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TMI Blog2021 (5) TMI 745X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income Tax Act of the assessee and further hold that the case of the assessee does not fall within ambit of the proviso to section 2(15) of the Act. The appeal of the assessee is allowed. - ITA No. 1387/Mum/2020, ITA No. 1705/Mum/2019 - - - Dated:- 4-3-2021 - Sri Rajesh Kumar, AM And Sri Amarjit Singh, JM For the Appellant : Shri Kirit Sanghvi, AR For the Respondent : Shri Brajendra Kumar, DR ORDER PER RAJESH KUMAR, AM: These appeals by the assessee directed against respective orders of learned Commissioner of Income Tax (Appeals) pertaining to Assessment Years 2013-14 2014-15. 2. As the facts and circumstances are exactly identical in both the assessment years i.e. AYs 2013-14 and 2014-15, hence, we take the facts from AY 2014-15 and decide the issue. The grounds raised by the assessee in AY 2014-15 are as under: - 1.0 Inappropriate Application of Proviso to s. 2(15). The learned CIT(A) erred on facts and in law in confirming that the Proviso to s.2(15) of the Income Tax Act, 1961 (the Act) applied to the appellant. 1.1 The learned CIT(A) erred on facts and in law in dismissing the claim of the appellant for exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der for AY 2013-14 wherein the AO had discussed the reasons for denying the exemption, I had gone through the assessment order for AY 2013- 14. I find that the AO in his assessment order for AY 2013-14 has observed as follows: 4.4 It can be summarized the facts that the assessee is doing regular activities which are in nature of business by way of arrange Seminars, Collective Participation fees from the participants, by collecting money in the name of awareness programs through seminars which is related to trade and commerce. The assessee trust was holding exhibition, trade etc. and therefore Business and Trade as per the interpretation place on the word education used in Section 2(15) of the I. T. Act. Reliance was place was placed on sole Trustees, Loka Shikshana Trust versus Commissioner Income tax (1975) 101 ITR 234 (SC) and Bihar Institute of mining and mine Surveying versus CIT (1994) 2008 ITR 604 (Patna). Secondly, the assessee trust was covered under the last limbs of charitable purpose i.e. advancement of any other object of general public utility. In view of amendment made in sec. 2(15) of the I.T Act i.e. from 1st April, 2009, for the A. Y.2009-10 onwards, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion as defined by the Supreme Court in sole trustee Loka Shikshan Trust (supra) 4.10 The sense in which the word 'education' has been used in section 2(15) is the systematic instruction, schooling or (raining given to the young in preparation for the work of life. It also connotes the whole course of scholastic instruction which a person has received. The word education' has not been used in that wide and extended sense, according to which every acquisition of further knowledge constitutes education. 4.11 In support of this, the ITAT Amritsar Bench in the case of M/s Jalandhar Development Authority relied upon the decision of the ITAT Chandigarh Bench, in the case of Punjab Urban Planning and Development Authority v/s CIT. The ITAT in the case of Jalandhar Development Authority held as under: It is the well known fact that in some of the situations the provisions of law are misused in the name of the charities. If an expanded / broader latitude is extended to the word charity, then there are so many institutions / departments who will try to come under umbrella of this provision to misuse the provision. Therefore, for the broad development ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd accordingly assessee s claim to allow the expenses claimed against the income from other sources is dismissed. Ground is dismissed. 5. After hearing the rival parties and perusal of the materials available on record, we note that the assessee is an association of persons constituted for the purposes of promotion of various objects of the assessee which reproduced as under: - (i) To promote the Science, Literature and diffusion of useful knowledge in photography and Fine Arts. (ii) To maintain library for the use and reference of members of the association. (iii) To encourage and promote research in manufacture of photographic materials. (iv) to collect and circulate educative information and technical knowledge relating to the manufacture of photographic items, articles and materials and equipments and thereby to put the manufacturing concerns of the members on progressive standard and to suggest and giuce and to cooperate for the same purpose. (v) To encourage friendly feelings amongst the persons, firms and companies who are engaged in the manufacture and dealing of photographic materials and to organize and promote welfare activities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was set up, then it will not be caught within sweep of proviso notwithstanding fact that they result in some income from carrying out such activity. The above decision of the Tribunal has been formed by the Hon ble Delhi High Court as reported in (2020) 117 Taxmann.Com 129 (Delhi) therein the Hon ble Court held that the ITAT s decision is sound in law and facts and no substantial question arises and the appeal of the Revenue is dismissed. The Revenue file SLP in the Supreme court and the same was dismissed by the Hon ble Supreme Court as reported in 2020 117 taxmann.com 130 (SC) though the SLP was dismissed, Revenue prayed to withdraw the same owing to low tax effect. Similarly, in the case of Confederation of Real Estate Developers Association of India 119 taxmann.com 491 (Mumbai) the co-ordinate Bench has held as under:- 4. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. We have heard the authorised representative for both the parties, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements pressed into service by them. The ld. Authorised representati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest,] 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 ITA No.6896/Mum/2019 A.Y.2016-17 7 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 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 year, do not exceed twenty per cent. of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year. As per the aforesaid post-amended definition of the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d institutions. The primary condition for grant of exemption to a trust or institution under the said section is that the income derived from property held under trust should be applied for charitable purposes in India. Charitable purpose‟ is defined in section 2(15) of the Act. The first proviso to clause (15) of section 2,inter alia, provides that 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. However, as per the second proviso, this restriction shall not apply if the aggregate value of the receipts from the activities referred above is twenty five lakh rupees or less in the previous year. 4.2 The institutions which, as part of genuine charitable activities, undertake activities like publishing books or holding program on yoga or other programs as part of actual carrying out of the objects which are o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es undertaken by the genuine organizations as part of actual carrying out of the primary purpose of the trust or institution. As such, advancement of any other object of general public utility shall not fall within the definition of 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 year, do not exceed twenty percent of the total receipts of the trust or institution undertaking such activity or activities of that previous year. To sum up, if a charitable institution with an object of advancement of any other object of general public utility carries out any activity in the nature of trade, commerce or business, or any activity of rendering any serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw. As observed by the Hon'ble Supreme Court in the case of Ahmedabad Rana Caste Association Vs. CIT (1971) ITR 82 ITR 704 (SC), the High Court in the case before them had rightly observed that an object beneficial to a section of the public is an object of general public utility. It was further observed by the Hon‟ble Apex Court that in order to serve a charitable purpose it was not necessary that the object should be to benefit the whole of mankind or all persons in a particular country or State, and it would be sufficient if the intention to benefit a section of the public as distinguished from a specified individual was present. In the backdrop of the aforesaid observations of the Hon‟ble Apex Court, we are of the considered view, that as the present assessee trust before us had been set up with the object to address the national issues related to real estate sector and better standards ITA No.6896/Mum/2019 A.Y.2016-17 11 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 for its all member associations, having 21 State cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 concluded that as the activities of the assessee trust were hit by the proviso‟ to Sec. 2(15) therefore, its objects could not be held to be in the nature of charitable objects, and thus, it would stand disentitled for claim of deduction u/s 11 of the Act. 9. As observed by us hereinabove, the core issue for which our indulgence has been sought, is to adjudicate, as to whether or not the CIT(A) is right in law and the facts of the case in concluding that the activities of the assessee trust, viz. holding conventions, exhibitions etc. were to be construed as being in the nature of trade, commerce or business. For a fair adjudication of the issue in hand, the main objects of the assessee trust after vetting of which it was registered as a charitable trust‟ by the DIT(Exemption), Mumbai, u/s 12A, vide his order dated 25.11.1999, in our considered view once again requires to be referred to, and thus, are reproduced as under : a) To act as a group of associations/federations functioning at national and stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss or fee or any other consideration, irrespective of the nature of use or application, or retention of the income from such activity, though subject to the allowable limit therein prescribed. 10. In the backdrop of our aforesaid observations, we shall now look into the aspect that as to whether the activities of the assessee trust before us are in the nature of trade, commerce or business, as the answer to the same would be decisive of its eligibility towards claim of deduction u/s 11 of the Act. At this stage it would be relevant to point out that as per the post-amended proviso‟ to Sec. 2(15) of the Act, an 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, that is undertaken in the course of actual carrying out of such advancement of any other object of general public utility by a trust or society, would not be held to be non-charitable, only if the aggregate receipts from such activity or activities during the said year do not exceed 20% of its total receipts. But then, it is not the case of the assessee before us that its acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee trust, as the same would benefit the members who would become aware of the services rendered by such sponsors. It was further submitted by the ld. A.R that it was beyond comprehension as to how the activities of the assessee trust could be run on a cost-to-cost basis as was so expected on the part of the lower authorities. Elaborating on his said claim, it was submitted by the ld. A.R that at the time of planning of the conventions, budgets would be prepared and the cost per ITA No.6896/Mum/2019 A.Y.2016-17 15 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 person was arrived at assuming a number of participants who would attend the convention. Accordingly, as submitted by the ld. A.R, if the actual number of participants would exceed what was initially expected, then every increase would lead to a surplus in the hands of the assessee, which would be channelized solely for the objects of the assessee trust. As such, it was submitted by the ld. A.R that mere generation of surplus from the aforesaid activities would not ipso facto mean t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the hands of the assessee during the year is concerned, we are in agreement with the claim of the assessee that the same if considered in the backdrop of the size of the association which has 21 State chapters, 220 city chapters and 20,000 members, cannot be held to be substantial. In the totality of our aforesaid deliberations, we are of a strong conviction that the surplus generated in the hands of the assesses in the course of the convention held by it only once during the year in furtherance of its objects and for the benefit of its members/real estate sector of the country cannot be brought within the realm of the meaning of trade, commerce or business. Our aforesaid view is fortified from a perusal of the Explanatory Notes‟ to the Provisions of Finance Act, 2015, as provided in the CBDT Circular No. 19/2015, dated 27.11.2015, wherein it is stated that the purpose behind the amendment to Sec. 2(15) of the Act, vide the Finance Act, 2015 w.e.f 01.04.2015, was to inter alia protect the activities undertaken by a genuine organization as part of actual carrying out of the primary purpose of the trust or institution. In fact, a similar issue had came up before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of general public utility . That as per the amended Sec. 2(15), 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 other 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. 9. We have given a thoughtful consideration to the issue before us. We find that the assessee is registered as a Charitable organization under Sec. 12A with the Director of Income-tax (Exemption), Mumbai. That as the activities of the assessee were primarily in the nature of advancement of any other object of general public utility , therefore, the A.O being of the view that as per the post amended definition of the term Charitable purpose‟ in Sec. 2(15), the commercial activities of the assessee could no more be held as being for charitable purpose, as a result whereof the assessee stood disentitled for claim of exemption under Sec. 11 of the Act. We find that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required for the growth of the industry and giving its members an exposure to the developments in the industry and keeping pace with the day to day changes and innovations in the industry, the objects of the assessee trust would have been frustrated and rendered as merely dumb and name sake in nature, defeating the very purpose for which it was set up. We find that a perusal of the orders of the lower authorities reveals that their view that the assessee was involved in carrying on of commercial activities within the meaning of Sec. 2(15), was primarily guided by the fact that the products of the sponsors from whom sponsorship fees were received by the assessee were displayed at the seminar held at Bangalore. We are of the considered view that the holding of the seminar at Bangalore was in furtherance of the main object of the assessee trust, which was solely for empowerment, betterment and creating awareness amongst the industrialists in order to bring about the development of the Fragrance and Flavours industry in India. We further find that the assessee was not by way of a regular and systematic activity carrying on such seminars, and as observed by us hereinabove, the seminar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the view of the Tribunal that as the dominant object of trust was to teach or impart skills and to instill confidence, therefore, the sale of the goods or articles produced in the course of such training could not be construed as carrying on of trade, commerce or business, did find favour with the Hon‟ble High Court. We find that in the case of the assessee before us, the holding of the seminars and carrying on of other activities, viz. receipt of subscriptions from the members, sale of publications, Fafai Journal, holding of workshops conferences, directory receipts etc., were activities which were for facilitating the dominant object of the assessee trust, viz. providing knowledge, information, awareness, demonstrations etc. to the members of the Fragrance and Flavours industry, therefore, neither the carrying on of either of the aforesaid activities, and specifically the display of the products of the sponsor members of the industry in the course of the seminar at Bangalore by the assessee, which we find had been emphasized by the revenue as the primary reason for concluding that the assessee was carrying on commercial activities, could thus be held as such and brough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us, in the backdrop of the aforesaid observations of the High Court of Madras, safely be held to be in the course of furtherance of the dominant object of the assessee trust, and would not fall within the realm of commercial activities. We further find that a similar view had also been taken by the Hon'ble High Court of Delhi in the case of The Institute of Chartered Accountants Of India Vs, Director General of Income Tax (Exemption) (2013) 260 CTR 1 (Del). The High Court held that no doubt the assessee institute was holding classes and providing coaching facilities for the members and articled clerks etc. who wanted to appear in the examination conducted by the Institute of Chartered Accountants, but these classes were not held for coaching or for appearance in an examination conducted by some other entity. The High Court observed that as conducting of coaching classes was with the predominant object of maintaining and upholding the standards of the accountancy profession and in furtherance of the object and purpose for which the institute was established, i.e., professional excellence and promotion of accountancy as a preferred profession, and to sharpen the skills and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the backdrop of our aforesaid observations are of the considered view that the assessee trust was set up for a charitable purpose within the meaning of Sec. 2(15) of the Act, viz. advancement of an object of the general public utility. We are of the view that as had been deliberated by us at length hereinabove, the holding of the seminar at Bangalore and the other activities of the assessee trust, viz. receipt of subscriptions from the members, sale of publications, Fafai Journal, holding of workshops conferences, directory receipts were incidental to its main object and were conducted only for the purpose of securing the main object of advancement and development of the Fragrance and Flavours industry in India. We are further of the considered view that the aforesaid activities of the assessee trust are neither in the nature of trade, commerce or business, nor an activity rendered in relation to any trade, commerce or business. We further find that the activities of the assessee trust are not with any motive to earn profit, which though we are not oblivious would not conclusively determine as to whether an activity is in the nature of a trade, commerce or business, but then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and the issue involved in the aforesaid case remains the same as are there before us in the case of the assessee before us. Accordingly, in the backdrop of our aforesaid deliberations, and also respectfully following the view taken by the Tribunal in the aforesaid case, we herein conclude that the holding of convention by the assessee, and the consequential receipts therein generated in its hands, viz. participation fees, sponsorship fees etc. cannot be brought within the meaning of trade, commerce or business or an activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration. We thus not being able to persuade ourselves to subscribe to the view taken by the lower authorities vacate the order passed by the CIT(A). 12. As regards the observation of the lower authorities that the parking of substantial amount of surplus funds by the assessee trust over a period as time deposits with the banks and receipt of interest income on the same revealed, that the activities of the assessee trust were backed by a profit motive, we are afraid does not find favour with us. As pointed out by the ld. A.R, and rightly so, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned preceding years, nor any contention to the said effect had been advanced by the ld. D.R before us. Accordingly, in the backdrop of our aforesaid deliberations on the merits of the case, and also, the consistent view taken by the revenue in the case of the assessee for the preceding years, we are of a strong conviction that the lower authorities had erred in concluding that as the activities of the assessee trust being in the nature of trade, business or commerce were thus not carried out for a charitable purpose within the meaning of Sec. 2(15) of the Act, it was therefore disentitled for claim of deduction u/s 11 of the Act. As such, we vacate the order of the CIT(A), and therein direct the A.O to allow the assessee‟s claim for deduction u/s 11 of the Act. The Ground of appeal No. 1 is allowed in terms of our aforesaid observations. 14. As we have vacated the orders of the lower authorities and have concluded that the assessee trust is eligible for claim of deduction u/s 11 of the Act, therefore, we refrain from dealing with the ground of appeal no. 2 raised by the assessee before us, wherein it had assailed the order of the ITA No.6896/Mum/2019 A.Y.2016- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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