BHARAT DIAMOND BOURSE,MUMBAI V. DCIT (E)- 1(1), MUMBAI

ITA 2219/MUM/2024

AI Insights

The case revolves around the eligibility of Bharat Diamond Bourse for tax exemption under Section 11 of the Income Tax Act, 1961, despite the proviso to Section 2(15) introduced by the Finance Act, 2008. The Tribunal examined whether the Bourse's activities, which include providing customs clearance and other facilities for diamond trade, constitute 'trade, commerce, or business' under the Act. The Tribunal concluded that the Bourse's activities, primarily aimed at promoting diamond exports and not conducted for profit, do not meet the criteria of trade or commerce as defined under the Act.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 25234 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Other Referred Cases: ACIT(E) vs Ahmedabad Urban Development Authority [2022] 449 ITR 1(SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONIKA H. PANDE
• Keywords: Set aside; Business income; Retrospective amendment; Competent authority; Charitable institution
• Section: 143(3); 143(1); 11; 12A; 6; 10(23C)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, V.P. AND SHRI GIRISH AGRAWAL, AM ITA No. 2219/Mum/2024) (Assessment Year: 2009-10) Bharat Diamond Bourse, G Block, Bandra-Kurla Complex, Bandra East-400051 Vs. DCIT(E)-1(1), Mumbai PAN/GIR No. AAACB 2358R (Applicant) : (Respondent) Applicant by : Shri B.M. Chatterji, Sr. Advocate, Shri Shreyash Shah, Advocate, Shri Kunal Shah, CA And Shri Udyan Mukherjee, Advocate Respondent by : Ms. Monika H. Pande, Sr. AR Date of Hearing : 12.12.2024 Date of Pronouncement : 12.03.2025 O R D E R Per Saktijit Dey, VP: Captioned appeal by the assessee arises out of order dated 28.02.2024 of learned First Appellate Authority pertaining to Assessment Year (AY) 2009-10. 2. The core issue arising for consideration as per concise grounds of appeal of the assessee is as under: “Whether the proviso to Section 2(15) of the Income Tax Act, 1961 (hereinafter called the ‘Act’) disentitles the assessee from availing exemption under Sections (u/s.) 11 and 12 of the Act.” 2 ITA No.2219/Mum/2024 AY 2009-10 Bharat Diamond Bourse 3. Before we delve into the issue in dispute, it is necessary to provide a brief background of the assessee and its activities. Initially, the export of diamond from India to abroad was unorganized. Therefore, the diamond exporters in India came together and formed Diamond Exporters Association for facilitating export of diamond. Subsequently, the diamond exporters found that there was need for setting up a diamond bourse in Bombay with customs clearance facilities for facilitating export of diamond and make trade more competitive in the international market. After deliberating on the request made by the Diamond Exporters Association, the Central Government, in 1984, accepted the proposal to set up a diamond bourse in Bombay. The Minerals and Metals Trading Corporation of India Ltd. (MMTC), a Central Government undertaking, agreed to coordinate the administrative steps. As per the suggestion of the Ministry of Commerce, Government of India, the bourse was named as ‘Bharat Diamond Bourse’. Thus, a decision was taken by the Government of India in the Ministries of Finance and Commerce to set up ‘Bharat Diamond Bourse’ with the object of encouraging and increasing the export of polished diamond from India. 4. Mumbai City (erstwhile Bombay), traditionally had been the headquarters of diamond trade and exports. However, the main business center for diamond trade was located in a congested locality. Whereas, the International Airport in Mumbai was situated at a far-off place in Sahar, Andheri, in North Bombay. The long distance between the center of activity and International Airport made it highly inconvenient and cumbersome for operations of the diamond export trade from the point of view of transportation, security and customs clearance. Therefore, with the concurrence of Central Government, it was decided to set up a customs clearance facility at Diamond Plaza near Opera House as a custom area for the purpose of storage and clearance of diamond for import/export. Since, diamonds and valuable gems are imported and exported in small packets in large quantities and have to be transported long distance involving high degree of security risk, an application was moved before the Registrar of Companies (RoC) for incorporating the assessee as a 3 ITA No.2219/Mum/2024 AY 2009-10 Bharat Diamond Bourse company and the RoC issued a certificate incorporating the assessee as a company on 18.08.1984. On 22nd November, 1984, the Collector of Customs, Bombay issued a notice u/s. 6 of the Customs Act approving MMTC premises situated at Diamond Plaza Building near Opera House as a customs area for the purposes of storage and clearance of diamond/gems etc. On the very same day another notification was issued u/s. 45(1) of the Customs Act approving the MMTC as the custodian of the import cargo of such goods until their clearance in accordance with the provisions of the Customs Act. It was also notified that MMTC would be the custodian with regard to the export cargo until they are transshipped and handed over to the airlines at Sahar International Airport, Bombay. 5. Thereafter, on 29.03.1986 an agreement was entered into between MMTC and the assessee, whereunder, MMTC agreed to act as a custodian at the Diamond Plaza building, wherein, infrastructure facilities, including handling, storage and clearance of import and export of diamonds, precious stones etc., on a cost recovery basis at the risk and expense of the assessee. After taking over the role of custodian, the MMTC took on sub-lease space at Diamond Plaza for a period of five years at monthly rent of Rs.86,720/- with refundable security deposit of Rs.52.03 lakhs for setting up the Bourse, which was subsequently sub-leased to the assesse. On 31 August, 1984, the Managing Committee of the assessee decided to treat the expenses incurred by the MMTC as a loan, which was to be returned with interest at 6 percent per annum. 6. Thus, the assessee was set up as a non-profit company with the principal object of facilitating diamond export so that maximum revenue could be earned by way of foreign exchange and also can make diamond trade more competitive at the international level. Subsequently, on 15.12.1986, an agreement was entered between MMTC and the assessee, under which, it was agreed that from 1st April, 1988 the activities of the Bourse would be carried out by the assessee and no more by MMTC. After taking over the operations from MMTC, to meet the expenditure relating to payment to be made to the Chief Executive, staffs and other expenditure connected 4 ITA No.2219/Mum/2024 AY 2009-10 Bharat Diamond Bourse with activities of Bourse, including, that of Customs Clearance Centre, storage, transportation and delivery of import and export parcels, it was decided, the assessee shall recover service charges on cost basis from members/non-members. As per the agreement, these reimbursements are to be deposited in a separate Bank account and the assessee will maintain separate books of account and get them audited. In terms with the agreement, the assessee issued a circular on 14.09.2001indicating the cost per parcel to be incurred and to be reimbursed from members/non-members towards service charges. As a result of setting up of the Bourse, the total value of parcels cleared through the Bourse increased from Rs. 2231 crores in 1985-86 to Rs.63,656/- crores in the current assessment year. 7. Since the assessee was having the charitable object of general public utility, it applied for registration u/s. 12A of the Act and the competent authority granted registration to the assessee under the said provision. It is also a fact that assessee’s claim of exemption u/s. 11 of the Act was accepted in AYs 1986-87 to 1988-89, of course, while processing the return of income u/s. 143(1) of the Act. The dispute between the assessee and Department began in AYs. 1989-90 and 1990-91. Though, the assessee claimed exemption u/s. 11 of the Act on the strength of the registration granted u/s. 12A of the Act, however, the Assessing Officer (AO), as per the reasons set forth in the assessment orders, held that the assessee is not entitled to exemption u/s.11 of the Act, as, its dominant objects are non-charitable. He further held that the service charges received by the assessee from members/non-members constituted profit of business within the meaning of Section 28(iii) of the Act. 8. Be that as it may, against the decision taken by the AO in A.Ys 1989-90 and 1990-91, assessee preferred appeals before the First Appellate Authority and thereafter to the Tribunal. While deciding the appeals, the Tribunal, considering the facts and material available before it, ultimately concluded that not only the assessee has charitable objects of general public utility but its activities are also charitable in nature. Hence, assessee is entitled to exemption u/s. 11 of the Act. 5 ITA No.2219/Mum/2024 AY 2009-10 Bharat Diamond Bourse 9. Against the said decision of the Tribunal, the Revenue went in appeal before the Hon’ble Bombay High Court, and having failed there, preferred an appeal to the Hon’ble Supreme Court. However, while deciding the appeal of the assessee, Hon’ble Supreme Court upheld the decisions of the Tribunal and Hon’ble Bombay High Court holding that the assessee, having carried out charitable activities as per its objects, is entitled to claim exemption u/s. 11 of the Act. 10. When the issue stood thus, the Director of Income Tax, (Exemption) cancelled the registration certificate granted u/s. 12A of the Act to the assessee, vide order dated 27.12.2011, with retrospective effect on the ground that the activities of the assessee are hit by the proviso to Section 2(15) of the Act, hence, the objects of the assessee do not fall within the ambit of ‘charitable purpose’. Based on the order cancelling registration u/s. 12A of the Act, the AO passed assessment orders for A.Ys 2005-06, 2006-07, 2007-08, 2008-09 and 2009-10, rejecting assessee’s claim of exemption u/s.11 of the Act. 11. Against such decision of the AO, as well as, challenging the cancellation of registration u/s. 12A of the Act, assessee ultimately came in appeal before the Tribunal. In a consolidated order passed on 30.03.2017 in ITA No. 884/Mum/2012 and others, the Tribunal set aside the order passed by the DIT(E) cancelling assessee’s registration, while restoring the registration granted earlier u/s. 12A of the Act. Further, the Tribunal directed the AO to verify whether the objects of general public utility carried on by the assessee would be hit by the proviso to section 2(15) of the Act brought into statute w.e.f. 01.04.2009. 12. In pursuance to the directions of the Tribunal, the AO took up the assessment proceedings for the relevant assessment years including assessment year under dispute. While completing the assessment, the AO held that the decisions of the Tribunal, Hon’ble High Court and Hon’ble Supreme Court in assessee’s case in A.Ys 1989-90 and 1990-91 would not be applicable to the impugned assessment year as the legal position stands altered due to amendment brought to the definition of charitable purpose u/s. 2(15) of the Act w.e.f. 01.04.2009. Referring to the proviso 6 ITA No.2219/Mum/2024 AY 2009-10 Bharat Diamond Bourse to Section 2(15) of the Act, as introduced w.e.f. 01.04.2009, the AO observed, though, the activities of the assessee fall within the meaning of any other object of general public utility, however, in course of such activity, the assessee had receipts by way of reimbursement of handling, custom expenses and other expenses from members and non-members, which fall under the category of trade, commerce or business. Thus, he concluded that the activities of the assessee squarely come within the ambit of proviso to Section 2(15) of the Act, hence, the assessee does not exist for charitable purpose. He further observed that the activities carried on by the assessee are rather based on mutuality, hence, non-charitable. He observed, since principle of mutuality applies to assessee’s case, only the receipts from members are not taxable. However, receipts from non- members or other source, such as, interest income and revenue from custodian custom contribution of reimbursement etc. are to be treated as income of the assessee not entitled for exemption u/s. 11 of the Act. Accordingly, he completed the assessment by determining the total income at Rs.4,77,68,346/-. Though, the assessee filed an appeal challenging the decision of the AO before First Appellate Authority, however, it was unsuccessful. 13. Before us, learned Senior counsel appearing for the assessee, in addition to the oral submissions made at the time of hearing, has furnished submissions in writing, as under: “17) Applicability of Proviso to Section 2(15) of the Act: i. The Finance Act, 2008 inserted Proviso to Section 2(15) of the Act. The Section 2(15) of the Act, as amended by the Finance Act, 2008, w.e.f. 01-04-2009 reads as under: \"15) \"charitable purpose\" includes relief of the poor, education, medical relief, 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 any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity;\" 7 ITA No.2219/Mum/2024 AY 2009-10 Bharat Diamond Bourse ii. The Memorandum explaining the provisions of the Finance Bill, 2008 lays down the legislative intent for insertion of Proviso to Section 2(15) of the Act. The relevant part of the Memorandum reads as under: \"Streamlining the definition of \"charitable purpose\" Section 2(15) of the Act defines \"charitable purpose\" to include relief of the poor, education, medical relief, and the advancement of any other object of general public utility. It has been noticed that a number of entities operating on commercial lines are claiming exemption on their income either under section 10(230) or section 11 of the Act on the ground that they are charitable institutions. This is based on the argument that they are engaged in the \"advancement of an object of general public utility\" as is included in the fourth limb of the current definition of \"charitable purpose\". Such a claim, when made in respect of an activity carried out on commercial lines, is contrary to the intention of the provision. With a view to limiting the scope of the phrase \"advancement of any other object of general public utility\", it is proposed to amend section 2(15) so as 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- (a) any activity in the nature of trade, commerce or business or, (b) any activity of rendering of any service in relation to any trade, commerce or business, for a fee or cess or any other consideration, irrespective of the nature of use or application of the income from such activity, or the retention of such income, by the concerned entity. This amendment will take effect from the 1st day of April, 2009 and will accordingly apply in relation to the assessment year 2009-10 and subsequent assessment years.\" (Emphasis Supplied) 18) The Memorandum explaining provisions of the Finance Bill, 2008 has clarified that the amendment in section 2(15) has been brought in as many entities carried out activities on commercial lines. In the present case, the Hon'ble ITAT (Refer page 409-466 of the Paper Book), Hon'ble High Court (Refer page 384-392 of the Paper Book) and 8 ITA No.2219/Mum/2024 AY 2009-10 Bharat Diamond Bourse Hon'ble Supreme Court order (Refer page 393-408 of the Paper Book) has clearly stated that the activities of the Appellant Assessee are not for profit. 19) As per Circular No.11 of 2008 issued by the CBDT, it is evident that the new proviso to Section 2(15) of the said Act was \"applicable to assesses, who are engaged in commercial activities, i.e., carrying on business, trade or commerce, in the garb of 'public utilities' to avoid tax liability as it was noticed that the object 'general public utility' was sometimes used as a mask or device to hide the true purpose, which was 'trade, commerce or business.\" From this, it is evident that the introduction of the proviso to Section 2(15) by virtue of the Finance Act, 2008 was directed to prevent the unholy practice of pure trade, commerce and business entities from masking their activities and portraying them in the garb of an activity with the object of a general public utility. It was not designed to hit at those institutions, which had the advancement of the objects of general public utility at their hearts and were charity institutions. The attempt was to remove the masks from the entities, which were purely trade, commerce or business entities, and to expose their true identities. The object was not to hurt genuine charitable organizations and, this was also the assurance given by the Finance Minister while introducing the Finance Bill 2008. 20) The expressions \"trade\", \"commerce\" and \"business\" as occurring in the first proviso to section 2(15) of the Act must be read in the context of the intent and purport of section 2(15) of the Act and cannot be interpreted to mean any activity which is carried on in an organised manner. The purpose and the dominant object for which an institution carries on its activities is material to determine whether the same is business or not. The purport of the first proviso to section 2(15) of the Act is not to exclude entities which are essentially for charitable purpose but are conducting some activities for a consideration or a fee. The object of introducing the first proviso is to exclude organizations which are carrying on regular business from the scope of \"charitable purpose\". The purpose of introducing the proviso to Section 2(15) of the Act can be understood from the Budget Speech of the Finance Minister while introducing the Finance Bill 2008. The relevant extract to the Speech is as under:- 9 ITA No.2219/Mum/2024 AY 2009-10 Bharat Diamond Bourse \"….Charitable purpose\" includes relief of the poor, education, medical relief and any other object of general public utility. These activities are tax exempt, as they should be. However, some entities carrying on regular trade, commerce or business or providing services in relation to any trade, commerce or business and earning incomes have sought to claim that their purposes would also fall under \"charitable purpose\". Obviously, this was not the intention of Parliament and, hence, I propose to amend the law to exclude the aforesaid cases. Genuine charitable organizations will not in any way be affected. The expressions \"business\", \"trade\" or \"commerce\" as used in the first proviso must, thus, be interpreted restrictively and where the dominant object of an organisation is charitable any incidental activity for furtherance of the object would not fall within the expressions \"business\", \"trade\" or \"commerce\": 21) With this in mind, it is to be seen as to what is meant by the expressions \"trade\", \"commerce\" or \"business\". The word \"trade\" was considered by the Supreme Court in its decision in the case of Khoday Distilleries Ltd. v. State of Karnataka [1995] 1 SCC 574, whereby the Supreme Court held that \"the primary meaning of the word 'trade' is the exchange of goods for goods or goods for money\". Furthermore, in State of Andhra Pradesh v. H. Abdul Bakhí & Bros. [1964] 5 STC 644 (SC), the Supreme Court held that \"the word 'business' was of indefinite import and in a taxing statute, it is used in the sense of an occupation, or profession which occupies time, attention or labour of a person, and is clearly associated with the object of making profit\". An activity would be considered 'business' if it is undertaken with a profit motive, but in some cases, this may not be determinative. Normally, the profit motive test should be satisfied, but in a given case activity may be regarded as a business even when profit motive cannot be established/proved. In such cases, there should be evidence and material to show that the activity has continued on sound and recognized business principles and pursued with reasonable continuity. There should be facts and other circumstances which justify and show that the activity undertaken is in fact in the nature of business. 22) The purpose for which the Appellant Assessee is established and the scope of activities carried out by the Appellant Assessee is discussed 10 ITA No.2219/Mum/2024 AY 2009-10 Bharat Diamond Bourse in detail in the foregoing para's. On going through the same and the Memorandum of Association of the Appellant Assessee (Refer page 275 of the Paper Book), it is amply clear that the Appellant Assessee is established for the promotion of exports of Gem & Jewellery from India and to provide for this purpose infrastructure and other facilities in India for Indian and overseas buyers and sellers of Gem and Jewellery and for the fulfilment of its object, it receives by way of reimbursement, the cost of carrying activities mentioned in its object clause. 23) The Appellant has been consistently following the same set of object year on year basis since its inception. 24) The Hon'ble ITAT, Hon'ble High Court and Hon'ble Supreme Court in AY 1989-90 and AY 1990-91 have already analyzed the activities carried out by the Appellant Assessee, i.e., whether they are in the nature of charitable activities. 25) The Hon'ble ITAT in its order for AY 1989-90 and AY 1990-91 in Appellant Assessee's own case holding the Appellant Assessee to be entity established not for profit and allowing exemption u/s 11 of the Act, from para 19-25 (page 421-426 of Paper Book) briefly discussed the purpose leading to creation of the bourse. 26) At page 387 to 391 of the Paper book, the Hon'ble Bombay High Court has in the Appellant Assessee's own case for AY 1989-90 and AY 1990-91 in detailed examined the activities carried out by the Appellant Assessee and concluded that the main object of the Appellant is to promote commerce and trade and is not engaged in commerce and trade as alleged by the department. In other words, the Appellant Assessee is created for charitable purpose and operates on a not-for-profit basis. 27) At page 397 to 401 of the Paper Book, the Hon'ble Supreme Court in Appellant Assessee's own case for AY 1989-90 and AY 1990-91 has concurred with the finding of the Hon'ble ITAT as well as the order of the Hon'ble High Court. The Hon'ble Supreme Court has specifically reproduced the same object clauses as present in the subject appeal before this Hon'ble Bench and concluded that the Appellant Assessee has been validly recognised as an institution established for charitable purpose. 11 ITA No.2219/Mum/2024 AY 2009-10 Bharat Diamond Bourse 28) The Ld. CIT(A) in the impugned proceeding has not disturbed the findings of the Hon'ble ITAT, Hon'ble High Court and Hon'ble Supreme Court with respect to the activities carried on by the Appellant Assessee in the impugned assessment year and even in the impugned assessment year, the Ld. CIT(A) agrees that the Appellant Assessee has received reimbursement of expenses. However, Ld. CIT(A) has merely tried to distinguish the earlier order of the Hon'ble ITAT, Hon'ble High Court and Hon'ble Supreme Court for the reason that the same was rendered prior to the amendment in section 2(15) of the Act. In doing so, the Ld. CIT(A) failed to appreciate that the findings made by the Hon'ble ITAT, Hon'ble High Court and Hon'ble Supreme Court still holds the field even after the amendment in section 2(15), as now the very same activities is to be seen keeping in mind proviso to section 2(15). Once that is done, it is amply clear that the Appellant Assessee is not hit by the proviso to section 2(15). 29) The judgement of the Hon'ble Apex Court in the case of ACIT(E) vs Ahmedabad Urban Development Authority [2022] 449 ITR 1(SC) has specifically dealt with the aspects relating to the advancement of General Public Utility (\"GPU\") with respect to trade promotion bodies. The Hon'ble Supreme Court has held that in case of advancement of GPU by trade promotion bodies, the activities cannot fall under the ambit of trade, commerce, business. In other words, such trade promotion bodies should be operating on a not- for-profit basis. The Hon'ble Supreme Court has further held that in order to ascertain the advancement of GPU as not for profit basis, it is important to look at the object clauses of the Memorandum of Association and identify if any clause falls within the ambit of trade, commerce or business. The Hon'ble Supreme Court has also held that where any services are provided at cost basis or nominally above cost, in such situations, the rigors of proviso to section 2(15) shall not be triggered, i.e., it will not fall within the mischief of \"cess, or fee, or any other consideration\" towards \"trade, commerce or business\". Without prejudice to the above, 30) The Ld. Assessing Officer and Ld. CIT(A) erred in not appreciating the fact that the Appellant Assessee is a mutual association and thus, also satisfies the test of principles of mutuality and even by following the principles of mutuality, the income of the Appellant Assessee is exempt from taxation. 12 ITA No.2219/Mum/2024 AY 2009-10 Bharat Diamond Bourse The doctrine of mutuality traces its origin from the basic principle that a man cannot engage into a business with himself. For that reason, it is deemed in law that if the identity of the seller and the buyer; or the vendor and the consumer, or the contributor and the participator is marked by oneness, then a profit motive cannot be attached to such a venture. Thus, for the lack of a profit motive, the excess of income over the expenditure or the \"surplus\" remaining in the hands of such a venture cannot be regarded as \"income\" taxable under the Act. What is taxable under the Act is \"income\" or \"profits\" or \"gains\" as they accrue to a person in his dealings with other party or parties that do not share the same identity with the assessee. For income, there is an underlying exchange of a commercial nature between two different entities. In CIT v. Bankipur Club Ltd. [1997] 92 Taxman 278, the Hon'ble Supreme Court observed on the nature of liability under the Act thus: \"6. Under the Income Tax Act (hereinafter referred to as \"the Act\") what is taxed is, the \"income, profits or gains earned or \"arising\", \"accruing\" to a person\". The question is whether in the case of members' clubs - a species of mutual undertaking in rendering various services to its members which result in a surplus, the club can be said to \"have earned income or profits\" In order to answer the question, it is necessary to have a background of the law relating to \"mutual trading\" or \"mutual undertaking\" and a \"members club\".\" The law regarding the tenets of mutuality is no more res integra. It has been settled in a catena of judicial pronouncements and academic works across multiple jurisdictions. In Bangalore Club v. CIT [2013] 350 ITR 509, the Hon'ble Supreme Court authoritatively quoted one of the earliest judicial pronouncements in New York Life Insurance Co. v. Styles (Surveyor of Taxes) [1889] 2 TC 460 thus: \"When a number of individuals agree to contribute funds for a common purpose... and stipulate that their contributions, so far as not required for that purpose, shall be repaid to them. I cannot conceive why they should be regarded as traders, or why contributions returned to them should be regarded as profits.\" 13 ITA No.2219/Mum/2024 AY 2009-10 Bharat Diamond Bourse The proposition of law is restated in Bankipur Club (supra) and Bangalore Club (supra) by placing reliance upon the following extract from Simon's Taxes Simon's Taxes, Volume B, 3rd Edition, Pgs. 159, 167: \"... it is settled law that if the persons carrying on a trade do so in such a way that they and the customers are the same persons, no profits or gains are yielded by the trade for tax purposes and therefore no assessment in respect of the trade can be made. Any surplus resulting from this form of trading represents only the extent to which the contributions of the participators have proved to be in excess of requirements. Such a surplus is regarded as their own money and returnable to them. In order that this exempting element of mutuality should exist it is essential that the profits should be capable of coming back at some time and in some form to the persons to whom the goods were sold or the services rendered...\" 14. Per contra, strongly relying upon the observations of the AO and learned First Appellate Authority, learned Departmental Representative submitted, since the assessee had generated income from activities, which are in the nature of trade and commerce and such receipts are not within the permissible limit in terms of proviso to Section 2(15) of the Act, the assessee is not entitled to claim exemption u/s. 11 of the Act. 15. We have given a thoughtful consideration to rival contentions and perused the materials on record. We have also carefully applied our mind to the judicial precedents cited before us. As could be seen from the background of the assessee discussed earlier, the assessee was set up u/s. 25 of the Indian Companies Act as a non-profit company with the concurrence of the Government of India under the Ministries of Finance and Commerce. It is also a fact that in the initial years, the activities of the Bourse were entirely carried by MMTC, a Central Government undertaking. At this stage, it is relevant to observe that the assessee was set up with the following main objects as per the Memorandum of Association: 14 ITA No.2219/Mum/2024 AY 2009-10 Bharat Diamond Bourse “a. To establish a Bourse for the promotion of exports of Gem & Jewellery from India and to provide for this purpose infrastructure and other facilities in India for Indian and overseas buyers and sellers of Gem and Jewellery. b. To establish and promote effective liaison between the Gem and Jewellery trade and industry in India and abroad. c. To promote, advance, protect and develop trade, commerce and industry in India relating to Gem & Jewellery including cutting, polishing and processing. d. To develop India as modern and sophisticated Gem & Jewellery market in the world by establishing and maintain an international trading centre in India all those engaged as manufacturers, traders, exporters, importers, brokers and commission agents in the Gem & Jewellery trade and Industry.” 16. While verifying the aforesaid objects of the assessee, the DIT(E), being convinced that such objects fall within the ambit of any other activity of general public utility, accepted the assessee as an organization existing for charitable purpose within the meaning of Section 2(15) of the Act and accordingly granted registration u/s. 12A of the Act. Though, the said registration was cancelled by learned DIT(E) for a brief period, however, ultimately, was restored by the Tribunal while setting aside the order of cancellation. Thus, factually, as on date, registration granted u/s. 12A of the Act recognizing the assessee as a charitable institution/organization is intact. It is a fact on record that the AO had made an attempt to deny claim of exemption u/s. 11 of the Act to the assessee in AYs 1989- 90 and 1990-91 on the reasoning that the assessee does not have charitable objects as it has generated income from business activity. However, higher appellate authorities, such as, the Tribunal, Hon’ble jurisdictional High Court and Hon’ble Supreme Court, while reversing the decisions of the Departmental authorities, have unequivocally held that not only the assessee’s objects are of charitable nature 15 ITA No.2219/Mum/2024 AY 2009-10 Bharat Diamond Bourse coming within the ambit of any other object of general public utility but it does not carry out any commercial activity, hence, entitled to exemption u/s. 11 of the Act. In this context, it will be relevant to look at the following observations of the Hon’ble Supreme Court :- “In order to decide the first question, the circumstances under which the appellant-assessee came into existence are required to be noticed. The diamond exporters in India had formed a Diamond Exporters Association for facilitating export of diamonds. There was need for setting up a diamond bourse in Bombay with customs clearance facilities which would facilitate the export of diamonds and make the trade more competitive in the international market. In 1984 the Central Government accepted the proposal made by the said association to set up a diamond bourse in Bombay. The Minerals and Metals Trading Corporation of India Ltd. (a Central Government Undertaking) agreed to co-ordinate the administrative steps and the bourse was to be named as suggested by the Ministry of Commerce as 'Bharat Diamond Bourse'. A decision to set up the same was taken up by the Government of India in the Ministries of Finance and Commerce with the object of encouraging and increasing the export of polished diamonds from India. 6. The city of Bombay had been traditionally the headquarters of diamond trade and exports, thought he main business center was located in a congested locality. The International Airport in Bombay is situated in Sahar, Andheri, in North Bombay. The long distance between the center of activity of the diamond trade and the international airport made it highly inconvenient and cumbersome for operations of the diamonds export trade from the point of view of transportation, security and customs clearance. It was, therefore, decided with the concurrence of the Central Government to have a custom clearance facility opened at Diamond Plaza near Opera House as a customs area for the purpose of storage and clearance of diamonds. There was also the question of security since diamonds and gems imported and exported in small packets in large quantities had to be transported over long distances. 7. The Registrar of Companies was moved for a certificate of incorporation of the assessee company which was done on 18th August, 1984. On 22nd November, 1984 the Collector of Customs, Bombay issued a notice under Section 8 of the Customs Act approving the MMTC situated at Diamond Plaza Building near Opera House as a 'Customs Area' for the purposes of storage and clearance of diamonds, gems etc. On the same day, another notification was issued under Section 45(1) of the Customs act approving MMTC as the Custodian of the imported cargo of such goods until their clearance in accordance with the provisions of the Customs Act. It was also notified that MMTC would be the custodian with regard to the export cargo until they are trans-shipped and handed over to the airlines at 16 ITA No.2219/Mum/2024 AY 2009-10 Bharat Diamond Bourse Sahar International Airport, Bombay. When MMTC was appointed as the custodian, it had incurred expenditure on behalf of the Bharat Diamond Bourse to the extent of about Rs. 81 lakhs for setting up of the bourse. On 31st August, 1984 the Managing Committee of the assessee resolved to treat the expenses incurred by MMTC as a loan which was to be returned with interest @ 6% per annum. MMTC had taken certain premises on lease in the Diamond Plaza which was sub-leased to the assessee on the same terms and conditions except for the deposit. The principal object of establishment of the bourse was to facilitate the diamond trade so that maximum revenue could be earned by way of foreign exchange and also to make the diamond trade more competitive at the international level. 8. On 15th December, 1987 an agreement was arrived at between MMTC and the assessee under which it was agreed that from 1st April, 1988 service charges would be collected by the assessee and not by MMTC, and from that date the bourse would meet its own obligations towards its staff, their expenses etc. and so on. Under the said agreement the operations of the bourse were taken over from the MMTC. 9. The setting up of the Diamond bourse had a great impact on the diamond export trade. The total value of parcels cleared through the bourse increased from Rs. 2231 crores in 1985-86 to Rs. 11261 crores in the year 1991-92. These figures indicate that the export turn over of diamonds gradually increased during the relevant period and consequently the country had benefited by increased earning of foreign exchange. 10. On the basis of these facts, the Revenue Authority granted registration to the appellant as an institution established for charitable purposes within the meaning of Section 2(15) of the Act. Though the assessee does earn certain income by reason of hiring of locker facilities as incidental to the main custom clearance facilities made available to members as well as non- members, and debits the expenses incurred in respect of customs department, transport charges, security charges and rent for the premises, these earnings must be treated as ancillary to the dominant purpose for which the Diamond Bourse were established. 11. The revenue authorities have concurrently held that, taking an overall view, the dominant objects of the assessee are charitable as the dominant object is one of general public utility and, therefore, the assessee is entitled to be registered as an institution established for charitable purpose within the meaning of Section 2(15) of the Act. 12. The learned senior counsel for the revenue, however, relied on the judgments of this Court in the Case of Delhi Stock Exchange v. CIT, (225 ITR, page 235) and the judgment of the Patna High Court in the case of Bihar State Forest Development Corporation v. CIT (224 ITR, page 757) to contend that the activities of the assessee bourse fall out side the definition of 'charitable purpose', even though the bourse might have been registered as an institution established for charitable purpose within the meaning of Section 2(15) of the Act. 17 ITA No.2219/Mum/2024 AY 2009-10 Bharat Diamond Bourse 13. The decision of the Constitutional Bench of this Court in Additional Commissioner of Income Tax, Gujarat, Ahmedabad v. Surat Art Silk Cloth Manufacturers' Association, Surat really clinches the issue. The assessee in Surat Art Silk case was an association established to promote commerce and trade in Art Silk Yarn, Raw Silk, Cotton Yarn Art Silk Cloth, Silk Cloth and Cotton Cloth. Its objects, as evidenced from the memorandum of association, included, inter alia, carrying on business in Art Silk Yarn, Raw Silk, Cotton Yarn, Art Silk Cloth, Silk Cloth, Silk Cloth and Cotton Cloth belonging to and on behalf of its members as well as buying and selling and dealing in all kinds of cloth and yarn belonging to and on behalf of this members. The Constitutional Bench of this Court held that, if there are several objects of the institution, some of which are charitable and some non-charitable and the trustees or the managers in their discretion may apply the income of the institution of those objects, the trust or institution would not be liable to be regarded as charitable and no part of its income would be exempted from tax. Where the main or primary objects are distributive, each and every one of the object must be charitable in order that the trust be held as a valid charity. But, if the primary or dominant purpose of the institution is charitable and another which, by itself, may not be charitable, but is merely ancillary or incidental to the primary or dominant object, it would not prevent the institution from validly being recognised as a charity. The test to be applied is, whether the object which is said to be non-charitable is the main or primary object of the trust or institution or it is ancillary or incidental to the dominent object which is charitable. Reiterating its earlier view in CIT v. Andhra Chamber of Commerce, [(1965) 55 ITR 722] the Supreme Court said in Surat Art Silk case (supra) that if the primary purpose is advancement of objects for general public utility, the institution would remain charitable, even if an incidental non-charitable object for achieving that purpose was contemplated. In the case of Andhra Chamber of Commerce (supra) it was held that a Chamber of Commerce did not cease to be charitable merely because the members of the chamber were incidentally benefited in carrying out its main charitable purpose. This Court approvingly followed the ratio in the case of Commissioner of Inland Revenue v. Yorkshire Agricultural Society [(1928) 1 KB 611] and Institution of Civil Engineers v. Commissioner of Civil Revenue [(1932) 1KB 149] for reaching the conclusion that merely because some facilities incidentally arose to the members of a society or institution in the course of carrying out its main charitable purpose, that by itself would not prevent the institution from being a charity. 14. All subsequent judgments have noticed and followed the judgment of the Constitutional Bench in Surat Ark Silk (supra) and the dominant purpose test evolved therein and applied them to the facts before them. Applying this dominant purpose test to the objects of the respondent-assessee it appears to us that there is no escape from the conclusion that it is validly recognized 18 ITA No.2219/Mum/2024 AY 2009-10 Bharat Diamond Bourse as an institution established for charitable purpose. The assessee's pre- dominant objects are: \"(i) To establish common facilities required to promote exports of diamonds from India and to provide for this purpose trading halls and other utilities at a central place for Indian Exporters and Overseas buyer to carry on trade and commerce in diamonds with speed and in secure conditions. (ii) To establish and promote effective liaison between diamond trade and industry in India and abroad with a view to promoting their sales from India in International market. (iii) To promote, advance, protect and develop trade, commerce and industry in India relating to exports and imports of diamonds and (iv) To develop India as Modern and sophisticated diamond market by establishing and maintaining an international trading center in India for all those engaged as manufacturers, traders, exporters and importers, brokers/commission agents of diamonds.\" 15. These being the pre-dominant objectives, we agree with the view taken by the Tribunal as well as the High Court that the assessee was rightly registered under Section 11 by treating it as an institution established for charitable purpose within the meaning of Section 2(15) of the Act.” 17. It is an undisputed fact on record that the main objects of the assessee based on which registration was granted u/s. 12A of the Act and, which objects have been accepted to be of charitable nature up to the stage of Hon’ble Supreme Court in assessee’s case, have not undergone any change till date. Therefore, it has to be accepted that the assessee is a charitable organization existing for charitable purpose having the object of general public utility in terms of Section 2(15) of the Act. At this stage, it is relevant to observe, Section 2(15) of the Act as was existing in the statute in its original form underwent change through amendment by Finance Act, 2008 with effect from 01.04.2009 with introduction of the following proviso:- \"15) \"charitable purpose\" includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility: 19 ITA No.2219/Mum/2024 AY 2009-10 Bharat Diamond Bourse 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;\" 18. A careful reading of the proviso clearly indicates that it applies only to ‘advancement of any other activities of general public utility’. Pertinently, the proviso introduced to Section 2(15) has undergone further changes subsequently. However, for the purpose of deciding the present appeal, the proviso as originally introduced by Finance Act, 2008 effective from 01.04.2009 would be relevant, as it applies to the assessment year under dispute. As could be seen from the reading of the proviso noted above, it carves out an exception in the sense that advancement of any other object of general public utility shall not be regarded as charitable purpose in the following situations: (i) if it involves any activity in the nature of trade, commerce or business. (ii) or it involves any activity of rendering of any service in relation to any trade, commerce or business, (iii) the activities in item (i) and (ii) are for a fee or cess or any other consideration. 19. Keeping in view the conditions of the proviso, it requires examination whether the assessee is either carrying on any trade, commerce or business or is rendering any service in relation to any trade, commerce or business for a cess or fee or any other consideration. The meaning of the words ‘trade’, ‘commerce’ and ‘business’ have to be understood in their ordinary sense and as known in common parlance. The word ‘trade’ would mean exchange of goods for goods or for money. The word ‘business’, though, has been defined under section 2(13) of the Act, however, it is generic. ‘Business’ in its ordinary sense would mean an occupation, or profession which occupies time, attention or labour of a person 20 ITA No.2219/Mum/2024 AY 2009-10 Bharat Diamond Bourse and is generally undertaken with a profit motive. The word ‘commerce’ again is of same connotation as ‘trade’ or ‘business’. 20. As could be seen from the main objects of the assessee, it is not in any manner involved in any activity of trade, commerce or business. There cannot be any doubt regarding this fact. Therefore, it is necessary to see whether the second condition of any activity of rendering any service in relation to any trade, commerce or business is applicable. Since the assessee itself is not carrying on any trade, commerce or business, it cannot be said that it is involved in any activity of rendering service in relation to any trade, commerce or business. The assessee merely provides a platform to importers/exporters of diamonds and precious stones to facilitate import/export activity seamless and less cumbersome to make the trade more competitive in international market. In sum and substance, the role of the assessee is akin to a trade promotion organization. 21. The memorandum explaining the provision of Finance Bill, 2003 spells out the legislative intent for insertion of the proviso to section 2(15) of the Act. The relevant part of the memorandum reads as under: “Streamlining the definition of \"charitable purpose\" Section 2(15) of the Act defines \"charitable purpose\" to include relief of the poor, education, medical relief, and the advancement of any other object of general public utility. It has been noticed that a number of entities operating on commercial lines are claiming exemption on their income either under section 10(230) or section 11 of the Act on the ground that they are charitable institutions. This is based on the argument that they are engaged in the \"advancement of an object of general public utility\" as is included in the fourth limb of the current definition of \"charitable purpose\". Such a claim, when made in respect of an activity carried out on commercial lines, is contrary to the intention of the provision. With a view to limiting the scope of the phrase \"advancement of any other object of general public utility\", it is proposed to amend section 2(15) so as 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- (a) any activity in the nature of trade, commerce or business or, 21 ITA No.2219/Mum/2024 AY 2009-10 Bharat Diamond Bourse (b) any activity of rendering of any service in relation to any trade, commerce or business, for a fee or cess or any other consideration, irrespective of the nature of use or application of the income from such activity, or the retention of such income, by the concerned entity. This amendment will take effect from the 1st day of April, 2009 and will accordingly apply in relation to the assessment year 2009-10 and subsequent assessment years.\" 22. From a reading of the explanatory notes it transpires that it was brought to the statute keeping in view the fact that in the garb of advancement of object of general public utility, many institutions/organizations are actually engaged in income generating commercial activities. Therefore, to prevent misuse of the exemption provision in the statute intended for genuine charitable institutions/organizations, the proviso was introduced. As could be seen from the main objects of the assessee and the actual activity carried on, the assessee was set up as no profit company only for the purpose of promotion of import/export of diamond/gems in India and to provide infrastructure and other facilities including customs clearance for Indian diamond exporters and importers. It cannot be denied that not only the assessee came into existence with the concurrence of the Government of India in the Ministries of Finance and Commerce but initially activities now carried on by the assessee were carried on by MMTC. It is also a fact on record that assessee has been recognized as a charitable organization with charitable purpose by Highest Court of the country. It cannot be denied that the activities of the assessee have remained as it is since inception. 23. It is further relevant to observe, as per the proviso to Section 2(15) of the Act, the activity of trade, commerce or business or service related to trade or commerce or business must be for a cess or fee or any other consideration. In the facts of the present appeal, admittedly the assessee recovers only the cost incurred for providing certain infrastructure facilities as under: 22 ITA No.2219/Mum/2024 AY 2009-10 Bharat Diamond Bourse (1) Provision of rent-free accommodation for housing and customs clearance centre as well as the custodian's office. (2) Maintenance of strong room at the Diamond Plaza Custom Clearance Centre ('DPCCC') as well as at the Sahar International Air- cargo complex. (3) Provision of security and to and for transportation of export and import parcels between DPCCC and Sahar International Air Cargo complex on every working day. (4) Depositing of Airways Bills with respective Airline Offices. (5) Collection and distribution of EP copies of shipping bills. (6) Providing Export/Import statistics on the website of the Bourse on a regular basis. 24. Initially the MMTC acting as a custodian of the custom clearance facility was providing the infrastructure facility including handling, storage, clearance of import and export cargo of diamonds precious stone, semi-precious stones etc. After taking over from the MMTC, the assessee is providing the same facilities to the exporters/importers on cost recovery basis. On a perusal of the accounts of the assessee, it is observed that the actual cost incurred by the assessee during the year under consideration is more than the amount received by the assessee towards reimbursement of cost. Only because the assessee had surplus interest income, the extra cost incurred by the assessee could be set off. It is further relevant to note, as per the working furnished before us, per parcel cost of handling, carting, storage etc on an average works out to Rs.580/-. These facts clearly reveal that the assessee neither carries out any activity in the nature of trade, commerce or business nor does it provide any service related to activity of trade or business or commerce. It is further clear from facts on record that assessee does not charge any cess or fee or any other consideration. What the assessee receives is reimbursement of actual cost incurred by it. In fact, at more 23 ITA No.2219/Mum/2024 AY 2009-10 Bharat Diamond Bourse than one place in the assessment order, the AO has accepted that the receipts of the assessee are in the nature of reimbursement of cost. 25. Keeping in view the aforesaid factual position, it can be safely concluded that the assessee is not hit by the mischief of the proviso contained u/s 2(15) of the Act. It is relevant to observe, in a recent decision in case of ACIT vs. Ahmedbad Urban Development Authority [2022] 143 taxmann 278 (SC), the Hon’ble Supreme Court was seized with the issue of interpretation of the proviso to Section 2(15) of the Act. While concluding, the Hon’ble Supreme Court has observed as under: “253. In view of the foregoing discussion and analysis, the following conclusions are recorded regarding the interpretation of the changed definition of “charitable purpose” (w.e.f. 01.04.2009), as well as the later amendments, and other related provisions of the IT Act. A. General test under Section 2(15) A.1. It is clarified that an assessee advancing general public utility cannot engage itself in any trade, commerce or business, or provide service in relation thereto for any consideration (“cess, or fee, or any other consideration”); A.2. However, in the course of achieving the object of general public utility, the concerned trust, society, or other such organization, can carry on trade, commerce or business or provide services in relation thereto for consideration, provided that (i) the activities of trade, commerce or business are connected (“actual carrying out…” inserted w.e.f. 01.04.2016) to the achievement of its objects of GPU; and (ii) the receipt from such business or commercial activity or service in relation thereto, does not exceed the quantified limit, as amended over the years (Rs. 10 lakhs w.e.f. 01.04.2009; then Rs. 25 lakhs w.e.f. 01.04.2012; and now 20% of total receipts of the previous year, w.e.f. 01.04.2016); A.3. Generally, the charging of any amount towards consideration for such an activity (advancing general public utility), which is on cost-basis or nominally above cost, cannot be considered to be “trade, commerce, or business” or any services in relation thereto. It is only when the charges are markedly or significantly above the cost incurred by the assessee in question, that they would fall within 24 ITA No.2219/Mum/2024 AY 2009-10 Bharat Diamond Bourse the mischief of “cess, or fee, or any other consideration” towards “trade, commerce or business”(emphasis by us). In this regard, the Court has clarified through illustrations what kind of services or goods provided on cost or nominal basis would normally be excluded from the mischief of trade, commerce, or business, in the body of the judgment. A.4. Section 11(4A) must be interpreted harmoniously with Section 2(15), with which there is no conflict. Carrying out activity in the nature of trade, commerce or business, or service in relation to such activities, should be conducted in the course of achieving the GPU object, and the income, profit or surplus or gains must, therefore, be incidental. The requirement in Section 11(4A) of maintaining separate books of account is also in line with the necessity of demonstrating that the quantitative limit prescribed in the proviso to Section 2(15), has not been breached. Similarly, the insertion of Section 13(8), seventeenth proviso to Section 10(23C) and third proviso to Section 143(3) (all w.r.e.f. 01.04.2009), reaffirm this interpretation and bring uniformity across the statutory provisions. B. Authorities, corporations, or bodies established by statute B.1. The amounts or any money whatsoever charged by a statutory corporation, board or any other body set up by the state government or central governments, for achieving what are essentially ‘public functions/services’ (such as housing, industrial development, supply of water, sewage management, supply of food grain, development and town planning, etc.) may resemble trade, commercial, or business activities. However, since their objects are essential for advancement of public purposes/functions (and are accordingly restrained by way of statutory provisions), such receipts are prima facie to be excluded from the mischief of business or commercial receipts. This is in line with the larger bench judgments of this court in Ramtanu Cooperative Housing Society and NDMC (supra). B.2. However, at the same time, in every case, the assessing authorities would have to apply their minds and scrutinize the records, to determine if, and to what extent, the consideration or amounts charged are significantly higher than the cost and a nominal mark-up. If such is the case, then the receipts would indicate that the activities are in fact in the nature of “trade, commerce or business” and as a result, would have to comply with the quantified limit (as amended from time to time) in the proviso to Section 2(15) of the IT Act. B.3. In clause (b) of Section 10(46) of the IT Act, “commercial” has the same meaning as “trade, commerce, business” in Section 2(15) of 25 ITA No.2219/Mum/2024 AY 2009-10 Bharat Diamond Bourse the IT Act. Therefore, sums charged by such notified body, authority, Board, Trust or Commission (by whatever name called) will require similar consideration – i.e., whether it is at cost with a nominal mark- up or significantly higher, to determine if it falls within the mischief of “commercial activity”. However, in the case of such notified bodies, there is no quantified limit in Section 10(46). Therefore, the Central Government would have to decide on a case-by-case basis whether and to what extent, exemption can be awarded to bodies that are notified under Section 10(46). B.4. For the period 01.04.2003 to 01.04.2011, a statutory corporation could claim the benefit of Section 2(15) having regard to the judgment of this Court in the Gujarat Maritime Board case (supra). Likewise, the denial of benefit under Section 10(46) after 01.04.2011 does not preclude a statutory corporation, board, or whatever such body may be called, from claiming that it is set up for a charitable purpose and seeking exemption under Section 10(23C) or other provisions of the Act. C. Statutory regulators C.1. The income and receipts of statutory regulatory bodies which are for instance, tasked with exclusive duties of prescribing curriculum, disciplining professionals and prescribing standards of professional conduct, are prima facie not business or commercial receipts. However, this is subject to the caveat that if the assessing authorities discern that certain kinds of activities carried out by such regulatory body involved charging of fees that are significantly higher than the cost incurred (with a nominal mark-up) or providing other facilities or services such as admission forms, coaching classes, registration processing fees, etc., at markedly higher prices, those would constitute commercial or business receipts. In that event, the overall quantitative limit prescribed in the proviso to Section 2(15) (as amended from time to time) has to be complied with, if the regulatory body is to be considered as one with ‘charitable purpose’ eligible for exemption under the IT Act. C.2. Like statutory authorities which regulate professions, statutory bodies which certify products (such as seeds) based on standards for qualification, etc. will also be treated similarly. D. Trade promotion bodies Bodies involved in trade promotion (such as AEPC), or set up with the objects of purely advocating for, coordinating and assisting trading organisations, can be said to be involved in advancement of objects of general public utility. However, if such organisations provide 26 ITA No.2219/Mum/2024 AY 2009-10 Bharat Diamond Bourse additional services such as courses meant to skill personnel, providing private rental spaces in fairs or trade shows, consulting services, etc. then income or receipts from such activities, would be business or commercial in nature. In that event, the claim for tax exemption would have to be again subjected to the rigors of the proviso to Section 2(15) of the IT Act. E. Non-statutory bodies E.1. In the present batch of cases, non-statutory bodies performing public functions, such as ERNET and NIXI are engaged in important public purposes. The materials on record show that fees or consideration charged by them for the purposes provided are nominal. In the circumstances, it is held that the said two assessees are driven by charitable purposes. However, the claims of such non- statutory organisations performing public functions, will have to be ascertained on a yearly basis, and the tax authorities must discern from the records, whether the fees charged are nominally above the cost, or have been increased to much higher levels. E.2. It is held that though GS1 India is in fact, involved in advancement of general public utility, its services are for the benefit of trade and business, from which they receive significantly high receipts. In the circumstances, its claim for exemption cannot succeed having regard to amended Section 2(15). However, the Court does not rule out any future claim made and being independently assessed, if GS1 is able to satisfy that what it provides to its customers is charged on cost-basis with at the most, a nominal markup. F. Sports associations So far as the state cricket associations are concerned (Saurashtra, Gujarat, Rajasthan, Baroda, and Rajkot), this Court is of the opinion that the matter requires further scrutiny, in light of the discussion in paragraphs 228-238 of the judgment. Accordingly, a direction is issued that the AO shall adjudicate the matter afresh after issuing notice to the concerned assessees and examining the relevant material indicated in the previous paragraphs of this judgment. Furthermore, if any consequential order needs to be issued, the same shall be done and resulting actions, including assessment orders shall be passed in accordance with the law under relevant provisions of the IT Act. G. Private Trusts So far as the appeal by assessee-Tribune Trust is concerned, it has been held that despite advancing general public utility, the Trust cannot benefit from exemption offered to entities covered by Section 2(15) as the records reveal that income received from advertisements, 27 ITA No.2219/Mum/2024 AY 2009-10 Bharat Diamond Bourse constituted business or commercial receipts. Consequently, the limit prescribed in the proviso to Section 2(15) has to be adhered to for the Trust’s claim of being as a charity eligible for exemption, to succeed. Therefore, despite differing reasoning, this court has held that the impugned judgment of the High Court does not call for interference. H. Application of interpretation H. At the cost of repetition, it may be noted that the conclusions arrived at by way of this judgment, neither precludes any of the assessees (whether statutory, or non-statutory) advancing objects of general public utility, from claiming exemption, nor the taxing authorities from denying exemption, in the future, if the receipts of the relevant year exceed the quantitative limit. The assessing authorities must on a yearly basis, scrutinize the record to discern whether the nature of the assessee’s activities amount to “trade, commerce or business” based on its receipts and income (i.e., whether the amounts charged are on cost-basis, or significantly higher). If it is found that they are in the nature of “trade, commerce or business”, then it must be examined whether the quantified limit (as amended from time to time) in proviso to Section 2(15), has been breached, thus disentitling them to exemption.” 26. As could be seen from the aforesaid observations of the Hon’ble Supreme Court, charging of any amount towards consideration for any activity relating to the object of general public utility, which is on cost basis or with nominal amount above the cost, cannot be considered to be trade, commerce or business or any services in relation thereto. Hon’ble Supreme Court has further observed that only when the charges are markedly or significantly above the cost incurred, then they would fall within the mischief of cess or fee or any other consideration towards trade, commerce or business. These observations of Hon’ble Supreme Court apply to various category of assessees including trade promotion bodies and non- statutory bodies. In the facts of the present appeal, admittedly, the receipts of the assessee are on account of reimbursement of cost. Further, the accounts of the assessee placed before us demonstrate that the cost recovery made by the assessee is as per cost without any excessive mark up. In fact, there is no such allegation even by the Assessing Officer. Therefore, assessee’s object 28 ITA No.2219/Mum/2024 AY 2009-10 Bharat Diamond Bourse of any other activity of general public utility would not fall within the vice of proviso to Section 2(15) of the Act. 27. At this stage, we must observe, introduction of proviso to section 2(15) of the Act ipso facto would neither negate assessee’s existence for charitable purpose nor disqualify the assessee from enjoying exemption u/s. 11 of the Act. Applicability of the proviso to Section 2(15) of the Act has to be examined factually based on material available on record to demonstrate that a particular assessee, though, is engaged in advancement of object of general public utility, however, it is engaged in the activity of trade or commerce or business or is providing service related to activity of trade commerce or business by charging cess or fee or any other consideration. 28. In the facts of the present appeal, no cogent material has been brought on record by the Assessing Officer to demonstrate that the assessee is either involved in the activity of trade or commerce or business or is providing any service related to trade or commerce or business. Further, there is nothing on record to show that the assessee is charging any cess or fee or any other consideration, which is markedly excessive of the cost incurred. 29. In view of the aforesaid, we hold that the assessee is not hit by the proviso to Section 2(15) of the Act. As a natural corollary, assessee would be entitled for exemption u/s. 11 of the Act. 30. In the result, appeal is allowed. Order pronounced in the open court on 12.03.2025 Sd/- Sd/- (Girish Agrawal) (Saktijit Dey) Accountant Member Vice President Mumbai; Dated : 12.03.2025 Aks/- 29 ITA No.2219/Mum/2024 AY 2009-10 Bharat Diamond Bourse Copy of the Order forwarded to : 1. The Applicant 2. The Respondent 3. The CIT(A) 4. CIT - concerned 5. DR, ITAT, Mumbai 6. Guard File BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai "