TMI Blog2015 (12) TMI 901X X X X Extracts X X X X X X X X Extracts X X X X ..... ee is entitled to the benefits of Sec.11 of the Act. The AO has not disputed the conditions necessary for allowing exemption u/s.11 of the Act, except the applicability of proviso to Sec.2(15) of the Act. In view of our conclusions that the said proviso is not applicable to the case of the Assessee, we uphold the order of CIT(A) and hold that the Assessee's income is not includible in the total income. - Decided in favour of assessee - ITA No. 735/Kol/2013 - - - Dated:- 2-12-2015 - N. V. Vasudevan, JM And Waseem Ahmed, AM For the Appellant : Shri Rajat Kr Kureel, JCIT, Sr. DR For the Respondents : Smt Varsha Jalan Shri Subash Agarwal, Advs ORDER Per Shri N V Vasudevan, JM This is an appeal by the revenue against the order dated 05.02.2013 of CIT(A)-Jalpaiguri relating to A.Y.2008-09. 2. Grounds of appeal raised by the revenue read as follows:- I. That on the facts and in circumstances of the case, The Ld. CIT (A) / Jalpaiguri had erred in justifying the applicability of the proviso to section 2( 15) of the Income Tax Act, 1961. 2. That on the facts in the circumstances of the case, The Ld. CIT (A) / Jalpaiguri had erred in appreciating the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and expenditure account after deducting expenditure incurred to tax. 5. Before CIT(A) the assessee explained the charitable nature of the assessee and submitted that it was existing for a charitable purpose. The Assessee pointed out that during the relevant financial year, the Assessee had organized its 14th trade fair. This Fourteenth International Leather Goods Fair was held between in 22nd February to 24th February. The fair was inaugurated by State Finance Minister, Dr.Asim Kumar Dasgupta and was chaired by Sri Bikash Ranjan Bhattacharya, the Mayor of Kolkata. Thirty eight business houses including several leading international companies took up stalls at the Fair. Delegates from various countries such as USA, Europe, South Africa, Australia, Germany, Sri Lanka, Italy and Spain visited the fair. The fair helped in generating business valued at ₹ 3.25 crores. The Stalls at fair were booked by members and non- members. Without the participation of non-members, there cannot be any value addition to the members in respect of knowledge, fashion, techniques and business. Total contribution from members was ₹ 14,67,500 and from nonmembers was ₹ 15,64,566 totaling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal before the Tribunal. 6. We have heard the rival submissions and the learned DR, who reiterated the stand of the AO as reflected in the order of the assessment. The learned counsel for the assessee relied on the order of the CIT(A) and also filed before us the copy of the Paper book containing the Memorandum Rules of the assessee, audited accounts and computation of total income. He also placed reliance on the decision of the Hon'ble Delhi High Court in the case of India Trade Promotion Organisation vs Director General of Income Tax (Exemptions) Others W.P.(C) 1872/2013 judgment dated 22.01.2015 wherein the Hon'ble Delhi High Court has explained the scope of proviso to section 2(15) of the Act. 7. We have given a very careful consideration to the rival submissions. The AO examined the claim of the Assessee for exemption u/s.11 of the Act, in the light of the proviso to Sec.2(15) of the Act. Sec.2 (15) of the Act, which defines the expression Charitable purpose for the purpose of the Act, had undergone an amendment by the Finance Act, 2008 with effect from 01-04-2009. The expression charitable purpose, prior to the aforesaid amendment read as follows; (15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the prescribed authority, having regard to the objects of the fund or institution and its importance throughout India or throughout any State or States, shall not form part of the total income under the Act. The prescribed authority withdrew the approval granted to the Assessee consequent to the insertion of the proviso to Sec.2(15) of the Act, on the ground that the Assessee was deriving rental income from letting out space for rent during trade fairs and exhibitions, was deriving income from sale of tickets and income from food and beverage outlets. The said withdrawal was challenged by the Assessee before the Hon'ble Delhi High Court. The Hon'ble Delhi High Court had to go into the question as to the scope of the proviso to Sec.2(15) of the Act. The Hon'ble Delhi High Court has laid down the following very important principles as to how the proviso to Sec.2(15) of the Act has to be interpreted:- (i) The proviso to Sec.2(15) of the Act introduced by virtue of the Finance Act, 2008 with effect from 01.04.2009 has two parts. The first part has reference to the carrying on of any activity in the nature of trade, commerce or business. The second part has reference t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is collected or received by an institution, it would not lose its character of having been established for a charitable purpose. If the dominant activity of the institution was not business, trade or commerce, then any such incidental or ancillary activity would also not fall within the categories of trade, commerce or business. If the driving force is not the desire to earn profits but to do charity, the exception carved out in the first proviso to Section 2(15) of the said Act would not apply. (vi) If a literal interpretation were to be given to the said proviso, then it would risk being hit by Article 14 (the equality clause enshrined in Article 14 of the Constitution). Courts should always endeavour to uphold the Constitutional validity of a provision and, in doing so, the provision in question may have to be read down, as pointed out above. (vii) Section 2(15) is only a definition clause. Section 2 begins with the words, Din this Act, unless the context otherwise requires . The expression charitable purpose appearing in Section 2(15) of the said Act has to be seen in the context of Section 10(23C)(iv). When the expression charitable purpose , as defined in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id that the activity of organizing trade fairs and exhibitions and the act of collecting contribution from non-members rendered the Assessee as an organization existing for profit or was doing business or trade. 11. Keeping in mind the above factual aspects and the objects of the Assessee and principle laid down in the aforesaid decision of the Hon'ble Delhi High Court in the case of India Promotion Organization (supra), in our view, will clearly show that the Assessee does not driven primarily by desire or motive to earn profits but to do charity through advancement of an object of general public utility. This is substantiated by the actual income received on operations of the Assessee and the expenditure incurred set out in the earlier paragraphs of this order. The proviso to Sec.2(15) of the Act is therefore not applicable to the case of the Assessee. We therefore hold that the Assessee is entitled to the benefits of Sec.11 of the Act. The AO has not disputed the conditions necessary for allowing exemption u/s.11 of the Act, except the applicability of proviso to Sec.2(15) of the Act. In view of our conclusions that the said proviso is not applicable to the case of the As ..... 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