TMI Blog2017 (3) TMI 1334X X X X Extracts X X X X X X X X Extracts X X X X ..... EME Court ) wherein held the expression object of general public utility would not necessarily mean that the object should be to benefit the whole of mankind and the test of dominant object has not been altered even after the said amendment. We therefore hold that the denial of exemption under section 11 and 12 in the case of the assessee is not in accordance with law and accordingly the additions made by the AO and confirmed by the CIT(A) are deleted. - Decided in favour of assessee - I.T.A.No.1325/Del/2015 - - - Dated:- 27-3-2017 - SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER For The Assessee : Sh. Mayank Jain Sh. Madhur Jain, Advocates. For The Department : Sh. Umesh Chand Dubey, Sr. DR ORDER PER H.S. SIDHU, JM The Assessee has filed the present appeal against the impugned order dated 31/12/2014 passed by the Ld. Commissioner of Income Tax(A)-40, New Delhi on the following grounds:- 1. That the order passed by Ld. CIT(A) is bad in law. 2. That the ld. CIT(A) has erred in not considering that no proper opportunity of being heard was provided to the appellant by the AO. 3. That the Ld. CIT(A) has erred in confirming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al assets of ₹ 1,77,988/-, funds received taken to corpus of ₹ 72,32,295/- and ₹ 28,66,610/- with respect to voluntary contribution and membership fee were added to the income of the assessee. Another addition of ₹ 10,57,458/- was made on account of provision of doubtful debts in the income of the assessee. 3. Aggrieved by the assessment order dated 22.03.2013, the assessee filed an appeal before Ld. CIT(A) who vide his impugned order dated 31.12.2014 has partly allowed the appeal of the assessee by deleting the addition of ₹ 10,57,458/-. However, the action of the AO with regard to denial of exemption under section 11 and 12 of the Act to the assessee was confirmed. 4. Against the order of the Ld. CIT(A), the Assessee is in appeal before the Tribunal. 5. Ld. Counsel of the assessee submitted that the assessee company has been incorporated under section 25 of the Companies Act and is a non-profit making company. He draw our attention towards the assessment Order Page No. 1 2 wherein the aims and objects of the assessee company are mentioned. 5.1 It was further stated that the assessee is registered u/s 12A of the Act vide order dated 22.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat aspect, and the exemption was allowed to the assessee and the demand was nil. 5.5 Ld. Counsel for the assessee further stated that it is an admitted case of the Department that the denial of the exemption under section 11 and 12 of the Act was solely for the reason of the amendment in section 2(15) of the Act in the year 2009. It is submitted that neither in the assessment order nor in the order passed by the CIT(A), the department has alleged violation of any of the objects of the assessee. It is not specified as to which object was violated by the assessee. The said amendment in the proviso to section 2(15) has come under judicial scrutiny of various High Courts including the jurisdictional Hon ble Delhi High Court. In the case of India Trade Promotion Organization Vs. Director General of Income Tax (Exemptions) Others, W.P. (C) No. 1872/2013 dated 22.01.2015, the Hon ble High Court was pleased to read down the said amendment and held that if the dominant and the prime objective of the institution is advancement of an object of general public utility, the institution has to be necessarily regarded as an institution established for charitable purposes irrespective of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this position, mere generation of surplus or charging of fee would not obliterate its overall object of general public utility. 5.8 The assessee s counsel further states that the charging of fee for seminars and training is only incidental to the main object of the assessee being improvement and sustainable growth of agriculture and food independency. The purpose is not to benefit any individual manufacture or group of manufactures but to hold awareness programs, undertaking training and research to improve the knowledge of the stake holders for a better livelihood and sustainable development of agriculture in India as a whole. There is nothing on record to substantiate that the income generated by the said activities were not utilized by the assessee for achievement of its main objects. It is important to note that neither the AO nor the Ld. CIT(A) has failed to point out any object for which the company has been incorporated, being violated by the assessee. It is further submitted that the department has failed to show any noncompliance as enumerated under section 13 of the Act, thus the impugned additions made by the revenue are liable to be deleted. 5.9 The assessee s co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y. It is further not pointed out as to under which clause of section 13, the assessee would fall so as to invite denial of exemption under section 11 and 12 of the Act. It is pertinent to note that the assessee has been granted certificated under section 12A on 22.06.1994 and has been receiving the said exemptions since then. The registration of the assessee has not been cancelled under section 12AA (3) of the Act. 7.1 To decide the issue in dispute, we can gainfully refer here the objects of the assessee company, which read as under:- i. To unite all firms, companies, corporation, associations and Individuals engaged in the Fertilisers Industry in India with a view to promoting the consideration and discussion of all questions affecting the trade of Fertilisers and the interest of sound agriculture and for the improvement of the economics development of the Fertiliser and Agriculture Industries. ii. To institute, prosecute, develop and carry on all kinds of scientific and economic research in or in connection with process for the preparation and use of Fertiliser for the purpose of increasing soil fertility and crop production and in the interest of agriculture. iii. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cent of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year;] 7.3 We further note that the Hon ble Delhi High Court in the case of India Trade Promotion Organization Vs. Director General of Income Tax (Exemptions) Others, W.P. (C) No. 1872/2013 dated 22.01.2015, was pleased to hold as under:- 46 The only thing that we have to examine is - whether the petitioner had been established for charitable purposes? The fact that it derives income does not, in any way, detract from the position that it is an institution established for charitable purposes. Therefore, in our view, merely because the petitioner derives rental income, income out of sale of tickets and sale of publications or income out of leasing out food and beverages outlets in the exhibition grounds, does not, in any way, affect the nature of the petitioner as a charitable institution if it otherwise qualifies for such a character. 50. In ICAI(II) (supra), while considering whether the activities of ICAI fell within the proviso to Section 2(15) as introduced with effect from 01.04.2009, this court, after considering the Supreme Court decision in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the first proviso must, thus, be interpreted restrictively and where the dominant object of an organisation is charitable any incidental activity for furtherance of the object would not fall within the expressions business , trade or commerce . 52. With regard to the Surat Art Silk case (supra), this court, in ICAI (II) (supra) observed as under:- 69. In the case of Addl. Commissioner of Income Tax v. Surat Art Silk Cloth Manufacturers Association: [1980] 121 ITR 1 (SC), the Supreme Court held as under:- The test which has, therefore, now to be applied is whether the predominant object of the activity involved in carrying out the object of general public utility is to subserve the charitable purpose or to earn profit. Where profit-making is the predominant object of the activity, the purpose, though an object of general public utility would cease to be a charitable purpose. But where the predominant object of the activity is to any out the charitable purpose and not to earn profit, it would not lose its character of a charitable purpose merely be cause some profit arises from the activity. 70. Although in that case the statutory provisions being co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... teral interpretation sought to be given to the expression charitable purpose by the revenue. With respect, we do not agree with the views of the Kerala and Andhra Pradesh High Courts .. 57. Ultimately, in the context of the factual matrix of that case, this court held that charging a nominal fee to use the coding system and to avail the advantages and benefits therein is neither reflective of the business aptitude nor indicative of the profit oriented intent . The court further observed:- Thus the contention of the revenue that the petitioner charges fee and, therefore, is carrying on business, has to be rejected. The intention behind the entire activity is philanthropic and not to recoup or reimburse in monetary terms what is given to the beneficiaries. Element of give and take is missing, but decisive element of bequeathing is present. In the absence of profit motive and charity being the primary and sole purpose behind the activities of the petitioner is perspicuously discernible and perceptible. The court also held:- 27. As observed above, fee charged and quantum of income earned can be indicative of the fact that the person is carrying on busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able purposes, is profit making, whether its activities are directly in the nature of trade, commerce or business or indirectly in the rendering of any service in relation to any trade, commerce or business, then it would not be entitled to claim its object to be a 'charitable purpose'. On the flip side, where an institution is not driven primarily by a desire or motive to earn profits, but to do charity through the advancement of an object of general public utility, it cannot but be regarded as an institution established for charitable purposes. 7.4 We further note that the Tribunal in similar facts in the case of ADIT Vs. Indian Medical Association, ITA No. 4291/Del/2012 dated 20.02.2015 held as under:- 43. From this, it is clear that prior to the introduction of the proviso to Section 2(15) of the said Act, there was no dispute that the petitioner was established for charitable purposes and, therefore, its income was not to be included in the total income and was, therefore, granted the benefit of exemption. We have already noted above, while discussing the facts of the case that the income received by the petitioner is from the letting out of space, sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase has no merits. In the course of hearing it was submitted by the Ld. Sr. DR on query that the registration till date has not been withdrawn. The date of the assessment order the record shows is 08.11.2011. The Ld. Sr. DR has also canvassed that the mere fact that the assessee has received financial support from the Ministry of Health and Family Welfare which fact it has been submitted does not mean that it is performing a charitable activity. On considering the judicial precedent cited we find that the Hon'ble High Court took into consideration in the facts of the ITPO that prime land was made available to the assessee to facilitate its objects of providing space on rent etc. for promotion of trade wherein the assessee apart from selling tickets etc was also providing food beverage outlets and providing for water, electricity etc in the facts of the present case admittedly financial support is also provided to the assessee trust whose activities have not been assailed to be contrary to the aims and objects and we find that mobilizing resources towards its aims and objects that too within the methods enshrined by the trust deed which are ploughed back by the society towards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a special definition of the expression charitable purpose for the Act: it is again inclusive and not exhaustive or exclusive. Even if the object or purpose may not be regarded as charitable in its popular signification as not tending to give relief to the poor or for advancement of education or medical relief, it would still be included in the expression charitable purpose if it advances an object of general public utility. The expression object of general public utility however is not restricted to objects beneficial to the whole mankind. An object beneficial to a section of the public is an object of general public utility. To serve a charitable purpose, it is not necessary that the object should be to benefit the whole of mankind or even all persons living in a particular country or Province. It is sufficient if the intention to the benefit a section of the public as distinguished from specified individuals. Observations to the contrary made by Beaumont, C.J., in CIT v. Grain Merchants' Association of Bombay [ 6 ITR 427] that an object of general public utility means an object of public utility which is available to the general public as distinct from any section of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
