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TMI Blog2021 (3) TMI 405X X X X Extracts X X X X X X X X Extracts X X X X ..... after referred to as "the CIT(A)") erred in denying exemption under section 11(1)(a) of the Act by up-holding that the appellant carries-on 'activities in the nature of trade, commerce or business" within the meaning of proviso to section 2(15) of the Act. (b). The appellant prays that based on the facts and circumstances of the case as well as in law, the proviso to section 2(15) of the Act is not applicable in the instant case and therefore the appellant is eligible for exemption under section 11(1)(a) of the Act. (c) The appellant prays that order of the Hon'ble CIT(A), being contrary to the facts and circumstances of the case, as well as in law, be set aside and the appellant be allowed exemption as claimed u/s 11(1)(a) of the Act. 2. The appellant prays for appropriate relief. 3. The appellant craves leave to add, alter or amend the grounds of appeal at the time of hearing." 2. Briefly stated, the assessee which is a trust registered under Sec. 12A of the Act, vide Registration No. INS/25048 dated 24.04.1989 had filed its return of income for A.Y. 2013-14 on 30.09.2013, declaring a net deficit of Rs.(9,65,852/-). As is discernible from the records, the DIT(exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose‟ in Sec 2(15) of the Act (w.e.f A.Y. 2009 -10 onwards), as to why its claim for exemption under Sec.11 may not be denied for the reason that it was involved in carrying out activities in nature of business and commerce and also provided services in relation to business for fee or other consideration. In reply, the assessee tried to impress upon the A.O that as the "proviso‟ to Sec. 2(15) of the Act was not applicable to its case thus, its claim for exemption under Sec. 11 was in order. Apart from that, it was submitted by the assessee that as its registration under Sec. 12AA had been restored therefore, there was no restriction in granting exemption under Sec. 11 of the Act. However, the A.O did not find favour with the aforesaid claim the assessee. Insofar the claim of the assessee that its registration under Sec.12AA(3) had been restored by the Tribunal vide its order dated 12.01.2015 was concerned, the A.O, observed, that the department had not accepted the said order and had filed an appeal under Sec. 260A of the Act before the Hon‟ble High Court. It was, thus, observed by the A.O that in order to keep the issue alive the assessee‟s claim for exempti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of the Act, which would otherwise result in notional application of income in the subsequent year. Backed by his aforesaid observations, the A.O declined the assessee‟s claim for carry forward of deficit of Rs.(9,65,852/-) for adjustment in the subsequent years. Lastly the A.O being of the view that expenses of Rs. 5,61,506/- claimed as deduction by the assessee not having being incurred wholly and exclusively for its business purpose as per the provisions of Sec. 37(1) of the Act thus, disallowed the same. In the backdrop of his aforesaid deliberations the income of the assessee trust was assessed by the A.O vide his order passed under Sec. 143(3), dated 09.03.2016 at Rs. 84,08,560/-. 5. Aggrieved, the assessee assailed the assessment order in appeal before the CIT(A). It was observed by the CIT(A) that his indulgence was sought for adjudication of two issues, viz.(i). whether the activities of the assessee trust could be considered as for "charitable purpose‟ within the meaning of Sec. 2(15) of the Act; and (ii) whether activities of the trust would be hit by the 1st and 2nd proviso to Sec. 2(15) of the Act. After necessary deliberations, it was observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal was squarely covered by the order of the Tribunal in the assessee‟s own case for A.Y. 2009-10 in ITA No. 550/Mum/2012, dated 12.01.2015 (copy placed on record). It was submitted by the ld. A.R that the Tribunal vide its aforesaid order had concluded that neither the assessee‟s case was hit by the "proviso to Sec. 2(15)‟ of the Act nor its registration granted earlier could be cancelled as per Sec. 12AA(3) of the Act. It was further averred by the ld. A.R that the aforesaid order of the Tribunal for A.Y. 2009-10 was thereafter followed by the Tribunal in the assessee‟s own case for A.Y. 2010-11 (assessee‟s appeal) in ITA No.2266/Mum/2015 and that for A.Y.2011-12 (revenue‟s appeal) in ITA No. 4694/Mum/2015, vide its consolidated order dated 10.08.2017. In the backdrop of his aforesaid contentions it was submitted by the ld. A.R that as the fact situation in the case of the assessee had not witnessed any change during the year in question i.e A.Y. 2013-14 thus, the issue herein involved was squarely covered by the aforesaid orders of the Tribunal. 8. We have heard the authorized representatives for both the parties, perused the orders of the lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontribution for programs, seminars and awards, etc., sponsorship and training, distribution of calendar, diary and journal and others, it is seen that the assessee has carried out these activities as per its objects only which is evident from the objects incorporated above. Most of the receipts have been received from the members either in the way of subscription or contribution for holding exhibition, conferences, seminars, training and sponsorship programs etc. It is not the case of the Ld. DIT that these activities were carried out for the outsiders and that to be for the commercial purpose solely to earn business receipts. Even the small amount of rental income is mainly to augment the financial resources to meet the cost of the assessee. To be hit by proviso to section 2(15), the dominant object of general public utility should be in the nature of trade, commerce or business. Herein this case, none of the activities like holding conferences, seminars, publishing journals for its member etc. can be held to be in the nature of business trade or commerce. All its activities are for its members only as a part of its objects. 8. The effect of proviso to section 2(15) inserted w.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss or consideration is charged by a person for carrying on any activity in the nature of trade, commerce or business or any activity of rendering of any service in addition to any trade, commerce or business, it would be covered under the proviso and the bar/prohibition will apply. 14. The most material and relevant words in the proviso are 'trade, business or commerce ". The activities which are undertaken by the activity of rendering any service in relation to any trade, commerce or business." Thereafter the Hon'ble High Court referred and analyzed the meaning of trade, business, commerce which have been elaborated by the Constitutional Bench of Hon'ble Supreme Court in the case of Addl. CIT vs. Surat Art and Silk Manufacturers Association 121 CIT 1, and other Supreme Court decisions; Sole Trustee Loka Shikshan Trust 101. ITR 234, State of Punjab vs. Bajaj Electrical Ltd. (1968) 2 see 536, Khodey Distillary Ltd. vs. State of Kerala (1975) 1 see 574 and CST vs. Sai Publication Fund (2002) 4 see 57 and also referred to various other dictionary meaning and commentary and held that: "18. The word "business" is the broadest term and it encompasses trade, commerce a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inguished from pleasure-anything which is an occupation or a duty which requires attention is business. It was also observed that business conveys in ordinary meaning the notion of a distinct enterprise (not necessarily for profit) having its distinct object, distinct management and distinct assets and liabilities. Section 2(15) defines the term 'charitable purpose ', Therefore, while construing the term 'business' for the said section, the object and purpose of the section has to be kept in mind. We do not think that a very broad and extended definition of the term 'business' is intended for the purpose of interpreting and applying the first proviso to section 2(15) of the Act to include any transaction for a fee or money. An activity would be considered "business" if it is undertaken with a profit motive, but in some cases this may not be determinative. Normally the profit motive test should be satisfied but in a given case activity may be regarded as business even when profit motive cannot be established/proved. In such cases, there should be evidence and material to show that the activity has continued on sound and recognized business principles, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed. 9. The appeal of the assessee is allowed. ITA No.5591/MUM/2019 (Assessment Year: 2014-15) 10. We shall now take up the appeal of the assessee for A.Y. 2014-15 wherein the assessee has assailed the impugned order on the following grounds of appeal before us: "1(a). The appellant submits that the Hon'ble Commissioner of Income-tax (Appeals)-3 Mumbai (hereinafter referred to as "the CIT(A)") erred in denying exemption under section 11(1)(a) of the Act by up-holding that the appellant carries-on "activities in the nature of trade, commerce or business‟ within the meaning of proviso to section 2(15) of the Act. (b). The appellant prays that based on the facts and circumstances of the case as well as in law, the proviso to section 2(15) of the Act is not applicable in the instant case and therefore the appellant is eligible for exemption under section 11(1)(a) of the Act. (c). The appellant prays that order of the Hon'ble CIT(A), being contrary to the facts and circumstances of the case, as well as in law, be set aside and the appellant be allowed exemption as claimed u/s 11(1)(a) of the Act. 2. The appellant prays for appropriate relief. 3. The appella ..... X X X X Extracts X X X X X X X X Extracts X X X X
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