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Facts
The assessee, Tamil Nadu Trade Promotion Organization, a non-profit company, was granted registration under Section 10(23C)(iv) of the Income Tax Act, which was later withdrawn. The assessee's appeal is against the order rejecting its application for permanent registration, arguing that its activities are for general public utility and not primarily for profit.
Held
The Tribunal, considering the pendency of similar issues before the Supreme Court and the favorable decisions in the case of the assessee's major shareholder (ITPO), directed the CIT(E) to grant registration to the appellant, subject to the outcome of the Supreme Court's decision. The appeal was allowed.
Key Issues
Whether the assessee's activities of promoting trade and industry constitute a charitable purpose, and if the proviso to Section 2(15) of the Income Tax Act, as interpreted by various courts, disqualifies it from exemption.
Sections Cited
10(23C)(iv), 2(15), 25, 14
AI-generated summary — verify with the full judgment below
This appeal by the assessee is directed against the order of learned Commissioner of Income Tax (Exemptions), Chennai [in short, the ld. CIT(E)] dated 29/03/2025 by raising following grounds of appeal:
“1. The order of the Learned Commissioner of Income Tax (Exemptions) is contrary to the law, facts and circumstances of the case.
2. For that the Learned Commissioner of Income Tax (Exemptions) erred in rejecting the application made for registration u/s 10(23C)(iv) of the Income Tax Act ("the Act") 3. For that the Learned Commissioner of Income Tax (Exemptions) had erred in holding that the appellant company was not established with charitable purposes.
4. For that the Learned Commissioner of Income Tax (Exemptions) erred in not appreciating the fact that the appellant being a Non-profit company registered u/s 25 of the Companies Act 1956 with its primary objective being the advancement of general public utility through promotion of Indian industry, trade and enhancement of its global competitiveness, is covered by the first proviso to Section 2(15) of the Act.
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5. For that the Learned Commissioner of Income Tax (Exemptions) erred in concluding the appellant's activities to be 'commercial merely on the basis of surplus generation, without appreciating the fact that such surplus generated was applied towards the charitable purposes of the appellant company.
6. For that the Learned Commissioner of Income Tax (Exemptions) had failed to examine whether the appellant company's activities were incidental to the main charitable object and had also failed to appreciate the element of 'profit motive' in a holistic manner. For these grounds and such other grounds that may be adduced before or during the hearing of the appeal, it is prayed that the Hon'ble Tribunal may be pleased to direct the Commissioner of Income Tax (Exemptions) to grant registration u/s 10(23C) (iv) of the Act and/or provide such other relief as this Hon'ble Tribunal may deem fit.”
As per the Statement of facts filed by the appellant Trust, the facts of the case, in brief, are that M/s. Tamil Nadu Trade Promotion Organization is a State Government undertaking established as a joint venture project of the Government of India, Ministry of Commerce & Industry represented by M/s India Trade Promotion Organisation (ITPO) (holding 51% of the Share Capital) and Government of Tamil Nadu represented by M/s Tamil Nadu Industrial Development Corporation Limited (‘TIDCO'), a Wholly owned State Government enterprise (holding 49% of the Share Capital) and was incorporated on 17th November 2000 as a "Non-Profit company' u/s 25 of the Companies Act, 1956, equivalent to Section 8 of the Companies Act, 2013.
The main objectives of the Appellant institution are to promote, organize and participate in industrial trade and other fairs in India and abroad and to take all measures incidental thereto for promoting Indian industry & trade and enhance its global competitiveness.
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The appellant was granted registration u/s 10(23C)(iv) of the Income Tax Act ('the Act') under the old regime vide Order dated 06.03.2009 from AY 2007-08 onwards. However, the said registration, granted as above, was subsequently withdrawn from AY 2009-10 onwards vide Order dated 26.02.2013, on the ground that with effect from 01.04.2009, proviso to Section 2(15) has been introduced in the Income Tax Act whereby if an institution is pursuing the object of general public utility and conducting business, where the commercial receipts is more than the threshold limit of Rs.10 lakhs, the institution loses its character as charitable.
5. The ITPO, a major shareholder of the appellant, carrying on activities identical to the appellant, was also granted registration u/s 10(23C) (iv) of the Act but was subsequently withdrawn post introduction of the proviso to Section 2(15) w.e.f.
01.04.2009 against which a Writ Petition was filed before the Hon'ble Delhi Court.
The case was decided in favour of ITPO vide Order dated 22.01.2015. The Department's appeal against the said Order admitted before the Hon'ble Supreme Court on 14.07.2017 in C.A. No. 9284 of 2017 was last listed on 24.09.2024 and is pending for disposal as on date.
6. Against the Order withdrawing the exemption so granted, the appellant, ‘TIDCO' had filed a Writ Petition in WP No. 26968 of 2013 before the Jurisdictional Madras High Court that is also pending as on date. The Hon'ble High Court, while admitting the Writ Petition vide Order dated 12.11.2019, in para 17 had observed that since "the Hon'ble Supreme Court is considering the same issue which arisen in this Court, propriety demands that this Court must not proceed ahead to 4 ITA1438/Chny/2025 M/s Tamil Nadu Trade Promotion Organization Vs CIT(E) adjudicate on the same issue."- referring to the above mentioned ITPO's case pending before the Supreme Court.
The appellant, on obtaining the provisional registration u/s 10(23)(C)(iv) of the Act under the new regime, applied for permanent registration before the Learned Commissioner of Income Tax (Exemptions) Chennai in Form 10AB on 30.09.2024.
The same was rejected vide Order dated 29.03.2025 on the grounds that the appellant was not established with charitable purposes in light of the facts & details of the appellant read with Section 2(15) of the Act, besides relying on the decision of the Hon'ble Supreme Court in the case of Ahmedabad Urban Development Authority held as applicable to the appellant's case in hand.
Aggrieved by the order of ld. CIT (E), the assessee has filed present appeal before this Tribunal.
During the appellate proceedings before us, the ld. AR of the assessee has submitted as under:
“Pursuant to the withdrawal of exemption u/s 10(23C)(iv) of the Act in the case of ITPO, assessments were completed denying the exemption. On being held in favour of ITPO in the second appellate stage before the ITAT, the Department had filed further appeal before the Hon'ble Delhi Court in ITA Nos. 3.4 & 5 of 2022 The said appeals were decided in favour of ITPO, vide Order dated 11.01.2022, since the subject issue was covered by the judgment passed by their predecessor Division Bench in WP(C) No. 1872/2013, holding as follows: “4. It is pertinent to mention that in a writ petition being India Trade Promotion Organization v DGIT (Exemptions) [2015] 53 taxmarin.com 404/229 Taxman 347/371 ITR 333 (Delhi) in WP(C) 1872/2013 the learned predecessor Division Bench issued a Mandamus to the appellant herein to grant approval to the respondent herein under section 10(23C) (iv) of the 5 ITA1438/Chny/2025 M/s Tamil Nadu Trade Promotion Organization Vs CIT(E)
Act. The relevant portion of the said judgment passed by the learned predecessor Division Bench is reproduced herein below: "53. From the said decision, it is apparent that merely because a fee or some other consideration is collected or received by an institution, it would not lose its character of having been established for a charitable purpose. It is also important to note that we must examine as to what is the dominant activity of the institution in question. If the dominant activity of the institution was not business, trade or commerce, then any such incidental or ancillary activity would also not fall within the categories of trade, commerce or business. It is clear from the facts of the present case that the driving force is not the desire to earn profits but, the object of promoting trade and commerce not for itself, but for the nation both within India and outside India. Clearly, this is a charitable purpose, which has as its motive the advancement of an object of general public utility to which the exception carved out in the first proviso to section 2(15) of the said Act would not apply. We say so, because, if a literal interpretation were to be given to the said proviso, then it would risk being hit by Article 14 (the equality clause enshrined in Article 14 of the Constitution). It is well-settled that the courts should always endeavor to uphold the Constitutional validity of a provision and, in doing so, the provision in question may have to be read down, as pointed out above, in Arun Kumar (supra)” ******* “58. In conclusion, we may say that the expression "charitable purpose", as defined in section 2(15) cannot be construed literally and in absolute terms. It has to take colour and be considered in the context of section 10(23C)(iv) of the said Act. It is also clear that if the literal interpretation is given to the proviso to section 2(15) of the said Act, then the proviso would be at risk of running fowl of the principle of equality enshrined in Article 14 of the Constitution India. In order to save the Constitutional validity of the proviso, the same would have to be read down and interpreted in the context of section 6 ITA1438/Chny/2025 M/s Tamil Nadu Trade Promotion Organization Vs CIT(E)
10(2C) (iv) because, in our view, the context requires such an interpretation. The correct interpretation of the proviso to section 2(15) of the said Act would be that it carves out an exception from the charitable purpose of advancement of any other object of general public utility and that exception is limited to activities in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business for a cess or fee or any other consideration. In both the activities, in the nature of trade, commerce or business or the activity of rendering any service in relation to any trade, commerce or business, the dominant and the prime objective has to be seen. If the dominant and prime objective of the institution, which claims to have been established for charitable purposes, is profit making, whether its activities are directly in the nature of trade, commerce or business or indirectly in the rendering of any service in relation to any trade, commerce or business, then it would not be entitled to claim its object to be a 'charitable purpose'. On the flip side, where an institution is not driven primarily by a desire or motive to earn profits, but to do charity through the advancement of an object of general public utility, it cannot but be regarded as an institution established for charitable purposes.” “59. Thus, while we uphold the Constitutional validity of the proviso to section 2(15) of the said Act, it has to be read down in the manner indicated by us. As a consequence, the impugned order dated 23-1 2013 is set aside and a mandamus is issued to the respondent to grant approval to the petitioner under section 10(23C) (iv) of the said Act within six weeks from the date of this judgment. The writ petition stands allowed as above. The parties are left to bear their own costs."
Learned Counsel for the Appellant/revenue states that the revenue has preferred a Special Leave Petition being SLP(C) No. 8434/2017 against the judgment passed in WP(C) 1872/2013 which is pending consideration
7 ITA1438/Chny/2025 M/s Tamil Nadu Trade Promotion Organization Vs CIT(E) in the Supreme Court. In the said Special Leave Petitions, Leave has been granted.
Admittedly, there is no stay of the judgment passed by the learned predecessor Division Bench, Consequently, in view of the judgment of the Supreme Court in Kunhayammed and others v. State of Kerala And Another [2000] 113 Taxman 470/245 ITR 360 (SC) (2000) 6 SCC 359 and Shree Chamundi Mopeds Ltd. v. Church of South India Trust Association CSI Cinod Secretariat, Madras (1992) 3 SCC 1 the present appeals and pending applications are dismissing being covered by the judgment passed by the learned predecessor Division Bench in WP(C) 1872/2013." The Department had further appealed to the Supreme Court against the above order of the Delhi High Court in SLP (Civil) Diary No. 12361 of 2023 that was dismissed vide Order dated 04.05.2023 wherein it was held that "3. This Court is of the opinion that the order impugned does not call for interference. The Special Leave Petition is, accordingly, dismissed." The Department had filed a Review Petition against the above Order in Civil Diary No. 5686 of 2024 that was dismissed vide Order dated 14.05.2024 by holding that " 2...... otherwise, having carefully gone through the Review Petition, the order under challenge and the papers annexed therewith, we are satisfied that there is no error apparent on the face of the record or any merit in the Review Petition, warranting reconsideration of the order impugned.
3. Accordingly, the Review Petition is dismissed both on the ground of delay as well as on merits." The appellant places reliance on the above mentioned Orders passed in the case of its major shareholder ITPO where the identical facts had travelled upto Supreme Court and had been held in favour of the assessee that is squarely applicable to its case in hand as well. Further, the appellant wishes to draw Your Authority's kind attention to the fact that the above mentioned Orders of the Supreme Court had been passed consequent to that passed in the case of Ahmedabad Urban Development Authority on 19.10.2022 and that of its Clarificatory Order passed on 03.11.2022 in Miscellaneous Application No. 1849 of 2022, that had been relied upon by the Learned CIT (E) while passing the impugned Rejection Order.”
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The ld. CIT-DR, on the other hand, has placed reliance on the decision of the Hon’ble Madras High Court W.P. Nos. 27216, 26968 and 26969 of 2013 wherein it has been held as under:
“12. Per contra, the learned counsel for the respondents contended that the judgment of the Delhi High Court does not lay down the correct Interpretation. According to the learned counsel, the exclusion of words "not involving the carrying on of any activity for profit the insertion of proviso was intended to ensure that the exemption is limited to those charitable organizations whose object is to carry on genuine charitable activity. The learned counsel for the respondents contended that the amendment was brought in to curb the practice of carrying on business or commerce in the garb of charity. The learned counsel for the respondents would state that the Delhi High Court has in fact set at naught the entire purpose of the amendment. She would state that the petitioner is carrying commercial activities by letting out space for rent to promote industrial trade, collecting money for hoardings, collecting fee for entrance etc.
13. In the counter-affidavit of the respondents, it has been stated that the ploughing back of the collections into the petitioner organization only goes to increase the profit margin of the petitioner and nothing to do with anything charitable in nature.
14. We find considerable force in the arguments of the learned counsel for the respondents. The Delhi High Court has virtually set at naught the entire purpose for which the amendments were brought in. Substantial amount has been collected by the petitioner by way of sale of tickets, leasing out the area to various parties, collecting money by placing kiosk, collecting money by permitting the persons to put up hoardings. All these activities cannot be said to be for "charitable purposes for advancement of "general public utility. The words "not involving the carrying out of any activity for profit was removed from the main Section and the proviso was inserted was only because it was found that many organizations were carrying on business or commerce under the garb of charity. The proviso clarifies that the advancement of any other object of general public utility shall not be a 9 ITA1438/Chny/2025 M/s Tamil Nadu Trade Promotion Organization Vs CIT(E) charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration then the income earned by the organization would not be entitled to exemption under Section 10(23C) (iv) of the said Act.
This Court, by an order dated 20.06.2019 rejected the stay application and the petitioner is paying amounts as assessed by the authorities.
The learned counsel for the respondents has brought to our notice the fact that the judgment of the Delhi High Court in W.P.(C) No.1872 of 2013 (supra) has been challenged before the Hon'ble Supreme Court by filing Petition to Special Leave to Appeal (C) No.14674 of 2016 and the Hon'ble Supreme Court, by its order dated 14.07.2017 has granted leave on the Special Leave to Appeal and the matter is now pending before the Hon'ble Supreme Court.
In view of the fact that the Hon'ble Supreme Court is considering the same issue which arisen in this Court, propriety demands that this Court must not proceed ahead to adjudicate on the same issue.”
To counter the argument of the ld. CIT-DR, the ld. AR of the assessee-trust further submitted that the Hon’ble Madras High Court in its order at Para-14, the reference of which was made by the Ld. CIT, DR, is only an observation in the nature of obiter dicta and cannot be treated as a direction. The appellant’s counsel finally, pleaded that in view of the decision made in the case of its major shareholder ITPO where the identical facts had travelled upto Supreme Court and had been held in favour of the assessee, this Bench should also follow the same as the case of the appellant is squarely covered by the decision in ITPO.
We have considered the rival submissions and we are inclined to accept the contentions of the appellant Trust that as on date the decision is in favour of the 10 ITA1438/Chny/2025 M/s Tamil Nadu Trade Promotion Organization Vs CIT(E) appellant’s major shareholder, i.e., ITPO unless it is reversed by subsequent orders. Thus, there is no harm in granting registration by the Ld. CIT (Exemption) till some adverse finding is given by the Hon’ble Supreme Court. Accordingly, we direct the Ld. CIT (Exemption) to grant registration to the appellant subject to the outcome of the Hon’ble Supreme Court decision in the case of the assessee. Thus, the appeal of the assessee-trust is allowed subject to above observation.
In the result, this appeal of the assessee is allowed.
Order pronounced in the open court on 26/09/2025.