TMI Blog2016 (10) TMI 550X X X X Extracts X X X X X X X X Extracts X X X X ..... utility, it would remain charitable even if an incidental or ancillary activity or purpose, for achieving the main purpose, was profitable in nature. In our view the basic principle underlying the definition of “charitable purpose” remained unaltered even on amendment in the section 2(15) of the Act w.e.f. 01/04/2009, though the restrictive first proviso was inserted therein. Accordingly, in the given facts of the case as discussed above in detail, the assessee association’s primary purpose was advancement of objects of general public utility and it would remain charitable even if an incidental or ancillary activity or purpose, for achieving the main purpose was profitable in nature. Hence, assessee is not hit by newly inserted proviso to section 2(15) of the Act. This issue of assessee’s appeal is allowed. - I.T.A Nos. 415 & 416/Kol/2016 - - - Dated:- 3-8-2016 - Shri Waseem Ahmed, Accountant Member And Shri S. S. Viswanethra Ravi, Judicial Member For the Appellant/ department : Shri Sellong Yaden, Addl CIT, ld.DR For the Respondent/ assessee: Shri Ravi Tulsiyan, FCA, ld.AR ORDER Shri S. S. Viswanethra Ravi, JM These two appeals of the Revenue arises out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom environment management centre, meeting, conference and seminars and fees for certificate of origin were in the nature of trade, commerce or business and the assesse is hit by the amended provision of section 2(15) of the act with effect from assessment year 2009 10 which provides by way of insertion of a proviso that any activity in the nature of trade, commerce or business or providing service in relation to trade, commerce or business for a fee shall not be regarded as charitable purpose. Based on such amendment assessing officer completed the assessment under section 143(3) of the act determining the total income of the assessee at ₹ 2,31,50,090/- without allowing exemption under section 11 as claimed by the assessee and as allowed in the earlier years. 5. In first appeal, the CIT-A allowed the appeal of the assessee observing as under:- (i) That issues involved in the present appeal for A.Y 2010 11 were in regard to receipts by way of any environment management centre, meeting, conferences and seminars and fees for certificate of origin, which have been deliberated and discussed in depth by the Hon ble ITAT, Kolkata in the assessee s own appeal in ITA no. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... donations. The expenses incurred on the said activities as and when incurred were on separately debited to the said accounts and the balance was shown as surplus over receipts. Thus in view of the above it is clear that the alleged activities were all merely incidental to the main object of the assessee and predominant object of the Association being the promotion and development and protection of trade and commerce which is an object of general public utility, it can never be the case that it is engaged in business, trade or commerce or in any service in relation to business, trade or commerce. The individual nature and purpose of the specific activities, it is stated that the activities held by AO and (A) to be business in nature, were as follows a) meetings, conferences and seminars (b) environment management centre (c) fees for certificate of origin. (iv) Thus the Hon ble ITAT held that the activities generating the nature of the impugned receipts were part and parcel of charitable purpose 6. The facts and circumstances under which the benefit of section 11 of the Act was denied by the assessing officer in assessment year s 2010 11 and 2011 12 is same as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merely incidental to the main object of the assessee and the predominant object of the association being the promotion development and protection of trade and commerce which is an object of general public utility, it can never be the case that it is engaged in business, trade or commerce or in any service in relation to business, trade or commerce. The individual nature and purpose of the specific activities, it is stated that the activities held by AO and the (A) to be business in nature, were as follows: (a) Meetings, Conferences Seminars (b) Environment Management Centre (c) Fees for Certificate of origin Facts relating to these activities are discussed in detail in para 23 to 25 of this order above, which need not be repeated. 36. From facts in entirety, now the question arises is whether principle of consistency will apply or not? From AY 1985-86 to 2007-08 exemption u/s 11 of the Act was allowed. Now, having extensively with the newly amended section 2(15) of the Act and its absolute inapplicability to the case of assessee supported by various judicial decisions, we will discuss this issue. We find that CIT(A) without appreciating that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as .. In this sub-section Charitable purpose includes relief of the poor, education, medical relief and the advancement of any other object of general public utility, but nothing contained in clause (i) or clause (ii) shall operate to exempt from the provisions of this Act part of the income from property held under a trust or other legal obligation for private religious purposes which does not ensure for the benefit of the public. The adding of the words not involving the carrying on of any activity for profit: was introduced by the Income tax Act, 1961. Hon'ble Apex court in the earliest decision in the case of Surat Art Silk Cloth Manufacturers Association (Supra) held the theory of dominant or primary object of the trust to be the determining factor so as to take the carrying on of the business activity merely ancillary or incidental to the main object. It was held as follows:- (i) That the dominant or primary purpose of the assessee was to promote commerce and trade in art silk yarn, raw silk, cotton yarn, art silk cloth, silk cloth and cotton cloth a set out in clause (a) and the objects specified in clauses (b) to (e) were merely powers in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dation Trust (Writ Petition No. 1206 of 2010 in the High Court of judicature At Bombay 27 March 2012) it was held that 4 It is a well settled position in law that the dominant nature of the purpose for which the trust exists has to be considered. The Chief Commissioner has not doubted the genuineness of the trust or the fact that it is conducting a hospital. Thus from all the above it is seen that though the definition of charitable purpose under section 2(15) has undergone changes, the principle underlying the same has remained the same. In context of the above, with regard to the principle of consistency it would be of relevance here to quote the decision of the Apex Court in the case of Radhasoami Satsang v. Commissioner of Income-tax (193 ITR 321 SC) wherein it was held that: . (ii) That, in the absence of any material change justifying the Department to take a different view from that taken in earlier proceedings, the question of the exemption of the assessee appellant should not have been reopened. Strictly speaking, res judicata does not apply to income-tax proceedings. Though, each assessment year being a unit, what was decided in one year m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness , the said section 28(iii) of the Act does not apply. 38. In view of the above discussion, we are of the considered view that in the given facts and detailed reading of the various judicial decisions through the years, interpreting the definition of charitable purpose as laid out in section 2(15) of the Act and also the definition of business in relation to the said section amply revels that the theory of dominant purpose has always, all through the years, been upheld to be the determining factor laying down whether the Institution is Charitable in nature or not. Where the main object of the Institution was charitable in nature, then the activities carried out towards the achievement of the said, being incidental or ancillary to the main object, even if resulting in profit and even if carried out with non members, were all held to be charitable in nature. Hon'ble Apex Court in the earliest case of Andhra Chamber of Commerce (supra) had clearly laid out the principle that if the primary purpose of an Institution was advancement of objects of general public utility, it would remain charitable even if an incidental or ancillary activity or purpose, for achievin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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