9911796707
TMI Blog2021 (5) TMI 745X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. 1.2 The learned CIT(A) erred on facts and in law in not considering he alternative claim of the appellant for deduction/ exemption made under s.44A of the Act. 2.0 Misappreciation of facts: The learned CIT(A) erred on facts and in law in wrongfully appreciating that the appellant was claiming deduction in respect of expenses against interest from banks and not appreciating that expenses were not claimed as "deduction" from any particular income, but the expenses represented application" of income." 3. The facts in brief are that the assessee filed the return of income on 25.11.2014 accompanying therewith the income and expenditure account, Balance sheet and Audit Report declaring total income of Rs. 40,32,933/-. Pertinent to state that the assessee is registered u/s 12A of the Act vide registration No. INS/10496/ dated 08.04.1974. The case was selected for the scrutiny and statutory notices were duly issued and served upon the assessee. The AO in Para 4 of the assessment order noted that in earlier years, the assessee's activities were hit by proviso to section 2(15) of the Act. According to the AO held that during the year the assessee has prepared profit and loss acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in nature of business and also charge fee or coordination. It was earning huge profits in systematic and organized manners and therefore, it was not an institute existing for charitable purpose under the revised proviso to Section 2(15) of the I.T Act. Thirdly, the assessee trust institute has been earning huge income from Stall rental charges, bunting & banners, sponsorship income, directory advertisement, Exhibition Entry ticket Collection etc. 4.5 To decide the above issue, it is necessary to examine section 2(15) after the amendment with effect from 1st April 2008. The relevant provision read as under: "Section 2 definition- 2(15) "Charitable purpose" includes relief of the poor, education, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest and the advancement of any other object of general public utility. 4.6 The assessee is an institution which carries on charitable activities in the nature of education or advancement of any other object of general public utility and secondly, in case of the assessee - institute is engaged in the activity of adva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arried on efficiently, properly unless and until it is carried out on a business principle but it does not mean that the provision is misused in any manner under the grab of charity and any institution be allowed to become richer and richer under the grab of charity by making it a non-tax payable organization. A charitable institution provides services for charitable purposes free of cost and not for a gain. 4.12 It may also be stated that the concept of charity is necessarily altruistic in nature and involved the idea of benefit to others. The essence of charity is that the person(s) doing charity exclude themselves from the benefits of the charity. Non exclusion of contributors to 'charity' fund from the benefits arising out of that is nothing but serving the interest of self in an organized manner. In fact the entire scheme of Sec. 11 to 13 and particularly sec. 13(1)(c) and 13(3) is based on this basic principle or essence of 'charity'. Thus in a case of even charitable institution, if benefit is proved to certain categories of people referred to in Sec. 13(3) the Exemptions u/s 11, 12 is not admissible. Therefore, the question of granting benefit to any Ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of convenience the proviso to section 2(15) of the Act is extracted as under:- "2. In this Act, unless the context otherwise requires,- ......................................... ........................ (15) "charitable purpose" includes relief of the poor, education, yoga, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or 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, unless- (i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and (ii) the aggregate receipts from such activity or activities during the previous ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6-17 6 Confederation of Real Estate Developers Association of India Vs. ACIT(Exemption)-1(1) ITA No.2815/Mum2018 A.Y.2014-15 Confederation of Real Estate Developers Association of India Vs. CIT(A)-3 claim of deduction envisaged in Sec. 11 of the Act. In order to buttress his aforesaid claim the ld. A.R took us through the facts of the case and drew support from a host of judicial pronouncements to which our attention was drawn during the course of hearing of the appeal. Accordingly, it was submitted by the ld. A.R that both the lower authorities by misconceiving the factual position had wrongly concluded that the activities of the assessee trust were hit by the "proviso‟ to Sec. 2(15) of the Act. As such, it was submitted by the ld. A.R that the lower authorities backed by their erroneous view had wrongly declined the assessee‟s claim for deduction u/s 11 of the Act. Alternatively, it was submitted by the ld. A.R, that as the A.O had admitted that the assessee was a mutual association, therefore, the surplus generated by it was not exigible to tax in the backdrop of the principle of mutuality. 5. Per contra, the ld. Departmental representative (for short "D.R") relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice 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. However, an exception to the application of the aforesaid exclusion has been provided by the legislature by way of a "Provision" that has been made available on the statute vide the Finance Act, 2015 w.e.f A.Y 2016-17. As per the "Proviso" to Sec. 2(15), if 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 is undertaken by the assessee in the course of actual carrying out of its object of advancement of its object of general public utility AND the aggregate receipts from such activity or activities during the previous year do not exceed twenty per cent of the total receipts of the trust or institution undertaking such activity or activities for that previous year, then the exclusion carved out in the definition of the term "charitable purpose" in Sec. 2(15) would not be applicable. Accordingly, it is in the backdrop of the aforesaid post-amended def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore the provisions of the Income-tax Act have been amended to include 'yoga' as a specific category in the definition of charitable purpose on the lines of education. 4.4 In order to ensure appropriate balance between the object of preventing business activity in the garb of charity and at the same time protecting the activities undertaken by the genuine organization as part of actual carrying out of the primary purpose of the trust or institution, the definition of "charitable purpose‟ in the Income-tax Act has been amended to provide 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, unless,- (i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and (ii) the aggregate receipts from such activity or activities, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meaning of "charitable purpose" as provided in Sec. 2(15) of the Act. But then, the legislature had provided an exception, as per which, if the activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; AND (ii) the aggregate receipts from such activity or activities, during the previous year, do not exceed twenty percent of the total receipts of the trust or institution ITA No.6896/Mum/2019 A.Y.2016-17 10 Confederation of Real Estate Developers Association of India Vs. ACIT(Exemption)-1(1) ITA No.2815/Mum2018 A.Y.2014-15 Confederation of Real Estate Developers Association of India Vs. CIT(A)-3 undertaking such activity or activities of that previous year, then such trust or institution would not be hit by the exclusion carved out in the definition of "charitable purpose" as provided in Sec. 2(15) of the Act. 7. Before proceeding any further, we may herein observe that the ld. CIT(A) while adjudicating the present appeal had erroneously referred to the pre-amended provisions of Sec. 2(15) of the Act. As observed by us at length hereinabove, the case of the present assessee would be regulated by the post-amended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oup of people and not for the benefit of the general public at large, therefore, it could not be held to be a trust set up for advancement of any other object of general public utility cannot be sustained and is herby vacated. 8. As is discernible from the orders of the lower authorities, we find, that they had observed that the activities of the assessee trust, viz. (i). offering of services in relation to trade and business of construction industry in lieu of fees, cess or other consideration; and (ii). receipt of interest on income accumulated in form of term deposits with banks, were in the nature of commercial activities. It was observed by the lower authorities that as the assessee was carrying on activities which were in the nature of commerce, and the receipts there from were in excess of the prescribed limit, it could thus not be held to be carrying on "charitable activities‟ within the meaning of Sec. 2(15) of the Act. Apart from that, the CIT(A) by referring to Sec. 11(4A) of the Act, had observed, that the provisions of Sec. 11 would be applicable only to such profits and gains that would be derived by a trust or institution from carrying on a business that was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade, industry and profession of building, construction and development of funds. c) To encourage adoption and promotion of fair business practices according to an ethical code of fair business practices and to maintain efficiency, dignity and integrity of the confederation." Now, for the attainment of its aforesaid objects, viz. to act as a group of associations/federations functioning at national and state level with an object to address the national issues relating to real estate sector and better standard for its all member associations; to encourage fraternity, feelings of co-operation and mutual help among the members of the confederation in respect of the subjects connected with the common good of trade, industry and profession of building, construction and development of funds; and to encourage adoption and promotion of fair business practices according to an ethical code of fair business practices and to maintain ITA No.6896/Mum/2019 A.Y.2016-17 13 Confederation of Real Estate Developers Association of India Vs. ACIT(Exemption)-1(1) ITA No.2815/Mum2018 A.Y.2014-15 Confederation of Real Estate Developers Association of India Vs. CIT(A)-3 efficiency, dignity and integrity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evelopers Association of India Vs. ACIT(Exemption)-1(1) ITA No.2815/Mum2018 A.Y.2014-15 Confederation of Real Estate Developers Association of India Vs. CIT(A)-3 of rendering any service in relation to any trade, commerce or business, it would thus not be hit by Sec. 2(15) of the Act. As neither of the aforesaid terms, viz. trade, commerce or business are defined in the Income-tax Act, 1961, therefore, we shall construe them as per their dictionary meaning for resolving the controversy before us, viz. (i). "trade‟ : the action of buying and selling goods and services; (ii). "commerce‟ : the activity of buying and selling, especially on a large scale. (iii)."business‟ : a commercial activity. As claimed by the ld. A.R, the conventions/seminars are held once in a year for around two days, wherein about 2,000 participants take part. Admittedly, the participants would not only be the members of the assessee trust, but also all such individuals/entities who would be connected with the real estate sector, viz. Housing Finance Companies etc., who would participate in such conventions /seminars, as they played a very crucial role in the development of real estate sector i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000 members. The aforesaid factual position so averred by the ld. A.R was not rebutted by the departments counsel before us. 11. We have deliberated at length on the issue under consideration and find substantial force in the claim of the ld. A.R that the activities of the assessee trust could not be brought within the meaning of trade, commerce or business. As observed by us hereinabove, the holding of convention by the assessee trust, and the resultant receipts therein generated by it, say participant fees, sponsorship fees (from advertisers) etc., were clearly in the nature of activities that were carried out by the assessee with the sole intent of attaining the object for which the trust was established. At this stage, we may herein observe, that the convention was held by the assessee trust only once in a year. Apart from that, the activities which would be involved in the said convention, say lectures of eminent personalities on issues having a strong bearing on the real estate sector etc., were for the benefit of its members by augmenting their knowledge about issues pertaining to the real estate sector. As for the sponsorship fees received by the assessee from the memb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also, to promote and safeguard the interest of the Trade and Industry. As the amounts received by the assessee from the various activities which were carried out by it for the benefit of its members and in furtherance of its objects, viz (i). Subscription received; (ii). Sale of publications ; (iii). Fafai Journal ; (iv). Workshop & Conference; (v). Bangalore Seminar; and (vi) Directory receipts, were held by the A.O/CIT(A) as receipts in lieu of activities which were in the nature of trade, commerce or business ITA No.6896/Mum/2019 A.Y.2016-17 17 Confederation of Real Estate Developers Association of India Vs. ACIT(Exemption)-1(1) ITA No.2815/Mum2018 A.Y.2014-15 Confederation of Real Estate Developers Association of India Vs. CIT(A)-3 carried out by it, and its claim for deduction u/s 11 was declined, for the reason, that the assessee was hit by Sec. 2(15) of the Act, the matter at the instance of the assessee was carried in appeal before the Tribunal. Observing, that the activities of the assessee trust could not be brought within the realm of trade, commerce or business, the Tribunal relying on a host of judicial pronouncements vacated the orders of the lower authorities, observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the furtherance of the general public utility object of the assessee, which by no means could be construed as commercial activities. 10. We have deliberated on the observations of the lower authorities and find that the A.O had concluded that the assessee was carrying on commercial activities, primarily for the reason that it had generated substantial revenue from the seminar held at Bangalore. We have given a thoughtful ITA No.6896/Mum/2019 A.Y.2016-17 18 Confederation of Real Estate Developers Association of India Vs. ACIT(Exemption)-1(1) ITA No.2815/Mum2018 A.Y.2014-15 Confederation of Real Estate Developers Association of India Vs. CIT(A)-3 consideration to the issue before us and have deliberated at length on the contentions of the ld. A.R in the backdrop of the facts of the case. We find that the activities of the assessee trust were directed towards providing knowledge, information, awareness, demonstrations etc. to the members of the Fragrance and Flavours industry. The activities of the assessee were essential to understand the development of the said industry in India. We have deliberated on the nature of activities of the assessee trust and are of the considered vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct that holding of the seminar at Bangalore by the assessee was in furtherance of the dominant object of the assessee, viz. empowerment, betterment and creating awareness amongst the industrialists of the Fragrance and Flavours industry, and display of the products of the sponsors can safely be concluded to be for furtherance of and in the interest of the members of the trade. We are unable to persuade ourselves to be in agreement with the view of the A.O that as the products of the sponsors were displayed at the seminar held at Bangalore, therefore, on the said stand alone basis the assessee was to be held to have carried on commercial activities. We are of the considered view that on a close analysis ITA No.6896/Mum/2019 A.Y.2016-17 19 Confederation of Real Estate Developers Association of India Vs. ACIT(Exemption)-1(1) ITA No.2815/Mum2018 A.Y.2014-15 Confederation of Real Estate Developers Association of India Vs. CIT(A)-3 of the aforesaid activities of the assessee trust when viewed in a broader perspective and pitted against the dominant object of the assessee to hold a seminar for furtherance of and in the interest of the members of the industry, the same cannot be characteri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nduct periodical meetings on professional subjects. The High Court observed that the publishing and sale of books, booklets etc. on professional subjects related to audit and not on any other subject by the assessee. The sale of the books was primarily made to the members of the society, as well as made available to the general public, with the aim to help the society to get better, well-equipped and skilled set of Chartered Accountants for maintaining audit quality, which however could not be construed as a trade or commerce or business. Thus, the High Court observed that the activities of the assessee- trust in publishing and selling books of professional interest, which were meant to be used as a reference material even by the general public as well as the professionals in respect of Bank Audit, Tax Audit, etc., could not be construed as a commercial activity. We are of the considered view that in the case of the present assessee before us, the services viz. receipt of subscriptions from the members, sale of publications, Fafai Journal, holding of workshops & conferences, directory receipts etc., were provided for facilitating ITA No.6896/Mum/2019 A.Y.2016-17 20 Confederation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oing through the provisions of the ICAI Act and the Regulations framed therein as well as various activities carried on by the petitioner, we are of the view that the petitioner institute does not carry on any business, trade or commerce. The activity of imparting education in the field of accountancy and conducting courses both at pre-qualification as well as post-qualification level are activities in furtherance of the objects for which the petitioner has been constituted. Activities of providing coaching classes or undertaking campus placement interviews for a fee are in relation to the main object of the petitioner which as stated earlier cannot be held to be trade, business or commerce. Accordingly, even though fees are charged by the petitioner institute for providing coaching classes and for holding interviews with respect to campus placement, the said activities cannot be stated to be rendering service in relation to any trade, commerce or business as such activities are undertaken by the petitioner institute in furtherance of its main object which as held earlier are not trade, commerce or business." We are further of the considered view that the proviso to Sec. 2(15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject, and no part of such surplus was distributed amongst its members. We have deliberated on the records pertaining to the nature of the activities of the assessee trust, and have observed that the generation of the surplus in its hands is merely a by-product of its main object, which had incidentally resulted in the course of furtherance of its dominant object, viz. advancement and development of the Fragrance and Flavors industry in India. We are further of the view that as the international seminar at Bangalore was held by the assessee for the very first time, and the assessee was not holding such type of seminars by way of a regular and systematic activity, therefore, on the said count also the same can safely be held as not being in the nature of a commercial activity. We have also deliberated on the order of the ITAT, Kolkata, in the case of Indian Chamber of Commerce Vs. Income Tax Officer (2015) 167 TTJ 1 (Kolkata) as had been relied upon by the ld. A.R, and find that a similar view in context of the issue before us was taken by the coordinate bench of the Tribunal. 13. We thus, in the backdrop of our aforesaid observations are unable to persuade ourselves to be in agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act, deposit of money in any account with a scheduled bank is one of the prescribed form and mode of depositing the money referred to in clause (b) of sub-section (2) to Sec. 11. Accordingly, not being able to persuade ourselves to subscribe to the view taken by the A.O that as the assessee over the years had invested surplus aggregating to Rs. 13,65,13,524/- in term deposits with the banks, it was thus be concluded that it was working with a profit motive, we vacate the said observation. ITA No.6896/Mum/2019 A.Y.2016-17 23 Confederation of Real Estate Developers Association of India Vs. ACIT(Exemption)-1(1) ITA No.2815/Mum2018 A.Y.2014-15 Confederation of Real Estate Developers Association of India Vs. CIT(A)-3 13. Before parting, we may herein observe that the narrowing of the definition of "charitable purpose" as contemplated in Sec. 2(15) insofar the same is related to "advancement of any other object of general public utility", was carried out by the legislature by way of an insertion of a "proviso‟, vide the Finance Act, 2009 w.e.f 01.04.2009. Assessments in the case of the assessee trust for A.Ys 2010-11 to A.Y 2013-14 were framed u/s 143(3), and its cla ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
