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TMI Blog2025 (3) TMI 1124X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Foundation [hereafter 'the Assessee'] was incorporated on 27.09.1999 as a not-for-profit company under Section 25 of the Companies Act, 1956 [hereafter 'the Companies Act']. The Assessee was also registered under Section 12A of the Act vide order dated 10.01.2001. The Assessee is an association of broadcasters formed to protect the interests of various stakeholders and related entities in the field of television broadcasting, including the television viewing audience. Its objectives include spreading awareness about the latest developments in the television industry, disseminating knowledge among its members, and supporting, protecting, and defining the rights of its members. 3. The Assessee filed its return of income declaring Nil income on 29.09.2014 for the AY 2014-15, claiming exemption under Sections 11 and 12 of the Act. The case was subsequently selected for scrutiny assessment under the Computer-Assisted Scrutiny Selection (CASS). A notice under Section 143(2) of the Act, dated 28.08.2015, was issued and served upon the Assessee. Thereafter, a notice dated 04.04.2016 under Section 142 (1) of the Act was issued, along with a questionnaire, requiring the Assessee to furni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 45, 00, 000/- and Rs. 2, 40, 00, 000/- were later refunded to the Assessee in the FY 2015-16. 7. The Assessee contended before the AO that the deployment of funds towards BARC's equity capital was directly aligned with its objectives and was made in compliance with the directions of the Ministry of Information and Broadcasting [hereafter 'MIB'] and the recommendations of the Telecom Regulatory Authority of India [hereafter 'TRAI']. It was submitted that the funds were deployed solely to fulfill its objectives and not for earning any income, interest, or profit, and thus should be treated as application of income rather than an investment. The Assessee relied on certain judgments to assert that the deployment of funds towards BARC's equity did not constitute an investment violating Section 13 (1) (d) of the Act, as no income was earned from the funds deployed. In the alternative, citing CBDT Circular No. 387 dated 06.07.1984 and various case laws, the Assessee submitted that even if the deployment was deemed a violation under Section 13 (1) (d) of the Act, the exemption withdrawal should be restricted to any income earned from such deployment, which in this case was Nil, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the learned ITAT. The Revenue contended that the learned CIT (A) had erred in relying on the observations made by this Court in Indian Broadcasting Foundation v. Chief Commissioner of Income Tax (E) & Ors. (supra), as this Court had not rendered a final decision on the merits but had merely directed the CIT (A) to adjudicate the matter on merits. The Revenue also contended that the transactions involving the purchase of shares worth Rs. 15 lakhs and the deployment of Rs. 45 lakhs as share application money in BARC constituted an investment, and therefore, the findings of the AO were justifiable. On the other hand, the Assessee contended that the core issue was whether the deployment of funds in BARC, made pursuant to Central Government policy, TRAI recommendations, and MIB directives, amounted to an investment violating Section 11 (5) read with Section 13 (1) (d) of the Act. The Assessee asserted that the funds deployed in BARC should be treated as an application of income, not an investment, and therefore, Section 13 (1) (d) of the Act was inapplicable. 11. The learned ITAT, by way of the impugned order, dismissed the appeal preferred by the Revenue. The ITAT upheld the findin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion money fall within the permissible modes of investment under Section 11 (5) (vii) of the Act. It was argued that such transactions constitute 'investment' and are in violation of Section 13 (1) (d) of the Act, which restricts investments that do not conform to the prescribed modes. 15. It was contended on behalf of the Revenue that the learned ITAT has erred in confirming the order of the CIT (A), which allowed the Assessee's exemption under Sections 11 and 12 of the Act. The Revenue asserted that the words 'investment' and 'deposit' in Section 13 (1) (d) of the Act are broad and include investments in shares and deposits made for charitable purposes, irrespective of whether such investments are intended to generate profit or income. The learned counsel emphasizes that investment in shares or share application money, even if made for charitable objectives, falls within the scope of Section 13 (1) (d) of the Act unless it conforms strictly to the forms and modes prescribed under Section 11 (5) of the Act. Therefore, it is urged that the impugned order be set aside, and the Revenue's appeal be allowed. 16. Conversely, the learned senior counsel for the Assessee contends that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he prescribed modes under Section 11 (5) of the Act. Section 12 of the Act extends the exemption to voluntary contributions received by a trust or institution, which are treated as income derived from property held under trust. However, the benefits under Sections 11 and 12 are subject to the conditions laid down under Section 13 of the Act, which enumerates circumstances under which such exemptions may be denied, particularly for investments that are not in compliance with the modes specified under Section 11 (5) of the Act. 22. Section 13 (1) (d) of the Act, which is central to the present dispute, provides that income from investments or deposits made otherwise than in the prescribed modes shall not be eligible for exemption under Section 11 and 12 of the Act. 23. In the above context, the first issue for our consideration is whether the deployment of funds by the Assessee in BARC was made pursuant to the directions and recommendations of the TRAI and MIB i.e. as per Government policy, or whether it was an independent investment for earning income or profit. 24. The learned ITAT, in the impugned order, has clearly observed that BARC was required to be established as an indust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noted, after considering the material placed on record, that the Assessee herein had deposited amounts with BARC - not by way of an investment or a choice - but on account of a policy of the Central Government. 27. We note that in pursuance of the Government's initiative, TRAI, on 19.08.2008, had published its recommendations on Television Audience Measurement/Television Rating Points. In its report, TRAI categorically recommended a self-regulatory approach through the creation of an industry-led body to be called as BARC. In particular, Para 2.8.2 of the TRAI Recommendations are set out below: "BARC proposes to be a not-for-profit body registered under section 25 of the Companies Act, 1956 with an equal representation (four members each) from Indian Society of Advertisers (ISA), Indian Broadcasting Foundation (IBF) and Advertising Agencies Association of India (AAAI). The IBF has the broadcasters as members... Each of the three members will have equal representation and equal voice in the design and monitoring of the rating system and in the administration of BARC..." 28. We note that TRAI had clearly endorsed the formation of BARC as a not-for-profit entity with equal represe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e information relating to the television industry; and to collect and furnish information for the benefit of members and stakeholders." 33. It is also significant to note that BARC, being a company registered under Section 25 of the Companies Act, is legally prohibited from distributing any dividends or profits to its shareholders. Additionally, in the event of liquidation, Memorandum of Association of BARC mandates that any surplus must be transferred to another company registered under Section 25 of the Companies Act with similar objectives, thereby negating any possibility of personal gain or profit for the Assessee from its deployment of funds. 34. Therefore, in view of the aforesaid, this Court finds merit in the Assessee's submission that the deployment of funds by the Assessee in BARC, by way of purchase of its shares, was - prima facie - not for earning any income or profit, but solely to meet the Assessee's objectives, as mandated by Government policy, following the TRAI Recommendations. 35. The next issue for our determination is whether the deployment of funds by the Assessee in the shares of BARC constitutes an 'investment' within the meaning of Section 11 (5) read w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the investor. An investment popularly means every application of money which is intended to fetch return by way of interest income or profit. This only employed as capital in a business is money invested in business, (vide Edwards J., in Tax Commissioner v. Australian Mutual Provident Fund Society [1902] 2 NZLR 445). In Arnaild v. Grinstead (21 WR Eng 155), it was observed that in its most comprehensive sense it is generally understood to signify the laying out of money in such a manner that it produces a revenue. An illuminating observation was made in Inland Revenue Commissioners v. Desoutter Bros. Ltd. [1946] 1 All ER 58 (CA) about what "investment" means. It was observed that the word "investment" is not a word of art, but has to be interpreted in a popular sense. It is not capable of legal definition, but a word of current vernacular. The words "invest", and "investment" are to be taken in the business sense of laying out of money for interest or profit" 40. Similarly, the Coordinate Bench of this Court in Anand Charitable Trust v. Commissioner of Wealth-tax: (2002) 257 ITR 275 (Delhi) had held as under: "10. The word 'investment' means to lay out money in busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Court clarified that an 'investment' implies the laying out of money with the intention of earning income or profit, while a 'deposit' implies an obligation of repayment and is placed for safekeeping or security. The Court found that the transaction with Mahila Haat lacked the essential characteristics of both investment and deposit, as the money was not laid out for earning a return, nor was it placed with a view to safekeeping or security. Consequently, this Court held that the transaction did not contravene Section 11 (5) or Section 13 (1) (d) of the Act, and the institution was entitled to exemption under Section 11 of the Act. 42. The Bombay High Court, in Commissioner of Income-tax-I v. Dr. Vikhe Patil Foundation: [2014] 42 taxmann.com 190, had addressed the issue as to whether a transaction involving the purchase of shares in cooperative banks by a charitable trust constituted an 'investment' under Section 11 (5) of the Act and thereby violating Section 13 (1) (d) of the Act. The assessee therein, a charitable foundation, had purchased shares in two cooperative banks as a pre-condition for obtaining loans from those banks, and these shares were recorded as 'investments' ..... X X X X Extracts X X X X X X X X Extracts X X X X
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