TMI Blog2019 (9) TMI 1003X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue to reject the appellant s application for registration u/s 12A of the Act and therby deny the benefit of Section 11 which was admittedly granted till AY 2009/10. As regards the AO s case that the appellant was not eligible for exemption u/s 11 in absence of grant of registration certificate u/s 12A by the Ld. CIT, we find that this issue is dealt by the Hon ble Allahabad High Court in its judgment in the case of Society for the Promotion of Education, Adventure Sport Conservation of Environment Vs CIT [ 2008 (4) TMI 700 - ALLAHABAD HIGH COURT] as held that if the application for registration u/s 12A is not disposed by the Commissioner within six months then the registration will be deemed to have been granted. Also confirmed by SC [2016 (2) TMI 672 - SC] ORDER] We find merit in the ld. AR s claim that the application dated 28.06.1973 ought to have been disposed by the Commissioner with six months i.e. on or before 28.12.1973 and in its absence the registration was deemed to be granted to the appellant on expiry of the said period of six months. We therefore hold that the order u/s 143(1) denying the benefit of exemption u/s 11 of the Act was contrary to the lega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at till AY 1973/74, the appellant s claim for the exemption u/s 11 was never disputed. He further submitted that even though the appellant always claimed the exemption u/s 11, no certificate of registration as a charitable institution was obtained till 1973 because the extant provisions of the Act as were in force till 1973,did not contain any provision requiring charitable institutions to obtain registration under the Act. The ld. AR submitted that by the Finance Act, 1972, Section 12A was inserted in the I T Act with effect from 01.04.1973 requiring the Trusts or Institutions claiming benefit of Section 11 12 to apply for the registration. Section 12A provided that Section 11 12 would not apply in relation to the income of any Trust or institution unless the person in receipt of the income had made an application for registration of the trust or institution in the prescribed form and in the prescribed manner, to the Commissioner before the 1st day of July 1973 or before the expiry of period of one year from the date of creation of the trust or the establishment of the institution, whichever is later. He brought to our attention that in compliance to the newly enacted Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent rendered by the Hon ble Supreme Court in the case of Surat Arts Silk Cloth Manufacturers Association (121 ITR 01). The ld. AR drew to our attention to the decision of this Tribunal in which the coordinate Bench took note of the fact that the appellant was providing executive machinery and secretarial services to various trade associations whose offices were located in the appellant s premises. As such a large source of appellant s income was by way of contributions received for such services and these receipts were assessed under the head Business . The Tribunal also took note of the fact that the Ld. CIT(A) had himself inspected premises of the appellant and reached his conclusions on spot verification. Taking note of these factual matters, the coordinate Bench held that the appellant s objects were covered by Section 2(15) of the Act and therefore it qualified for exemption/s 11 of the Act. 4. The ld. AR submitted that Section 12AA was enacted by the Finance (No.2) Act, 1996 with effect from 01.04.1997 which provided that the CIT should pass an order in writing on receipt of an application for registration u/s 12A(1) of the Act. The newly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal before the Ld. CIT(A) who dismissed the same by holding that the AO was justified in not allowing the benefit of exemption u/s 11 in absence of any registration certificate u/s 12A. Besides he also held that the activities of the appellant did not come within the purview of Section 2(15) which was substantially amended by the Finance Act, 2008. Being aggrieved by the orders of the lower authorities, the appellant is now in appeal before us. 5. We have heard the rival submissions of both the parties. The short point before us is whether the AO could have denied the benefit of exemption claimed u/s 11 by the appellant while processing the return of income u/s. 143(1) which otherwise permits the AO to only make the following adjustments to the income returned: (i) any arithmetical error in the return; (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; (iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under subsection (1) of section 139; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the general commercial interests of India or any part thereof and the interests of persons engaged in trade, commerce or manufactures in India and in particular in Calcutta. (3) To consider all the question connected with trade, commerce and manufactures. (4) To collect and circulate statistics and other information relating to trade, commerce and manufactures. (5) To promote and oppose legislative and measures affecting trade, commerce and manufactures. (6) To adjust controversies between members of the Association. (7) To arbitrate in the settlement of disputes arising out of commercial transactions between parties willing or agreeing to abide by the judgement and decision of the Association. (8) To establish just and equitable principles in trade. (9) To form a code of conduct of practice to simplify and facilitate transaction of business. (10) To maintain uniformity in rules, regulations and facilitate transaction of business. (11) To communicate with Chamber of Commerce and other mercantile and public bodies throughout the wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the trust yield profit will not alter the charitable character of the trust. The test now is, more clearly that in the past, the genuineness of the purpose tested by the obligation created to spend the money exclusively or essentially on charity'. 8. We find that while deciding the appeals of the appellant for the AYs 1974-75 1975-76, this Tribunal took note of the fact that the ratio laid down by the Hon ble Supreme Court in the case of Indian Chamber of Commerce (supra) was no longer a good law in view of the later judgment of the Hon ble Supreme Court in the case of CIT Vs Surat Arts Silk Cloth Manufacturers Association (supra) and accordingly held that the activities of the appellant being charitable in nature, the assessee was entitled for exemption u/s 11 of the Act. It is not the Revenue s case that the objects and the activities of the appellant during the years under consideration were different from the earlier years. We note that the nature of the appellant s activities as well as sources of income in the relevant year as well as in the earlier years were same and identical. As observed by the coordinate Bench of this Tribunal in the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndians are engaged or concerned The activities of conducting Environment Management Centre, Meetings, Conferences Seminar and issuance of Certificate of Origin, being the activities stated to be services in relation to trade, commerce or business were all well covered by the main object being fully connected, incidental and ancillary to the main purpose and were conducted solely for the empowerment, betterment and for creating awareness amongst the industrialists in order to bring about the development of trade and industries in India. Further it is to be noticed that the Memorandum has also specifically authorized the Chamber to do all other things as may be conductive to the development of trade, commerce and industries, or incidental to attainment of the above objectives or any of them. Thus it was only for the purpose of securing its primary aims of proper development of business in India that the assessee was taking the said ancillary steps. The said activities were not carried out independent of the main purpose of the association of the institution being the development and protection of trade. There was no independent profit motive in any of the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the years, been upheld to be the determining factor laying down whether the Institution is Charitable in nature or not. Where the main object of the Institution was charitable in nature, then the activities carried out towards the achievement of the said, 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. Hon'ble Apex Court in the earliest case of Andhra Chamber of Commerce (supra) had clearly laid out the principle that if the primary purpose of an Institution was advancement of objects of general public utility, it would remain charitable even if an incidental or ancillary activity or purpose, for achieving the main purpose, was profitable in nature. It was laid out by the Court that, That if the primary purpose be advancement of objects of general public utility, it would remain charitable even if an incidental entry into the political domain for achieving that purpose, e.g. promotion of or opposition to legislation concerning that purpose, was contemplated. It was only for the purpose of securing its primary aims that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a charitable purpose viz. promotion, protection and development of trade, commerce and industry, there being no motive to earn profits, the respondent was not engaged in any activity in the nature of business or trade, and, if any income arose from such activity it was only incidental or ancillary to the dominant object for the welfare and common good of the country's trade, commerce and industry, and its income was, therefore, exempt from tax under s.11 of the IT Act, 1961 Again reiterating the dominant purpose theory, the Hon'ble SC in the case of Sai Publication Fund (supra) laid out as follows: ... If the main activity is not business, then any transaction incidental or ancillary would not normally amount to business unless an independent intention to carry on business in the incidental or ancillary activity is established. In such cases, the onus of proof of an independent intention to carry on business : connected with or incidental or ancillary sales will rest on the Department. Thus, if the main activity of a person is not trade, commerce etc., ordinarily incidental or ancillary activity may not come w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. We find that section 28(iii) of the Act provides that the income derived by a trade, professional or similar association from specific services performed for its members will be brought to charge under the head profits and gains of business or profession . The underlying idea behind s. 28(iii) is that there must be a business from which income is derived and that in the course of such business specific services must be rendered for its members. The concept behind s.28(iii) is to cut at the mutuality principle being relied on in support of a claim for exemption, when the assessee was actually deriving income or making profits as a result of rendering specific services for its members in a commercial way. The reason for the introduction of Section 28(iii) of Act, to ignore the principle of mutuality and reach the surplus arising to the mutual association and this is clear from the fact that these provisions are confirmed to services performed by the association for its members . Such income would either be charged as business income or under the residual head, depending upon the question whether the activities of the association with the non-members amount to a business or o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee 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. 9. Since the facts of the appellant s case are admittedly analogous to the facts involved in the case of Indian Chamber of Commerce (supra), we hold that no material change took place in the legal position even after the amendment was brought in Section 2(15) by the Finance Act, 2008. We therefore do not find merit in the findings of the Ld. CIT(A) that the assessee would not be eligible for exemption u/s 11 because it is primarily set up with the object of promoting trade commerce. Since we find that the objects and the activities of the appellant were for charitable purpose, then there should be no reason for the Revenue to reject the appellant s application for registration u/s 12A of the Act and therby deny the benefit of Section 11 which was admittedly granted till AY 2009/10. 10. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Consequently therefore we do not find merit in the orders of the lower authorities upholding the intimation u/s 143(1) and rejecting the appellant s application for rectification u/s 154 of the Act. 12. For the reasons set out in the foregoing therefore the orders of the lower authorities as well as the adjustments carried out by the AO in the intimation u/s 143(1) are set aside. Ground Nos. 1 to 10 is therefore allowed. 13. Ground No. 11 is against short credit of TDS allowed by the AO in the intimation u/s 143(1) of the Act. The AO is directed to grant credit of TDS as per law. This ground therefore stands allowed for statistical purposes. 14. We now take up the appeal of the appellant in ITA No.706/Kol/2019 for AY 2012-13 15. Ground Nos. 1 to 10 taken by the appellant are against the Ld. CIT(A) s action of upholding the order passed by the AO u/s 154 of the Act, rejecting the appellant s rectification application against the intimation u/s 143(1) denying the exemption claimed by the assessee u/s. 11 of the Act. After hearing the rival submissions and perusing the relevant material available on record, we find th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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