TMI Blog2012 (10) TMI 895X X X X Extracts X X X X X X X X Extracts X X X X ..... s is an appeal by the assessee against the order dated 9/3/2011 of DIT(E), Mumbai passed under section 12AA(1)(b)(ii) r.w.s. 12A of the Act. The concise grounds raised by the assessee read as follows: "I. The learned Director of Income-tax (Ex.) erred in refusing to register the Appellant u/s.12AA read with Sec.12A of the Income Tax Act on the ground that the Appellant has been formed with the main object of providing networking facilities to the Chief Executive Officers (CEO) and promotion of entrepreneurship and the same cannot be held to be charitable in nature of general public utility. II. The DIT(E) erred in holding that the Appellant was engaged in carrying out activities outside India, as a conference was held in Thailand of Executives from India and attended by other Executives from Bangkok." 2. The assessee was incorporated as a Private Limited Company on 11/09/2007. The Company passed special resolution for alteration of the Memorandum of Association object clause in keeping with the requirements of Sec.25 of the Companies Act, 1956. The Assessee was given a license under section 25 of the Companies Act 1956 dated 10/3/2010 by the Government of India, Ministry of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... establishing facilities to promote diamond export, effective liaison between India and abroad, promote trade and export and import of diamonds is an object to promote trade and commerce which qualifies as object of general public utility. The Assessee also submitted that various judicial pronouncements of the apex court and various High Courts confirm the view that all Chambers of Commerce and Industry, federations, registered societies and trade associations, companies incorporated without a profit motive are to be regarded as established for the general public utility within the meaning of section 2(15) of the Income-tax Act, 1961. The dominant activity of the CEO Club is to promote commerce, art, global co-operation by networking and other useful objects connected with the CEO's of enterprises. The expression "object of general public utility" as per Supreme Court decision in case of CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 is not restricted to the objects beneficial to whole of mankind. An object beneficial to a section of public is an object of general public utility. To serve a charitable purpose, it is not necessity that the object should be to benefit the whole ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fact that most of the activities are held either in Dubai, China and Thailand. He held that as per the provisions of Income-tax Act, 1961, it is necessary for the trust/institution to carry out the activities within India. In this regard he referred to the decision of the Hon'ble Bombay High Court in the case of CIT v. State Bank of India [1988] 169 ITR 298/[1987] 32 Taxman 619 wherein it was held that where the trustees were given the direction to apply income for charitable purpose either in India or abroad, no part of the income of the trust would be entitled to exemption, even though factually no part had been utilized outside India. The ratio of the said case also disentitles from any relief being granted in favour of the Trust. 7. The DIT also held that the membership clause of the memorandum of Association places a restriction on becoming its members of only individual heading an organization or to any corporate member, which includes any company, association or body corporate. The above restrictive clause according to the DIT prescribes a specific qualification of becoming a CEO of a company, to become a member of the Assessee. According to the DIT therefore, the objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in all kinds of cloth and other goods and fabrics belonging to and on behalf of the members; . . . (n) to do all other lawful things as are incidental or conducive to the attainment of the above objects." The income and property of the assessee were liable to be applied solely and exclusively for the promotion of the objects set out in the memorandum and no part of such income or property could be distributed amongst the members in any form or utilised for their benefit either during its operational existence or on its winding up or dissolution. The assessee's income was derived primarily from two sources: (i) an annual subscription collected from its members at the rate of Rs. 3 per power loom, in regard to which it was conceded by the department that it was exempt from tax; and (ii) commission of a certain percentage of the value of licences for import of foreign yarn and quotas for purchase of indigenous yarn obtained by the assessee for its members. This commission was credited separately in a building account and out of this amount the assessee constructed a building. The Tribunal held that the primary purpose for which the assessee was established was to promote commerce and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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