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ITO (E) , Ward 1 (3) , New Delhi Versus Delhi Chamber of Commerce

2017 (12) TMI 344 - ITAT DELHI

Charitable institution within the meaning of s.11(1) - whether the assessee was engaged in commercial activities and proviso to s.2(15) was clearly applicable in this case - appellant had receipts from services provided to both members and non-members. The Assessing Officer has held that the income/fee received from members and nonmembers are purely commercial - Held that:- It is an admitted fact that the assessee is registered under section 12A. The main objects of the assessee are to promote a .....

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he surplus or the profits remain with the assessee chamber and is applied towards achieving the objects. So it cannot be said that the assessee is involved in any business activity. It is apparent that the assessee exists only for the Welfare of its members and there is nothing on record to prove that the assessee is involved in any business activities. In the assessment years 2009-10 to 2012-13, the AO similarly denied exemption under section 11 of the act. However the Ld.CIT(A) allowed the app .....

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ember, 2015 finding the tax effect being below ₹ 10 lakhs. However, nothing is explained about the remaining years. It is well settled law that the rule of consistency do apply to the income tax proceedings - It may also be noted here that the claim of the assessee has been denied under section 13(3) of the Act. However it was explained by the assessee all these items have been purchased and used for meetings with delegations and attending conferences. These items are necessities and .....

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any evidence on record as to what business activities are conducted by the assessee with a profit motive and whether the items purchased for achieving the objects are misused by any of the persons covered u/s 13(3) of the Act. Merely because SLP of the department is pending before the Hon’ble Supreme Court in the case of Phd Chamber of Commerce and Industry (supra) is no ground to take a different view against the assessee. Considering all find no merit in the departmental appeal and the same i .....

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ts and in the circumstances of the case and in law, the CIT(A) has erred in law and on facts in holding that assessee is a charitable institution within the meaning of s.11(1) of the Income Tax Act, 1961 (the Act.). 2. On the facts and in the circumstances of the case and in law, the CIT(A) has erred in law and on facts in not appreciating the facts that the assessee was engaged in commercial activities and proviso to s.2(15) was clearly applicable in this case. 3. On the facts and in the circum .....

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ons and disallowances made by the Ld.AO have been omitted from consideration by the Ld.CIT(A). 1(B) That adjustment to Income and expenditure account by the AO i.e. adding sale proceeds of assets of ₹ 2,76,899/- and disallowing loss on sale of assets of ₹ 44,690/- and not allowing depreciation is erroneous. The impugned order passed by the AO in computing the taxable income of the assessee is also not based on any discussion or reasoning and therefore the additions/disallowances made .....

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rotect trade, commerce and manufacturers in Delhi and to watch over and protect the general commercial interest in Delhi or any part thereof in the interest of persons engaged in trade, commerce or industry in the adjoining places or areas. Since the activities of the assessee did not fall in the field of education or medical relief or relief to poor, the AO was of the view that the assessee can be considered for benefit of exemption under section 11 and 12 after verifying the applicability of t .....

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ssessing Officer(AO). Since it was observed that the assessee was charging fee from both members and non members for issue of certificate of origin, it was held that the assessee is providing services in relation to business and not doing any sort of charity. Further, it was held that no direct payment out of profit is being given to the office bearers yet some indirect benefits of personal nature are definitely being given to members/office bearers covered under section 13(3). This inference ha .....

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O. It was submitted that the main object of the assessee is to promote trade, commerce and protect the general commercial interest of the persons who are engaged in trade, commerce and industry. The assessee charge nominal fees as per the guidelines provided by Ministry of Commerce, Government of India. The nominal fees are incidental to the main objects of the assessee. The issue is covered by the decision of Hon ble Delhi High Court in the case of PhD Chamber of Commerce and Industry vs DIT(Ex .....

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s, it was stated that these were necessary for officials of chamber and are used for meetings with delegations and for attending/visiting conferences, seminars and keeping with the times and advancement of Technology, these tools are necessary and they are not luxury items. The order of the AO is based on surmises and conjectures and not on actual facts. 5. The ld.CIT(A) considering the issue in the light of judgement of Honourable Delhi High Court in the case of PhD Chamber of Commerce and Indu .....

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02/2015-16) have also been perused. 4.2 Grounds Nos. I, 2 and 3 challenge the denial of exemption under section 11. Ground No. 4 challenges certain disallowances made to the income as per the income and expenditure account. 4.2.1 Since these grounds are interlinked, these are being adjudicated together. 4.2.2 The main activity of the appellant is to promote, trade and commerce of its members. During the year under consideration, as was the case in earlier years also wherein relief had been allow .....

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3 The Hon'ble Delhi High Court, in the case of PHD Chamber of Commerce and Industry vs. Director of Income Tax (Exemption) [357 ITR 296 (Del)]have examined the question as to whether by rendering specific services to members and non-members for a fee, a trade, professional or similar association can be said to be carrying on a business activity. The Hon'ble Delhi High Court in this case have observed as under: 8. The nice question as to whether by rendering specific services to members a .....

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bed above, in the case of an assessee such as the present one, which is a trade association-Chamber of Commerce and Industry, established to protect the interests of trade and industry in Punjab, Haryana and Delhi - were activities which are incidental to the attainment of the objects of the chamber. We do not think that the Tribunal is justified in taking the view that the assessee, which is a chamber of commerce and industry, is carrying on business activities which require compliance with the .....

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strength of the Supreme Court in CIT v. Federation of Indian Chambers of Commerce and Industries [1981} 130 ITR 186 (SC) held that where the main object of the assessee was the promotion, protection and development of trade, commerce and industry in India, its income from conducting a trade fair, rent for space allotted and sale of entry and gate tickets, fees for arbitration, etc., would be exempted from tax under section 11 read with section 2(15) of the Act. The 11 dominant purpose 11 test w .....

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majority opinion in Addl. CIT v. Surat Art Silk Cloth Manufacturers Association supra). It would, therefore, appear that judicial thinking was never in favour of the view that the services performed by a trade, professional or similar association, such as a chamber of commerce and industry, 'were in pursuit of a business or trade with a profit motive. The Hon'ble Delhi High Court, in this case, have held that- ... Having regard to the authorities which we have noticed above it is not pr .....

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n 2(15) of the Act. In this view of the matter, we are satisfied that the provisions of section 11 (4A) are not attracted to the present case and a remand to the Assessing Officer for finding out whether the activities were incidental to the objectives of the trust and separate books of account were maintained for such business was unnecessary. We accordingly answer the substantial question of law framed by us in the negative, in favour of the assessee and against the . Revenue ... 4.2.4 The Hon .....

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e trust notwithstanding the profit and gain involved therein. In this respect, a reference may be made to the decision of Hon ble Supreme Court in the case of Asstt. CIT vs, Thanthi Trust (2001) 247 ITR 785(SC). Thus, mere because there was a surplus from the activity of micro financing, that by itself cannot be a ground to say that the assessee does not exist for charitable purpose particularly when under the Memorandum of Association and Articles of Association, it has been clearly provided th .....

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etc. which are luxury items as per the Assessing Officer, it is observed that no specific material has been brought on the record to show that there was indeed misused. Hence, this cannot be considered as a ground for withdrawing exemption under section 11. 4.2.6. On similar facts, my ld.predecessor in the appeal for assessment year 2012-13 in Appeal No. 02/2015-16 held as under: 3.5 I have considered the order of the AO and the submissions of the Assessee and I find considerable merit in the s .....

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he case laws relied upon by the Assessee also supports the case of the assessee. After considering all the facts and circumstances of the case, I am of the view that the Assessee is a charitable institution within the meaning of section 11 (1) and the appeal of the Assessee is allowed the following the appellate order of AY. 2009-10, AY. 2010-11 and AY. 2011-12 on the principle of consistency and accordingly the AO is directed to allow the exemption and as such the appeal of the Assessee is allo .....

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f Disha India Micro Credit Vs. CIT (supra) and following the appellate orders of my Id. predecessors CIT (A)-XXI/40 for assessment years 2009-10, 2010-11, 2011-12 and 2012-13 on the principle of consistency, the Assessing Officer is directed to allow the exemption under section 11. These grounds of appeal are, therefore, allowed. 6. Ld.D.R. relied upon the order of the AO and submitted that the departmental SLP is pending before the Honorable Supreme Court in the case of PhD Chamber of Commerce .....

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an admitted fact that the assessee is registered under section 12A of the act. The main objects of the assessee are to promote and protect trade, commerce and manufacture in Delhi and to watch over and protect the general commercial interest in Delhi and adjoining area and to protect the interest of persons engaged in trade, commerce and industry. The assessee charge nominal fee for admission fee, subscription fee and certificate of origin fee as per the guidelines of Ministry of Commerce, Gove .....

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s 2009-10 to 2012-13, the AO similarly denied exemption under section 11 of the act. However the Ld.CIT(A) allowed the appeals of the assessee in all these years, copies of the orders are placed in the paper book. The assessee in all these years submitted before the Ld.CIT(A) that the issue is covered by the judgement of Delhi High Court in the case of PhD Chamber of Commerce and Industry vs. DIT(E) (supra) and the Ld.CIT(A) allowed the claim of the assessee. In the Assessment Year 2009-10 the d .....

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