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TMI Blog2019 (6) TMI 348X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant-company as engaged in the activity of holding Fairs, Meetings, Conferences and Seminars in the nature of trade, commerce or business falling within the ambit of section 2(15) of the Act. 3. That, the Ld. C.LT.(A) while upholding disallowance of Rs. 91,10,026/- and thus denying the benefit of section 11 of the Act further erred and misdirected himself in not properly considering the principal objective of the appellant company behind holding of Fairs, Meetings, Conferences and Seminars and assuming such activities in lieu of sponsorship as in the nature of trade, commerce or business in spite of the fact there was no contravention of the provisions of sec.l1 in claiming such lawful claim. 4. That, on the facts and in the circumstances of the case, the Ld. C.LT.(A) erred and misdirected himself in treating corpus donation of Rs. 17,50,000/-, being in the form of Admission Fees from members, as not exempt u/s 11(1)(d) of the Act. 5. That, as the order of Ld. CIT(A) suffers from illegality and is devoid of any merit, the same should be quashed and your appellant be given such relief(s) as prayed for.." 3. Ground nos. 1, 2 and 3 are against the action of the Ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 2(15) of the Act and consequently therefore the appellant was not eligible to claim benefit of Section 11 of the Act. The AO accordingly computed the business income of the assessee after allocating the direct and indirect expenses on account of the said activity as under : Total Business receipts Rs. 3,94,70,967/- Less: Business expenses - direct Rs. 3,03,60,941/- Profit from business Rs. 91,10,026/- Aggrieved, assessee preferred an appeal before the Ld. CIT(A), who denied exemption u/s. 11 r.w.s. 13(8) of the Act and held that the assessee is engaged in the activity of holding fairs, meetings, conferences and seminars which wasin the nature of trade, commerce or business and therefore the activities of the appellant did not come within the ambit of section 2(15) of the Act. Aggrieved by the order of the Ld. CIT(A), assessee isnow in appeal before us. 5. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the appellant has been granted registration u/s 12AA of the Act since 1995 and onwards. Holding trade exhibitions and conferences has been the regular feature of the activities carried on by the appellant since its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal rendered in appellant's own case for earlier years. Per contra the Ld. DR appearing on behalf of the Revenue strongly supported the orders of the lower authorities. 6. After giving a thoughtful consideration to the rival submissions, material placed on record and the judicial precedents available on this subject, we note that in the appellant's case the lower authorities rejected appellant's claim for benefit of Section 11 primarily on the ground that the appellant was holding trade fairs, exhibitions and conferences and in respect of these activities received substantial sums from the participants who were both members of the appellant organization as well as non-members. In the opinion of the lower authorities the appellant activity of holding trade fairs, exhibitions and conferences was in the nature of trade or business and therefore in terms of the proviso introduced by the Finance Act, 2008 in Section 2(15) of the Act, the said activity could not be regarded to be charitable in nature and consequently therefore the benefit of Section 11 was not available to the appellant. We however find that since inception of the appellant it has been conducting the foregoing ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous and to provide effective platform for holding interface amongst various stakeholders connected with development or urban infrastructure with Govt. agencies and general public for the development of civic infrastructure. We further note that the persons taking part in such fairs and making contributions are primarily members of the appellant-institution. It may be so that some of the non-members also participate in these fairs, exhibitions & conferences. However the non-members participating are not strangers but they are important stakeholders closely connected with real estate development industry and thus have important role in the development of civic infrastructure facilities. In this factual background we are of the considered view that the activities of holding fairs, exhibitions and conferences were incidental or ancillary to the attainment of the main objects for which the appellant-institution was created and registered u/s. 12AA of the Act. In view of the foregoing facts we are of the considered opinion that the benefit of Section 11 could not be denied to the appellant only because it realized net surplus from activities which were undertaken in the pursuit of attain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... '5) To organize conferences, exhibitions, film shows, seminars, tours, delegation, etc. in India and abroad and to nominate delegates and advisers and to take steps which may promote and support the construction industry, trade and profession.' The assessee-company was established with the aforesaid objects and the same were accepted by the Revenue while granting the registration u/s 12AAof the Act on 10.10.1995. Since the inception of the assessee-company the objects and activities remained same and which were accepted by the Revenue even under the assessment framed u/s 143(3)/147 of the Act consistently without holding the aforesaid activities as commercial in nature. Accordingly, in view above, we are inclined to provide the relief to the assessee on the basis of consistency as there is no change in the objects and activities of the society. In this connection, we rely in the case of Radhasoami Satsang vs. CIT (1992) 193 ITR 321 where the Hon'ble Supreme Court has held as under:- "There is no dispute that the properties of the assessee are also recorded in the name of the Sabha (Central Council) and there is no personal interest claimed by the Sant Satguru in such prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity : Provided further that first proviso shall not apply if the aggregate value of receipts from activities referred to therein is twenty-five lakh rupees or less in the previous year" The ld. CIT passed impugned order u/s 263 of the Act is treating the activities of the assessee as commercial in nature in terms of the clause of section2(15) i.e. 'advancement of any other object of general public utility'. However we find that as per the proviso to section 15 along with the speech of the Finance Minister and CBDT circular number 11 of the 2008 dated 19thDecember 2008 make it clear that only the institution carrying on commercial activities are intended to be covered by the proviso, not the genuine charitable institutions. The activity will be deemed to be in the nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tificate of Origin were not incidental to the main object of the appellant which was charitable in nature." 9. From the above facts, we find that there was no question to decide before the then Hon'ble ITAT which is arising in the instant case whether the activities of the instant assessee are incidental/ ancillary to the main objects to the trade, commerce and industry or main objects are in the nature of trade, commerce and industry. Therefore, in our considered view the facts of the case are squarely applicable of case of Indian Chamber of Commerce Vs. ITO(Supra), wherein it was held that the activities of the assessee are charitable in nature. The relevant portion of the order is reproduced below:- "30. Hence in view of all the above, concluding this issue we hold that the purpose for which the assessee association, i.e. the Indian Chamber of Commerce was established is a charitable purpose within the meaning of s. 2(15) of the Act. The assessee is carrying out the said activities which are incidental to the main object of the Association and which are conducted only for the purpose of securing the main object which is the advancement and development of trade and commerce a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... institution being the development and protection of trade. There was no independent profit motive in any of the said activities. The surplus arising out of the same was merely incidental to the main object to charity. The majority of the receipts in the said activities were out of the sponsorships and donations. The expenses incurred on the said activities as and when incurred were all separately debited to the said accounts and the balance was shown as surplus over receipts. Thus in view of the above it is clear that the alleged activities were all merely incidental to the main object of the assessee and the predominant object of the association being the promotion development and protection of trade and commerce which is an object of general public utility, it can never be the case that it is engaged in "business trade or commerce" or in any "service in relation to business, trade or commerce. The individual nature and purpose of the specific activities, it is stated that the activities held by AO and the (A) to be business in nature, were as follows:- a) Meetings, Conference & Seminars b) Environment Management Centre c) Fees for Certificate of origin 38. In view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee in regard to holding of the Conference of the Afro-Asian Organisation in the relevant accounting year were for the advancement of the dominant object and purpose of the trust, viz., promotion, protection and development of trade, commerce and industry in India. The income derived 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . People who are truly charitable do not think of the tax benefits while making charities. One must realise that even the poor who do not pay income tax can be charitable and their charities made at great personal inconvenience are commendable indeed. One need not go in search 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." 9. Since the factual matrix of the appellant's case for the AY 2012-13 is identical with that involved in AY 2011-12, we have no hesitation in holding that the ratio laid down in the decision of the coordinate Bench of this Tribunal holds good and applies to the year under consideration as well. Applying the said decision we hold that the appellant's activity of holding trade fairs, exhibitions and conferences was not in the nature of trade, commerce or business and therefore there was no violation of Section 2(15) of the Act. Accordingly we hold that the low ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of the appellant. For the reasons set out in the foregoing therefore the addition of Rs. 91,10,026/- is deleted and hence, Ground Nos. 1 to 3 are allowed. 13. The next ground of appeal of the assessee is against the action of the Ld. CIT(A) in confirming the action of the A.O. in treating the corpus donation of Rs. 17,50,000/- in the form of admission fees from its members as not exempt u/s 11(1)(d) of the Act. 14. Brief facts are that the appellant had created the membership admission fees of Rs. 17,50,000/- received by it as corpus funds to the reserve fund and claimed exemption u/s 11(1)(d) of the Act when confronted by the A.O. the appellant filed copies of letters of corpus donation received from member / entrants and details of admissions fees and explained that the membership / admission fees received by the appellant institution was corpus donation though it was brought to the notice of the A.O. that as per section 12(1) of the Act, donation towards corpus funds of a charitable institution shall be excluded from voluntary contribution and such corpus donations would not form part of the income of the charitable institution was not accepted by the A.O. It was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y contribution within the meaning of the expression "fund" in section 12 of the Income-tax Act, 1961. 16. Thus there is a distinction between voluntary contribution and subscription. When a sum is paid in the nature of gift or a gratuitous payment to the trust without any consideration it would be considered as voluntary contribution. Subscription is not to be treated as voluntary contribution. 17. Voluntary contribution is an act not coupled with compulsion. One may contribute or one may not contribute. Therefore, it is rightly said that it is in the nature of a gift. But so far as subscription is concerned, it is with some compulsion. If one wants to become a member of a trust and if he is required to pay subscription, as in the instant case, then, it amounts to compulsion. Sometimes it becomes a question of prestige i.e., to say that a person is a member of a charitable institution. If a person had made voluntary contribution to the said trust, then on payment of such contribution he does not become a member. The membership may be coupled with benefits or duties and that all depends on the nature of the trust and terms and conditions of the contract. 18. Sometimes members ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for application to such religious or charitable purposes as relate to anything done within the taxable territories, and in the case of property so held in part only for such purposes, the income applied or finally set apart for application thereto." Thus income derived from property held under trust or other legal obligations came to be considered by the Court. In the instant case, we are not required to consider whether the assessee can be said to be a charitable trust or not as it is admitted position and not in question. But the question is only with regard to income derived from property held under trust is there or not. By way of subscription, if the amount is received, can it be said that that is income derived from property held under trust. The Bombay High Court observed that the question is beyond controversy in view of the decision of the Supreme Court in the case of CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722. Under almost identical provisions the Andhra Chamber of Commerce was constituted and when a similar attempt to tax that chamber was made, one of the questions which arose was whether the objects and purposes of the Chambers of Commerce showed that it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or organization itself and whether we consider either of the two sources of income of this company, namely, the grant or the subscriptions from its members, both arose directly and substantially from that business or organization. If the organization had not existed, the grants would not have been paid to the company nor would the subscriptions have been received by the company. Therefore, even upon the construction put upon the word "derived" the income would be derived from the business or organization which we held was the property held under trust in this case." 23. It is in view of this, that the question whether on the facts and circums-tances of the case the assessee's income is exempted under section 4(3)(i) of the Income-tax Act or not was answered in the affirmative. 24. In view of the Division Bench judgment of the Bombay High Court, it was submitted by the assessee that the assessee trust is a charitable trust for which there is no doubt. The objects of the trust were placed before the Court. We have perused the same and in fact there is no dispute with regard to the fact that it is a charitable trust and, therefore, we are not required to examine this aspect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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