TMI Blog2020 (6) TMI 603X X X X Extracts X X X X X X X X Extracts X X X X ..... espect to interpretation of proviso of Section 2(15) of the Act and respectfully following the ratio of India Trade Promotion Organisation vs. DGIT (Exemption) [ 2015 (1) TMI 928 - DELHI HIGH COURT] we are unable to concur with the observations and findings of both the lower authorities and while setting aside the orders of the Ld. CIT (Appeals), we direct the AO to allow the assessee the benefit of exemption u/s 11 12 - Decided in favour of assessee. - ITA No.5293/Del/2016 - - - Dated:- 26-2-2020 - Shri Bhavnesh Saini, Judicial Member And Shri R.K. Panda, Accountant Member For the Assessee : Shri Rajan Malik, Advocate, Shri Gulshan Gaba, CA For the Revenue : Shri S.L. Anuragi, Sr. DR ORDER PER R.K. PANDA, AM: This appeal filed by the Revenue is directed against the order dated 4th July, 2016 of the CIT(A)-40 (Exemption), New Delhi, relating to assessment year 2012- 13. 2. The grounds of appeal raised by the Revenue read as under:- 1. On the facts and in the circumstances of the case and in law, the ld.CIT(A) has erred in allowing the appeal of the assessee by not appreciating the fact that the activity of the assessee of letting out galle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s business and is hit by the amended provisions of section 2(15) as amended w.e.f. 01.04.2009 that is applicable for A.Y. 2009-10 onwards. The arguments of the assessee that it is charging less than what other societies are charging for letting out their gallery was rejected by the AO. He also rejected the submission of the assessee that there is no profit motive in carrying out this activity. Rejecting the various explanations given by the assessee, the AO rejected the claim of deduction u/s 11 and 12 of the Act and determined the total income at ₹ 8,10,44,651/-. 5. In appeal, the ld.CIT(A) allowed the claim of the assessee. While doing so, he held that the assessee should not be termed as a non-charitable organization under the first proviso to section 2(15) of the Act as it is not primarily driven by profit motive keeping in view the facts of the case. Therefore, the assessee shall be entitled to exemption u/s 11 and 12 of the IT Act. So far as the receipts from gallery rent and sale of paintings are concerned, he noted that the receipts from these two activities is on a very lower side as compared to the overall expenditure incurred by the society and, therefore, no pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of section 2(15) of the Act and CBDT Circular No.11/2008, denied the exemption claimed u/s 11 of the Act to the society on the ground that the activities of the assessee society are not charitable. According to the AO, the activities of renting out the property has no nexus with the objective of promotion of fine arts and crafts and the receipts therefrom are not given as quid pro quo for the business of fine arts and crafts or rendering any services. According to the AO, the rent being received by the society is subject to TDS as a pure rent. Further, the rent from the property has never been considered or linked with the main activities of the assessee, i.e., promotion of fine arts and crafts under the first proviso to section 2(15) of the Act. 11. We find, the ld.CIT(A) allowed the claim of exemption u/s 11 of the Act. We find, identical issue had come up before the Tribunal in assessee s own case for the immediately preceding A.Y. We find, the Tribunal, vide ITA No.1806/Del/2016, order dated 19th June, 2019, has dismissed the appeal filed by the Revenue by observing as under:- 10. We have considered the rival arguments made by both the sides and perused the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssions and have also perused the material on record. We agree with the averment of the Ld. Authorised Representative that the assessee s case is favourably covered for the assessee by the ratio of the judgment of the Hon ble Delhi High Court in the case of India Trade Promotion Organisation vs. DGIT (E) (supra), wherein vide judgment dated 22.01.2015, the Hon ble Delhi High Court, while upholding the constitutional validity of proviso to Section 2(15) of the Act, has laid down the strict and literal interpretation of the proviso to Section 2(15) of the Act. The Hon ble Delhi High Court has held that mere receipt of fee or charge will not mean that the assessee is involved in any trade, commerce or business. In the case of India Trade Promotion Organisation, the Ld. DGIT (E) had passed an order stating that though the assessee was engaged in the advancement of any other object of general public utility , as per s. 2(15) of the Act, its object could not be regarded as charitable purposes due to the new proviso to s. 2(15) and further that it was not eligible for exemption u/s 10(23C)(iv). It was held by the Ld. DGIT (E) that as the assessee had huge surpluses in banks, it had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) Section 2(15) is only a definition clause. The expression charitable purpose appearing in Section 2 (15) of the said Act has to be seen in the context of Section 10(23C)(iv). When the expression Charitable Purpose , as defined in Section 2(15) of the Act, is read in the context of Section 10(23C)(iv) of the said Act, we would have to give up the strict and literal interpretation sought to be given to the expression charitable purpose by the revenue. In conclusion, we may say that the expression charitable purpose , as defined in Section 2(15) cannot be construed literally and in absolute terms. It has to take colour and be considered in the context of Section 10(23C)(iv) of the said Act. It is also clear that if the literal interpretation is given to the proviso to Section 2(15) of the said Act, then the proviso would be at risk of running fowl of the principle of equality enshrined in Article 14 of the Constitution India. In order to save the Constitutional validity of the proviso, the same would have to be read down and interpreted in the context of Section 10(23C)(iv) because, in our view, the context requires such an interpretation. The correct inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Arts and Crafts in India etc. It is also undisputed that the assessee society has carried out activities in the form of annual art exhibitions, camps for senior and junior artists, providing maintenance to aged artists etc. It is also not the department s case that any part of surplus was diverted from the society and applied for any personal benefit of any member or office bearer of the society. Therefore, it can be safely concluded that the dominant activity of the assessee society is not business, trade or commerce and, accordingly, any incidental or ancillary activity like hiring out of art gallery or selling paintings would not also fall within the categories of trade, commerce or business. 5.2 We also note that the Hon ble Delhi High Court in the case of India Trade Promotion Organisation vs. DGIT (Exemption) (supra) has also duly considered Circular No. 11 of 2008 issued by the CBDT and has observed that the proviso to Section 2(15) of the Act, which was inserted by Finance Act, 2008, was directed to prevent the unholy practice of pure trade, commerce and business entities from masking their activities and portraying them in the garb of an activity in the object of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... haritable for the purposes of Sections 11 and 12 of the Income Tax Act, 1961. 3. Having heard learned counsel for the Revenue, and having examined the impugned order of the ITAT, this Court is of the view that the ITAT has committed no legal error in applying the law explained by this Court in the aforementioned decision. No substantial question of law arises. 13. Similarly, the order for A.Y. 2011-12 has also attained finality and the appeal filed by the Revenue was dismissed by the Hon ble High Court by observing as under:- At the outset, learned counsel for the appellant has fairly drawn our attention to the order dated 19.08.2019 passed in ITA No. 754/2019, whereby the Revenue s appeal from the order dated 14.02.2019 passed in ITA No. 1449/Del/2013 in relation to the respondent assessee for the assessment year 2009-10 was dismissed by this Court. The impugned order passed by the Tribunal relies on the said earlier order dated 14.02.2019 in relation to the assessment year 2009-10. Since this Court has already held that no substantial question arises for our consideration, we find no merit in this appeal and the same is dismissed. 14. The appeal filed by the Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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