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Income Tax Appellate Tribunal, AHMEDABAD A BENCH, AHMEDABAD
Per Bench:
These six appeals pertain to the same assessee, involve some common issues and were heard together. As a matter of convenience, therefore, all the six appeals are being disposed of by way of this consolidated order.
The lead order in this case is passed by the CIT(A) for the assessment year 2011-12, and in all other cases the same has been followed. We will, therefore, take up the assessment year 2011-12 first. The related appeal is ITA No 3565/Ahd/16.
ITA No. 3565/Ahd/16 Assessment year 2011-12
This appeal is directed against the order dated 1st September 2016 passed by the 3. CIT(A) in the matter of assessment under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’), for the assessment year 2011-12, on the following grounds:
ITA Nos.: 772 and 2656/Ahd/17, 3565/Ahd/16, 426, 2657 and 2658/Ahd/17 Assessment years: 2009-10, 10-11, 11-12, 12-13, 13-14 and 14-15 Page 2 of 15 “I. Whether on the facts and in the circumstances of the case the is Ld. CIT(A) justified in giving the benefit of Section 11 of the Act by deleting the addition of Rs.1,85,46,802/- which the disallowed by invoking the provision of section 2(15) of- the Act.
II. Whether on the facts and the circumstances of the case is the Ld. CIT(A) justified in treating the expenses like Assistance to Voluntary Agencies, Management Assistance & Training, Public Education Programme, Research & Publications and Expenses for community service as application of income.
III. 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.
IV. 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.”
There are thus two issues requiring our adjudication in this appeal- first, whether or not the CIT(A) was justified in holding that proviso to Section 2(15) will not have any application on the facts of this case and thus benefit of Section 11 cannot be declined to the assessee; and, second- whether or not the CIT(A) was justified the expenses, like assistance to voluntary agencies, management assistance and training, public education programme, research and publications and expenses for community service, as application of income for the purposes of Section 11 of the Act.
To adjudicate on these issues, only a few material facts need to be taken note of. The assessee before us is a society registered as a charitable institution registered under section 12AA of the Act. The assessee filed a return of income on 26.9.2011 showing NIL income. During the course of scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has shown gross receipts of Rs 3,81,01,051, and a surplus of Rs 39,94,650. In the computation of income, the assessee had claimed application of funds for charitable purposes to the extent of Rs 3,81,16,559 and claimed exemption under section 11 of the Act. When the Assessing Officer probed the matter further, he found that out of total receipts of Rs 3,81,01,051, a sum of Rs 2,73,26,591 (i.e. 71.72% of revenues) is in respect of garba event only. The Assessing Officer also noted that the assessee organizes one of the most popular and prestigious garba event in Baroda in a highly professional manner, that the assessee charges entry fees from the participants as also the stall owners, and that it is in the nature of a business activity. It was in this backdrop that the assessee required the assessee to justify the eligibility for exemption of income under section 11, in the light of the provisions of
ITA Nos.: 772 and 2656/Ahd/17, 3565/Ahd/16, 426, 2657 and 2658/Ahd/17 Assessment years: 2009-10, 10-11, 11-12, 12-13, 13-14 and 14-15 Page 3 of 15 Section 13(8) read with proviso to Section 2(15). In response to this requisition, the assessee explained at length about the activities of the United Way of Baroda, which includes supporting 120 NGOs and volunteer driven activities that link, support and deliver health and human services to improve the quality of life in the society. Its mission was said to be “to improve and make Baroda a better place to live in” and its vision was stated to be “to increase the organized capacities of people and to take care of one another”. It was also pointed out that the objectives of the society include “mobilizing resources from the local communities and the people having affiliation and concern for India in general, and Gujarat in particular, residing in India or abroad and to apply them for strengthening the services in education, health and human care and other social sectors existing in Baroda and State of Gujarat” and “assessing on a continuing basis the need for human service programs, to seek solution to human problems, to assist in the development of new or the expansion or modification of existing human services programs, and to foster cooperation among local, state and national agencies for providing service to the community”. It was also pointed out that the assessee contributes by strengthening the services in education, by providing vocational training to the disabled, helping orphans, empowering women through various programs and providing mid meal to poor students. The details of the eye camp and thalassemia screening and detection camp conducted by the assessee were also furnished. The assessee also gave details of how the monies are spent to these ends. As regards the application of proviso to Section 2(15), it was pointed out that only when the institutions are carrying out activities on commercial lines with profit motive, this provision comes into play. It was pointed out that surplus funds are purely incidental and the institution is not run on the commercial lines at all. Elaborate legal submissions were made on the scope of proviso to Section 2(15) and its legislative history and background. A reference was also made to CBDT circular No. 11/2008 dated 29th December 2008 in support of the proposition the proviso to Section 2(15) will not apply in respect of activities involving relief to poor, education or medical relief, even if it incidentally involves the carrying on of commercial activities. It was then pointed out that main object of the trust is to mobilize the resources from local communities and the people having affiliation and concern for India in general, and Gujarat in particular, residing in India or abroad, and to apply them for strengthening the services in education, health and human care and the other social sectors of the underprivileged. It was thus contended that the proviso to Section 2(15) will have no application in this case. The assessee also made elaborate submissions on the connotations of expressions ‘business activities’ and made out a case as to how the activities
ITA Nos.: 772 and 2656/Ahd/17, 3565/Ahd/16, 426, 2657 and 2658/Ahd/17 Assessment years: 2009-10, 10-11, 11-12, 12-13, 13-14 and 14-15 Page 4 of 15 of the assessee, even with respect to holding the garba event, do not constitute business activities.
None of these submissions, however, impressed the Assessing Officer.
The Assessing Officer was of the view that how the income is applied is one thing, but what is much more important is, what he termed as, “gravity of generation of income”. He referred to the provisions of Section 2(15), as amended with effect from 1st April 2009, and observed that “after the insertion of the above proviso, the advancement of any other object of public utility shall not be a charitable purpose, if it involves carrying on of (i) any activity in the nature of trade, commerce or business; (ii) any activity of rendering any services in relation to any trade, commerce or business, for cess or fee or any other consideration, irrespective of the nature of use or application or retention of income from such activity”. He then referred to the monetary threshold limits brought about by the Finance Act, 2010, with respect to revenues generated by such activities. The Assessing Officer then referred to, and relied upon, the memorandum explaining the provisions of Finance Act, 2008. He then noted that the main activity of the assessee is to organize garba event which generates more than 71% of its revenues and such a predominant object can at best be an object of general public utility. It was then noted that the application of earnings from this activity will not end the nature of prime activity. He then referred to the provisions of Section 13(8) and observed that the benefits of section 11 and 12 will not be applicable even in a case of registered charitable institution in a situation in which the provisions of Section 2(15) come into play as in this case. The Assessing Officer reiterated that sale of entry tickets and hiring out of stalls is clearly a commercial activity. The Assessing Officer thus rejected the claim of exemption under section 11. While he allowed deduction, in computation of income, of such expenses as were incidental to earning of the income, the Assessing Officer disallowed the following expenses : Sr. Particulars Amount (Rs.) No. 1 FSF Doubtful Loan Provided 2205000 2 Assistance to Voluntary Agencies 10822700 3 Management Assistance & Training 120317 4 Public Education Programme 468116 5 Research & Publications 37179 6 Expenses for Community Service 898840
ITA Nos.: 772 and 2656/Ahd/17, 3565/Ahd/16, 426, 2657 and 2658/Ahd/17 Assessment years: 2009-10, 10-11, 11-12, 12-13, 13-14 and 14-15 Page 5 of 15 8. The Assessing Officer thus computed taxable profits at Rs 1,85,46,802. Aggrieved, assessee carried the matter in appeal before the CIT(A). Learned CIT(A), in a very elaborate and well reasoned order, reversed the stand of the Assessing Officer and held the assessee to be eligible for section 11 and 12 benefits as, in his considered opinion, the proviso to Section 2(15) had no application in the matter. While holding so, learned CIT(A), inter alia, reasoned as follows:
“5.3 I have carefully considered the facts and circumstances of the case, the observations of the Assessing Officer, the submissions of the assessee, material available on record and the judicial pronouncements on the subject. The assessee is registered as a trust under Bombay Public Trust Act with the Charity Commissioner and also has registration u/s 12AA and 80G of the Income-tax Act. The Assessing Officer noted that the assessee was organizing annual Garba event during Navratri Festival and 71.72% of its annual receipt was generated from that single event. Based on this observation, the Assessing Officer inferred that the prime objective of the assessee was to organize its annual Garba event, which was a commercial activity, hit by the first proviso to section 2(15) of the Act. He also denied exemption u/s 11 of the Act to the assessee, on this ground. However, the Assessing Officer has nowhere referred to the objects of the assessee, which are the guiding points for assessee's activities.
5.4 Perusal of the Memorandum of Association of the assessee reveals that assessee's first and foremost aim and objective of the assessee is 'To mobilize resources from local communities and people having affiliation to Gujarat and Baroda in particular residing in India and abroad; and to apply them in education, health, human care and social sectors existing in Baroda and the State of Gujarat." From the above, it is clear that assessee's objective is to provide education and medical relief (health and human care) to its target population and to that end, its aim was also to mobilise and generate resources from the local communities. It is obvious from assessee's Memorandum of Association that its objects viz. providing education and health are included in the second and third limb of the definition of "Charitable purpose" as defined u/s 2(15) of the Act. No charitable activity can be conducted in vacuum, without financial resources. Therefore, the assessee is also engaged in organising annual Garba events in Baroda, which provide a large part of its financial requirements for its activities. It is seen from the material available on record that the assessee's activities include providing Ayurvedic medicines at nominal charges to beneficiaries and on further discount of 15% to senior citizens, provided trained medical personnel to KGP Children Hospital for screening out school children for ophthalmic problems, provided funds for education, recreation, prevocational training for mentally challenged children, has provided study loans to academically bright students of financial weaker sections, has provided funds for providing mid- day meals to school children for their better health and nutrition etc. It is therefore, seen that the activities of the assessee are in the nature of education and medical relief, which are in consonance with its stated objectives. It is seen that the assessee organizes its annual Garba event as a part of its fund raising activity and the funds raised by such event are used for assessee’s objects. It is true that not all the activities
ITA Nos.: 772 and 2656/Ahd/17, 3565/Ahd/16, 426, 2657 and 2658/Ahd/17 Assessment years: 2009-10, 10-11, 11-12, 12-13, 13-14 and 14-15 Page 6 of 15 of the assessee relate to either education or medical relief, but the fact lemons that the assessee is actually involved in educational and medical relief activities in a major way, which is in congruence with its aims and objectives.
5.5 The provisions of section 2(15) of the Act read as under-
"(15) "charitable purpose" includes 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 object of general public utility:
Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity:
Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is ten lakh rupees or less in the previous year;"
5.6 The Assessing Officer has alleged that assessee's activity of organizing Garba is in the nature of business, trade and commerce. However, the assessee has counteracted the same and has submitted that it's nothing but mobilization of funds for the aims and objects of the assessee. The assessee has asserted that since there is no profit motive and since the Garba event is a fund raising activity, the same cannot be construed as business, trade or commerce. Many activities of genuine charitable purposes may still generate surplus, however, the same does not render the activity as trade, commerce or business. The objects of the assessee trust clearly establish that the prime object of the assessee was for charitable purpose in the nature of education and medical relief. Profit making is neither the aim nor the object of the assessee trust. It was not the principle activity of the trust. Merely because while carrying out the activities for the purpose of achieving its objects, certain surplus was generated, it cannot be said that the assessee trust is engaged in trade , commerce or business. Similar views have also been expressed by Hon'ble Gujarat High Court in the case of DIT (Exemption) vs Sabarmati Ashram Gaushala Trust [2014] 44 taxmann.com 141 (Guj), Hon'ble ITAT, Delhi has, in the case of DDIT (E) vs Institute of Chartered Accountants of India [2016] 70 taxmann.com 54 (Delhi-Trib.), held that ICAI was an educational institute and its coaching activities, which generated surplus, fell within meaning of charitable purpose under section 2(15), hence it would be entitled to exemption under section 11. Therefore, simply because an activity has generated surplus, it cannot be said that the same constitutes trade, commerce or business.
5.7 Hon'ble ITAT, Delhi has, in the case of DDIT (E) vs All India Football Federation [2015] 62 taxmann.com 362 (Delhi - Trib.), has held that the assessee viz. All India Football Federation was constituted with an objective of promoting sports of football. Apart from Government and FIFA grant, assessee earned income from allocating sponsorship rights and telecasting rights of matches and this fund was
ITA Nos.: 772 and 2656/Ahd/17, 3565/Ahd/16, 426, 2657 and 2658/Ahd/17 Assessment years: 2009-10, 10-11, 11-12, 12-13, 13-14 and 14-15 Page 7 of 15 required for advancement of main objectives of sports promotion activity as grants were very insufficient, Hon'ble ITAT held that the mere fact that assessee had generated sponsorship funds during course of carrying on ancillary objects, would not alter character of main objects which continued to be charitable, and not to earn profits and proviso to section 2(15) could not be applied to assessee society and assessee was entitled to exemption under section 11.
5.8 From the perusal of the material available on the record, it is clear that the first and foremost object of assessee's. existence is education, health and human care and a large part of the activities carried out by the assessee, are in the nature of education, medical relief and relief to the poor, which are covered by the first three limbs of the 'Charitable purpose1 definition u/s 2(15) of the Act. I agree with the assessee that the newly inserted proviso to section 2(15) of the Act only comes in to play when the trust is engaged in "the advancement of any other object of general public utility" covered by the fourth limb of section 2(15). Since the assessee was covered not by the fourth limb of section 2(15) of the Act, it was not hit by the newly inserted proviso to section 2(15) of the Act. Hon'ble ITAT, Bangalore has, in the case of Vivekanand General Hospital vs CIT [2014] 49 taxmann.com 392 (Bangalore- Trib.), held that
"15. We have considered the rival submissions. We are in agreement with the arguments put forth on behalf of the assessee. As rightly contended by learned counsel for the assessee, the definition of "charitable purpose" has several limbs, viz., (i) relief of the poor, (ii) education, (iii) medical relief, (iv) preservation of environment (including watershed, forest and wildlife), (v) preservation of monuments or places or objects of artistic or historic interest, and (vi) advancement of any other object of general public utility. Proviso to section 2(15) of the Act is applicable only in respect of a charitable institution which has the object of "any other object of general public utility".
5.9 Hon'ble Gujarat High Court has, in the case of DIT (E) vs Ahmedabad Management Association [2014] 47 taxmann.com 162 (Gujarat), has held that newly inserted proviso to section 2(15) will apply to entities whose purpose is advancement of any other object of general public utility but will not apply to entities engaged in activities in nature of relief to poor, education or medical relief.
"5.3 Section 11 of the Act provides that subject to the provisions of Section 60 to 63 the income derived from property held under trust wholly for charitable or religious purposes to the extent to which such income is applied to such purposes in India, and, where any such income is accumulated or set apart for application to such purposes in India shall not be included in the total income of the previous year of the person in receipt of the said income.
'"Charitable purpose" is defined under Section 2(15) of the Act, which reads as under;
"Charitable purpose" includes relief of the poor, education, medical relief [preservation of environment (including watersheds, forests and wildlife) and
ITA Nos.: 772 and 2656/Ahd/17, 3565/Ahd/16, 426, 2657 and 2658/Ahd/17 Assessment years: 2009-10, 10-11, 11-12, 12-13, 13-14 and 14-15 Page 8 of 15 preservation of monuments or places or objects of artistic or historic interest] and the advancement of any other object of general public utility.'
However, subsequently and with effect from Assessment Year 2008-09 proviso to Section 2(15) of the Act has been added and Section 2(15) has been amended by the Finance Act, 2008 by adding the proviso which states that the 'advancement of any other object of general public utility' shall not be a charitable purpose if it involves the carrying on of-(a) any activity in the nature of trade, commerce or business; or (b) any activity of rendering any service in relation to any trade, commerce or business for cess or fee or any other consideration, irrespective of the nature of use or application, or retention of the income from such activity. The revenue has denied the exemption claimed by the assessee under Section 11 of the Act mainly relying upon the amended Section 2(15) of the Act by submitting that the case of the assessee would fall under the fourth limb of the definition of 'charitable purpose i.e. 'advancement of any other object of general public utility' and, therefore, the assessee shall not be entitled to exemption from tax under Section 11 of the Act.
Therefore, the first question, which is posed for consideration of this Court is, whether proviso to Section 2(15) of the Act would be applicable in case where it is found that the activity of the assessee is an educational activity and whether the activities of the assessee can be said to be educational activities or not?
5.4 Now while considering whether the activities of the assessee can be said to be educational activities or not the decision of this Court as well as Hon'ble the Supreme Court is required to be referred to and considered. In the case of Gujarat State Co-operative Union (Supra) it is held by the Division Bench of this Court that mere existence of profit will not disqualify institution for exemption under Section 10(22) of the Act, if sole purpose of its existence is not profit making but is educational activities. In the said decision the Division Bench also considered the decision of Hon'ble the Supreme Court in the case of Sole Trustee, Lok Shikshana Trust (Supra), which has been relied upon by the Assessing Officer as well as the learned Counsel appearing on behalf of the revenue, in the said decision the Division Bench of this Court has observed as under;
'It appears to us that the decision of the tribunal which seeks to rest it on the observations made by the Supreme Court in Loka Shikshana Trust's (Supra) for holding that, the assessee is not entitled to exemption under Section 10(22) of the Act is based on a complete misreading of the observations of the Supreme Court. In Loka Shikshana Trust's (Supra) the Supreme Court, while dealing with the provisions of Section 11 road with Section 2(15) of the Act, which defines "charitable purpose" observed as under;
"The sense in which the word 'education' has been used in Section 2(15) of the Act in the systematic instruction, schooling or training given to the young is preparation for the work of life. It also connotes the whole course of scholastic
ITA Nos.: 772 and 2656/Ahd/17, 3565/Ahd/16, 426, 2657 and 2658/Ahd/17 Assessment years: 2009-10, 10-11, 11-12, 12-13, 13-14 and 14-15 Page 9 of 15 instruction which a person has received. The word 'education' has not been used in that wide and extended sense, according to which every acquisition of further knowledge constitutes education. According to this wide and extended sense, travelling is education, because as a result of travelling you acquire fresh knowledge....but this not the sense in which the word 'education' is used in Clause (15) of Section 2. What 'education' connotes in that Clause is the process of training and developing the knowledge, skill, mind and character of students by normal schooling?
The Supreme Court, in the above observations by referring to the systematic instruction, schooling or training given to the young has only cited an instance in order to indicate as to what the word "education" appearing in Section 2(15) of the Act which defines "charitable purposes" is intended to mean. We are certain that these observations were not intended to keep out of the meaning of the word "education", persons other than "young. The expression "schooling" also means "that schools, instructs or educates" (The Oxford English Dictionary Vol. IX, page 217). The Supreme Court has observed that the word "education" also connotes the whole course of scholastic instruction which a person has received. This clearly indicates that the observations of the Supreme Court were not intended to give a narrow or pedantic sense to the word "education". By giving further illustrations of a traveler gaining knowledge, victims of swindlers and thieves becoming wiser, the visitors to night clubs adding to their knowledge the hidden mysteries of life, the Supreme Court has indicated that the word "education" is not used in a loose sense so as to include acquisition of even such knowledge. The observations of the Supreme Court only indicate the proper confines of the word "education" in the context of the provisions of Section 2(15) of the Act. It will not be proper to construe these observations in a manner in which they are construed by the tribunal when it infests from these observations, in paragraph 17 of its judgment, that the word "education" is limited to schools, colleges and similar institutions and does not extend to any other media for such acquisition of knowledge. The observations of the Supreme Court do not confine the word "education" only to scholastic instructions but other forms of education also are included in the word "education". As noticed above, the word "schooling" also means instructing or educating. It, therefore, cannot be said that the word "education" has been given an unduly restricted meaning by the Supreme Court in the said decision. Though, in the context of the provision of Section 10(22), the concept of education need not be given any wide or extended meaning, it surely would encompass systematic dissemination of knowledge and training in specialized subjects as is done by the assesses. The changing times and the ever widening horizons of knowledge may bring in changes in the methodology of teaching and a shift of the better in the institutional setup. Advancement of knowledge brings within its fold suitable methods of its dissemination and though the primary method of sitting in a classroom may remain ideal for most of the initial education, it may become necessary to have a different outlook for further education, ft is not necessary to nail down the concept of education to a particular formula or to flow it only through a defined channel. Its progress lies in the acceptance of new ideas and development of appropriate means to reach them to recipients.'
ITA Nos.: 772 and 2656/Ahd/17, 3565/Ahd/16, 426, 2657 and 2658/Ahd/17 Assessment years: 2009-10, 10-11, 11-12, 12-13, 13-14 and 14-15 Page 10 of 15
5.5 Now so far as reliance placed upon the decision of the Division Bench of this Court in the case of Saurashtra Education Foundation (Supra) by the learned advocate appearing on behalf of the revenue is concerned, it is required to be noted that as such the tribunal has considered the same in detail and has rightly held and observed that as such the said decision would assist the assessee rather than the revenue. It is also required to be noted that as such in the said decision the Division Bench has not taken any contrary decision that of the decision of Gujarat State Co-operative Union (Supra). It is to be noted that, on facts, it was held that the assessee cannot be said to be an educational institution and, therefore, the assessee would not be entitled to exemption as contemplated under Section 10(22) of the Act
5.6 Now applying the ratio of the decision of the Division Bench of this Court in the case of Gujarat State Co-operative Union (Supra) reproduced hereinabove and the activities of the assessee such as Continuing Education Diploma and Certificate Programme; Management Development Programme; Public Talks and Seminars and Workshops and Conferences etc., we are in complete agreement with the view taken by the tribunal that the activities of the assessee is educational activities and/or is in the field of education.
5.7 Now in view of the aforesaid finding that the activities of the assessee is in the field of education, whether the assessee is entitled to exemption under Section 11 of the 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 Section 10(23C) of the Act if they carry on commercial activities. Thus, on fair reading of Section 2(15) of the Act the newly inserted provision Section 2(15) of the Act will not apply in respect of the first three limbs of Section 2(15) of the Act i.e. relief to the poor; education or medical relief. Thus, where the purpose of a trust or institution is relief of the poor; education or medical relief, it will constitute 'charitable purpose' even if it incidentally involves the carrying on of the commercial activities. Thus, on fair reading of Section 2(15) of the Act read with Circular No.11/2008 dated 19/12/2008 it appears that if the case of the assessee does not fall within the first three limbs of Section 2(15) of the Act i.e. relief to the poor; education or medical relief and
ITA Nos.: 772 and 2656/Ahd/17, 3565/Ahd/16, 426, 2657 and 2658/Ahd/17 Assessment years: 2009-10, 10-11, 11-12, 12-13, 13-14 and 14-15 Page 11 of 15 if it falls in the fourth limb i.e. advancement of any other object of general public utility and it is found that such activity of advancement of any other object of general public utility involves carrying on of (a) any activity in the nature of trade, commerce or business; or (b) any activity of rendering any service in relation to any trade, commerce or business; for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention of the income from such activity, the same shall not be considered for "charitable purpose" and shall not be entitled to exemption under Section 11 of the Act.
5.8 In the present case, as observed hereinabove and rightly held by the tribunal, the activities of the assessee would fall within the definition of "charitable purpose" as per Section 2(15) of the Act and, therefore, would be entitled to exemption under Section 11 of the Act.
In view of the above, we are in complete agreement with the view taken by the tribunal that the activities of the assessee is related to education and, therefore, is entitled to exemption under Section 11 of the Act At this stage, it is required to be noted that right from the Assessment Year 1995-96 till 2008- 09 the activities of the assessee has been considered by the revenue as educational activities. Considering various activities of the assessee as narrated by the Assessing Officer in paragraph nos. 4 and 5 of the Assessment Order and considering the decision of the Division Bench of this Court in the case of Gujarat State Co-operative Union (Supra) we confirm the view taken by the tribunal that the activities of the assessee-Ahmedabad Management Association is related to education and, therefore, is entitled to exemption under Section 11 of the Act as claimed."
5.10 The core activity of the assesses is undisputedly charitable. The Assessing Officer has never raised any doubt about the activities carried out by the assessee. One of the major aims of the assessee is to raise resources to meet its objects relating to education, medical relief and relief to the poor. There is a close and proximate connection between the organization of Garba event and the utilization of the surplus generated, to meet the aims and objects of the assessee, which, incidentally fall within the first three limbs of section 2(15) of the Act and are out of the mischief of the newly inserted first proviso to section 2(15) of the Act. The activity of organizing the annual Garba event was with a prior and ultimate motive of providing education, medical relief and relief to the poor, such activity, even if it generates surplus, cannot be termed as trade, commerce or business, in view of the decision of Hon'ble ITAT, Delhi in Society of Indian Automobile Manufacturers vs ITO (E) [2016] 71 taxmann.com 138 (Delhi - Trib.), where it was held that where activities of assessee-society in organising seminars/conferences and Auto Expo were performed with prior object of promotion of growth of automobile industry in India which is an object of general public utility, such activities would not come within ambit of proviso to section 2(15) even if some income was generated from such activities.
5.11 In view of the above discussion, it is held that the objects of the assessee are covered by the first three limbs of the definition of 'Charitable purpose' u/s 2(15), viz. relief to poor, education and medical relief and a large part of its activities also relate
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Aggrieved by the relief so granted by the CIT(A), the Assessing Officer is in appeal before us.
We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.
Let us begin by taking a look at the provisions of Section 2(15) as it stood at the relevant point of time, which, for ready reference, is reproduced below:
Section 2(15) “charitable purpose” includes 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 object of general public utility:
Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity:
Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is ten lakh rupees or less in the previous year;
As a plain look at the above statutory provision would show the disability on account of first proviso to Section 2(15) comes into play only in a case in which the objects of an institution are objects of general public utility. In contrast, however, in the present case, the objects of the institution are in the area of relief to poor, education and medical relief, and that is the area in which the core activities are performed. The objects of the assessee society, for ready reference, are reproduced below:
ITA Nos.: 772 and 2656/Ahd/17, 3565/Ahd/16, 426, 2657 and 2658/Ahd/17 Assessment years: 2009-10, 10-11, 11-12, 12-13, 13-14 and 14-15 Page 13 of 15 “The objectives of Appellant as per Constitution are listed below: - To mobilize resources from local communities and the people having affiliation and concern for India and Gujarat in particular residing in India or abroad; and to apply them for strengthening the services in education, health, human care and other social sectors existing in Baroda and State of Gujarat - To assessee on a continuing basis the need for human service programs; to seek solutions to human problems; to assist in the development of new or the expansion or modification of existing human service programs and to foster cooperation among local, state and national agencies for providing service to community
- To mobilize resources for specific need based project and apply them for strengthening services in one or more sectors existing in Baroda and/or anywhere India - To obtain as far as possible the financial resources, both governmental and voluntary, needed to meet the human service needs of the community and to reduce the duplication of efforts to the extent feasible and practical for resource mobilization - To deploy United Way financial and management support so as to maximize the resources available to agencies for services aimed at the most urgent current needs of the community - To facilitate starting of United Way Organizations in various cities, towns and villages in India with local support and with the objective of promoting, strengthening and coordinating the voluntary efforts of citizens by providing assistance to them.”
In pursuance of these objects, even if the assessee performs some activities, which can be alleged to be on commercial lines, are performed, the charitable nature of the objects will not be vitiated as proviso to Section 2(15) comes into play only in respect of “any other object of general public utility” and is not covered by the specific objects pointed out earlier- including relief to poor, education and medical relief. Nothing, therefore, really turns on the garba event being organized on the basis of, what can be termed as, commercial principles. That aspect of the matter is not relevant in the present case. As we have noted earlier, one of the major object of the assessee society is “mobilizing resources from the local communities and the people having affiliation and concern for India in general, and Gujarat in particular, residing in India or abroad and to apply them for strengthening the services in education, health and human care and other social sectors existing in Baroda and State of Gujarat”, and there is also no dispute that considerable work in this area has been carried out in this area as evident from the material produced before the Assessing Officer, copies of which have been filed before us as well. The genuineness of this object, and furtherance of this object, cannot even be doubted. We are satisfied that the activities carried out by the assessee are in the
ITA Nos.: 772 and 2656/Ahd/17, 3565/Ahd/16, 426, 2657 and 2658/Ahd/17 Assessment years: 2009-10, 10-11, 11-12, 12-13, 13-14 and 14-15 Page 14 of 15 nature of education, medical relief and help to poor which are specifically covered by section 2(15) and not by its residuary segment. The proviso to Section 2(15) thus indeed has no application in the matter. As for the denial of deduction in respect of expenses like assistance to voluntary agencies, management assistance and training, public education programme, research and publications and expenses for community service, that is only consequential in nature inasmuch as the deductions were declined in computation of business income from garba event but then once the proviso to Section 2(15) is held to be inapplicable on the facts of this case, these expenses are to be treated as application of income. Learned representatives do not dispute this position.
In view of these discussions, as also bearing in mind entirety of the case, we are in considered agreement with the well reasoned conclusions arrived at by the learned CIT(A) and we, therefore, decline to interfere in the matter.
In the result, ITA No. 3565/Ahd/16 is dismissed.
ITA Nos.: 772 and 2656/Ahd/17, 426, 2657 and 2658/Ahd/17 Assessment years: 2009-10, 10-11, 12-13, 13-14 and 14-15
Learned representatives fairly agree that whatever we decide in the above appeal will also apply mutatis mutandis in the all the remaining five appeals as well, even though there is a slight variation in wordings of the grounds of appeal, because, in substance, the grievances remain the same, and the CIT(A) has only followed his order impugned in the above appeal. In view of this admitted position, these remaining five appeals must also fail.
In the result, all the six appeals are dismissed. Pronounced in the open court today on the 25th day of June, 2019.
Sd/- Sd/-
Justice P P Bhatt Pramod Kumar (President) (Vice-President) Ahmedabad, dated the 25th day of June, 2019
ITA Nos.: 772 and 2656/Ahd/17, 3565/Ahd/16, 426, 2657 and 2658/Ahd/17 Assessment years: 2009-10, 10-11, 11-12, 12-13, 13-14 and 14-15 Page 15 of 15
Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) DR (6) Guard File
By order