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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI C.N. PRASAD, JM & SHRI MANOJ KUMAR AGGARWAL, AM
आदेश / O R D E R
Per Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year [AY] 2010-11 contest the order of the Ld. Commissioner of Income-Tax (Appeals)-1 [CIT(A)], Mumbai, Appeal No.CIT(A)-I/IT/E-2 (56)/2013-14 dated 14/09/2015. The original grounds as well as additional grounds filed on 28/03/2018 as urged before us reads as under:-
The Advertising Club Bombay Assessment Year-2010-11 1. The learned CIT (Appeals)-1 was not justified in confirming the order of the learned ADIT denying the exemption u/s 11 of the Act to the appellant. He has erred in holding that the proviso to section 2(15) was applicable to the case of the appellant. The reasons given both by the learned CIT (Appeals) and the learned ADIT in this regard, particularly their reading of the proviso to section 2(15), are incorrect and unjustified.
The learned Assessing Officer and the learned CIT (Appeals) should have reduced the income of the appellant by Rs.78,85,845/- already taxed in the AY 2009-10. As evident from grounds of appeal
, the assessee is primarily aggrieved by denial of exemption u/s 11. The assessment for impugned AY was framed by Ld. Assistant Director of Income Tax (E) –II(2), Mumbai u/s 143(3) of the Income Tax Act,1961 on 28/03/2013 wherein the income of the assessee has been assessed at Rs.82.34 Lacs after denial of exemption u/s 11 as against ‘Nil’ return filed by the assessee on 29/09/2010 along with Income & Expenditure Account, Balance Sheet and Audit Report in Form No. 10B. The assessee has been assessed as an Association of person (Trust) and is an entity duly registered u/s 12A with effect from 01/04/1990 vide certificate dated 14/01/2000, a copy of which has been placed on record.
2. The root of denial of deduction u/s 11 lies in the fact that the activities of the assessee trust carried out during impugned AY, in the opinion of, Ld. AO constituted business activity in terms of proviso to section 2(15) and 11(4) of the Income Tax act, 1961. The assessee defended the same vide reply dated 11/03/2013, inter-alia, by submitting that various programs/activities being carried out by the assessee could not be considered as business activities but were incidental to the attainment of the objectives for the assessee Trust. However, not convinced, Ld. AO, The Advertising Club Bombay Assessment Year-2010-11 relying on the decision of this Tribunal for AY 1978-79 in assessee’s own case, held that it was mutual concern and therefore, subscription and entrance fees were exempt on the doctrine of mutuality whereas other miscellaneous receipts were chargeable to tax. Resultantly, the surplus of Rs.82.34 Lacs as reflected in the income and expenditure account was assessed as business income in the hands of the assessee.
3. Aggrieved the assessee contested the same without any success before Ld. CIT(A) vide impugned order dated 14/09/2015 and reiterated the contentions that the activities were within the overall objectives of the Trust since the programs / award functions being carried out by the assessee were with a view to recognize and encourage talents in the field of advertising. Further, the surplus being generated out of the said activities was ploughed back in furtherance of Trust’s objects. Reliance was placed on certain judicial pronouncements. It was pointed out that the decision of the Tribunal as relied upon by Ld. AO could not be applied since subsequent to the said decision, the Trust obtained registration u/s 12A and the claim was to be examined at the realm of the statutory provisions as contained u/s 11 & 12. However, not convinced, Ld. CIT(A) upheld the stand of Ld. AO by observing as under:- 5.2 I have considered the facts and circumstances of the case, gone through the assessment order of the A.O and the submissions of the appellant and also discussed the case with the AR of the appellant. The contentions and submissions of the appellant are being discussed and decided herein in under: i. The appellant contended that in its opinion there is no element of business nature in any activities carried out by it and hence, provisions of section 11(4A) or proviso to section 2(15) are not applicable. In this regard it is clarified that the assessment year being 2010-11, the proviso to section 2(15) is relevant for this year. Accordingly, on perusal of the income and expenditure The Advertising Club Bombay Assessment Year-2010-11 account and the balance sheet riled by the appellant for the year under consideration it was noted that during the year under consideration, the appellant has organized award functions being ABBY Awards, EFFIE Awards, EMVIE awards and Young Achiever Awards. In addition, certain other programmes have also been organized. The appellant was asked to give details of the its activities including the receipt and expenditure. With reference to these details filed regarding EFFIE Awards, it is noted that the total receipts of Rs. 77,14,700/- from this activity include the sponsorship income which includes Rs. 12.50 lakhs from Marico Ltd. Rs. 6 lakhs from Bennett Colman Ltd. and Ps. 25 lakhs from Yahoo India. Against this, the expenditure of Rs. 31.5 lakhs has been made on Event management fees, Rs. 11.19 Lakhs for supply of food and Rs. 7.06 Lakhs for lawn booking. Similarly, in case of ENVIE Awards, the sponsorship income of Rs. 35 lakhs include Rs, 10 lakhs from Ankit Advertising, Rs. 5 lakhs from Rasik Publicity, Rs. 10 lakhs from Mahesh Advertising and Rs. 5 lakhs each from B.Y Padhye Publicity and Concept Communications. Against this, the expenditure incurred includes Rs.23.24 lakhs for event management, Rs. 19.25 lakhs for ball room booking, dinner etc. Against the receipt of Rs. 21.30 lakhs for organizing Young Achiever Award, the sponsorship income is Rs. 20 lakhs. Against this expenditure includes event management fees of Rs.16.79 lakhs and ball room booking and dinner Rs. 8.29 lakhs. For the event M Ad Quiz, the total receipt of Rs. 17.23 lakhs includesRs.10lakhs on account of sponsorship to M/s. Sunshine Communication Ps.2.5 lakhs from Birla Sunlife and Ps. 3.5 lakhs from ASL Ltd. Against this the expenditure includes Ps. 5.5 lakhs on account of event Rs. 1.86 lakhs as dinner charges etc. On the analysis of this data it is evident that the activities of the appellant are in the nature of event management where the bookings for show are being made and sponsorship is received and the event is being managed by the outside agencies. There is no visible charity in this activity of the appellant. Under these circumstances proviso to section 2(15) squarely applies to the facts or the appellant's case. ii. The proviso to section 2(15) is attracted even in a case where the assessee is not carrying out business, trade, commerce by itself. The charging of tees and consideration 'in relation to' services (or any trade, business and commerce or 'involvement' in trade, commerce and business is sufficient to attract the proviso to section 2(15). The decision in the case of Subhram Trust vs. DIT (E) (2009) 317 ITR (AT)(Bang.) that 'the term in relation to should be broadly Interpreted i.e. to say if any activity which directly or indirectly facilitates the rendering of any service in relation to any trade, commerce or business, is carried on by trust, then it will be covered under proviso to section 2(15)1 is relevant in deciding that the carrying out of trade, commerce, business by the assessee itself is not necessary For applicability of proviso to section 2(15). Therefore, the arguments of the appellant that it is not engaged in carrying out business, commerce, trade per se is not relevant to the issue in hand and such arguments are against the legal provision of section 2(15) and its applicability under the facts and circumstances as in the case of the appellant. The Legal question involved in applicability of section 2(15) of the I.T. Act, 1961 is not the carrying out of business, trade or commerce per se, rather charging of fees in relation to trade, commerce, business and / or involvement in business trade, commerce is sufficient for attracting proviso to section 2(15). The observation of THE HIGH COURT OF KERALA AT ERNAKULAM in WP(C).No. 6899 of 2009(F) in the case of M/S.INFOPARKS, KERALA, KUSUMAGIRI PO is applicable and deciding factor on the issue, which is reproduced for the sake of convenience, as follows- -Yet another, important aspect to be noted in this context is that, after the amendment by incorporating a proviso to Section 2(15), the fourth limb as to the advancement of "any The Advertising Club Bombay Assessment Year-2010-11 other object of general public utility" will no longer remain as charitable purpose, if it involves carrying on of, (a) any activity in the nature of trade, commerce or business; (b) any activity of rendering any service in relation to any trade, commerce or business for a cess or a fee or any other consideration, irrespective of the nature of use or application or retention of the income from such activity. The first limb of exclusion from charitable purpose under clause (a) will be attracted, if the activity pursued by the institution involves any trade, commerce or business. But the situation contemplated under the second limb [clause (b)] stands entirely on a different pedestal, with regard to the service in relation to the trade, commerce or business mentioned therein. To put it more clear, when the matter comes to the service in relation to the trade, commerce or business, it has to be examined whether the words "any trade, commerce or business" as they appear in the second limb of clause (b) are in connection with the service referred to the trade, commerce or business pursued by the institutions to which the service is given by the assessee. If the said words are actually in respect of the trade commerce or business of the assessee itself, the said clause (second limb of the stipulation under clause (b) is rather otiose. Since the activity of the assessee involving any trade commerce or business, is ô/ready excluded from the charitable purpose by virtue of the first limb (clause (a)) itself, there is no necessity to stipulate further, by way of clause (b), adding the words "or any activity of rendering any service in relation to any trade, commerce or business." Under the circumstances, and facts of the case the activities of the appellant are not within the ambit of- charitable purpose. The decision in the case of ACIT Vs The Tribune Trust,ITAT (Chandigarh) in is also relevant where it was held that publishing of journals / newspapers and deriving income from Advertisement etc. is not charitable purpose / activity. It is noticed from the sources of income and revenues derived by the appellant that they are in the nature of realization of fees for various services rendered by way of organizing award functions, income from exhibitions, seminars, workshops and so on, from year to year on regular basis in furtherance of the interest of a particular Industry / business interest devoid of carrying out any charitable activities as defined in Section 2(15) of the I.T. Act, 1961. Thus from the above discussion and facts of the case it is clear that the proviso to section 2(15) of the I.T. Act, 1961 is applicable for the year on facts and as per law. iii. Further it would be relevant to mention here that if a charitable organization carrying out objects of 'advancement of general public utility' is involved in carrying on any activity in the nature of trade, commerce, business or is charging fees for services in relation to any trade, commerce, business, is excluded from being 'charitable.' The case of the appellant is excluded from being charitable also because the charitable activity claimed by it is in the domain of 'advancement of general public utility' only. The profit motive behind such business, commerce or trade activity is not required to be separately examined and proved for applicability of proviso to section 2(15). The specific amendment by way of proviso to section 2(15) wet. A.Y. 2009-10 does not provide for carrying out business trade or commerce per e for applicability of proviso, rather the stipulation in the proviso is 'in relation to' which is to be interpreted and applied in that context - in a wider term and not to be confined to carrying out trade, business and profession as held in the case of Subhram Trust vs. DIT (E) (2009) 317 ITR (AT) (Bang) referred to above. Accordingly, contention of the appellant is not acceptable. iv. The appellant contended that its income from organizing award shows is merely incidental. In this regard it is mentioned that as per the data discussed in the preceding paragraph, its main The Advertising Club Bombay Assessment Year-2010-11 activity is organizing these shows which is predominant and not ancillary. This is also evident from the fact that the total receipts from award functions, programs, seminars and workshops is Rs.157.20 lacs, while the receipts from membership subscription and entrance fees is only RS.6.09 lacs. Accordingly, the case laws relied on by the appellant are not applicable to the appellant’s case. v. It was stated that the ITAT order relied upon by the AO related to the year when it was not granted registration us/ 12A and the said order was on the point of mutuality and hence not relevant. I agree with the appellant that during the year under consideration, the findings of Hon. ITAT are not relevant. This is also because in the year before Hon’ble ITAT, proviso to section 2(15) was not there on the statute. vi. In view of the facts and above legal position as discussed, it is held that the appellant is not eligible for exemption u/s.
11. Accordingly Grounds number 1, 2 and 3 raised by the appellant are dismissed.
6. The appeal is therefore dismissed. Aggrieved, the assessee is in further appeal before us.
The main plea of Ld. Auhtorized Representative for Assessee [AR], Shri Hiro Rai revolves around the fact that the activities being carried out by the assessee Trust were incidental to the attainment of the main objective and there was no profit motive since the surplus were ploughed back in furtherance of main objectives of the assessee Trust. It was further submitted that reliance of the decision of this Tribunal for AY 1978-79 was misplaced since the assessee, subsequently, obtained registration u/s 12A. An alternative submission has also been put forwarded in the shape of the fact that an amount of Rs.78.85 Lacs as credited in the Profit & Loss Account during impugned AY had already been offered to tax in earlier years and therefore, the same was excludible while computing the surplus earned by assessee during impugned AY. Per Contra, Ld. Departmental Representative, Shri Rajesh Kumar Yadav submitted that the assessee did not carry out any charitable activities during the year and was operating The Advertising Club Bombay Assessment Year-2010-11 more like an event management entity and therefore, the lower authorities were justified in bringing the surplus to tax. 5.1 We have carefully heard the rival contentions and perused relevant material on record including documents placed in the paper book and judicial pronouncements as cited before us. At the outset we are of the opinion that the ratio of this Tribunal rendered in assessee’s own case for AY 1978-79 could not be applied since the assessee, post that decision, obtained registration u/s 12A vide certificate no. INS/31155 dated 14/01/2000 with effect from 01/04/1990, a copy of which has been placed on record. Therefore, the claim of the assessee for the impugned AY was to be examined at the threshold of statutory provisions of Section 11 & 12. Hence, the approach of Ld. AO, to that extent, was erroneous. 5.2 At the same time, the observation of the Ld. CIT(A) that the assessee was operating more like an event management entity where the booking of the shows were being made and sponsorship fees was being received and the event was being managed by outside agencies, also remain un- rebutted. Upon perusal of financial statements for impugned AY as placed before us, we concur with this stand of Ld. CIT(A) since the broad break-up of the assessee’s gross receipts could be categorized as follows:- No. Nature of Receipts Amount (Rs.) 1. Membership Subscriptions, Entrance 6,25,950/- Fees, Misc. Incomes 2. Interest & Others 17,69,828/- 3. Award Functions 1,57,22,000/- 4. Programs, Seminars & Workshops 36,67,957/- 5. Premises Fund written back 98,35,845/- TOTAL 3,16,21,580/- The Advertising Club Bombay Assessment Year-2010-11 It is clear from the above table that the assessee’s major activities during the impugned AY were confined to conducting Award Functions / programs only. The only plea in support of the same as raised by Ld. AR is the assertion that the said activities were incidental to carrying out the main objectives of the assessee Trust and secondly, there was no profit motive in carrying out the same. In support, certain judicial pronouncements have been cited before us. The Ld. AR has also raised an alternative plea that the amount of Rs.78.85 Lacs as written-off by way of credit to Profit & Loss Account had already been offered to tax in earlier years and therefore, the same is excludible while computing the surplus for impugned AY. In our opinion, these submissions require proper appreciation of factual matrix which has not been done by Ld. AO particularly the submissions that the activities being carried out by the assessee were incidental to carrying out the objectives on the basis of which registration was granted to the assessee. 5.3 Keeping in view the aforesaid facts and circumstances, keeping all issues open, we deem it fit to restore the matter back to the file of Ld. AO for re-adjudication of the same with a direction to the assessee to substantiate its claim as argued before us failing which Ld. AO shall be at liberty to decide the same as per law on the basis of material available on record.
The appeal stand allowed for statistical purposes in terms of our above order.