Madras Chamber of Commerce and Industry, CHENNAI V. DIT, CHENNAI

ITA 1608/CHNY/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8040 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 11-01-2016
• Assessment Year: misc
• Appeal Filed On: 17-08-2012
• Court: TRIBUNAL
• Department Lawyers: PATHLAVATH PEERYA
• Assessee Lawyers: V S MANOJ; PUSHYA SITARAMAN SR C OUNSEL
• Section: 12AA; 12

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI . . . , . ! , ' # $ [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO.1608/MDS/2012 / ASSESSMENT YEAR : N.A MADRAS CHAMBER OF COMMERCE AND INDUSTRY KARUMUTHU CENTRE 1 ST FLOOR NO.498, ANNA SALAI, NANDANAM CHENNAI 600 035 VS. THE DIRECTOR OF INCOME - TAX(EXEMPTIONS) CHENNAI [PAN AAAAT 0095 R] ( %& / APPELLANT) ( '(%& /RESPONDENT) / APPELLANT BY : SMT. PUSHYA SITARAMAN, SR. C OUNSEL & SHRI V.S. MANOJ, ADVOCATE /RESPONDENT BY : SHRI PATHLAVATH PEERYA, CIT / DATE OF HEARING : 11 - 01 - 2016 ! / DATE OF PRONOUNCEMENT : 25 - 0 2 - 2016 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE DIRECTOR OF INCOME-TAX (EXEMPTIONS), CHENNAI, DATED 7.12.2011 CANCELLING THE REGISTRATION GRANTED U/S 12AA OF TH E INCOME-TAX ACT, 1961. 2. THERE WAS A DELAY OF 189 DAYS IN FILING THE APPEAL BY THE ASSESSEE. THE ASSESSEE HAS FILED A PETITION FOR C ONDONATION OF DELAY. ITA NO. 1608/12 :- 2 -: WE HAVE HEARD THE SR. COUNSEL FOR THE ASSESSEE AND THE LD. DEPARTMENTAL REPRESENTATIVE. WE FIND THAT THERE WA S SUFFICIENT CAUSE FOR NOT FILING THE APPEAL WITHIN THE STIPULATED TIM E. THEREFORE, WE CONDONE THE DELAY AND ADMIT THE APPEAL. 3. SMT. PUSHYA SITARAMAN, LD. SR. COUNSEL FOR THE ASS ESSEE SUBMITTED THAT THE ASSESSEE-TRUST WAS GRANTED REGI STRATION U/S 12AA OF THE ACT BY AN ORDER DATED 22.5.1992. THE OBJECT OF THE TRUST IS TO BRING TOGETHER WITHIN ITS FOLD PERSONS, FIRMS, LIMI TED COMPANIES AND ORGANIZATIONS ETC. WHO ARE ENGAGED IN TRADE AND COM MERCE WITH A VIEW TO CO-ORDINATE THEIR EFFORTS TO IMPROVE THEIR BUSINESS INTERESTS AND TO ESTABLISH CLOSE CONTACTS AMONG THEMSELVES. IN THE COURSE OF THE ACTIVITY CARRIED ON BY THE ASSESSEE-TRUST, IT HAS RECEIVED FEE FOR CERTIFICATE OF ORIGIN, INCOME FROM CONDUCTING SEMIN ARS ETC. THE DIT(E) FOUND THAT THE ACTIVITY OF THE ASSESSEE IS GENERAL PUBLIC UTILITY IN NATURE AND THE ASSESSEE IS RECEIVING COMMERCIAL RECEIPTS FOR PROVIDING SERVICE TO A PARTICULAR SECTION OF THE TR ADE. THE DIT(E) HAS ALSO FOUND THAT THE THRESHOLD LIMIT FOR THE ASSESSM ENT YEAR 2009-10 IS ` 10 LAKHS. SINCE THE ASSESSEE HAS RECEIVED MORE T HAN ` 10 LAKHS, ACCORDING TO THE DIT(E), THE ACTIVITY OF THE ASSES SEE CANNOT BE CHARITABLE IN NATURE. ONCE THE ACTIVITY IS NOT CHA RITABLE IN NATURE, THE DIT(E) HELD THAT THE REGISTRATION CANNOT BE CONTINU ED. ACCORDING TO THE LD. SR. COUNSEL, THE ASSESSEE IS RECEIVING FEE FOR ISSUE OF CERTIFICATE ITA NO. 1608/12 :- 3 -: OF ORIGIN TO ITS MEMBERS AND NON-MEMBERS FOR THE GO ODS EXPORTED OUT OF INDIA. ACCORDING TO THE LD. SR. COUNSEL, ISSUE OF CERTIFICATE OF ORIGIN IS INCIDENTAL TO CARRYING ON THE CHARITABLE ACTIVI TY. THE MADRAS HIGH COURT WHILE CONSIDERING THE CASE OF THE ASSESSEE, FOUND THAT THE ISSUE OF CERTIFICATE OF ORIGIN IS INCIDENTAL TO THE MAIN ACTIVITY OF THE ASSESSEE. ONCE IT IS INCIDENTAL TO THE ACTIVITY, ACCORDING TO THE LD. SR. COUNSEL, THE ASSESSEE-TRUST IS ENTITLED FOR REGISTRATION U/S 12 AA OF THE ACT, AND THEREFORE, THE IMPUGNED ORDER OF CANCELLATION CANNO T STAND IN THE EYE OF LAW. 4. REFERRING TO THE AMOUNT OF RECEIPTS WHICH EXCEEDS ` 10 LAKHS FOR THE ASSESSMENT YEAR 2009-10, LD. SR. COUNSEL SU BMITTED THAT IF THE RECEIPTS EXCEEDS MORE THAN ` 10 LAKHS, AT THE BEST, THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS , MAY DENY EXEMPTION PROVIDED U/S 11 OF THE ACT. HOWEVER, IT WILL NOT ENTITLE THE DIT(E) TO CANCEL THE REGISTRATION GRANTED U/S 12AA OF THE ACT. THE LD. SR. COUNSEL PLACED HER RELIANCE ON THE UNREPORTED J UDGMENT OF THE DELHI HIGH COURT IN THE CASE OF INDIA TRADE PROMOTI ON ORGANIZATION VS DIT(E) & OTHERS IN W.P.(C) 1872/2013, DATED 22.1.20 15, A COPY OF WHICH IS FILED BY THE SR. COUNSEL FOR THE ASSESSEE . 5. ON THE CONTRARY, SHRI PATHLAVATH PEERYA, LD. DEPART MENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE IS ENGA GED IN RENDERING SERVICE TO THE TRADE AND COMMERCE, THEREFORE, THE ASSESSEE IS NOT ITA NO. 1608/12 :- 4 -: ENTITLED FOR REGISTRATION U/S 12AA OF THE ACT. RE FERRING TO PROVISO TO SEC. 2(15) OF THE ACT, THE LD. DR SUBMITTED THAT WH EN THE ASSESSEE IS RENDERING SERVICE TO THE TRADE BY ISSUING CERTIFICA TE OF ORIGIN FOR THE GOODS EXPORTED BY ITS MEMBERS AND NON-MEMBERS, THE ACTIVITY OF THE ASSESSEE CANNOT BE CONSTRUED AS CHARITABLE ACTIVITY , THEREFORE, THE DIT(E) HAS RIGHTLY CANCELLED THE REGISTRATION GRANT ED U/S 12AA OF THE ACT. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE IS ISSUING CERTIFICATE OF ORIGIN TO I TS MEMBERS AND NON- MEMBERS IN RESPECT OF THE GOODS EXPORTED FROM INDIA AND CHARGING FEE. THE QUESTION ARISES FOR CONSIDERATION IS WHEN THE ASSESSEE IS ISSUING CERTIFICATE OF ORIGIN IN RESPECT OF THE GOO DS EXPORTED FROM INDIA WHETHER THIS WOULD AMOUNT TO RENDERING SERVICE TO T RADE AND COMMERCE? THIS TRIBUNAL IS OF THE CONSIDERED OPIN ION THAT WHEN THE ASSESSEE IS RENDERING SERVICE IN THE FORM OF ISSUIN G CERTIFICATE O ORIGIN, IT HAS TO BE TREATED AS RENDERING SERVICE TO THE TR ADE AND COMMERCE. 7. WE HAVE ALSO GONE THROUGH THE JUDGMENT OF THE DELHI HIGH COURT IN THE CASE OF INDIA TRADE PROMOTION ORGANIZA TION (SUPRA). THE DELHI HIGH COURT, AFTER CONSIDERING THE STATEMENT M ADE BY THE FINANCE MINISTER ON THE FLOOR OF THE PARLIAMENT, FOUND THAT THE EXPRESSIONS ITA NO. 1608/12 :- 5 -: BUSINESS, TRADE OR COMMERCE AS USED IN FIRST PROVISO SEC. 2(15) MUST BE INTERPRETED RESTRICTIVELY AND WHERE THE DOM INANT OBJECT OF AN ORGANIZATION IS CHARITABLE ANY INCIDENTAL ACTIVITY FOR FURTHERANCE OF THE OBJECT WOULD NOT FALL WITHIN THE EXPRESSIONS BUSIN ESS, TRADE OR COMMERCE. IN FACT, THE DELHI HIGH COURT HAS OBSE RVED AS FOLLOWS: '67. 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 I NTENT AND PURPORT OF SECTION 2(15) OF THE ACT AND CANNOT BE INTERPRETED TO MEAN ANY ACTIVITY WHICH IS CARRIED O N IN AN ORGANISED MANNER. THE PURPOSE AND THE DOMINANT OBJE CT FOR WHICH AN INSTITUTION CARRIES ON ITS ACTIVITIES IS M ATERIAL 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 CHARITABL E PURPOSE BUT ARE CONDUCTING SOME ACTIVITIES FOR A CONSIDERATION OR A FEE. THE OBJECT OF INTRODUCING THE FIRST PROVISO IS TO E XCLUDE 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. THE 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. ITA NO. 1608/12 :- 6 -: 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 INTERPRETED RES TRICTIVELY AND WHERE THE DOMINANT OBJECT OF AN ORGANISATION IS CHARITABLE ANY INCIDENTAL ACTIVITY FOR FURTHERANCE OF THE OBJE CT WOULD NOT FALL WITHIN THE EXPRESSIONS BUSINESS , TRADE OR COMMERCE. 8. IN VIEW OF THE ABOVE JUDGMENT OF THE DELHI HIGH COU RT, WE HAVE TO EXAMINE WHETHER THE ACTIVITY OF THE ASSESSE E IN ISSUING CERTIFICATE OF ORIGIN TO ITS MEMBERS AND NON-MEMBER S IS AN INCIDENTAL ACTIVITY IN FURTHERANCE OF ITS OBJECT OR IT IS A DO MINANT OBJECT. THE MADRAS HIGH COURT IN THE ASSESSEES OWN CASE IN TA X CASE NO. 186 TO 188 OF 1976, HAD AN OCCASION TO CONSIDER THIS ISSUE . AFTER CONSIDERING THE OBJECT OF THE TRUST, THE MADRAS HIGH COURT FOUN D THAT ISSUING CERTIFICATE OF ORIGIN IN RESPECT OF THE GOODS IS ON LY INCIDENTAL ACTIVITY IN FURTHERANCE OF ITS MAIN ACTIVITY. THE MADRAS HIGH COURT HAS ALSO OBSERVED THAT THERE IS NOTHING TO SHOW THAT THE AS SESSEE, IN GIVING ASSISTANCE BY WAY OF ARBITRATION OR ISSUING CERTIFI CATE OF ORIGIN IN RESPECT OF THE GOODS, WAS CARRYING ON ANY ACTIVITY FOR PROFIT. IN FACT, THE MADRAS HIGH COURT HAS OBSERVED AS FOLLOWS: THE FIRST POINT TO BE CONSIDERED IN THE PRESENT CA SE IS WHETHER THE ASSESSEE IS PURSUING AN OBJECT OF GENERAL PUBLIC UTILITY. IN THE LIGHT OF THE JUDGME NT OF THE SUPREME COURT IN THE COMMISSIONER OF INCOME- TAX VS ANDHRA CHAMBER OF COMMERCE (55 I.T.R 722) IT HAS TO BE HELD THAT THE ASSESSEES OBJECTS ARE ITA NO. 1608/12 :- 7 -: SUCH TO SUBSERVE THE GENERAL PUBLIC. THEREFORE, TH E ASSESSEE WOULD FALL WITHIN THE MAIN PART OF DEFINIT ION OF SECTION 2(15). THE ONLY FURTHER QUESTION THAT WOULD REQUIRE CONSIDERATION WOULD BE WHETHER THE ASSOCIATION IS CARRYING ON ANY ACTIVITY FOR PROFIT, SO AS TO FALL WITHIN THE WORD EXCLUSION IN SECTION 2 (15). THERE IS NOTHING TO SHOW THAT THE ASSESSEE, IN GIV ING ASSISTANCE BY WAY OF ARBITRATION OR ISSUING CERTIFICATES OF ORIGIN IN RESPECT OF GOODS, WAS CARRYING ON ANY ACTIVITY FOR PROFIT. THE DOMINANT PURPOSE OF THE ASSESSEE-CHAMBER IS ONLY TO PURSUE AN OBJECT OF GENERAL PUBLIC UTILITY. THE SERVICES RENDERED IN CONNECTION WITH ARBITRATION OR ISSUE OF CERTIFICATES ARE ONLY INCIDENTAL. 9. IN VIEW OF THE ABOVE JUDGMENT OF THE MADRAS HIGH CO URT, WHICH IS BINDING ON THIS TRIBUNAL, ISSUING CERTIFIC ATE OF ORIGIN IN RESPECT OF THE GOODS EXPORTED IS INCIDENTAL TO THE MAIN CHA RITABLE ACTIVITY OF THE ASSESSEE. THEREFORE, AS OBSERVED BY THE DELHI HIGH COURT IN THE CASE OF INDIA TRADE PROMOTION ORGANIZATION(SUPRA), PROVISO TO SEC. 2(15) MAY NOT BE APPLICABLE TO THE ASSESSEES CASE . THEREFORE, WE ARE UNABLE TO UPHOLD THE ORDER OF THE DIT(E). ACCO RDINGLY, THE SAME IS SET ASIDE. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS A LLOWED. ITA NO. 1608/12 :- 8 -: ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH FEBRUARY, 2016, AT CHENNAI. SD/- SD/- ( . ! ) (A. MOHAN ALANKAMONY) ' / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 25 TH FEBRUARY, 2016 RD &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF