SOUTHERN GUJARAT CHAMBER TRADE & INDUSTRY DEVELOPMENT CENTRE,,SURAT vs. INCOME TAX OFFICER,, SURAT

ITA No. 910/AHD/2016 Assessment Year.2011-12 Southern Gujarat Chamber Trade & Industry Development Centre INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH (JUDICIAL MEMBER) AND Dr. ARJUN LAL SAINI (ACCOUNTANT MEMBER) ITA No. 910/AHD/2016 for Assessment Year: 2011-12 (Virtual Court Hearing) Southern Gujarat Chamber The Income Tax Officer, Trade & Industry Vs. Exemption-Ward, Development Centre, Aayakar Bhavan, Opp. New Civil “Samruddhi”, Near Makkai Hospital Majuragate Surat. Bridge Nanpura, Surat-395001. PAN No. AAICS 8963 M Appellant Respondent Assessee by : Mr. Rasesh Shah & Ms Chaitali ARs Revenue by : Mr. O.P. Vaishnav, CIT-DR : Date of Hearing : 28/06/2021 Date of pronouncement : 06/07/2021 Order under section 254(1) of Income tax Act PER PAWAN SINGH, JUDICIAL MEMBER 1. This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-3, Surat, hereinafter referred as CIT(A) dated 26.02.2016 for assessment year 2011-12. Initially, this appeal was adjudicated by order dated 25.04.2018. Subsequently, the assessee filed Miscellaneous Application (MA) vide MA No. 34/SRT/2018 for pointing out certain mistake apparent in the order. Our predecessor on being convinced that there is mistake apparent from the record, the order dated 24.04.2018 was recalled vide order dated 11.02.2020. Accordingly, this appeal came up hearing

2 ITA No. 910/AHD/2016 Assessment Year.2011-12 Southern Gujarat Chamber Trade & Industry Development Centre for adjudication afresh. The assessee has raised following grounds of appeal: I. Denial of exemption u/s 11 of the Act: 1) On the facts and circumstances of the case and as per law, the learned Commissioner of Income tax (Appeals) erred in rejecting claim of exemption u/s. 11 of the Act. 2) The appellant submits that the learned Commissioner of Income tax (Appeals) wrongly applied proviso to sub-section (15) of section 2 of the Act when appellant had not violated any condition thereof. 3) The appellant submits that the appellant only earned rent and did not carry out any activity alongwith SarInfracon Ltd. II. Taxing Rs.68,96,676/-: The learned Commissioner of Income tax (Appeals) erred in confirming taxability of Rs.68,96,676/- which was in the nature of rent. (III) Miscellaneous: 1) The learned Commissioner of Income tax (Appeals) ought to have deleted charge of interest u/s.234A of the Act. 2) The learned Commissioner of Income tax (Appeals) ought to have deleted charge of interest u/s.234B of the Act. 3) The appellant craves leave to add, alter or vary any of the grounds of appeal. 2. Brief facts of the case are that the assesse is a Charitable Trust received with the Charity Commissioner Surat. The main object of the assessee is promotion and development of trade and business in South Gujarat. The assessee was also granted registration under section 12AA vide order dated

3 ITA No. 910/AHD/2016 Assessment Year.2011-12 Southern Gujarat Chamber Trade & Industry Development Centre 27.11.2001. The assessee filed its return of income for assessment year 2011-12 on 29.09.2011 declaring nil income. The case was selected for scrutiny. The Assessing Officer after serving statutory notice under section 142(1) and 143(2) proceeded for assessment. On verification of computation of income, the Assessing Officer found that assessee-trust derived income as interest on deposits in banks and also received contribution from Sar Infracon Private Limited. The contribution was received on account of letting out of its convention centre for organizing exhibitions and other function. On further verification of fact, the Assessing Officer noted that convention centre was given on rent as per Memo of Understanding (MOU) executed between assessee-trust Sar Infracon Pvt. Ltd. The Assessing Officer after examining object and the activities of the assessee treated the receipt of Rs.68,96,676/- as income of assessee-trust as the said receipt is hit by provision of section 2(15) of Income Tax Act and brought the same to tax. Aggrieved by the action of the Assessing Officer, the assessee filed appeal before the CIT(A). The Ld. CIT(A) after hearing the representative of the assessee and considering the material placed on record confirmed the

4 ITA No. 910/AHD/2016 Assessment Year.2011-12 Southern Gujarat Chamber Trade & Industry Development Centre order of Assessing Officer. Thus, further aggrieved, the assessee has filed present appeal before this Tribunal. 3. We have heard the submission of learned authorised representative (AR) of the assessee and Commissioner of Income Tax-Departmental Representative (CIT-DR) of the Revenue and with their active assistance gone through the orders of lower authorities. The learned AR of the assessee submits that assessee is a Charitable Trust registered with the Charity Commissioner. The main object of trust is to promote and develop the trade and business in South Gujarat. To attain the objectives of the trust the assessee has to organize exhibition and other similar activities for promotion of trade and commerce in southern Gujarat. The assessee has established a convention center for fulfillment of the objectives of trust organizing exhibition seminars symposia etc. The assessee is also running the training classes in the field of trade and industry as per its object. To achieve the objection in promotion of trade and industry the Central Government and the State Government have launched various beneficiary schemes. As per scheme of Central Government known as Industrial Infrastructure Upgradation

5 ITA No. 910/AHD/2016 Assessment Year.2011-12 Southern Gujarat Chamber Trade & Industry Development Centre Scheme (IIUS) Central Governments to assistance of 75% of cost; 25% is to be contributed by the industry cluster. 25% of the State co-ordinate gives supports up to 10%. To support the scheme the Statement Government allotted 12 hectors of land at a concessional price. 4. The learned AR for the assessee submits that the assessee entered into an agreement with Sar Infracon Private Limited, a Special Purpose Vehicle (SPV) was formed at the behest of the Central Government. Sar Infracon Private Limited is also a Company registered under section 25 of Companies Act, 1956 having charitable objects. The assessee entered into agreement with the Sar Infracon Pvt. Ltd. for development of land allotted to assessee-trust. Sar Infracon Pvt. Ltd. developed / constructed a Convention Centre for organizing exhibitions to fulfill the objects of assessee for promotion of trade and industry. As per the agreement Sar Infracon Private Limited lets out the Convention Centre on rent and earned rental income. Out of the rent received, 50% share is shared to the assessee-trust. During the year under consideration, the assessee received Rs.68,96,676/- on account of rent on sharing basis from Sar Infracon Private Limited. The assessing

6 ITA No. 910/AHD/2016 Assessment Year.2011-12 Southern Gujarat Chamber Trade & Industry Development Centre officer treated the said receipt as income of the assessee. The assessing officer has not invoked the proviso of section 2(15) of the Act. However, the assessing officer held that the assessee is not charitable trust within the meaning of section 2(15) as the assessee- trust earned profit after meeting the normal expenditure. The Ld. CIT(A) applied the Proviso of section 2(15) of the Act, by taking view that the assessee-trust has received rent on sharing basis and not on fixed basis. 5. The learned AR for the assessee submits that receipt of rent does not involve carrying on any activity in the nature of trade, commerce or business. The charging of fee are the incidental to the activity to the main object of the assessee- trust. The organization of seminars and letting out of seminar hall are incidental to the object of the assessee- trust. Facts remains the same that predominant object of the trust is to promote and development of the trade and commerce in the south Gujarat. Mere earning of surplus should not be construed as profit. The assessee-trust has not distributed any profit outside the organization, which is utilized for the activities of assessee-trust.

7 ITA No. 910/AHD/2016 Assessment Year.2011-12 Southern Gujarat Chamber Trade & Industry Development Centre 6. In support of the Ld. AR of the assessee relied upon the following decisions:  DIT Vs Gujarat Cricket Association [106 CCH 0086(Gujarat High Court)]  Ahmedabad Urban Development Authority vs. ACIT [396 ITR 0323(Gujarat High Court)]  DIT vs. Sabarmati Ashram Gaushala Trust [223 Taxman 43(Gujarat High Court)]  Institute of Chartered Accountants of India vs. DCIT [347 ITR 99(Delhi High Court )]  DIT Vs Women's India Trust [277 CTR 180 (Bombay High Court)]  DIT Vs Shri Vile Parie Kelavani Mandai [286 CTR 0219(Bombay High Court)]  CIT Vs Jodhpur Development Authority [287 CTR 0473 (Raj. HC)]  CIT Vs Lucknow Development Authority [219 Taxman 162(Allah. HC)]  Improvement Trust, Moga Vs CIT [390 ITR 547 (Pun. & Har. HC)]  ITO Vs Moradabad Development Authority [159 ITD 0971 (Del. Trib)]  DCIT Exemption Vs Ernest India [ITA No. 1355/Del/2017 (Del. Trib)]  Society of Indian Automobile Manufacturers Vs ITO [159 ITD 659(Del. Trib.)]

8 ITA No. 910/AHD/2016 Assessment Year.2011-12 Southern Gujarat Chamber Trade & Industry Development Centre  Confederation of Real Estate Developers Association of India. Vs. ACIT [119 Taxmann.com 491 (Mum Trib.)]  IP India Foundation vs. DIT [38 ITR(Trib.) 195 (Hyd. Trib)]  Fragrance & Flavors Association of India vs. DDIT [92 taxmann.com 325 (MumTribunal)]  India Trade Promotion Organization vs. DCIT [371 ITR 333(Delhi High Court)]  Indian Chamber of Commerce vs. ITO [52 taxmann.com 52 (Kol. Trib.)] 7. The assessee has also filed the following document on record:  Certificate of Collector, Surat dated 11-09-2006 about allotment of land admeasuring 12-94-48 hectors land at survey No. 47, Block No. 146 at Sarsana, Taluka Choryasi to assessee.  Copy of Letter dtd. 24-04-2013 to the ACIT Circle-4, Surat  Copy of Letter dtd 15-10-2013 to the ACIT Circle-4.  Copy of Letter dtd. 25-11-2013 to ACIT Circle-4, Surat  Copy of Letter dtd. 02-12-2013 to ACIT Circle-4, Surat  Copy of Letter dtd. 26-03-2014 to ACIT Circle-5, Surat  Copy of return of income, Copy of Computation of income, and copy of Profit & Loss Account.  Copy of Ledger Account for the period 01-04-2010 to 31- 03-2011 of state Government Grant, Interest, & Share from Sar Infracon Private limited.  Note on activities and objects of the Trust  Copy of Industrial Infrastructure Upgradation Scheme declared by the Central Government

9 ITA No. 910/AHD/2016 Assessment Year.2011-12 Southern Gujarat Chamber Trade & Industry Development Centre  Copy of Registration Certificate under section 12A Act  Copy of Trust deed  Copy of MOU made with Sar Infracon Private Limited. 8. On the other hand, the Ld. CIT-DR of the Revenue supported the order of lower authorities. The Ld. CIT-DR of the Revenue also filed his written submission in the form of short written note. In the short written note, the Ld. DR of the revenue submits that the case of law relied by Ld. AR of the assessee are not relevant and applicable and the facts of the present case. All cases are on different facts and there is not a single case wherein revenue sharing was income from letting out of the property of the trust was allowed by legal forums. Thus the fact of the case of unique and not identical to those case laws. The Ld. CIT-DR for the revenue further submits that newly inserted proviso to section 2(15) will apply to entity whose purpose is of advancement or any other object of general public utility i.e 4th limb of the definition of charitable purpose prescribed in section 2(15) of the Act whether the trust is carrying out the activities in the nature of trade, commerce , business in question of fact which will be decided based on the nature, scope and extent and frequency of the

10 ITA No. 910/AHD/2016 Assessment Year.2011-12 Southern Gujarat Chamber Trade & Industry Development Centre activities enshrined Central Board of Direct Taxes (CBDT) Circular No. 11/2018 dated 19/12/2008. As per MOU both the entities are sharing income from letting out of the convention centre. The Ld. CIT-DR for the revenue submits that income from letting out of convention centre is not income of rent simplicitor, the assessee is partner of 50% in the convention center and are getting 50% of revenue. The land is the capital contribution by assessee. The profit is given to the Sar Infracon Private Limited, and therefore creation of maintenance of the convention centre services are in relation to trade, commerce and business. 9. We have considered the rival submissions of the parties and have gone through the orders of the lower authorities. We have also deliberated on the various case laws relied by the lower authorities and the learned AR for the assessee. The assessing officer, during the year under consideration, noted that the assessee received Rs.68,96,676/- on account of rent on sharing basis from Sar Infracon Private Limited. The assessing officer treated the said receipt as income of the assessee. The assessee is recovering huge fee on account of rent from the persons who takes the convention center for

11 ITA No. 910/AHD/2016 Assessment Year.2011-12 Southern Gujarat Chamber Trade & Industry Development Centre exhibition. We find that the assessing officer has not invoked the proviso of section 2(15) of the Act. Though, the assessing officer held that the assessee- trust earned profit after meeting the normal expenditure. The Ld. CIT(A) affirmed the order of assessing officer. We find the while affirming the order of assessing officer has not disputed that the objects of the assessee falls under the advancement of general public utility and the activities conducted in the convention centre built by Sar Infracon Private limited as per MOU with assessee, are rendering services and assistance to trade, commerce and business in South Gujarat. However, the Ld. CIT(A) held that income of the assessee from renting out of exhibition centre, the proviso of section 2(15) is applicable. 10. The Hon’ble Supreme Court in Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1, held that when the object of a trust was carrying on of an object of general public utility, it is that object of general public utility which must not involve the carrying on of an activity for profit. It was pointed out that it was immaterial how the money for achieving or implementing such purpose was found. Whether, that money was obtained by the running of an activity for

12 ITA No. 910/AHD/2016 Assessment Year.2011-12 Southern Gujarat Chamber Trade & Industry Development Centre profit or not, did not make the charity not charitable(emphasis added by us). 11. The Hon'ble Gujarat High Court in DIT Vs Gujarat Cricket Association (supra) held where driving force of assessee-State cricket association was not desire to earn profit but object was to promote game of cricket and nurture best of talent, merely because it put up tickets of international cricket matches for sale and earned some profit out of same and said profit was used in activities of promotion of game, it would not lose its character of having been established for a charitable purpose. 12. Further, the Hon'ble High Court in DIT Vs Sabarmati Ashram Gaushala Trust (supra) while considering the scope of the proviso to section 2(15) held that the said proviso provides for exclusion from the main object of the definition of the term 'Charitable purposes' and applies only to cases of advancement of any other object of general public utility. If the conditions provided under the proviso are satisfied, any entity, even if involved in advancement of any other object of general public utility by virtue to proviso, would be excluded from the definition of ' charitable trust'. However, for the application of the proviso, what is necessary is that the entity

13 ITA No. 910/AHD/2016 Assessment Year.2011-12 Southern Gujarat Chamber Trade & Industry Development Centre should be involved in carrying on activities in the nature of trade, commerce or business, or any activity of rendering services in relation to any trade, commerce or business, for a cess or fee or any other consideration. In such a situation, the nature, use or application, or retention of income from such activities would not be relevant. Under the circumstances, the important elements of application of proviso are that the entity should be involved in carrying on the activities of any trade, commerce or business or any activities of rendering service in relation to any trade, commerce or business, for a cess or fee or any other consideration. 13. The Hon'ble Delhi High Court in Indian Trade promotion Organization Vs DGIT (supra) also held that the expression 'charitable purpose', as defined in section 2(15) cannot be construed literally and in absolute terms and it has to take colour and be considered in context of section 10(23C)(iv), thus, if dominant and prime objective of institution, was not desire to earn profits but, object of promoting trade and commerce not for itself, but for nation, it was clearly a charitable purpose.

14 ITA No. 910/AHD/2016 Assessment Year.2011-12 Southern Gujarat Chamber Trade & Industry Development Centre 14. Now adverting to the facts of present case, as noted above the Ld. CIT(A) has not disputed the objects of assessee, which are of general public charitable purpose. We find that the case of the assessee throughout the proceedings at all levels are that the dominant and prime objective of assessee-trust, was not desired to earn profits but, with sole object of promoting trade and commerce not for itself, but promoting trade and commerce in South Gujarat, which is clearly a charitable purpose. Considering the aforesaid legal position as held by various superior courts referred above if during the activities of promotion of object of the assessee, some profit (receipt) are generated and the said receipt is used in the activities for promotion of the object, the assessee will not lose its character of having been established for a charitable purpose. Thus, keeping in view of the aforesaid factual and legal discussions, we do not find any justifiable reason in rejecting the exemption under section 11 of the Act. Hence, the grounds of appeal raised by assessee are allowed. 15. So far as objections of the Ld. CIT-DR for the revenue that the cases relied by learned AR for assessee are on different facts and there is not a single case wherein revenue sharing was

15 ITA No. 910/AHD/2016 Assessment Year.2011-12 Southern Gujarat Chamber Trade & Industry Development Centre income from letting out of the property of the trust and other contention that the profit is given to the Sar Infracon Private Limited, and therefore creation of maintenance of the convention centre services are in relation to trade, commerce and business. As discussed above for the application of the proviso, what is necessary is that the entity should be involved in carrying on activities in the nature of trade, commerce or business, or any activity of rendering services in relation to any trade, commerce or business, In such a situation, the nature, use or application, or retention of income from such activities would not be relevant. The important elements of application of proviso are that the entity should be involved in carrying on the activities of any trade, commerce or business or any activities of rendering service in relation to any trade, commerce or business. We may further retreat that the lower authorities have not disputed the facts that letting out of the convention centre is in furtherance of the abject of the assessee. Even if, some surplus is generated said receipt is used in the activities for promotion of the object, the assessee will not lose its character of having been established for a

16 ITA No. 910/AHD/2016 Assessment Year.2011-12 Southern Gujarat Chamber Trade & Industry Development Centre charitable purpose. Therefore, we do not find any convincible force in the submissions of the Ld. CIT-DR for the revenue. 16. In the result the grounds of appeal raised by the assessee are allowed. Resultantly the appeal of the assessee is allowed. Order pronounced on 6th July 2021 by placing result on notice board. Sd/- Sd/- (DR. ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat; Dated: 06/07/2021 Rahul Sharma, Sr. P.S. (on tour) Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, //True Copy// (Sr. Private Secretary) ITAT, Surat