TMI Blog2022 (9) TMI 1570X X X X Extracts X X X X X X X X Extracts X X X X ..... s not lead to presumption that assessee might have earned excess profit, it depends upon the setup and their broad objects. We observe that in similar fact on record the Hon'ble Supreme Court reviewed the similar issue in ACIT v. Surat Art Silk Cloth Manufacturers Association [ 1979 (11) TMI 1 - SUPREME COURT] decided the issue on applicability of the section 2(15) of the Act in favour of the assessee and against the revenue. Thus what is relevant is it is not important how the assessee has charged the fees to the members or non-members, it is relevant to analyse whether these activities are carried with the sole object of making profit or mere these activities are carried to support its objects of charity. Further, it is also relevant that whether these surplus funds earned from these activities are applied for the object of the trust. In the given case there is no finding from the tax authorities that the assessee has not applied for the object of the trust nor it has reported any misuse of the funds of the trust. we further observed that the CIT(E) equated the formal education and the indirect education. The assessee conducts seminars, training courses and commercial examina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of over 2500 direct members, comprising a cross section of the business community, including public and private limited companies and over 225 trade and industry associations through which the Chamber reaches out to over 2,00,000 business establishments in the country. The objects of the assessee are as under: - a) To promote, advance and protect trade, commerce and industry in India or in any part thereof, b) To add, stimulate and promote the development of trade, commerce and industry in India or any part thereof; c) To promote the interests of Indian Industry and business in matters of inland and foreign trade, industry and commerce; d) To watch over, protect and promote the general commercial and industrial interests of India or any part thereof and to secure the interest and well-being of persons engaged in trade, commerce and industry, directly or indirectly; e) To institute, finance, encourage, prosecute, develop and carry on, all kinds of scientific and economic research relating to trade, commerce and industry 3. During analyzing of application filed in Form -56D seeking approval for exemption u/s. 10(23c)(iv) of the Act, Ld.CIT(E) asked the assessee to submit clarificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat assessee claiming exemption u/s. 10(23C)(iv) of the Act by holding that it is a charitable trust involving in the education and in the advancement of any other object of general public utility. However, he observed that on a perusal of the records, it was found that the assessee is involved in the certification of certain courses and organizing of the seminars only without imparting the formal education. Further, he observed that the activities of issuance of certification of the origin etc. are in the nature of trade, commerce or business, thereby, due to amendments brought in section 2(15) of the Act w.e.f. 01.04.2009, these activities cannot be termed as charitable in nature. 7. By relying on the amendments made to the section 2(15) of the Act and CBDT circular No. 11/2008, he observed that charges for the services rendered by the assessee are collected at the rate of ₹.80/- from Members and ₹.100/- from Non-Members. He also observed that this is as per DGFT guidelines as per which the charges should not exceed ₹.100 per certificate. Further, he observed that there are other chambers of commerce which charges much less than the charges collected by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income Tax Act, 1961; 4. not appreciating the fact that the appellant does not carry out activities which are in nature of trade, commerce or business with intention of making profit. 5. holding that the proviso to section 2(15) of the Act is applicable to the appellant without taking into consideration the order passed by the Hon'ble Income Tax Appellate Tribunal in appellant's own case for the Assessment Year 2009-2010 and 2011-2012 holding interalia that even after the amendment of section 2(15) of the Act w.e.f. 01.04.2009, Appellant Association having primary purpose of advancement of objects of general public utility. would remain charitable even an incidental or ancillary activity or purpose, for achieving the main purpose was profitable in nature; 6. erroneously placing reliance on assessment orders for AY 2010-11 and subsequent years, where the Assessing Officer has held that the appellant is a mutual association and hence not charitable in nature. The Appellant craves, to consider each of the above grounds of appeal without prejudice to each other and craves leave to add, alter, delete or modify all or any of the above grounds of appeal. 12. At the time of he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een touched. - If at all required, as regards certificate of origin fees, it must be noted that the same are capped by the Government at Rs. 100/-. This itself shows that there could be no profit motive therefrom. In any case, the fees charged by the appellant are same as the others in the case of non members. It may please be appreciated that the costs in Mumbai are high. This is all the more so since the appellant is a very old organization formed in 1907 and has long serving employees whose salaries are higher. The learned CIT has presumed that the appellant is earning huge profit without showing from where she arrives at this conclusion. Similarly, she states that the direct expenses are minimum. This is also a presumption without any basis whatsoever. It has already been demonstrated that the excess is only on account of the investment income which is the result of over 100 years of existence of the appellant. The activities of certificate of origin fees, etc. have not resulted in any surplus. 13. On the other hand, Ld.DR supported the findings of the Ld.CIT(E) and further, submitted that assessee itself during the course of assessment proceedings made a request before the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbers/non-members within the limit prescribed by the DGFT i.e., not more than ₹.100/-. 16. Now the issue is whether the assessee charges fees for issuing certification is for making profit and whether the fees collected by the assessee are more than other trade bodies, can this be treated as motive for making profit. In our considered view assessee has liberty to charge fees for issuing certification within the limit fixed by the DGFT, just because other trade bodies are charging less than the fees collected by the assessee, it does not lead to presumption that assessee might have earned excess profit, it depends upon the setup and their broad objects. We observe that in similar fact on record the Hon'ble Supreme Court reviewed the similar issue in ACIT v. Surat Art Silk Cloth Manufacturers Association dated 19.11.1979 and discussed the case of Indian Chambers of Commerce v. CIT in detail and they observed as under: - We must, however, refer to the decision of this court in Indian Chamber of Commerce v. CIT [1975] 101 ITR 796 because that is the decision on which the strongest reliance was placed on behalf of the revenue. The question which arose for decision in that case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e institution engages itself in activities for profit. The Calcutta decisions are right in linking activities for profit with advancement of the object. If you want immunity from taxation, your means of fulfil ling charitable purposes must be unsullied by profit-making ventures. The advancement of the object of general public utility must not involve the carrying on of any activity for profit. If it does, you forfeit. The Kerala decisions fall into the fallacy of emphasizing the linkage between the objects of public utility and the activity carried on. According to that view, whatever the activity, if it is intertwined with, wrapped in or entangled with the object of charitable purpose even if profit results there from, the immunity from taxation is still available. This will result in absurd conclusions. Let us take this very case of a chamber of commerce which strives to promote the general interests of the trading community. If it runs certain special types of services for the benefit of manufacturers and charges remuneration from them, it is undoubtedly an activity which, if carried on by private agencies, would be taxable. Why should the Chamber be granted exemption for making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lished and every purpose must for its accomplishment involve the carrying on of an activity. The activity must, however, be for profit in order to attract the exclusionary clause and the question, therefore, is when can an activity be said to be one for profit? The answer to the question obviously depends on the correct connotation of the proposition for . This proposition has many shades of meaning but when used with the active participle of a verb it means for the purpose of and connotes the end with reference to which something is done. It is not, therefore, enough that as a matter of fact an activity results in profit but it must be carried on with the object of earning profit. Profit-making must be the end to which the activity must be directed or in other words, the predominant object of the activity must be making of profit. Where an activity is not pervaded by profit motive but is carried on primarily for serving the charitable purpose, it would not be correct to describe it as an activity for profit. But where, on the other hand, an activity is carried on with the predominant object of earning profit, it would be an activity for profit, though it may be carried on in advan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indeed be difficult for persons in charge of a trust or institution to so carry on the activity that the expenditure balances the income and there is no resulting profit. With the above observation the Hon'ble Supreme Court decided the issue on applicability of the section 2(15) of the Act in favour of the assessee and against the revenue. 17. From the above discussion it is clear that what is relevant is, it is not important how the assessee has charged the fees to the members or non-members, it is relevant to analyse whether these activities are carried with the sole object of making profit or mere these activities are carried to support its objects of charity. Further, it is also relevant that whether these surplus funds earned from these activities are applied for the object of the trust. In the given case there is no finding from the tax authorities that the assessee has not applied for the object of the trust nor it has reported any misuse of the funds of the trust. we further observed that the Ld.CIT(E) equated the formal education and the indirect education. The assessee conducts seminars, training courses and commercial examinations for the benefit of its members, it n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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