TMI Blog2021 (10) TMI 224X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts highlight the fundamental fact that the assessee by and large strives to promote and protect the trade, commerce and manufacturers of India without seeking to make profits for its members. Tribunal after considering the proviso to section 2(15) of the Act and the CBDT Circular No. 11/2008 dated 19.12.2008 (which was issued pursuant to the proviso being inserted in the Act) held that the definition of the term charitable purpose remained unaltered even on amendment in the section 2(15) of the Act w.e.f. 01.04.2009, though the restrictive first proviso was inserted therein. Hence, the assessee was not hit by newly inserted proviso to section 2(15) of the Act. The issue in present appeal is also covered in favour of assessee in the case of Indian Chamber of commerce [ 2014 (12) TMI 256 - ITAT KOLKATA] because of its income streams noted above. We also noted that the amounts received are not in nature of trade (since there is no exchange of goods either for goods in return or money) or commerce (since it is not engaged in purchase and sale of goods) or business (since we are a non-profit making body formed with the promotion of protecting the trade, commerce and manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come and sale of publications and hence the objects of the appellant are not charitable. 5. The CIT(A) erred in holding that the case laws relied by the appellant were distinguishable as the same were decided without considering the decision of the Hon ble Supreme Court in the case of Sole Trustee, Loka Shikshana Trust v. CIT (101 ITR 234). 3. Brief facts as narrated by assessee and not disputed by revenue are that the assessee is a non-profit company incorporated in 1924, inter alia for the purposes of promoting and protecting the trade, commerce and manufacturers of India and in particular the trade, commerce and manufacturers of the Bombay Presidency. It is registered as a section 25 company under the erstwhile Companies Act, 1956. The assessee was registered as a charitable trust under section 12A of the Act by order dated 22.09.1998. Upto and including the assessment year 2008-2009 the assessments were made granting exemption under section 11 of the Act. For the assessment year under consideration, the assessee filed its return of income on 30.09.2009 claiming exemption under section 11 of the Act. A copy of the computation of income and the audited financials f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble for exemption u/s 11 of the Act, the following issues are required to be decided as under: - a) Whether the activities of the appellant could be considered as for Charitable purpose within the meaning of Sec 2(15) of the Act, b) Whether the activities of the trust would be hit by 1 and 2nd provisos to Sec. 2(15) of the Act as a result of which the activities cannot be regarded as Charitable purpose; As regards the 1st issue whether the activities of the appellant could be considered as for Charitable purpose within the meaning of Sec.2(15) of the Act it is an undisputed fact that the activities of the appellant trust is not for Relief of the poor, Education, Medical relief Preservation of environment. It is observed from the arguments of the appellant that the appellant is not only offering services in relation to the trade and business of Bombay Presidency but is also accepting fees, cess or other consideration for providing such services The appellant is also accumulating the income and as such is also getting a good interest income on it. However, during the course of appellate proceedings, the appellant had totally failed to demonstrate and had not brou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any other object of general public utility', it is proposed to amend section 2(15) so as to provide that 'the advancement of any other object of general public utility shall not be a charitable purposes, 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. It is also relevant to discuss in this context the term 'charity' as against profit making activity: Charity v. Prifit making activity - In the case before the Supreme Court of Sole Trustee, Lok Shikshana Trust v CIT [1975 101 ITR 234, J. Ben has explained the term 'charity' as against profit making activity as under- 'It seems to me that a common concept or element of charity is shared by each of the four different categories of charity. It is true that charity does not necessarily exclude carrying on an activity which yield profit, provided that profit has to be used up for what is recognized as charity. The v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes not apply to every income from business that is earned by the trust. Cases where the business is carried out mainly with the objective of earning profit than to carry out charitable work would be hit by the proviso to the section 2(15). If any business is carried out which is incidental to the carrying out the charitable objects and the income is utilized for charity, such income would still be eligible for exemption u/s 11. In the final analysis, however whether the assessee has for its object the advancement of any other object of general public utility' is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled to claim that its object is charitable purpose. In such a case, the object of general public utility' will be only a mask or a device to hide the true purpose which is trade, commerce or business or the rendering of any service in relation to trade, commerce or business. Each case would, therefore, be decided on its own facts and no generalization is possible. Assessee, who claim that their object is 'chari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y denotes altruistic thought and action i.e. to benefit others rather than oneself and the beneficiaries must not be able to claim the benefit as was held by Hon'ble courts in the cases of Chamber of Commerce Vs. CIT 4 ITR (Alld.), and also in Sole Trustee Lok Shikshan Trust Vs. CIT (SC) 101 ITR. Contention of the appellant is therefore rejected. The judicial decisions relied upon by Ld. AR are distinguishable and had been decided without considering the Apex court's decision cited supra. The Hon'ble Supreme Court in the case of A. Distributors (Baroda) Pvt. Ltd vs. Union of India reported in 155 ITR 120 had decided that the powers of the CIT(A) exists to decide the issue which had not been considered by the higher authority. In view of the above, I hold that the appellant's claim u/s 11 is not allowable for the year under consideration i.e for AY 2009-10. Accordingly, grounds of appeal nos. 1 to 3 are dismissed Aggrieved, assessee came in appeal before tribunal on this very issue. 7. We have heard the rival contentions and gone through the facts and circumstances of the case. We have noted the objectives of the assessee which inter alia ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. From the reading of the aforesaid clauses, it is clear that the members of the assessee chamber do not stand to gain personally since no portion of the income or property is paid or transferred directly or indirectly by way of dividend or bonus or otherwise. Further, even on winding up, the members cannot claim any share in the surplus assets. These facts highlight the fundamental fact that the assessee by and large strives to promote and protect the trade, commerce and manufacturers of India without seeking to make profits for its members. 10. Now, we have gone through the amended definition of the term 'charitable purpose' under section 2(15) of the Act by the Finance Act, 2008 w.e.f. 1 April 2009, reads as under: charitable purpose includes relief of the poor, education , medical relief preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement 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 car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in any way. The learned Counsel for the assessee stated that as discussed above, the terms trade , commerce and business imply carrying on an activity for profit since no trader/businessmen would like to carry on its activities at a loss. The definition of the term charitable purpose was practically the same as was contained in the last para of section 4(3) of the 1922 Act except for the addition of the words not involving the carrying on of any activity for profit at the end. Section 2(15) read as under: 'charitable purpose includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility not involving the carrying on of any activity for profit . 13. The words not involving the carrying on of any activity for profit occurring at the end were omitted by the Finance Act, 1983 with effect from 01.04.1984. 14. We noted that the term not involving any activity for profit came up for discussion before the Supreme Court in ACIT v. Surat Art Silk Cloth Manufacturers Association (121 ITR 1) (SC). The majority view was that the condition that the purpose should not involve the carrying on of any act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision and, in doing so, the provision in question may have to be read down, as pointed out above (para 53) 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(23 C) (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 IO23)iv because, in our view, the context requires such an interpretation. The correct interpretation of the proviso to Section 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant; namely to do all such other things as may be necessary for or incidental or conducive to the extension of trade, commerce or manufacture, or the attainment of objects. c. Labour advisory Fees -₹ 21,91,605/- The appellant has a labour advisory department which is constituted of advisors providing opinions to the members on specific queries referred to it relating to labour statues. The purpose of this department is to get the grievances of the members redressed on labour matters. A nominal charge, as per a fixed schedule, to cover the costs of establishment and opinions of the labour advisors are recovered from them as fees. d. Seminar and training programmes - ₹ 43,61,134/- e. Conference and exhibition - ₹ 48,22,078/- The appellant conducts seminars/conferences and arranges executive training programmes in order to: encourage and promote a friendly feeling and unanimity among commercial men on all subjects involving their common good; Promote and protect the trade, commerce and manufacturers of India and in particular the trade, commerce and manufacturers of the Bombay Presidency; consider all que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has held that the decision of the Kolkata Tribunal in Indian Chamber of Commerce vs. ITO (67 SOT 176) (Kolkata ITAT) is distinguishable as proviso to section 2(15) of the Act was not adjudicated upon since a ground in respect of the proviso to section 2(15) of the Act was not raised. 19. We noted that the observations of the CIT(A) mentioned in the order of Assessment Year 2010-11 and 2011-12 is incorrect because the Kolkata Tribunal in Indian Chamber of Commerce (supra) has considered the effect of the proviso to section 2(15) of the Act in arriving at its conclusion. One of the grievances raised in the appeal filed by Indian Chamber of Commerce (supra) for AY 2009-10 before the Tribunal read as under (para 311): Thai on the facts and circumstances of the case of the appellant, the Ld. CIT(A) erred in confirming the allegation of the Ld. AO that the appellant was hit by the proviso to section 2(15) of the Income-tax Act inserted w. e.f. 01.04.2009, in as much as the appellant was allegedly involved in the rendering of service in relation to trade, commerce or business, for cess or fee or any other consideration . The Tribunal in para 32 stated as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X
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