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TMI Blog2021 (10) TMI 1055X X X X Extracts X X X X X X X X Extracts X X X X ..... held that mere receipt of fee or charge will not mean that the assessee is involved in any trade, commerce or business. Accordingly considering the legal position as found settled with respect to interpretation of proviso of Section 2(15) of the Act in the case of India Trade Promotion Organisation vs. DGIT (Exemption) (supra) the coordinate bench held that the benefit of exemption u/s. 11 12 of the Act could not be denied. We find that similar view has been followed right from 2009-10 assessment year till date. Thus we hold that the appeals filed by the Revenue have to be dismissed in view of the consistent orders available on record qua the issue ordered accordingly. Lack of opportunity as pleaded by the assessee - Without commenting upon the correctness, of the conclusions drawn addressing the procedural shortcoming only, we deem it to appropriate to set aside the orders of the Ld. First Appellate Authority to this extent and restore the issue back to the file of the CIT(A) with a direction to give a specific opportunity to the assessee to make its submission before the passing of the order. No doubt technically the resultant addition may not be capable of being descr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant craves leave to add, to alter or amend any ground of appeal raised above at the time of hearing. 4. Addressing the issues raised in the two appeals filed by the assessee in both the years it is seen that the grounds raised are identical except for the difference in the amounts in the two years. Accordingly, grounds from ITA No. 1630/Del/2018 are reproduced hereunder for completeness: 1. That the Ld. CIT(A) has erred in passing the order both in law and on facts. 2. On the facts and circumstances of the case and in law, the Ld. CIT(Appeals) has erred in giving directions in its appellate order to include a sum of ₹ 2,02,28,490/- (₹ 2,43,32,550/-) as income to be taxed u/s. 11(3) of the Income Tax Act, 1961 without giving any opportunity of showing cause against enhancement of income u/s. 251(2) of the Income Tax Act, 1961. 3. Without prejudiced to Ground No. 2 above, on the facts and circumstances of the case and in law, the Ld. CIT(Appeals) has erred in reaching to a conclusion and consequently holding that the unspent amount of ₹ 2,02,28,490/- (₹ 2,43,32,550/-) considered as deemed income u/s. 11(3) of the Income Tax Act, 1961, is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on its governing body. The Society is stated to be catering to the needs of the upcoming and not so established artists thus enabling them to display their skills etc. To promote these aims it is stated to hold exhibitions, organizes art camps, etc. It has also been stated that it gives financial assistance to old and needy artists; has been publishing news letter in the field of arts and sculpture during the last few decades. We find that as in the earlier years in the year under consideration also the Assessing Officer has observed that the assessee is renting out galleries to the artists for displaying their work and has thus concluded that the assessee is engaged in a business activity and held to be in violation of the statutory remit in view of the amendment in section 2(15) of the Act by Finance Act, 2009 where the activities involved in the carrying on of any trade, commerce and business or any services rendered in relation to the trade, commerce or business against any cess, fee or consideration has been considered to be not amenable to the benefits carved out in this section. The conclusion on facts is assailed by the assessee before the CIT(A) on the grounds of being ill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demonstrated on facts. 7.4. It has been explained before the tax authorities that the paintings which are made by these artists during the art event/annual exhibitions are left with the Society as these have been made from the materials supplied by the assessee society and this is referred to as the property of the Society. The primary reason for having these paintings with the assessee society, it has been explained, is to adjudge the winners amongst the participants and hence these paintings are kept aside. It has been explained that these paintings accumulate over the years, and as and when there is a shortage of space for storage of the same and/or on noticing deteriorations etc. in the paintings with the efflux of time, these are sold in lots at very reasonable prices. It has been argued that the intention here is not to make any profit but to utilize the possible waste of these paintings piling up and utilize these for augmenting the resources to serve the prime objective of promotion of art for which it has been established. 7.5. It has simultaneously been also argued that the AO's allegation that the society charges 15% on sales made during the holding of these e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,20,400/ - 1,78,26,000/ - 2010-11 9,75,071/ - 1,45,47,697/ - 7.8. We find that these submissions on facts remain un-assailed in the present proceeding. 7.9. Reverting back to the order we note that in the said factual background reliance was placed on the decisions of the Hon'ble Delhi High Court in the case of India Trade Promotion Organization vs. DIT (Exemption) Others writ petition (C) 1872/2013 (judgment delivered on 22.01.2015) (P. No. 31-55), India International Centre Vs. Assistant Director of Income Tax by the Hon'ble ITAT Delhi - 'C' Bench (ITA No. 3124/Delhi/2014 and Dy. Director of Income Tax (Exemption) Delhi Vs. All India Football Federation (2015) 62 Taxman.com 362 (Delhi Tribunal). Taking strength from the ratio decidendi of these decisions it has been canvassed that if some incidental activities are carried out by a charitable organization whose dominant and prime objective is not a profit motive, the organization cannot be deemed to be pursuing non charitable objects and hence be considered to be existing for non-charitable purposes. 7. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reimbursement of travelling expenses incurred by them for visit to the annual event held by the society. After the competition is held the paintings made by these various artists are kept with the society amongst which the best paintings are given awards by the jury comprising group of artists. These paintings are kept and remain with the assessee for a very long time. When there is a dearth of further storage because of regular annual events held for such contests, the old paintings are sold in lots to clear space for further storage for paintings etc. received out of which the award winning paintings are selected. The paintings kept by the society are also deteriorated due to efflux of time and, thus, are sold in lots at a very reasonable price. The argument of the appellant's counsel is that paintings are not disposed off as a business but is only undertaken to prevent wastage of probable resources. The appellant has supplied the figures for the last three years showing the revenue from the letting out of galleries as well as sale of painting vis- -vis the total expenses incurred by it for the promotion of objects of the society i.e. advancement of the object of art, cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us, should not be deprived of exemption u/s. 11/12 of the Income Tax Act. It has also been brought to my notice that for the immediately preceding assessment year 2011-12 I have accepted in principle the contention of the appellant that it is not driven by profit motive and, thus, is entitled to exemption u/s. 11 12, though in that case barring rental income of ₹ 4,80,00,000/- from G.E. Groups of Companies, the receipts from renting of galleries and sale of paintings were less than ₹ 10 lacs, the threshold limit relevant for that assessment year under the second proviso to section 2(15) of the Income Tax Act. However, it is emphasized that regardless of the receipt during assessment year 2011-12, concurrence on principle has been given with regard to the fact that the overall objective/dominant purpose of the assessee-society is not to do business or earn income. ... Considering of the above said facts, arguments advanced by the appellant and the case laws relied upon by its counsels, I am inclined to accept their contention. I hold that the appellant should not be termed as a non-charitable organization under the first proviso to section 2(15) of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lhi; (c) To organize art exhibitions and societies in India and abroad; (d) To act as the Central Organizations of Arts and Crafts in India; (e) To do all such law full things as are incidental or conducive to the attainment of above objects and any other objects of arts and literature not mentioned above. 4. The Assessing Officer asked the assessee to explain as to why the benefit u/s. 11 12 of the Act in respect of the income should be allowed in view of the amended Section 2(15) of the Act introduced w.e.f. 01.04.2009 i.e. relevant to assessment year 2011-12 under consideration, since its activities fall in the category of advancement of object of general public utility and its income including rental income is in the nature of business, trade or commerce and the same income exceeds ₹ 10,00,000/-. Rejecting the various explanation given by the assessee and relying on the amended provisions of Section 2(15) of the Act and CBDT Circular No. 11/2008 dated 19.12.2008, the Assessing Officer held that the activities of the assessee society is not for charitable purpose and therefore, the income of the assessee is taxable. He noted that the assessee durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 would not apply; (ii) If a literal interpretation were to be given to the said proviso, then it would risk being hit by Article 14 (the equality clause enshrined in Article 14 of the Constitution). It is well settled that the courts should always endeavour to uphold the Constitutional validity of a provision, and in doing so, the provision in question may have to be read down; (iii) Section 2(15) is only a definition clause. The expression charitable purpose appearing in Section 2 (15) of the said Act has to be seen in the context of Section 10(23C)(iv). When the expression Charitable Purpose , as defined in Section 2(15) of the Act, is read in the context of Section 10(23C)(iv) of the said Act, we would have to give up the strict and literal interpretation sought to be given to the expression ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir 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. 8. Accordingly considering the legal position as found settled with respect to interpretation of proviso of Section 2(15) of the Act in the case of India Trade Promotion Organisation vs. DGIT (Exemption) (supra) the coordinate bench held that the benefit of exemption u/s. 11 12 of the Act could not be denied. We find that similar view has been followed right from 2009-10 assessment year till date. The decision of the ITAT in 2009-10 assessment year before the Hon'ble High Court wherein the Revenue failed in its appeal filed. In ITA No. 754/Del/2019 in its order dated 19th August, 2019 the Jurisdictional Court dismissed the appeal filed by the Revenue holding as under: 1. The Revenue is in appeal against an order dated 14th February, 2019 passed by the ITAT in ITA No. 1449/Del/2013 for the Assessment Year 2009-10. 2. The question sought to be urged by the Revenue is whether the ITAT erred in allowin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever the fact remains that confronting the facts to the assessee before applying the statutory provisions in no way can be said to cause any inconvenience to the Revenue and on the other hand advances the cause of justice having prevailed. Once an order is passed after giving due opportunity to the assessee no grievance can then be said to subsist. On a reading of the impugned order, it is evident that without hearing the assessee the Ld. Commissioner has decided the issue on the basis of the decision of the position of law as considered in Director of Income Tax (Exemption) Vs. Girdharilal Shewnarain Tantia Trust [ (1993) 199 ITR 215 (Cal.) and in the case of B.N. Gamadia Parsi Hunnarshala Vs. Asstt. DIT (Exemption) [ (2002) 77 TTJ 274 (Mum.), however, without hearing the assessee. Accordingly, without commenting upon the correctness, of the conclusions drawn addressing the procedural shortcoming only, we deem it to appropriate to set aside the orders of the Ld. First Appellate Authority to this extent and restore the issue back to the file of the CIT(A) with a direction to give a specific opportunity to the assessee to make its submission before the passing of the order. No doubt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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