TMI Blog2022 (2) TMI 503X X X X Extracts X X X X X X X X Extracts X X X X ..... se is required, research has to be done and the project has to be conceived in such a manner, it brings about the purpose for which the concept was evolved by RBI. The same would be also for the project which was conceived by the Surat Municipal Corporation. Therefore, to state that the assessee was only a contractor is to belittle their status and the purpose for which they were established by the Ministry of Culture, Government of India. The authorities as well as the tribunal were of the view that it is the RBI which is engaged in the educational activities and not the assessee. This finding is also erroneous as the museum is conceptualised by the assessee and all necessary inputs including training of personnel who are to man the museum or to function as a curator are all the task assigned to the assessee. All these would clearly fall within the objects of the assessee company. Thus, the message and information which will be disseminated through the museum which will be in the nature of a non-formal education is based upon the material which has been evolved by the assessee and implemented for and on behalf of the Reserve Bank of India. The responsibility for museums is on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... every company registered under Section 25 would be automatically entitled for registration under Section 12A ? - The Court noted that the Income Tax department has been consistently granting registration to all companies registered under Section 25 of the Act. The Court took note of the decision in ICAI Accounting Research Foundation [ 2009 (8) TMI 61 - HIGH COURT OF DELHI] wherein it is pointed out that the fact that the assessee therein was a company registered under Section 25 of the Act was ignored by the tribunal as the status which has been granted by the Government of India itself is the recognition of the fact that foundation is essentially established for the purpose of education and/or for the advancement of any other project of general public utility. The Court also considered as to whether when one limb of the Government has granted a benefit whether another limb of the Government can ignore the same. Registration under Section 25 of the Companies Act is undoubtedly a relevant factor to be noted while considering an application for registration under Section 12AA of the Act as registration under Section 25 of the Companies Act recognises the main objectives of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial questions of law for consideration:- (i) Whether the exemption under Section 11 of the Income Tax Act, 1961 can be denied on the basis of the objectives of the petitioner entity when it the same have been accepted as charitable at the time of registration under Section 12A / 12AA of the Act? (ii) Whether the activity of the petitioner of setting up of museums, science parks, planetariums, interactive galleries, exhibits and other forms of dissemination of knowledge through informal means, at the behest of other public bodies or entities, be regarded as commercial in nature and within the periphery of the proviso to Section 2(15) of the Income Tax Act, 1961? (iii) Whether the Tribunal was justified in denying the exemption under Section 11 of the Act and its findings that the objects and the activities of the petitioner are commercial in nature and/or are done with the intent of earning profits are arbitrary, erroneous, contrary to law and perverse? 2. We have heard Mr. Pratyush Jhunjhunwala, Learned Senior Standing Counsel and Mr. Uttar Sharma, Learned Junior Standing Counsel for the appellant. 3. The assessee is a company registered under Section 25 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial literacy center in Kolkata for explaining the development of monetary system and exhibit its collection of arte facts issued a tender notification calling upon various agencies throughout the world to participate in the tender. It is stated that there were several participants from the European and American countries but the assessee was the only Government agency working in India which had participated in the tender. The Appropriate authority of the RBI upon being satisfied that the assessee was the best organisation which could be entrusted with the task, awarded the tender to the assessee vide letter dated 08.06.2012. The assessee would state that the RBI museums and financial literacy center, was completed by the assessee with the state of art facilities interactive galleries, trained professional and was handed over to the Reserve Bank of India on 17.09.2018. On similar lines, Surat Municipal Corporation had awarded the task of establishing five galleries on textiles, astronomy, space, polar science and children learning activities, to educate the general public about the history of development of textiles, study of astronomy through the ages, understanding space travel, u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wledge centers and substantial, technical and highly skilled work is involved, deployment of modern machinery and equipment etc. It is submitted that the object behind the projects implemented by the assessee is to take forward the vision of the Central Government in promoting education and learning among the public in an informal and easy manner. It is submitted that the tribunal had taken note of a letter sent by RBI dated 08.06.2012 in which it was stated that they have some concerns about the terms and conditions mentioned in the financial bill. It is submitted that the tribunal thoroughly misread the contents of the letter and the circumstances under which the RBI had addressed the assessee and the letter pertains to the terms of engagement of the assessee in the said project and it has nothing to do regarding dissemination of knowledge. It is further submitted that the tribunal and the authorities committed serious error in stating that the assessee is a contractor functioning in lieu of money and they are an agent engaged in commercial activity of construction of a museum for RBI. It is submitted that the tribunal failed to note that the dissemination of knowledge was being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the materials placed on record. 9. Before we venture into the factual matrix, we need to take note of certain undisputed facts. The assessee is a company registered under Section 25 of the Companies Act. By virtue of the license granted under Section 25 by the Registrar of Companies, West Bengal dated 27.10.2011, it has been proved to the satisfaction of the Registrar of Companies that the assessee has been established for promoting objects of the nature specified in Section 25(1) (a) of the Companies Act and that it intends to apply its profit, if any, or other income in promoting its objects and to prohibit the payment of any dividend to its members. The licence granted under Section 25 has eight conditions attached to it of which one would state that the incumbent property of the assessee, whensoever derived shall be applied solely for promotion of the objects as set forth in its memorandum of association and no portion thereof shall be paid or transferred directly or indirectly by way of dividend, bonus or otherwise by way of profit, to persons who at any time are, or have been members of the said company or to any of them or to any person claiming through anyone or more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d service required and to exploit/use or turn to profit any patents or copyrights generated within the Company or acquired or purchased from any person either in India or abroad. 13. To set up infrastructure and develop softwares and communication packages for science communication and education projects. 14. Implementation of non-formal science education/program/activities and schemes. 15. To enter into collaboration with national and international agencies for development of museums/science centers/science activities. 16. To undertake establishment of network of dealers/agencies/franchises etc. for advancement of business. 10. Apart from the above main objects, there are objects, incidental or ancillary to the attainment of main objects. In the impugned order, the tribunal has referred to the incidental objects and missed out the main objects for which the assessee company had been established. This mistake committed by the tribunal has had an impact on the proceedings before it. Apart from the main objects, the incidental or ancillary objects, clause 5 of the memorandum imposes an absolute prohibition on the company to apply its income and property for an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he activities done by the assessee qua the objects behind its incorporation as a company under Section 25 of the Companies Act, thus, calling for interference. We support our conclusion with the following reasons:- 12. As mentioned above the tribunal failed to take note of the main objects to be pursued by the company as mentioned in the memorandum of association. In fact, it has not even referred to the main objects but straightway proceeded to take note of the objects incidental or ancillary to the main objects. It is elementary principle that anything incidental or ancillary to the main object has to be read along with and in conjunction with the main object and the incidental objects cannot be read in isolation. This fundamental error committed by the tribunal has lead to a wrong decision by it. That apart the tribunal did not take note of the objects of the company which are not included in the main objects and the incidental or ancillary objects. Had an effort been taken by the tribunal to examine the same it would have been amply clear that the assessee company is a non-profit organisation established for the purpose of undertaking works for all kinds of museums/science c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and implemented for and on behalf of the Reserve Bank of India. 13. The moot question would be as to who is the keeper of the museums established by the assessee company. The tribunal opines it as the RBI/Municipality. In our considered view this approach is thoroughly flawed. The responsibility for museums is on the collection curator, a museum curator or a keeper of the heritage of the institution. The curator is a specialized person/organisation who has been entrusted with the onerous duty of taking charge of the content and interpretation of the heritage value. The role of the curator is a specialist work, they have the expertise to develop as to how the archives could be interpreted through various events. Neither RBI nor Surat Municipal Corporation had the expertise within them to establish the museum. They took a policy decision to do the same, realizing that it required the assistance of experts, awarded the work to the assessee. Thus the role of the assessee in conceptuating, developing and establishing the museum is that of a museum curator who develops interprets and explains the significance of the collections for the study and education of the public. Thus t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Court also considered as to whether when one limb of the Government has granted a benefit whether another limb of the Government can ignore the same. In this regard, it referred to the decision in the case of M.V.S. Kathirvelu Nadar Versus Commissioner of Agriculture Income Tax [1968] 68 ITR 786 wherein it was held that the different limbs of the Government should act in coordination. A word caution was also added that the Court is not laying down a broad proposition that every company registered under Section 25 of the Act would be automatically entitled for registration under Section 12AA of the Act. But registration under Section 25 of the Companies Act is undoubtedly a relevant factor to be noted while considering an application for registration under Section 12AA of the Act as registration under Section 25 of the Companies Act recognises the main objectives of the company as a non-profit organisation. As noted above, this aspect of the matter has not been dealt with by the tribunal which in our opinion ought to have been and if taken into consideration the decision should lean in favour of the assessee. 15. The next aspect is as to whether the assessee company was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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