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TMI Blog2020 (10) TMI 1094X X X X Extracts X X X X X X X X Extracts X X X X ..... e authorities and the Tribunal and remand the matter for fresh consideration. Appeal is allowed and the impugned order passed by the Tribunal as well as the order passed by CIT(A) and the assessment order are set aside and the matter is remanded to the Assessing Officer to take a fresh decision bearing in mind the legal principles laid down by the Courts and Tribunal in various decisions as referred. - T.C.A.No.98 of 2018 And CMP.No.1567 of 2018 - - - Dated:- 9-9-2020 - Mr. Justice T.S. Sivagnanam And Mrs. Justice V. Bhavani Subbaroyan For the Appellant : Ms.Radhika Chandrasekar For the Respondent : Mr.J.Narayanaswamy Senior Standing Counsel JUDGMENT T.S.SIVAGNANAM , J. This appeal filed by the Assessee, under Section 260A of the Income Tax Act, 1961 ('the Act' for brevity) is directed against the order dated 30.01.2017 passed by the Income Tax Appellate Tribunal, Chennai 'C' (SMC) Bench, ('the Tribunal' for brevity), in I.T.A.No.1854/Mds/2014 for the assessment year 2009-10. 2. The appeal was admitted on 07.06.2019 on the following substantial questions of Law: (i) Whether on the facts and circumstance of the case, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f more than ₹ 10,00,000/- in the nature of fees, as such, it would come within the purview of second proviso under Section 2(15) of the Act. The Assessing Officer treated the assessee as an Association of Persons (AOP) and the excess of income over the expenditure of it, was taxed. Further, the Assessing Officer referred the case to the Director of Income Tax (Exemptions), for consideration of withdrawal/cancellation of registration under Section 12AA of the Act. 5. The fact remains that the assessee is a non-profit entity viz., a charitable public trust and in the light of being a such organisation/institution, the registration of the assessee has not been cancelled or withdrawn till date. 6. The Assessing Officer after discussing the case with the authorised representative and on considering the details made available, had passed the assessment order on 30.12.2011, determining the total income as ₹ 11,86,560/- and the tax payable as ₹ 3,93,250/-. 7. Aggrieved by the assessment order dated 30.12.2011, passed under Section 143(3) of the Act, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) -VII, Chennai [ in short 'CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will not be eligible for exemption under section 11 or under section 10(23C) of the Act if they carry on commercial activities. Whether such an entity is carrying on an activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of the activity. 3.1. There are industry and trade associations who claim exemption from tax u/s 11 on the ground that their objects are for charitable purpose 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 the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be right, but there is an important aspect which needs to be taken note of while applying the first proviso under Section 2(15). In fact, this has been brought out very lucidly in Circular No.11/2008. The CBDT explains it by stating that the entities which fall within the fourth limb of charitable purpose under Section 2(15) will not be eligible for exemption under Section 11, if they carry on commercial activity. Further, it is stated that whether such an entity is carrying on activity in the nature of trade, commerce or business, is a question of fact, which will be decided based on the nature, scope, expenditure and frequency of the activity. Further, it has been pointed out that whether the assessee has for its object ' the advancement of any other object of general public utility' is a question of fact. If the assessee is engaged in an activity in the nature of trade, commerce or business or render any service in relation to trade, commerce or business, it would not be entitled to claim that its object is 'charitable purpose' and in such a case, the object of general public utility will be only a mask to hide the true purpose. Thus the Board has clarif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts, which was charity. In PHD Chamber of Commerce and Industry Vs. Director of Income-Tax (Exemptions) [(2013) 357 ITR 296 (Del)], while dealing with more or less identical facts, it was held as follows : Having regard to the authorities which we have noticed above it is not proper to characterise the activities of the chamber as activities amounting to a business in the generally understood sense of the word, the most important feature of business being profit motive. It has not been suggested by the Income-tax authorities that the activities carried out by the assessee-chamber were propelled by any profit motive. In such circumstances, it is proper to view the activities as driven by a charitable motive in the sense in which a charitable purpose is defined in section 2(15) of the Act. 11(4)A are not attracted to the present case and a remand to the Assessing Officer for finding out whether the activities were incidental to the objectives of the trust and separate books of account were maintained for such business was unnecessary. We accordingly answer the substantial question of law framed by us in the negative, in favour of the assessee and against the Revenue. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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