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TMI Blog2023 (2) TMI 1386X X X X Extracts X X X X X X X X Extracts X X X X ..... pure commercial exercise, favourably impacting it qua income application for Objects 1 & 2, where shown.
There is, in view of the foregoing, nothing to hold that the assessee's trading business is being run for the benefit of the poor, the sub-stratum of it's case, much less as part of it's mandate. It's claim for exemption u/s. 11 on the profits of the said business, constituting the primary source of it's income for the relevant years, cannot, accordingly, be upheld, and stands rightly denied by the Revenue.
Assessee has filed a compilation of case law, which were not referred to during hearing and, accordingly, not responded to by the other side. The same, accordingly, do not form part of the Tribunal's record.
This explains our non-reference thereto, which though stand browsed to find as not in conflict with anything stated herein so as to impact our adjudication, which is based on the facts borne out by the record; the first legal principles; and the settled law in the matter. Decided against assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... ial on record. 3.1 The main objects of the assessee-company as per it's Memorandum of Association (MoA), are as under: "1. To establish a world class research centre in the field of organic farming and to promote, encourage, establish, develop maintain, organize, undertake, manage, operate, research in all kinds of biotechnological, organic, agricultural, horticultural, dairy, poultry and farm produces and products and to encourage research and development for promoting nutritious food-grains, cereals, seeds, soya-beans, corn, corn oils, cash crops, plants, flowers, vegetables, spices, coffee, edible oils, meat, fish, eggs, and other human food products to ensure quality food products are made available to the society. 2. To initiate, carry out, execute, implement, aid and assist activities towards development in the organic farming sector in India and meeting the entire value chain's requirements of appropriately trained manpower in quality and quality on a sustained and evolving basis and to prevent use of harmful chemicals and pesticides in agricultural activities in land through establishing, promoting academies of excellence and to coordinate participation of social part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relief to the poor' does not emanate from any of the assessee's three main/principal objects, afore-noted, to pursue which the assessee-company stands formed, with objects incidental thereto being only in the nature of preparatory and ancillary activities that would be required to be undertaken toward the main objects. Sure, the 'business' of trading in agricultural produce could stand to be regarded as a 'property held under the trust', income from which could then be deployed toward the assessee's charitable object, i.e., as stated, 'relief to the poor'. The same, however, is conspicuous by its absence in its MoA, much less shown to have been actually pursued by distributing profit among the farmers, i.e., even assuming them to be poor. In other words, without any object to that effect, there is no legal obligation on the appellant-company to apply its profits for alleviating or providing relief to the poor, be it the farmers from whom the assessee procures its trading stock, or generally. There is, as such, no legal basis for the same to be regarded or construed as it's object, so as to be regarded as being formed or constituted therefor. Reference in this regard be made to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the poor, and which by its very nature, as explained hereinbefore, cannot be, unless and to the extent the purchase price is shown to be in excess of the prevailing market price of the goods bought, of which there is no whisper. This is as to this extent a 'benefit' can be said to have been passed to the farmers. However, being only a manner of transfer of profit thereto, proscribed for distribution to members, the same cannot legally form part of it's objects. The asssessee's submissions, we further observe, speak of direct purchases from the farmers, avoiding middle men and, thus, enabling a better price thereto. However, in the absence of any material in support, the same remains a bald claim. Two, it is only to this extent, then, that the farmers can be said to be benefitted. Further still, purchase being a normal cost and incident of a business, the same is deductible in full in computing the assessee's profit/income, while exemption u/s. 11 would stand to arise only qua such profit, on application thereof. Thus, in addition to the conceptual issue arising on treating the purchase as helping the seller, adverted to earlier (para 3.2), the same also raises a computational issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the stand-point of advancement of an object of general public utility, and under which it's main Objects 1 & 2 fall. To this extent, we are in agreement with the ld. CIT(A). So, however, even as pointed out by him, the same, the residuary limb of sec. 2(15) defining 'charitable purpose', could be validly invoked for claiming u/s. 11 only where the turnover does not exceed a threshold limit, defined at 20% of the gross receipt, while in the instant case the same extends to nearly the entirety of it, foreclosing the assessee's case. This is as, even as observed by the Bench during hearing, commerciality is central to the assessee's trading activity; the whole premise being to fetch a better realization by marketing the agricultural produce in India and abroad, maximizing it's profits. As explained per it's recent decision in Asst. CIT v. Ahmedabad Urban Development Authority [2022] 449 ITR 1 (SC), commerciality is integral to the application of the amended law. That apart, as afore-stated, it is only on the application of income for the stated objects being shown would exemption u/s. 11, to the extent eligible, arise. We find no claim toward such application, much less it being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of providing relief through sourcing, i.e., the assessee's case in fine, is, a legal obligation in its respect apart, a better value transfer to a class of farmers on a regular basis, both absent/unshown, which could also further it as regards it's business being not a pure commercial exercise, favourably impacting it qua income application for Objects 1 & 2, where shown. 5. There is, in view of the foregoing, nothing to hold that the assessee's trading business is being run for the benefit of the poor, the sub-stratum of it's case, much less as part of it's mandate. It's claim for exemption u/s. 11 on the profits of the said business, constituting the primary source of it's income for the relevant years, cannot, accordingly, be upheld, and stands rightly denied by the Revenue. The assessee has filed a compilation of case law, which were not referred to during hearing and, accordingly, not responded to by the other side. The same, accordingly, do not form part of the Tribunal's record. This explains our non-reference thereto, which though stand browsed to find as not in conflict with anything stated herein so as to impact our adjudication, which is based on the facts bor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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