TMI Blog2017 (5) TMI 537X X X X Extracts X X X X X X X X Extracts X X X X ..... sh Chamber of Commerce (1964 (10) TMI 19 - SUPREME Court ) 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. 5093/Del/2016 - - - Dated:- 9-5-2017 - Shri H.S. Sidhu, Judicial Member And Shri Prashant Maharishi, Accountant Member Assessee by : Sh. Mayank Jain, Advocate Department by : Sh. N.K. Bansal, Sr. DR ORDER Per H. S. Sidhu, JM The Assessee has filed the present appeal against the impugned order dated 19/7/2016 relevant for the assessment year 2011-12 passed by the Ld. Commissioner of Income Tax(A)-36, New Delhi on the following grounds:- 1. That the Ld. CIT(A) erred in facts and law in denying the benefit under section 11 12 of the Income Tax Act, 1961. 2. That the Ld. CIT(A) erred in 'facts and law in confirming the addition of ₹ 2,61,95,214/- under Section 13(8) of the Act. 3. That the Ld. CIT(A) erred in the facts and law in confirmi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n projects, workshop and seminar etc to improve their knowledge and skill to help them for a better livelihood. The AO observed that it is evident that the activities of the assessee is clearly falling under the last limb of 'Charitable Activities' as defined u/s. 2(15) of the I.T Act i.e. 'Objects of other general public utility'. Income and Expenditure Account of the assessee revealed that the assessee received income under following heads apart from other receipts: Rent - ₹ 65,61.397/- Advertisement Revenue - ₹ 36,24,540/- Sale of association publications - ₹ 23,00,082/- Training fee received ₹ 1,18,61.508/- Annual Seminar Receipts ₹ 2,99,09,577/- 2.1 Assessee was also charging fee from its members and non- members was that FAI conducts various training programmes, workshops, seminars etc. in order to discuss the various prevailing issues in the agriculture and fertilizers industry and to educate the participants as to the latest up-dates in their respective fields. As the programmes are very attractive and generate huge benefit to the fertilizers and agriculture sector, many non-members and Associa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see was also added to the income and assessed the income of the assessee at ₹ 3,42,30,880/- vide order dated 31.3.2014 passed u/s. 143(3) of the I.T. Act, 1961. 3. Aggrieved by the assessment order dated 31.03.2014, the assessee filed an appeal before Ld. CIT(A) who vide his impugned order dated 19/7/2016 has confirmed the additions made by the AO and also confirmed the action of the AO with regard to denial of exemption under section 11 and 12 of the I.T. Act, 1961. 4. Against the order of the Ld. CIT(A), the Assessee is in appeal before the Tribunal. 5. At the time of hearing, Ld. Counsel of the Assessee stated that recently exactly on similar grounds the ITAT has allowed the appeal of the Assessee for the preceding assessment year i.e. 2010-11 in assessee s own case in ITA No. 1325/Del/2015 vide order dated 27.3.2017 and filed the copy thereof. Further, he draw our attention towards para no. 7 to 8 at page no. 8 to 23 of the Tribunal s order dated 27.3.2017, as aforesaid and requested to respectfully follow the aforesaid order of the Tribunal and allow the appeal of the assessee. 6. On the other hand, Ld. DR relied upon the orders of the authorities below and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecute, 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. To carry out all kinds Scientific and economic investigations and other experiments for the purposes aforesaid and for improving for commercial purpose the manufacture, use and sale of such fertilizers for use in connection therewith. iv. To study and promote the application of science and scientific and economic methods to the manufacture of fertilizers and their utilization in the fields either alone or in conjunction with preparation with other materials. v. To study and introduce Fertilizer Industries in India schemes of standardization in commercial practices in manufacture and to improve same and extend use of fertilizers. vi. To construct develop and use scientific, chemical and agricultural experimental and other laboratories, plant and machinery and workshops and to employ all kinds of scientists, economists, chemists, agriculturists, engineers, mechanics, technical and other experts in connection there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution 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 the case of Commissioner of Sales Tax v. Sai Publication Fund: (2002) 258 ITR 70(SC) held:- Thus, if the dominant activity of the assessee was not business, then any incidental or ancillary activity would also not fall within the definition of business. 51. This court also observed in ICAI(II) (supra) that:- 64. It is not necessary that a person should give something for free or at a concessional rate to qualify as being established for a charitable purpose. If the object and purpose of the institution is charitable, the fact that the institution collects certain charges, does not alter the character of the institution. This court in ICAI (II) (supra) held:- 67. The expressions trade , commerce and business as occurring in the first proviso to section 2(15) of the Act must be read in the context of the intent and purport of section 2(15) of the Act and cannot be interpreted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dominant 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 considered by the Supreme Court were different and the utilisation of income earned is, now, not a relevant consideration in view of the express words of the first proviso to section 2(15) of the Act, nonetheless the test of dominant object of an entity would be relevant to determine whether the entity is carrying on business or not. In the present case, there is little doubt that the objects of the activities of the petitioner are entirely for charitable purposes. .53. From the said decision, it is apparent that merely because a fee or some other consideration is collected or received by an institution, it would not lose its character of having been established for a charitable purpose. It is also important to note that we must examine as to what is the dominant activity of the institution in question. If the dominant activity of the institution was not business, trade or commerce, then any such incidental or anc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ole 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 business or commerce and not charity, but we must keep in mind that charitable activities require operational/running expenses as well as capital expenses to be able to sustain and continue in long run. The petitioner has to be substantially selfsustaining in long-term and should not depend upon government, in other words taxpayers should not subsidize the said activities, which nevertheless are charitable and fall under the residuary clause general public utility. The impugned order does not refer to any statutory mandate that a charitable institution falling under the last clause should be wholly, substantially or in part must be funded by voluntary contributions. No such requirement has been pointed out or argued. A practical and pragmatic view is required when we examine the data, which should be analyzed objectively and a narrow and coloured view will be counter-productive and contrary to the language of Section 2(15) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 of publications, sale of tickets and leasing out food and beverages outlets in Pragati Maidan. The dominant and main object of the petitioner is to organise trade fairs/exhibitions in order to promote trade, commerce and business not only within India, but internationally. This is done through the organization of trade fairs, including the annual international Trade Fair and other exhibitions. It is for this purpose that the space is let out to various entities during the said fairs and exhibitions. All these activities, including the sale of tickets and sale of publications are an inherent part of the main object of the petitioner. It is clear from the facts of the case that profit making is not the driving force or objective of the petitioner. It is registered under Section2 5 of the Companies Act, 1956, which specifically applies to entities which intend to apply their profits, if any, or other income in promoting their obj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose 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 its aims objects to our minds does not cause any grievance to the Revenue. It goes without saying that financial support from the Ministry of Health and Family Welfare to the assessee necessarily would be based on the functions performed by the said trust and would necessarily be monitored at each and every step and stage with adequate checks and balances and would not be allowed to be frittered away carelessly. Accordingly considering the judicial precedent cited and the arguments of the parties before the Bench and the peculiar facts and circumstances of the case which we have brought out in great detail in the earlier part of this order, we hold that the departmental grounds have no merit and deserve to be dismissed. 8. In the result, the appeal of the Revenue is dismissed. 7.5 We further note that the Hon ble Supreme Court in the case of CIT Vs. Andhra Chamber of Commerce, 55 ITR 722 has observed as under:- 10. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the public and that objects of an association to benefit works of public utility confined to a section of the public i.e. those interested in commerce are not objects of general public utility, do not correctly interpret the expression objects of general public utility . The section of the community sought to be benefited must undoubtedly be sufficiently defined and identifiable by some common quality of a public or impersonal nature: where there is no common quality uniting the potential beneficiaries into a class, it may not be regarded as valid. 7.6 We further find considerable cogency in the assessee s counsel submissions that the judgment relied upon by the AO of the Hon ble Andhra Pradesh High Court in the case of Andhra Pradesh State Seed Certification Agency dated 29.12.2012 cannot be relied upon as the Hon ble Jurisdictional High Court in ITPO Case (Supra) disagreed with the view taken in the aforesaid judgment. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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