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Income Tax Appellate Tribunal, AHMEDABAD “C” BENCH
Before: SHRI PRADIP KUMAR KEDIA & SHRI MAHAVIR PRASAD
PER MAHAVIR PRASAD, JUDICIAL MEMBER
This appeal filed by the Revenue is directed against the order of the Ld. CIT(A)-9, Ahmedabad dated 06.07.2017 pertaining to A.Y. 2010-11. In its appeal, Assessee has taken following grounds:
ITA No. 2323/Ahd/2017 2 . A.Y. 2010-11 I.The Ld. CIT(A) has erred in law and on the facts of the case in deleting the penalty of Rs.53,58,585/-levied u/s. 271 (1 )(c) of the Act. II. The Ld. CIT(A) failed to appreciate that the denial of exemption u/s.11 of the Act has been confirmed in quantum appeal. III. The Ld. CIT(A) failed to appreciate the fact that the claim of exemption u/s.11 by the assessee trust without this activities being carried out in terms of object of the trust, is surely covered under" furnishing in accurate particulars of income" as per provisions of section 271 (1) (c ) of the Act. IV. On the facts and circumstances of the case, the Ld. Commissioner of Income-Tax (Appeals) ought to have upheld the order of the Assessing Officer. V. It is, therefore, prayed that the order of the Ld. Commissioner of Income-tax (Appeals) may be set aside and that of the Assessing Officer be restored.
The assessee is a trust and providing advisory, guidance and research services to the plastic manufacturers in Gujarat.
At the time of hearing, ld. A.R. submitted that in quantum proceeding, ITAT has allowed the appeal of the assessee and submitted that nothing remained for confirming the penalty against the assessee and filed copy of the ITAT order in favour of the assessee and in ITA No. 2840/Ahd/2014 for A.Y. 2010-11 dated 22.10.2019 wherein ITAT has allowed the appeal of the assessee with following observation:
We have gone through the relevant record and impugned order. The trust is registered u/s. 12AA of the I.T. Act dated 10.07.1998 since then trust is carrying out its activities without any hindrance and prior to assessment year 2010-11. Activities of the trust were going on without any hindrance and returns of the trust were duly accepted by the department.
ITA No. 2323/Ahd/2017 3 . A.Y. 2010-11 7. At the outset, ld. A.R. cited an order of our own Bench in the case of ITO vs. Indian Stainless Steel Development Organisations ITA No. 2441/Ahd/2015 dated 14.05.2018 wherein in similar facts and circumstances relief was granted to the assessee and appeal of the Revenue was dismissed and operative Para of the said order is reproduced herein:
We have gone through the relevant record in the impugned order in support of its contention. Ld. D.R. stated that ld. CIT(A) has wrongly given the relief to the assessee and stated that the fund was raised by way of exhibition space charges and advertisement income and TDS was also deducted. The objects and activity of the assessee has to seen in the light of the provisions of Section 2(15) of the Income Tax Act. Charitable objects defined in the section 2(15) of the Act are: * relief of the poor, * education, * medical relief, *preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and * the advancement of any other objection of general public utility.
On the other hand, ld. A.R. stated that it is very clear from the objects of the Trust as mentioned in its Article of Memorandum the main objects are to promote trading, dealing and manufacturing Stainless steel and to protect the interest of members .The assessee Trust had organized Stainless Steel fair called "INDIANOX-2010" at Ahmedabad during 16th to 19th January, 2010 from its brochure it is noticed from there were 800 domestic exhibitors and 30 International exhibitors. The activity of the assessee was on the charging basic. The assessee charge entrance fees, earn through the selling of exhibition space and also from the exhibition advertisement charges. Therefore the assessee
ITA No. 2323/Ahd/2017 4 . A.Y. 2010-11 clearly falls under the category "advancement of any other object of general public utility". The assessee earned through the selling of exhibition space amounts to Rs. 37108743/-. On the TDS Certificate issued by deducting person shows the nature of payment as contractor, rent and fees and in support of its contention. Ld. A.R. cited an order of ITAT Kolkata Bench in ITA No. 1491/Kol/2012 & ITA No. 1284/Kol/2012 for Assessment Years 2008-09 & 2009- 10 titled as Indian Chamber of Commerce Vs. ITO wherein in similar circumstances ITAT Kolkata Bench granted relief to the assessee with following observation:- 38. In view of the above discussion, we are of the considered view that in the given facts and detailed reading of the various judicial decisions through the years, interpreting the definition of "charitable purpose" as laid out in section 2(15) of the Act and also the definition of "business" in relation to the said section amply revels that the theory of dominant purpose has always, all through the years, been upheld to be the determining factor laying down whether the Institution is Charitable in nature or not. Where the main object of the Institution was "charitable" in nature, then the activities carried out towards the achievement of the said, being incidental or ancillary to the main object, 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 clearly 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 or ancillary activity or purpose, for achieving the main purpose, was profitable in nature. In our view the basic principle underlying the definition of "charitable purpose" remained unaltered even on amendment in the section 2(15) of the Act w.e.f. 01/04/2009, though the restrictive first proviso was inserted therein. Accordingly, in the given facts of the case as discussed above in detail, the assessee association's primary purpose was advancement of objects of general public utility and it would remain charitable
ITA No. 2323/Ahd/2017 5 . A.Y. 2010-11 even if an incidental or ancillary activity or purpose, for achieving the main purposes profitable in nature. Hence, assessee is not hit by newly inserted proviso to section 2(15) of the Act. This issue of assessed appeal is allowed. 39. In the result, both appeals of assessee are allowed.
Assessee also cited an order of ITAT Kolkata Bench in ITA No. 735/Kol/2013 titled as ITO Vs. Indian Leather Products Association wherein in similar circumstances relief was granted to the assessee with following observation:- Charitable Trust—Income of Charitable Trusts-Benefit u/s. 11—Assessee was Association duly registered u/s 12A—Assessee also held certificate u/s 80G— Assessee was carrying on charitable activities since 1988—Association of Assessee was formed by leather merchants for various activities such as spreading, knowledge among members, regarding the trade to remove hardship of members, to assist members in increasing volume by organizing trade shows, fairs, seminars and publishing of magazines for sole benefit and advantages of leather industry—Prime object of Assessee was to promote leather trade— During previous year, Assessee derived income from conducting trade shows, seminars, fairs, SVHC testing, leather goods park booking fees, fashion magazine and entry tickets for various trade shows—AO was of view that, Assessee was allowing outsiders also to participate by keeping their stall in trade fair organized by Assessee—AO was therefore of view that, Assessee was having dealings or relations with outside body and generating income—AO therefore concluded that, Assessee was deriving income by carrying on activity in nature of trade, commerce or business—AO accordingly denied benefit of exemption u/s 11 of the Act to Assessee—AO brought to tax gross receipts as per income and expenditure account after deducting expenditure incurred to tax—Before CIT(A) Assessee explained charitable nature of Assessee and submitted that, it was existing for charitable purpose—CIT(A) was of view that, main contribution from non-
ITA No. 2323/Ahd/2017 6 . A.Y. 2010-11 members was stall booking charges in trade fair organized by Assessee during previous year-He was of view that, as per First Proviso to S. 2(15), advancement of any other object of general public utility should not be charitable purpose, if it involved carrying on activity in nature of trade, commerce or business—Assessee had not carried out any such activity by charging rent from non-members for stalls in trade fair organized by Assessee—CIT(A) accordingly directed AO to compute income of Assessee without invoking First Proviso to Section 2(15)— Held, it could be seen from bye-laws of Assessee that, dominant and prime objective of Assessee was not profit making—Prior to introduction of the proviso to S 2(15), there was no dispute that, Assessee was established for charitable purposes—Contribution Assessee received from non-members in conducting trade fair was Rs.15,64,556— Total receipts of Assessee during previous year was sum of Rs.l,30,26,506—It could not be said that receipts from non-members constituted major receipts of Assessee—Expenses incurred in connection with trade fairs and promotion events was Rs.29,03,411—It could not thus be said that, activity of organizing trade fairs and exhibitions and the act of collecting contribution from non-members rendered Assessee as organization existing for profit or was doing business or trade—Factual aspects and objects ofAssessee would clearly show that, Assessee did not driven primarily by desire or motive to earn profits but to do charity through advancement of object of general public utility—This was substantiated by actual income received on operations of Assessee and expenditure incurred set out in earlier paragraphs of this order— Proviso to S.2(15) was therefore not applicable to case of Assessee—Assessee was entitled to benefits of S.l1—AO had not disputed conditions necessary for allowing exemption u/s.11, except applicability of proviso to S.2(15)—Said proviso was not applicable to case of Assessee—Order of CIT(A), upheld— Assessee's income was not includible in total income—Appeal by Revenue was dismissed.
ITA No. 2323/Ahd/2017 7 . A.Y. 2010-11 10. As we can see, the assessee is in fact carrying out activities for charitable purposes and there is an excess of expenditure over income year after year and in similar circumstances relief have been granted by the ITAT Kolkata Benches and in our considered opinion, the assessee is entitled for claim of deduction u/s. 11 & 12 of Income Tax Act. After considering the above facts, we observe that the aims and object of the assessee trust were charitable in nature. The assessee has been granted registration u/s. 12AA of the Act and since its 1st year the assessee trust has carried out activities for charitable purposes. On perusal of the audited annual accounts for A.Y. 2011-12 to 2013-14 show that the assessee trust has spent more amounts on the object of the trust than the total receipts as mentioned below:- A.Y. Amount spent for object of trust Total 2011-12 34,53,361/- 5,41,889/- 2012-13 12,57,968/- 4,62,409/- 2013-14 10,76,392/- 33,240/-
It is clear that there is an excess of expenditure over income year after year and the assessee trust has been carrying out activities for charitable purposes. We consider that the main object of the assessee trust was the promotion, protection and development of trade commerce and industry, therefore its income generated from trade fair etc. would be exempted from tax u/s. 11 r.w.s. 2(15) of the Act. In view of the above facts and findings, we are inclined with the decision of ld. CIT(A). Therefore, the appeal of the Revenue is dismissed.
In the result, the appeal filed by the Department is dismissed.
ITA No. 2323/Ahd/2017 8 . A.Y. 2010-11 8. On the other hand, ld. D.R. vehemently relied on the order of the ld. CIT(A). But we are not agree with the contention of the ld. D.R. Since matter is fairly covered in favour of the assessee.
Thus in parity with our own order in similar facts and circumstances, we allow the appeal of the assessee.
In the result, appeal filed by the Assessee is allowed.
Since ITAT has already granted relief to the assessee in quantum proceeding now nothing remain against the assessee. Thus, appeal of the Revenue is dismissed.
In the result, appeal filed by the Revenue is dismissed.
Order pronounced in Open Court on 21 - 11- 2019
Sd/- Sd/- (PRADIP KUMAR KEDIA) (MAHAVIR PRASAD) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad: Dated 21/11/2019 Rajesh Copy of the Order forwarded to:- 1. The Appellant. 2. The Respondent. 3. The CIT (Appeals) – 4. The CIT concerned. 5. The DR., ITAT, Ahmedabad. 6. Guard File. By ORDER
Deputy/Asstt.Registrar ITAT,Ahmedabad