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TMI Blog2015 (7) TMI 209X X X X Extracts X X X X X X X X Extracts X X X X ..... ng its returns claiming exemption u/s 11 of the Act, which has been allowed by the department over the years. For the AY under consideration, assessee filed its return of income on 29/09/2009 declaring 'nil' income after claiming exemption u/s 11 of the Act. During the assessment proceeding, it was noticed from information available on record by AO that assessee is constructing a Jagannadha Temple making huge investment and up to the end of PY 2008-09, it has invested an amount of Rs. 2,29,50,378. He further noticed that out of the total income of Rs. 1,54,72,028, for the year under consideration assessee trust has invested an amount of Rs. 76,67,283 in construction of the temple. AO observed that as per its bye-law, primary object of assessee society is to provide facility for cultural meetings, events and activities of people from Odisha. One more activity which was included in the aims and objects after amendment is to promote and propagate Jagannadha dharma/culture and philosophy. He further noticed that object of the trust has to render support and to provide subsidized free accommodation for temporary period to people hailing from Odisha. However, he found that apart from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome from letting out of function hall, sale of souvenir etc, which are purely commercial activity, therefore, in view of proviso to section 2(15) of the Act, assessee's activity cannot be considered to be for charitable purpose. Accordingly, he concluded that assessee is not entitled for exemption u/s 11 of the Act. AO, ultimately, passed assessment order by determining the total income of assessee at Rs. 51,66,893 by making various additions and disallowances. Being aggrieved of the assessment order, so passed, assessee preferred appeal before ld. CIT(A). 4. In course of hearing of appeal before ld. CIT(A), it was submitted by assessee that construction of Jagannadha Temple being a part of odisha culture cannot be construed to be an activity different from its aims and objects. Assessee strongly contesting the finding of AO that construction of temple is not charitable activity, relied upon a decision of the Hon'ble AP High Court in case of CIT Vs. Social Services Centre, 250 ITR 39 wherein construction of church was held to be a charitable activity. It was submitted by assessee that religion and charity always come together in this country and once exemption is granted for cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ablished for charitable purpose, hence, no exemption u/s 11 can be allowed. 7. Ld. AR, on the other hand, apart from making oral submissions filed a detailed and exhaustive written submission, the sum and substance of which is assessee being involved in charitable activity, exemption cannot be denied to it merely because some income is generated to assessee from letting out of function hall or sale of souvenir. It was submitted that such activity of letting out function hall or sale of souvenir being incidental and ancillary to the primary object of society, which is charitable in nature and moreover the income generated from such activity being utilized for the charitable object, proviso to section 2(15) will not apply. Ld. AR submitted, in case of assessee, the Tribunal that in the preceding AYs having already held construction of Jagannadha Temple as a charitable activity and further the income generated from letting out of function hall is not a commercial activity, the issue stand settled in favour of assessee. He, therefore, submitted that there is no justifiable reason to interfere with the order of ld. CIT(A). As far as souvenir sale is concerned, ld. AR submitted, souveni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oviso to section 2(15) by the Finance Act, 2008 w.e.f. 01/04/09 would automatically disentitle the assessee from being considered as having been established for charitable purpose and thereby depriving it from claiming exemption u/s 11 of the Act. A plain reading of section 2(15) of the Act, also makes it clear that the proviso applies only to the last limb of 'charitable purpose' i.e. advancement of any other object of general public utility'. The intention of the legislature in introducing the proviso to section 2(15) as could be gathered from the speech of the Hon'ble Finance Minister on the floor of Parliament, explanatory notes, departmental circulars, is to deny exemption to trusts or institutions who in the garb of charity are purely engaged in commercial or business activities and whose main intention is to earn profit. The proviso is never meant to deprive genuine trusts and institutions whose main object is charity but in process of achieving the main object they undertake some income generating activity which is ancillary and incidental to the main object. Further, income generated from such activity is also utilized for achieving the main charitable object. The true imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while interpreting expressions 'trade, commerce and business', as find place in the first proviso to section 2(15), the court held that merely because fees or some other consideration is collected or received by an institution, it would not lose its character of having been established for charitable purpose. The Court observed, in this context, the dominant activity of the institution has to be looked into. If the dominant activity of the institution is not business, trade or commerce, then, any such incidental or ancillary activity would also not fall within the categories of trade or commerce or business. The driving force of the trust or institution should not be a desire to earn profit, but, utilize the same for achieving the charitable objects for which it is established. The Hon'be High Court laying down the principle as to how the proviso to section 2(15) should be construed, held as under: "58. In conclusion, we may say that the expression II charitable purpose", as defined in section 2(15) cannot be construed literally and in absolute terms. It has to take colour and be considered in the context of section 10(23C)(iv) of the said Act. It is also clear that if the litera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g no dispute to the fact that dominant object of assessee is charitable in nature, proviso to section 2(15) cannot be applied to deny exemption to assessee u/s 11 of the Act. In our view, AO without examining the issue in proper perspective has abruptly concluded that assessee is not entitled to exemption u/s 11 of the Act only because proviso to section 2(15) was introduced w.e.f. 01/04/09. In our view, proviso to section 2(15) of the Act will not apply automatically to every trust or institution irrespective of the fact, whether the dominant object of the trust or institution is charitable purpose or earning profit. When in the present case assessee is registered as charitable institution and there is no change in the aims and objects of assessee in the impugned AY and the activities of assessee over the years remains the same, the proviso to section 2(15) cannot be applied to assessee to deny exemption u/s 11 of the Act. In view of the aforesaid, we do not find any merit in the submissions of the ld. DR so as to disturb the finding of the ld. CIT(A) on this issue. Accordingly, we uphold the order of ld. CIT(A) by dismissing the grounds raised. 9. In ground No. 3, department has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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