Appeal Details
Counselvise Citation
[2019] 118 COUNSELVISE.COM (IT) 4493 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
3 year(s) 11 month(s) 2 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
14-02-2019
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Assessment Year
2010-2011
Appeal Filed On
12-03-2015
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI R.K.PANDA, ACCOUNTANT MEMBER & SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.- 1449/DEL/2013, (A.Y. 2009-10) 1448/DEL/2015 (A. Y.: 2010-11) ALL INDIA FINE ARTS & CRAFTS SOCIETY 1-RAFI MARG NEW DELHI PAN : AAATA7840E VS . ADIT (E) INV. CIRCLE-1, 24 TH FLOOR, CIVIC CENTRE, MINTO ROAD NEW DELHI APPELLANT RESPONDENT ASSESSEE BY: MS. SOUMYA SINGH, ADV. REVENUE BY: SHRI RAGHUNATH, SR.DR ORDER PER SUDHANSHU SRIVASTAVA, J.M.: ITA NO. 1449/DEL/2013 IS PREFERRED BY THE ASSESSEE AGAINST ORDER DATED 24.12.2012 PASSED BY THE LD. CIT (APPEA LS)-21, NEW DELHI FOR ASSESSMENT YEAR 2009-10. ITA NO. 1448/DEL /2015 IS ASSESSEES APPEAL AGAINST ORDER DATED 05.01.2014 PA SSED BY THE LD. CIT (APPEALS)-40, NEW DELHI FOR ASSESSMENT YEAR 2010-11. BOTH THE APPEALS WERE HEARD TOGETHER AS THE ISSUES INVOL VED WERE IDENTICAL AND THEY ARE BEING DISPOSED OF THROUGH TH IS COMMON ORDER FOR THE SAKE OF CONVENIENCE. DATE OF HEARING 17.01.2019 DATE OF PRONOUNCEMENT 14.02.2019 2 ITA NO. 1448/DEL/2015 & 1449/DEL/2013 (ALL INDIA FINE ARTS & CRAFTS SOCIETY) 2.0 BRIEF FACTS OF THE CASE FOR ASSESSMENT YEAR 200 9-10 ARE THAT THE ASSESSEE SOCIETY IS A REGISTERED SOCIETY CARRYI NG ON VARIOUS ACTIVITIES LIKE ORGANIZING CAMPS FOR SENIOR AND JU NIOR ARTISTS IN PAINTING, SCULPTURE, GRAPHICS AND DRAWING, GIVING A WARDS TO ARTISTS FOR THEIR PERFORMANCE/S, ORGANIZING EXHIBITIONS ON ALL INDIA BASIS IN THE FIELD OF PAINTING, DRAWING, SCULPTURE AND GRAPH ICS AND GIVING AWARDS TO DESERVING PARTICIPANTS, PUBLICATION OF MA GAZINES AND BOOKLETS AND PROVIDING ASSISTANCE TO AGED ARTISTS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED D ECLARING INCOME AT RS. NIL. THE CASE WAS SELECTED FOR SCRUTINY AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO REQUIRED THE ASSES SEE SOCIETY TO EXPLAIN ITS NATURE OF ACTIVITIES AND ALSO TO DESCRI BE THE METHOD OF EARNING THE DIFFERENT KINDS OF INCOME EARNED BY IT. THEREAFTER, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE AO REQUIRED THE ASSESSEE TO FURTHER EXPLAIN AS TO WHY THE BENEFIT U /S 11 AND 12 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO A S THE ACT) SHOULD BE ALLOWED TO THE ASSESSEE IN VIEW OF THE AM ENDED SECTION 2(15) OF THE ACT INTRODUCED WITH EFFECT FROM 01.04. 2009 RELEVANT A.Y. 2009-10 AS THE ACTIVITIES OF THE SOCIETY FELL IN THE CATEGORY ADVANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTILITY AND FURTHER AS THE INCOME FROM ART GALLERY AND SALE OF PAINTINGS, CONSIDERED TO BE BUSINESS INCOME, EXCEEDED RS. 10,00,000/-. THEREAFT ER, AFTER 3 ITA NO. 1448/DEL/2015 & 1449/DEL/2013 (ALL INDIA FINE ARTS & CRAFTS SOCIETY) CONSIDERING THE RESPONSE OF THE ASSESSEE, THE AO PR OCEEDED TO HOLD THAT THE ACTIVITY OF THE ASSESSEE FELL WITHIN OBJE CT OF GENERAL PUBLIC UTILITY AND WAS, THEREFORE, HIT BY THE TWO PROVISO S TO SECTION 2(15) OF THE ACT. THE AO NOTED THAT THE SOCIETY HAD RECOV ERED MAINTENANCE CHARGES OF RS. 14,08,110/- FROM THE VAR IOUS ARTISTS AND HAD ALSO EARNED RS. 20,00,000/- FROM SALE OF AR T OBJECTS. ACCORDINGLY, THE AO PROCEEDED TO DISALLOW THE ASSES SEES CLAIM OF EXEMPTION U/S 11 AND 12 OF THE ACT AND BROUGHT TO T AX THE ENTIRE EXCESS OF INCOME OVER EXPENDITURE AMOUNTING TO RS. 4,67,37,354/- AND AFTER DISALLOWING DEPRECIATION ON THE GROUND TH AT DOUBLE DEDUCTION COULD NOT BE ALLOWED ADDED BACK ANOTHER A MOUNT TO RS. 14,87,114/-. THE ASSESSMENT WAS COMPLETED AT AN IN COME OF RS. 4,82,24,468/-. 2.1 THE ASSESSEES APPEAL BEFORE THE LD. CIT (APPEA LS) WAS ALSO DISMISSED VIDE ORDER DATED 24.12.2012 AND NOW THE A SSESSEE IS IN APPEAL BEFORE THE ITAT AND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE CIT(A) HAS, IN VIEW OF THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW, GROSSLY ERRED IN UPHOLDING THE ORDER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 BY THE LD. A.O. 2. THE CIT(A) HAS, IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, GROSSLY ERRED IN 4 ITA NO. 1448/DEL/2015 & 1449/DEL/2013 (ALL INDIA FINE ARTS & CRAFTS SOCIETY) UPHOLDING THE ACTION OF THE AO IN TREATING THE SOCI ETY AS ENGAGED INTO THE ACTIVITY IN NATURE OF TRADE, COMME RCE AND BUSINESS. 3. THE CIT(A) HAS, IN VIEW OF THE FACTS AND CIRCUMS TANCES OF THE CASE AND IN LAW, GROSSLY ERRED IN UPHOLDING THE ACTION OF THE AO IN TREATING THE SALE OF PAINTINGS AS ACTIVITY IN NATURE OF TRADE, COMMERCE AND BUSINESS. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. AO AND CIT(A) HAS ERRED IN TERMING NATURE OF BUSINE SS AS RUNNING OF ART GALLERIES AND THE ACTIVITIES OF THE SOCIETY AS ACTIVITIES FALLING IN THE NATURE OF TRADE, COMMERCE AND BUSINESS. 5. THAT THE CIT(A) AND LD. AO HAS ERRED IN LAW AND ON FACTS IN WITHDRAWING THE BENEFITS OF SECTION 11 AND 12 AND IN MAKING AN ADDITION OF RS. 4,67,37,354/- WHICH IS EXCESS OF INCOME OVER EXPENDITURE AS PER INCOME & EXPENDITURE A/C AND ASSESSING THE INCOME OF THE ASS ESSEE ON MAXIMUM MARGINAL RATE OF TAXATION. THE GROUNDS G IVEN IN THE ORDER BY THE ASSESSING OFFICER ARE VAGUE, AR BITRARY AND UNRELATED TO THE ACTIVITIES CARRIED ON BY THE A PPELLANT. 6. THAT THE LD. AO AND CIT(A) HAS ERRED IN NOT RECO GNIZING THE FACT THE SOCIETY IS A CHARITABLE SOCIETY AND RE GISTERED UNDER SECTION 12A OF THE ACT AND THUS ELIGIBLE TO EXEMPTIONS UNDER SECTION 11 AND 12. 7. THAT THE EXPLANATIONS FILED AND THE MATERIALS AVAILABLE ON RECORDS HAVE NOT BEEN PROPERLY CONSIDE RED AND LEGALLY INTERPRETED. THE ADDITION MADE CANNOT B E JUSTIFIED WITH THE MATERIAL ON RECORD. SUCH ACTION OF 5 ITA NO. 1448/DEL/2015 & 1449/DEL/2013 (ALL INDIA FINE ARTS & CRAFTS SOCIETY) ASSESSING AUTHORITY IS IN VIOLATION OF RULES OF NAT URAL JUSTICE. 8. THAT THE INTEREST U/S 234B HAS BEEN WRONGLY AND ILLEGALLY CHARGED AND THE APPELLANT DENIES ITS LIAB ILITY OF INTEREST TO BE CHARGED UNDER SAID SECTIONS. 9. THAT THE ASSESSING AUTHORITY HAS ERRED IN NOT GI VING THE CREDIT OF TAX PAID OR TAX DEDUCTED AT SOURCE AND CL AIMED BY THE ASSESSEE AS REFUND. 2.2 IN ASSESSMENT YEAR 2010-11 (ITA NO. 1448/DEL/20 15), THE RETURN WAS FILED DECLARING AN INCOME OF RS. 1,01,29 ,716/- AND IN THIS YEAR ALSO THE CASE WAS SELECTED FOR SCRUTINY. IN THIS YEAR ALSO THE AO WAS OF THE VIEW THAT THE ASSESSEE WAS HIT BY THE PROVISO TO SECTION 2(15) OF THE ACT AS THE ASSESSEE WAS CARRYI NG OUT ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY. IN THIS YEAR THE ASSESSMENT WAS COMPLETED AT AN INCOME OF R S. 19,99,86,200/- AFTER DENYING THE ASSESSEE THE CLAIM OF EXEMPTION U/S 11 AND 12 OF THE ACT AND BY TAXING THE ENTIRE E XCESS OF INCOME OVER EXPENDITURE AMOUNTING TO RS. 18,60,216/- AND A FTER MAKING A DISALLOWANCE OF DEPRECIATION AMOUNTING TO RS. 13,84 ,030/- AGAIN ON THE GROUND THAT DEPRECIATION AS WELL AS PURCHASE OF CAPITAL ASSETS AS APPLICATION OF INCOME WOULD AMOUNT TO DOU BLE BENEFIT BEING GIVEN TO THE ASSESSEE. THE ASSESSEES APPEAL IN THIS YEAR WAS ALSO DISMISSED BY THE LD. CIT (APPEALS) BY HOLDING THAT THERE WAS 6 ITA NO. 1448/DEL/2015 & 1449/DEL/2013 (ALL INDIA FINE ARTS & CRAFTS SOCIETY) NO MERIT IN THE SUBMISSIONS OF THE ASSESSEE FOR CLA IMING EXEMPTION U/S 11(1) OF THE ACT. 2.3 THE ASSESSEE IS NOW BEFORE THE ITAT AGAINST THI S ORDER DATED 05.10.2014 AND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. THE LD. CIT (A) HAS, IN VIEW OF THE FACTS & CIRCUMS TANCES OF THE CASE AND IN LAW, GROSSLY ERRED IN UPHOLDING THE ORDER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 BY THE LD. AO. 2. THE LD. CIT (A) HAS, IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, GROSSLY ERRED IN UPHOLDING THE ACTION OF THE LD. AO IN TREATING THE SOCIETY AS ENGAGED INTO THE ACTIVITY IN NATURE OF TRADE, COMME RCE AND BUSINESS. 3. THE LD. CIT (A) HAS, IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, GROSSLY ERRED IN UPHOLDING THE ACTION OF THE LD. AO IN TREATING THE SALE OF PAINTINGS AND MAINTENANCE CHARGES BY PROVIDING THE GALLERIES ON HIRE AS ACTIVITIES IN NATURE OF TRADE, COMMERCE AND BUSINESS. 4. THAT THE LD. CIT (A) AND LD. AO HAS ERRED IN DENYIN G THE EXEMPTION U/S 11/12 TO THE APPELLANT ERRONEOUSLY HO LDING THAT (I) THE RECEIPTS FROM RENTING OF GALLARY AND S ALE OF PAINTINGS ARE IN THE NATURE OF BUSINESS (II) THE RE CEIPTS FROM THE ABOVE ACTIVITIES EXCEEDS RS. 10 LACS BEING THE STATUTORY THRESHOLD LIMIT PRESCRIBED IN THE SECOND PROVISO TO SECTION 2(15) FOR THE PURPOSES OF DENIAL OF THE EXEMPTION. 7 ITA NO. 1448/DEL/2015 & 1449/DEL/2013 (ALL INDIA FINE ARTS & CRAFTS SOCIETY) 5. THAT THE LD. CIT (A) HAS IN VIEW OF THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW, GROSSLY ERRED IN UPHOLDING THE RENTAL INCOME, FDR INTEREST AND BANK INTEREST AS ACTIVITY OF ACTIVITY OF THE SOCIETY FAL LING IN THE NATURE OF TRADE, COMMERCE & BUSINESS WITHOUT GIVING ANY REASONABLE OPPORTUNITY OF BEING HEARD AND WITHOUT CONFRONTING THE SAME WHEREAS THE LD. AO NEVER DISPU TED THE SAME 6. THAT THE LD. CIT (A) AND LD. AO HAS ERRED IN LAW AN D ON FACTS IN WITHDRAWING THE BENEFITS OF SECTION 11 AND 12 AND IN MAKING AN ADDITION OF RS. 1,86,02,167/- WHICH IS EXCESS OF INCOME OVER EXPENDITURE AS PER INCOME & EXPENDIT URE A/C AND ASSESSING THE INCOME OF THE ASSESSEE ON MAX IMUM MARGINAL RATE OF TAXATION. THE GROUNDS GIVEN IN THE ORDER BY THE ASSESSING OFFICER ARE VAGUE, ARTBITRARY AND UNR ELATED TO THE ACTIVITIES CARRIED ON BY THE APPELLANT. 7. THAT THE LD. AO AND LD. CIT (A) HAS ERRED IN NOT RECOGNIZING THE FACT THE SOCIETY IS A CHARITABLE SO CIETY AND REGISTERED UNDER SECTION 12AA OF THE ACT AND THUS E LIGIBLE TO EXEMPTIONS UNDER SECTION 11 & 12. 8. THAT THE EXPLANATIONS FILED AND THE MATERIALS AVAI LABLE ON RECORDS HAVE NOT BEEN PROPERLY CONSIDERED AND LEGAL LY INTERPRETED. THE ADDITION MADE CANNOT BE JUSTIFIED WITH THE MATERIAL ON RECORD. SUCH ACTION OF ASSESSING AUTHOR ITY IS IN VIOLATION OF RULES OF NATURAL JUSTICE. 9. THAT THE APPELLANT CRAVES YOUR HONORS LEAVE TO ADD , ALTER, MODIFY, CHANGE, SUBSTITUTE, WITHDRAW ANY OF THE GRO UNDS OF 8 ITA NO. 1448/DEL/2015 & 1449/DEL/2013 (ALL INDIA FINE ARTS & CRAFTS SOCIETY) APPEAL AT ANY STAGE OF APPELLANT PROCEEDINGS. 3.0 THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THA T THE ASSESSEES CASE WAS COVERED IN ITS FAVOUR BY THE JU DGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF INDIA TRADE PROMOTION ORGANISATION VS. DGIT (EXEMPTIONS) REPORTED IN (201 5) 371 ITR 333 (DELHI) WHEREIN THE HONBLE DELHI HIGH COURT HAS RE AD DOWN THE PROVISION OF SECTION 2(15) AND HAS RULED THAT MEREL Y BECAUSE A FEE OR SOME OTHER CONSIDERATION IS COLLECTED OR RECEIVE D BY AN INSTITUTION, IT WOULD NOT LOSE ITS CHARACTER OF HAV ING BEEN ESTABLISHED FOR A CHARITABLE PURPOSE. RELIANCE WAS ALSO PLACED ON ORDER OF ITAT DELHI BENCH IN THE CASE OF ITO (E) VS . THE INDIAN GOLF UNION IN ITA NO. 2653/DEL/2015 WHEREIN VIDE OR DER DATED 04.07.2018 THE ITAT DELHI BENCH HAD ALSO TAKEN SIMI LAR VIEW BY FOLLOWING THE JUDGMENT OF THE HONBLE DELHI HIGH CO URT IN THE CASE OF INDIA TRADE PROMOTION ORGANISATION VS. DGIT (E) (SUPRA). THE LD. AUTHORISED REPRESENTATIVE FURTHER SUBMITTED THAT TH ERE WAS NO PROFIT MOTIVE BEHIND THE ACTIVITIES BEING CARRIED O UT BY THE ASSESSEE SOCIETY AND THE PRE-DOMINANT PURPOSE REMAINED CHARI TABLE AND JUST BECAUSE THE ASSESSEE SOCIETY HAD CHARGED FEES FOR RENT AND MAINTENANCE WHILE LETTING OUT THE ART GALLERIES AND HAD ALSO EARNED INCOME FROM SALE OF PAINTINGS, IT COULD NOT BE SAID THAT THE ENTIRE 9 ITA NO. 1448/DEL/2015 & 1449/DEL/2013 (ALL INDIA FINE ARTS & CRAFTS SOCIETY) ACTIVITY HAD BECOME COMMERCIAL IN NATURE. 3.1 THE LD. AUTHORISED REPRESENTATIVE FURTHER SUBMI TTED THAT THE ISSUE IN ASSESSMENT YEAR 2010-11 WAS ALSO IDENTICAL AND THE ARGUMENTS WOULD BE THE SAME FOR THAT YEAR ALSO AND THE SAME WERE NOT BEING REPEATED FOR THE SAKE OF BREVITY. 4.0 IN RESPONSE, THE LD. SR. DEPARTMENTAL REPRESENT ATIVE PLACED RELIANCE ON THE CONCURRENT FINDINGS OF BOTH THE LOW ER AUTHORITIES AND VEHEMENTLY ARGUED THAT THE NATURE OF ACTIVITIES IS COMMERCIAL INASMUCH AS THE ASSESSEE WAS SELLING PAINTINGS, LET TING OUT PROPERTY AND WAS ENJOYING HUGE SURPLUS FROM THE VAR IOUS ACTIVITIES BEING CARRIED OUT BY IT. THE LD. SR. DR SUBMITTED T HAT IT WAS APPARENT THAT THE MOTIVE OF THE ASSESSEE SOCIETY WA S TO EARN PROFITS AND, THEREFORE, THE ASSESSEES CLAIM OF EXEMPTION U /S 11(1) HAD RIGHTLY BEEN DENIED. 5.0 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE AL SO PERUSED THE MATERIAL ON RECORD. WE AGREE WITH THE AVERMENT OF THE LD. AUTHORISED REPRESENTATIVE THAT THE ASSESSEES CASE IS FAVOURABLY COVERED FOR THE ASSESSEE BY THE RATIO OF THE JUDGME NT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF INDIA TRADE PROMOTI ON ORGANISATION VS. DGIT (E) (SUPRA), WHEREIN VIDE JUDGMENT DATED 2 2.01.2015, THE HONBLE DELHI HIGH COURT, WHILE UPHOLDING THE CONST ITUTIONAL VALIDITY OF PROVISO TO SECTION 2(15) OF THE ACT, HA S LAID DOWN THE 10 ITA NO. 1448/DEL/2015 & 1449/DEL/2013 (ALL INDIA FINE ARTS & CRAFTS SOCIETY) STRICT AND LITERAL INTERPRETATION OF THE PROVISO T O SECTION 2(15) OF THE ACT. THE HONBLE DELHI HIGH COURT HAS HELD THAT MERE RECEIPT OF FEE OR CHARGE WILL NOT MEAN THAT THE ASSESSEE IS IN VOLVED IN ANY TRADE, COMMERCE OR BUSINESS. IN THE CASE OF INDIA T RADE PROMOTION ORGANISATION, THE LD. DGIT (E) HAD PASSED AN ORDER STATING THAT THOUGH THE ASSESSEE WAS ENGAGED IN THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY, AS PER S. 2(15) OF THE ACT, ITS OBJECT COULD NOT BE REGARDED AS CHARITABLE PURPOSES DUE TO THE NEW PROVISO TO S. 2(15) AND FURTHER THAT IT WAS NOT ELI GIBLE FOR EXEMPTION U/S 10(23C)(IV). IT WAS HELD BY THE LD. DGIT (E) TH AT AS THE ASSESSEE HAD HUGE SURPLUSES IN BANKS, IT HAD GIVEN ITS SPACE FOR RENT DURING TRADE FAIRS AND EXHIBITIONS, IT HAD REC EIVED INCOME BY WAY OF SALE OF TICKETS AND INCOME FROM FOOD AND BEV ERAGE OUTLETS IN PRAGATI MAIDAN, ETC, THE ASSESSEE WAS RENDERING SER VICE TO A LARGE NUMBER OF TRADERS AND INDUSTRIALISTS IN RELATION TO TRADE, COMMERCE AND BUSINESS AND WAS, THEREFORE, HIT BY THE EXPANDE D LIST OF ACTIVITIES CONTAINED IN THE PROVISO TO SECTION 2(15 ). IT WAS FURTHER OBSERVED BY THE LD. DGIT (E) THAT THE SERVICE OF AL LOTTING SPACE AND OTHER AMENITIES LIKE WATER, ELECTRICITY AND SECURIT Y, ETC. TO THE TRADERS TO CONDUCT THEIR EXHIBITIONS FELL WITHIN TH E AMBIT OF ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO TR ADE, COMMERCE OR BUSINESS. THE ASSESSEE FILED A WRIT PETITION BEFORE THE HONBLE DELHI 11 ITA NO. 1448/DEL/2015 & 1449/DEL/2013 (ALL INDIA FINE ARTS & CRAFTS SOCIETY) HIGH COURT CLAIMING THAT THE FIRST PROVISO TO SECTI ON 2(15), AS AMENDED BY THE FINANCE ACT, 2008, WAS ARBITRARY AND UNREASONABLE AND VIOLATIVE OF ARTICLE 14 OF THE CON STITUTION OF INDIA. THE HONBLE DELHI HIGH COURT HELD IN THE FAV OUR OF THE ASSESSEE. THE RELEVANT OBSERVATIONS OF THE HONBLE HIGH COURT ARE AS UNDER: (I) IT IS APPARENT THAT MERELY BECAUSE A FEE OR SOM E OTHER CONSIDERATION IS COLLECTED OR RECEIVED BY AN INSTIT UTION, IT WOULD NOT LOSE ITS CHARACTER OF HAVING BEEN ESTABLI SHED FOR A CHARITABLE PURPOSE. IT IS ALSO IMPORTANT TO NOTE AS TO WHAT IS THE DOMINANT ACTIVITY OF THE INSTITUTION IN QUESTIO N. IF THE DOMINANT ACTIVITY OF THE INSTITUTION WAS NOT BUSINE SS, TRADE OR COMMERCE, THEN ANY SUCH INCIDENTAL OR ANCILLARY ACTIVITY WOULD ALSO NOT FALL WITHIN THE CATEGORIES OF TRADE, COMMERCE OR BUSINESS. IT IS CLEAR FROM THE FACTS OF THE PRES ENT CASE THAT THE DRIVING FORCE IS NOT THE DESIRE TO EARN PR OFITS BUT, THE OBJECT OF PROMOTING TRADE AND COMMERCE NOT FOR ITSE LF, BUT FOR THE NATION BOTH WITHIN INDIA AND OUTSIDE INDIA. C LEARLY, THIS IS A CHARITABLE PURPOSE, WHICH HAS AS ITS MOTI VE THE ADVANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTILITY TO WHICH THE EXCEPTION CARVED OUT IN THE FIRST PROVISO TO SE CTION 2(15) OF THE SAID ACT WOULD NOT APPLY; (II) IF A LITERAL INTERPRETATION WERE TO BE GIVEN T O THE SAID PROVISO, THEN IT WOULD RISK BEING HIT BY ARTICLE 14 (THE EQUALITY CLAUSE ENSHRINED IN ARTICLE 14 OF THE CONS TITUTION). IT IS WELL SETTLED THAT THE COURTS SHOULD ALWAYS EN DEAVOUR TO UPHOLD THE CONSTITUTIONAL VALIDITY OF A PROVISION, AND IN 12 ITA NO. 1448/DEL/2015 & 1449/DEL/2013 (ALL INDIA FINE ARTS & CRAFTS SOCIETY) DOING SO, THE PROVISION IN QUESTION MAY HAVE TO BE READ DOWN; (III) SECTION 2(15) IS ONLY A DEFINITION CLAUSE. T HE EXPRESSION CHARITABLE PURPOSE APPEARING IN SECTION 2 (15) OF THE SAID ACT HAS TO BE SEEN IN THE CONTEXT OF SECTION 10(23C )(IV). WHEN THE EXPRESSION CHARITABLE PURPOSE, AS DEFINE D IN SECTION 2(15) OF THE ACT, IS READ IN THE CONTEXT OF SECTION 10(23C)(IV) OF THE SAID ACT, WE WOULD HAVE TO GIVE UP THE STRICT AND LITERAL INTERPRETATION SOUGHT TO BE GIVE N TO THE EXPRESSION CHARITABLE PURPOSE BY THE REVENUE. IN CONCLUSION, WE MAY SAY THAT THE EXPRESSION 'CHAR ITABLE PURPOSE', AS DEFINED IN SECTION 2(15) CANNOT BE CON STRUED LITERALLY AND IN ABSOLUTE TERMS. IT HAS TO TAKE COLOUR AND BE CONSIDERED IN THE CONT EXT OF SECTION 10(23C)(IV) OF THE SAID ACT. IT IS ALSO CLE AR THAT IF THE LITERAL INTERPRETATION IS GIVEN TO THE PROVISO TO S ECTION 2(15) OF THE SAID ACT, THEN THE PROVISO WOULD BE AT RISK OF RUNNING FOWL OF THE PRINCIPLE OF EQUALITY ENSHRINED IN ARTI CLE 14 OF THE CONSTITUTION INDIA. IN ORDER TO SAVE THE CONSTITUTI ONAL VALIDITY OF THE PROVISO, THE SAME WOULD HAVE TO BE READ DOWN AND INTERPRETED IN THE CONTEXT OF SECTION 10(2 3C)(IV) BECAUSE, IN OUR VIEW, THE CONTEXT REQUIRES SUCH AN INTERPRETATION. THE CORRECT INTERPRETATION OF THE P ROVISO TO SECTION 2(15) OF THE SAID ACT WOULD BE THAT IT CARV ES OUT AN EXCEPTION FROM THE CHARITABLE PURPOSE OF ADVANCEMEN T OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AND THAT EXCEPTION IS LIMITED TO ACTIVITIES 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 FOR A CESS OR FE E OR ANY 13 ITA NO. 1448/DEL/2015 & 1449/DEL/2013 (ALL INDIA FINE ARTS & CRAFTS SOCIETY) OTHER CONSIDERATION. IN BOTH THE ACTIVITIES, IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR THE ACTIVITY OF REND ERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSIN ESS, THE DOMINANT AND THE PRIME OBJECTIVE HAS TO BE SEEN. IF THE DOMINANT AND PRIME OBJECTIVE OF THE INSTITUTION, WH ICH CLAIMS TO HAVE BEEN ESTABLISHED FOR CHARITABLE PURP OSES, IS PROFIT MAKING, WHETHER ITS ACTIVITIES ARE DIRECTLY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR INDIRECTLY IN THE RENDERING OF ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, THEN IT WOULD NOT BE ENTITLED TO CLAIM ITS OBJECT TO BE A 'CHARITABLE PURPOSE'. ON THE FLIP SIDE, WHE RE AN INSTITUTION IS NOT DRIVEN PRIMARILY BY A DESIRE OR MOTIVE TO EARN PROFITS, BUT TO DO CHARITY THROUGH THE ADVANCE MENT OF AN OBJECT OF GENERAL PUBLIC UTILITY, IT CANNOT BUT BE REGARDED AS AN INSTITUTION ESTABLISHED FOR CHARITABLE PURPOS ES. THUS, WHILE WE UPHOLD THE CONSTITUTIONAL VALIDITY O F THE PROVISO TO SECTION 2(15) OF THE SAID ACT, IT HAS TO BE READ DOWN IN THE MANNER INDICATED BY US. 5.1 THUS, THE HONBLE DELHI HIGH COURT HAS HELD THA T MERELY BECAUSE A FEE OR SOME OTHER CONSIDERATION IS COLLEC TED OR RECEIVED BY AN INSTITUTION, IT WOULD NOT LOOSE ITS CHARACTER OF HAVING BEEN ESTABLISHED FOR A CHARITABLE PURPOSE. UNDISPUTEDLY, IN THE PRESENT CASE THE DOMINANT ACTIVITY OF THE ASSESSEE SOCIETY IS NOT BUSINESS TRADE OR COMMERCE BUT ITS ACTIVITIES ARE FOR THE PR OMOTION OF ART, CRAFT AND CULTURE FOR THE INDIAN ARTISTS IN INDIA. THE ASSESSING OFFICER HAS HIMSELF REPRODUCED THE MAIN OBJECTIVES OF THE ASSESSEE 14 ITA NO. 1448/DEL/2015 & 1449/DEL/2013 (ALL INDIA FINE ARTS & CRAFTS SOCIETY) SOCIETY AS PER THE MEMORANDUM OF ASSOCIATION IN HIS ASSESSMENT ORDER AND THEY ARE: (I) FOSTERING AND DEVELOPING FINE AND APPLIED ARTS IN INDIA TO PROMOTE APPRECIATION BY MEANS OF P UBLICATIONS, LECTURES, CONFERENCES, DEMONSTRATION, EXHIBITION ET C.;(II) ORGANIZING AND ESTABLISHING A NATIONAL ART GALLERY IN NEW DELHI; (III) ORGANIZING ART EXHIBITIONS AND SOCIETIES IN INDIA A ND ABROAD; (IV) ACTING AS CENTRAL ORGANIZATION OF ARTS AND CRAFTS I N INDIA ETC. IT IS ALSO UNDISPUTED THAT THE ASSESSEE SOCIETY HAS CARRI ED OUT ACTIVITIES IN THE FORM OF ANNUAL ART EXHIBITIONS, CAMPS FOR SE NIOR AND JUNIOR ARTISTS, PROVIDING MAINTENANCE TO AGED ARTISTS ETC. IT IS ALSO NOT THE DEPARTMENTS CASE THAT ANY PART OF SURPLUS WAS DIVE RTED FROM THE SOCIETY AND APPLIED FOR ANY PERSONAL BENEFIT OF ANY MEMBER OR OFFICE BEARER OF THE SOCIETY. THEREFORE, IT CAN BE SAFELY CONCLUDED THAT THE DOMINANT ACTIVITY OF THE ASSESSEE SOCIETY IS NOT BU SINESS, TRADE OR COMMERCE AND, ACCORDINGLY, ANY INCIDENTAL OR ANCIL LARY ACTIVITY LIKE HIRING OUT OF ART GALLERY OR SELLING PAINTINGS WOUL D NOT ALSO FALL WITHIN THE CATEGORIES OF TRADE, COMMERCE OR BUSINES S. 5.2 WE ALSO NOTE THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF INDIA TRADE PROMOTION ORGANISATION VS. DGIT (EXEMPT ION) (SUPRA) HAS ALSO DULY CONSIDERED CIRCULAR NO. 11 OF 2008 IS SUED BY THE CBDT AND HAS OBSERVED THAT THE PROVISO TO SECTION 2 (15) OF THE ACT, WHICH WAS INSERTED BY FINANCE ACT, 2008, WAS DIRECT ED TO PREVENT 15 ITA NO. 1448/DEL/2015 & 1449/DEL/2013 (ALL INDIA FINE ARTS & CRAFTS SOCIETY) THE UNHOLY PRACTICE OF PURE TRADE, COMMERCE AND BUS INESS ENTITIES FROM MASKING THEIR ACTIVITIES AND PORTRAYING THEM IN THE GARB OF AN ACTIVITY IN THE OBJECT OF A GENERAL PUBLIC UTILI TY BUT WAS NOT DESIGNED TO HIT AT THOSE INSTITUTIONS, WHICH HAD T HE ADVANCEMENT OF THE OBJECTS OF GENERAL PUBLIC UTILITY AT THEIR HEARTS AND WERE CHARITY INSTITUTIONS. 5.3 THEREFORE, AFTER DULY CONSIDERING THE OBJECTS O F THE ASSESSEE SOCIETY, THE SETTLED LEGAL POSITION WITH RESPECT TO INTERPRETATION OF PROVISO OF SECTION 2(15) OF THE ACT AND RESPECTFULL Y FOLLOWING THE RATIO OF THE JUDGMENT OF THE HONBLE DELHI HIGH COU RT IN THE CASE OF INDIA TRADE PROMOTION ORGANISATION VS. DGIT (EXEMPT ION) (SUPRA) WE ARE UNABLE TO CONCUR WITH THE OBSERVATIONS AND F INDINGS OF BOTH THE LOWER AUTHORITIES AND WHILE SETTING ASIDE THE O RDERS OF THE LD. CIT (APPEALS), WE DIRECT THE AO TO ALLOW THE ASSESS EE THE BENEFIT OF EXEMPTION U/S 11 & 12 OF THE ACT FOR ASSESSMENT YEA R 2009-10. 6.0 SINCE THE ISSUE IN ASSESSMENT YEAR 2010-11 IS IDENTICAL, THEREFORE, FOR THE SAME REASONING AS GIVEN BY US IN ASSESSEES APPEAL FOR ASSESSMENT YEAR 2009-10 WHILE ALLOWING T HE ASSESSEES APPEAL, WE ALLOW ASSESSEES APPEAL FOR ASSESSMENT Y EAR 2010-11 ALSO. IN THIS YEAR ALSO THE ORDER OF THE LD. CIT (A PPEALS) IS SET ASIDE AND THE AO IS DIRECTED TO ALLOW THE ASSESSEE THE BE NEFIT OF EXEMPTION U/S 11 & 12 OF THE ACT TO THE ASSESSEE. 16 ITA NO. 1448/DEL/2015 & 1449/DEL/2013 (ALL INDIA FINE ARTS & CRAFTS SOCIETY) 7.0 IN THE FINAL RESULT, BOTH THE APPEALS OF THE AS SESSEE STAND ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.02.2019. SD/- SD/- (R.K.PANDA) (SUDHANSHU SR IVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMB ER DATED: 14.02.2019 *BR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI 17 ITA NO. 1448/DEL/2015 & 1449/DEL/2013 (ALL INDIA FINE ARTS & CRAFTS SOCIETY) DATE OF DICTATION 12/02/2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 13/02.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER 13/02.2019 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS 14/02.2019 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 14/02.2019 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 14/02.2019 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 15/02.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER
Other Referred Cases
-
Laws Referred To
-
1:1 Consultation on Business Development
₹1
1:1 Consultation on Salary Structuring
₹1
Tax Holiday Secrets for Startups
₹0
CRM Implementation Plan
₹0
Assignment of Registered Trademark
Mehul₹500
Why Lacoste Won a 20-Year Trademark Battle Against Crocodile ?
Team Counselvise - March 10, 2026
Finance Bill, 2026: Key Direct Tax Amendments on Assessments and Appeals
Team Counselvise - February 06, 2026
Budget 2026: 5 Major Personal Tax Changes Every Taxpayer Must Know
Team Counselvise - February 05, 2026