M/s. The Fertilizer Association of India, New Delhi V. DDIT(E), New Delhi

ITA 1325/DEL/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6390 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2010-2011
• Appeal Filed On: 05-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: UMESH CHAND DUBEY
• Assessee Lawyers: MAYANK JAIN
• Keywords: Capital asset; Charitable institution; Opportunity of being heard
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 12A; 12AA; 10B; 143(2); 13; 22

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER I.T.A.NO.1325/DEL/2015 A.Y. : 2010-11 THE FERTILIZER ASSOCIATION OF INDIA, SHAHEED JEET SINGH MARG, NEW DELHI -110 067 (PAN: AAACT0097M) VS. DDIT(E), TRUST CIRCL-IV, CIVIC CENTRE NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. MAYANK JAIN & SH. MADHUR JAIN, ADVOCATES. DEPARTMENT BY : SH. UMESH CHAND DUBEY, SR. DR ORDER PER H.S. SIDHU, JM THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE IMPUGNED ORDER DATED 31/12/2014 PASSED BY THE LD. COMMISSIO NER OF INCOME TAX(A)-40, NEW DELHI ON THE FOLLOWING GROUNDS:- 1. THAT THE ORDER PASSED BY LD. CIT(A) IS BAD IN LAW. 2. THAT THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING T HAT NO PROPER OPPORTUNITY OF BEING HEARD WAS PROVIDED T O THE APPELLANT BY THE AO. 3. THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF AO OF DENIAL OF EXEMPTION UNDER SECTION 11(1) OF THE INCOME TAX ACT, 1961 TO THE APPELLANT. 4. THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF AO ADDING THE INCOME RECEIVED TOWARDS 2 THE CORPUS FUND WHICH IS EXEMPT UNDER SECTION 11(1)(D) OF THE INCOME TAX ACT, 1961. 5. THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO OF ADDITION OF VOLUNTARY CONTRIBUTIONS AND TRAINING PROGRAMME FEE WHICH WAS NOT RECEIVED BY THE APPELLANT. 6. THE APPELLANT CRAVES LEAVE OF ADD OR MODIFY OR AMEND ANY SUBSTITUTE ANY OTHER GROUNDS OF APPEAL AT THE TIME OF HEARING. 2. THE BRIEF FACTS OF THIS CASE AS NARRATED BY THE REVENUE AUTHORITIES ARE THAT THE ASSESSEE ASSOCIATION NAMELY FERTILISER ASSOCIATION OF INDIA (FAI) IS A NON-PROFIT AND NON-TRADING COMPANY REPRE SENTING MAINLY THE FERTILISER MANUFACTURERS, DISTRIBUTORS, IMPORTERS, EQUIPMENT MANUFACTURERS, RESEARCH INSTITUTES AND SUPPLIERS OF INPUTS. IT IS REGISTERED UNDER SECTION 25 OF THE COMPANIES ACT, 1956. THE AS SESSEE FILED ITS RETURN SHOWING NIL INCOME ALONG WITH THE AUDIT REP ORT IN FORM NO. 10B AND FORM NO. 10 ON 28.09.2010. LATER ON, THE CASE W AS SELECTED FOR SCRUTINY UNDER CASS UNDER SECTION 143(2) OF THE I.T . ACT, 1961 VIDE NOTICE DATED 14.09.2010 AND LATER ON A QUESTIONNAIR E UNDER SECTION 142(1)OF THE I.T. ACT, CALLING FOR THE BOOKS OF AC COUNT ALONG WITH THE BILLS, VOUCHERS REGARDING EXPENDITURES INCURRED AND EVIDEN CE FOR HAVING EARNED THE INCOME FROM DIFFERENT HEADS, WERE PRODUCED AND VERIFIED BY THE ASSESSING OFFICER. THEREAFTER, THE AO COMPLETED THE ASSESSMENT U/S. 143(3) OF THE I.T. ACT, 1961 VIDE HIS ORDER DATED 2 2.03.2013 AND DENIED THE EXEMPTIONS CLAIMED BY THE ASSESSEE UNDER SECTIO N 11 AND 12 OF THE ACT. IT WAS OBSERVED BY THE AO THAT PURSUANT TO THE AMENDMENT IN SECTION 2(15) OF THE ACT IN 2009 THE SCOPE OF ADVA NCEMENT OF GENERAL PUBLIC UTILITY WAS LIMITED AND THEREFORE THE ASSES SEE WAS REQUIRED TO STOP ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR BUSI NESS TO REMAIN CHARITABLE AS PER SECTION 2(15) OF THE ACT. ACCORDI NG TO THE AO, THE ASSESSEE WAS CHARGING FEE FOR RENDERING SERVICES AN D THEREFORE, COULD NOT 3 HAVE COME WITHIN THE AMBIT OF SECTION 2(15). THE IN COME OF THE ASSESSEE WAS ASSESSED AT RS. 2,66,92,342/. ON ACCOUNT OF DEN IAL OF EXEMPTION UNDER SECTION 11 AND 12, FOLLOWING ADDITIONS WERE M ADE, SURPLUS AMOUNTING TO RS. 1,46,473/-, EXPENDITURE ON CAPITAL ASSETS OF RS. 1,77,988/-, FUNDS RECEIVED TAKEN TO CORPUS OF RS. 7 2,32,295/- AND RS. 28,66,610/- WITH RESPECT TO VOLUNTARY CONTRIBUTION AND MEMBERSHIP FEE WERE ADDED TO THE INCOME OF THE ASSESSEE. ANOTHER A DDITION OF RS. 10,57,458/- WAS MADE ON ACCOUNT OF PROVISION OF DOU BTFUL DEBTS IN THE INCOME OF THE ASSESSEE. 3. AGGRIEVED BY THE ASSESSMENT ORDER DATED 22.03.20 13, THE ASSESSEE FILED AN APPEAL BEFORE LD. CIT(A) WHO VIDE HIS IMPU GNED ORDER DATED 31.12.2014 HAS PARTLY ALLOWED THE APPEAL OF THE ASS ESSEE BY DELETING THE ADDITION OF RS. 10,57,458/-. HOWEVER, THE ACTION OF THE AO WITH REGARD TO DENIAL OF EXEMPTION UNDER SECTION 11 AND 12 OF THE ACT TO THE ASSESSEE WAS CONFIRMED. 4. AGAINST THE ORDER OF THE LD. CIT(A), THE ASSESSE E IS IN APPEAL BEFORE THE TRIBUNAL. 5. LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE A SSESSEE COMPANY HAS BEEN INCORPORATED UNDER SECTION 25 OF THE COMPA NIES ACT AND IS A NON-PROFIT MAKING COMPANY. HE DRAW OUR ATTENTION TO WARDS THE ASSESSMENT ORDER PAGE NO. 1 & 2 WHEREIN THE AIMS AN D OBJECTS OF THE ASSESSEE COMPANY ARE MENTIONED. 5.1 IT WAS FURTHER STATED THAT THE ASSESSEE IS REG ISTERED U/S 12A OF THE ACT VIDE ORDER DATED 22.06.1994, F. NO. DIT(E) 94-9 5/ T-362/94 147 BY DIT(E) NEW DELHI. THE ACTIVATES/ OBJECT OF THE ASS ESSEE APPARENTLY FALL WITHIN THE AMBIT OF SECTION 2(15) OF THE INCOME TAX ACT, 1961 BEING CHARITABLE PURPOSE. ASSESSEE HAS COMPLIED WITH PR OVISION OF SECTION 11/12 OF THE INCOME TAX ACT AND BENEFIT OF IT IS BE ING ALLOWED THERETO. HE 4 FURTHER STATED THAT IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS BEEN AVAILING EXEMPTION U/S 11(1) OF THE ACT, SINCE THE YEAR 1994. 5.2 IT WAS FURTHER SUBMITTED THAT THE PROVISO TO SE CTION 2(15) WAS INSERTED BY THE FINANCE BILL, 2008. THE THEN THE HO NBLE FINANCE MINISTER WHILE PILOTING THE FINANCE BILL 2008 MENTIONED IN H IS SPEECH, THE PURPOSE OF INSERTING THE PROVISO WHICH IS REPRODUCED BELOW FOR REFERENCE: I ONCE AGAIN ASSURE THE HOUSE THAT GENUINE CHARITAB LE ORGANIZATION WILL NOT IN ANY WAY BE AFFECTED. THE C BDT WILL, FOLLOWING THE USUAL PRACTICE, ISSUE EXPLANATORY CIR CULAR CONTAINING GUIDELINES FOR DETERMINING WHETHER AN EN TITY IS CARRYING ON ANY ACTIVITY IN THE NATURE OF TRADE, CO MMERCE OR BUSINESS OR ANY ACTIVITY OF RENDERING ANY SERVICE I N RELATION TO ANY TRADE, COMMERCE OR BUSINESS. WHETHER THE PURPOS E IS A CHARITABLE PURPOSE WILL DEPEND ON THE TOTALITY OF T HE FACTS OF THE CASE. ORDINARILY, CHAMBERS OF COMMERCE AND SIMI LAR ORGANIZATIONS RENDERING SERVICES TO THEIR MEMBERS W OULD CONTINUE TO BE REGARDED AS ADVANCEMENT OF ANY OTHE R OBJECT OF GENERAL PUBLIC UTILITY. 5.3 THE ASSESSEES COUNSEL FURTHER SUBMITS THERE IS NO CHANGE IN THE ACTIVITIES OF THE BUSINESS OF THE ASSESSEE AND THER EFORE MUST BE ALLOWED THE EXEMPTION U/S 11(1) OF THE ACT. THE ASSESSEES COUNSEL FURTHER STATES THAT EVEN AFTER THE AMENDMENT BY THE FINANCE ACT, 2 009 IN SECTION 2(15), THERE HAS BEEN NO CHANGE EITHER IN THE OBJEC T OR IN THE NATURE OF ACTIVITIES CARRIED ON BY THE ASSESSEE SO AS TO BE H IT BY THE PROVISO TO SECTION 2(15) OF THE ACT. 5.4 IT WAS FURTHER SUBMITTED THAT DURING ASSESSMENT YEARS 2012-13 AND 2013-14, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY BY ISSUANCE OF NOTICE U/S 143(2) OF THE ACT. THE ASSESSEE MADE THE SUBMISSION WITH RESPECT TO EXEMPTION UNDER SECTION 11 OF THE ACT AN D AS TO THE NATURE OF 5 ACTIVITIES OF THE ASSESSEE COMING WITHIN THE AMBIT OF SECTION 2(15) OF THE ACT. THE SAME WAS ACCEPTED BY THE DEPARTMENT THAT T HE ASSESSEE IS CARRYING ON ACTIVITIES OF CHARITABLE NATURE AND THE REFORE NO ADDITION WAS MADE ON THAT ASPECT, AND THE EXEMPTION WAS ALLOWED TO THE ASSESSEE AND THE DEMAND WAS NIL. 5.5 LD. COUNSEL FOR THE ASSESSEE FURTHER STATED THA T IT IS AN ADMITTED CASE OF THE DEPARTMENT THAT THE DENIAL OF THE EXEMP TION UNDER SECTION 11 AND 12 OF THE ACT WAS SOLELY FOR THE REASON OF THE AMENDMENT IN SECTION 2(15) OF THE ACT IN THE YEAR 2009. IT IS SUBMITTED THAT NEITHER IN THE ASSESSMENT ORDER NOR IN THE ORDER PASSED BY THE CIT (A), THE DEPARTMENT HAS ALLEGED VIOLATION OF ANY OF THE OBJECTS OF THE ASSESSEE. IT IS NOT SPECIFIED AS TO WHICH OBJECT WAS VIOLATED BY THE AS SESSEE. THE SAID AMENDMENT IN THE PROVISO TO SECTION 2(15) HAS COME UNDER JUDICIAL SCRUTINY OF VARIOUS HIGH COURTS INCLUDING THE JURIS DICTIONAL HONBLE DELHI HIGH COURT. IN THE CASE OF INDIA TRADE PROMOTION OR GANIZATION VS. DIRECTOR GENERAL OF INCOME TAX (EXEMPTIONS) & OTHER S, W.P. (C) NO. 1872/2013 DATED 22.01.2015, THE HONBLE HIGH COURT WAS PLEASED TO READ DOWN THE SAID AMENDMENT AND HELD THAT IF THE DOMINA NT AND THE PRIME OBJECTIVE OF THE INSTITUTION IS ADVANCEMENT OF AN O BJECT OF GENERAL PUBLIC UTILITY, THE INSTITUTION HAS TO BE NECESSARILY REGA RDED AS AN INSTITUTION ESTABLISHED FOR CHARITABLE PURPOSES IRRESPECTIVE OF THE FACT THAT THE ACTIVITIES ARE IN THE NATURE OF TRADE, COMMERCE OR BUSINESS. IT WAS FURTHER HELD THAT CHARGING OF FEE FOR PROVIDING SERVICE BY AN INSTITUTION CLAIMING ITSELF TO BE ESTABLISHED FOR CHARITABLE PURPOSE WOU LD NOT LOSE ITS CHARACTER OF HAVING BEEN ESTABLISHED FOR CHARITABLE PURPOSE. 5.6 IT WAS FURTHER STATED BY THE LD. COUNSEL OF THE ASSESSEE THAT THE SAID AMENDMENT THEREFORE, IS OF NO CONSEQUENCE IN THE PR ESENT CASE OF THE ASSESSEE IN VIEW OF THE AFORESAID AUTHORITATIVE AND BINDING JUDGMENT OF THE JURISDICTIONAL HIGH COURT. THE ASSESSEE SUBMITS THAT THERE IS NOTHING ON RECORD TO INDICATE THAT ITS ACTIVITIES ARE DRIVE N BY PROFIT MOTIVE OR THE 6 ASSESSEE IS CARRYING OUT ANY ACTIVITIES OUTSIDE ITS REGISTERED OBJECTS. THERE IS INFACT NO VIOLATION OF SECTION 11, 12 AND 13 OF THE ACT BY THE ASSESSEE. IT IS FURTHER ASSERTED THAT MERE CHARGING OF FEE BY THE ASSESSEE FOR HOLDING SEMINARS OR TRAINING WOULD NOT IPSO FACTO A LTER THE NATURE OF ACTIVITIES CARRIED OUT BY IT. THE FEE CHARGED IS ON LY FOR THE OBJECTS MENTIONED ABOVE AS THE ASSESSEE CONDUCTS VARIOUS SE MINARS, TRAINING PROGRAM, WORKSHOPS, RESEARCH AS WELL AS GIVE AWARDS TO VARIOUS PERSONS OF EXCELLENCE TO CREATE AWARENESS, IMPART KNOWLEDGE ABOUT THE FERTILIZERS AND DO ALL ENDEAVOURS TO IMPROVE THE SOIL FERTILITY BY IMPROVING THE QUALITY OF THE FERTILIZER WHICH HELPS IN PRODUCING THE BETT ER QUALITY FOOD GRAINS FOR THE NATION AT LARGE. THUS, THE DOMINANT OBJECT OF T HE ASSESSEE IS TO HELP IN OVERCOMING THE CHALLENGES FACED BY THE FERTILIZE R INDUSTRIES AS WELL AS THE AGRICULTURIST IN ORDER TO PROMOTE THE AGRICULTU RE. THE SAID ENDEAVOUR BY THE ASSESSEE BENEFITS THE PUBLIC AT LARGE AND BE SIDES MANY OTHERS, HELPS IN IMPROVING THE QUALITY OF GOOD GRAIN WHICH HAS A DIRECT IMPACT ON THE HEALTH OF THE COUNTRY. THE ASSESSEE HAS FURTHER SUBMITTED AT VARIOUS RESEARCH PROGRAMS AND JOURNALS ARE PUBLISHED ON USE OF VARIOUS ELEMENTS LIKE SULPHUR, POTASH, AND NITROGEN ETC. TO PREPARE A BETTER FERTILIZER. THEREFORE, THE OBJECTS OF THE ASSESSEE IS CHARITABL E PURPOSE AND NOT FOR MAKING PROFITS GOING INTO SOME INDIVIDUALS POCKETS . 5.7 IT WAS THE FURTHER CONTENTION OF THE ASSESSEES COUNSEL THAT THE FACT THAT THE REGISTRATION GRANTED TO THE ASSESSEE EVIDE NCES THE OBJECTS OF THE ASSESSEES TRUST WERE OF ADVANCEMENT OF OBJECT OF G ENERAL PUBLIC UTILITY AND THERE IS ADMITTEDLY NOTHING ON RECORD TO DEMONS TRATE ANY SHIFT FROM THIS POSITION, MERE GENERATION OF SURPLUS OR CHARGI NG OF FEE WOULD NOT OBLITERATE ITS OVERALL OBJECT OF GENERAL PUBLIC UTI LITY. 5.8 THE ASSESSEES COUNSEL FURTHER STATES THAT THE CHARGING OF FEE FOR SEMINARS AND TRAINING IS ONLY INCIDENTAL TO THE MAI N OBJECT OF THE ASSESSEE BEING IMPROVEMENT AND SUSTAINABLE GROWTH OF AGRICUL TURE AND FOOD INDEPENDENCY. THE PURPOSE IS NOT TO BENEFIT ANY IND IVIDUAL MANUFACTURE OR 7 GROUP OF MANUFACTURES BUT TO HOLD AWARENESS PROGRAM S, UNDERTAKING TRAINING AND RESEARCH TO IMPROVE THE KNOWLEDGE OF T HE STAKE HOLDERS FOR A BETTER LIVELIHOOD AND SUSTAINABLE DEVELOPMENT OF AG RICULTURE IN INDIA AS A WHOLE. THERE IS NOTHING ON RECORD TO SUBSTANTIATE T HAT THE INCOME GENERATED BY THE SAID ACTIVITIES WERE NOT UTILIZED BY THE ASSESSEE FOR ACHIEVEMENT OF ITS MAIN OBJECTS. IT IS IMPORTANT T O NOTE THAT NEITHER THE AO NOR THE LD. CIT(A) HAS FAILED TO POINT OUT ANY O BJECT FOR WHICH THE COMPANY HAS BEEN INCORPORATED, BEING VIOLATED BY TH E ASSESSEE. IT IS FURTHER SUBMITTED THAT THE DEPARTMENT HAS FAILED TO SHOW ANY NONCOMPLIANCE AS ENUMERATED UNDER SECTION 13 OF THE ACT, THUS THE IMPUGNED ADDITIONS MADE BY THE REVENUE ARE LIABLE T O BE DELETED. 5.9 THE ASSESSEES COUNSEL FURTHER SUBMITS THAT PRO MOTION OF TRADE, COMMERCE AND INDUSTRIES ALSO COMES WITHIN THE PURVI EW OF SECTION 2(15) OF THE ACT. THE HONBLE SUPREME COURT IN THE CASE O F CIT VS. ANDHRA CHAMBER OF COMMERCE, 55 ITR 722, OBSERVED THAT THE EXPRESSION OBJECT OF GENERAL PUBLIC UTILITY WOULD NOT NECESSARILY MEA N THAT THE OBJECT SHOULD BE TO BENEFIT THE WHOLE OF MANKIND. 5.10 IT WAS FURTHER SUBMITTED BY THE LD. COUNSEL OF THE ASSESSEE THAT THE JUDGMENT RELIED UPON BY THE AO OF THE HONBLE A NDHRA PRADESH HIGH COURT IN THE CASE OF ANDHRA PRADESH STATE SEED CERT IFICATION AGENCY DATED 29.12.2012 CANNOT BE RELIED UPON AS THE HONB LE JURISDICTIONAL HIGH COURT IN ITPO CASE (SUPRA) DISAGREED WITH THE VIEW TAKEN IN THE AFORESAID JUDGMENT. 5.11 IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, IT WAS STATED THAT THE ACTIVITIES OF THE ASSESSEE ARE NOT HIT BY THE PROVISO TO SECTION 2(15) OF THE ACT AND THEREFORE THE ASSESSEE MUST BE ALLOWED THE EXEMPTION UNDER SECTION 11 OF THE ACT. IN SUPPORT OF THE AFORESAID ARGUMENTS ADVANCED BY THE LD. COUNSEL OF THE ASSESS EE, HE DRAW OUR ATTENTION TOWARDS THE AIMS AND OBJECTS OF THE SOCI ETY; RELEVANT PROVISIONS 8 OF SECTION 2(15) OF THE I.T. ACT, 1961 AND FILED TH E COPY OF THE JUDGEMENT RENDERED BY THE HONBLE DELHI HIGH COURT IN THE C ASE OF INDIA TRADE PROMOTION ORGANIZATION VS. DIRECTOR GENERAL OF INCO ME TAX (EXEMPTIONS) & OTHERS PASSED IN WP(C) NO. 1872/2013 DATED 22.1.2 015; COPY OF ITAT, DELHI DECISION DATED 20.2.2015 IN THE CASE OF ADIT VS. INDIAN MEDICAL ASSOCIATION PASSED IN ITA NO. 4291/DEL/2012 AND THE COPY OF THE JUDGEMENT RENDERED BY THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. ANDHRA CHAMBER OF COMMERCE REPORTED IN 55 I TR 722. 6. ON THE CONTRARY, LD. SR. DR HAS RELIED UPON THE ORDER PASSED BY THE AO AND THE CIT(A). IT WAS SUBMITTED BY THE LD. DR THAT MERE EXEMPTION UNDER SECTION 12A OF THE ACT WOULD NOT AUTOMATICALL Y GRANT THE ASSESSEE BENEFIT UNDER SECTION 11 AND 12 OF THE ACT. HENCE, IT WAS REQUESTED THAT ASSESSEES APPEAL MAY BE DISMISSED. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT RECORDS. WE FIND THAT THE ASSESSEE WAS DENIED THE B ENEFIT UNDER SECTION 11 AND 12 OF THE ACT SOLELY FOR THE REASON OF AMEND MENT IN SECTION 2(15) OF THE ACT. IT WAS NOTED THAT NEITHER THE AO NOR TH E CIT(A) HAVE POINTED OUT ANY PARTICULAR OBJECT WHICH IS VIOLATED BY THE ASSESSEE IN THE RELEVANT A.Y. IT IS FURTHER NOT POINTED OUT AS TO UNDER WHIC H CLAUSE OF SECTION 13, THE ASSESSEE WOULD FALL SO AS TO INVITE DENIAL OF E XEMPTION UNDER SECTION 11 AND 12 OF THE ACT. IT IS PERTINENT TO NOTE THAT THE ASSESSEE HAS BEEN GRANTED CERTIFICATED UNDER SECTION 12A ON 22.06.199 4 AND HAS BEEN RECEIVING THE SAID EXEMPTIONS SINCE THEN. THE REGIS TRATION OF THE ASSESSEE HAS NOT BEEN CANCELLED UNDER SECTION 12AA (3) OF TH E ACT. 7.1 TO DECIDE THE ISSUE IN DISPUTE, WE CAN GAINFULL Y REFER HERE THE OBJECTS OF THE ASSESSEE COMPANY, WHICH READ AS UND ER:- I. TO UNITE ALL FIRMS, COMPANIES, CORPORATION, ASSOCIA TIONS AND INDIVIDUALS ENGAGED IN THE FERTILISERS INDUSTRY IN INDIA WITH A VIEW TO PROMOTING THE CONSIDERATION AND DISCUSSIO N OF ALL 9 QUESTIONS AFFECTING THE TRADE OF FERTILISERS AND TH E INTEREST OF SOUND AGRICULTURE AND FOR THE IMPROVEMENT OF THE ECONOMICS DEVELOPMENT OF THE FERTILISER AND AGRICUL TURE INDUSTRIES. II. TO INSTITUTE, PROSECUTE, DEVELOP AND CARRY ON ALL K INDS OF SCIENTIFIC AND ECONOMIC RESEARCH IN OR IN CONNECTIO N WITH PROCESS FOR THE PREPARATION AND USE OF FERTILISER F OR THE PURPOSE OF INCREASING SOIL FERTILITY AND CROP PRODU CTION AND IN THE INTEREST OF AGRICULTURE. III. TO CARRY OUT ALL KINDS SCIENTIFIC AND ECONOMIC INVE STIGATIONS AND OTHER EXPERIMENTS FOR THE PURPOSES AFORESAID AN D FOR IMPROVING FOR COMMERCIAL PURPOSE THE MANUFACTURE, U SE AND SALE OF SUCH FERTILIZERS FOR USE IN CONNECTION THEREWITH. IV. TO STUDY AND PROMOTE THE APPLICATION OF SCIENCE AND SCIENTIFIC AND ECONOMIC METHODS TO THE MANUFACTURE OF FERTILIZERS AND THEIR UTILIZATION IN THE FIELDS EIT HER ALONE OR IN CONJUNCTION WITH PREPARATION WITH OTHER MATERIALS. V. TO STUDY AND INTRODUCE FERTILIZER INDUSTRIES IN IND IA SCHEMES OF STANDARDIZATION IN COMMERCIAL PRACTICES IN MANUFACTURE AND TO IMPROVE SAME AND EXTEND USE OF FERTILIZERS. VI. TO CONSTRUCT DEVELOP AND USE SCIENTIFIC, CHEMICAL A ND AGRICULTURAL EXPERIMENTAL AND OTHER LABORATORIES, P LANT AND MACHINERY AND WORKSHOPS AND TO EMPLOY ALL KINDS OF SCIENTISTS, ECONOMISTS, CHEMISTS, AGRICULTURISTS, E NGINEERS, MECHANICS, TECHNICAL AND OTHER EXPERTS IN CONNECTIO N THEREWITH. VII. TO MAKE KNOWN TO MEMBERS AND OTHERS UPON SUCH TERMS AS THE ASSOCIATION MAY DETERMINE THE RESULTS THEREO F ALL RESEARCH DISCOVERIES, PATENTS, AND INVESTIGATIONS M ADE IN CONNECTION WITH THE ABOVE OBJECTS AND TO RENDER SER VICES IN CONNECTION THEREWITH TO THE MEMBERS AND OTHERS AND TO 10 CHARGE THEREOF OR NOT, AS THE ASSOCIATION MAY IN AN Y CASE DETERMINE. 7.2 WE FURTHER FIND THAT SECTION 2(15) OF INCOME TA X ACT, 1961 READ AS UNDER:- CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR, EDUCATION, [YOGA,] MEDICAL RELIEF, PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILD LIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF A RTISTIC 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 PU RPOSE, IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NAT URE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSIN ESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIV E 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 ACT UAL CARRYING OUT OF SUCH ADVANCEMENT OF ANY OTHER OBJEC T OF GENERAL PUBLIC UTILITY; AND ( II ) THE AGGREGATE RECEIPTS FROM SUCH ACTIVITY OR ACTI VITIES DURING THE PREVIOUS YEAR, DO NOT EXCEED TWENTY PER CENT OF THE TOTAL RECEIPTS, OF THE TRUST OR INSTITUTION UND ERTAKING SUCH ACTIVITY OR ACTIVITIES, OF THAT PREVIOUS YEAR; ] 7.3 WE FURTHER NOTE THAT THE HONBLE DELHI HIGH COU RT IN THE CASE OF INDIA TRADE PROMOTION ORGANIZATION VS. DIRECTOR GEN ERAL OF INCOME TAX (EXEMPTIONS) & OTHERS, W.P. (C) NO. 1872/2013 DATED 22.01.2015, WAS PLEASED TO HOLD AS UNDER:- 11 46THE ONLY THING THAT WE HAVE TO EXAMINE IS - WH ETHER THE PETITIONER HAD BEEN ESTABLISHED FOR CHARITABLE PURPOSES? THE FACT THAT IT DERIVES INCOME DOES NOT, IN ANY WA Y, DETRACT FROM THE POSITION THAT IT IS AN INSTITUTION ESTABLI SHED FOR CHARITABLE PURPOSES. THEREFORE, IN OUR VIEW, MERELY BECAUSE THE PETITIONER DERIVES RENTAL INCOME, INCOME OUT OF SALE OF TICKETS AND SALE OF PUBLICATIONS OR INCOME OUT OF L EASING OUT FOOD AND BEVERAGES OUTLETS IN THE EXHIBITION GROUND S, DOES NOT, IN ANY WAY, AFFECT THE NATURE OF THE PETITIONE R AS A CHARITABLE INSTITUTION IF IT OTHERWISE QUALIFIES FO R SUCH A CHARACTER. 50. IN ICAI(II) (SUPRA), WHILE CONSIDERING WHETHER THE ACTIVITIES OF ICAI FELL WITHIN THE PROVISO TO SECTI ON 2(15) AS INTRODUCED WITH EFFECT FROM 01.04.2009, THIS COURT, AFTER CONSIDERING THE SUPREME COURT DECISION IN THE CASE OF COMMISSIONER OF SALES TAX V. SAI PUBLICATION FUND: (2002) 258 ITR 70(SC) HELD:- 'THUS, IF THE DOMINANT ACTIVITY OF THE ASSESSEE WAS NOT BUSINESS, THEN ANY INCIDENTAL OR ANCILLARY ACTIVITY WOULD ALSO NOT FALL WITHIN THE DEFINITION OF BUSINESS.' 51. THIS COURT ALSO OBSERVED IN ICAI(II) (SUPRA) TH AT:- 64. IT IS NOT NECESSARY THAT A PERSON SHOULD GIV E SOMETHING FOR FREE OR AT A CONCESSIONAL RATE TO QUA LIFY AS BEING ESTABLISHED FOR A CHARITABLE PURPOSE. IF THE OBJECT AND PURPOSE OF THE INSTITUTION IS CHARITABLE, THE F ACT THAT THE INSTITUTION COLLECTS CERTAIN CHARGES, DOES NOT ALTER THE CHARACTER OF THE INSTITUTION. THIS COURT IN ICAI (II) (SUPRA) HELD:- 67. THE EXPRESSIONS TRADE, COMMERCE AND BUSINESS AS OCCURRING IN THE FIRST PROVISO TO SEC TION 12 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 SAM E IS BUSINESS OR NOT. THE PURPORT OF THE FIRST PROVISO T O SECTION 2(15) OF THE ACT IS NOT TO EXCLUDE ENTITIES WHICH ARE ESSENTIALLY FOR CHARITABLE PURPOSE BUT ARE COND UCTING SOME ACTIVITIES FOR A CONSIDERATION OR A FEE. THE O BJECT OF INTRODUCING THE FIRST PROVISO IS TO EXCLUDE ORGANIZATIONS WHICH ARE CARRYING ON REGULAR BUSINES S 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. T HE RELEVANT EXTRACT TO THE SPEECH IS AS UNDER:- . 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 A S USED IN THE FIRST PROVISO MUST, THUS, BE INTERPRETE D 13 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. 52. WITH REGARD TO THE SURAT ART SILK CASE (SUPRA), THIS COURT, IN ICAI (II) (SUPRA) OBSERVED AS UNDER:- 69. IN THE CASE OF ADDL. COMMISSIONER OF INCOME TA X V. SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION: [1980] 121 ITR 1 (SC), THE SUPREME COURT HELD AS UNDER:- THE TEST WHICH HAS, THEREFORE, NOW TO BE APPLIED IS WHETHER THE PREDOMINANT OBJECT OF THE ACTIVITY INVOLVED IN CARRYING OUT THE OBJECT OF GENERAL PUBLIC UTILITY IS TO SUBSERVE THE CHARITABLE PURPOS E OR TO EARN PROFIT. WHERE PROFIT-MAKING IS THE PREDOMINANT OBJECT OF THE ACTIVITY, THE PURPOSE, THOUGH AN OBJECT OF GENERAL PUBLIC UTILITY WOULD CEASE TO BE A CHARITABLE PURPOSE. BUT WHERE THE PREDOMINANT OBJECT OF THE ACTIVITY IS TO ANY OUT THE CHARITABLE PURPOSE AND NOT TO EARN PROFIT, IT WOULD NOT LOSE ITS CHARACTER OF A CHARITABLE PURPOSE MERELY BE CAUSE SOME PROFIT ARISES FROM THE ACTIVITY. 70. ALTHOUGH IN THAT CASE THE STATUTORY PROVISIONS BEING CONSIDERED BY THE SUPREME COURT WERE DIFFERENT AND THE UTILISATION OF INCOME EARNED IS, NOW, NOT A RELEVAN T CONSIDERATION IN VIEW OF THE EXPRESS WORDS OF THE F IRST PROVISO TO SECTION 2(15) OF THE ACT, NONETHELESS TH E TEST OF DOMINANT OBJECT OF AN ENTITY WOULD BE RELEVANT T O DETERMINE WHETHER THE ENTITY IS CARRYING ON BUSINES S OR NOT. IN THE PRESENT CASE, THERE IS LITTLE DOUBT THA T THE 14 OBJECTS OF THE ACTIVITIES OF THE PETITIONER ARE ENT IRELY FOR CHARITABLE PURPOSES. .53. FROM THE SAID DECISION, IT IS APPARENT THAT M ERELY BECAUSE A FEE OR SOME OTHER CONSIDERATION IS COLLEC TED OR RECEIVED BY AN INSTITUTION, IT WOULD NOT LOSE ITS C HARACTER OF HAVING BEEN ESTABLISHED FOR A CHARITABLE PURPOSE. I T IS ALSO IMPORTANT TO NOTE THAT WE MUST EXAMINE AS TO WHAT I S THE DOMINANT ACTIVITY OF THE INSTITUTION IN QUESTION. I F THE DOMINANT ACTIVITY OF THE INSTITUTION WAS NOT BUSINE SS, TRADE OR COMMERCE, THEN ANY SUCH INCIDENTAL OR ANCILLARY ACT IVITY WOULD ALSO NOT FALL WITHIN THE CATEGORIES OF TRADE, COMME RCE OR BUSINESS. IT IS CLEAR FROM THE FACTS OF THE PRESENT CASE THAT THE DRIVING FORCE IS NOT THE DESIRE TO EARN PROFITS BUT , THE OBJECT OF PROMOTING TRADE AND COMMERCE NOT FOR ITSELF, BUT FO R THE NATION - BOTH WITHIN INDIA AND OUTSIDE INDIA. CLEAR LY, THIS IS A CHARITABLE PURPOSE, WHICH HAS AS ITS MOTIVE THE ADV ANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTILITY TO WHICH THE EXCEPTION CARVED OUT IN THE FIRST PROVISO TO SECTION 2(15) OF THE SAID ACT WOULD NOT APPLY. WE SAY SO, BECAUSE, IF A LITERAL I NTERPRETATION WERE TO BE GIVEN TO THE SAID PROVISO, THEN IT WOULD RISK BEING HIT BY ARTICLE 14 (THE EQUALITY CLAUSE ENSHRINED IN ARTICLE 14 OF THE CONSTITUTION). IT IS WELL-SETTLED THAT THE COUR TS SHOULD ALWAYS ENDEAVOUR TO UPHOLD THE CONSTITUTIONAL VALID ITY OF A PROVISION AND, IN DOING SO, THE PROVISION IN QUESTI ON MAY HAVE TO BE READ DOWN, AS POINTED OUT ABOVE, IN ARUN KUMAR (SUPRA). 54. IT WOULD BE PERTINENT TO REITERATE THAT SECTION 2(15) IS ONLY A DEFINITION CLAUSE. SECTION 2 BEGINS WITH THE WORDS, IN THIS ACT, UNLESS THE CONTEXT OTHERWISE REQUIRES. T HE EXPRESSION 'CHARITABLE PURPOSE' APPEARING IN SECTIO N 2(15) OF THE SAID ACT HAS TO BE SEEN IN THE CONTEXT OF SECTI ON 15 10(23C)(IV). WHEN THE EXPRESSION 'CHARITABLE PURPOS E', AS DEFINED IN SECTION 2(15) OF THE SAID ACT, IS READ I N THE CONTEXT OF SECTION 10(23C)(IV) OF THE SAID ACT, WE WOULD HA VE TO GIVE UP THE STRICT AND LITERAL INTERPRETATION SOUGHT TO BE GIVEN TO THE EXPRESSION 'CHARITABLE PURPOSE' BY THE REVENUE. WITH RESPECT, WE DO NOT AGREE WITH THE VIEWS OF THE KERA LA AND ANDHRA PRADESH HIGH COURTS.. 57. ULTIMATELY, IN THE CONTEXT OF THE FACTUAL MATRI X OF THAT CASE, THIS COURT HELD THAT 'CHARGING A NOMINAL FEE TO USE THE CODING SYSTEM AND TO AVAIL THE ADVANTAGES AND BENEF ITS THEREIN IS NEITHER REFLECTIVE OF THE BUSINESS APTIT UDE NOR INDICATIVE OF THE PROFIT ORIENTED INTENT'. THE COUR T FURTHER OBSERVED:- THUS THE CONTENTION OF THE REVENUE THAT THE PETITI ONER CHARGES FEE AND, THEREFORE, IS CARRYING ON BUSINESS , HAS TO BE REJECTED. THE INTENTION BEHIND THE ENTIRE ACT IVITY IS PHILANTHROPIC AND NOT TO RECOUP OR REIMBURSE IN MONETARY TERMS WHAT IS GIVEN TO THE BENEFICIARIES. ELEMENT OF GIVE AND TAKE IS MISSING, BUT DECISIVE ELEMENT OF BEQUEATHING IS PRESENT. IN THE ABSENCE O F PROFIT MOTIVE AND CHARITY BEING THE PRIMARY AND S OLE PURPOSE BEHIND THE ACTIVITIES OF THE PETITIONER IS PERSPICUOUSLY DISCERNIBLE AND PERCEPTIBLE. THE COURT ALSO HELD:- 27. AS OBSERVED ABOVE, FEE CHARGED AND QUANTUM OF INCOME EARNED CAN BE INDICATIVE OF THE FACT THAT TH E PERSON IS CARRYING ON BUSINESS OR COMMERCE AND NOT CHARITY, BUT WE MUST KEEP IN MIND THAT CHARITABLE ACTIVITIES REQUIRE OPERATIONAL/RUNNING EXPENSES AS WELL AS CAPITAL EXPENSES TO BE ABLE TO SUSTAIN AND CONTI NUE IN LONG RUN. THE PETITIONER HAS TO BE SUBSTANTIALLY 16 SELFSUSTAINING IN LONG-TERM AND SHOULD NOT DEPEND U PON GOVERNMENT, IN OTHER WORDS TAXPAYERS SHOULD NOT SUBSIDIZE THE SAID ACTIVITIES, WHICH NEVERTHELESS A RE CHARITABLE AND FALL UNDER THE RESIDUARY CLAUSE GE NERAL PUBLIC UTILITY. THE IMPUGNED ORDER DOES NOT REFER T O ANY STATUTORY MANDATE THAT A CHARITABLE INSTITUTION FAL LING UNDER THE LAST CLAUSE SHOULD BE WHOLLY, SUBSTANTIAL LY OR IN PART MUST BE FUNDED BY VOLUNTARY CONTRIBUTIONS. NO SUCH REQUIREMENT HAS BEEN POINTED OUT OR ARGUED. A PRACTICAL AND PRAGMATIC VIEW IS REQUIRED WHEN WE EXAMINE THE DATA, WHICH SHOULD BE ANALYZED OBJECTIV ELY AND A NARROW AND COLOURED VIEW WILL BE COUNTER- PRODUCTIVE AND CONTRARY TO THE LANGUAGE OF SECTION 2(15) OF THE ACT. 58. IN CONCLUSION, WE MAY SAY THAT THE EXPRESSION ' CHARITABLE PURPOSE', AS DEFINED IN SECTION 2(15) CANNOT BE CON STRUED LITERALLY AND IN ABSOLUTE TERMS. IT HAS TO TAKE COL OUR AND BE CONSIDERED IN THE CONTEXT OF SECTION 10(23C)(IV) OF THE SAID ACT. IT IS ALSO CLEAR THAT IF THE LITERAL INTERPRET ATION IS GIVEN TO THE PROVISO TO SECTION 2(15) OF THE SAID ACT, THEN THE PROVISO WOULD BE AT RISK OF RUNNING FOWL OF THE PRINCIPLE O F EQUALITY ENSHRINED IN ARTICLE 14 OF THE CONSTITUTION INDIA. IN ORDER TO SAVE THE CONSTITUTIONAL VALIDITY OF THE PROVISO, TH E SAME WOULD HAVE TO BE READ DOWN AND INTERPRETED IN THE CONTEXT OF SECTION 10(23C)(IV) BECAUSE, IN OUR VIEW, THE CONTE XT REQUIRES SUCH AN INTERPRETATION. THE CORRECT INTERPRETATION OF THE PROVISO TO SECTION 2(15) OF THE SAID ACT WOULD BE T HAT IT CARVES OUT AN EXCEPTION FROM THE CHARITABLE PURPOSE OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY AND THAT EXCEPTION IS LIMITED TO ACTIVITIES IN THE NATU RE OF TRADE, COMMERCE OR BUSINESS OR ANY ACTIVITY OF RENDERING A NY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS FOR A CESS OR 17 FEE OR ANY OTHER CONSIDERATION. IN BOTH THE ACTIVIT IES, IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR THE ACTIVI TY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COM MERCE OR BUSINESS, THE DOMINANT AND THE PRIME OBJECTIVE HAS TO BE SEEN. IF THE DOMINANT AND PRIME OBJECTIVE OF THE IN STITUTION, WHICH CLAIMS TO HAVE BEEN ESTABLISHED FOR CHARITABL E PURPOSES, IS PROFIT MAKING, WHETHER ITS ACTIVITIES ARE DIRECTLY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR INDIRE CTLY IN THE RENDERING OF ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, THEN IT WOULD NOT BE ENTITLED TO CLAIM IT S OBJECT TO BE A 'CHARITABLE PURPOSE'. ON THE FLIP SIDE, WHERE AN INSTITUTION IS NOT DRIVEN PRIMARILY BY A DESIRE OR MOTIVE TO EARN PROFITS, BUT TO DO CHARITY THROUGH THE ADVANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTILITY, IT CANNOT BUT BE REGARDED AS AN INS TITUTION ESTABLISHED FOR CHARITABLE PURPOSES. 7.4 WE FURTHER NOTE THAT THE TRIBUNAL IN SIMILAR FA CTS IN THE CASE OF ADIT VS. INDIAN MEDICAL ASSOCIATION, ITA NO. 4291/DEL/20 12 DATED 20.02.2015 HELD AS UNDER:- 43. FROM THIS, IT IS CLEAR THAT PRIOR TO THE INTRO DUCTION OF THE PROVISO TO SECTION 2(15) OF THE SAID ACT, THERE WAS NO DISPUTE THAT THE PETITIONER WAS ESTABLISHED FOR CHARITABLE PURPOSES AND, THEREFORE, ITS INCOME WAS NOT TO BE INCLUDED I N THE TOTAL INCOME AND WAS, THEREFORE, GRANTED THE BENEFIT OF E XEMPTION. WE HAVE ALREADY NOTED ABOVE, WHILE DISCUSSING THE F ACTS OF THE CASE THAT THE INCOME RECEIVED BY THE PETITIONER IS FROM THE LETTING OUT OF SPACE, SALE OF PUBLICATIONS, SAL E OF TICKETS AND LEASING OUT FOOD AND BEVERAGES OUTLETS IN PRAGA TI MAIDAN. THE DOMINANT AND MAIN OBJECT OF THE PETITIONER IS T O ORGANISE TRADE FAIRS/EXHIBITIONS IN ORDER TO PROMOTE TRADE, COMMERCE AND BUSINESS NOT ONLY WITHIN INDIA, BUT INTERNATION ALLY. THIS IS DONE THROUGH THE ORGANIZATION OF TRADE FAIRS, INCLU DING THE 18 ANNUAL INTERNATIONAL TRADE FAIR AND OTHER EXHIBITIO NS. IT IS FOR THIS PURPOSE THAT THE SPACE IS LET OUT TO VARIOUS E NTITIES DURING THE SAID FAIRS AND EXHIBITIONS. ALL THESE ACTIVITIE S, INCLUDING THE SALE OF TICKETS AND SALE OF PUBLICATIONS ARE AN INH ERENT PART OF THE MAIN OBJECT OF THE PETITIONER. IT IS CLEAR FROM THE FACTS OF THE CASE THAT PROFIT MAKING IS NOT THE DRIVING FORC E OR OBJECTIVE OF THE PETITIONER. IT IS REGISTERED UNDER SECTION2 5 OF THE COMPANIES ACT , 1956, WHICH SPECIFICALLY APPLIES TO ENTITIES WHICH INTEND TO APPLY THEIR PROFITS, IF ANY, OR OTH ER INCOME IN PROMOTING THEIR OBJECTS AND PROHIBITS, THE PAYMENT OF ANY DIVIDEND TO ITS MEMBERS. THIS MAKES IT CLEAR THAT N AY INCOME GENERATED BY THE PETITIONER DOES NOT FIND ITS WAY I NTO THE POCKETS OF ANY INDIVIDUALS OR ENTITIES. IT IS TO BE UTILIZED FULLY FOR THE PURPOSES OF THE OBJECTS OF THE PETITIONER. 45. TO BE CLEAR, IF AN ACTIVITY IN THE NATURE OF TR ADE, COMMERCE OR BUSINESS IS CARRIED ON AND IT GENERATES INCOME, THE FACT THAT SUCH INCOME IS APPLIED FOR CHARITABLE PURPOSES, WOULD NOT MAKE ANY DIFFERENCE AND THE ACTIVITY WOUL D NONETHELESS NOT BE REGARDED AS BEING CARRIED ON FOR A CHARITABLE PURPOSE. WE HAVE SEEN THAT BY VIRTUE OF SECTION 25 OF THE ACT, THE PETITIONER IS ENJOINED TO PLOUGH B ACK ITS INCOME IN FURTHERANCE OF ITS OBJECT AND THE DECLARA TION OF DIVIDENDS IS PROHIBITED. IF A LITERAL INTERPRETATIO N IS TO BE GIVEN TO THE PROVISO, THEN IT MAY BE CONCLUDED THAT THIS FACT WOULD HAVE NO BEARING ON DETERMINING THE NATURE OF THE AC TIVITY CARRIED ON BY THE PETITIONER. BUT WE FEEL THAT IN D ECIDING WHETHER ANY ACTIVITY IS IN THE NATURE OF TRADE COMM ERCE OR BUSINESS, IT HAS TO BE EXAMINED WHETHER THERE IS AN ELEMENT OF PROFIT MAKING OR NOT. SIMILARLY, WHILE CONSIDERI NG WHETHER ANY ACTIVITY IS ONE OF RENDERING ANY SERVICE IN REL ATION TO ANY 19 TRADE, COMMERCE OR BUSINESS, THE ELEMENT OF PROFIT MAKING IS ALSO VERY IMPORTANT.' 7.2.16 ..IN THE ABSENCE OF ANY ADVERSE FINDING IN REGARD TO THE ACTIVITIES OF THE TRUST WE FIND THAT THE DEPART MENT'S CASE HAS NO MERITS. IN THE COURSE OF HEARING IT WAS SUBM ITTED BY THE LD. SR. DR ON QUERY THAT THE REGISTRATION TILL DATE HAS NOT BEEN WITHDRAWN. THE DATE OF THE ASSESSMENT ORDER TH E RECORD SHOWS IS 08.11.2011. THE LD. SR. DR HAS ALSO CANVAS SED THAT THE MERE FACT THAT THE ASSESSEE HAS RECEIVED FINANC IAL SUPPORT FROM THE MINISTRY OF HEALTH AND FAMILY WELFARE WHIC H FACT IT HAS BEEN SUBMITTED DOES NOT MEAN THAT IT IS PERFORM ING A CHARITABLE ACTIVITY. ON CONSIDERING THE JUDICIAL PR ECEDENT CITED WE FIND THAT THE HON'BLE HIGH COURT TOOK INTO CONSI DERATION IN THE FACTS OF THE ITPO THAT PRIME LAND WAS MADE AVAI LABLE TO THE ASSESSEE TO FACILITATE ITS OBJECTS OF PROVIDING SPACE ON RENT ETC. FOR PROMOTION OF TRADE WHEREIN THE ASSESSEE AP ART FROM SELLING TICKETS ETC WAS ALSO PROVIDING FOOD & BEVER AGE OUTLETS AND PROVIDING FOR WATER, ELECTRICITY ETC IN THE FAC TS OF THE PRESENT CASE ADMITTEDLY FINANCIAL SUPPORT IS ALSO P ROVIDED TO THE ASSESSEE TRUST WHOSE ACTIVITIES HAVE NOT BEEN A SSAILED TO BE CONTRARY TO THE AIMS AND OBJECTS AND WE FIND THA T MOBILIZING RESOURCES TOWARDS ITS AIMS AND OBJECTS T HAT TOO WITHIN THE METHODS ENSHRINED BY THE TRUST DEED WHIC H ARE PLOUGHED BACK BY THE SOCIETY TOWARDS ITS AIMS & OBJ ECTS TO OUR MINDS DOES NOT CAUSE ANY GRIEVANCE TO THE REVEN UE. IT GOES WITHOUT SAYING THAT FINANCIAL SUPPORT FROM THE MINISTRY OF HEALTH AND FAMILY WELFARE TO THE ASSESSEE NECESSARI LY WOULD BE BASED ON THE FUNCTIONS PERFORMED BY THE SAID TRU ST AND WOULD NECESSARILY BE MONITORED AT EACH AND EVERY ST EP AND STAGE WITH ADEQUATE CHECKS AND BALANCES AND WOULD N OT BE ALLOWED TO BE FRITTERED AWAY CARELESSLY. ACCORDINGL Y 20 CONSIDERING THE JUDICIAL PRECEDENT CITED AND THE AR GUMENTS OF THE PARTIES BEFORE THE BENCH AND THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE WHICH WE HAVE BROUGHT OUT IN GREAT DETAIL IN THE EARLIER PART OF THIS ORDER, WE HOLD T HAT THE DEPARTMENTAL GROUNDS HAVE NO MERIT AND DESERVE TO B E DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. 7.5 WE FURTHER NOTE THAT THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. ANDHRA CHAMBER OF COMMERCE, 55 ITR 722 HAS OBSE RVED AS UNDER:- 10. THE PRINCIPAL OBJECTS OF THE ASSESSEE ARE TO PR OMOTE AND PROTECT TRADE, COMMERCE AND INDUSTRIES AND TO A ID, STIMULATE AND PROMOTE THE DEVELOPMENT OF TRADE, COM MERCE AND INDUSTRIES IN INDIA OR ANY PART THEREOF. BY THE ACHIEVEMENT OF THESE OBJECTS, IT IS NOT INTENDED TO SERVE MERELY THE INTERESTS OF THE MEMBERS OF THE ASSESSEE . ADVANCEMENT OR PROMOTION OF TRADE, COMMERCE AND IND USTRY LEADING TO ECONOMIC PROSPERITY ENSURES FOR THE BENE FIT OF THE ENTIRE COMMUNITY. THAT PROSPERITY WOULD BE SHARED A LSO BY THOSE WHO ENGAGE IN TRADE, COMMERCE AND INDUSTRY BU T ON THAT ACCOUNT THE PURPOSE IS NOT RENDERED ANY THE LE SS AN OBJECT OF GENERAL PUBLIC UTILITY. IT MAY BE REMEMBE RED THAT PROMOTION AND PROTECTION OF TRADE, COMMERCE AND IND USTRY CANNOT BE EQUATED WITH PROMOTION AND PROTECTION OF ACTIVITIES AND INTERESTS MERELY OF PERSONS ENGAGED IN TRADE, C OMMERCE AND INDUSTRY. .. 11. IN THE PROMOTION OF TRADE, COMMERCE AND INDUSTR IES OF INDIA THE PUBLIC IS VITALLY INTERESTED AND IF BY TH E ACTIVITIES OF THE ASSESSEE THAT OBJECT IS ACHIEVED, IT WOULD BE W ITHIN THE MEANING OF SECTION 4(3)(I) OF THE ACT AN ADVANCEMEN T OF AN 21 OBJECT OF GENERAL PUBLIC UTILITY. IN ENACTING THE L AST PARAGRAPH OF SECTION 4(3) THE LEGISLATURE HAS USED LANGUAGE O F GREAT AMPLITUDE. CHARITABLE PURPOSE INCLUDES NOT ONLY R ELIEF OF THE POOR, EDUCATION AND MEDICAL RELIEF ALONE, BUT ADVAN CEMENT OF OTHER OBJECTS OF GENERAL PUBLIC UTILITY AS WELL. TH E CLAUSE IS INTENDED TO SERVE AS A SPECIAL DEFINITION OF THE EX PRESSION CHARITABLE PURPOSE FOR THE ACT: IT IS AGAIN INCLU SIVE AND NOT EXHAUSTIVE OR EXCLUSIVE. EVEN IF THE OBJECT OR PURP OSE MAY NOT BE REGARDED AS CHARITABLE IN ITS POPULAR SIGNIFICAT ION AS NOT TENDING TO GIVE RELIEF TO THE POOR OR FOR ADVANCEME NT OF EDUCATION OR MEDICAL RELIEF, IT WOULD STILL BE INCL UDED IN THE EXPRESSION CHARITABLE PURPOSE IF IT ADVANCES AN O BJECT OF GENERAL PUBLIC UTILITY. THE EXPRESSION OBJECT OF G ENERAL PUBLIC UTILITY HOWEVER IS NOT RESTRICTED TO OBJECTS BENEF ICIAL TO THE WHOLE MANKIND. AN OBJECT BENEFICIAL TO A SECTION OF THE PUBLIC IS AN OBJECT OF GENERAL PUBLIC UTILITY. TO SERVE A CHARITABLE PURPOSE, IT IS NOT NECESSARY THAT THE OBJECT SHOULD BE TO BENEFIT THE WHOLE OF MANKIND OR EVEN ALL PERSONS LI VING IN A PARTICULAR COUNTRY OR PROVINCE. IT IS SUFFICIENT IF THE INTENTION TO THE BENEFIT A SECTION OF THE PUBLIC AS DISTINGUISHE D FROM SPECIFIED INDIVIDUALS. OBSERVATIONS TO THE CONTRARY MADE BY BEAUMONT, C.J., IN CIT V. GRAIN MERCHANTS' ASSOCIAT ION OF BOMBAY [ 6 ITR 427] THAT AN OBJECT OF GENERAL PUBL IC UTILITY MEANS AN OBJECT OF PUBLIC UTILITY WHICH IS AVAILABL E TO THE GENERAL PUBLIC AS DISTINCT FROM ANY SECTION OF THE PUBLIC AND THAT OBJECTS OF AN ASSOCIATION TO BENEFIT WORKS OF PUBLIC UTILITY CONFINED TO A SECTION OF THE PUBLIC I.E. THOSE INTE RESTED IN COMMERCE ARE NOT OBJECTS OF GENERAL PUBLIC UTILITY , DO NOT CORRECTLY INTERPRET THE EXPRESSION OBJECTS OF GENE RAL PUBLIC UTILITY. THE SECTION OF THE COMMUNITY SOUGHT TO BE BENEFITED MUST UNDOUBTEDLY BE SUFFICIENTLY DEFINED AND IDENTI FIABLE BY SOME COMMON QUALITY OF A PUBLIC OR IMPERSONAL NATUR E: WHERE 22 THERE IS NO COMMON QUALITY UNITING THE POTENTIAL BE NEFICIARIES INTO A CLASS, IT MAY NOT BE REGARDED AS VALID. 7.6 WE FURTHER FIND CONSIDERABLE COGENCY IN THE ASS ESSEES COUNSEL SUBMISSIONS THAT THE JUDGMENT RELIED UPON BY THE AO OF THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF ANDHRA PRA DESH STATE SEED CERTIFICATION AGENCY DATED 29.12.2012 CANNOT BE REL IED UPON AS THE HONBLE JURISDICTIONAL HIGH COURT IN ITPO CASE (SUP RA) DISAGREED WITH THE VIEW TAKEN IN THE AFORESAID JUDGMENT. 7.7 WE ALSO AGREE WITH THE SUBMISSIONS MADE BY THE LD. COUNSEL OF THE ASSESSEE THAT MERE CHARGING OF FEE FROM MEMBERS OR NON-MEMBERS FOR RENDERING SERVICES LIKE TRAINING, CONDUCTING SEMINA RS WOULD NOT IPSO FACTO LEAD TO DENIAL OF EXEMPTION. THE DOMINANT OBJECT O F THE ASSESSEE REMAINS CHARITABLE AND THE AFORESAID ACTIVITIES ARE ONLY INCIDENTAL TO THE MAIN ACTIVITY OF THE ASSESSEE. ALSO , THE ACTIVITIE S OF THE ASSESSEE ARE BENEFITING THE PUBLIC AT LARGE AT SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE. FURTHERMORE, IT IS NOT THE CASE OF THE DE PARTMENT THAT ANY CHANGE IN OBJECTS HAD TAKEN PLACE IN THE RELEVANT Y EAR SO AS TO TAKE THE ASSESSEE OUTSIDE THE AMBIT OF SECTION 2(15). THE EF FECT OF THE AMENDMENT HAS BEEN DISCUSSED ELABORATELY BY THE HONBLE DELHI HIGH COURT IN ITPO CASE (SUPRA) AS WELL AS THE JUDGMENT OF APEX COURT IN ANDHRA PRADESH CHAMBER OF COMMERCE(SUPRA) AND THE TEST OF DOMINANT OBJECT HAS NOT BEEN ALTERED EVEN AFTER THE SAID AMENDMENT. WE THER EFORE HOLD THAT THE DENIAL OF EXEMPTION UNDER SECTION 11 AND 12 IN THE CASE OF THE ASSESSEE 23 IS NOT IN ACCORDANCE WITH LAW AND ACCORDINGLY THE A DDITIONS MADE BY THE AO AND CONFIRMED BY THE CIT(A) ARE DELETED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27/03/2017. SD/- SD/- [L.P. SAHU] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 27/03/2017 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES