TMI Blog2016 (6) TMI 802X X X X Extracts X X X X X X X X Extracts X X X X ..... nst which receipt of ₹ 1.85 crore has been shown. The assessee held four seminars/conferences, namely, SIAM Annual Session, Technical seminar, AOTS – Kaizen/MTP Programme and WHTC-August, 2009. Total receipts from these four conferences/seminars has totaled to ₹ 1.85 crore. The major item of receipt is ₹ 1.59 crore from ‘SIAM Annual Session’, the details of which are available on page 89 of the paper book. As perusing these receipts above, it emerges that these are largely sponsorship amounts received from automobile companies. Details of expenses incurred on seminars and conferences have been set out on page 106 of the paper book. These details reveal that for some conferences, income is higher than the expenses, while for others, it is vice versa. Above narration of the activities actually undertaken by the assessee transpires that these are aimed at the overall promotion of the automobile sector. Even if there has resulted some surplus in organizing these conferences and seminars etc., it cannot be said that the assessee carried out any trade, commerce or business or rendering any service in relation to any trade, commerce or business. It is manifest that n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee claimed these activities to be charitable as was done in the past, the AO called upon the assessee to show cause as to why its activities be not considered as not charitable in the light of the amended provisions of section 2(15) of the Act. The assessee submitted explanation fortifying its claim of charitable character, which has been reproduced in the assessment order. Not convinced, the AO held that the activities of the assessee were hit by the amended provisions of section 2(15) of the Act. In his opinion, the receipts from seminar, statistical information and Auto Expo 2008 were not charitable activities. Relying upon the amended provisions of section 2(15), the AO denied the benefit of sections 11/12 and computed total income at ₹ 3.02 crore. The ld. CIT(A) approved the action of the AO in holding that the assessee s activities were not in the nature of charitable activities as defined u/s 2(15) of the Act as the same were marred by the proviso inserted w.e.f. assessment year 2009-10. The assessee is aggrieved against the impugned order. 3. We have heard the rival submissions and perused the relevant material on record. Undisputedly, the assessee society wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing any service in relation to any trade, commerce or business for consideration irrespective of the nature of use of the income from such activity. If we closely peruse the mandate of the proviso, it transpires that any other object of general public utility shall not be considered as a charitable purpose if the activities of the assessee are either the carrying on of or rendering of any service in relation to any trade, commerce or business for a consideration. It is further clear that the user of the income earned from the carrying on of or rendering of any service in relation to any trade, commerce or business does not, in any manner, alter the non-charitable purpose of the character of the income derived from such activities. The essence of the proviso is that the assessee must carry on any activity in the nature of trade, commerce or business or render any service in relation to any trade, commerce or business so as to be tagged as an activity of a non-charitable purpose. Thus, it becomes important to ascertain if the assessee was carrying on any activity in the nature of trade, commerce or business or was rendering any service in relation to any trade, commerce or business. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in general and automobile industry in particular. VII. to encourage friendly feelings and unanimity amongst the manufacturers of automobiles and automobile products and all those engaged in commerce and industry on all subjects involving their common good; 3) To organize or form organizations for the development and regulation of the sale of automobiles and/or components, and establish branch offices, markets, syndicates or boards, with such. powers as may be thought fit within India and in any other country or countries; 4). To encourage., assist, and extend knowledge, education and Information connected with environment and safety and trade, commerce and industries and manufacturers in India, whether by establishment and promotion of lectures, discussions or correspondence, by holding conferences, by formation of libraries, by publication of papers, periodicals, magazines, books, maps and any other kinds of literature using print, electronic or any other devices or by foundation and endowment of professorship. studentship, or scholarship, or by encouraging research work or howsoever or otherwise, and by establishing museums, or organizing exhibitions indu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in relation to any trade, commerce or business. Thus carrying on an `activity in the nature of trade, commerce or business or rendering of any service in relation to trade etc. is sine qua non for taking away the character of charitable purpose. An activity in the nature of trade, commerce or business is always carried on with the prior object of earning income. What is relevant is the intention of the person before undertaking such activity. A line of distinction needs to be drawn between the activities undertaken by a society, otherwise satisfying the prescription of section 2(15) prior to the insertion of proviso, which are aimed at earning income divorced from the objects for which it is charitable por una parte and the activities which are aimed at the attainment of the objects for which it was set up por otra parte. Whereas the former fall within the mandate of the proviso to section 2(15), the latter do not. The obvious reason is that the latter activities are in furtherance of the charitable objects of such society and income, if any, resulting from such activities does not convert the otherwise charitable activity [within the definition of section 2(15)] into carrying o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness so as to deny exemption u/s 11 of the Act. It further observed that if the object or purpose of an institution is charitable, the fact that the institution collects certain charges does not alter the character of the institution. The Hon ble High Court further observed in para 67 that: the purport of the first proviso to section 2(15) of the Act is not to exclude entities which are essentially for charitable purpose, but are conducting some activities for a consideration or a fee. The object of introducing the first proviso is to exclude organizations which are carrying on regular business from the scope of charitable purpose . The Hon ble High Court also noticed the purpose of introducing the proviso to section 2(15) of the Act from the Budget Speech of the Finance Minister while introducing the Finance Bill 2008 and reproduced the relevant extract to the Speech as under:- . Charitable purpose includes relief of the poor, education, medical relief and any other object of general public utility. These activities are tax exempt, as they should be. However, some entities carrying on regular trade, commerce or business or providing services in relation to any trade, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utility which is otherwise charitable within the main provision of section 2(15). The Revenue has also accepted such objects as charitable in nature and granted registration in the year 1998. However, it needs to be examined as to whether or not the activities undertaken by the assessee during the year amount to carrying on any activity in the nature of business, trade or commerce or rendering of services in business, trade or commerce so as to attract the proviso to section 2(15). For that we will venture to examine the actual activities carried out by the assessee during the year, which can be traced from the income side of the assessee s Income and expenditure account, a copy of which is available on page 59 of the paper book. First item is Annual membership subscription amounting to ₹ 1.81 crore. This comprises of annual membership subscription and admission fees. The ld. AR submitted that the assessee has 46 regular members who pay annual fees of ₹ 7.50 lac and there are roughly 350 temporary members who pay @ ₹ 50,000/- per annum. No carrying on of any business can be inferred from receipt of annual membership subscription by the assessee, which is a regula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee carried out any trade, commerce or business or rendering any service in relation to any trade, commerce or business. It is manifest that none of the activities undertaken by the assessee was pursued with the prior object of earning income. Au contraire, all such activities were performed with the prior object of promotion of growth of the automobile industry in India which is an object of general public utility. The activities of the assessee in organizing seminars and conferences, etc. can be seen de hors its main object of general public utility so as to bring the case within the ambit of first proviso to section 2(15). Even if there has generated some excess of receipts over expenses in doing these activities, the same is a normal incidence of the activity of promotion of automobile industries and cannot be characterized as doing any business etc. or rendering of any services in connection with business etc. Since the AO has denied the benefit of sections 11 and 12 on the ground that the assessee did not fall within the scope of charitable purpose defined in section 2(15) of the Act because of carrying on or rendering of any services in business, trade and commerce, w ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
