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TMI Blog2023 (12) TMI 1224X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the proviso to section 2(15) of the Act, which admittedly the Ld. CIT(A) did not consider, before he passed the impugned order. n the light of the recent decision of the Hon ble Supreme Court in the case of Ahmedabad Urban Development Authority (supra) as well as Servants of People Society (supra), we are of the opinion that Ld. CIT(A) erred in merely following the order of the Tribunal in assessee s own case for AY. 2011-12 to AY. 2013-14 passed on 06.09.2022. And that AO has framed the assessment only discussing the Principle of Mutuality and did not consider the application of proviso to section 2(15) of the Act. And since the ratio laid by the Hon ble Supreme Court (supra) is applicable in the case of assessee for assessment [regarding claim of exemption] for the relevant year under consideration, in the interest of justice and fair play, we are inclined to set aside the impugned order and restore the assessment back to the file of AO for denovo assessment. AO to decide the issues [claim of exemption] involved in assessment for AY. 2018-19 after giving proper opportunity to assessee and assessee is directed to file relevant/details/written submission and request for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w, the Ld. CIT(A) was justified by relying upon the decision of Hon ble ITAT in assessee s own case for A.Y.2010-11 in which the Hon ble ITAT was right in directing the Assessing Officer to allow exemption u/s 11 of the LT. Act, 1961, even though the activities of assessee Trust to provide cover for credit risk to various public through insurance are in the nature of services provided in relation to trade, business and commerce and as the receipts from the same are more than 20% of the total receipt of the trust, the proviso to section 2(15) is applicable. 3. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in directing the AO to allow the benefit of exemption u/s 11 of the LT. Act relying on the decision of the Hon ble ITAT in ITA No.5762/Mum/2015 dated 06.09.2022, ITA No.5761/Mum/ 2015 dated 06.09.2022 ITA No.6888/Mum/2016 dated 06.09.2022 in assessee s own cases respectively for A.Y.2011-12, A.Y 2012-13 A. 2013-14 wherein exemption u/s 11 was allowed to the assessee ignoring the fact that once the assessee is hit by the proviso to section 2(15) of the LT. Act, its objects are no more charitable objects. 4. Whether on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue that the activities of the object of general utility carried on by the assessee in the present case is only a mask or a device to hide the true purpose which is trade, commerce or business or rendering of any service in relation to trade, commerce or business not appreciating that even if the activities of the assessee are held to be covered under residuary part of section 2(15) as advancement of any other object of general public utility even then it is not entitled to exemption u/s 11 because it is hit by the proviso to section 2(15) as the income of the assessee as spelt out clearly in the Judgement of the Hon ble Supreme Court ? 3. Brief facts are that the assessee was incorporated u/s 25 of the Companies Act, 1956 and enjoying registration u/s 12A of the Act. The assessee filed its return of income on 28.09.2018 declaring total income of Rs. Nil., after claiming exemption u/s 11 of the Act. Later, the return of income filed by assessee was selected for scrutiny. During the assessment proceedings, the assessee was asked as to why the income from ARN Fees, ARN data fees due diligence fee, summit collection and other income including interest should not be taxed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Add: Depreciation and amortization expenses as discussed above 53,15,510 Business Income Assessed Income 14,76,53,702 4. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A)/NFAC who was pleased to follow the order of this Tribunal in assessee s own case for AY. 2011-12 (ITA. No.5762/Mum/2015) for AY. 2012-13 (ITA. NO.5761/Mum/2015) for AY. 2013-14 (ITA. No.6888/Mu/2016) order dated 06.09.2022 wherein the Tribunal was pleased to allow the exemptions claimed u/s 11 of the Act by holding as under: - 17. Keeping in view the facts of the present case, we are of the view, that the Appellant is engaged in charitable activity. We have examined the objects of the Appellant. The Appellant has not been established with the objects of earning profits. The Appellant was registered under Section 25 of the Companies Act, 1956, which specifically applies to entities which intend to apply their profits, if any, and/or other income in promoting its objects, and prohibits the payment of any dividend to its membe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also maintained separate accounts in respect of these activities. As regards activities of the Appellant directed towards the benefit of its members are concern, the Assessing Officer has granted the benefit of principle of mutuality in respect of the same. 18. In view of the above, the Assessing Officer is directed to allow exemption under Section 11 of the Act to the Appellant. Ground No. 1 to 7 raised by the Appellant are, therefore, allowed. Ground No. 8 is disposed off as being infructuous. In the result, the present appeal is allowed. ITA No.5761/Mum/2015 (Assessment Year 2012-13) ITA No.6888/Mum/2016 (Assessment Year 2013-14) 19. Both the sides agreed that all the grounds raised by the Appellant in the Appeals for the Assessment Year 2012-13 and 2013-14 are identical to the grounds raised in appeal for the Assessment Year 2011-12 with only difference being that no ground corresponding Ground No. 8 raised in appeal for the Assessment Year 2011-12 pertaining to allowance of expenses has been raised in appeals for the Assessment Year 2012-13 and 2013-14 since the Assessing Officer has allowed deduction for the expenses while computing taxable income. 20. Give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the Tribunal before passing its order dated 06.09.2022 for earlier year could not have considered the Hon ble Supreme Court decision in the case of Ahmedabad Urban Development Authority (supra). Assailing the Tribunal order (supra) the Ld. DR pointed out that even after the amendment was made u/s 2(15) of the Act, the Tribunal has applied Dominant Object Test as laid down by the Apex Court in ACIT Vs. Surat Art Silk Cloth Manufacturers Association (1980) 121 ITR 1. According to the Ld. CIT-DR, the Hon ble Supreme Court in Ahmedabad Urban Development Authority (supra) has considered its own decision in Surat Art Silk Cloth Manufacturers Association (supra) in Ahmedabad Urban Development Authority (supra) at para no. 200 to 205 wherein their Lordship observed as under: - 200. Surat Art Silk (supra) and other decisions, had ruled that as long as the objects of trade promotion bodies were for general public utility - wherein 'trade promotion' in itself, was held to be a GPU - the fact that incidentally these bodies carried on some commercial activity, leading to profit, did not preclude them from claiming to be driven by charitable purpose. As observed earlier, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court, in respect of two assessment years, in the case of Apparel Export Promotion Council (AEPC). The objects of AEPC, which was set up in 1978 - include promotion of ready-made garment export. To achieve that end, its objects include providing training to instil skills in the workforce, to improve skills in the industry; guide in sourcing machinery; to serve as a body advising, providing information on market or technical intelligence; assisting the concerned industry in obtaining import licenses; showcase the best capabilities of Indian garment exports through the prestigious India International Garment Fair organised twice a year by AEPC, etc. These fairs host over 350 participants who exhibit their garment designs and patterns. Other functions are to provide information, and to provide market research. AEPC also assists in developing new design patterns and garments and to perform promotional activities in individual foreign markets. Further, AEPC sends missions and trade delegations abroad, who participate in international fairs; and conducts surveys to gather information on potential export of ready-made garments. 204. As part of its functioning, it also books bulk spa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e conclusion that the fees charged by the assesse is significantly higher than the cost incurred by it and therefore in view of the ratio laid down by the Hon ble Apex Court, these receipts would constitute commercial or business receipts; and such income would attract mischief of proviso to section 2(15) of the Act. The Ld DR also pointed out that the ratio laid down by the Hon ble Supreme Court in the case of Ahmedabad Urban Development Authority (supra) was reiterated in the recent decision dated 31.01.2023 rendered in the case of PCIT(E) Vs. Servants of People Society (2023) 147 taxmann.com 79 (SC). In view of the above facts and discussion, he pleaded that the exemption denied u/s 11 of the Act by the AO may be upheld by reversing the impugned order of Ld. CIT(A). 7. Per contra, the Ld. AR appearing for the assessee pointed out that the AO has only discussed about application of Principle of Mutuality to deny exemption claimed by assessee, which was erroneous and the AO has not discussed anything about the amendment brought in by proviso to section 2(15) of the Act. According to the Ld. AR, the objects of the assessee are for charitable purposes and its activities are for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... note that the relevant year under consideration is AY 2018-19 and the Parliament had substituted the first and second proviso of section 2(15) of the Act by Finance Act, 2015 w.e.f 01.04.2016 which is applicable for the year under consideration. And the Hon ble Supreme Court had laid the law on the issue regarding claim of exemption by similar assessee s in the case of Ahmedabad Urban Development Authority (supra) [as well as in the case of Servants of People Society (supra)] which was decided after considering the proviso to section 2(15) of the Act, which admittedly the Ld. CIT(A) did not consider, before he passed the impugned order. In the light of the recent decision of the Hon ble Supreme Court in the case of Ahmedabad Urban Development Authority (supra) as well as Servants of People Society (supra), we are of the opinion that Ld. CIT(A) erred in merely following the order of the Tribunal in assessee s own case for AY. 2011-12 to AY. 2013-14 passed on 06.09.2022. And that AO has framed the assessment only discussing the Principle of Mutuality and did not consider the application of proviso to section 2(15) of the Act. And since the ratio laid by the Hon ble Supreme Court ( ..... 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