DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION)-1(1), MUMBAI, MUMBAI vs. ALL INDIA GEM AND JEWELLERY DOMESTIC COUNCIL, MUMBAI

3. On the facts and circumstances of the case and in law, the 3. On the facts and circumstances of the case and in law, the 3. On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) has erred in learned Commissioner of Income Tax (Appeals) has erred in learned Commissioner of Income Tax (Appeals) has erred in relying upon the relying upon the principle of mutuality despite clear findings of principle of mutuality despite clear findings of the Assessing Officer that the assessee's activities benefit the Assessing Officer that the assessee's activities benefit the Assessing Officer that the assessee's activities benefit specified members and big business houses/jewellers and are specified members and big business houses/jewellers and are specified members and big business houses/jewellers and are not of charitable nature. not of charitable nature.

4. On the facts and circumstances of the case and in law, 4. On the facts and circumstances of the case and in law, 4. On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) has erred in learned Commissioner of Income Tax (Appeals) has erred in learned Commissioner of Income Tax (Appeals) has erred in relying on the ratio of the Hon'ble Bombay High Court's decision relying on the ratio of the Hon'ble Bombay High Court's decision relying on the ratio of the Hon'ble Bombay High Court's decision in the case of CIT us Bombay Presidency Golf Club Ltd (ITA No in the case of CIT us Bombay Presidency Golf Club Ltd (ITA No in the case of CIT us Bombay Presidency Golf Club Ltd (ITA No 235 of 2017) which is distinguishable on facts and not 235 of 2017) which is distinguishable on facts and not 235 of 2017) which is distinguishable on facts and not applicable to the present case. o the present case.

5. On the facts and circumstances of the case and in law, the 5. On the facts and circumstances of the case and in law, the 5. On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) has failed to learned Commissioner of Income Tax (Appeals) has failed to learned Commissioner of Income Tax (Appeals) has failed to appreciate that the interest income earned by the assessee is appreciate that the interest income earned by the assessee is appreciate that the interest income earned by the assessee is from surplus funds placed in banks and de not partake from surplus funds placed in banks and de not partake from surplus funds placed in banks and de not partake the character of voluntary contributions or income derived property character of voluntary contributions or income derived property character of voluntary contributions or income derived property heid under trust wholly for charitable or religious purposes. heid under trust wholly for charitable or religious purposes. heid under trust wholly for charitable or religious purposes.

6. On the facts and circumstances of the case and in law, the 6. On the facts and circumstances of the case and in law, the 6. On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) has failed to learned Commissioner of Income Tax (Appeals) has failed to learned Commissioner of Income Tax (Appeals) has failed to appreciate that the memb of assessee's trust are related parties eciate that the memb of assessee's trust are related parties eciate that the memb of assessee's trust are related parties in terms of section 13(3) of the Act and the assessee is hit by in terms of section 13(3) of the Act and the assessee is hit by in terms of section 13(3) of the Act and the assessee is hit by provisions of section 13(1)(c)(ii) of the Act which denies provisions of section 13(1)(c)(ii) of the Act which denies provisions of section 13(1)(c)(ii) of the Act which denies exemption u/s 11 of the Act exemption u/s 11 of the Act 7. On the facts and circumstances of the cas 7. On the facts and circumstances of the case and in law, the e and in law, the learnind Commissioner of Income Tax (Appeals) has erred in learnind Commissioner of Income Tax (Appeals) has erred in learnind Commissioner of Income Tax (Appeals) has erred in deleting the addition of H 1,60,30,000/ deleting the addition of H 1,60,30,000/- made by the Assessing made by the Assessing Officer on account of corpus donation claimed by the assessee Officer on account of corpus donation claimed by the assessee Officer on account of corpus donation claimed by the assessee as the assessee could not furnish satisfactory enden o as the assessee could not furnish satisfactory enden o as the assessee could not furnish satisfactory enden or specific letters of donors to prove that the donations received were witho letters of donors to prove that the donations received were witho letters of donors to prove that the donations received were witho specific direction towards corpus as mandated under section specific direction towards corpus as mandated under section specific direction towards corpus as mandated under section 11(1)(d) of the Act 11(1)(d) of the Act All India Gem And Jewellery Domestic Council All India Gem And Jewellery Domestic Council 8. On the facts and circumstances of the case and in law, the 8. On the facts and circumstances of the case and in law, the 8. On the facts and circumstances of the case and in law, the learnert Commissioner of Income Tax ( learnert Commissioner of Income Tax (Appeals) has failed to Appeals) has failed to appreciate that if the tru leses exemption u/s 11 due to violation appreciate that if the tru leses exemption u/s 11 due to violation appreciate that if the tru leses exemption u/s 11 due to violation of proviso to section 2(15), then ever corpus donations of proviso to section 2(15), then ever corpus donations of proviso to section 2(15), then ever corpus donations cannot be excluded. excluded.

2.1 During the year under consideration, the assessee claimed During the year under consideration, the assessee claimed During the year under consideration, the assessee claimed exemption under section 11 in respect of interest income and exemption under section 11 in respect of interest income and exemption under section 11 in respect of interest income and corpus donations. The Assessing Officer denied the exemption on corpus donations. The Assessing Officer denied the exemption on corpus donations. The Assessing Officer denied the exemption on the grounds that the assessee was a mutual concern, its activities that the assessee was a mutual concern, its activities that the assessee was a mutual concern, its activities did not constitute “charitable purpose” under section 2(15), and did not constitute “charitable purpose” under section 2(15), and did not constitute “charitable purpose” under section 2(15), and that it was hit by section 13(1)(c). The AO accordingly assessed that it was hit by section 13(1)(c). The AO accordingly assessed that it was hit by section 13(1)(c). The AO accordingly assessed interest income as business income and taxed corpus donations as interest income as business income and taxed corpus donations as interest income as business income and taxed corpus donations as ordinary revenue receipts. ry revenue receipts.

All India Gem And Jewellery Domestic Council All India Gem And Jewellery Domestic Council the assessee is a registered charitable institution, the assessee is a registered charitable institution, the assessee is a registered charitable institution,  earning of interest on bank deposits mandated under section earning of interest on bank deposits mandated under section earning of interest on bank deposits mandated under section 11(5) cannot be regarded as an activity 11(5) cannot be regarded as an activity in the nature of in the nature of business,  the proviso to section 2(15) has no application, and the proviso to section 2(15) has no application, and the proviso to section 2(15) has no application, and  corpus donations, duly supported by confirmations, are corpus donations, duly supported by confirmations, are corpus donations, duly supported by confirmations, are capital receipts exempt under section 11(1)(d). capital receipts exempt under section 11(1)(d).

3.1 The Ld. CIT(A) also noted that in earlier years the assessee had The Ld. CIT(A) also noted that in earlier years the assessee had The Ld. CIT(A) also noted that in earlier years the assessee had granted exemption under section 11 in assessments where the been granted exemption under section 11 in assessments where the granted exemption under section 11 in assessments where the AO had accepted substantial interest income without treating the AO had accepted substantial interest income without treating the AO had accepted substantial interest income without treating the assessee as a mutual concern or business entity. The relevant assessee as a mutual concern or business entity. assessee as a mutual concern or business entity. finding of the Ld. CIT(A) is reproduced as under: finding of the Ld. CIT(A) is reproduced as under:

5. Decision I have carefully perused grounds of appeal

, statement of facts, e carefully perused grounds of appeal, statement of facts, e carefully perused grounds of appeal, statement of facts, assessment order, submissions made by the Appellant and other assessment order, submissions made by the Appellant and other assessment order, submissions made by the Appellant and other details/evidences on records. details/evidences on records. 5.1 The Appellant has raised the following two vide various grounds of The Appellant has raised the following two vide various grounds of The Appellant has raised the following two vide various grounds of appeal: i. The AO has erred in con The AO has erred in concluding that the Appellant is indulging in cluding that the Appellant is indulging in business activities since it has earned interest income and, therefore, it business activities since it has earned interest income and, therefore, it business activities since it has earned interest income and, therefore, it is covered by the 1st proviso to section 2(15). is covered by the 1st proviso to section 2(15). ii. The AO erred in denying the claim u/s 11(1)(d) of the Act and taxing the corpus donation donation of Rs.1.60,30,000/- by treating the by treating the same as ordinary donations. iii. The AO has erred in holding that the Appellant is a mutual The AO has erred in holding that the Appellant is a mutual The AO has erred in holding that the Appellant is a mutual organization In this regard, the Appellant has submitted that Appellant is registered In this regard, the Appellant has submitted that Appellant is registered In this regard, the Appellant has submitted that Appellant is registered u/s 12AA of the Act. This presupposes that the Appellant is a charitable u/s 12AA of the Act. This presupposes that the Appellant is a charitable u/s 12AA of the Act. This presupposes that the Appellant is a charitable All India Gem And Jewellery Domestic Council All India Gem And Jewellery Domestic Council trust and its activities are covered u/s 2(15) of the Act. Appellant had trust and its activities are covered u/s 2(15) of the Act. Appellant had trust and its activities are covered u/s 2(15) of the Act. Appellant had been allowed exemption u/s been allowed exemption u/s 11 in AYs 2009-10 and 2010-11, wherein, 11, wherein, substantial interest income was reported. The Appellant was not treated substantial interest income was reported. The Appellant was not treated substantial interest income was reported. The Appellant was not treated as mutual concern nor held to be indulging in business activities since as mutual concern nor held to be indulging in business activities since as mutual concern nor held to be indulging in business activities since there is receipt of interest income. The Appellant has further submitted there is receipt of interest income. The Appellant has further submitted there is receipt of interest income. The Appellant has further submitted that placement of surplus funds with banks is a statutory requirement ement of surplus funds with banks is a statutory requirement ement of surplus funds with banks is a statutory requirement in terms of section 11(5) of the Act. This does not imply that the in terms of section 11(5) of the Act. This does not imply that the in terms of section 11(5) of the Act. This does not imply that the Appellant is mutual organization or it is engaged in business activities Appellant is mutual organization or it is engaged in business activities Appellant is mutual organization or it is engaged in business activities and , thus, hit by the 1st proviso to section 2(15) of and , thus, hit by the 1st proviso to section 2(15) of the Act. As regards the Act. As regards case laws relied upon by the AO, the Appellant has submitted that the case laws relied upon by the AO, the Appellant has submitted that the case laws relied upon by the AO, the Appellant has submitted that the same are misplaced. This is because the Appellant does not distribute same are misplaced. This is because the Appellant does not distribute same are misplaced. This is because the Appellant does not distribute profits and is a charitable trust registered u/s 12AA of the Act. Further, profits and is a charitable trust registered u/s 12AA of the Act. Further, profits and is a charitable trust registered u/s 12AA of the Act. Further, the Appellant being a the Appellant being a trade association, it carried out various activities trade association, it carried out various activities for its members like exhibitions, award functions, legal proceedings etc. for its members like exhibitions, award functions, legal proceedings etc. for its members like exhibitions, award functions, legal proceedings etc. the cost involved are recovered from members of the trade. This fact has the cost involved are recovered from members of the trade. This fact has the cost involved are recovered from members of the trade. This fact has been conveniently ignored by the AO. The Appellant has been conveniently ignored by the AO. The Appellant has placed reliance placed reliance on the decision of Hon’ble ITAT in its own case in AYs. 2011 on the decision of Hon’ble ITAT in its own case in AYs. 2011-12 & 2012 12 & 2012-

13. The Appellant has submitted that Hon’ble ITAT has set aside the 13. The Appellant has submitted that Hon’ble ITAT has set aside the 13. The Appellant has submitted that Hon’ble ITAT has set aside the assessment order back to the AO with a direction that the AO should assessment order back to the AO with a direction that the AO should assessment order back to the AO with a direction that the AO should strictly go by section 11 to 13 r strictly go by section 11 to 13 r.w.s. 2(15) and come to a conclusion .w.s. 2(15) and come to a conclusion without invoking principles of mutuality. The Appellant is a charitable without invoking principles of mutuality. The Appellant is a charitable without invoking principles of mutuality. The Appellant is a charitable trust covered u/s 2(15) of the Act. The Appellant has placed reliance on trust covered u/s 2(15) of the Act. The Appellant has placed reliance on trust covered u/s 2(15) of the Act. The Appellant has placed reliance on various case laws in support of the contention that merely because various case laws in support of the contention that merely because various case laws in support of the contention that merely because some facilities were outside the main charitable purpose, would not cilities were outside the main charitable purpose, would not cilities were outside the main charitable purpose, would not prevent the institution from being a valid charitable institution. The test prevent the institution from being a valid charitable institution. The test prevent the institution from being a valid charitable institution. The test to be applied is whether the object which is said to be non to be applied is whether the object which is said to be non-charitable is charitable is the primary object of the trust or is ancilla primary object of the trust or is ancillary or incidental to the ry or incidental to the dominant object which is charitable: dominant object which is charitable: d. DIT vs Bharat Diamond Bourse 126 taxman 365 (SC) DIT vs Bharat Diamond Bourse 126 taxman 365 (SC) e. CIT vs Madras Jewelers & Diamond Merchants Associations 129 ITR CIT vs Madras Jewelers & Diamond Merchants Associations 129 ITR CIT vs Madras Jewelers & Diamond Merchants Associations 129 ITR 214 f. CIT vs Andhra Chambers of Commerce 55 ITR 722 (SC) CIT vs Andhra Chambers of Commerce 55 ITR 722 (SC) [Appellant has placed reliance on several other case laws as well] ced reliance on several other case laws as well] ced reliance on several other case laws as well] Without prejudice, the Appellant has submitted that even if it is Without prejudice, the Appellant has submitted that even if it is Without prejudice, the Appellant has submitted that even if it is considered a mutual organization, the interest from bank deposits considered a mutual organization, the interest from bank deposits considered a mutual organization, the interest from bank deposits cannot be taxed. In support the same, the Appellant has placed reliance cannot be taxed. In support the same, the Appellant has placed reliance cannot be taxed. In support the same, the Appellant has placed reliance on various case laws: various case laws: d. CIT vs Delhi Gymkhana CIT vs Delhi Gymkhana e. CIT vs Standing Conference of public Enterprise 319 ITR 179 (Del) CIT vs Standing Conference of public Enterprise 319 ITR 179 (Del) CIT vs Standing Conference of public Enterprise 319 ITR 179 (Del)

All India Gem And Jewellery Domestic Council All India Gem And Jewellery Domestic Council f. Canara Bank Golden Jubilee Staff Welfare Fund vs DCIT 308 ITR Canara Bank Golden Jubilee Staff Welfare Fund vs DCIT 308 ITR Canara Bank Golden Jubilee Staff Welfare Fund vs DCIT 308 ITR 202(Kar) [Appellant has placed reliance on several other case laws as well] [Appellant has placed reliance on several other case laws as well] [Appellant has placed reliance on several other case laws as well] The Appellant has also given details of charitable activities carried on e Appellant has also given details of charitable activities carried on e Appellant has also given details of charitable activities carried on by it. Accordingly, the Appellant has submitted that it is squarely by it. Accordingly, the Appellant has submitted that it is squarely by it. Accordingly, the Appellant has submitted that it is squarely covered by the decision of Bombay High Court in the case of CIT vs covered by the decision of Bombay High Court in the case of CIT vs covered by the decision of Bombay High Court in the case of CIT vs Bombay Presidency Golf Club, of 2017, d Bombay Presidency Golf Club, of 2017, dated02/04/2019. ated02/04/2019. The Appellant has further submitted that complete details of Corpus The Appellant has further submitted that complete details of Corpus The Appellant has further submitted that complete details of Corpus donation were submitted before the AO. This being capital receipt, donation were submitted before the AO. This being capital receipt, donation were submitted before the AO. This being capital receipt, cannot be taxed. Appellant has placed reliance on the following case cannot be taxed. Appellant has placed reliance on the following case cannot be taxed. Appellant has placed reliance on the following case law: a. DIT (Exem.) vs Basanti Devi DIT (Exem.) vs Basanti Devi and Chakkhanlal Garg Educational Trust and Chakkhanlal Garg Educational Trust Appellant has, further, submitted vide letter dated 11/06/2024 that Ld Appellant has, further, submitted vide letter dated 11/06/2024 that Ld Appellant has, further, submitted vide letter dated 11/06/2024 that Ld CIT(A) has passed order in AY 2011 CIT(A) has passed order in AY 2011-12, dated 13/02/2024, wherein, 12, dated 13/02/2024, wherein, similar issue has been adjudicated in favour of the Appellant. similar issue has been adjudicated in favour of the Appellant. similar issue has been adjudicated in favour of the Appellant. 5.1.1 I have considered the submissions made by the Appellant; I have idered the submissions made by the Appellant; I have idered the submissions made by the Appellant; I have also perused the assessment order. I find that the Appellant had made also perused the assessment order. I find that the Appellant had made also perused the assessment order. I find that the Appellant had made a detailed submissions before the AO in response to the show cause as a detailed submissions before the AO in response to the show cause as a detailed submissions before the AO in response to the show cause as to why the assessee not be considered to be hit by the new proviso to to why the assessee not be considered to be hit by the new prov to why the assessee not be considered to be hit by the new prov section 2(15) r.w.s.13(8) of the Act, since it has carried out business of section 2(15) r.w.s.13(8) of the Act, since it has carried out business of section 2(15) r.w.s.13(8) of the Act, since it has carried out business of trade, commerce and also provides services in relation to trade, trade, commerce and also provides services in relation to trade, trade, commerce and also provides services in relation to trade, business or commerce. The Appellant has made a detailed submissions business or commerce. The Appellant has made a detailed submissions business or commerce. The Appellant has made a detailed submissions which have reproduced at para 5 of the as which have reproduced at para 5 of the assessment order. I find that sessment order. I find that submissions made during present proceedings have also been furnished submissions made during present proceedings have also been furnished submissions made during present proceedings have also been furnished before the AO. The AO, however, did not accept the same. The AO has before the AO. The AO, however, did not accept the same. The AO has before the AO. The AO, however, did not accept the same. The AO has held that the benefits of the Appellant society is limited to its members held that the benefits of the Appellant society is limited to its members held that the benefits of the Appellant society is limited to its members only and it does not affect the public at large. As per the AO, Appellant’s not affect the public at large. As per the AO, Appellant’s not affect the public at large. As per the AO, Appellant’s main objective is to benefit its members. Its object is not to benefit public main objective is to benefit its members. Its object is not to benefit public main objective is to benefit its members. Its object is not to benefit public at large. The Appellant does not carry out any charitable activities for at large. The Appellant does not carry out any charitable activities for at large. The Appellant does not carry out any charitable activities for the public. The AO, thus, held that the Appell the public. The AO, thus, held that the Appellant is not covered u/s ant is not covered u/s 2(15) of the Act. The AO, further, observed that members of the 2(15) of the Act. The AO, further, observed that members of the 2(15) of the Act. The AO, further, observed that members of the Appellant Trust are related parties in terms of section 13(3) of the Act Appellant Trust are related parties in terms of section 13(3) of the Act Appellant Trust are related parties in terms of section 13(3) of the Act and accumulated contribution from each of them is huge. Daily activities and accumulated contribution from each of them is huge. Daily activities and accumulated contribution from each of them is huge. Daily activities and services are exclus and services are exclusively for the benefits for members which has ively for the benefits for members which has directly or indirectly benefitted the related parties as well. Hence, the directly or indirectly benefitted the related parties as well. Hence, the directly or indirectly benefitted the related parties as well. Hence, the Appellant is also hit by provision of section 13(1 )(c)(ii) of the Act, which Appellant is also hit by provision of section 13(1 )(c)(ii) of the Act, which Appellant is also hit by provision of section 13(1 )(c)(ii) of the Act, which denies exemption u/s 11. Hence, AO has denied the claim made u/s 11 denies exemption u/s 11. Hence, AO has denied the claim mad denies exemption u/s 11. Hence, AO has denied the claim mad of the Act and proceeded to compute income on the basis of principle of of the Act and proceeded to compute income on the basis of principle of of the Act and proceeded to compute income on the basis of principle of mutuality. The AO has held the Appellant to be a mutual organization mutuality. The AO has held the Appellant to be a mutual organization mutuality. The AO has held the Appellant to be a mutual organization since its object is to promote, manage or assist in the promotion or since its object is to promote, manage or assist in the promotion or since its object is to promote, manage or assist in the promotion or management for development of trade a management for development of trade and commerce for its members nd commerce for its members only. The AO has held that the concept of charity and mutuality are only. The AO has held that the concept of charity and mutuality are only. The AO has held that the concept of charity and mutuality are All India Gem And Jewellery Domestic Council All India Gem And Jewellery Domestic Council mutually exclusive of each other. The AO has, thus, concluded that the mutually exclusive of each other. The AO has, thus, concluded that the mutually exclusive of each other. The AO has, thus, concluded that the Appellant is a mutual organization and, therefore, not charitable. Appellant is a mutual organization and, therefore, not charitable. Appellant is a mutual organization and, therefore, not charitable. Accordingly, the AO ha Accordingly, the AO has treated the interest income as business income s treated the interest income as business income and has denied exemption u/s 11. The AO has, further, added corpus and has denied exemption u/s 11. The AO has, further, added corpus and has denied exemption u/s 11. The AO has, further, added corpus donation and denied exemption u/s 11 (1)(d) of the Act. donation and denied exemption u/s 11 (1)(d) of the Act. 5.1.2 On consideration of above facts, submissions of the Appellant and On consideration of above facts, submissions of the Appellant and On consideration of above facts, submissions of the Appellant and findings of the AO, I am of the considered vide that the AO has erred in the AO, I am of the considered vide that the AO has erred in the AO, I am of the considered vide that the AO has erred in denying exemption to the Appellant ^u/s 11 on the ground that it is denying exemption to the Appellant ^u/s 11 on the ground that it is denying exemption to the Appellant ^u/s 11 on the ground that it is established to serve the interest of members only and not public at established to serve the interest of members only and not public at established to serve the interest of members only and not public at large. Thus, it is not a charitable organization and its ac large. Thus, it is not a charitable organization and its activities are in tivities are in the nature of business activities, hit by the 1st proviso to section 2(15) of the nature of business activities, hit by the 1st proviso to section 2(15) of the nature of business activities, hit by the 1st proviso to section 2(15) of the Act. In this regard, I find that on similar facts, Hon’ble Jurisdictional the Act. In this regard, I find that on similar facts, Hon’ble Jurisdictional the Act. In this regard, I find that on similar facts, Hon’ble Jurisdictional ITAT Mumbai in the case of Bombay Presidency Golf Club Ltd vs ITO(E), ITAT Mumbai in the case of Bombay Presidency Golf Club Ltd vs ITO(E), ITAT Mumbai in the case of Bombay Presidency Golf Club Ltd vs ITO(E), dated 29/02/2016, has held the activities to m/2012, dated 29/02/2016, has held the activities to m/2012, dated 29/02/2016, has held the activities to be charitable in nature and has allowed exemption u/s11 of the Act. be charitable in nature and has allowed exemption u/s11 of the Act. be charitable in nature and has allowed exemption u/s11 of the Act. Relevant part of the decision is reproduced below: Relevant part of the decision is reproduced below: 3. Facts in brief are that the assessee is a Club with the principal object 3. Facts in brief are that the assessee is a Club with the principal object 3. Facts in brief are that the assessee is a Club with the principal object of providing a Golf Course and allied facilities for the promotion of sport ding a Golf Course and allied facilities for the promotion of sport ding a Golf Course and allied facilities for the promotion of sport of Golf. The assessee was registered as a charitable organisation with of Golf. The assessee was registered as a charitable organisation with of Golf. The assessee was registered as a charitable organisation with DIT (E), Mumbai, under Section 12A under Registration No. INS/36487 DIT (E), Mumbai, under Section 12A under Registration No. INS/36487 DIT (E), Mumbai, under Section 12A under Registration No. INS/36487 dated 6th June, 2002. The assessee has been claim dated 6th June, 2002. The assessee has been claiming exemptions on ing exemptions on the grounds of mutuality as well as under Section 11 on the basis that it the grounds of mutuality as well as under Section 11 on the basis that it the grounds of mutuality as well as under Section 11 on the basis that it exists for charitable purposes. The assessee filed its Return of income exists for charitable purposes. The assessee filed its Return of income exists for charitable purposes. The assessee filed its Return of income for AY 200910 declaring an income of NIL. The computation of total 10 declaring an income of NIL. The computation of total 10 declaring an income of NIL. The computation of total income filed by the asse income filed by the assessee indicates that the only source of income ssee indicates that the only source of income declared for the purposes of declared for the purposes of Section 11 was interest on bank amounting Section 11 was interest on bank amounting to Rs.2,17,92,167. From this various expenditure and deprecation was to Rs.2,17,92,167. From this various expenditure and deprecation was to Rs.2,17,92,167. From this various expenditure and deprecation was claimed. A deduction under Section 11(1)(a) of 15% was claimed and claimed. A deduction under Section 11(1)(a) of 15% was claimed and claimed. A deduction under Section 11(1)(a) of 15% was claimed and having regard to the amounts spent on the objects of the Trust viz. the ing regard to the amounts spent on the objects of the Trust viz. the ing regard to the amounts spent on the objects of the Trust viz. the promotion of Golf, the income declared was NIL. promotion of Golf, the income declared was NIL.

4. On scrutiny of the heads of income, AO observed that the assessee On scrutiny of the heads of income, AO observed that the assessee On scrutiny of the heads of income, AO observed that the assessee has received interest income of Rs.2,17,92,167/ has received interest income of Rs.2,17,92,167/- which had been which had been shown under the head 'Other Income'. As per AO, the said income under the head 'Other Income'. As per AO, the said income under the head 'Other Income'. As per AO, the said income received by the assessee is not in the nature of mutuality and is from received by the assessee is not in the nature of mutuality and is from received by the assessee is not in the nature of mutuality and is from non members. In view of the decision of the Hon'ble Bombay High Court non members. In view of the decision of the Hon'ble Bombay High Court non members. In view of the decision of the Hon'ble Bombay High Court in the case of CIT V/s. Common Effluent Treatment Plant (Thane in the case of CIT V/s. Common Effluent Treatment Plant ( in the case of CIT V/s. Common Effluent Treatment Plant ( Belapur) Association (2010) 328 ITR 362, the interest so received from Belapur) Association (2010) 328 ITR 362, the interest so received from Belapur) Association (2010) 328 ITR 362, the interest so received from the non members was held to be taxable and there is no application of the non members was held to be taxable and there is no application of the non members was held to be taxable and there is no application of principle of mutuality for such earnings. Following the decision of principle of mutuality for such earnings. Following the decision of principle of mutuality for such earnings. Following the decision of jurisdictional High Court, the said inter jurisdictional High Court, the said interest income was brought to tax by est income was brought to tax by the AO. The AO took up the assessment and was of the view that the the AO. The AO took up the assessment and was of the view that the the AO. The AO took up the assessment and was of the view that the assessee was not an entity set up for charitable purposes' as it violated assessee was not an entity set up for charitable purposes' as it violated assessee was not an entity set up for charitable purposes' as it violated the conditions prescribed in the proviso to Section 2(15) of the Income the conditions prescribed in the proviso to Section 2(15) of the Income the conditions prescribed in the proviso to Section 2(15) of the Income All India Gem And Jewellery Domestic Council All India Gem And Jewellery Domestic Council Tax Income Act, 1961 ('the Act') as it stood in Assessment Year 2009 Act, 1961 ('the Act') as it stood in Assessment Year 2009-10. Act, 1961 ('the Act') as it stood in Assessment Year 2009 The said proviso reads as follows. The said proviso reads as follows. 'Provided that the advancement of any other object of general public 'Provided that the advancement of any other object of general public '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 utility shall not be a charitable purpose, if it involves the carrying on of 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 in the nature of trade, commerce or business, or 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, of rendering any service in relation to any trade, commerce or business, 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 for a cess or fee or any other consideration, irrespective of the nature of for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the inc use or application, or retention, of the income from such activity'. ome from such activity'. According to the Assessing Officer, the proviso was applicable with According to the Assessing Officer, the proviso was applicable with According to the Assessing Officer, the proviso was applicable with effect from AY 2009- -10 and once an institution was hit by the aforesaid 10 and once an institution was hit by the aforesaid proviso, then it would follow that such an entity does not exist for a proviso, then it would follow that such an entity does not exist for a proviso, then it would follow that such an entity does not exist for a 'charitable purpose. In view of the above, the income of the assessee In view of the above, the income of the assessee was computed as under: was computed as under: …………… 5. By the impugned order CIT(A) confirmed the action of the AO, against By the impugned order CIT(A) confirmed the action of the AO, against By the impugned order CIT(A) confirmed the action of the AO, against which the assessee is in further appeal before us and has taken the which the assessee is in further appeal before us and has taken the which the assessee is in further appeal before us and has taken the following grounds:- "

1. The learned CIT(Appeals) has erred in law and on the facts of the CIT(Appeals) has erred in law and on the facts of the CIT(Appeals) has erred in law and on the facts of the case in sustaining the order of the assessing officer holding that the case in sustaining the order of the assessing officer holding that the case in sustaining the order of the assessing officer holding that the assessee company is not carrying on any charitable purpose within the assessee company is not carrying on any charitable purpose within the assessee company is not carrying on any charitable purpose within the meaning of the proviso to section 2(15) of the Income Tax Act meaning of the proviso to section 2(15) of the Income Tax Act.

2. The learned CIT(Appeals) has erred in law and on the facts of the The learned CIT(Appeals) has erred in law and on the facts of the The learned CIT(Appeals) has erred in law and on the facts of the case in sustaining the order of the assessing officer denying the benefit case in sustaining the order of the assessing officer denying the benefit case in sustaining the order of the assessing officer denying the benefit of section 11(1)(a) and section 11(2) of the Income Tax Act." of section 11(1)(a) and section 11(2) of the Income Tax Act." ……………

12. We found that the AO has taxed interest We found that the AO has taxed interest income on the following income on the following three reasonings:- (i) the proviso to Section 2( 15) applies, the proviso to Section 2( 15) applies, (ii) the registration under Section 12A has been withdrawn by the OIT the registration under Section 12A has been withdrawn by the OIT the registration under Section 12A has been withdrawn by the OIT (E), and (iii) the decision of the Bombay High Court in Common Effluent decision of the Bombay High Court in Common Effluent decision of the Bombay High Court in Common Effluent Treatment Plant (2010) 328ITR 362 hold that the interest received from Treatment Plant (2010) 328ITR 362 hold that the interest received from Treatment Plant (2010) 328ITR 362 hold that the interest received from non members is not exempt under the principle of mutuality. non members is not exempt under the principle of mutuality. First we take the first objection of AO to the effect that proviso to Section First we take the first objection of AO to the effect that proviso to S First we take the first objection of AO to the effect that proviso to S 2(15) applies to the case of assessee. As per our considered view, the 2(15) applies to the case of assessee. As per our considered view, the 2(15) applies to the case of assessee. As per our considered view, the proviso denies an entity carrying on 'advancement of any other objects proviso denies an entity carrying on 'advancement of any other objects proviso denies an entity carrying on 'advancement of any other objects All India Gem And Jewellery Domestic Council All India Gem And Jewellery Domestic Council of general public utility' the benefit of the regime prescribed under of general public utility' the benefit of the regime prescribed under of general public utility' the benefit of the regime prescribed under Sections 11 to 13 of the Act if the e Sections 11 to 13 of the Act if the entity concerned is involved in ntity concerned is involved in carrying on any activity in the nature of trade, commerce or business or carrying on any activity in the nature of trade, commerce or business or carrying on any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce any activity of rendering any service in relation to any trade, commerce any activity of rendering any service in relation to any trade, commerce or business for a cess or fee or any consideration irrespective of the or business for a cess or fee or any consideration irrespective of the or business for a cess or fee or any consideration irrespective of the nature of use or application or retention of the income from such activity. f use or application or retention of the income from such activity. f use or application or retention of the income from such activity. The activity which according to the Assessing Officer has resulted in the The activity which according to the Assessing Officer has resulted in the The activity which according to the Assessing Officer has resulted in the application of the proviso and which is the subject matter of the application of the proviso and which is the subject matter of the application of the proviso and which is the subject matter of the assessment is the interest earned from banks. As assessment is the interest earned from banks. As per our considered per our considered view the investments made with banks is not an activity in the nature of view the investments made with banks is not an activity in the nature of view the investments made with banks is not an activity in the nature of trade, commerce or business but is income earned on application of trade, commerce or business but is income earned on application of trade, commerce or business but is income earned on application of moneys mandated under Section 11(5)(iii) of the Act which reads as moneys mandated under Section 11(5)(iii) of the Act which reads as moneys mandated under Section 11(5)(iii) of the Act which reads as follows :- "The forms and mod "The forms and modes of investing or depositing the money referred to es of investing or depositing the money referred to in clause (b) of sub-section (2) shall be the following, namely: section (2) shall be the following, namely:- - (i) investment in savings certificates as defined in clause(c) of section 2 investment in savings certificates as defined in clause(c) of section 2 investment in savings certificates as defined in clause(c) of section 2 of the Government Savings Certificates Act, 1959 (46 of 1959), and any of the Government Savings Certificates Act, 1959 (46 of 1959), of the Government Savings Certificates Act, 1959 (46 of 1959), other securities or certificates issued by the Central Government under other securities or certificates issued by the Central Government under other securities or certificates issued by the Central Government under the Small Savings Scheme of the Government; the Small Savings Scheme of the Government; (ii) deposit in any account with the Post Office Savings Bank; deposit in any account with the Post Office Savings Bank; (iii) deposit in any account with a scheduled bank or a co deposit in any account with a scheduled bank or a co operative deposit in any account with a scheduled bank or a co society engaged in carrying on the business of banking (including a society engaged in carrying on the business of banking (including a society engaged in carrying on the business of banking (including a society engaged in carrying on the business of banking (including a co- society engaged in carrying on the business of banking (including a co society engaged in carrying on the business of banking (including a co operative land mortgage bank or a co operative land mortgage bank or a co-operative land development bank). operative land development bank). Thus, as per the provisions ol section 11(5) Thus, as per the provisions ol section 11(5), the assessee is permitted to , the assessee is permitted to deposit in any account with a scheduled bank on the deposits made deposit in any account with a scheduled bank on the deposits made deposit in any account with a scheduled bank on the deposits made therein and hence it cannot be said that interest received from the bank therein and hence it cannot be said that interest received from the bank therein and hence it cannot be said that interest received from the bank is in the nature of trade, commerce or business. is in the nature of trade, commerce or business.

13. The investment in banks is not on The investment in banks is not only authorised but mandated and is ly authorised but mandated and is compulsory in so far as an entity carrying on charitable purposes compulsory in so far as an entity carrying on charitable purposes compulsory in so far as an entity carrying on charitable purposes concerned and in fact, under Section 13(1)( d)(ii), if the funds of a trust concerned and in fact, under Section 13(1)( d)(ii), if the funds of a trust concerned and in fact, under Section 13(1)( d)(ii), if the funds of a trust or institutions is invested in assets other than those specified in Section or institutions is invested in assets other than those specified in Section or institutions is invested in assets other than those specified in Section 11 (5), the exemption under Sections 11 to 13 would be withdrawn. it is 5), the exemption under Sections 11 to 13 would be withdrawn. it is 5), the exemption under Sections 11 to 13 would be withdrawn. it is therefore not only inexplicable, but absurd as to why the Assessing therefore not only inexplicable, but absurd as to why the Assessing therefore not only inexplicable, but absurd as to why the Assessing Officer has taken the stand that interest received from deposits in banks Officer has taken the stand that interest received from deposits in banks Officer has taken the stand that interest received from deposits in banks falls foul of the proviso to Section 2(15). It falls foul of the proviso to Section 2(15). It is to be noted that all the other is to be noted that all the other activities and income streams received by the assessee have been held activities and income streams received by the assessee have been held activities and income streams received by the assessee have been held to be not taxable by the Assessing Officer himself in making his order to be not taxable by the Assessing Officer himself in making his order to be not taxable by the Assessing Officer himself in making his order dated 30th December, 2012 on the grounds of mutuality and the only dated 30th December, 2012 on the grounds of mutuality and the only dated 30th December, 2012 on the grounds of mutuality and the only amount which has been assessed to tax as income of the assessee is has been assessed to tax as income of the assessee is has been assessed to tax as income of the assessee is income from interest of Rs.2,17,92,167. Thus according to the AO income from interest of Rs.2,17,92,167. Thus according to the AO income from interest of Rs.2,17,92,167. Thus according to the AO All India Gem And Jewellery Domestic Council All India Gem And Jewellery Domestic Council compliance by a entity set up for charitable purpose with the provisions compliance by a entity set up for charitable purpose with the provisions compliance by a entity set up for charitable purpose with the provisions of section 11 (5) of the Act would result in its status of 'charitable of section 11 (5) of the Act would result in its status of 'char of section 11 (5) of the Act would result in its status of 'char purposes' being denied on account of the proviso to section 2( 15) of the purposes' being denied on account of the proviso to section 2( 15) of the purposes' being denied on account of the proviso to section 2( 15) of the Act. The direct consequence of such an interpretation would be that an Act. The direct consequence of such an interpretation would be that an Act. The direct consequence of such an interpretation would be that an otherwise 'charitable institution' would lose its status as a 'charitable otherwise 'charitable institution' would lose its status as a 'charitable otherwise 'charitable institution' would lose its status as a 'charitable institution' if it complied wi institution' if it complied with section 11 (5) of the Act and if it did not th section 11 (5) of the Act and if it did not comply with section 11 (5) of the Act it would be denied the benefit on comply with section 11 (5) of the Act it would be denied the benefit on comply with section 11 (5) of the Act it would be denied the benefit on the grounds that the entity has not complied with section 11 (5) of the the grounds that the entity has not complied with section 11 (5) of the the grounds that the entity has not complied with section 11 (5) of the Act.

14. Several decisions have considered and interpreted the sc Several decisions have considered and interpreted the sc Several decisions have considered and interpreted the scope, purpose and limits of the proviso to Section 2(15). in GS 1 India Vs. DGiT purpose and limits of the proviso to Section 2(15). in GS 1 India Vs. DGiT purpose and limits of the proviso to Section 2(15). in GS 1 India Vs. DGiT 360 iTR 138 (Del), the term trade, commerce or business was 360 iTR 138 (Del), the term trade, commerce or business was 360 iTR 138 (Del), the term trade, commerce or business was interpreted, and in that case even though the assessee was charging a interpreted, and in that case even though the assessee was charging a interpreted, and in that case even though the assessee was charging a fee having regard to the economic status of th fee having regard to the economic status of the beneficiaries, it was held e beneficiaries, it was held that it was necessary for the operation and running expenses and the that it was necessary for the operation and running expenses and the that it was necessary for the operation and running expenses and the sustenance of charitable activities, that a fee could be charged. In the sustenance of charitable activities, that a fee could be charged. In the sustenance of charitable activities, that a fee could be charged. In the case of the assessee on the other hand, there is no fee whatsoever and case of the assessee on the other hand, there is no fee whatsoever and case of the assessee on the other hand, there is no fee whatsoever and in fact, it is passive income not involving any activity whatsoever. passive income not involving any activity whatsoever. passive income not involving any activity whatsoever. Therefore, the AO was not correct in holding that act of deposit of money Therefore, the AO was not correct in holding that act of deposit of money Therefore, the AO was not correct in holding that act of deposit of money in scheduled bank account and in scheduled bank account and receipt of interest thereon an activity in receipt of interest thereon an activity in the nature of trade, commerce or business. The same vi the nature of trade, commerce or business. The same view was taken ew was taken by the Delhi High Court in institute of Chartered Accountants of India by the Delhi High Court in institute of Chartered Accountants of India by the Delhi High Court in institute of Chartered Accountants of India Vs. DCiT 358 iTR 91 (Del), where the institute was taxed by the Vs. DCiT 358 iTR 91 (Del), where the institute was taxed by the Vs. DCiT 358 iTR 91 (Del), where the institute was taxed by the Assessing Officer on the grounds that fees were charged by the institute Assessing Officer on the grounds that fees were charged by the institute Assessing Officer on the grounds that fees were charged by the institute for providing coaching classes and for providing coaching classes and for holding interviews with respect to for holding interviews with respect to campus placement. The Court held that such activities cannot be stated campus placement. The Court held that such activities cannot be stated campus placement. The Court held that such activities cannot be stated to be rendering service in relation to any trade, commerce or business at to be rendering service in relation to any trade, commerce or business at to be rendering service in relation to any trade, commerce or business at all. This was reiterated by the Delhi High Court in Bureau of Indian all. This was reiterated by the Delhi High Court in Bureau of Indian all. This was reiterated by the Delhi High Court in Bureau of Indian Standards v. DGiT 358 iTR 78 and in PHD Chamber of Commerce 357 ndards v. DGiT 358 iTR 78 and in PHD Chamber of Commerce 357 ndards v. DGiT 358 iTR 78 and in PHD Chamber of Commerce 357 iTR 296. The Gujarat High Court in DGiT Vs. Sabarmathi Ashram iTR 296. The Gujarat High Court in DGiT Vs. Sabarmathi Ashram iTR 296. The Gujarat High Court in DGiT Vs. Sabarmathi Ashram Gaushala Trust 44 Taxman 141 took the view that a Trust registered Gaushala Trust 44 Taxman 141 took the view that a Trust registered Gaushala Trust 44 Taxman 141 took the view that a Trust registered with the objects of breeding cattle and cows and oxen cannot be said to with the objects of breeding cattle and cows and oxen cannot be sa with the objects of breeding cattle and cows and oxen cannot be sa be carrying on activities of trade, commerce or business merely because be carrying on activities of trade, commerce or business merely because be carrying on activities of trade, commerce or business merely because considerable income was generated on account of production and sale considerable income was generated on account of production and sale considerable income was generated on account of production and sale of milk. The same view was taken by the Tribunal in DD!T Vs. All india of milk. The same view was taken by the Tribunal in DD!T Vs. All india of milk. The same view was taken by the Tribunal in DD!T Vs. All india Football 1 Federation 62 Taxmann.com 36 Football 1 Federation 62 Taxmann.com 362 (Del Trib) dealing with a 2 (Del Trib) dealing with a case of an Association having as its object the promoting of the game of case of an Association having as its object the promoting of the game of case of an Association having as its object the promoting of the game of footfall, organising tournaments, training players, coaches etc. The footfall, organising tournaments, training players, coaches etc. The footfall, organising tournaments, training players, coaches etc. The Tribunal held that the receipts by way of sponsorship do not alter the Tribunal held that the receipts by way of sponsorship do not alter the Tribunal held that the receipts by way of sponsorship do not alter the character of the main objects and is not affected by the proviso as it e main objects and is not affected by the proviso as it e main objects and is not affected by the proviso as it cannot be said to be engaged in any activity which is in the nature of cannot be said to be engaged in any activity which is in the nature of cannot be said to be engaged in any activity which is in the nature of trade, commerce or business. trade, commerce or business.

All India Gem And Jewellery Domestic Council All India Gem And Jewellery Domestic Council However, the order withdrawing the registration under section 12A has However, the order withdrawing the registration under section 12A has However, the order withdrawing the registration under section 12A has been cancelled by the Tribunal and the Appeal of the assessee has been been cancelled by the Tribunal and the Appeal of the assessee has been been cancelled by the Tribunal and the Appeal of the assessee has been allowed by the Tribunal vide its order dated 30th May, 2012. Therefore, Tribunal vide its order dated 30th May, 2012. Therefore, Tribunal vide its order dated 30th May, 2012. Therefore, the second reason given by the Assessing Officer that the registration the second reason given by the Assessing Officer that the registration the second reason given by the Assessing Officer that the registration has been withdrawn is no longer valid as the registration, withdrawn has been withdrawn is no longer valid as the registration, withdrawn has been withdrawn is no longer valid as the registration, withdrawn by DIT(E) has been cancelled by the Tribunal vide its orde by DIT(E) has been cancelled by the Tribunal vide its order dated 30 r dated 30-5- 2012. Thus, the objection taken by the AO for declining of registration 2012. Thus, the objection taken by the AO for declining of registration 2012. Thus, the objection taken by the AO for declining of registration for exemption has been withdrawn has no legs to stand in view of the for exemption has been withdrawn has no legs to stand in view of the for exemption has been withdrawn has no legs to stand in view of the decision decision decision of of of the the the Tribunal Tribunal Tribunal in in in assessee's assessee's assessee's own own own case case case in in in ITA ITA dated 30 No.311/Mum/2012, dated 30-5- 2012, wherein the order passed by order passed by DIT(E) u/s.12A(3) of the Act cancelling registration granted u/s.12AA DIT(E) u/s.12A(3) of the Act cancelling registration granted u/s.12AA DIT(E) u/s.12A(3) of the Act cancelling registration granted u/s.12AA was set aside and appeal of the assessee was allowed. was set aside and appeal of the assessee was allowed.

5. Clause (a) of sub- -section (1) of Section 11 provides that subject to the section (1) of Section 11 provides that subject to the provisions of Sections 60 to 63, the income derived from the property provisions of Sections 60 to 63, the income derived from the prop provisions of Sections 60 to 63, the income derived from the prop held under trust wholly for charitable or religious purposes to the extent held under trust wholly for charitable or religious purposes to the extent held under trust wholly for charitable or religious purposes to the extent to which such income is applied to such purposes shall not be included to which such income is applied to such purposes shall not be included to which such income is applied to such purposes shall not be included in the total income of the previous year of the person in receipt of the in the total income of the previous year of the person in receipt of the in the total income of the previous year of the person in receipt of the income. In the present case, as income. In the present case, as recorded by the Tribunal, the assessee recorded by the Tribunal, the assessee had invested its surplus funds in specified deposits earning interest had invested its surplus funds in specified deposits earning interest had invested its surplus funds in specified deposits earning interest which reduced the assessee's loss. In terms of sub which reduced the assessee's loss. In terms of sub-section (1) of Section section (1) of Section All India Gem And Jewellery Domestic Council All India Gem And Jewellery Domestic Council of the Act, therefore, such income was exempt from tax. The Tribunal, 11 of the Act, therefore, such income was exempt from tax. The Tribunal, 11 of the Act, therefore, such income was exempt from tax. The Tribunal, therefore, correctly granted relief to the assessee. No question of law therefore, correctly granted relief to the assessee. No question of law therefore, correctly granted relief to the assessee. No question of law arises.

4.1 In opinion of the AO of the AO if the assessee was not not entitled for charitable status under the provisions of section 2(15) of the Act as charitable status under the provisions of section 2(15) of charitable status under the provisions of section 2(15) of general public utility, then t general public utility, then the Assessing Officer should have moved he Assessing Officer should have moved the matter to the concerned Commissioner of Income-tax the matter to the concerned Commissioner of Income the matter to the concerned Commissioner of Income (Exemption) who is author authorized to withdraw the registration granted registration granted to charitable institution but till the continuance to charitable institution but till the continuance of the registration f the registration he Assessing Officer certificate granted by the Ld. CIT(Exemption), t nted by the Ld. CIT(Exemption), the Assessing Officer can not deny the claim of exemption holding that the activity of the the claim of exemption holding that the activity of the the claim of exemption holding that the activity of the and activity of the assessee is not charitable in nature. The object assessee is not charitable in nature. The object and assessee was already approved already approved by the Ld. CIT(Exemption) and by the Ld. CIT(Exemption) and then certificate u/s 12A has been granted and which is subsisting. certificate u/s 12A has been granted and which is certificate u/s 12A has been granted and which is Therefore, this contention of the Assessing Officer for declining the Therefore, this contention of the Assessing Officer for declining the Therefore, this contention of the Assessing Officer for declining the exemption is rejected. Further, the Assessing Officer has held that exemption is rejected. Further, the Assessing Officer has held that exemption is rejected. Further, the Assessing Officer has held that as far as claim of exemption u/s assessee is a mutual assessee is a mutual concern but as far as claim of 11 is concerned, the requirement that assessee trust should be he requirement that assessee trust should be he requirement that assessee trust should be registered u/s 12A and subject to the conditions prescribed u/s 11 registered u/s 12A and subject to the conditions prescribed u/s 11 registered u/s 12A and subject to the conditions prescribed u/s 11 the assessee is eligible for exemption. the assessee is eligible for exemption.

4.2 The Hon’ble Bombay High Court in The Hon’ble Bombay High Court in CIT(E) v. Bombay CIT(E) v. Bombay Presidency Golf Club Ltd. Presidency Golf Club Ltd., has clearly held that: , has clearly held that:

All India Gem And Jewellery Domestic Council All India Gem And Jewellery Domestic Council earning passive interest income on investments mandated earning passive interest income on investments mandated earning passive interest income on investments mandated under section 11(5) is not an activity in the nature of trade, under section 11(5) is not an activity in the nature of trade, under section 11(5) is not an activity in the nature of trade, commerce, or business, commerce, or business,  the proviso to section 2(15) the proviso to section 2(15) is not attracted in such is not attracted in such circumstances, and circumstances, and  once the proviso is ruled out, exemption under section 11 once the proviso is ruled out, exemption under section 11 once the proviso is ruled out, exemption under section 11 necessarily follows. follows.

4.3 This binding jurisdictional precedent squarely governs the This binding jurisdictional precedent squarely governs the This binding jurisdictional precedent squarely governs the —would lead to a present case. The AO’s interpretation present case. The AO’s interpretation—if accepted— contradiction wherein compliance with the statutory investment radiction wherein compliance with the statutory investment radiction wherein compliance with the statutory investment conditions under section 11(5) would itself disqualify an institution conditions under section 11(5) would itself disqualify an institution conditions under section 11(5) would itself disqualify an institution from exemption under section 11. Such an interpretation cannot be from exemption under section 11. Such an interpretation cannot be from exemption under section 11. Such an interpretation cannot be sustained in law.

4.4 Further, the allegation of violation un Further, the allegation of violation under section 13(1)(c) was der section 13(1)(c) was made without any cogent material. No personal benefit to any made without any cogent material. No personal benefit to any made without any cogent material. No personal benefit to any related party has been demonstrated. The conclusion is purely related party has been demonstrated. The conclusion is purely related party has been demonstrated. The conclusion is purely presumptive. The corpus donations are capital receipts and exempt orpus donations are capital receipts and exempt orpus donations are capital receipts and exempt under section 11(1)(d), as held by several under section 11(1)(d), as held by several judicial authorities judicial authorities including ITO (Exemption) Vs. Smt. Basanti Devi & Shri Chakhan ITO (Exemption) Vs. Smt. Basanti Devi & Shri Chakhan ITO (Exemption) Vs. Smt. Basanti Devi & Shri Chakhan Lal Garg Education Trust, IT Appeal No.5082(Delhi) of 2010 dated Lal Garg Education Trust, IT Appeal No.5082(Delhi) of 2010 dated Lal Garg Education Trust, IT Appeal No.5082(Delhi) of 2010 dated 30.1.2009.

4.5 We find that in identical case of Association of Gems and We find that in identical case of Association of Gems and We find that in identical case of Association of Gems and Jewellery Export Promotion Counc Jewellery Export Promotion Council having similar activity on similar activity on All India Gem And Jewellery Domestic Council All India Gem And Jewellery Domestic Council promotion of gems and jewellery industry at the international level promotion of gems and jewellery industry at the international level promotion of gems and jewellery industry at the international level has been held to be charitable u/s 2(15) of the Act by the Co- has been held to be charitable u/s 2(15) of the Act by the Co has been held to be charitable u/s 2(15) of the Act by the Co ordinate Bench of the Tribunal in and ITA ordinate Bench of the Tribunal in and ITA ordinate Bench of the Tribunal in and ITA No.3176/Mum/2023 for assessment No.3176/Mum/2023 for assessment year 2018-19 and 2017 19 and 2017-18 respectively. The Tribunal respectively. The Tribunal (supra) has also examined the effect of examined the effect of the decision of the Hon’ble Supreme Court in the case of the decision of the Hon’ble Supreme Court in the case of the decision of the Hon’ble Supreme Court in the case of Ahmadabad Ahmadabad Ahmadabad Urban Urban Urban Development Development Development Authority Authority Authority (2022) (2022) (2022) 143 143 143 taxmann.com 278 (SC): taxmann.com 278 (SC):

“5.23 In view of the above discussi 5.23 In view of the above discussion, we are of the opinion that on, we are of the opinion that assessee is not hit by the proviso to section 2(15) of the Act as far assessee is not hit by the proviso to section 2(15) of the Act as far assessee is not hit by the proviso to section 2(15) of the Act as far as activity of conducting or participating in exhibitions within India as activity of conducting or participating in exhibitions within India as activity of conducting or participating in exhibitions within India or overseas and therefore the disallowance of exemption claimed by or overseas and therefore the disallowance of exemption claimed by or overseas and therefore the disallowance of exemption claimed by the assess made b the assess made by the Assessing Officer and the findings of the Ld y the Assessing Officer and the findings of the Ld CIT(A) on the issue in dispute are set aside and matter restore back CIT(A) on the issue in dispute are set aside and matter restore back CIT(A) on the issue in dispute are set aside and matter restore back to grant benefit of section 11 and 12 as per provisions of law." to grant benefit of section 11 and 12 as per provisions of law." to grant benefit of section 11 and 12 as per provisions of law." After elaborate discussion on this matter, the Hon'ble ITAT has come After elaborate discussion on this matter, the Hon'ble ITAT has come After elaborate discussion on this matter, the Hon'ble ITAT has come to a conclusion that in the instant case, there being no markup on to a conclusion that in the instant case, there being no markup on to a conclusion that in the instant case, there being no markup on consideration charged from the exporter, therefore in the broad consideration charged from the exporter, therefore in the broad consideration charged from the exporter, therefore in the broad principles laid down by the Hon'ble Supreme Court, the a principles laid down by the Hon'ble Supreme Court, the a principles laid down by the Hon'ble Supreme Court, the activity is beyond the purview of either trade, commerce and business or beyond the purview of either trade, commerce and business or beyond the purview of either trade, commerce and business or activity of rendering services in relation to trade, commerce or activity of rendering services in relation to trade, commerce or activity of rendering services in relation to trade, commerce or business. Further the ITAT has held that assessee is not hit by the business. Further the ITAT has held that assessee is not hit by the business. Further the ITAT has held that assessee is not hit by the proviso to section 2(15) of the Act as far as activ proviso to section 2(15) of the Act as far as activity of conducting or ity of conducting or participating in exhibitions within India or overseas. Respectfully participating in exhibitions within India or overseas. Respectfully participating in exhibitions within India or overseas. Respectfully following the decision of the respective jurisdictional ITAT the A.O is following the decision of the respective jurisdictional ITAT the A.O is following the decision of the respective jurisdictional ITAT the A.O is directed to grant the benefit of section 11 and 12 as per provisions directed to grant the benefit of section 11 and 12 as per provisions directed to grant the benefit of section 11 and 12 as per provisions of law. Grounds of appeal of law. Grounds of appeal are allowed in favour of the the assessee." 4.6 The facts and circumstances in the case being identical to the The facts and circumstances in the case being identical to the The facts and circumstances in the case being identical to the facts of the case of Gems and Jew facts of the case of Gems and Jewellery Export Promotion Council ellery Export Promotion Council. In view of the above factual matrix, the detailed findings of the Ld. In view of the above factual matrix, the detailed findings of the Ld. In view of the above factual matrix, the detailed findings of the Ld. CIT(A), and the binding authority of the Hon’ble Bombay High the binding authority of the Hon’ble Bombay High the binding authority of the Hon’ble Bombay High Court, we find no infirmity in the order of the Ld. CIT(A). The Court, we find no infirmity in the order of the Ld. CIT(A). The Court, we find no infirmity in the order of the Ld. CIT(A). The All India Gem And Jewellery Domestic Council All India Gem And Jewellery Domestic Council assessee is entitled to exemption under section 11, and the assessee is entitled to exemption under section 11, and the assessee is entitled to exemption under section 11, and the additions made by the AO in respect of interest income and corpus additions made by the AO in respect of interest income and corpus additions made by the AO in respect of interest income and corpus donations were rightly deleted. ightly deleted. The grounds of appeal of the The grounds of appeal of the Revenue are accordingly dismissed. Revenue are accordingly dismissed.