TMI Blog2020 (10) TMI 555X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee as being non-charitable specifically considering the fact that no material or evidence has been led to show that there was any profit motive in carrying out such activities. Pertinently, there is no rebuttal at any stage to the assertions of the assessee that its activities in the instant years are similar to the activities in the past years. We set-aside the order of CIT(A) and direct the Assessing Officer to allow the exemption Decided in favour of assessee. - ITA no.2108/Mum./2019 - - - Dated:- 17-9-2020 - Shri Saktijit Dey, Judicial Member And Shri N.K. Pradhan, Accountant Member For the Assessee : Ms. Aarti Vissanji For the Revenue : Shri Michael Jerald ORDER PER SAKTIJIT DEY. J.M. Captioned appeal has been filed by the Revenue challenging the order dated 28th January 2019, passed by the learned Commissioner of Income Tax (Appeals) 1, Mumbai, allowing assessee s claim of exemption under section 11 of the Income Tax Act, 1961 (for short the Act ) pertaining to the assessment year 2015 16. 2. Brief facts are, the assessee is a company registered under section 25 of the Companies Act, 1956. Additionally, the assessee has also been granted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f dispute in assessee s own case in assessment years 2011 12, 2012 13 and 2013 14, the Tribunal has allowed assessee s claim of exemption under section 11 of the Act. Therefore, following the aforesaid decision of the Tribunal, learned Commissioner (Appeals) allowed assessee s claim of exemption under section 11 of the Act, thereby, deleting the addition made by the Assessing Officer. 4. At the outset, Ms. Aarti Vissanji, learned Counsel for the assessee submitted that the issue is squarely covered by the decision of the Tribunal in assessee s own case in assessment years 2011 12, 2012 13 and 2013 14. 5. Shri Michael Jerald, the learned Departmental Representative, though, agreed that the issue is covered by the decision of the Tribunal in the preceding assessment years, however, he relied upon the observations of the Assessing Officer. 6. We have considered the rival submissions, perused the orders of the authorities below and the material placed on record. Undisputedly, the dispute in the present appeal is with regard to assessee s claim of exemption under section 11 of the Act. Undisputedly, the Assessing Officer has rejected such claim on the reasoning that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, co-ordination of interests or co-operation with similar or allied associations or societies in other countries, (3) arranging and providing facilities for conferences, exhibitions, demonstrations, lectures, and excursions and other functions relating to the Rubber Industry and Trade, (4) establishing, equipping and maintaining laboratories for Testing as well as Research and Libraries for the benefit of the Members and if possible of non-members also; (5) collection and dissemination of statistics and data related to the global rubber industry, particularly in respect of market situations with emphasis on exports; (6) educating the general public by all suitable means in the utility of Rubber Goods from the industrial as well as other points of view; (7) to provide fora for interaction with consumers of rubber products with a view to improving their quality; (8) to promote technical education related to Rubber Technology, training and retraining of manpower employed in rubber industry and in general to concern with the Human Resources Development for and in the rubber industry and (9) providing facilities and machinery for the settlement of disputes by arbitration. ....... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the benefits are limited to the members of the assessee-association, therefore, the same is not charitable. In our view, the aforesaid approach of the Assessing Officer is contrary to the accepted legal position on this subject, and more so, considering that in assessee s own case for Assessment Year 1997-98, the Tribunal in ITA No. 2057/Mum/2001 dated 14.01.2002 had considered an identical controversy. At the time of hearing, the learned representative had referred to the order of the Tribunal dated 14.01.2002 (supra) in this regard, whose relevant portion reads as under :- 4. It is to be noted that when an object seeks to promote or project the interest of a particular trade or industry, that object becomes an object of public utility, but not so, if it seeks to promote the interest of those who conduct the said trade or industry. The distinction between projection of the interest of an individual and projection of the interest of an activity which is of general public utility goes to the root of the whole problem. The advancement of an object of benefit to the public or a section of the public is distinguished from an individual or a group of individual would be of chari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cement of any other object of general public utility; Provided that the 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 . 15. The impact of the aforesaid proviso inserted w.e.f. 01.04.2009 is that advancement of any other object of general public utility would no longer be considered as a charitable purpose if it involved 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 a fee or for any other consideration irrespective of the nature of use or application or retention of such income from such activity. The aforesaid proviso has been invoked by the Assessing Officer to say that as assessee s objects were of general public utility, and since in the course of carrying on its objects, it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income is generated by any of the two sets of activities referred to above, the nature of use of such income or application or retention of such income is irrelevant for the purposes of construing the activities as charitable or not. (ii) If an activity in the nature of trade, commerce or business is carried on and it generates income, the fact that such income is applied for charitable purposes, would not make any difference and the activity would nonetheless not be regarded as being carried on for a charitable purpose. If a literal interpretation is to be given to the proviso, then it may be concluded that this fact would have no bearing on determining the nature of the activity carried on by the petitioner. But, in deciding whether any activity is in the nature of trade, commerce or business, it has to be examined whether there is an element of profit making or not. Similarly, while considering whether any activity is one of rendering any service in relation to any trade, commerce or business, the element of profit making is also very important. (iii) The meaning of the expression charitable purposes has to be examined in the context of income , because, it is only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 2(15) of the said Act would be that it carves out an exception from the charitable purpose of advancement of any other object of general public utility and that exception is limited to activities 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. In both the activities, in the nature of trade, commerce or business or the activity of rendering any service in relation to any trade, commerce or business, the dominant and the prime objective has to be seen. If the dominant and prime objective of the institution, which claims to have been established for charitable purposes, is profit making, whether its activities are directly in the nature of trade, commerce or business or indirectly in the rendering of any service in relation to any trade, commerce or business, then it would not be entitled to claim its object to be a 'charitable purpose'. On the flip side, where an institution is not driven primarily by a desire or motive to earn profits, but to do charity through the advancement of an object of general public utility, it cannot but be regarded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by selling milk, which was only an incidental activity; and, accordingly, the assessee was found eligible for registration u/s 12A of the Act. 18. In this background, if we are to examine the case made out by the Revenue in the instant, we do not find any finding at all by the Assessing Officer or even by the CIT(A) that any of the activities of the assessee are with a profit motive so as to attract proviso to Sec. 2(15) of the Act. The stream of incomes noted by the Assessing Officer in para 10 of the assessment order on account of advertisement and subscription income, seminar income, sale of books and periodicals, etc. are not shown to be carried out with any profit motive and rather, the explanation consistently advanced by the assessee has been to the effect that such activities are only incidental to its object of promoting and safeguarding rubber industry. In fact, in para 6 of the assessment order, a portion of the submissions furnished by the assessee have been reproduced wherein assessee specifically asserted that dissemination of information and publication of magazine relating to Rubber industry in India and developments abroad was a substantive activity carried ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithstanding that some of the associations charged their members fees for specific services rendered. Other cases on similar lines are: NAME OF CASE CITATION ASSOCIATION OF CIT v. Banaras Brass Merchant and Manufacturers Association (2000) 241 ITR 70/117 Taxman 568 (All.) Brass Merchant and Manufacturers CIT v. Gayathri Women Welfare Association (1993) 203 ITR 389/67 Taxman 528 (Kar.) Women's Welfare CIT v. Silk and Art Silk Mills Association Ltd. (1990) 182 ITR 38/48 Taxman 20 (Bom.) Silk Mills CIT v. A. P. Bankers Pawnbrokers Association [1988] 170 ITR 476/[1987] 34 Taxman 433 (AP) Bankers Pawnbrokers CIT v. Bengal Mills and Steamers Presbyterian Association [1983] 140 ITR 586/[1981] Taxman 78 (Cal.) Mills and Steamers Presbyterian CIT v. Nachimuthu Industrial Association [1982 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a, (1981) 130 ITR 28; a public utility undertaking such as a State Road Transport Corporation was held eligible for the exemption by the Supreme Court in Commissioner of Income-tax v. Andhra Pradesh State Road Transport Corporation 159 ITR 1. In all these cases the common thread which was noticed to run through was the absence of any motive of private profit. These decisions do establish that the receipts derived by a chamber of commerce and industry for performing specific services to its members, though treated as business income under Section 28(iii) would still be entitled to the exemption under Section 2(15) read with Section 11, provided there is no profit motive. 22. Therefore, so far as the Principle of Mutuality is concerned, the same is with reference to the services vis-a-vis the members and qua the income received by assessee from non-members, the other provisions of the Act would govern. In any case, an entity cannot be denied charitable character merely because some element of its income is exempt from the Principles of Mutuality. Thus, on this aspect also, we find no reason to uphold the stand of the Revenue. 23. In the result, we hereby set-aside the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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