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TMI Blog2016 (8) TMI 1445X X X X Extracts X X X X X X X X Extracts X X X X ..... e is a delay of 14 days in filing of the appeal for the assessment year 2009-10 by the Revenue. The learned DIT (Exemptions) has filed an affidavit stating that the records in the appeal papers inadvertently got mixed up with other files and after tracing the same, the appeal was filed before the Tribunal with a delay of 14 days. Considering the prayer of the learned DIT (Exemptions), we are of the view that the delay in filing of the appeal by 14 days requires to be condoned. Accordingly, we hereby condone the delay in filing the appeal and take up the appeal for adjudication. 4. Brief facts of the case are that that the assessee is an trade association registered as society in the Registrar of Societies, Chennai filed its return of income for the assessment years 2009-10, 2010-11 and 2011-12 on 30.09.2009, 18.10.2010 and 30.09.2011 respectively. The assessee society was granted registration under section 12A(a) of the Act vide letter No.DIT(E)No.2 (529)/1999-2000 dated 22.12.2000. The activities of the association as per its memorandum of association provide as follows:- "To ensure the, proper growth of economy in the country and the availability of standard goods at reasona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stribution of wattle was carried out without any profit motive. But, it was noticed by the learned Assessing Officer that the assessee had earned surplus from such distribution Rs. 14,53,414/-, Rs. 26,79,130/- and Rs. 49,20,557/- for the assessment years 2009-10, 2010-11 and 2011-12 respectively. Therefore, invoking the proviso to section 2(15) of the Act, the learned Assessing Officer withdrew the benefit of section 11 & 12 of the Act to the assessee and brought the surplus earned by the assessee to tax. 6. On appeal, the learned Commissioner of Income Tax (Appeals) held that the activities undertaken by the assessee trust are for the fulfillment of the charitable objects on noncommercial lines and are not hit by the provisions of section 2(15) of the Act by observing as under:- "4.4 The Assessing Officer took into account the objects of the society as can be seen from the page 2 of the assessment order of assessment year 2009-10.As correctly observed by the Assessing Officer that the society is coming under the last limb of the object of "general public utility". That itself does not mean that 2nd proviso to sec.2(15) of the Act is automatically attracted when the receipts e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity will not be unrelated business income. 4.7 In the case under consideration the predominant portion of the income exceeding the threshold limit of Rs. 10,00,000/- is through import of wattle extract and selling it to members and earning income out of it. The income or surplus so earned is ploughed back into the organization for use in its charitable activity. This activity is substantially related to the appellant's charitable purpose and contributes importantly in accomplishing that purpose apart from production of funds. Therefore the proviso to section 2(15) cannot be invoked in the case of the appellant. 4.8 The 'B' Bench of ITAT Ahmedabad in the case of Sabarmati Ashram Gaushala Trust v. Assistant Director of Income-tax ( Exemption) [2013J 35 taxmann.com 552 (Ahmedabad - Trib.) has held that where the aims and objects of assessee-trust were charitable and profit earned from said activities was incidental in nature, assessee was not hit by proviso to section 2(15). It clarified that where a trust is carrying out its activities on non-commercial lines with no motive to earn profits, for fulfillment of its aims and objectives, which are charitable in nature a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il Nadu and in the process some profit was earned by the assessee-trust, which is incidental in nature. Moreover such substantial income earning activity is neither a regular business activity nor a un-related business activity. Therefore the activities undertaken by the assessee-trust for the fulfillment of its charitable objects on non-commercial lines are not hit by the proviso to section 2(15). 4.11 Finally it becomes imperative to reproduce the Hon'ble Finance Minister's Speech" while moving amendments to define charity u/s 2(15). "I once again assure the House that genuine charitable organizations will not in any way be affected. The CBDT will, following the usual practice, issue an explanatory circular containing guidelines for determining whether an entity is 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. Whether the purpose is a charitable purpose will depend on the totality of the facts of the case. Ordinarily, Chambers of Commerce and similar organizations rendering services to their members would not be affected by the amendment and their activit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horized Representative on the other hand, argued in support of the order of the learned Commissioner of Income Tax (Appeals). 9. We have heard the rival submissions and carefully perused the materials available on record. We have also perused the decisions relied by the learned CIT(A) and we do not find it to be applicable to the facts of the present case before us. On examining the facts of the case, it is evident that the assessee is procuring raw material from African countries and distributing the same to its members as well as other concerns which has similar nature of business as those of the members of the assessee society. Further from the objects of the assessee society, it is evident that such trading activity indulged by the assessee society is not mentioned in the objects of the assessee society. Moreover, the activity of the assessee society viz., procuring raw materials from abroad and distributing the same will amount to pure commercial transaction because it is purely a trading activity generating substantial profits. There is no element of charity in this kind of activity indulged by the assessee society. It is not a case where the assessee had imported raw mater ..... X X X X Extracts X X X X X X X X Extracts X X X X
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