POWER LOOM DEVELOPMENT AND EXPORT PROMOTION COUNCIL,MUMBAI vs. INCOME TAX OFFICER (EXEM) WARD 2(2), MUMBAI

Membership Subscription 16,79,964 2. Interest on Investments 86,88,077 3. Miscellaneous Income 76,810 4. Prior period Income 45,47,188 5. Income from design centre 1,38,780 6. Grant for integrated powerloom 66,20,557 development scheme 7. Office rent 7,20,557 8. Grant for exposure visits 12,71,086 9. Participation fees 11,38,970 10. Profit on sale of Motor Car 4,148 Total 2,48,85,580 2.3. The Ld. AO thus, issued show cause notice dated 05/01/2016 and 03/03/2015 calling upon assessee, as to why the first proviso Assessment Year: 2013-14 Powerloom Development And Export Promotion Council to Section 2(15) should not be invoked in the present facts of the case. The assesse was also called upon the substantiate as to why, interest income received during the year amounting to Rs.86,88,077/- and non-mutual income should not be brought to tax separately. 2.4. In response to the show cause notices issued, the assessee submitted that, if being Section 25 company under the Companies Act, 1956, and governed u/s. 11 and 12 of the Act, the income generated from investment made as per provision of Section 11(5) are to be taxed as per normal provisions. It was submitted that, the said provision for investment u/s.11(5) are provided to grant exemption from payment of tax. It was submitted that, the assesse made investment out of the fund accumulated being the standard deduction at 50% and investment in the manner prescribe u/s. 11(5) of the Act. 2.5. It was submitted that the interest income is earned from the property held under the trust and therefore, income derived from such property is eligible for exemption u/s. 11(1) of the act. He placed reliance on the decision of Hon’ble Supreme Court in case of CIT vs Bankipor Club Ltd. reported in (1997) 92 taxman.com 278, wherein it was held that, if the members contribution was invested, then the income earned from the such investment would be exempt on ground of mutuality. He also placed reliance on following decision in support of the concept of mutuality that no one can make profit out of himself. i. CIT v. Kumbakonam Mutual Benefit Fund Ltd. 53 ITR 241 (Supreme Court).

In support he relied for following case laws: a) Calcutta cricket & Football Club 177 TTJ 589 (Calcutta). b) Bombay Presidency Golf Club Ltd. 69 Taxmann.com 208 (Mumbai). c) Chembur Gymkhana 164 ITD 279 (Mumbai). d) Council for Leather exports 70 SOT 574 (Madras). e) CONFEDERATION OF REAL ESTATE DEVELOPERS ASSOCIATION OF INDIA 185 ITD 0090 (Mumbai-Trib) 4.8. The Ld. AR emphasised that, the assessee during the year under consideration, did not generate any surplus out of the activities of exhibitions but earned deficit which is met out of the Assessment Year: 2013-14 Powerloom Development And Export Promotion Council Government grant. Placing reliance on the provisions of Section 2(15) as it was applicable for the relevant period read with Section 11, the Ld.AR submitted that, the contribution being only Rs. 11,38,970/- is lower than Rs. 25 lacs. He thus submitted that, the second proviso to Section 2(15) would not be applicable under such circumstances, as it existed prior to the amendment by Finance Act, 2015. In support the Ld. AR place reliance on the following decisions: i. “Decision of Hon’ble Supreme court in case of Ahmedabad Urban Development Authority 449 ITR 01(SC). ii. Decision of coordinate bench of this Tribunal in case of Media Research User Council (2023) 157 taxman.com 470 iii. Decision of coordinate bench of this Tribunal in case of Gem & Jewellery Export Promotion Council 166 Taxman.com (2024) 166 taxman.com 169 iv. Confederation of Real Estate Developers Association of India 185 ITD 90” 4.9. The Ld. AR finally in all its fairness submitted that, identical issue travelled to this Tribunal for assessment year 2011-12 in dated 28/07/2017, wherein this Tribunal set aside order of the Ld. CIT(A) and restored the matter to the file of the Ld. AO for making fresh assessment after giving an opportunity of being heard to the assessee. The Ld. AR submitted that similarly for assessment year 2012-13 this Tribunal in vide order dated 24/07/2018, remitted the matter to the file of the Ld. AO for de-novo assessment by following assessment year 2011-12. The Ld. AR however, submitted that, the facts involved in the case of assessee for the years under consideration are distinguishable based on the decision of Hon’ble Assessment Year: 2013-14 Powerloom Development And Export Promotion Council Supreme Court in case of Ahmedabad Urban Development Authority (Supra). 4.10. On the contrary the Ld. DR submitted that the issue may be remitted to the file of the Ld. AO to reconsider afresh as per directions of this Tribunal in the preceding assessment years. We have perused the submissions advanced by both the sides in the light of records place before us.

Admittedly the issue was remanded by coordinate benchs of this Tribunal assesses own for the preceding assessment year being 2011-12 and 2012-13. Assessee was asked to file the order giving effect to the ITAT decisions. The assessee vide paper book dated 24/03.2025 filed the decisions wherein the Ld. AO while passing OGE reiterated the disallowance based on identical reasoning by observing as under: “The principle is based on the premise that no man can make profit out of interest, but this principle cannot have any application in respect of the surplus received from non-members. It is not difficult to conceive of cases where the same concern may indulge in activities, which are mutual and non-mutual. True, keeping in view the principle of mutuality, the surplus accruing to members from the subscription charges received from its members cannot be said to be income within the meaning of the Act. However, if such receipts are from sources other than members then no exemption can be claimed in respect of such receipts on the plea of mutuality. vi. The careful examination of the assessee's actual activities as well as the perusal of objects and objects incidental or ancillary to the attainment of the main objects show that the dominant or rather the predominant object of the assessee is to provide benefit to its members.

In view of the facts mentioned above, the assessee is a mutual association and not a charitable one. The assessee is an organization, which is limited to the benefits of its members by virtue of which principle of mutuality applies. Respectfully, Assessment Year: 2013-14 Powerloom Development And Export Promotion Council following Apex Court decision in the case of CIT vs. Bankipor Club Ltd. 226 ITR 97 and applying the doctrine of mutuality, assessee's receipts from non-rmembers and other sources such as interest income etc. are treated as income of the assessee during the year and taxed accordingly. 5.1. The main contention of the Ld. AR is that, activities carried out are substantially with its members during year under consideration. Moreover, there is no allegation that the activities not genuine or are not carried out in accordance with the main objects. During the course of hearing the decision of Hon’ble Supreme Court in case of Ahmedabad Urban Development Authority (Supra) was also discussed in detailed. It was submitted that the profit motive is necessary for an activity to be heat by the proviso to Section 2(15) as observed by Hon’ble Supreme Court in following paras. “141. From NDMC (supra), it is clear that not every state activity resembling commerce can be considered per se exempt from union taxation, in the context of Article 289. The court also emphasized that mere sale or lease of government property does not imply trade or business. The crucial or determinative element in the venture, so to say, is whether performance of a function is actuated by profit motive.

What then is the true meaning of the expressions "fee, cess or consideration"? The careful analysis of the amended proviso to section 2(15), reveal that the prohibition applies in a four-fold manner- (a) The bar to engaging in trade, commerce or business, (b) The bar to providing any service in relation to trade, commerce or business, (c) wherein "for a fee, cess or any other consideration" is the controlling phrase for both (a) and (b) (which are collectively referred to as "prohibited activities" for brevity) (d) irrespective of the application of the income derived from such 'prohibited activities'.

The impermissibility of any trade, or commercial activity or service, and income, from them, was intended to be conveyed through the prohibition, in the first part of the definition of GPU charities. The Assessment Year: 2013-14 Powerloom Development And Export Promotion Council necessary implication which arises is that income (received as fee, cess, or any other consideration) derived from such 'prohibited activities' is necessarily motivated by profit. The ordinary meaning of fee or consideration would be synonymous with something of value, usually in monetary terms. However, the use of the expression "cess" facially lends a different colour to all the three expressions.” 5.2. Hon’ble Supreme Court further categorically held that merely because there is surplus/profit from the activities carried out, would not mean that the trust is not carrying out any charity and that, pure charity in the sense of performance of an activity without consideration is not envisioned under the Act. The Ld. AR at the time of argument compared the amendment made to Section 2(15) and the proviso wherein the legislature limited the profits not to exceed 20% of the overall receipts, vis-a-vis the pre amended provision (applicable to the facts of the present case). It is noted that as per the provisions applicable to the year under consideration the second proviso to Section 2(15)., can be invoked if the receipts from exhibition exceeds Rs.25 Lac. 5.3.He thus submitted that, under both the circumstances the case of the assessee fall within the specified limit, and assessee will not be hit by second proviso section 2(15). It is also noted that, the assessee did not charge significantly towards subscription or participation fees, for conducting exhibitions etc. In any event, surplus/deficit is determined only after meeting the costs. 5.4. Hon’ble Supreme Court also held that the material test to considered the applicability of proviso is that, consideration charged by the assessee to its members for disseminating information is actuate by the motive to earned profit. Hon’ble Assessment Year: 2013-14 Powerloom Development And Export Promotion Council Supreme Court in further paragraphs held that, activities such as organizing meetings, disseminating information through publication, holding awareness camps and events would be broadly covered by trade promotion. 5.5. The Ld. AR also relied on the decision of Hon’ble Supreme Court in case of Apparel Export Promotion Council reported in 16 ITA(T) 321 wherein it was found that, some of the activities of Apparel Export Promotion Council were with the nature of trade, commerce or business and therefore, the question arose, if such activities fell within the ambit of section 2(15) second proviso. The Hon’ble Court was of the opinion, that the activities carried out was as per the main objects and unless there is a profit motive, second proviso to Section 2(15) cannot be invoke. Similar view was taken in case of Gem and Jewellery Export Promotion Council (Supra) that, cost was reimbursed. 5.5. The Ld. AR also relied on the decision of coordinate bench of this Tribunal in case of Media Research User Council VS. DIT (E) (supra), wherein identical situation like that of present assessee before us was analysed in the light of the aforesaid decisions by observing as under:

This issue of proviso to Section 2(15) in the case of institutions carrying out object of general public utility has been discussed in detail by the Hon'ble Supreme Court in the case of Ahmedabad Urban Development Authority (supra). Certain relevant paragraphs of the Hon'ble Supreme Court for the sake of ready reference are reproduced hereunder: - "167. Thus, the journey which began with Surat Art Silk was interpreted in Thanthi Trust to mean that the carrying on of business by GPU charity was permissible as long as it inured to the benefit of the trust. The change brought about by the amendments in questions, however, place the focus on an entirely different perspective: that if at all any activity in the nature of trade, commerce or business, or a service in the nature of the same, for any form of consideration is permissible, that activity should be intrinsically linked to, or a part of the GPU category charity's object. Thus, the test of the charity being driven by a predominant object is no longer good law. Likewise, the ambiguity with respect to the kind of activities generating profit which could feed the main object and incidental profit-making also is not good law. What instead, the definition under section 2(15) through its proviso directs and thereby marks a departure from the previous law, is firstly that if a GPU charity is to engage in any activity in the nature of trade, commerce or business, for consideration it should only be a part of this actual function to attain the GPU objective and, secondly and the equally important consideration is the imposition of a quantitative standard i.e., income (fees, cess or other consideration) derived from activity in the nature of trade, business or commerce or service in relation to these three activities, should not exceed the quantitative limit of Rs. 10,00,000 (w.e.f. 1-4-2009), Rs. 25,00,000 (w.e.f. 1-4-2012), and 20% (w.e.f. 1-4-2016) of the total receipts. Lastly, the "ploughing" back of business income to "feed" charity is an irrelevant factor again emphasizing the prohibition from engaging in trade, commerce or business.

If one understands the definition in the light of the above enunciation, the sequitur is that the reference to "income being profits and gains of business" with a further reference to its being incidental to the objects of the Trust, cannot and does not mean Assessment Year: 2013-14 Powerloom Development And Export Promotion Council proceeds of activities incidental to the main object, incidental objects or income derived from incidental activities. The proper way of reading reference to the term "incidental" in section 11(4A) is to interpret it in the light of the sub-clause (i) of proviso to section 2(15), i.e., that the activity in the nature of business, trade, commerce or service in relation to such activities should be conducted actually in the course of achieving the GPU object, and the income, profit or surplus or gains can then, be logically incidental. The amendment of 2016, inserting sub clause (i) to proviso to section 2(15) was therefore clarificatory. Thus interpreted, there is no conflict between the definition of charitable purpose and the machinery part of section 11(4A). Further, the obligation under section 11(4A) to maintain separate books of account in respect of such receipts is to ensure that the quantitative limit imposed by sub-clause (ii) to section 2(15) can be computed and ascertained in an objective manner.

The conclusion recorded above is also supported by the language of seventh proviso to section 10(23C). Whereas section 2(15) is the definition clause, section 10 lists out what is not income. Section 10(23C) by sub-clauses (iv) and (v) exempt incomes of charitable organisations. Such organisations and institutions are not limited to GPU category charities but rather extend to other types of charities (1.e. the per se kind as well). The controlling part of section 10(23C) along with the relevant clauses (iv) and (v) seek to exclude income received by the concerned charities. However, the provisos hedge such exemption with conditions. The seventh proviso much like section 11(4A) and the definition - carve out an exception, to the exemptions such that income derived by charities from business, are not exempt. The seventh proviso virtually echoes section 11(4A) in that business income derived by a charity (in the present case, the GPU charities) which arises from an activity incidental to the attainment of its objective is not per se excluded.

Classically, the idea of charity was tied up with eleemosynary. However, "charitable purpose" - and charity as defined in the Act have a wider meaning where it is the object of the institution which is in focus. Thus, the idea of providing services or goods at no consideration, cost or nominal consideration is not confined to the provision of services or goods without charging anything or charging a token or nominal amount. This is spelt out in Indian Chamber of Commerce (supra) where this Court held that certain GPUs can render services to the public with the condition that they would not charge "more than is actually needed for the rendering of the services, - may be it may not be an Assessment Year: 2013-14 Powerloom Development And Export Promotion Council exact equivalent, such mathematical precision being impossible in the case of variables, may be a little surplus is left over at the end of the year the broad inhibition against making profit is a good guarantee that the carrying on of the activity is not for profit".

Therefore, pure charity in the sense that the performance of an activity without any consideration is not envisioned under the Act. If one keeps this in mind, what section 2(15) emphasizes is that so long as a GPU's charity's object involves activities which also generates profits (incidental, or in other words, while actually carrying out the objectives of GPU, if some profit is generated), it can be granted exemption provided the quantitative limit (of not exceeding 20%) under second proviso to section 2(15) for receipts from such profits, is adhered to.

Yet another manner of looking at the definition together with sections 10(23) and 11 is that for achieving a general public utility object, if the charity involves itself in activities, that entail charging amounts only at cost or marginal mark up over cost, and also derive some profit, the prohibition against carrying on business or service relating to business is not attracted if the quantum of such profits do not exceed 20% of its overall receipts.

It may be useful to conclude this section on interpretation with some illustrations. The example of Gandhi Peace Foundation disseminating Mahatma Gandhi's philosophy (in Surat Art Silk) through museums and exhibitions and publishing his works, for nominal cost, ipso facto is not business. Likewise, providing access to low-cost hostels to weaker segments of society, where the fee or charges recovered cover the costs (including administrative expenditure) plus nominal mark up; or renting marriage halls for low amounts, again with a fee meant to cover costs; or blood bank services, again with fee to cover costs, are not activities in the nature of business. Yet, when the entity concerned charges substantial amounts over and above the cost it incurs for doing the same work, or work which is part of its object (i.e., publishing an expensive coffee table book on Gandhi, or in the case of the marriage hall, charging significant amounts from those who can afford to pay, by providing extra services, far above the cost-plus nominal markup) such activities are in the nature of trade, commerce, business or service in relation to them. In such case, the receipts from such latter kind of activities where higher amounts are charged, should not exceed the limit indicated by proviso (ii) to section 2(15).

The question that arises is whether the change in definition impacts the claims of trade promotion bodies, federations of commerce, or such organizations, that they are GPU charities The judgment in Surat Art Silk (xupra) proceeded on the assumption that trade promotion was the pre-dominant object of the GPU charity before the court, and that other objects including procuring licences, trade etc. were incidental. The assessee in Surat Silk had clear trading objects: "(b) To carry on all and any of the business of Art Silk Yarn, Raw Silk, Cotton Yarn as well as Art Silk floth, Silk Cloth and Cotton Cloth belonging to and on behalf of the members. (e) To buy and sell and deal in all kinds of cloth and other goods and fabrics belonging to and on behalf of the Members." This court, nevertheless, held that since the predominant object of the assessee was trade promotion, while furthering it, the fact that some trading occurred, leading to income, did not preclude the assessee from claiming tax exemption.

In the opinion of this court, the change in definition in section 2(15) and the negative phraseology- excluding from consideration, trusts or institutions which provide services in relation to trade, commerce or business, for fee or other consideration has made a difference Organizing meetings, disseminating information through publications, holding awareness camps and events, would be broadly covered by trade promotion However, when a trade promotion body provides individualized or specialized services such as conducting paid workshops, training courses, skill development courses certified by it, and hires venues which are then let out to industrial, trading or business organizations, to promote and advertise their respective businesses, the claim for GPU status geeds to be serutinised more closely. Such activities are in the nature of services "in relation to trade, commerce or business. These activities, and the facility of consultation, or skill development courses, are meant to improve business activities, Assessment Year: 2013-14 Powerloom Development And Export Promotion Council and make them more efficient. The receipts from such activities clearly are fee or other consideration for providing service "in relation to trade, commerce or business.

The revenue has appealed to this court, in respect of two assessment years, in the case of Apparel Export Promotion Council (AEPC). The objects of AEPC, which was set up in 1978- include promotion of ready-made garment export. To achieve that end, its objects include providing training to instil skills in the workforce, to improve skills in the industry, guide in sourcing machinery, to serve as a body advising. providing information on market or technical intelligence, assisting the concerned industry in obtaining import licenses, showcase the best capabilities of Indian garment exports through the prestigious "India International Garment Fair" organised twice a year by AEPC, etc. These fairs host over 350 participants who exhibit their garment designs and patterns. Other functions are to provide information, and to provide market research. AEPC also assists in developing new design patterns and garments and to perform promotional activities in individual foreign markets. Further, AEPC sends missions and trade delegations abroad, who participate in international fairs, and conduct surveys to gather information on potential export of readymade garments.

As part of its functioning, it also books bulk space, which is then rented out to individual Indian exporters, who showcase their products and services, and ultimately secure export orders. Towards these services, ie. booking and providing space, AEPC charges rentals. Now, these rents are not towards fixed assets owned by it. They are in fact charges, or Tees, towards services in relation to business; likewise, the skill development and diploma courses conducted by it, for which fees are charged, are to improve business functioning of garment exporters. Furthermore, market surveys and market intelligence, especially country specific activities, aimed at catering to specified exporters, or specified class of exporters, is also service in relation to trade, commerce or business.

In the circumstances, it cannot be said that AEPC's functioning does not involve any element of trade. commerce or business, or service in relation thereto. Though in some instances, the recipient may be an individual business house or exporter, there is no doubt that these activities, performed by a trade body continue to be trade promotion. Therefore, they are in the "actual course of carrying on the GPU activity. In such a Case, for each year, the question would be whether the quantum from these Assessment Year: 2013-14 Powerloom Development And Export Promotion Council receipts, and other such receipts are within the limit prescribed by the sub-clause (ii) to proviso to section 2(15) If they are within the limits, AEPC would be for that year, entitled to claim benefit as a GPU charity.

The Hon'ble Supreme Court after analysing the law which was prevalent and applicable prior to insertion of proviso w.e.f. 01/04/2009 and amendments made thereafter, have clarified the amended position of law in the following manner: - ? if at all any activity in the nature of trade, commerce or business, or a service in the nature of the same, for any form of consideration is permissible, activity should then be intrinsically linked to, or is part of the GPU category charity's object. ? the test of the charity being driven by a predominant object is no longer good law. Likewise, the ambiguity with respect to the kind of activities generating profit which could feed the main object and Incidental profit-making also is not good law.. ? What instead, the definition under section 2(15) through its proviso directs and thereby marks a departure from the previous law, that if a GPU charity is to engage in any activity in the nature of trade, commerce or business, for consideration it should only be a part of this actual function to attain the GPU objective; and equally important consideration is the imposition of a quantitative standard - i.e., income (fees, cess or other consideration) derived from activity in the nature of trade, business or commerce or service in relation to these three activities, should not exceed the quantitative limit. ? The Hon'ble Apex Court has further held that the idea of providing services or goods at no consideration or at cost may not be relevant factor as it has to be given a wider meaning. But now there is an inhibition against making profit though there may be a little surplus left over the end of the year. Thus, concept of pure charity i.e. the performance of an activity without consideration is not envisioned under the Act, however, as long as GPUs object involves activities which also generates profits, it can be granted exemption provided the quantitative limit under second proviso to section 2(15) for receipts from such profits, is adhered to. ? In para 171, it has been stated that if the charity involves itself in activities that entail charging amounts only at cost or marginal markup over cost and also derives from profit, the prohibition against carrying on business or service relating to business is not Assessment Year: 2013-14 Powerloom Development And Export Promotion Council attracted (if the quantum of such profits did not exceed 20% of its overall receipts) has been adhered to.

The Id. Sr. Counsel referring to para 172, submitted that Hon'ble Apex Court has observed that, if the profit do not exceed 20% then benefit of Section 11 cannot be denied. However, such an interpretation as stated by the Id. Senior Counsel cannot be accepted, because all through the judgment the Hon'ble Supreme Court while mentioning the limit of 20% have clarified that receipts from trade, commerce or business should not exceed 20% of overall receipts. It does not mean that up to 020% of the profit from the activities of trade, commerce and business is permissible.

Further, while analyzing the case of trade promotion bodies, councils, association, organization, Hon'ble Apex Court citing the example of Apparel Export Promotion Council (AEPC), held that the change of definition of Section 2(15) starts with negative phraseology, l.e., they exclude any activity which is in the nature of trade, commerce or business for fee or other consideration has made a difference. Their Lordships observed that, organizing meetings, disseminating information through publications holding awareness camps and events are broadly covered under trade promotion. However, when trade promotion provides individuals or specialized services like conducting trade workshops, training course, skill development courses certified by it and hires venue which are then let out to industrial, trading of business organisation to promote and advertise their respective business, then the claim for GPU status needs to be scrutinized more closely. Such activities are in the nature of services "in relation to" trade, commerce or business. Thus, receipt from such activity clearly are "fee or other consideration" for providing services "in relation to" trade, commerce or business. In para 202 (supra), after citing examples of activities of AEPC the Hon'ble Court held that these activities carried out cannot be held that it does not have any element of trade, commerce or business or service and the activities carried out by it, has to be examined, whether they are in the "actual course of carrying on" the GPU activity or not. In such a case, for each year, the question would be whether the quantum from these receipts, and other such receipts are within the limit prescribed by the sub-clause (ii) to proviso to section 2(15). If they are within the limits, AEPC would be for that year, entitled to claim benefit as a GPU charity. Thus, judgment of the Hon'ble Supreme Court has clarified the law post insertion of the proviso to Section 2(15).

Now, the question is that, if an institution has been granted registration u/s. 12A for a particular object of GPU holding it to be charitable in nature, then, still it has to be seen, whether that activity per se for which it has been granted registration has some element of trade, commerce or business. If it has only one source of receipts from that activity only, then whether the able. For example, threshold of 20% of the total receipts would still be applicable if the entire receipts are from one activity only, for which it has been granted registration and it is solely carrying its activity for the same object for which it has been recognised for grant of exemption u/s.11, then how the 20% of the total receipts is to be calculated, i.e. in relation to which receipt 20% is to be calculated. For instance, if only from one activity (for which it has been granted registration u/s.12A) receipt is of Rs.1 Crore and it has no other receipts then how 20% is to be calculated. Whether in such case it falls into the main provision of Section 2(15) or the first and second proviso gets triggered; or one has to see, whether in course of main GPU activity, it carries on other ancillary activity which is to feed the object of GPU, then receipts from those activities have to be examined under both the provisos and apply the threshold limits. In cases where an institution or a body or trade promotion carries out any other activity in the nature of trade, commerce or business for a consideration to fulfill its GPU objects, then the receipts from such activity should not cross the threshold limit of Rs.10 lakhs, Rs.20 lakhs or 20% of the total receipts. Now, if there is only one activity and there are no other receipts from any other activity, then the issue would arise is how to calculate the threshold limit of 20%. If activity carried out in pursuance of that object which is the only activity, then whether registration u/s.12A should at all be granted, because, ostensibly the receipts will always will fall in Assessment Year: 2013-14 Powerloom Development And Export Promotion Council the scope of the proviso if the limit provided therein is crossed; or the mandate of law is that such institution or body should not cross the threshold at all. If that is the purport, then activity per se does not qualify under main section 2(15). In our view, this cannot be the true purport of the section or the judgment of the Hon'ble Supreme Court. What needs to be examined, if there is any activity which is hit by proviso, then only benefit can be denied. Another view of looking into the proviso is that, during the course of carrying out activity of objects of GPU, it undertakes any activity which falls into the nature of trade and commerce and receipts from such activity should not cross the threshold, then perhaps it makes some sense. The law which has been explained by the Hon'ble Supreme Court, then can it be interpreted that the main activity per se has to be seen from the angle, whether it is in the nature of trade, commerce or business; and other factors of low margin or very low profit coupled with conditions provided in the proviso; or one has to see, is there any other activity falling into ambit of proviso and examine the benefit u/s.11.

If one takes a view that the very activity for which it has been granted registration for carrying out object of GPU, then also limit has to be adhered to, that is, in case the receipts from said activity of GPU exceeds Rs.10 lakhs or Rs.20 lakhs or 20%, then, no benefit of Section 11 is to be given and only in the year it is less than Rs.10 lakhs or Rs.20 lakhs then only exemption u/s.11 can be given. This interpretation, in our view will defeat the very intent of the section 2(15) for any trust or body carrying GPU as its main object. Here, in this case, the only activity which has been carried out, has been recognized for the charitable purposes with the object of GPU. If the very activity was in the nature of trade, commerce or business, then why it was even granted registration u/s.12A for last 3 decades. Here one very important fact is that, even under the new law, it has been granted registration for the same object from A.Y.2023-24 onwards. Thus, the Income Tax department still considers the main activity of the assessee is charitable within the object of GPU. If from the same activity the receipts of the assessee exceeds the threshold, how can benefit be denied and the proviso will be invoked year after year, or if only when the assessee carries out any other activity to fulfil its GPU object which involves any element of trade, commerce or business, then only receipts from such activity has to be examined from the prospective of threshold provided in the proviso.

The Hon'ble Apex Court while explaining the true purport of proviso, as explained in para 167 to 172, clarified that; firstly, if GPU charity is engaged in any activity, the nature of trade, Assessment Year: 2013-14 Powerloom Development And Export Promotion Council commerce or business for consideration it should only be part of its actual function to attain GPU objective, i.e., if at all there is any activity for GPU charity which involves any such activity which is in the nature of trade, commerce or business, then threshold imposed for the quantitative limit has to be adhered to. Secondly, if charity involves itself any activities that entail charging amounts only at cost or marginal markup over cost and it also derives profit, then such profit should not exceed 20% of its overall receipts. That means the Court envisioned that if carrying out GPU objective or any other activity which has been carried out, then the receipts from such activity should not exceed 20%. This has been further clarified while explaining the case of trade promotion bodies in para 202 wherein they have held that if the trade promotion's main activity is organizing meetings, disseminating information through publication, holding awareness camps and events would be broadly covered by trade promotion for which it is recognized for GPU. However, only when trade promotion body provides individuals or specialized services which have been elaborated therein and if such receipts are in the nature of fee or other consideration, then it is reckoned to be providing service in relation to trade, commerce or business. The activities carried out in that case which were in the nature of individuals and specialized services, the Hon'ble Supreme Court held that its functioning involved element of trade, commerce or business and therefore, for such services whether the quantum for these receipts are within the limit prescribed has to be examined year to year.

While deciding the issue, whether the nature of receipts of income garnered by the trust in the course actually carrying out these activities of publishing newspaper can be characterized as in the nature of trade, commerce or business for the consideration, normally Apex Court observed and held as under:- "245. The publication of advertisements for consideration, in the opinion of the court, by the newspaper, cannot but be termed as an activity in the nature of carrying on business, trade or commerce for a fee or consideration. That the newspaper published by the trust ("the Tribune") in this case is funded mainly through advertisement is no basis for holding that publishing such advertisements by the Trust does not constitute business. The object of the trust to involve or engage in publication of newspapers. Publishing advertisements is obviously to garner receipts which are in the nature of profit. Now, by virtue of the amended definition of section 2(15), GPU charities can engage themselves in business or commercial activity or profit, only if the receipts Assessment Year: 2013-14 Powerloom Development And Export Promotion Council from such activities do not exceed the quantitative limit of the overall receipts earned in a given year. While the assessee's contention that publication of advertisement is intrinsically linked with newspaper activity (thereby fulfilling sub-clause (1) of the proviso to section 2(15), e an activity in the course of actual carrying on of the activity towards advancement of the object) is acceptable, nevertheless, the condition imposed by sub-clause (if) of the proviso to section 2(15) has to also be fulfilled. In the present case, that percentage had been exceeded, as evident from the record."

Thus, the activity of the trust for publishing advertising in the newspaper is intrinsically linked for newspaper activity falls within the ambit of sub-clause (i) of Subsection 2(15) and conditions imposed in sub-clause (ii) of the proviso has to be fulfilled. The moot question is, whether the receipts from such activity itself is in the nature of trade, commerce or business or any activity of ranging in services in relation to any trade, commerce or business has to be examined. If the assessee is generating revenue from the activities for which it has been granted status of charitable nature, then whether it falls within the main section 2(15) itself or its activities are hit by proviso has not been discussed by the authorities below, both by the AO and Id. CIT(A) who have simply stated that since receipts of the assessee had crossed the limit of Rs.10 lakhs, therefore, benefit of Section 11 cannot be granted. Before deciding this issue, it is incumbent whether its activity for which it has been granted registration u/s.12A itself per se falls in the category of carrying of any activity in the nature of trade, commerce or business. Only if it carries any other activity which falls in such nature, then only proviso to Section 2(15) would be applicable.

Accordingly, we remit this issue to the file of the AO to decide this issue in line with judgment of Hon'ble Supreme Court and the principles laid down therein, whether any activity carried out by the assessee falls in the nature of trade, commerce or business or service for which any fees or cess or consideration has been received.

In so far as assessee's contention, its activities from members alone should be treated as general public utility and only nominal revenue from non-members should be treated as activity in the nature of trade, commerce or business cannot be accepted. Because, even if it is with the members, what is to be seen is whether the activity per se is in the nature of trade, commerce or Assessment Year: 2013-14 Powerloom Development And Export Promotion Council business or not. How a distinction can be made only for non- members and the subscription revenue from them alone has to be treated as in the nature of trade, commerce or business and for some activity and charging fees from the members, it is not. We are unable to appreciate such plea and is rejected.

Secondly, in so far as the issue of principle of mutuality also prima facie, once the revenues are from the non-members, even if they are marginal, that does not mean the entire activities of the assessee falls within the ambit of principle of mutuality. However, since in the earlier years this issue has been remanded back to the AO by the Tribunal with specific direction therefore, we are not deciding or adjudicating this issue and matter is remanded back to deal and decide the issue in line with the order of the Tribunal in the earlier years. Respectfully, following the above view by of coordinate bench of this Tribunal in case of Media Research (Supra) we are of the view that the issue needs to be verified in the light of observation by coordinate bench in para 27 to 30 herein above. We thus, remit the issue back to the Ld. AO to decide the case of assessee based on the directions hear in above. Needless to say that proper opportunity of being heard must be granted to the assessee. Accordingly, the grounds raised by the assessee stands partly allowed in statistical purposes.