TMI Blog2023 (7) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... ing services in relation to Trade, Commerce, Business by charging fee, cess. Basic fact in this case is that the quantum of receipt from such activities is more than 20% of the total receipt. For Example, the Leasing Income is Rs.2,23,17,651/- out of total income of Rs.10,60,58,855/- which is 21% of the total receipts. In addition to the leasing income there are other receipts like hall charges, programme fees etc. These receipts are in the nature of trade, business or commerce or providing services in relation to Trade, Commerce, Business for fee. Thus, the receipts from these activities which is in the nature of trade business, or commerce is definitely more than 20% of the total receipts, hence, as per proviso to section 2(15) of the Act, the activities are not for charitable purpose. Assessee is not eligible for exemption u/s 11 - Also observed that the net profit is 28%. The Reserve Surplus is Rs.37,13,44,294/-. This also explains that the assessee s main aim is to earn profit - Appeal of the Revenue is allowed. - ITA No.80/PUN/2021 - - - Dated:- 3-3-2023 - SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER Assessee by Shri Nikhil S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , exhibitions etc. It is also important to mention here that activity of renting out hall and leasing premises cannot be treated as charitable activity, more so, when said premises are rented out with motive of earning huge profits. Income from leased premises of assessee during the year was Rs. 2,23,17,651/-. Income from hall charges was Rs. 1,03,58,851/-. Out of gross total income, above two income along with interest income constitutes almost 49.18%. It clearly shows that leasing of premises and renting out hall constitutes major income earning activity of the assessee which concludes that assessee is carrying on activity in the nature of business and commerce. Further, when bifurcation of said receipts from members and non-members was asked, assessee failed to submit the same and just submitted huge ledgers (in pen drive) which do not show case any information on receipts / bifurcation of receipts from members non-members. During the year, assessee had actually earned the exorbitant surplus of Rs.3,05,98,600/- which is almost 28.85% of gross receipts of I E account. Further, the assessee was generating huge surplus in earlier years as well and thus the activities are carrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 013-14 on identical facts have allowed exemption u/s 11 to the assessee. The Ld.AR submitted that hence Ld.CIT(A) was right in allowing the appeal of the assessee. Ld.AR submitted that assessee is a charitable organization duly registered u/s 12AA of the Act. All the activities of the assessee are as per the objects of the assessee. The ld.AR submitted that the income earned from publication, trade exhibitions, seminars, issuing certificates, advertisements etc., were earned while performing the main objects of the assessee i.e. to promote Trade, Commerce Industry, Agricultural and Agricultural Business in India, particularly in the state of Maharashtra. The Ld.AR tried to distinguish the decision in the case of ACIT Vs. Ahmedabad Urban Development Authority (supra). Findings and Discussion: 7. We have heard both the parties and perused the records. It is observed from the Profit and Loss Account that the assessee has shown following receipts: Income from Leasing of premises 2,23,17,651/- Hall Charges 1,03,58,851/- Programme Fee Activities Revenue 1,68,22,412/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mendment in 2008 and as it stands today, is that firstly a GPU charity cannot engage in any activity in the nature of trade, commerce, business or any service in relation to such activities for any consideration (including a statutory fee etc.). This is emphasized in the negative language employed by the main part of section 2(15). Therefore, the idea of a predominant object among several other objects, is discarded. The prohibition is relieved to a limited extent, by the proviso which carves out the condition by which otherwise prohibited activities can be engaged in by GPU charities . (c) Both parts of the proviso: (i) and (ii) (to Section 2 (15)) have to be read conjunctively-given the conscious use of or connecting the two of them. This means that if a charitable trust carries on any activity in the nature of business, trade or commerce, in the actual course of fulfilling its objectives, the income from such business, should not exceed the limit defined in subclause (ii) to the proviso . 167. Thus, the journey which began with Surat Art Silk was interpreted in Thanthi Trust to mean that the carrying on of business by GPU charity was permissible a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen, be logically incidental. The amendment of 2016, inserting sub clause (i) to proviso to section 2(15) was therefore clarificatory. Thus interpreted, there is no conflict between the definition of charitable purpose and the machinery part of section 11(4A). Further, the obligation under section 11(4A) to maintain separate books of account in respect of such receipts is to ensure that the quantitative limit imposed by sub-clause (ii) to section 2(15) can be computed and ascertained in an objective manner. Unquote. 9. Thus, the Hon ble Supreme Court has clearly held that Parliament has proscribed involvement or engagement of GPU in any activities in the nature of trade, commerce or business or involve in providing services in relation to trade, business or commerce for fee, cess or other consideration. The limited relief granted by Parliament is that if such activities are carried out in the course of actual carrying on objects of GPU (general Public Utilities) then the quantum of receipts shall not exceed 20% of the total receipt. 10. Section 2(15) of the Act applicable for A.Y.2016-17 is reproduced here as under: 15) charitable purpose includes relief of the poor, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, the Assessee is not eligible for exemption under section 11 of the Act. Therefore, we hold that the assessee is not eligible for exemption under section 11 of the Act. Hence, appeal of the Revenue is allowed. 12. It is also observed that the net profit is 28%. The Reserve Surplus is Rs.37,13,44,294/-. This also explains that the assessee s main aim is to earn profit. 13. The assessee has earned income from leasing out its immovable property. As per the Return of Income of the assessee, the assessee has leased out certain parts of its property called MCCIA Trade Tower, Senapati Bapat Road, Pune and Mahratta Chamber Bhavan, Tilak Road, Pune. Earning income from leasing property is not one of the objects of the trust. The assessee has shown value of office building at Rs.12,06,66,047/- and claimed depreciation. In the notes, it is categorically mentioned that, that part of the office building which has been leased out have been classified as fixed assets. Also, earning income from leasing out immovable property is definitely not intrinsically linked to the Objects or activities of the Assessee company. Therefore, as held by the Hon ble Supreme Court in the case of ACIT V ..... 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