High Court in the case of India Trade Promotion Organisation vs. DGIT (Exemption) [2015 (1) TMI 928 - DELHI HIGH COURT] we are unable to concur with the observations and findings of both the lower authorities and while setting aside the orders of the Ld. CIT (Appeals), we direct the AO to allow the assessee the benefit of exemption u/s 11 & 12 of the Act for assessment year 2009-10. - Decided in favour of assessee. - ITA No.- 1449/Del/2013, (A.Y. 2009-10), 1448/Del/2015 (A. Y.: 2010-11) - - - Dated:- 14-2-2019 - Shri R.K. Panda, Accountant Member And Shri Sudhanshu Srivastava, Judicial Member For the Assessee : Ms. Soumya Singh, Adv. For the Revenue : Shri Raghunath, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingly, the AO proceeded to disallow the assessee s claim of exemption u/s 11 and 12 of the Act and brought to tax the entire excess of income over expenditure amounting to ₹ 4,67,37,354/- and after disallowing depreciation on the ground that double deduction could not be allowed added back another amount to ₹ 14,87,114/-. The assessment was completed at an income of ₹ 4,82,24,468/-. 2.1 The assessee s appeal before the Ld. CIT (Appeals) was also dismissed vide order dated 24.12.2012 and now the assessee is in appeal before the ITAT and has raised the following grounds of appeal:- 1. The CIT(A) has, in view of the facts circumstances of the case and in law, grossly erred in upholding the order passed under section 143(3) of the Income Tax Act, 1961 by the Ld. A.O. 2. The CIT(A) has, in view of the facts and circumstances of the case and in law, grossly erred in upholding the action of the AO in treating the society as engaged into the activity in nature of trade, commerce and business. 3. The CIT(A) has, in view of the facts and circumstances of the case and in law, grossly erred in upholding the action of the AO in treating the sale of painting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... double benefit being given to the assessee. The assessee s appeal in this year was also dismissed by the Ld. CIT (Appeals) by holding that there was no merit in the submissions of the assessee for claiming exemption u/s 11(1) of the Act. 2.3 The assessee is now before the ITAT against this order dated 05.10.2014 and has raised the following grounds of appeal :- 1. The Ld. CIT (A) has, in view of the facts circumstances of the case and in law, grossly erred in upholding the order passed under section 143(3) of the Income Tax Act, 1961 by the Ld. AO. 2. The Ld. CIT (A) has, in view of the facts and circumstances of the case and in law, grossly erred in upholding the action of the Ld. AO in treating the society as engaged into the activity in nature of trade, commerce and business. 3. The Ld. CIT (A) has, in view of the facts and circumstances of the case and in law, grossly erred in upholding the action of the Ld. AO in treating the sale of paintings and maintenance charges by providing the Galleries on hire as activities in nature of trade, commerce and business. 4. That the Ld. CIT (A) and Ld. AO has erred in denying the exemption u/s 11/12 to the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso placed on order of ITAT Delhi Bench in the case of ITO (E) vs. The Indian Golf Union in ITA no. 2653/Del/2015 wherein vide order dated 04.07.2018 the ITAT Delhi Bench had also taken similar view by following the judgment of the Hon ble Delhi High Court in the case of India Trade Promotion Organisation vs. DGIT (E) (supra). The Ld. Authorised Representative further submitted that there was no profit motive behind the activities being carried out by the assessee society and the pre-dominant purpose remained charitable and just because the assessee society had charged fees for rent and maintenance while letting out the art galleries and had also earned income from sale of paintings, it could not be said that the entire activity had become commercial in nature. 3.1 The Ld. Authorised Representative further submitted that the issue in assessment year 2010-11 was also identical and the arguments would be the same for that year also and the same were not being repeated for the sake of brevity. 4.0 In response, the Ld. Sr. Departmental Representative placed reliance on the concurrent findings of both the lower authorities and vehemently argued that the nature of activities is com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), as amended by the Finance Act, 2008, was arbitrary and unreasonable and violative of Article 14 of the Constitution of India. The Hon ble Delhi High Court held in the favour of the assessee. The relevant observations of the Hon ble High Court are as under: (i) It is apparent that merely because a fee or some other consideration is collected or received by an institution, it would not lose its character of having been established for a charitable purpose. It is also important to note as to what is the dominant activity of the institution in question. If the dominant activity of the institution was not business, trade or commerce, then any such incidental or ancillary activity would also not fall within the categories of trade, commerce or business. It is clear from the facts of the present case that the driving force is not the desire to earn profits but, the object of promoting trade and commerce not for itself, but for the nation both within India and outside India. Clearly, this is a charitable purpose, which has as its motive the advancement of an object of general public utility to which the exception carved out in the first proviso to Section 2(15) of the said Act wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Thus, while we uphold the Constitutional validity of the proviso to Section 2(15) of the said Act, it has to be read down in the manner indicated by us. 5.1 Thus, the Hon ble Delhi High Court has held that merely because a fee or some other consideration is collected or received by an institution, it would not loose its character of having been established for a charitable purpose. Undisputedly, in the present case the dominant activity of the assessee society is not business trade or commerce but its activities are for the promotion of art, craft and culture for the Indian artists in India. The Assessing Officer has himself reproduced the main objectives of the assessee society as per the Memorandum of ..... 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