TMI Blog2016 (11) TMI 600X X X X Extracts X X X X X X X X Extracts X X X X ..... ered view there is no violation to the provisions of section 11(1)(a) of the Act. Accordingly we conclude that the impugned order of the ld. CIT passed u/s 263 of the Act is not sustainable in law and accordingly directed to be set aside. - Decided in favour of assessee. - ITA No. 381/Kol /2016 - - - Dated:- 30-9-2016 - Shri Waseem Ahmed, Accountant Member And Shri K. Narasimha Chary, Judicial Member By Appellant : Shri S.K.Tulsiyan, Advocate By Respondent : Shri Niraj Kumar, CIT(DR) ORDER Per Waseem Ahmed, Accountant Member This appeal by the assessee is against the order passed by Commissioner of Income Tax (Exemption), Kolkata u/s 263 of the Income Tax Act, 1961 (hereinafter referred to as the Act ) dated 10.02.2016. Assessment was framed by JCIT, (Exemption), Kolkata u/s 143(3)/11 of the Act vide his order dated 26.10.2013 for assessment year 2011-12. Shri S.K.Tulsiyan, Advocate appeared on behalf of assessee and Shri Niraj Kumar, Ld. Sr. Departmental Representative represented on behalf of Revenue. 2. The issue raised by the assessee in this appeal is that ld. CIT u/s 263 of the Act erred in holding the order of the AO passed under section 143(3)/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrying out the charitable purpose. The assessee in support of his claim has relied in the order of Hon ble Jurisdictional Tribunal in the case of Indian Chamber of commerce Vs. ITO in ITA No. 1491/Kol/2011 and ITA No. 1284/Kol/2011 for the AYs 2008-09 2009-10 dated 2.12.2014. So there was no violation of the provisions of section 2(15) of the Act. Violation of provisions of section 11(1)(a) of the Act ii. As regards the violation of section 11(1)(a) of the Act with regard to the income applied outside India for the fair held outside India, the assessee submitted that all the receipts from members and participants are from India only. Similarly all the expenses in connection with the fair in North America were incurred in India. The purpose of holding the fair in North America to invite the Indian Residents residing there to make investment in realty sector in India. The assessee has not done any charitable activity outside India. As such there was no violation of the provisions of section 11(1)(a) of the Act. However the ld. CIT rejected the plea of the assessee by observing as under:- Violation of provisions of section 2(15) of the Act The facts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rplus generated from such activities were in the knowledge of the Ld. AO and s he had already dealt with such activities in a particular manner as discussed in the assessment order for A.Y 2011-12, the Ld. CIT (Exemption) erred in assuming jurisdiction u/s. 263 of the Act in order to impose his own views on the Ld. A.O. 5. The ld. AR before us has filed a paper book which is running from pages 1 to 176 and submitted that in this case, the assessee is not carrying out any trade, commerce or business. The object and activities being carried out by the assessee are attributable to a section of the public. Its sole motto is to provide assistance and support services to entrepreneurs and investors in real estate industry. Therefore, admittedly, there is no profit element in such activities which are rendered to a section of the people, who are entrepreneurs in housing industry. The assessee is not providing assistance/ support services to any specified individual but to a section of the people, i.e. entrepreneurs/ investors in real estate industry. Therefore, in the circumstances of the case, the object of the assessee is for the benefit of a section of the community or a class id ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. But generation of surplus does not make the work of the Institution as that of carrying on business. The assessee, as required by sec. 11 of the Act, has applied the receipts for charitable purposes in India and such application is deductible from the gross receipts of the institution. Section 11 of the Act duly recognizes and permits accumulation of 15% out of the gross receipts. For the furtherance of object, further accumulation is permitted by sec.11 (2) also. Without prejudice to the above submissions, it was also pleaded that the aims and activity of the assessee right from the inception till now remained the same. The assessments framed for earlier assessment years were consistently accepting the charitable activities carried on by the assessee and holding the same not for business and the gains/income derived from such activities and were not held to be arising from business. Further, the department has granted registration u/s 12AA of the Act since 1995 and remained in force, thereby accepting the objects for which the assessee is established to be a charitable and a non-profit making organization. In such circumstances, Rule of Consistency shall apply on the facts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an opportunity of hearing in this respect to the assessee; and 4) He has to make or cause to make such enquiry as he deems necessary; 5) He may pass such order thereon as the circumstances of the case justify including, (i) An order enhancing or, (ii) Modifying the assessment or (iii) Cancelling the assessment and directing a fresh assessment. 8.1 Now in the light of above words, we have to examine as to whether the order of the ld. CIT is a valid order in the light of the above stated points/ provisions of section 263 of the Act. Issue No. 1 Violation of provisions of section 2(15) of the Act 9. We find that the activities of the assessee are within the objects as per its memorandum of association. The relevant main objects and objects incidental or ancillary to the attainment of the main objects stand as under: Main objects:- 3) To establish harmony between the construction industry and the Government Departments at the Central and State levels, local ad public bodies, financial institutions and private bodies and institutions for promoting healthy growth and development of the construction industry. 4) xxx xxxx xxxx ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trust, the Central Council would exercise authority. It is on record that there has been no Satguru long before the period of assessment under consideration. As a fact, therefore, the Tribunal was justified in holding that the property was subject to a legal liability of being used for the religious or charitable purpose of the Satsang.-All India Spinners' Assocn. vs. CIT (1944) 12 ITR 482 (PC) : TC23R.179 applied; The Secretary of State for India in Council vs. Radha Swami Satsang (1945) 13 ITR 520 (All) impliedly approved; CIT vs. Radha Swami Satsang (1980) 19 CTR (All) 345 : (1981) 132 ITR 647 (All) : TC23R.644 set aside. Properties of assessee, a religious institution, were meant for the common purpose of furthering the objects of the Sant Satguru and vested in its Central Council and income was always utilised for that purpose and, therefore, assessee was entitled to exemption under ss. 11 and 12. Now coming to the objects and activities of the assessee company, we find that the ld. CIT held that the activities are commercial in nature in terms of the provisions of section 2(15) of the Act. At this juncture we would like to reproduce the said provision which reads a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12.2014. But the ld. CIT distinguished the said case law by holding that in that case the assessee s activities were incidental and ancillary to the main objects to the trade, commerce and industry but in the case on hand the main activities of the assessee are commercial in nature. However, we disagree with the view taken by the ld. CIT as the questions before the Hon ble ITAT were as follows:- 2. That on the acts and the circumstances of the case of the appellant the Ld. CIT(A) erred in confirming the allegation of the Ld. AO that the appellant s activities of conducting the Environment Management Centers, meetings, conferences seminar and the Issuance of Certificate of Origin were all in the nature of business carried on systematically and continuously with a motive to earn profit from the same. 3. That on the acts and the circumstances of the case of the appellant and in law, the Ld. CIT(A) erred in holding that decision of the Hon'ble Delhi HC dated 19th September, 2011, in the case of DIT (Exemptions) Vs. Institute of Chartered Accountants of India and that the case of The Institute of Chartered Accountant of India in Write Petition 1927 of 2010 are not appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the present case. That the assessee association is a charitable institution, duly registered as such us.12A of the Act, carrying in its main object of development of trade, industries and commerce. The main objects for which the association came into existence, are clearly set out in clause 3 of the memorandum of Association which duly records and reads as under:- 3(a) To promote and protect the trade, commerce and industries and in particular the trade, commerce and industries in or with which Indians are engaged or concerned. The activities of conducing Environment Management Centre, Meetings, Conferences Seminar and issuance of Certificate of Origin, being the activities stated to be services in relation to trade, commerce or business were all well covered by the main object being fully connected, incidental and ancillary to the main purpose and were conducted solely for the empowerment, betterment and for creating awareness amongst the industrialists in order to bring about the development of trade and industries in India. Further it is to be noticed that the Memorandum has also specifically authorized the Chamber to do all other things as may be conductive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;ble Apex Court in the earliest case of Andhra Chamber of Commerce (supra) had 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 and ancillary activity or purpose, for achieving the main purpose, was profitable in nature, in our view the basic principle underlying the definition of charitable purposes remained unaltered even on amendment in the sec. 2(15) of the Act w.e.f. 1.4.2009 though the restrictive first proviso was inserted therein. Accordingly, in the given facts of the case as discussed above in detail, the assessee association 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 s. 2(15) of the Act. this issue of assessee s appeal is allowed. Besides the above, we also rely in the case of the CIT Vs. Federation of Indian Chambers of Commerce Industry (1981) 130 ITR 186 (SC) where the Hon ble Supreme Court has held as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lic utility to prevent tax evasion, by diversion of business profits to charities. It is the vagueness of the fourth head of charity any other object of general public utility that impelled Parliament to insert the restrictive words not involving the carrying on of any activity for profit . It was clearly inconsistent with the settled principles to hold in the aforesaid case that if the dominant or primary object of a trust was charity' under the fourth head any other object of general public utility', it was permissible for such an object of general public utility, to augment its income by engaging in trading or commercial activities. In retrospect, it seems that it would have been better for Parliament to have deleted the fourth head of charity any other object of general public utility from the ambit of the definition of charitable purpose' while enacting s. 2(15) rather than inserted the words not involving the carrying on of any other activity for profit , thereby creating all this legal conundrum . When the Government had not accepted the recommendation of the Direct Tax Laws Committee in Chapter 2 (Interim Report, December, 1977) for the deletion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld. AR. The argument of the ld. AR is fortified from the details of expenditure, bank statement, receipts expenditure of foreign fair, participants list which are placed on record on pages 21 to 52 of the paper book. The ld. DR has not brought anything supporting to the fact that the income of the assessee has applied outside India. The fair in North America was organized to invite the Indian residents to invest in India in realty sectors. Therefore the object and activity for the fair in North America was for the advancement of realty business in India. Mostly all the participants were Indian corporate and contributions were received in Indian currency. There was no charitable act done in North America. In similar set of facts the Hon ble Supreme Court in the case of ACIT Vs. Surat Art Silk Cloth Manufacturing Association (1980) 121 ITR 1 (SC) has decided the issue in favour of assessee. The relevant extract of the judgment is reproduced below: 17. If we apply this test in the present case, it is clear that the activity of obtaining licences for import of foreign yarn and quotas for purchase of indigenous yarn, which was carried on by the assessee, was not an activity for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rived by the assessee from such activities was exempt under r/w s. 11(1)(a) s. 2(15). There is a distinction between the purpose of a trust and powers conferred upon the trustees as incidental to the carrying out of the purpose. For instance, cl. 3(v) enables the establishment and support of associations, institutions, funds, trusts and convenience calculated to benefit the employees and their dependents, for making provision for grant of pension and allowances, etc. The framing of such employee benefit scheme is essential and necessary for the proper functioning of the organisation and is incidental to the carrying out of the purpose for which it is constituted. If the primary or dominant purpose of a trust or institution is charitable, any other object which is merely ancillary or incidental to the primary or dominant purpose, would not prevent the trust or the institution from being a valid charity. Likewise, cl. 3(z1) and (z2) which permit the establishment of a trust or trusts, appointment of trustees thereof from time to time and the vesting of funds or surplus income or any property of the assessee in the trustees, are nothing but powers conferred on them for the proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of charitable persons amongst the taxpayers only. Still the majority view has got to be followed now. The main object of assessee being promotion, protection and development of trade, commerce, and industry in India, it was an object of general public utility and income derived from activities for advancing the dominant object was exempt under s. 11. 11. We also find that the activity of conducting the trade fair in foreign country of the assessee is within the object clause which was permitted while granting the registration under section 12AA of the Act. We also find that the income which has arisen from the non-members has already been taxed by the AO while framing the assessment u/s 143(3) of the Act. In view of above, we hold that the assessee has not spent any money in a country outside India although the fair was organized in a foreign country. Similarly we also find that the facts of the case Nachimuthu Industrial Association Vs. CIT 235 ITR 190 as relied by the ld. CIT are different from the instant case before us. The facts in the above case stand as under : The following two questions were raised before the Tribunal : (1) Whether, on the facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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