TMI Blog2023 (10) TMI 1229X X X X Extracts X X X X X X X X Extracts X X X X ..... activity of organizing the shivir which is in the nature of seminar, conference and lectures on the education and therefore, an aid to the main object of the assessee. Neither the AO nor the Ld. CIT(A) has disputed that the shivir organized by the assessee is for the purpose of education to the students and children as well as training for the teachers. Even if the expenditure incurred by the assessee is not regarded as solely for the purpose of providing formal education but if the same is incurred for the activities which are ancillary and part and parcel of the activities of imparting education then the same is considered as incurred for achievement of overall object of the assessee society. Various distinguish speakers have delivered their lecture on the topic of improvement of quality of education, improvement of moral values in the students and children of the society therefore, the shivir organized by the assessee cannot be separated from the activity of imparting education but it is an essential part of the educational activity for the overall development of the students as well as training of the teaching staff. Hence, the expenditure incurred in organizing such shiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n as to the genuineness of the said expenditure and further the expenditure prima facie is unrelated to the main object of the society i.e. education. While passing the revision order u/s 263 the Commissioner set aside the assessment order u/s 143(3) dated 16.03.2015 and directed the AO to reflect the assessment de novo after affording reasonable opportunity of being heard to the assessee. In pursuant to the revised order passed u/s 263 of the Act the AO has passed the assessment order u/s 143 r.w. section 263 on 28.12.2017 thereby the expenditure of Rs. 98,45,124/- on account of Vaman Drishti Shivir has been disallowed as application of income for charitable purpose. Aggrieved by the assessment order the assessee filed the appeal before the Ld. CIT(A) but could not succeed. 3. Before the Tribunal Ld. AR of the assessee has submitted that the assessee is engaged in the promotion and educational activity as well as imparting education which is part of its objects? He has referred to the bylaws of the assessee society and submitted that it is parent body of schools situated in the State of Madhya Pradesh consisting of Indore, Ujjain, Gwalior, Bhopal, and the schools in these distr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which various cultural program, meetings, conferences, group discussions, etc. were held. All the expenses for Vaman Drishti Shivir (Silver Jubilee Program) were separately audited and all expenses are well supported and duly verified in all respects and were also submitted to the Ld. AO at the time of assessment along with the books of accounts and Ld. AO after satisfying the nature of expenses have allowed the same . 3.1 He has submitted that that the case of assessee society was later selected by Ld. CIT Exemption for invoking proceeding u/s 263. The assessee submitted full details including minutes of meeting, photographs of event, annual report and various correspondence during the proceedings u/s 263 of the Act which was also submitted at the time of original hearing. However Ld. CIT (E) passed order u/s 263 against the assessee on 14.03.2017 setting aside the order considering the nature of expenses is not recurring and incurred during the year and Ld. AO had accepted without any inquiry and even could have raised his eyebrow for such exceptional expenses and set aside the order directed Ld. AO for denovo assessment. 3.2 He has further submitted its contention befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re outcome of Shivir and was also suggested to State and Central Govt. for formation of New Education Policy. 3.4 He asserted that in all stages of proceedings none of the officers had any doubt on the authenticity and genuineness of events and its related expenditure and the only question on which the addition is made is on the basis of argument that this is a non-recurring expenses which is not related to objects of assessee society. This event was very widely covered by the local and national newspaper and media. Copy of some sample newspaper cutting are filed in the paper book. Without prejudice to above, assessee here wants to draw the attention of the bench towards fact as per the provisions of section 11 12 of the Act, Capital expenditure even repayment of loan are also allowable as expenses while computing total income of the assessee. That as per the provisions of the section 11 of the act it doesn t differentiate the expenses on the basis of recurring and nonrecurring expenses, capital and revenue. It only mandates that expenditure should be on the objects of trust which is very clear from above submission that the expenditure incurred was towards the objects of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are disallowed as application of Income and computation is made accordingly. I am also satisfied that the assessee has committed default within the meaning of the provisions of section 271(1)(c) of the Act by furnishing inaccurate particulars of its income, hence, penalty proceedings u/s 271(1)(c) of the Act are initiated separately. 5.1 Thus, it is clear that the AO has disallowed the claim primarily on two grounds, that this expenditure is incurred for organizing the Shivir/celebration and not proportionate to the normal expenditure incurred by the assessee on providing education to the students. The second objection of the AO is that this is one time expenditure and not recurring in nature and therefore, this expenditure is not incurred for the purpose/ objects of providing education to the students. In the assessment order AO has not denied the fact that this expenditure was incurred while organizing Vaman Drishti Shivir from 11 to 13 November 2011. The assessee has organized three days programme delivering lectures, holding seminars, conference and meetings on various topic for improving the quality of general education, quality of education of moral values in the student ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... marine engineers, i.e., members of the assessee society, to meet and exchange ideas, annual meetings are held by the assessee in addition to international meet which is held once in four years. In the said meetings, the members interact with each other in addition to technical sessions being held for enlightenment of the subject of marine engineering. In these technical and social meetings, technical papers pertaining to the Shipping Industries are presented, which are attended by members from all over the country, Government officers and representative from various companies interested in the shipping business. During the year under consideration two Meetings/Seminars were held, one at Mumbai and another international seminar in Chennai, which was attended by people from marine industries all over the world. Brochures were takes out for the said Meeting/Seminars in which the companies engaged with marine industries had given advertisements as well as sponsorships. The surplus received as a result of these international and national conferences have been shown as the income of the assessee for the year under consideration. The assessee is maintaining separate accounts for the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the predominant object of the activity is to carry out the charitable purpose and not to earn profit, it would not lose its character of a charitable purpose merely because some profit arises from the activity. The exclusionary clause does not require that the activity must be carried on in such a manner that it does not result in any profit. If the profits must necessarily feed a charitable purpose under the terms of the trust, the mere fact that the activities of the trust yield profit will not alter the charitable character of the trust. The test now is, more clearly than not in the past, the genuineness of the purpose tested by the obligation created to spend the money exclusively or essentially on charity . The restrictive condition that the purpose should not involve the carrying on of any activity for profit would be satisfied if profit making is not the real object. From the facts and circumstances of the case, it is clear that the assessee had not carried on business as per the provisions of section 2(13) of the IT Act. In any case, as per the amended provisions of section 11(4A), which were amended by the Finance (No. 2) Act, 1991 with effect from 1-4-1992 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year by the Assessing Officer, he (Assessing Officer) should find something different in the conduct of the business in order to deviate from the said stand as held by several Courts. Res judicata does not apply to the income-tax proceedings, but if no new facts are brought on record, there should not be any deviation from a particular stand. We have carefully gone through the judicial pronouncements relied upon by the ld. AR. We find that although the Supreme Court, in the case of Radhasoami Satsang ( supra) had given a note that the decision is confined to the facts of the present case, but the law is settled on this point as held by the Delhi High Court in the case of CIT v. A.R.J. Security Printers [2003] 264 ITR 2761 . 18. Considering the facts of the case in totality, we are of the considered view that the activities carried on by the assessee society are with a view to serve its members, for which sufficient funds were required and money was collected by way of sponsorship and advertisement in order to promote the activities of the assessee-trust and the same income is exempt under section 11 of the IT Act. 5.3 The Tribunal has held that the meetings and semina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility in itself involves carrying on any trade, commerce or business only then the proviso will be applicable. In other words the activity of the organization on its own should constitute either trade, commerce or business or any activity involving provision of service in relation to trade, commerce or business. We however note that in the present case the lower authorities have not brought on record any cogent or tangible material which in any manner will persuade us to hold that the activity of the appellant of holding trade fairs, exhibitions or conferences were in itself for making profit or in the nature of trade, commerce or business. 7. We note that as per Memorandum of Association, the main object of the assessee is to engage itself in establishing harmony between the construction industry and the Government Departments at the Central and State levels, local and public bodies, financial institutions and private bodies and institutions for promoting healthy growth and development of the construction industry. In order to pursue and fulfilment of the said main objectives, the appellant-association organised certain incidental or ancillary activities, as stated above, nam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntroduction of first proviso to Section 2(15) of the Act. In this regard we also note that the ratio laid down by the Hon'ble Apex Court in the case of Addl. CIT vs Surat Art Silk Cloth Manufacturers Association (supra) was applied by this Tribunal in appellant-assessee's own case for A.Y. 2011-12 which is placed at page no. 68 to 87 of the Paper Book in ITA No. 381/Kol/2016 passed on 30.09.2016. The relevant extracts of the decision is reproduced below: 8.1 Now in the light of above words, we have to examine as to whether the order of the ld. CIT is a valid order in the light of the above stated points/provisions of section 263 of the Act. Violation of provisions of section 2(15) of the Act 9. We find that the activities of the assessee are within the objects as per its memorandum of association. The relevant main objects and objects incidental or ancillary to the attainment of the main objects stand as under: Main objects:- '3) To establish harmony between the construction industry and the Government Departments at the Central and State levels, local and public bodies, financial institutions and private bodies and institutions for promoting h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the property was not to go back to the Satguru and, at the most, in place of trust, the Central Council would exercise authority. It is on record that there has been no Satguru long before the period of assessment under consideration. As a fact, therefore, the Tribunal was justified in holding that the property was subject to a legal liability of being used for the religious or charitable purpose of the Satsang. All India Spinners' Assocn. vs. CIT (1944) 12 ITR 482 (PC) : TC23R.179 applied; The Secretary of State for India in Council vs. Radha Swami Satsang (1945) 13 ITR 520 (All) impliedly approved; CIT vs. Radha Swami Satsang (1980) 19 CTR (All) 345 : (1981) 132 ITR 647 (All) :TC23R.644 set aside. Properties of assessee, a religious institution, were meant for the common purpose of furthering the objects of the Sant Satguru and vested in its Central Council and income was always utilised for that purpose and, therefore, assessee was entitled to exemption under ss. 11 and 12. Now coming to the objects and activities of the assessee company, we find that the ld. CIT held that the activities are commercial in nature in terms of the provisions of section 2(15) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in the case of Indian Chamber of Commerce Vs. ITO (ITA Nos. 1491 1284/Kol/2012 dated 02.12.2014. But the ld. CIT distinguished the said case law by holding that in that case the assessee's activities were incidental and ancillary to the main objects to the trade, commerce and industry but in the case on hand the main activities of the assessee are commercial in nature. However, we disagree with the view taken by the ld. CIT as the questions before the Hon'ble ITAT were as follows:- 2. That on the acts and the circumstances of the case of the appellant the Ld.CIT(A) erred in confirming the allegation of the Ld. AO that the appellant's activities of conducting the Environment Management Centers, meetings, conferences seminar and the Issuance of Certificate of Origin were all in the nature of business carried on systematically and continuously with a motive to earn profit from the same. 3. That on the acts and the circumstances of the case of the appellant and in law, the Ld. CIT(A) erred in holding that decision of the Hon'ble Delhi HC dated 19th September, 2011, in the case of DIT (Exemptions) Vs. Institute of Chartered Accountants of India and that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s allowed. 35. In view of the above, we thus now turn to examine and analyze in full details the particular fact of the present case. That the assessee association is a charitable institution, duly registered as such u/s. 12A of the Act, carrying in its main object of development of trade, industries and commerce. The main objects for which the association came into existence, are clearly set out in clause 3 of the memorandum of Association which duly records and reads as under:- '3(a) To promote and protect the trade, commerce and industries and in particular the trade, commerce and industries in or with which Indians are engaged or concerned' The activities of conducing Environment Management Centre, Meetings, Conferences Seminar and issuance of Certificate of Origin, being the activities stated to be services in relation to trade, commerce or business were all well covered by the main object being fully connected, incidental and ancillary to the main purpose and were conducted solely for the empowerment, betterment and for creating awareness amongst the industrialists in order to bring about the development of trade and industries in India. Further it is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bject, even if resulting in profit and even if carried out with non members, were all held to be charitable in nature. Hon'ble Apex Court in the earliest case of Andhra Chamber of Commerce (supra) had laid out the principle that if the primary purpose of an Institution was advancement of objects of general public utility, it would remain charitable even if an incidental and ancillary activity or purpose, for achieving the main purpose, was profitable in nature, in our view the basic principle underlying the definition of charitable purposes remained unaltered even on amendment in the sec. 2(15) of the Act w.e.f. 1.4.2009 though the restrictive first proviso was inserted therein. Accordingly, in the given facts of the case as discussed above in detail, the assessee association primary purpose was advancement of objects of general public utility and it would remain charitable even if an incidental or ancillary activity or purpose, for achieving the main purpose was profitable in nature. Hence, assessee is not hit by newly inserted proviso to s. 2(15) of the Act. this issue of assessee's appeal is allowed. Besides the above, we also rely in the case of the CIT Vs. Fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut by Parliament in the system of taxation of income and profits of charities, with particular reference to objects of general public utility to prevent tax evasion, by diversion of business profits to charities. It is the vagueness of the fourth head of charity any other object of general public utility that impelled Parliament to insert the restrictive words not involving the carrying on of any activity for profit . It was clearly inconsistent with the settled principles to hold in the aforesaid case that if the dominant or primary object of a trust was 'charity' under the fourth head 'any other object of general public utility', it was permissible for such an object of general public utility, to augment its income by engaging in trading or commercial activities. In retrospect, it seems that it would have been better for Parliament to have deleted the fourth head of charity any other object of general public utility from the ambit of the definition of 'charitable purpose' while enacting s. 2(15) rather than inserted the words not involving the carrying on of any other activity for profit , thereby creating all this legal conundrum . When the Govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticulars Cash Basis Accrual Basis Inflow from Fairs etc. Members 3,43,28,080 3,44,74,450 Non-Members (Others) 49,96,517 49,96,517 Total 3,93,24,597 3,94,70,967 Outgo on a/c of Fairs etc Members portion 2,87,18,963 2,65,17,636 Non-Members (Others) 41,80,099 38,43,305 3,28,99,062 3,03,60,941 Net Surplus 64,25,534 91,10,026 11. We note that even though the appellant realized surplus from organizing fairs exhibitions yet there was express understanding between the appellant and the participants that the surplus, if any, remaining after meeting the cost and expenses for holding the events would be transferred to infrastructure fund of the appellant. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act or not and whether in the facts and circumstances of the case the assessee can be denied exemption under Section 11 of the Act relying upon and/or considering the proviso to Section 2(15) of the Act is concerned so far as the amendment in Section 2(15) of the Act amended vide Finance Act, 2008 and insertion of proviso to Section 2(15) of the act is concerned, as such the same has been explained vide Circular No.11/2008 dated 19/12/2008. It is clarified that where industries or trade association claim both to be charitable institutions as well as mutual organizations and their activities are restricted to contributions from and participation of only their members, these would not fall under the purview of the proviso to Section 2(15) of the Act owing to the principles of mutuality. From the Circular No.11/2008 dated 19/12/2008 it appears that the newly inserted proviso to Section 2(15) of the Act will apply to entities whose purpose is advancement of any other object of general public utility i.e. fourth limb of definition of 'charitable purpose' contained in Section 2(15) of the Act and hence such entities will not be eligible for exemption under Section 11 or under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) has dismissed the appeal of the assessee in para 8 to 8.3 as under: 8. I have carefully considered the action of the Assessing Officer and the submissions of the appellant. I find that the AO has disallowed a sum of Rs. 98,45,124/- being expenses incurred on Vaman Drishiti Shivir as the Assessing Officer found it excessive and disproportionate to the income of the appellant. Appellant has claimed that 12A registration was granted on the basis of amended by-laws of Sarawati Vidhya Pratishthan (vide para 4) and that the expenditure was incurred on organizing Vaman Drishti Shivir on the occasion of Silver Jubliee of Saraswati Vidya Pratishthan. The appellant has claimed that around 10,000 teachers, principals and others participated in cultural programmes, meetings, conferences etc. and the expenses are allowable. 8.1 I agree with the view of the Assessing Officer that expenditure was not exclusively for the purpose of providing education. Given the nature of activities described by the appellant during the Shivir, I find that the expenditure is more in the nature of the brand promotion than providing education. 8.2 Items in Para 4 of the by-laws are very ge ..... X X X X Extracts X X X X X X X X Extracts X X X X
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