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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
आदेश / O R D E R याजेश कुभाय, लेखा सदस्य के द्वाया / PER RAJESH KUMAR, AM: These appeals by the assessee directed against respective orders of learned Commissioner of Income Tax (Appeals) pertaining to Assessment Years 2013-14 & 2014-15.
& 1705/M/19 Page No. 2 2. As the facts and circumstances are exactly identical in both the assessment years i.e. AYs 2013-14 and 2014-15, hence, we take the facts from AY 2014-15 and decide the issue. The grounds raised by the assessee in AY 2014-15 are as under: - “1.0 Inappropriate Application of Proviso to s. 2(15). The learned CIT(A) erred on facts and in law in confirming that the Proviso to s.2(15) of the Income Tax Act, 1961 (the Act) applied to the appellant. 1.1 The learned CIT(A) erred on facts and in law in dismissing the claim of the appellant for exemption under s.11, s.12, s.12A and s.13 of the Act. 1.2 The learned CIT(A) erred on facts and in law in not considering he alternative claim of the appellant for deduction/ exemption made under s.44A of the Act. 2.0 Misappreciation of facts: The learned CIT(A) erred on facts and in law in wrongfully appreciating that the appellant was claiming deduction in respect of expenses against interest from banks and not appreciating that expenses were not claimed as “deduction” from any particular income, but the expenses represented application” of income.”
3. The facts in brief are that the assessee filed the return of income on 25.11.2014 accompanying therewith the income and expenditure account, Balance sheet and Audit Report declaring total income of Rs.40,32,933/-. Pertinent to state that the assessee is registered u/s 12A of the Act vide registration No. INS/10496/ dated 08.04.1974. The case was selected for the scrutiny and statutory notices were duly issued and served upon the assessee. The AO in Para 4 of the assessment order noted that in earlier years, the assessee’s activities were hit by proviso to section 2(15) of the Act. According to the AO held that during the year the assessee has prepared profit and loss & 1705/M/19 Page No. 3 account and showed his activities as business activities. However, the assessee has shown the interest income as income from charitable purpose and claimed various expenses against the said interest income. The AO observed that once the assessee’s activities are hit by the proviso to section 2(15) of the Act, the interest income is treated as income from other sources and therefore exemption under section 11 of the Act is not available to the assessee. Consequently, all the expenses claimed against the income from other sources were rejected and income was assessed at Rs. 1,03,64,794/- vide order dated 24.12.2016 passed under section 143(3) of the Act.
4. In the appellate proceedings the CIT(A) dismissed the appeal of the assessee by observing and holding as under:- “6. Decision: I have considered the facts of the case and appellant's submissions and case laws relied upon by the appellant. I find that the AO has decided the issue relied on the stand taken by the assessing officer in earlier years. The appellant also at Para 1.7 of his submission has reproduced excerpts from the assessment order for AY 2013-14 wherein the AO had discussed the reasons for denying the exemption, I had gone through the assessment order for AY 2013-
14. I find that the AO in his assessment order for AY 2013-14 has observed as follows: "4.4 It can be summarized the facts that the assessee is doing regular activities which are in nature of business by way of arrange Seminars, Collective Participation fees from the participants, by collecting money in the name of awareness programs through seminars which is related to trade and commerce. The assessee trust was holding exhibition, trade etc. and therefore Business and Trade as per the interpretation place on the word education used in Section 2(15) of the I. T. Act. Reliance was place was placed on sole Trustees, Loka Shikshana Trust versus Commissioner Income tax (1975) 101 ITR 234 (SC) and Bihar Institute of mining & 1705/M/19 Page No. 4 and mine Surveying versus CIT (1994) 2008 ITR 604 (Patna). Secondly, the assessee trust was covered under the last limbs of charitable purpose i.e. advancement of any other object of general public utility. In view of amendment made in sec. 2(15) of the I.T Act i.e. from 1st April, 2009, for the A. Y.2009-10 onwards, the assessee trust was not entitle to exempted as it is an institution which conducts on activity in nature of business and also charge fee or coordination. It was earning huge profits in systematic and organized manners and therefore, it was not an institute existing for charitable purpose under the revised proviso to Section 2(15) of the I.T Act. Thirdly, the assessee trust institute has been earning huge income from Stall rental charges, bunting & banners, sponsorship income, directory advertisement, Exhibition Entry ticket Collection etc. 4.5 To decide the above issue, it is necessary to examine section 2(15) after the amendment with effect from 1st April 2008. The relevant provision read as under: "Section 2 definition- 2(15) "Charitable purpose" includes relief of the poor, education, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest and the advancement of any other object of general public utility. 4.6 The assessee is an institution which carries on charitable activities in the nature of education or advancement of any other object of general public utility and secondly, in case of the assessee - institute is engaged in the activity of advancement of any other object of general public utility can be institute be denied exemption in view of the proviso to section 2(15), which was introduced with effect from 1S1 April 2009. 4.7 A scrutiny of section 2(15) of the Act elucidates that charitable purpose for the purpose of the Act has been divided into six categories, 1) Relief to the poor 2) education 3) Medical relief 4) preservation of environment (including watersheds, forests and wildlife), 5) preservation of monuments or places or objects of artistic or historical & 1705/M/19 Page No. 5 importance and 6) advancement of any other object of general public utility. 4.8 The assessee trust institution will fall under the sixth category i.e. advancement of any other object of general public utility. The assessee trust institute cannot be regarded as an education institutions as the main object is to regulate the profession of the assessee trust institute is not a statutory authority or professional body. 4.9 These activities undertaken by the assessee - institute not satisfies the requirement of the term education as defined by the Supreme Court in sole trustee Loka Shikshan Trust (supra) 4.10 The sense in which the word 'education' has been used in section 2(15) is the systematic instruction, schooling or (raining given to the young in preparation for the work of life. It also connotes the whole course of scholastic instruction which a person has received. The word education' has not been used in that wide and extended sense, according to which every acquisition of further knowledge constitutes education. 4.11 In support of this, the ITAT Amritsar Bench in the case of M/s Jalandhar Development Authority relied upon the decision of the ITAT Chandigarh Bench, in the case of Punjab Urban Planning and Development Authority v/s CIT. The ITAT in the case of Jalandhar Development Authority held as under: "It is the well known fact that in some of the situations the provisions of law are misused in the name of the charities. If an expanded / broader latitude is extended to the word charity, then there are so many institutions / departments who will try to come under umbrella of this provision to misuse the provision. Therefore, for the broad development of the nation / society, a strict and positive vigils is required so that the provision can be saved from its misuse in any manner. No activity can be carried on efficiently, properly unless and until it is carried out on a business principle but it does not mean that the provision is misused in any manner under the grab of charity and any institution be allowed to become richer and richer under the grab of charity by making it a non-tax payable organization. A charitable institution ITA Nos. 1387/M/20 & 1705/M/19 Page No. 6 provides services for charitable purposes free of cost and not for a gain. 4.12 It may also be stated that the concept of charity is necessarily altruistic in nature and involved the idea of benefit to others. The essence of charity is that the person(s) doing charity exclude themselves from the benefits of the charity. Non exclusion of contributors to 'charity' fund from the benefits arising out of that is nothing but serving the interest of self in an organized manner. In fact the entire scheme of Sec. 11 to 13 and particularly sec. 13(1)(c) and 13(3) is based on this basic principle or essence of 'charity'. Thus in a case of even charitable institution, if benefit is proved to certain categories of people referred to in Sec. 13(3) the Exemptions u/s 11, 12 is not admissible. Therefore, the question of granting benefit to any Institution or Club where the objects themselves are not charitable and are for the benefit of members and where certain facilities and conveniences are provided to members on payment cannot be considered as charitable objects and activities. 4.13 Finally, the assessee has himself accepted that assessee is engaged in the activities of trade, business and commerce and rendering the services in relation to trade, commerce or business which is hit by the revised pro2iso to section 2(15) of the act and not claimed exemption u/s 11 of the Act; and offered the surplus income for taxation. 4.14 Therefore, in view of the above explanation offered and various court judgments/decisions as discussed above, the exemption u/s 11 of the Act is not allowed to the assessee and assesse's receipts /income from activities and interest income are treated as income of the assessee and taxed accordingly. In view of the above, I find no reason to intervene in the decision taken by the Assessing Officer for AY 2014-15 also and accordingly assessee’s claim to allow the expenses claimed against the income from other sources is dismissed. Ground is dismissed.”
After hearing the rival parties and perusal of the materials available on record, we note that the assessee is an association of & 1705/M/19 Page No. 7 persons constituted for the purposes of promotion of various objects of the assessee which reproduced as under: -
(i) To promote the Science, Literature and diffusion of useful knowledge in photography and Fine Arts. (ii) To maintain library for the use and reference of members of the association. (iii) To encourage and promote research in manufacture of photographic materials. (iv) to collect and circulate educative information and technical knowledge relating to the manufacture of photographic items, articles and materials and equipments and thereby to put the manufacturing concerns of the members on progressive standard and to suggest and giuce and to cooperate for the same purpose. (v) To encourage friendly feelings amongst the persons, firms and companies who are engaged in the manufacture and dealing of photographic materials and to organize and promote welfare activities amongst them.
A perusal of the objects of the assessee shows that the assessee is not carrying of any activity of business in nature which is hit by the proviso to section 2(15) of the Act, for the sake of convenience the proviso to section 2(15) of the Act is extracted as under:- “2. In this Act, unless the context otherwise requires,— ………………………………….. …………………… (15) "charitable purpose" includes relief of the poor, education, yoga, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility: & 1705/M/19 Page No. 8 Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity, unless— (i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and (ii) the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year;”
A close perusal of the proviso also reveals that assessee is not carrying out of any activity which is related to advancement of any other object of general public utility. Source of the income of the assessee is from the member’s fee and from the organization of exhibitions etc which is done only to promote the interest of the members. The assessee filed the memorandum of association and also referred to various objects of the assessee which has been reproduced above and we find that none of the objects of the assessee can be construed as advancement of any other object of public utility. The case of the assessee finds from the decision of Society of Indian Automobile Manufacturers Vs. ITO (2016) 71 taxmann.com 138 (Delhi – Trib), wherein it is held that if the purpose of all the activities is to promote objects for which it was set up, then it will not be caught within sweep of proviso notwithstanding fact that they result in some income from carrying out such activity. The above decision of the Tribunal has been formed by the Hon’ble Delhi High Court as reported in (2020) 117 Taxmann.Com 129 (Delhi) therein the Hon’ble Court ITA Nos. 1387/M/20 & 1705/M/19 Page No. 9 held that the ITAT’s decision is sound in law and facts and no substantial question arises and the appeal of the Revenue is dismissed. The Revenue file SLP in the Supreme court and the same was dismissed by the Hon’ble Supreme Court as reported in 2020 117 taxmann.com 130 (SC) though the SLP was dismissed, Revenue prayed to withdraw the same owing to low tax effect. Similarly, in the case of Confederation of Real Estate Developers Association of India 119 taxmann.com 491 (Mumbai) the co-ordinate Bench has held as under:- “4. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. We have heard the authorised representative for both the parties, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements pressed into service by them. The ld. Authorised representative for the assessee (for short "A.R") vehemently submitted that the case of the assessee trust was not hit by the „proviso‟ to Sec. 2(15) of the Act, and thus, was duly eligible for A.Y.2016-17 6 Confederation of Real Estate Developers Association of India Vs. ACIT(Exemption)- 1(1) ITA No.2815/Mum2018 A.Y.2014-15 Confederation of Real Estate Developers Association of India Vs. CIT(A)-3 claim of deduction envisaged in Sec. 11 of the Act. In order to buttress his aforesaid claim the ld. A.R took us through the facts of the case and drew support from a host of judicial pronouncements to which our attention was drawn during the course of hearing of the appeal. Accordingly, it was submitted by the ld. A.R that both the lower authorities by misconceiving the factual position had wrongly concluded that the activities of the assessee trust were hit by the „proviso‟ to Sec. 2(15) of the Act. As such, it was submitted by the ld. A.R that the lower authorities backed by their erroneous view had wrongly declined the assessee‟s claim for deduction u/s 11 of the Act. Alternatively, it was submitted by the ld. A.R, that as the A.O had admitted that the assessee was a mutual association, therefore, the surplus generated by it was not exigible to tax in the backdrop of the principle of mutuality.
ITA Nos. 1387/M/20 & 1705/M/19 Page No. 10 5. Per contra, the ld. Departmental representative (for short "D.R") relied on the orders of the lower authorities.
6. Before proceeding any further, we deem it fit to cull out the definition of the term "charitable purpose" as contemplated in Sec. 2(15) of the Act, which we find had been subjected to an amendment by the legislature, vide the Finance Act, 2015, w.e.f 01.04.2016. Post-amended definition of the term "charitable purpose" would be applicable to the appeal of the assessee for the year under consideration i.e A.Y 2016-17. As per the aforesaid amendment, the "first" and "second" proviso to Sec. 2(15) (as was available on the statute till A.Y 2015- 16), had been substituted by the legislature in all its wisdom by a "Proviso", and the post-amended section therein reads as under: "2(15) "charitable purpose includes relief of the poor, education, [yoga] medical relief, [preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest,] and the advancement of any other object of general public utility: Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or A.Y.2016-17 7 Confederation of Real Estate Developers Association of India Vs. ACIT(Exemption)-1(1) ITA No.2815/Mum2018 A.Y.2014- 15 Confederation of Real Estate Developers Association of India Vs. CIT(A)-3 any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity, unless- (i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and (ii) the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent. of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year.
ITA Nos. 1387/M/20 & 1705/M/19 Page No. 11 As per the aforesaid post-amended definition of the term "charitable purpose", "advancement of any other object of general public utility" shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity. However, an exception to the application of the aforesaid exclusion has been provided by the legislature by way of a "Provision" that has been made available on the statute vide the Finance Act, 2015 w.e.f A.Y 2016-17. As per the "Proviso" to Sec. 2(15), if 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 is undertaken by the assessee in the course of actual carrying out of its object of advancement of its object of general public utility AND the aggregate receipts from such activity or activities during the previous year do not exceed twenty per cent of the total receipts of the trust or institution undertaking such activity or activities for that previous year, then the exclusion carved out in the definition of the term "charitable purpose" in Sec. 2(15) would not be applicable. Accordingly, it is in the backdrop of the aforesaid post-amended definition of the term "charitable purpose" as provided in Sec. 2(15) of the Act, i.e w.e.f A.Y 2016-17, that the adjudication of the case of the present assessee before us has to be looked into. In all fairness, in order to understand the purpose and the intent that had led to the aforesaid amendment to the definition of the term "charitable purpose" as A.Y.2016-17 8 Confederation of Real Estate Developers Association of India Vs. ACIT(Exemption)-1(1) ITA No.2815/Mum2018 A.Y.2014- 15 Confederation of Real Estate Developers Association of India Vs. CIT(A)-3 provided in Sec. 2(15) of the Act, we shall look into the Explanatory Notes to the Provisions of Finance Act, 2015, as provided in the CBDT Circular No. 19/2015, dated 27.11.2015, which reads as under: "4. Rationalisation of definition of charitable purpose in the Income-tax Act 4.1 Section 11 of the Income-tax Act deals with exemption to charitable trusts and institutions. The primary condition for grant of exemption to a trust or & 1705/M/19 Page No. 12 institution under the said section is that the income derived from property held under trust should be applied for charitable purposes in India. „Charitable purpose‟ is defined in section 2(15) of the Act. The first proviso to clause (15) of section 2,inter alia, provides that advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity. However, as per the second proviso, this restriction shall not apply if the aggregate value of the receipts from the activities referred above is twenty five lakh rupees or less in the previous year. 4.2 The institutions which, as part of genuine charitable activities, undertake activities like publishing books or holding program on yoga or other programs as part of actual carrying out of the objects which are of charitable nature were being put to hardship due to first and second proviso to section 2(15). 4.3 The activity of Yoga has been one of the focus areas in the present times and international recognition has also been granted to it by the United Nations. Therefore the provisions of the Income-tax Act have been amended to include 'yoga' as a specific category in the definition of charitable purpose on the lines of education. 4.4 In order to ensure appropriate balance between the object of preventing business activity in the garb of charity and at the same time protecting the activities undertaken by the genuine organization as part of actual carrying out of the primary purpose of the trust or institution, the definition of „charitable purpose‟ in the Income-tax Act has been amended to provide that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity, unless,- (i) such activity is undertaken in the ITA Nos. 1387/M/20 & 1705/M/19 Page No. 13 course of actual carrying out of such advancement of any other object of general public utility; and (ii) the aggregate receipts from such activity or activities, during the previous year, do not exceed twenty percent. of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year. A.Y.2016-17 9 Confederation of Real Estate Developers Association of India Vs. ACIT(Exemption)- 1(1) ITA No.2815/Mum2018 A.Y.2014-15 Confederation of Real Estate Developers Association of India Vs. CIT(A)-3 4.5 Applicability: - These amendments take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years." On a perusal of the aforesaid amendment to the definition of the term "charitable purpose" provided in Sec. 2(15) of the Act, we find, that the legislative intent behind the amendment was to ensure an appropriate balance between the object of preventing business activity in the garb of charity, and at the same time protecting the activities undertaken by the genuine organizations as part of actual carrying out of the primary purpose of the trust or institution. As such, "advancement of any other object of general public utility" shall not fall within the definition of "charitable purpose" if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity, unless,- (i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; AND (ii) the aggregate receipts from such activity or activities, during the previous year, do not exceed twenty percent of the total receipts of the trust or institution undertaking such activity or activities of that previous year. To sum up, if a charitable institution with an object of "advancement of any other object of general public utility" carries out 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, the same irrespective of the nature of ITA Nos. 1387/M/20 & 1705/M/19 Page No. 14 use or application, or retention, of the income from such activity, would take such "advancement of any other object of general public utility" beyond the meaning of "charitable purpose" as provided in Sec. 2(15) of the Act. But then, the legislature had provided an exception, as per which, if the activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; AND (ii) the aggregate receipts from such activity or activities, during the previous year, do not exceed twenty percent of the total receipts of the trust or institution A.Y.2016-17 10 Confederation of Real Estate Developers Association of India Vs. ACIT(Exemption)- 1(1) ITA No.2815/Mum2018 A.Y.2014-15 Confederation of Real Estate Developers Association of India Vs. CIT(A)-3 undertaking such activity or activities of that previous year, then such trust or institution would not be hit by the exclusion carved out in the definition of "charitable purpose" as provided in Sec. 2(15) of the Act.
7. Before proceeding any further, we may herein observe that the ld. CIT(A) while adjudicating the present appeal had erroneously referred to the pre-amended provisions of Sec. 2(15) of the Act. As observed by us at length hereinabove, the case of the present assessee would be regulated by the post-amended Sec. 2(15), as had been made available on the statute vide the Finance Act, 2015 w.e.f 01.04.2016. Be that as it may, we shall hereinafter deal with the issue that as to whether or not the assessee before us would be hit by the post-amended Sec. 2(15) of the Act. But then, before dealing with the said aspect, we are confronted with another observation of the lower authorities. As observed by the lower authorities, as the assessee trust had been set up for catering to a limited group of people, viz. members of the assessee trust/real estate professionals etc., and not for the benefit of the general public at large, therefore, it could not be held to be a trust set up for advancement of any other object of general public utility. At the first blush the said observation of the lower authorities appeared to be very convincing, but then, we are afraid the same cannot be sustained in the eyes of law. As observed by the Hon'ble Supreme Court in the case of Ahmedabad Rana Caste Association Vs. CIT (1971) ITR 82 ITR 704 (SC), the High Court in the case before them had rightly observed that an object beneficial to a section of the ITA Nos. 1387/M/20 & 1705/M/19 Page No. 15 public is an object of general public utility. It was further observed by the Hon‟ble Apex Court that in order to serve a charitable purpose it was not necessary that the object should be to benefit the whole of mankind or all persons in a particular country or State, and it would be sufficient if the intention to benefit a section of the public as distinguished from a specified individual was present. In the backdrop of the aforesaid observations of the Hon‟ble Apex Court, we are of the considered view, that as the present assessee trust before us had been set up with the object to address the national issues related to real estate sector and better standards A.Y.2016-17 11 Confederation of Real Estate Developers Association of India Vs. ACIT(Exemption)-1(1) ITA No.2815/Mum2018 A.Y.2014- 15 Confederation of Real Estate Developers Association of India Vs. CIT(A)-3 for its all member associations, having 21 State chapters, 220 city chapters and 20,000 members, it can safely be held to be for the benefit of a particular section of the public and not for any specified individual. Accordingly, the view taken by the lower authorities that as the assessee trust was set up for providing facilities to a limited group of people and not for the benefit of the general public at large, therefore, it could not be held to be a trust set up for advancement of any other object of general public utility cannot be sustained and is herby vacated.
As is discernible from the orders of the lower authorities, we find, that they had observed that the activities of the assessee trust, viz. (i). offering of services in relation to trade and business of construction industry in lieu of fees, cess or other consideration; and (ii). receipt of interest on income accumulated in form of term deposits with banks, were in the nature of commercial activities. It was observed by the lower authorities that as the assessee was carrying on activities which were in the nature of commerce, and the receipts there from were in excess of the prescribed limit, it could thus not be held to be carrying on „charitable activities‟ within the meaning of Sec. 2(15) of the Act. Apart from that, the CIT(A) by referring to Sec. 11(4A) of the Act, had observed, that the provisions of Sec. 11 would be applicable only to such profits and gains that would be derived by a trust or institution from carrying on a business that was incidental to the attainment of the objectives of such trust or institution. In the backdrop ITA Nos. 1387/M/20 & 1705/M/19 Page No. 16 of his aforesaid observations, the CIT(A) was of the view that the dealings of trade and industry associations with the non- members for activities which were in the nature of trade, commerce or business did not qualify for tax exemption and would be liable for tax under Sec. 28(iii) of the Act. On the basis of his aforesaid deliberations, the CIT(A) held a conviction that though the activities of the assessee trust were in the nature of "advancement of any other object of general public utility", the same, however, being in the nature of commercial activities for which fees had been charged, would thus be hit by the „proviso‟ to Sec. 2(15) of the Act. Accordingly, backed by his aforesaid conviction the CIT(A) A.Y.2016-17 12 Confederation of Real Estate Developers Association of India Vs. ACIT(Exemption)- 1(1) ITA No.2815/Mum2018 A.Y.2014-15 Confederation of Real Estate Developers Association of India Vs. CIT(A)-3 concluded that as the activities of the assessee trust were hit by the „proviso‟ to Sec. 2(15) therefore, its objects could not be held to be in the nature of charitable objects, and thus, it would stand disentitled for claim of deduction u/s 11 of the Act.
9. As observed by us hereinabove, the core issue for which our indulgence has been sought, is to adjudicate, as to whether or not the CIT(A) is right in law and the facts of the case in concluding that the activities of the assessee trust, viz. holding conventions, exhibitions etc. were to be construed as being in the nature of trade, commerce or business. For a fair adjudication of the issue in hand, the main objects of the assessee trust after vetting of which it was registered as a „charitable trust‟ by the DIT(Exemption), Mumbai, u/s 12A, vide his order dated 25.11.1999, in our considered view once again requires to be referred to, and thus, are reproduced as under : "a) To act as a group of associations/federations functioning at national and state level and with the object to address the national issues relating to real estate sector and better standard for its all member associations. b) To encourage fraternity, feelings of co-operation and mutual help among the members of the confederation in respect of the subjects connected with the common good of ITA Nos. 1387/M/20 & 1705/M/19 Page No. 17 trade, industry and profession of building, construction and development of funds. c) To encourage adoption and promotion of fair business practices according to an ethical code of fair business practices and to maintain efficiency, dignity and integrity of the confederation." Now, for the attainment of its aforesaid objects, viz. to act as a group of associations/federations functioning at national and state level with an object to address the national issues relating to real estate sector and better standard for its all member associations; to encourage fraternity, feelings of co- operation and mutual help among the members of the confederation in respect of the subjects connected with the common good of trade, industry and profession of building, construction and development of funds; and to encourage adoption and promotion of fair business practices according to an ethical code of fair business practices and to maintain A.Y.2016-17 13 Confederation of Real Estate Developers Association of India Vs. ACIT(Exemption)- 1(1) ITA No.2815/Mum2018 A.Y.2014-15 Confederation of Real Estate Developers Association of India Vs. CIT(A)-3 efficiency, dignity and integrity of the confederation, the assessee trust in our considered view had to carry out certain activities, say holding conventions, exhibitions, meetings etc. Insofar carrying out of such activities are concerned, we are unable to comprehend as to how simplicitor carrying on of the same for the furtherance of the objects of the assessee trust on a standalone basis would take the color as that of a trade, commerce or business. At the same time, we also cannot remain oblivious of the fact that a trust or a society whose objects falls within the realm of "advancement of any other object of general public utility", would loose its character as that of a charitable institution, if it is involved in carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention of the income from such activity, though subject to the allowable limit therein prescribed.
ITA Nos. 1387/M/20 & 1705/M/19 Page No. 18 10. In the backdrop of our aforesaid observations, we shall now look into the aspect that as to whether the activities of the assessee trust before us are in the nature of trade, commerce or business, as the answer to the same would be decisive of its eligibility towards claim of deduction u/s 11 of the Act. At this stage it would be relevant to point out that as per the post-amended „proviso‟ to Sec. 2(15) of the Act, an 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, that is undertaken in the course of actual carrying out of such advancement of any other object of general public utility by a trust or society, would not be held to be non-charitable, only if the aggregate receipts from such activity or activities during the said year do not exceed 20% of its total receipts. But then, it is not the case of the assessee before us that its activities albeit in the nature of trade, commerce or business, are however less than 20% of its total receipts. In fact, the claim of the assessee throughout had been that as its activities do not fall within the realm of either trade, commerce or business or any activity A.Y.2016-17 14 Confederation of Real Estate Developers Association of India Vs. ACIT(Exemption)- 1(1) ITA No.2815/Mum2018 A.Y.2014-15 Confederation of Real Estate Developers Association of India Vs. CIT(A)-3 of rendering any service in relation to any trade, commerce or business, it would thus not be hit by Sec. 2(15) of the Act. As neither of the aforesaid terms, viz. trade, commerce or business are defined in the Income-tax Act, 1961, therefore, we shall construe them as per their dictionary meaning for resolving the controversy before us, viz. (i). „trade‟ : the action of buying and selling goods and services; (ii). „commerce‟ : the activity of buying and selling, especially on a large scale. (iii).„business‟ : a commercial activity. As claimed by the ld. A.R, the conventions/seminars are held once in a year for around two days, wherein about 2,000 participants take part. Admittedly, the participants would not only be the members of the assessee trust, but also all such individuals/entities who would be connected with the real estate sector, viz. Housing Finance Companies etc., who would participate in such conventions /seminars, as they played a very crucial role in the development of real estate sector in India. As per the ld. A.R eminent personalities from ITA Nos. 1387/M/20 & 1705/M/19 Page No. 19 various fields would be roped in for delivering lectures on issues having a material bearing on the real estate sector. As for the receipts from holding of the conventions, it was submitted by the ld. A.R that on an average, per person fee/charge would work out to Rs. 30,000/- to Rs. 32,000/-, which would include making of arrangements for their boarding and lodging facilities. It was further submitted by the ld. A.R, that in the course of the conventions the members and also the individuals connected with the real estate sector would display their advertisements, for which the assessee would receive sponsorship fees from them. It was submitted by the ld. A.R that the displaying of the advertisements during the conventions would again be a step towards furtherance of the objects of the assessee trust, as the same would benefit the members who would become aware of the services rendered by such sponsors. It was further submitted by the ld. A.R that it was beyond comprehension as to how the activities of the assessee trust could be run on a cost-to-cost basis as was so expected on the part of the lower authorities. Elaborating on his said claim, it was submitted by the ld. A.R that at the time of planning of the conventions, budgets would be prepared and the cost per A.Y.2016-17 15 Confederation of Real Estate Developers Association of India Vs. ACIT(Exemption)-1(1) ITA No.2815/Mum2018 A.Y.2014- 15 Confederation of Real Estate Developers Association of India Vs. CIT(A)-3 person was arrived at assuming a number of participants who would attend the convention. Accordingly, as submitted by the ld. A.R, if the actual number of participants would exceed what was initially expected, then every increase would lead to a surplus in the hands of the assessee, which would be channelized solely for the objects of the assessee trust. As such, it was submitted by the ld. A.R that mere generation of surplus from the aforesaid activities would not ipso facto mean that the assessee was carrying on activities in the nature of trade, commerce or business. Insofar the amount of surplus generated in the hands of the assessee was concerned, it was submitted by the assessee that the same had to be considered in the backdrop of the size of the association which had 21 State chapters, 220 city chapters and 20,000 members. The aforesaid factual position so averred by the ld. A.R was not rebutted by the departments counsel before us.
ITA Nos. 1387/M/20 & 1705/M/19 Page No. 20 11. We have deliberated at length on the issue under consideration and find substantial force in the claim of the ld. A.R that the activities of the assessee trust could not be brought within the meaning of trade, commerce or business. As observed by us hereinabove, the holding of convention by the assessee trust, and the resultant receipts therein generated by it, say participant fees, sponsorship fees (from advertisers) etc., were clearly in the nature of activities that were carried out by the assessee with the sole intent of attaining the object for which the trust was established. At this stage, we may herein observe, that the convention was held by the assessee trust only once in a year. Apart from that, the activities which would be involved in the said convention, say lectures of eminent personalities on issues having a strong bearing on the real estate sector etc., were for the benefit of its members by augmenting their knowledge about issues pertaining to the real estate sector. As for the sponsorship fees received by the assessee from the members and other entities related to the real estate sector, we are afraid that the lower authorities had failed to appreciate that the objective of allowing display of such advertisements/banners was in order to make the members aware of the services rendered by such sponsors. As the convention would be held by the A.Y.2016-17 16 Confederation of Real Estate Developers Association of India Vs. ACIT(Exemption)-1(1) ITA No.2815/Mum2018 A.Y.2014-15 Confederation of Real Estate Developers Association of India Vs. CIT(A)-3 assessee trust only once in a year, and that too spread over a short span of only two days, we are of the considered view that such standalone event cannot be brought within the meaning of trade, commerce or business, wherein profit is the dominant motive. Insofar the quantum of surplus generated in the hands of the assessee during the year is concerned, we are in agreement with the claim of the assessee that the same if considered in the backdrop of the size of the association which has 21 State chapters, 220 city chapters and 20,000 members, cannot be held to be substantial. In the totality of our aforesaid deliberations, we are of a strong conviction that the surplus generated in the hands of the assesses in the course of the convention held by it only once during the year in furtherance of its objects and for the benefit of its members/real estate sector of the country cannot be brought ITA Nos. 1387/M/20 & 1705/M/19 Page No. 21 within the realm of the meaning of trade, commerce or business. Our aforesaid view is fortified from a perusal of the „Explanatory Notes‟ to the Provisions of Finance Act, 2015, as provided in the CBDT Circular No. 19/2015, dated 27.11.2015, wherein it is stated that the purpose behind the amendment to Sec. 2(15) of the Act, vide the Finance Act, 2015 w.e.f 01.04.2015, was to inter alia protect the activities undertaken by a genuine organization as part of actual carrying out of the primary purpose of the trust or institution. In fact, a similar issue had came up before the Tribunal in the case of Fragrance and Flavours Associaton of India. Vs. DDIT(E)-1(2), Mumbai, for A.Y 2011-12. In the said case, the objects of the assessee trust was to promote co-operation and friendly feeling amongst the persons, firms and companies engaged in or connected with the Fragrance and Flavours Trade and Industry in India, and also, to promote and safeguard the interest of the Trade and Industry. As the amounts received by the assessee from the various activities which were carried out by it for the benefit of its members and in furtherance of its objects, viz (i). Subscription received; (ii). Sale of publications ; (iii). Fafai Journal ; (iv). Workshop & Conference; (v). Bangalore Seminar; and (vi) Directory receipts, were held by the A.O/CIT(A) as receipts in lieu of activities which were in the nature of trade, commerce or business ITA No.6896/Mum/2019 A.Y.2016-17 17 Confederation of Real Estate Developers Association of India Vs. ACIT(Exemption)- 1(1) ITA No.2815/Mum2018 A.Y.2014-15 Confederation of Real Estate Developers Association of India Vs. CIT(A)-3 carried out by it, and its claim for deduction u/s 11 was declined, for the reason, that the assessee was hit by Sec. 2(15) of the Act, the matter at the instance of the assessee was carried in appeal before the Tribunal. Observing, that the activities of the assessee trust could not be brought within the realm of trade, commerce or business, the Tribunal relying on a host of judicial pronouncements vacated the orders of the lower authorities, observing as under: "8. We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record. We find that our indulgence in the present appeal is sought for adjudicating as to whether the claim of the assessee for exemption under Sec. 11, in the & 1705/M/19 Page No. 22 backdrop of the post amended definition of the term „Charitable purpose‟ in Sec. 2(15) made available on the statute vide the Finance Act, 2008, w.e.f 01.04.2009 is in order, or not. We find that pursuant to the post amended Sec. 2(15), the legislature in all its wisdom by making available the proviso to the said statutory provision had narrowed down the scope and gamut of the definition of the term „Charitable purpose‟, to the extent the same is relatable to the "advancement of any other object of general public utility". That as per the amended Sec. 2(15), the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business OR any other activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity.
We have given a thoughtful consideration to the issue before us. We find that the assessee is registered as a Charitable organization under Sec. 12A with the Director of Income-tax (Exemption), Mumbai. That as the activities of the assessee were primarily in the nature of "advancement of any other object of general public utility", therefore, the A.O being of the view that as per the post amended definition of the term „Charitable purpose‟ in Sec. 2(15), the commercial activities of the assessee could no more be held as being for charitable purpose, as a result whereof the assessee stood disentitled for claim of exemption under Sec. 11 of the Act. We find that the assessee had declined that it was carrying on any commercial activities, and had rather by referring to its activities which had been taken cognizance of by the A.O, viz. (i). Subscription received; (ii). Sale of publications ; (iii). Fafai Journal ; (iv). Workshop & Conference; (v). Bangalore Seminar; and (vi) Directory receipts, submitted that the said respective activities were for the furtherance of the general public utility object of the assessee, which by no means could be construed as commercial activities.
We have deliberated on the observations of the lower authorities and find that the A.O had concluded that the assessee was carrying on commercial activities, primarily for the reason that it had generated substantial revenue from the ITA Nos. 1387/M/20 & 1705/M/19 Page No. 23 seminar held at Bangalore. We have given a thoughtful A.Y.2016-17 18 Confederation of Real Estate Developers Association of India Vs. ACIT(Exemption)- 1(1) ITA No.2815/Mum2018 A.Y.2014-15 Confederation of Real Estate Developers Association of India Vs. CIT(A)-3 consideration to the issue before us and have deliberated at length on the contentions of the ld. A.R in the backdrop of the facts of the case. We find that the activities of the assessee trust were directed towards providing knowledge, information, awareness, demonstrations etc. to the members of the Fragrance and Flavours industry. The activities of the assessee were essential to understand the development of the said industry in India. We have deliberated on the nature of activities of the assessee trust and are of the considered view that all of its activities, viz. receipts by way of subscriptions from the members, sale of publications, Fafai Journal, holding of workshops & conferences, directory receipts and holding of the seminar at Bangalore, were activities which were for facilitating the very object of the assessee trust, viz. providing knowledge, information, awareness, demonstrations etc. to the members of the Fragrance and Flavours industry. We are of the considered view that the providing of the aforesaid services were indispensably required to facilitate the furtherance of the very interest of the Fragrance and Flavours industry. Rather, we are of a strong conviction that in the absence of the aforesaid activities of the assessee trust, which as observed by us hereinabove can safely be held to have been indispensably required for the growth of the industry and giving its members an exposure to the developments in the industry and keeping pace with the day to day changes and innovations in the industry, the objects of the assessee trust would have been frustrated and rendered as merely dumb and name sake in nature, defeating the very purpose for which it was set up. We find that a perusal of the orders of the lower authorities reveals that their view that the assessee was involved in carrying on of commercial activities within the meaning of Sec. 2(15), was primarily guided by the fact that the products of the sponsors from whom sponsorship fees were received by the assessee were displayed at the seminar held at Bangalore. We are of the considered view that the holding of the seminar at Bangalore was in furtherance of the main object of the assessee trust, which was solely for empowerment, betterment and creating awareness amongst ITA Nos. 1387/M/20 & 1705/M/19 Page No. 24 the industrialists in order to bring about the development of the Fragrance and Flavours industry in India. We further find that the assessee was not by way of a regular and systematic activity carrying on such seminars, and as observed by us hereinabove, the seminar at Bangalore was the only international seminar held by the assessee trust. We are further of the considered view that no such inextricable nexus between the receipt of sponsor fees by the assessee and display of the products of the sponsors does emerge, on the basis of which the same could safely be characterised as a commercial activity.
11. We are of the considered view that the fact that holding of the seminar at Bangalore by the assessee was in furtherance of the dominant object of the assessee, viz. empowerment, betterment and creating awareness amongst the industrialists of the Fragrance and Flavours industry, and display of the products of the sponsors can safely be concluded to be for furtherance of and in the interest of the members of the trade. We are unable to persuade ourselves to be in agreement with the view of the A.O that as the products of the sponsors were displayed at the seminar held at Bangalore, therefore, on the said stand alone basis the assessee was to be held to have carried on commercial activities. We are of the considered view that on a close analysis A.Y.2016-17 19 Confederation of Real Estate Developers Association of India Vs. ACIT(Exemption)- 1(1) ITA No.2815/Mum2018 A.Y.2014-15 Confederation of Real Estate Developers Association of India Vs. CIT(A)-3 of the aforesaid activities of the assessee trust when viewed in a broader perspective and pitted against the dominant object of the assessee to hold a seminar for furtherance of and in the interest of the members of the industry, the same cannot be characterised as commercial activities. We find that the Hon'ble Jurisdictional High Court in the case of Director of Income-tax Vs. Womens India Trust (2015) 379 ITR 506 (Bom) had upheld the observations of the Tribunal that where a trust formed to carry out the object of education and development of natural talents of the people having special skills, more particularly the women in the society, had in the course of imparting to them training in the field of catering, stitching, toy making, etc., therein carried out sale of certain finished products, viz. pickles, jams, etc. which would be & 1705/M/19 Page No. 25 produced by them, through shops, exhibitions and personal contracts, the same could not be held to be activities in the nature of trade, commerce or business as contemplated in the proviso of Sec. 2(15). We find that the view of the Tribunal that as the dominant object of trust was to teach or impart skills and to instill confidence, therefore, the sale of the goods or articles produced in the course of such training could not be construed as carrying on of trade, commerce or business, did find favour with the Hon‟ble High Court. We find that in the case of the assessee before us, the holding of the seminars and carrying on of other activities, viz. receipt of subscriptions from the members, sale of publications, Fafai Journal, holding of workshops & conferences, directory receipts etc., were activities which were for facilitating the dominant object of the assessee trust, viz. providing knowledge, information, awareness, demonstrations etc. to the members of the Fragrance and Flavours industry, therefore, neither the carrying on of either of the aforesaid activities, and specifically the display of the products of the sponsor members of the industry in the course of the seminar at Bangalore by the assessee, which we find had been emphasized by the revenue as the primary reason for concluding that the assessee was carrying on commercial activities, could thus be held as such and brought within the sweep of the first proviso of Sec. 2(15). We further find that the Hon'ble High Court of Madras in the case of Director of Income Tax (Exemption) Vs. The Chartered Accountant Study Circle (2012) 250 CTR 70 (Mad), had the occasion to deliberate on the scope and gamut of the first proviso of Sec. 2(15) in the case of an asseseee trust whose objects among other things was to conduct periodical meetings on professional subjects. The High Court observed that the publishing and sale of books, booklets etc. on professional subjects related to audit and not on any other subject by the assessee. The sale of the books was primarily made to the members of the society, as well as made available to the general public, with the aim to help the society to get better, well-equipped and skilled set of Chartered Accountants for maintaining audit quality, which however could not be construed as a trade or commerce or business. Thus, the High Court observed that the activities of the assessee- trust in publishing and selling books of professional interest, which were meant to be used as a reference material even by the ITA Nos. 1387/M/20 & 1705/M/19 Page No. 26 general public as well as the professionals in respect of Bank Audit, Tax Audit, etc., could not be construed as a commercial activity. We are of the considered view that in the case of the present assessee before us, the services viz. receipt of subscriptions from the members, sale of publications, Fafai Journal, holding of workshops & conferences, directory receipts etc., were provided for facilitating A.Y.2016-17 20 Confederation of Real Estate Developers Association of India Vs. ACIT(Exemption)- 1(1) ITA No.2815/Mum2018 A.Y.2014-15 Confederation of Real Estate Developers Association of India Vs. CIT(A)-3 the dominant object of the assessee trust, viz. providing knowledge, information, awareness, demonstrations etc. to the members of the Fragrance and Flavours industry. We further find that even the display of the products of the sponsors of the seminar at Bangalore, who were primarily the members of the industry, was also in furtherance of the interest of the members of the industry, i.e both by facilitating the very holding of the seminar, as well as providing them knowledge and information of the wide range of products available in the industry. We are thus of the view that the aforesaid activities of the assessee trust before us, in the backdrop of the aforesaid observations of the High Court of Madras, safely be held to be in the course of furtherance of the dominant object of the assessee trust, and would not fall within the realm of commercial activities. We further find that a similar view had also been taken by the Hon'ble High Court of Delhi in the case of The Institute of Chartered Accountants Of India Vs, Director General of Income Tax (Exemption) (2013) 260 CTR 1 (Del). The High Court held that no doubt the assessee institute was holding classes and providing coaching facilities for the members and articled clerks etc. who wanted to appear in the examination conducted by the Institute of Chartered Accountants, but these classes were not held for coaching or for appearance in an examination conducted by some other entity. The High Court observed that as conducting of coaching classes was with the predominant object of maintaining and upholding the standards of the accountancy profession and in furtherance of the object and purpose for which the institute was established, i.e., professional excellence and promotion of accountancy as a preferred profession, and to sharpen the skills and knowledge of the members of Institute who would ITA Nos. 1387/M/20 & 1705/M/19 Page No. 27 attend the courses/lectures etc., therefore, the activities of providing coaching classes or undertaking campus placement interviews for a fee were in relation to the main object of the assessee institute, which could not be held to be trade, business or commerce. The High Court while concluding as hereinabove, had observed as under: After going through the provisions of the ICAI Act and the Regulations framed therein as well as various activities carried on by the petitioner, we are of the view that the petitioner institute does not carry on any business, trade or commerce. The activity of imparting education in the field of accountancy and conducting courses both at pre-qualification as well as post-qualification level are activities in furtherance of the objects for which the petitioner has been constituted. Activities of providing coaching classes or undertaking campus placement interviews for a fee are in relation to the main object of the petitioner which as stated earlier cannot be held to be trade, business or commerce. Accordingly, even though fees are charged by the petitioner institute for providing coaching classes and for holding interviews with respect to campus placement, the said activities cannot be stated to be rendering service in relation to any trade, commerce or business as such activities are undertaken by the petitioner institute in furtherance of its main object which as held earlier are not trade, commerce or business." We are further of the considered view that the proviso to Sec. 2(15) is not aimed at excluding genuine charitable trusts of general public utility, but rather, a trust would not be held to be for „Charitable purpose‟, if it is engaged in any activity in nature of trade, commerce or business or renders any service in relation to trade, commerce or business for a cess, fee and/or any A.Y.2016-17 21 Confederation of Real Estate Developers Association of India Vs. ACIT(Exemption)-1(1) ITA No.2815/Mum2018 A.Y.2014- 15 Confederation of Real Estate Developers Association of India Vs. CIT(A)-3 other consideration. We find that our aforesaid view is fortified by the judgment of the Hon'ble High Court of Gujarat in the case of DIT (Eexemption) Vs. Sabarmati Ashram Gaushala Trust (2014) 362 ITR 539 (Guj). & 1705/M/19 Page No. 28 12. We thus in the backdrop of our aforesaid observations are of the considered view that the assessee trust was set up for a charitable purpose within the meaning of Sec. 2(15) of the Act, viz. advancement of an object of the general public utility. We are of the view that as had been deliberated by us at length hereinabove, the holding of the seminar at Bangalore and the other activities of the assessee trust, viz. receipt of subscriptions from the members, sale of publications, Fafai Journal, holding of workshops & conferences, directory receipts were incidental to its main object and were conducted only for the purpose of securing the main object of advancement and development of the Fragrance and Flavours industry in India. We are further of the considered view that the aforesaid activities of the assessee trust are neither in the nature of trade, commerce or business, nor an activity rendered in relation to any trade, commerce or business. We further find that the activities of the assessee trust are not with any motive to earn profit, which though we are not oblivious would not conclusively determine as to whether an activity is in the nature of a trade, commerce or business, but then, the same undoubtedly remains a crucial factor for characterising an activity, as one. We find that the surplus arising to the assessee is only incidental and ancillary to the dominant object of the assessee, viz. advancement and development of the Fragrance and Flavours industry in India. We further find that the surplus generated by the assessee trust was utilized only for the purpose of feeding its dominant object, and no part of such surplus was distributed amongst its members. We have deliberated on the records pertaining to the nature of the activities of the assessee trust, and have observed that the generation of the surplus in its hands is merely a by-product of its main object, which had incidentally resulted in the course of furtherance of its dominant object, viz. advancement and development of the Fragrance and Flavors industry in India. We are further of the view that as the international seminar at Bangalore was held by the assessee for the very first time, and the assessee was not holding such type of seminars by way of a regular and systematic activity, therefore, on the said count also the same can safely be held as not being in the nature of a commercial activity. We have also deliberated on the order of the ITAT, Kolkata, in the case of Indian Chamber of Commerce Vs. Income Tax Officer ITA Nos. 1387/M/20 & 1705/M/19 Page No. 29 (2015) 167 TTJ 1 (Kolkata) as had been relied upon by the ld. A.R, and find that a similar view in context of the issue before us was taken by the coordinate bench of the Tribunal.
We thus, in the backdrop of our aforesaid observations are unable to persuade ourselves to be in agreement with the view of the lower authorities that the assessee was involved in carrying of commercial activities. We thus being of the view that as the assessee is carrying on its charitable activities, which are in the nature of advancement of the object of general public utility and is not carrying on any commercial activity, therefore, uphold the entitlement of the assessee towards claim of exemption under Sec. 11 of the A.Y.2016-17 22 Confederation of Real Estate Developers Association of India Vs. ACIT(Exemption)- 1(1) ITA No.2815/Mum2018 A.Y.2014-15 Confederation of Real Estate Developers Association of India Vs. CIT(A)-3 Act. We thus in terms of our aforesaid observations set aside the order of the CIT(A)." We find that the facts and the issue involved in the aforesaid case remains the same as are there before us in the case of the assessee before us. Accordingly, in the backdrop of our aforesaid deliberations, and also respectfully following the view taken by the Tribunal in the aforesaid case, we herein conclude that the holding of convention by the assessee, and the consequential receipts therein generated in its hands, viz. participation fees, sponsorship fees etc. cannot be brought within the meaning of trade, commerce or business or an activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration. We thus not being able to persuade ourselves to subscribe to the view taken by the lower authorities vacate the order passed by the CIT(A).
As regards the observation of the lower authorities that the parking of substantial amount of surplus funds by the assessee trust over a period as time deposits with the banks and receipt of interest income on the same revealed, that the activities of the assessee trust were backed by a profit motive, we are afraid does not find favour with us. As pointed out by the ld. A.R, and rightly so, the term deposits of Rs. 13.65 crores referred to by the A.O were the term deposits ITA Nos. 1387/M/20 & 1705/M/19 Page No. 30 accumulated by the assessee trust over a period of 15 years i.e since the year 1999, and therefore, merely on the ground of having such huge term deposits the assessee‟s entitlement towards claim of deduction u/s 11 of the Act could not have been denied. In fact, we are in agreement with the claim of the ld. A.R, that as per clause (iii) of Sec. 11(5) of the Act, deposit of money in any account with a scheduled bank is one of the prescribed form and mode of depositing the money referred to in clause (b) of sub-section (2) to Sec.
Accordingly, not being able to persuade ourselves to subscribe to the view taken by the A.O that as the assessee over the years had invested surplus aggregating to Rs.13,65,13,524/- in term deposits with the banks, it was thus be concluded that it was working with a profit motive, we vacate the said observation. A.Y.2016-17 23 Confederation of Real Estate Developers Association of India Vs. ACIT(Exemption)-1(1) ITA No.2815/Mum2018 A.Y.2014-15 Confederation of Real Estate Developers Association of India Vs. CIT(A)-3 13. Before parting, we may herein observe that the narrowing of the definition of "charitable purpose" as contemplated in Sec. 2(15) insofar the same is related to "advancement of any other object of general public utility", was carried out by the legislature by way of an insertion of a „proviso‟, vide the Finance Act, 2009 w.e.f 01.04.2009. Assessments in the case of the assessee trust for A.Ys 2010-11 to A.Y 2013-14 were framed u/s 143(3), and its claim for deduction u/s 11 after being tested in the backdrop of the amended definition of "charitable purpose", and also, the „proviso‟ that supplemented the said definition, were in both the years found by the revenue to be in order. In sum and substance, the revenue while framing the assessment for the aforementioned preceding years had not held the activities of the assessee trust as being in the nature of trade, commerce or business, or those of rendering of any services in relation to any trade, commerce or business. Nothing is either discernible from the records which would reveal that the activities of the assessee trust had witnessed any change during the year in question as in comparison to those for the aforementioned preceding years, nor any contention to the ITA Nos. 1387/M/20 & 1705/M/19 Page No. 31 said effect had been advanced by the ld. D.R before us. Accordingly, in the backdrop of our aforesaid deliberations on the merits of the case, and also, the consistent view taken by the revenue in the case of the assessee for the preceding years, we are of a strong conviction that the lower authorities had erred in concluding that as the activities of the assessee trust being in the nature of trade, business or commerce were thus not carried out for a "charitable purpose" within the meaning of Sec. 2(15) of the Act, it was therefore disentitled for claim of deduction u/s 11 of the Act. As such, we vacate the order of the CIT(A), and therein direct the A.O to allow the assessee‟s claim for deduction u/s 11 of the Act. The Ground of appeal
No. 1 is allowed in terms of our aforesaid observations.
14. As we have vacated the orders of the lower authorities and have concluded that the assessee trust is eligible for claim of deduction u/s 11 of the Act, therefore, we refrain from dealing with the ground of appeal no. 2 raised by the assessee before us, wherein it had assailed the order of the A.Y.2016-17 24 Confederation of Real Estate Developers Association of India Vs. ACIT(Exemption)-1(1) ITA No.2815/Mum2018 A.Y.2014-15 Confederation of Real Estate Developers Association of India Vs. CIT(A)-3 CIT(A), on the ground that he had erred in not allowing the relief by applying the principle of mutuality, and is thus left open. The Ground of appeal No. 2 is disposed off in terms of our aforesaid observations.
15. The appeal of the assessee is allowed in terms of our observations recorded hereinabove."
8. Since the facts of the instant case before us are similar to one as decided by the co-ordinate benches and also affirmed by the high Court in the case of Delhi High Court society of India Automobile Mfrs. (supra). We, respectfully following these decisions set aside the order of the ld. CIT(A) and direct the AO to allow the exemption under section 11 of the Income Tax Act of the assessee and further hold that the case of the assessee does not fall within ambit of the proviso to section 2(15) of the Act. The appeal of the assessee is allowed. & 1705/M/19 Page No. 32
9. The facts relating to AY 2013-14 are similar to AY 2014-15. Therefore, the findings given would, mutatis mutandis, apply to the Assessment Year 2013-14 as well. Accordingly, the appeal of the assesee for Assessment Year 2013-14 is allowed.
10. In the Result, both the appeals of assessee are allowed. Order pronounced in the open court on 04.03.2021.