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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 ..... ctional 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 ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2. Whether, on the facts and in the circumstances 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advancement of any other object of general utility, as the The Gem and Jewellery Export Promotion Council 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to section 2(15) as argued in the case charitable activity in the nature of "general public utility" (in short, 'GPU') adjudicated by determining 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 pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case the order was passed by the co-ordinate bench of ITAT, Mumbai bearing ITA No.752/Mum2017 & 989/Mum/2019 Date of pronouncement 31/01/2023. The relevant paragraphs 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... table activity in the nature of „general public utility‟. adjudicated by the determining the scope of the phrase "general public utility" (GPU) in the definition of "charitable purposes" primarily on the grounds that the institutions 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 GPU‟s 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". 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 reprod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt has laid down principle giving the example of 'Gandhi Peace Foundation' that where in the process of dissemination of Philosophy of Mahatma Gandhi through museum and exhibition for a nominal cost is ipso facto not a business. Similarly, the Hon'ble Supreme Court has held that services of low- cost hostel, providing of marriage halls or supply of blood bank for nominal markup is not in the nature of business. …………. 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 ( i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penses of Rs. 35,15,598/-. The AO has not made any elaborate discussion as to why the same is disallowed. Addition made without adequate discussion has been objected by the assessee. I am of the view that as all the expenditure were incurred by the assessee towards the objects of the trust and the AO has not brought out any adverse finding that this is not incurred for the objects of the trust, the same needs to be allowed as a deduction consequent to the allowability of benefit the section 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition of Rs. 79,62,0007-." Submission made by the assessee was examined in this regard. The AO invoked the provisions of Section 56(2)(vii)(b) of the IT Act which is applicable only for individuals and HUF's. There was no appropriate machinery provisions to tax trust in case of difference between the actual consideration paid and the stamp duty value. The Assessing Officer has invoked wrong provisions of the Act and the said provisions are not applicable in the case of the assessee and on this ground alone, the addition made 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 asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ground No. 7: Claim of prior period of expenditure of Rs. 8,40,895/- 19. During the course of assessment the AO has disallowed prior period expenses of Rs. 8,40,895/-. 20. However, the Id. CIT(A) held that assessee is entitled to the benefit of Sec. 11 of the Act and all the expenditure were incurred by the assessee towards the object of trust. The AO has not brought any contrary material to demonstrate that assessee has not incurred the expenditure for the object of the trust, therefore, we don't find any reason to interfere in the decision of Id. CIT(A), accordingly, this ground of appeal of the revenue is dismissed." 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d disallowance made by the assessing officer. The relevant extract of the decision of ld. CIT(A) is reproduced as under: "Ground No. 5: During the course of assessment proceeding the A.O made an alternative disallowance of accumulation of income u/s 11(2) of the IT act. The AO concluded in his order that furnishing form-10 is not a formality but requires precise details of the proposed projects and should not be reduce to a formality by merely reproducing the objects and denied the accumulation of u/s 11(2) of the IT Act. Against such conclusion of the AO, the assessee submitted that accumulated income u/s 11(2) for specified purpose and the same has been 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 accumula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rought any contrary material to demonstrate that assessee has not incurred the expenditure for the object of the trust, therefore, we don't find any reason to interfere in the decision of ld. CIT(A), accordingly, this ground of appeal of the revenue is dismissed. 21. The appeal of the revenue is dismissed." 13. We heard the rival submission and considered the documents available in the records. All the grounds of the revenue are duly covered by the orders of the co-ordinate bench of ITAT, Mumbai in assessee's own case. The assessee is a facilitator and arranges the exhibition for its members for development of the business and trade in India and outside India. There is no 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 'Busin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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