TMI Blog2018 (11) TMI 1118X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee is not eligible for exemption u/s. 11 and for this, help of any authority is not required and therefore, we do not enter into this aspect of examining the applicability of various judicial pronouncements cited revenue. This is a settled position of law that at the stage of granting registration u/s 12A, only the objects as per the relevant Deed i.e. Trust Deed etc. are required to be seen and if the objects are charitable, such registration has to be granted but granting of such registration is not final and binding for granting exemption u/s 11 in assessment proceedings. In course of assessment proceedings, actual activities are to be examined and if such actual activities are not found to be charitable, exemption u/s 11 is not allowable although registration u/s 12A was granted on the basis of stated objects. We have to examine as to whether the actual activities are charitable or not and when we do so, we find that the only activity undertaken by the assessee is to take a hall on rent for ₹ 125 lacs and realize huge amount of receipts for Stall space charges ₹ 4,82,47,599/-, power ₹ 18.99 Lakhs and ₹ 4,74,305/- from Directory, total ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is was a query put forward by the bench as to what are the actual activities taken by the assessee and what are the expenses incurred for such activities and what are the receipts if any from such activities. In reply, it was submitted by ld. AR of assessee that the assessee has submitted the audited accounts of the assessee in the paper book and as per the same, the income of the assessee in the present year is mainly from Stall space charges of ₹ 4,82,47,599/- and power ₹ 18.99 Lakhs along with ₹ 4,74,305/- from Directory, total ₹ 506,20,904/-. She also submitted that the assessee has called various experts from outside country for giving lectures etc. and when this query was raised by the bench as to what are the expenses incurred for this purpose, she pointed out that the details of expenses for the present year are available in schedule 22 of the audited accounts which include Hall Rent -Rs. 125 Lakhs, Publicity -Rs. 13,11,538/-, Marketing-Rs. 6,82,868/-, Office Expenses ₹ 1,95,273/-, Printing and Stationery ₹ 3,32,995/-, Postage ₹ 1,66,950/-, Bank Charges ₹ 35,359/-, Conveyance ₹ 3,400/- and Telephone/Fax &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tention to para 14 of the assessment order where it was mentioned by the AO that the assessee owns a exhibition hall and it was proved by the AR with reference to the depreciation statement filed by the assessee that no such exhibition hall is owned by the assessee. 7. Ground numbers 11,12 and 13 deal with the Factually incorrect statements made in the Assessment order by the Assessing Officer. It was emphasized by the AR that there are a number of incorrect and factually inaccurate statements made by the AO in the body of the assessment order to come to conclusion that proviso to Sec.2(15) is applicable to the facts of the case of the assessee. 8. The submissions made have been examined and it appears that the plea of the assessee regarding factual inaccuracies, incorrect statements in the assessment order appears to be correct. 9. The substance of all the grounds of appeal basically deals with whether the assessee is entitled for exemption u/s.11 or whether proviso to Sec.2(15) gets attracted to the facts of the case of the assessee. 10. In the submissions made at the time of appeal hearings, reliance was placed on the decision of the ITAT, Delhi Bench in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts of the assessee is not a proper conclusion. Accordingly, the assessee is held to be entitled for exemption u/s.11. The AO is directed to re-compute the income of the assessee considering that the assessee is entitled for exemption u/s.11. 5. From these paras reproduced from the order of CIT (A), it is seen that ld. CIT (A) has reproduced the submissions of the ld. AR of assessee in Para 5 of his order and thereafter, he has given a finding in Para 6 of his order that the objects mentioned by the AO in para 9.2 of the assessment order do not figure in the list of objects for which the assessee trust have come into existence. But we find that in para 9.2 of the assessment order, the AO is not discussing about the objects of the assessee. In this Para, the AO is discussing about the activities and hence, for the sake of ready reference, we reproduce Para 9.2 from page 8 of the assessment order. The same is as under. 9.2 In the given facts and circumstances, wherein it is seen that the assessee is involved in providing/letting out space to industries for organizing exhibition and related events on license fee/rental basis, the assessee's case would fall under the sixt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correct statements in the assessment order appears to be correct without giving any basis for coming to this conclusion and particularly, when we examine the income and expenditure account of the assessee available in the paper book, we find that only activity undertaken by the assessee in the present year is taking a hall on rent by paying hall rent of ₹ 125 Lakhs and earning income of ₹ 482.48 Lakhs as stall space charges. Moreover as per paras 11 and 12 of the order of CIT(A) as reproduced above, the CIT(A) has reproduced various incomes declared by the assessee in the income and expenditure account which includes DMI Exhibition -2012 income of ₹ 506.20 Lakhs and DMI Exhibition -2011 income of ₹ 14.11 Lakhs in addition to income of ₹ 60.51 Lakhs as interest from bank and thereafter, he has come to the conclusion as per para 12 of the order of CIT(A) that from the perusal of these receipts, it is clear that it cannot be held as having been received on account of any trade or commerce without giving any reason for coming to this conclusion. 7. The ld. AR of assessee has placed reliance on various judicial pronouncements copy of which has been submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only recently, the government had issued directives to the petitioners to construct a state of the art conventioncum- exhibition centre in Pragati Maidan in place of the old infrastructure which was constructed about four (4) decades back. According to the petitioner, the corpus of funds available with the petitioner may not be sufficient to meet the cost of the new project. 8. From the above Para no. 5 of this judgement of Hon ble Delhi High Court, it is seen that in that case, Pragati Maidan Complex was allotted by Govt. of India to the assessee at a nominal ground rent of Re 1 per annum for the initial 5 years which was subsequently revised to ₹ 6 Lakhs (approximately) per annum and same ground rent continues till the relevant year and because the assessee obtained such premium land from Govt. of India at a nominal ground rent, as compared to the commercial rates that could have been charged by the government, it had enabled the assessee to provide space for exhibitions, seminars, conferences and other trade promotion activities to various participants at economically viable rates. In the present case, this is not the case of the assessee that any premium land wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordingly, 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. 10. From the above para reproduced from this Tribunal order, it is seen that the basis of decision in this case is this that where the main object of the institution was charitable in nature, then the activities carried out towards the achievement of the said main object, 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. In the present case as per the main object of the assessee, it is stated to promote, training and the diffusion of knowledge to standards in the manufacture of Tools and Gauges but it is seen that the said main object is not carried out by assessee because the assessee is neither in receipt of any amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... @ ₹ 50,000/- per annum. No carrying on of any business can be inferred from receipt of annual membership subscription by the assessee, which is a regular feature ab initio. Next item is Technical literature publications receipt amounting to ₹ 1.93 lac. This was stated to be receipt of some amount for bringing out publications in relation to the automobile industry etc. This amount received for publication of some technical literature concerning the automobile industry cannot be considered as carrying on of any trade, business or commerce. The next item is interest received amounting to ₹ 1.60 lac, which has been earned from banks, bonds, etc. This receipt also cannot be considered as arising from carrying on of any trade, commerce or business. The next important receipt is ₹ 1 crore from Auto Expo 2008. The AO has also accentuated on this amount to hold that the assessee was carrying out business. The assessee is annually organizing Auto Expo, which is a trade fair confined to automobile industry. The automobile manufacturers give advertisements of their products which is the major source of receipts from Auto Expo apart from sale of tickets. Sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee did not fall within the scope of charitable purpose defined in section 2(15) of the Act because of carrying on or rendering of any services in business, trade and commerce, which in our considered opinion is not a correct interpretation of the provision, we direct to grant such benefit to the assessee. The impugned order is overturned pro tanto. 12. From the above Para 11 of this Tribunal order, it is seen that in that case, ₹ 1 Crore was received by that assessee from organizing Auto Expo 2008. This is also noted that the automobile manufacturers give advertisements of their products which is the major source of receipts from Auto Expo apart from sale of tickets. Apart from this, in that case, the major receipt was of ₹ 1.85 Crores for seminars and conferences. In the present case, there is no receipt from seminars or conferences and no expenditure for organizing any seminar or conference and there is no receipt from any expo and the receipt in the present case is hire charges of the hall. Hence in our considered opinion, this Tribunal order is also not applicable in the facts of present case. 13. The next judgment cited before us is the Tribunal order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of Hon ble Delhi High Court rendered in the case of GS1 India Vs. DGIT (E) as reported in [2014] 360 ITR 138(Delhi). In this case, the dispute was regarding assessee s eligibility for registration u/s. 10(23C)(iv) and not regarding exemption u/s. 11 of IT Act and hence, in our considered opinion, this judgment is not applicable in the facts of present case. 16. Moreover, Para nos. 20 to 27 of this judgement are relevant and the same are reproduced hereinbelow for the sake of ready reference. 20. In the present case, the business is not held in trust and neither is the business feeding the charity. The very act or activity of charity as claimed by the petitioner is regarded by the revenue as nothing but business, trade or commerce. Money received, of course is used and utilized for the charitable activities. Four reasons are elucidated and propound in the impugned order to state that the petitioner is engaged in business, trade or commerce and aforesaid encapsulated in the impugned order. Petitioner has acquired intellectual property rights, receives fee from third parties, which is nothing but payment of royalty, there is huge surplus of receipts over expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e would amount to business but when the underlying and propelling motive is not to earn profits or commercially exploit the rights but general public good i.e. to promote and make GS1 coding system available to Indian traders, manufacturers, government etc, it will fail the test of business and meets the touchstone of charity. The petitioner is not directly or indirectly subjecting their activity to market mechanism/ dynamics (i.e. demand and supply), rather it is motivated and prompted to serve the beneficiaries. This is not a case of commercial exploitation of intellectual property rights to earn profits but rather a case where a token fee has been fixed and payable by the user of the global identification system. 24. The petitioner does not cater to the lowest or marginalized section of the society, but Government, public sector and private sector manufacturers and traders. No fee is charged from users and beneficiaries like stockiest, whole sellers, government department etc. while a nominal fee is only paid by the manufacturer or marketing agencies i.e. the first person who installs the coding system which is not at all exorbitant in view of the benefit and advanta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion of the Revenue in the present case. 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 self-sustaining 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 the Act. 17. From the above paras, it is seen that the basis of this judgement i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the ld. DR of revenue has also placed reliance on the following judicial pronouncements. a) DGIT Vs. Institute of Chartered Accountants of India, [2016] 236 Taxman 481 (SC) b) CIT Vs. Truck Operators Association, [2010] 328 ITR 636 (Punjab Haryana) c) Sukhmani Society for Citizen Services Vs. ACIT, [2018] 93 taxmann.com 292 (Amritsar-Trib.) d) Employers Federation of Southern India Vs. ADIT (E), [2017] 54 ITR(T) 568 (Chennai-Trib.) 21. But in the facts of present case, we do not consider it necessary to examine the applicability of these judgements in the present case because as per the above discussion, we have seen that in the present case, the assessee is not doing any activity in respect of its stated main objects i.e. to promote training and the diffusion of knowledge relating to standards in the manufacture of Tools and Gauges to improve the standards or the connected trade therewith or with allied industries and to impart relevant and appropriate training to all those engaged in the manufacture of tools and gauges. We have seen that in the present case, the assessee has taken a hall on rent and the assessee is earning huge amount of income on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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