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TMI Blog2024 (9) TMI 515X X X X Extracts X X X X X X X X Extracts X X X X ..... l High Court in the assessee s own case for assessment year 2004-05. The assessee is a started on 27/04/1966 U/s 25 of the Companies Act, 1956 with the main object to support, protect, maintain, increase and promote the export of gems and etc. For the assessment year under consideration, the assessee filed return of income along with income and expenditure account, balance sheet and audit report in prescribed of Income-tax Rules, 1962. Considering the assessee s transaction in impugned assessment year exhibition in India and outside after deleting the membership fees and the interest from investment, the assessee had incurred loss in exhibitions for promotion of trade and business of the members as well as the benefit should be carried over to other business entities who run as the members of the assessee s organization. In larger aspect, the assessee s GPU is duly covered U/s 2(15) of the Act. The business of trading, sale and purchase are duly restricted during the time of exhibition. The revenue was unable to establish that the assessee is doing any business transactions during its activities. We rely on the orders of our co- ordinate bench of ITAT, Mumbai in assessee s own case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances of the case and in law the Ld.,CIT(A) is right in allowing the exemption u/s 11 of the Act to the assessee whose case squarely falls under the under the proviso (i) to section 2(15) of the Act with respect to the advancement of any other object of general utility, as the act of conducting exhibitions being in the nature of trade arid commerce. When such activities have been held as trade or commerce in the APEC case judgement of the Supreme Court? 3. Whether, on the facts and to the circumstances of the case and in law the Ld.CIT(A) is right in allowing exemption u/s 11 of the Act to the assessee, on the basis of the manner in which the : funds generated from commercial activities are utilized even though provisions of proviso to section 2(15) clearly do not provide for arty such exception on account of nature of use or application or retention of income from: commercial activities? 4. Whether on the facts and circumstances of the case and in law, the assesses trust is not liable to pay taxes on the surplus generated from commercial activities, akin to any other entity engaged in such commercial activity? 5. Whether on the facts and circumstances of the case and in law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l act of conducting exhibitions being in the nature of trade and commerce. When such activities have been held as trade or commerce in the APEC case judgement of the Supreme Court:? 3, Whether, on the facts and in the circumstances of the case and in law the Ld.CIT(A) is right in allowing exemption u/s 11 of the Act to the assessee, on the basis of the manner in which the funds generated from commercial activities areutilized even though provisions of proviso to section 2(15) clearly do not provide for any such exception on account of nature of use or application or retention of income from commercial activities? 4. Whether on the facts and circumstances of the case and in Jaw, the assessee trust is not liable to pay taxes on the surplus generated from its commercial activities, akin to any other entity ] engaged in such commercial activity? 5. Whether on the facts and circumstances of the case and in law and in light of the law laid down by Hon'ble I Supreme Court in Civil Appeal No. 21762 of 2017 in various batch of appeal and SLP's (Lead case ACIT (Exemptions) Vs, Ahmedabad Urban Development Authority [2022] 143 taxmnn.com 278(SC)], the Ld.CIT(A) erred in not appreciatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etermining the scope of GPU in the definition of charitable purpose. Considering the above provision, Ld.CIT(A) allowed the appeal of the assessee. Being aggrieved, the revenue filed an appeal before us. 5. The Ld.DR vehemently argued and placed that the assessee is converting the GPU as charitable work. In any case, the assessee is doing the business and the trading which is a full nature of business activity, and the commercial activity is more than 20% of the total receipt. So, in any case, the assessee has contravened the provisions of section 2(15) of the Act. Ld.AO has correctly withdrawn the exemption u/s 11 of the Act. Ld.DR invited our attention in assessment order page 3 paragraphs 4.2 4.3 which are reproduced here below: - 4.2 It is seen from the return of income filed by the assessee that the assessee is engaged in various commercial activities which prima-facie are in the nature of business. As such, it is clear that purpose of the assessee trust is not education, medical relief, relief to poor, preservation of environment and preservation of monuments or places or objects of artistic or historic interest but at the most of the advancement of any other object of genera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aphs are reproduced below: - 5.10. In the instant year a assessee of promoting the export of gems and jewellary remained the same. In the year under consideration, the assessee has claimed the organising and participating in exhibitions and trade fair as the core activity promotion of Indian products of gems, jewellary overseas market buyers in these exhibitions, to overseas buyer and prohibited from purchase or sale of products. The exhibitions are meeting point of overseas buyers and Indian exporter and during the period of exhibition, the exporters are also made aware about various policies of foreign exchange to the country through seminars and conference organized along with exhibitions where exporter across the India participate. 5.11 Thus, we find that there is no change in facts and circumstances in the year under consideration 2010-11, therefore following the rule of consistency, the Revenue should have allowed the exemption u/s 11 of the Act to the assessee in the year under consideration as same issue has been conceded by the Revenue in AY 2010-11. But, there is a new development in relation to the trade; for the year under consideration is the judgment of 19/10/2022 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stitutions were carrying on trade, commerce or business for consideration, which does not qualify as GPU under the provisions of the Act as amended by Finance Act (FA), 2008 read with subsequent amendments. 5.13 Before the Hon ble supreme court (supra), in the cases of most of the entities, there is no dispute as to the activities involved in the appeal qualified as GPUs within the meaning of the term charitable purposes , but the dispute was in respect of the meaning of fee, cess or other consideration and its impact on construing whether the activity falls under to the description of trade, commerce or business . 9. The Ld.AR has further invited our attention in the revenue s ground No.7 for A.Y. 2017-18 where the Revenue claimed that the prior period expenditure was duly allowed by the Ld.CIT(A) without considering the provisions of the Act. In this case, Ld.AR invited our attention in the observation of the Ld.CIT(A). In the appeal order the relevant paragraphs are reproduced as under: - 4. Decision: Ground No.1, 2 and 3:- All the above three grounds are related to the denial of exemption u/s 11 of the IT Act and addition of Rs. 17,33,88,833/-. This issue was in appeal during e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration and its impact on construing whether the activity falls under to the description of trade, commerce or business . 5.14 The Hon'ble Supreme Court held that where fee, cess or other consideration' is statutorily fixed or where it represents recoupment of cost or cost with nominal mark up, the activity may not be construed as trade, commerce or business' and will be excluded from the mischief of commercial activity under the amended provision. If, however, fee, cess or other consideration' charged is substantially higher over cost, it is tainted with 'trade, commerce or business' and will qualify for tax exemption only if receipts are within the quantitative limit prescribed by the amended provision. The relevant paragraphs of the order of the Hon'ble Supreme Court (supra) are reproduced as under for ready reference. 170. Classically, the idea of charity was tied up with eleemosynary. However, charitable purpose - and charity as defined in the Act have a wider meaning where it is the object of the institution which is in focus. Thus, the idea of providing services or goods at no consideration, cost or nominal consideration is not confined to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.18 ....... When we examine the facts of the instant case before us, we find thatthe Ld. AO and the Ld. CIT(A) has disputed the activities of conducting exhibitions and trade fair by the assessee, which according to the Assessing Officer are in the nature of trade, commerce or business or activity of rendering service in relation to trade, commerce or 5.19 We find that in the year under consideration, the assessee has declared expenditure of Rs. 83,77,48,288/- on the exhibitions within and outside India. The detail of said expenditure is provided in the notes to the financial statement for the year ended 31/03/2012, which is available on paper book page 124 to 126. As against this expenditure on exhibitions, revenue ( income) of Rs. 83,95,30,850/-from exhibitions within and outside India has been shown in the notes to financial statement, which are available on paperbook page 119. The assessee has further claimed expenditure on advertisement for exhibition amounting to Rs. 1,78,37,641/-. Ground No. 4:-Addition on account of denial of accumulation u/s 11(2):- During the course of assessment proceeding the A.O made an alternative disallowance of accumulation of income u/s 11 (2) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 11 of the assessee. Ground of appeal of the assessee is allowed. Ground No.5(b):- Addition on account of difference between purchase consideration and valuation of the property:- During the course of Assessment proceedings the AO observed that assessee trust has purchased the immovable property vide agreement dated 02.03.2017 and the stamp duty value of the property is Rs. 4,02,12,0007- and consideration paid by the assessee Rs. 3,22,50,000/-. The AO brought the difference of Rs. 79,62,000/-being the difference between the stamp duty value and the consideration paid by the assessee by invoking of provision of section 50C. The assessee in his submission stated as follows: 22. During the year under consideration the appellant purchased a commercial property being Premises no. 16, D wing, 4th Floor, Building No. 4, Plot No. 78, Commerce Centre CHSL, Janata Nagar, Tardeo Road, Mumbai - 400 034 vide agreement dated 02.03.2017 for a consideration of Rs. 3,22,50,000/-. The stamp duty valuation for the aforesaid property as adopted by the valuation authorities was Rs. 4,02,12, 000/-. 23. The learned Assessing Officer made addition of Rs. 79, 62, OOO/- under Section 56(2)(vii)(b)(ii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the Assessing Officer is deleted. Thus, we find that in the year under consideration there is net loss of Rs. 1,60,55,079/- from the activity of exhibitions conducted by the assessee within and outside India. In the immediately proceeding assessment year the expenses on exhibitions were of Rs. 77,09,23,044/- as compared to revenue or income of Rs. 70,79,56,744/-. The assessee has further incurred expenditure on advertisement for exhibitions and thus there was a net loss from the consideration charged by the assessee for conducting said exhibitions or trade fair. Details of exhibition revenue and expenses submitted by the assessee for assessment year 2011-12 to 2015-16 is reproduced as under. .. 5.20 Thus, in the instant case it is evident that assessee has charged fee or consideration for conducting exhibitions or trade fair is slightly below the cost. The Hon'ble Supreme Court in the case of AEPC has held that activity of renting space to individual exhibitors or exporters in the exhibition or trade fair is a service in relation to trade commerce or business, but in the instant case, there being no markup on consideration charged from the exporter, therefore in the broad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missed. 21. The appeal of the revenue is dismissed. 11. The Ld.DR further argued and placed the order of the Hon ble High Court at Calcutta in the case of DIT (Exemption) vs Trustees of Singhania Charitable Trust bearing (1993 199 ITR 819 (Cal). The relevant para 2 is reproduced below: - 2. Whether, on the facts and in the circumstances of the case, the Tribunal is justified in cancelling the order of the Commissioner of Income-tax under section 263 of the Income-tax Act, 1961, holding that the assessment of the Income-tax Officer allowing accumulation of the income under section 11(2) of the Income-tax Act, for all the objects for which the trust was created and not for any specific objects, was neither erroneous nor prejudicial to the interests of the Revenue? The facts leading to this reference are that the assessee, a public charitable trust, was assessed by the Income-tax Officer for the assessment year 1984-85 on January 7,1987, and allowed exemption under section 11, relying on the notice given by the assessee under section 11(2). Thereafter, the Commissioner of Income-tax, invoking the powers vested in him under section 263 of the Income-tax Act, 1961, called for and examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spent in subsequent financial years for the purpose for which said funds has been accumulated i.e towards the objects of the Trust It was further submitted that once the assessee has accumulated income with a specific purpose and such purpose is specified in the main objects of the trust, then the Assessing Officer cannot deny such accumulation of income merely for the reason that purpose specified in Form 10 is vague and general in nature. As long as objects of the Trust provide for such purpose, then the assessee can accumulate funds for the purpose which is specified in trust deed. Further the assessee submitted that this view is fortified by the decision of Hon'ble Gujrat High Court in the case of CIT (Exemption) v. Bochasanwasi Shri Akshar Purshottam Public Charitable Trust (409 ITR 591) where it was held that lack of declaration in Form no 10 regarding specific purpose for which funds were being accumulated by the assessee trust would not be fatal to the exemption claimed u/s 11(2) of the Act. The Hon'ble Supreme Court has dismissed SLP filed by the department in the above case and has upheld the findings of the Hon'ble Gujrat High Court. Considering the facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deviation of assessee s main object which is covered by section 2(15) of the Act. The Ld.AO in assessment order has not pointed out any of the deviations of the main object of the assessee. The ld. AO observed receipts from membership, subscription fees, grants from Government of India, income from publication, exhibitions, award functions etc. Regarding the activity of conducting exhibitions, the ld. AO was of the view that was a commercial activity trade or business, in view of expression meaning of Business is wide in fiscal statues. He also inferred profit motive to assessee. Whether ld. AO erred in upholding the denial of carry forward of deficit relating to the earlier years contrary to the binding judgment of the jurisdictional High Court in the assessee s own case for assessment year 2004-05. The assessee is a started on 27/04/1966 U/s 25 of the Companies Act, 1956 with the main object to support, protect, maintain, increase and promote the export of gems and etc. For the assessment year under consideration, the assessee filed return of income along with income and expenditure account, balance sheet and audit report in prescribed of Income-tax Rules, 1962. Considering the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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