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TMI Blog2021 (11) TMI 1024X X X X Extracts X X X X X X X X Extracts X X X X ..... in A.Y. 2009-10 also for the assessee. The very same stream of incomes/receipts were found to be charitable in nature by this Tribunal in A.Y. 2009-10. There is absolutely no differentiating fact brought on record by the ld. Departmental Representative (ld. DR for short) before us to drive home the point that the decision rendered by this Tribunal for A.Y. 2009-10 is not applicable to the years under consideration. In view of the identical facts prevailing in A.Y. 2009-10 with that of the years under consideration, we hold that the decisions rendered hereinabove by this Tribunal for A.Y. 2009-10 shall apply mutate mutandis for the years under consideration also. Accordingly, ground nos. 1 to 4 raised by the assessee for all the years under consideration are allowed. - ITA Nos. 1174 & 1175/Mum/2015 and 5834 & 5835/Mum/2019 - - - Dated:- 10-11-2021 - Shri M. Balaganesh, AM And Shri Pavan Kumar Gadale, JM For the Appellant : Shri Niraj Sheth Shri Ketan Ved. For the Respondent by : Shri Suresh Periasamy. ORDER Per M. Balaganesh, AM: These appeals by the assessee are directed against the order of the learned Commissioner of Income Tax (Appeals)-I, Mumb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al activity for which fees were charged. For this issue the assessee has raised the following grounds: - - Denial of exemption under section 1 of the Income-tax Act, 1961 (the Act) 1. The CIT(A) erred in confirming the action of the Income-tax Officer (Exemptions)-1(1), Mumbai (hereinafter referred to as the ITO) in denying exemption under section 11 of the Act. Applicability of the proviso to section 2(15) of the Act. 2. The CIT(A) erred in holding that proviso to section 2(15) of the Act was applicable to the appellant as it had rendered services in relation to a commercial activity for which fees were charged. 3. The CIT(A) erred in holding that the appellant had not brought any evidence which proved that activities carried out by it were non-commercial and without profit motive. 4. The CIT(A) erred in holding that the appellant is engaged in doing regular business activities which are in the nature of business and commerce by arranging seminars, collecting fess from participants, interest income and sale of publications and hence the objects of the appellant are not charitable. 5. The CIT(A) erred in holding that the case laws relied by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the file of the ITO to decide the issue afresh considering that it had re-stored the assessee s registration under section 12A of the Act. The ITAT also heard the appeal of the assessee against the DIT(E)'s order cancelling 12A registration, the ITAT held that for cancellation of registration under section 12AA(3) of the Act, the provisions of section 2(15) of the Act cannot be brought into play and accordingly set- aside the order of the DIT(E) and directed him to re-store the registration. 6. The CIT(A) confirmed the action of the AO and not consider the assessee s charitable institution for the purposes of section 2(15) of the Act. He stated that the activities of Trust would be hit by first and second proviso under section 2(15) of the Act. For this, he recorded the following finding in Para 4.3 as under:- 4.3 Decision on Ground Nos. 1 to 3 I have carefully considered the contentions of the AO and arguments of appellant and case laws relied before me in order to decide whether the appellant is eligible for exemption u/s 11 of the Act, the following issues are required to be decided as under: - a) Whether the activities of the appellant could be conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and sale of publications. Thus, it can be said that the appellant is carrying on activity in the nature of commerce and the objects of the appellant is not to be considered as for charitable purpose. It is pertinent to discuss what is stated in the Memorandum while explaining the provisions of the Finance Bill, 2008 the Legislative intent behind the amendment as below' It has been noticed that a number of entities operating on commercial lines are claiming exemption on their income either under section 10(23C) or section 11 of the Act on the ground that they are' charitable institutions. This is based on the argument that they are engaged in the 'advancement of an object of general public utility' as is included in the fourth limb of the current definition of 'charitable purpose'. Such a claim, when made in respect of an activity carried out on commercial lines, is contrary to the intention of the provision. With a view to limiting the scope of the phrase 'advancement of any other object of general public utility', it is proposed to amend section 2(15) so as to provide that 'the advancement of any other object of general public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation (supra) has approved the observations of J Ben rendered in the above case, though the judgment was overruled. The above observations therefore hold importance to understand the concept of charity. Similarly, the provision u/s 11 (4A) which provides that the provisions of section 11 would apply to any business income if it is incidental to the attainment of the objects of the trust. The Proviso inserted in 2008 has also not been amended. In this situation, the only conclusion or interpretation of the amendment is that the reiteration of the existing or prevailing principle, that any commercial activity under the garb of charitable activity would only be affected and for that purpose, one has to look into the dominant object of the Trust. the manner and form in which the objects are achieved Needless to say, the concept of charity as explained by the Supreme Court in the case of Sole Trustee, Lok Shikshana Trust (supra) has to be kept in mind The only meaning that can be drawn is that the amendment does not apply to every income from business that is earned by the trust. Cases where the business is carried out mainly with the objective of earning profit than to carry out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... association (e.g. CII, FICCI) will be liable to pay tax for renting their facilities to non-members A thorough analysis of the above shows the intent of legislation to curb the practice of claiming exemption on the pretext of carrying out objects of general public utility and thereby taking the benefit of exemption in respect of business carried out in the mask of charity. The proviso mentions that advancement of object of general public utility shall not be a charitable purpose if it involves the carrying 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. In the case under consideration, the appellant has rendered services in relation to a commercial activity for which fee has been charged and thus, is hit by this provision The Very Concept of Charity denotes altruistic thought and action i.e. to benefit others rather than oneself and the beneficiaries must not be able to claim the benefit as was held by Hon'ble courts in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntures or Debenture Stock. 8. The assessee has also drew our attention to clause 4 and clause 8 of the Memorandum and Article of Association, which is enclosed at assessee s paper book. The relevant Clause 4 of the MOA provides that the income and property of the Association whensoever derived shall be applied solely towards the promotion of the objects of the Association and no portion thereof shall be paid or transferred directly or indirectly by way of dividend or bonus or otherwise howsoever by way of profit to the persons who at any time are or have been members of the Association or to any person claiming through any of them. Further, Clause 8 of the MOA provides that on winding up, the surplus property remaining after satisfaction of all the debts, shall not be paid or distributed among the members, but shall be transferred to some other institution or institutions having similar objects similar to the objects of the Association which is to be determined by the members of the Association. 9. From the reading of the aforesaid clauses, it is clear that the members of the assessee chamber do not stand to gain personally since no portion of the income or property is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 activities would continue to be regarded as advancement of any other object of general public utility (Emphasis supplied,) 12. From a perusal of the FM's speech it is apparent that the intent behind the amendment was that only such entities which are carrying on regular trade, commerce or business would not fall within the definition of the term 'charitable purpose. It was never intended to affect genuine charitable organizations in any way. The learned Counsel for the assessee stated that as discussed above, the terms trade , commerce and business imply carrying on an activity for profit since no trader/busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t while in arriving at its conclusion held as under: If the dominant activity of the institution was not business, trade or commerce, then any such incidental or ancillary activity would also not fall within the categories of trade, commerce or business. Ills clear from the facts of the present case that 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. We say so, because, 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 wellsettled 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, as pointed out above (para 53) In conclusion, we may say that the expression charitable purpose as defin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. 17. The learned Counsel for the assessee explained the brief facts with reference to the income scheme of the assessee which are as under:- a. Certificate of origin fees - ₹ 2,81,06,980/- The appellant has been authorized by the Ministry of Commerce, Government of India to issue NonPreferential Certificates of Origin in accordance with Article II of International Convention relating to Simplification of the Custom Formalities. The schedule of fees is prescribed by the Ministry of Commerce. This service is mainly availed of by member companies of the Chamber. b. Secretarial Fees- ₹ 5,00,000/- The appellant provides secretarial services to the associations who are members or are associated with it. Secretarial fees are charged to cover the cost of providing services viz. organizing meetings, preparation of accounts, filing income tax and TDS returns, service tax and other related work. This activity is in pursuance of Object no. 21 of the appellant; namely to do all such other things as may be necessary for or incidental or conducive to the extension of trade, commerce or manufacture, or the attainment of objects. c. Labour a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o trade, commerce and manufactures, The appellant brings out reports and studies which are used for presentation to the government, members and other interested individuals from the member organizations. Some of these reports are given out to the applicants on a cost basis. The appellant also provides e-information to its members about the latest changes in law etc. at a nominal cost. The membership directory in a published form and a Table listing is also offered for sale on cost basis. 18. The learned counsel for the assessee before us explained that the appellate orders for earlier years i.e. AYs 2009-10, 2010-11 and 2011- 12 cannot be followed for the assessment year under consideration because the benefit of the decision of the Delhi High Court in India Trade Promotion Organization (supra) was not available before the CIT(A) while passing the order and the CIT(A) in para 5.3.12 and 5.3.14 of its order dated 19.12.2014 for AYs 2010-11 and 2011-12 respectively has held that the decision of the Kolkata Tribunal in Indian Chamber of Commerce vs. ITO (67 SOT 176) (Kolkata ITAT) is distinguishable as proviso to section 2(15) of the Act was not adjudicated upon since a g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. 21. We noted that the issue in present appeal is also covered in favour of assessee by the Kolkata Tribunal decision in the case of Indian Chamber of commerce (supra) because of its income streams noted above. We also noted that the amounts received are not in nature of trade (since there is no exchange of goods either for goods in return or money) or commerce (since it is not engaged in purchase and sale of goods) or business (since we are a non-profit making body formed with the promotion of protecting the trade, commerce and manufacture of India and in particular the Bombay Presidency). In view thereof, we hold that the activities carried out by the assessee chamber continue to be charitable in nature even under the amended definition under section 2(15) of the Act and assessee is entitled for exemption under section 11 of the Act. We direct the AO accordingly. 22. Since, we have held that the assessee is entitled for exemption under section 11 of the Act, we need not adjudicate any other issue on this. 23. In the Result, the appeal of the assessee is allowed. 7. It can be seen from the above, that this Tribunal for A.Y. 2009-10 in assessee s own ..... 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