ITO (Exemption), Udaipur V. Tatpadam Upavan, Rajsamand

ITA 161/JODH/2020

AI Insights

The case revolves around the dispute concerning the eligibility of Tatpadam Upavan, a trust, for exemption under section 11 of the Income Tax Act, 1961. The trust organized a cultural event featuring a performance by Bollywood actress Hema Malini, from which it earned significant revenue. The Income Tax Officer (ITO) denied the exemption, categorizing the trust's activities as commercial in nature, primarily due to the high revenue generated from ticket sales. However, the Commissioner of Income Tax (Appeals) reversed this decision, leading to the revenue's appeal to the Tribunal. The Tribunal upheld the CIT(A)'s decision, emphasizing that the trust's activities were charitable and not commercial, and the income from the event was used for charitable purposes.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 122786 (ITAT-JODHPUR)
• Duration Of Justice: 2 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 11-07-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 11-11-2020
• Other Referred Cases: Institute of Chartered Accountants of India vs Director General of Income-tax (Exemptions), Delhi, Rajasthan Cricket Association vs. Additional Commissioner of Income-tax, Range-2(3), Jaipur, Bangalore Development Authority vs. Additional Commissioner of Income-tax, Bengaluru, Sabarmati Ashram Gaushala Trust vs. Assistant Director of Income-tax (Exemption), Mehrangarh Museum Trust vs. Assistant Commissioner of Income-tax, Circle-01, Jodhpur, Indian Chamber of Commerce vs. Income-tax Officer, Exemption-1, All India Rubber Industries Association vs. Additional Director of Income-tax (E), Mumbai, Advertising Agencies Association of India vs. Assistant Director of Income-tax (E), Mumbai, Credai Bengal vs. Income-tax Officer (Exemptions), Ward-1(1), Kolkata
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M. S. JHANWAR
• Keywords: Gift; Revision of order; Charitable institution; Maximum Marginal Rate; Rule of consistency; Assessment record; Benefit of exemption; Cancellation of registration; Revenue expenditure; Capital expenditure; CHAPTER IV
• Section: 131; 263; 12; 11; 143(3); 142(1); 80G; 12A; 12AA; 10B; 250; 192; 139(1); 113; 48; 13; 22; 10(23C)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM ITA No. 161/Jodh/2020 (ASSESSMENT YEAR- 2017-18) ITO (Exemption), Udaipur Vs Tatpadam Upavan, Rajsamand (Appellant) (Respondent) PAN NO. AAECT 6830 G Assessee By Sh. M. S. Jhanwar, CA Revenue By Sh. Lovish Kumar, CIT-DR Date of hearing 12/07/2023 Date of Pronouncement 06/09/2023 O R D E R PER: RATHOD KAMLESH JAYANTBHAI, AM The present appeal is filed by revenue and is arising out of the order of the Commissioner of Income Tax (Appeals)-1, Udaipur dated 11.09.2020 [here in after (ld. CIT(A)] for assessment year 2017-18 which in turn arise from the order dated 27.12.2019 passed under section 143(3) of the Income Tax Act, by the ITO, Exemption Ward, Udaipur. 2 ITA No. 161/Jodh/2020 TatpadamUpavan 2. The revenue has marched this appeal on the following grounds:- “1. On the facts and the circumstances of the case and in law the Ld. CIT(Appeals) has erred in allowing exemption u/s 11 of the IT. Act, 1961 to the assessee despite the fact that the proviso to section 2(15) is invoked in the case of the assessee as the activities of the assessee are being run on commercial basis, there being no element of charity. 2. On the facts and the circumstances of the case and in law the ld. CIT(Appeals) has erred in allowing claim of capital expenditure of Rs. 22,88,80,253/- to the assessee society without appreciating the fact that the activities of the assessee society cannot be treated as charitable activities and accordingly provisions of section 11 & 12 of the Income Tax Act were not applicable in assessee’s case. 3. Any other question of law as deemed fit in the facts and circumstances of the case may also be framed before the Hon’ble Tribunal in the interest of justice.” 3. The facts of the case in brief are that the assessee is a company registered on 24.16.2013 with the registrar of the companies under section 25 of the Companies Act. The assessee trust was promoted by M/s. Miraj Developers Ltd and is a special purpose vehicle for the development, operation and maintenance of the project of recreational park, including erection of Lord Shiva, statue and other recreational facilities for general public utility, on no non-profit basis to facilitate tourism recreation and sociocultural activities. The assessee was also granted registration by the Commissioner of income tax Udaipur under section 12 AA of the Income tax Act vide order dated 8.11.2023. The assessee also avails the benefit of registration under section 80 G of 3 ITA No. 161/Jodh/2020 TatpadamUpavan the Income tax Act vide order dated 13.11.2014. The assessee E filed its return of income on 14.10.2017 in form number ITR 7. The accounts of the assessee audited as required under section 12A(b) of the income tax act, 1961 and audit report in form number 10 B as been filed electronically on 13.10.2017, the case of the assessee selected for scrutiny under CASS. Notices were issued to the assessee electronically. In response to the notices issued the assessee filed details as called for by the assessing officer. 3.1 The assessee got its account audited and filled in audit report in Form-10B. In its return of income, the assessee trust has claimed its income / receipt exempted u/s 11 of the Income Tax Act. As per ITR, audit report, computation of total income and other details submitted by the assessee the assessee was in receipt of Rs 17,15,34,482/-. From these receipt and surplus of earlier years, it has shown application of Rs. 26,67,618/- as revenue expenditure and 22,87,80,253/- as capital expenditure in order to attain its object. Thus, the assessee has shown deficit in its return of income filed. 4 ITA No. 161/Jodh/2020 TatpadamUpavan 3.2 On perusal of Income & Expenditure statement it is noticed that the assessee has shown total receipts of Rs. 17,15,34,482/- which includes 'Revenue from operation' of Rs. 16,19,51,207/- and 'other income' of Rs. 95,83,275/-. Further, note 12 of audited accounts shows bifurcation of Revenue from Operations. As per this note, Income from programs is of Rs. 4,85,15,000/- and Voluntary contributions - donations are of Rs. 11,34,36.207/-. Against the income from programs, the assessee as per note 15 of audited accounts has booked Rs. 23,90,155/- as 'Programs Related Expenses'. Thus, the assessee earned a net profit from the programs of Rs. 4,61,24,845/- (4,85,15,000-23,90,155). Prima facie such earning of huge profit clearly shows that the activities of the trust are on commercial lines. Therefore, in order to verify the same, the assessee vide query letter dated 18.02.2019 was asked as under: "You have shown income of Rs. 4,85,15,000/- from programme. Please furnish detailed narration along with programme/ wise head wise receipt. Please explain how organizing programme is oriented with charitable in nature. 3.3 In response to this, the assessee filed its reply dated 22.02.2019. The reply of the assessee was examined by the ld AO. The ld. AO noted that the assessee in its reply has tried to establish 5 ITA No. 161/Jodh/2020 TatpadamUpavan that the program organized by the assessee was in the nature of charity. But the assessee did not furnish the complete details of the program and suggested to examine its statement of income & Expenditure for details dated 22.10.2019, the assessee was again asked to furnish detailed information of the program. In response to the same, the assessee furnished its reply on 28.11.2019. In its reply the assessee admitted conducting a programme i.e. “Yashoda Krishna Nritya Natika’ by actress Ms. Hema Malini. Further specific queries were raised vide notice u/s 142(1) dated 30.11.2019. The assessee filed its reply on 15.12.2019 stating that • Actress Ms. Hema malini performed a dance programme named Yashoda Krishna NotyaNatika • The programme has been conducted in property owned on lease basis by M/s Miraj Products Pvt. Ltd Le. Miraj Stadium, Raapcha, Nathdwara • The seating capacity of this stadium is approx. 9000 to 10000 persons. • Tickets were sold for the show bearing different prices ie. Gaandhar for Rs 5,000/- Panjam for Rs 10,000/- and Nishaad for Rs. 15.000/-. • The sale proceeds have been deposited in accounts maintained at Yes Bank Ltd. and Bank of Baroda on different dates. However, along with its reply, the assessee filed copies of statement of ticket sales on dated 14 10 2016 & 13.10.2016 (Anenxure 5) only reflecting sales and deposits. 3.4 Thus, the ld. AO observed that the assessee has organized a dance program named "Yashoda Krishna Nritya Natika" wherein 6 ITA No. 161/Jodh/2020 TatpadamUpavan Actress Ms. Hema Malini performed and for this dance program tickets with different rates were sold to the public at a very high rate is purely on commercial lines. The assessee in its return of income has claimed its object as advancement of general public utility. In the present case, total receipt from organizing such program is Rs 4,85,15,000/- whereas total receipt during the year is Rs. 17,15,34,482/-. Thus, the percentage receipt from organizing of this program against total receipts works out to be more than 28%. As per proviso to section 2(15), 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, 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, if such receipts exceed 20% of total receipt. The proviso applies only if trust/society is engaged in advancement of any other object of general utility and postulates that such a trust is not "charitable if it is involved in carrying on 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. All the facts and circumstances of the case, as discussed in earlier paras, when 7 ITA No. 161/Jodh/2020 TatpadamUpavan examined in the light of the intention of the legislature behind inserting the proviso, language therein and the threshold limit of such receipt, there remains no doubt that the activity of the assessee trust is completely covered under the said provisions of section 2(15). Consequently, the activity of the assessee trust during the year under consideration does not remain charitable anymore and this absolutely leads to forfeiture of benefit of exemption claimed u/s 11 of the I.T. Act. Therefore, the assessee vide show cause dated 19/12/2019 asked to show cause as to why the benefit of section 11 & 12 claimed in return of income may not be denied by invoking proviso 1st and 2nd to section 2(15) of the I.T. Act and treated the assessee as an A.O.P. In response to the show cause the assessee submitted its reply submitting details called for and submitted that: 1. The cultural event was organized to fulfill the main object of promoting commerce, art and other objects of Assessee companyin terms of memorandum of associations (MOA) and the assessee company had also received receipts from cultural event te. Nariya Nalika of Hema malini. organized on 15.10.2016. Accordingly, the said activity was not organized as a trade, commerce or business. 2. Your good self has required some information towards the cultural programme which was submitted the details of entry fee along with copies of tickets. we are submitting herewith the complete detail of ticket sold which is being enclosed as annexure no.1 for your ready reference. The relevant detail towards specific expenditures with regard to cultural programme was already furnished vide our reply dated 21 st January 2019. 8 ITA No. 161/Jodh/2020 TatpadamUpavan 4. The assessee company in order to full fill main objects of its incorporation, organized a cultural event Le Nartiya Natika of Ms. Hema Malini on 15.10.2016 at Miraj Stadium, NH-8, Nathdwara, Rajasthan. The said cultural event consisted several activities for the audience which also include youth where they got opportunity to know & educate themselves about art, customs, beliefs and social behavior. The theme of the program was based on life incidents of 'Lord Krishna' and his mother Yashoda. Ms Hema Malini presented the life incidents in 'Kathak' style of dance. It is pertinent to highlight here in that the dance style is a subject matter of arts and by the dance performance the audience was greatly 'educated' about the said dance style. It is respectfully submitted that the price of tickets cannot be a decisive criteria to judge any profit motive in organizing cultural event rather what is required to be seen is the main object of the Assessee Company which is chantable purpose and there is no inclusion inits object clause of the MOA to carry out any profit/commercial activity. Even otherwise, the prices charge does not reflect the intrinsic value/consideration towards the cultural programme. The object behind the value price of ticket was just to get contribution for the chantable objective which also includes the good cause of constructions of world class shiva statue of 351 feet. The amount mentioned on the entry pass can by no chance be considered as 'consideration' for theservices. Accordingly, we further submit that the assessee company has not rendered any services for a cess or fess or any other consideration It is humbly submitted that interpretation given to proviso to section 2(15) is misconceived and your good office has given very narrow interpretation to the said proviso, That the provision to section 2(15) is applicable only if the advancement of generally public utility involved carrying out any activity in the nature of trade.commerce or business for a fee or any other consideration. The objective of event was to promote organized arts of dance style 'Kathak' and education for the society for general public and to spread awareness among the young people of Nathdwara. We had successfully tried and achieved our objective through our event & created an environment where association with art & our culture was at peak, thereby educating the audience forboth Further, it is pertinent to refer to the very basis of incorporation of the Assessee Company and the objects with which it is incorporate, which on the face of it are not to carry on any business activity or to generate profit. It is reitereated that The assessee Company Tatpadam Upavan was incorporated under the provisions of the Section 25 of the Companies Act, 1956 which is being reproduced as under "(1) Where it is proved to the satisfaction of the Central Government that an association- 9 ITA No. 161/Jodh/2020 TatpadamUpavan (a) is about to be formed as a limited company for promoting commerce, art, science, religion, charty or any other useful object, and (b) intends to apply its profits, if any, or other income in promoting its objects. and to prohibit the payment of any dividend to its members, The Central Government may by license, direct that the association may be registered as a company with limited liability, without the addition to its name of the word "Limited" or the words "Private Limited". 2. The Company applied for registration U/S 12AA on 26 Aug 2013 and company received registration vide letter no AA AA/Udai/12AA/2013- 14/2744 with effect from 26 June 2013 dated 08 Nov 2013. The Company has also registered under section 80 G of Income tax act, 1961 vide letter no AA AA/Udai/12AA/2014-15/3229 with effect from 28 October 2014 dated 13 Nov 2014. Accordingly, Assessee is entitled to exemption u/s 11 and 12 of the Act The assessee company had also received receipts from a cultural event i.e. Nartya Natika of Hema Malini organised on 15.10.2016. The cultural event was organized to fulfil the main object of promoting commerce, art and other objects of Assessee company in terms of memorandum of associations (MOA) The said objects do not provide for any trade commerce or business activities. 3. In view of the aforesaid purpose and objects of establishment of the Assessee Company, it is evident that main objects of the Assessee Company is the promotion of art, science, conducting cultural shows and construct, develop, erect, Operate, promote and maintain, Statue of Lord Shiva, Landscaping Garden, Amusement Park, Children Park, recreational Park, Prayer hall and other recreational facilities. None of the objects of the Assessee Company is to carry out any business activity. We further submit Assessee Company was incorporatedin accordance with the memorandum of understanding (MOU) which was executed between Miraj Developers Limited and the local and government authorities on 17th April, 2013. Accordingly, it was constituted as SPV (Special Purpose Vehicle) for the development, operation & maintenance of the project of recreational Park including erection of Lord Shiva statue, amusement park and other recreational facilities for general public on non- profit basis to facilitate tourism, recreations & socio cultural activities. For the said objects and in accordance with MOU dated 17.04.2013, land was allotted on 99 years lease to the assessee company on dated 05.10.2018 by the State Govt., Rajasthan (earlier the same was under the ownership of the said Municipal Corporation in terms of MOU executed on 17th April2013.) 10 ITA No. 161/Jodh/2020 TatpadamUpavan From conjoint reading of objects contained in MOA and registration u/s12AA and 80G of the Assessee Company, it is evident that main object of establishing the Assessee Company is promotion of art and to develop construct and maintain the Statute of Lord Shiva. Thus, there is no object of carrying out of any trade, commerce or business activity It is pertinent to mention here that organizing cultural and social events/programs was just ancillary activity to attainment of main objects of chantable nature, which does not involve carrying on any activity in the nature of trade, commerce or business. Functions or activities carried out by the Assessee are for general public welfare and not for any profit motive. Further, as perobjects of the Assessee Company it is not allowed to carry on any business activity and having regard to the said object, the Assessee is granted registration u/s 12A of the Act. Accordingly, since the dominant objects of the Assessee Company is promotion of art, science and to develop, construct and maintain Statute of Lord Shiva etc, then conducting of cultural and social event by the Assessee with the main objects of promoting organized arts and recreation & education, cannot be said to be business Accordingly. conducting of cultural events/shows cannot be said to be the main business/object of the Assessee Company to deny exemption to it. The said view of the Assessee finds support from the decision of Hon'ble Delhi High Court in the case of Institute of Chartered Accountants of India vs Director General of Income-tax (Exemptions), Delhi1, wherein it was held that: while construing the term 'business' for the purpose of section 2(15), the object and purpose of the Section must be kept in mind and a broad and extended definition of business would not be applicable for the purpose of interpreting and applying the first proviso to section 2(15). If the object or purpose of an institution is chantable, the fact that the institution collects certain charges does not alter the character of the institution. The expressions "trade", "commerce" and "business" as occurring in the first proviso to section 2(15) must be read in the context of the intent and purport of section 2(15) 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) 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. 11 ITA No. 161/Jodh/2020 TatpadamUpavan The functions performed by the assessee institute are in the genre of public welfare and not for any private gain or profit and in this view, it cannot be said that the assessee is involved in carrying on any business, trade or commerce. 7. Similar view has also been taken by various other Courts and Tribunals in varied judgments as under:- • Tribune Trust v. CIT, Chandigarh [2016] 76 taxmann.com 363 • Institute of Chartered Accountants of India v. Director General of Income- tax (Exemption), Delhi [2013] 35 taxmann.com 140 (Delhi) • Rajasthan Cricket Association v. Additional Commissioner of Income-tax, Range-2(3), Jaipur [2017] 79 taxmann.com 464 (Jaipur-Trib). • Bangalore Development Authority v. Additional Commissioner of Income- tax, Bengaluru [2019] 104 taxmann.com 266 (Bangalore-Trib.) • Sabarmati Ashram Gaushala Trust vs. Assistant Director of Income-tax (Exemption) [2013] 35 taxmann.com 552 (Ahmedabad-Trib.) • Mehrangarh Museum Trust v. Assistant Commissioner of Income-tax, Circle-01, Jodhpur [2014] 48 taxmann.com 129 (Jodhpur-Trib.) • Indian Chamber of Commerce v. Income-tax Officer, Exemption-1 [2014] 52 taxmann.com 52 (Kolkata-Trib.) • All India Rubber Industries Association v. Additional Director of Income-tax (E), Mumbai [2018] 100 taxmann.com 7 (Mumbai-Trib.) • Advertising Agencies Association of India v. Assistant Director of Income- tax (E), Mumbai [2019] 104 taxmann.com 218 (Mumbai-Trib.) • Credai Bengal vs. Income-tax Officer (Exemptions), Ward-1(1), Kolkata [2019] 110 taxmann.com 113 (Kolkata-Trib.) In view of the above, it is humbly submitted that it would incorrect to allege the receipts from cultural event to be a receipts from carrying out any business activities. Thus, it is denied that such cultural event was organized to earn profit from carrying out an organized business activity as alleged in notice under reference. Furthermore, it is humbly submitted that the expression 'any other object of general public utility" in the section 2(15) of the Act, is of widest connotation. That expression would prima facie include all object which promote the welfare of the general public. If the primary purpose and the predominant object are to promote the welfare of the general public the purpose would be charitable purpose. Accordingly, it would be incorrect to infer that only with the object of carrying out business activities the Assessee Company has organized cultural events/show, whereas it is evident from the main objects of the Assessee Company that the same is not to carry on any business, trade or commerce. Thus, when the main objects of the Assessee Company is charitable in nature, then receipts/surplus from organizing cultural events in fulfillment of the said objects, cannot be said to be receipts from carrying out of any trade, commerce or business activities. Thus, it is specifically denied that Assessee conducted any dance program by sale of high-priced 12 ITA No. 161/Jodh/2020 TatpadamUpavan tickets and the said activity involves carrying on any activity in the nature of trade, commerce or business activities. Thus, adverse inference being taken against the Assessee Company is not justified and misconceived as the same is based on misinterpretation of provision of the Act. It is further stated that activities of Assessee falls within the scope of chantable purpose as defined in section 2(15) which despite covering other charitable purpose also includes preservation of monuments or places or objects of artistic or historic interest within its scope. Thus, on this ground also, the Assessee Company is entitled to exemption u/s 11 of the Act. 13. In view of the above, the receipts from said event is eligible to get the exemption u/s 11 as they fall in the scope of relevant provisions of the Income by the Act. 3.5 The reply filed by the assessee has been considered by the AO but not found acceptable and concluded that 5.13 From the above it can be finally concluded that the activity carried out by the trust by executing the sale of tickets at high rates for organizing of programme is not a charitable activity as per the definition of charitable purpose u/s 2(15) of the I.T. Act. 1961. The selling of tickets against organizing of dance programmeof Bollywood Star cannot be said to be a charitable activity since it is an activity in the nature of trade, commerce and business. Therefore, considering the facts and in view of the above discussion it is held that the trust is not engaged in any charitable activity, rather organizing programmes on commercial line and therefore, the trust is squarely covered under proviso to section 2(15) of the IT. Act. Consequently the claim of the assessee u/s 11 of the I.T. Act is hereby denied and the case is assessed as an A.O.P. 3.6 Disallowance of capital Expenditure: The assessee in its return of income has declared total receipts of Rs. 17,15,61,482/- against which has claimed application under capital account of Rs. 22,87,80.253/- As discussed in earlier paras, the assessee is not entitled for benefit of exemption of income u/s. 11 of 13 ITA No. 161/Jodh/2020 TatpadamUpavan the I.T. Act and its case is being assessed as AOP, therefore, income has to be computed as per the provision of chapter IV and not as per the provision of Chapter III. Consequently, Capital expenditure debited in its a/c to the extent of Rs. 22,87,80.253/- is not an allowable expense. Therefore, the amount of Rs. 22,87,80,253/- is disallowed being in nature of capital expenditure and added to the total surplus of the assessee during the year. 3.7 The assessee is denied exemption u/s 11. In view of this fact, the assessee assessed as A.O.P. Since, the assessee has filed ITR- 7, the same is assessed at Maximum Marginal Rate, as the assessee has income from business. Despite the fact that it is indulged in business activities, it has mis-represented its facts and claimed exemption u/s 11. Thus, the assessee, by misreporting such facts has underreported its income and is liable for penalty u/s 270A of the I.T. Act, 1961 @200% of the amount of tax payable on under reported income. 4. Aggrieved from the above order of the Assessing Officer, assessee preferred an appeal before the ld. CIT(A). A propose to the 14 ITA No. 161/Jodh/2020 TatpadamUpavan grounds so raised by the assessee, the relevant finding of the ld. CIT(A) is reiterated here in below: “19. I have carefully and thoroughly considered the facts of the case, assessment order, appellant's written and oral submissions. I have also considered the case- laws relied on by the appellant and the AO. The AO laid much emphasis on the fact that from one particular dance event organized on 15-10-2016, i.e. "Yashoda Krishna Nritya Natika" which was performed by the actress Ms. Hema Malini, the appellant earned huge income by selling tickets at high rates and as such the activity of the appellant cannot be said to be a charitable activity since it is in the nature of trade, commence or business. It is imperative at this stage to recapitulate the salient facts of the case as extracted from records. The appellant company filed its return of income on 14-10-2017 in the form ITR-7, declaring the total income at Nil and claimed exemption u/s. 11 of the Act. The appellant had shown total receipts of Rs. 17,15,34,482/-, out of which it had shown application of Rs. 26,67,618/- as revenue expenditure and Rs. 22,87,80,253/- as capital expenditure in order to attain its objects and thus it had shown deficit of Rs. 5,99,13,389/- as its income. The AO noted that during the year under consideration, the appellant. company had organized a programme on 15-10- 2016 i.e. "Yashoda Krishna Nritya Natika" which was performed by the renowned bollywood actress Ms. Hema Malini, earned huge profit of Rs. 4,61,24,845/- by selling tickets at high rates, charging from stall owners and that it is in the nature of business activity. It was in this backdrop that the AO required the assessee to justify the eligibility for exemption of income under section 11, in the light of the proviso to Section 2(15) of the Act. In response to this requisition, the assessee stated that as per memorandum of Association, M/s. Miraj Developers Limited constituted Tatpadam Upavan as SPV (Special Purpose Vehicle) for the development, operation & Maintenance of the project of recreation park including erection of Lord Shiva statue and other recreational facilities for general public utility on non-profit basis to facilitate tourism, recreation & socio cultural activities. The appellant also stated that it is registered u/s 12AA of the Act and also got exemption u/s 80G of the Act vide CIT, Udaipur's orders dated 08-11-2013 and 13-11-2014 respectively. As regards the dance event organized by it, the appellant submitted that it had organized a Social and cultural event for motivation of public to achieve its objectives by the program, the objective of the event was to promote organized arts, recreation & education for the society for general public utility and to spread awareness for the young people of Nathdwara. As regards the application of proviso to Section 2(15), it was pointed out that only when institutions are carrying out activities on commercial lines with profit motive, this provision comes into play. It was pointed out that surplus funds are purely 15 ITA No. 161/Jodh/2020 TatpadamUpavan incidental and the institution is not run on commercial lines at all. The appellant discussed/referred to its objects, purpose for organizing "Yashoda Krishna Nritya Natika" and how it helped in attaining the objects of the trust. The appellant also referred to the definition of "trade, commerce or business" and placed reliance on various Judicial pronouncements to emphasize that the expression "any other object of general public utility in sec. 2(15) of the Act is of widest connotation and its case fell within the scope of charitable purpose as defined in sec. 2(15) of the Act. Thus, the assessee pleaded before the AO that receipts from the said event were eligible to get exemption u/s. 11 of the Act. However, the AO was not satisfied with the assessee's explanation and legal position as discussed by the assessee. The AO referred to the definition of charitable purpose as given in the provisions of sec. 2(15) and assessee's objects as mentioned in the MOU and mentioned that receipts from such programme exceeded 20% and as such its case fell in the ambit of sec. 2(15) of the Act. The AO also discussed the legislature's intention to bring the proviso to sec. 2(15) of the Act in the statute and mentioned that it is not to be proved that the assessee is actually doing business, trade or commerce and if the assessee does something in the nature of trade, commerce or business, it is covered by the proviso to sec, 2(15) of the Act. The AO was of the view that how the income is applied is one thing, but what is much more important is, what he termed as, method of generation of income. He referred to the provisions of Section 2(15), as amended with effect from 1st April 2009, and observed that after the insertion of the above proviso, the advancement of any other object of public utility shall not be a charitable purpose, if it involves carrying on of (1) any activity in the nature of trade, commerce or business; (ii) any activity of rendering any services in relation to any trade, commerce or business, for cess or fee or any other consideration, irrespective of the nature of use or application or retention of income from such activity. He then referred to the monetary threshold limits brought about by the Finance Act, 2010, with respect to revenues generated by such activity. The AO then referred to, and relied upon, the memorandum explaining the provisions of the Finance Act, 2008. He then noted that the main activity of the assessee was to organize this dance event which generated majority of its revenues and such a predominant object cannot at best be an object of general public utility. The AO observed that the benefits of section 11 and 12 will not be applicable in a case of registered charitable institution in a situation in which the provisions of Section 2(15) come into play as in this case. The AO reiterated that sale of entry tickets on high rates and hiring out of stalls is clearly a commercial activity. To support his case, the AO also referred to the judgment of the Hon'ble ITAT, Jaipur Bench in the case of ITO vs. Rajasthan Cricket Association (supra). The AO concluded that the activity carried out by the trust by executing the sale of tickets at high rates for organizing of programme is not a charitable activity as per the definition of charitable purpose 16 ITA No. 161/Jodh/2020 TatpadamUpavan u/s. 2(15) of the Act and it is an activity in the nature of trade, commerce or business. Accordingly, the AO denied the exemption u/s. 11 of the Act to the assessee and assessed it as an AOP. The appellant has vehemently contested the AO's action in invoking proviso to sec. 2(15) of the Act to deny exemption claimed u/s. 11 of the Act alleging that the activity of the appellant cannot be said to be a charitable purpose and it is in the nature of trade, commerce or business. Elaborate legal submissions were made on the scope of proviso to Section 2(15), its legislative history and background. A reference was also made to CBDT circular No. 11/2008 dated 29-12-2008 in support of the proposition that proviso to Section 2(15) will not apply in respect of activities involving general public utility, even if it incidentally involves the carrying on of commercial activities. The appellant also referred to its objects and stated that from several objects as specified under the MOU of assessee, it is clear that it has been established to provide general public utility on non-profit basis. It was then pointed out that main object of the trust and its creation was for the purposes of advancement of organized arts and the event in question was for performance of Bharatnatyam which is an ancient form of Indian Art which falls under the category of organized arts. It was thus contended that the proviso to Section 2(15) will have no application in this case. The appellant also made elaborate submissions on the connotations of expression "business activities" and made out a case as to how the activities of the appellant, even with respect to holding the dance event, do not constitute business activities. 20. The crux of the issue to be decided in the instant case is whether the AO was justified in holding that the assessee's case is covered/hit by the first proviso to sec. 2(15) of the Act and denying the exemption claimed u/s. 11 of the Act. In the instant case, the AO's action in holding that the appellant company violated the provisions of sec, 2(15) of the Act and consequent denial of exemption claimed u/s. 11 of the Act is due to the fact that the appellant received Rs. 4,85,15,000/- through ticket sales of a dance programme "Yashoda Krishna Nritya Natika" organized by it on 15-10-2016 performed by the renowned bollywood actress Ms. Hema Malini, which according to the AO was on commercial lines with profit motive. Before addressing the issue, the main thrust being on the objects of trust, it would be appropriate to reproduce the stated objects of the trust which are as under- "III. (AA) No object of the Company will carry out on commercial basis. 1. To construct, develop, erect, Operate, promote and maintain, Statue of Lord Shiva, Landscaping Garden, Amusement Park, Children Park, recreational Park, Prayer hall and other recreational facilities for general public utility. 17 ITA No. 161/Jodh/2020 TatpadamUpavan 2. To Construct, Develop, Exhibit, Operate, Conduct Shows, Exhibition, Public Library, cafeteria & Collect donations. 3. To Construct, Operate, run and conduct Theaters, Open Air Theatres, seminars, Lectures, develop promoting organized arts, recreation, education, civic emergency, social services and other community endeavors to establish community centre, for the society for general public utility. 4. To initiate, supervise and coordinate activities to implement the Corporate Social Responsibility Policy of Companies mandate to formulate such policies in terms of section 135 of the Companies Act 2013, where any such company or companies entrusts the job of such implementation. 5. To eradicate hunger, poverty and malnutrition, promoting yfaffy health care including preventive health care and sanitation including contribution to the Swach Bharat Kosh set-up by the Central Government for the promotion of sanitation and making available safe drinking water to promote education, including special education and employment enhancing vocation skills, especially among children, women, elderly and the differently abled and livelihood enhancement project; to promote gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day care centres and such other facilities for senior citizen and measures for reducing inequalities faced by socially and economically backward group. 6. To ensure environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agro forestry, conservation of natural resources and maintaining quality of soil, air and water (including contribution to the Clean Ganga Fund set-up the Central Government for rejuvenation of river Gangajto protect national heritage, art and culture including restoration of building and sites of historical importance and works of art; setting up public libraries; promotion and development of traditional art and handicrafts. 7. To provide measures for the benefit of armed forces veterans, war widows and their dependents; to provide training to promote rural sports, nationally recognized sports, Paralympics sports and Olympic sports; to contribute to the prime minister, national relief fund or any other fund set up by the central govt. for social economic development and relief and welfare 18 ITA No. 161/Jodh/2020 TatpadamUpavan of the schedule caste, other back ward classes, minorities and women; to provide contributions or fund provided to technology incubators located within academic institutions which are approved by the central govt; to promote rural development and slum area development projects. 8. To undertake such other activities as may be prescribed by Central Government under Section 135 read with Schedule VII of the Companies 2013 or under any other law relating to 'Corporate Social Responsibility for the time being in force. III. (B) matters which are necessary for furtherance of the objects specified in clause-III (A) are: To bring about publications and organized activity that will help promote charity and social service, the income generated if any, form which shall accrue to and form part of the Company Fund to be utilized for all or any of the objects of the company. V. (1) The income and property of the company, when so ever aufafafy derived, shall be applied solely for the promotion of its objects as set forth in this Memorandum. (2) No portion of the income or property aforesaid shall be paid or transferred, directly or indirectly, by way of dividend, bonus or otherwise by way of profit, to persons who, at any time are, or have been members of the company or to any one or more of them or to any person claiming through any one or more of them. From the aforesaid purposes and objects for establishment of the appellant Company, it is clear that the main object of the appellant Company is to promote art, science, conducting cultural shows, construct, develop, erect, Operate, promote and maintain Statue of Lord Shiva, Landscaping Garden, Amusement Park, Children Park, recreational Park, Prayer hall and other recreational facilities for general public and not for profit motive. Moreover, it is clearly provided under the MOU of the appellant that it can conduct organized activity that will help promote charity and social service, the income generated, if any, shall accrue to and form part of the Company Fund to be utilized for all or any of the objects of the Company. The appellant company, therefore, in order to fulfill the main objects of promoting art and other objects in terms of Memorandum of Association, organized a cultural event i.e. Nartiya Natika of Ms. Hema Malini on 15.10.2016 which consisted of several activities for the audience and also included 19 ITA No. 161/Jodh/2020 TatpadamUpavan participation of youth from general public where they got opportunity to know & educate themselves about art, culture, customs, beliefs and ancient dance forms. It is to be noted that the programme organized by the appellant was not a typical Bollywood type dance programme just to entertain the audience. Rather, the theme of the program was based on life incidents of Lord Krishna and his mother Yashoda, the Nritya Natika was performed by Ms. Hema Malini in 'Kathak dance style which is a classical dance form. A plain reading of the objects and activities of the appellant as mentioned in the MOU reveals that its objects are for general public utility as stated in the Memorandum and Rules & Regulations of the Society. 21. Further, before deciding whether the aforesaid reason is good enough to hold that there was violation of provisions of sec. 2(15), we have to look at the meaning of 'charitable purpose' as defined under section 2(15) of the Act. The section 2(15) of the Act, as applicable for the relevant assessment year 2017- 18, is reproduced hereunder. (15) "charitable purpose" includes relief of the poor, education, 20[yoga.] medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic 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 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, unless- (i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and (ii) the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year;]] A plain reading of the aforesaid provision will make it clear that the expression "charitable purpose" is an inclusive one which amongst other things includes relief 20 ITA No. 161/Jodh/2020 TatpadamUpavan to the poor, education, medical relief etc. The restrictions imposed in the proviso relating to carrying of any activity in the nature of trade business or commerce is only in respect of the activity relating to 'any other object of general public utility' and not in relation to other activities. In the instant case, there is no dispute that the appellant's main objects are to promote arts and other objects in terms of MOU, which falls in the activity relating to advancement of any other object of general public utility'. In simple language, the following activities incorporated in the newly inserted proviso are excluded from the 'definition of charitable purpose provided u/s 2(15) of the Act:- (a) any activity in the nature of trade, commerce or business, (b) any activity of rendering any service in relation to trade, commerce or business, (c) if fee or cess or any other consideration is charged, irrespective of the nature of use or application or retention of such income by the concerned entity. The Finance Minister amended the definition of 'charitable purpose' provided under Section 2(15) of the Act by the Finance Act, 2008, with effect from 1.4.2009, by adding a proviso, to the Section of just five lines, which affected the exemption of charitable trusts for "advancement of any other object of general public utility" very substantially. In Para 180 of the Budget speech, the Finance Minister stated as follows: `"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 income have sought to claim that their purpose would also fall under 'charitable purpose'. Obviously, this may not be 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." It will, thus, be noted that the intention of the Finance Minister was only to exclude from exemption, entities carrying on business and earning income for which exemption was claimed on the basis that the purpose would fall under charitable purpose as defined in the last limb of the definition u/s 2(15) of the Act. The Central Board of Direct Taxes issued Circular No. 11/2008 dated 19.12.2008, stating that following implications arise from this amendment :- 21 ITA No. 161/Jodh/2020 TatpadamUpavan "The newly inserted proviso to Section 2(15) will not apply in respect of the first three limbs of Section 2(15) i.e. relief of the poor, education or medical relief. Consequently where the purpose of a trust or institution is relief of the poor, education or medical relief, it will constitute charitable purpose, even if it incidentally involves the carrying on of commercial activities. The Circular further stated as under- "3. The newly inserted proviso to Section 2(15) will apply only to entities whose purpose is advancement of any other object of general public utility' i.e. the fourth limb of the definition of the charitable purpose contained in Section 2(15). Hence such entities will not be eligible u/s 11 or u/s 10(23C) of the Act if they carry on commercial activity. Whether such an entity is carrying on an activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of the activity." Further, CBDT in paragraph 3.2 pointed out the scope of the provision in the circular as under:- "In the final analysis, however, whether the assessee has for its objects 'the advancement of any other object of general public utility is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled to claim its objects are charitable purpose. In such a case, the object of 'general public utility' will be only a mask or a device to hide the true purpose, which is trade, commerce or business or the rendering of any service in relation to trade, commerce or business. Each case would, therefore, be decided on its own facts and no generalization is possible. Assessee, who claim that their object is 'charitable purpose' within the meaning: of Section 2(15), would be well advised to eschew any activity which is in the nature of trade, commerce or business or rendering of any service in relation to trade, commerce or business." Thus, the proviso to Section 2(15) of the Act is only to check those institutions, which attempt to gain exemption under the cloak of a trust and each case would, therefore, be decided on its own facts as per aforesaid circular. 22 ITA No. 161/Jodh/2020 TatpadamUpavan 22. The terms trade, commerce or business and the predominant object: The Hon'ble Apex Court in the case of Surat Art Silk Cloth Manufacturers Association, 121 ITR 1 held as under: "(ii) The requirement of s. 2(15) is satisfied where there is either a total absence of the purpose of profit-making or It is so insignificant compared to the purpose of advancement of the object of general public utility that the dominating role of the latter renders the former unworthy of account. If the profit making purpose holds a dominating role or even constitutes an equal component with the purpose of advancement of the general public utility, then clearly the definition in s. 2(15) is not satisfied. (iii) If the purpose is charitable in reality, the mode adopted must be one which is directed to carrying out the charitable purpose. It would include a business engaged in for carrying out the charitable purpose of the trust or Institution. The carrying on of such a business does not detract from the purpose which permeates it, the end result of the business activity being the effectuation of the charitable purpose. (iv) The real question whether a trust is created or an institution is established for a charitable purpose fails to be determined by reference to the real purpose of the trust or the institution and not by the circumstance that the income derived can be measured by standards usually applicable to a commercial activity. The quantum of income is no test in itself. It may be the result of an activity permissible under a truly charitable purpose for a profitable activity in working out the charitable purpose is not excluded". This decision of the Hon'ble Supreme Court, is applicable to the instant applicant as far as the definition of "Charitable Purpose" is concerned. In the instant case, there is no dispute that the main object as well as other objects/activities of the appellant Company/trust fell within the expression advancement of any other object of general public utility, however, only dispute raised by the AO is that organizing of dance event fell within the scope of first proviso to Section 2(15) of the Act. Now question arises whether the activity of the appellant l.e. "promotion of arts" which falls in the definition of 'advancement of any other object of general public utility' comes under the definition of nature of trade, commerce or business. To answer this question, it is imperative to understand the meaning of "trade", "commerce" or "business" and whether the same meaning can be applied while interpreting the same terms used in proviso to sec 2(15) of the Act. The definitions as given in various dictionaries are being discussed hereunder for ready reference:- 23 ITA No. 161/Jodh/2020 TatpadamUpavan Black's Law Dictionary 6th edition, Year 1991 a. The act or the business of buying or selling for money, traffic, barter. b. Purchase and sale of goods and services between businesses, states or nations. c. One's calling; occupation, gainful employment, means of livelihood. Oxford Dictionary Vth edition, Year 2002 a. Use as object of trade, buy or sell, barter, exchange. Tax Dictionary, Year 2013 edition. a. In its primary meaning "trade" is the exchange of goods for goods or goods for money. In its secondary meaning it is repeated activity in the nature of business carried on with a profit motive. b. Means a business which a person has learnt or carries on for procuring subsistence or profit. Further the meaning of the term "commerce" provided in some of the dictionaries is as follows:- Black's Law Dictionary 6th edition, Year 1991 a. The exchange of goods, productions or property of any kind; buying, selling, and exchanging of articles. Oxford Dictionary Vth edition, Year 2002 c. Buying and selling the exchange of merchandise or services especially on large scale . Tax Dictionary, Year 2013 edition. a. Commerce is traffic, trade or merchandise in buying and selling of goods. b. Exchange or buying and selling of commodities on large scale involving transportation from place to place. The meaning of the term "business" as per dictionaries is as follows: Black's Law Dictionary 6th edition, Year 1991 24 ITA No. 161/Jodh/2020 TatpadamUpavan a. Employment, occupation, profession or commercial activity engaged in for gain or livelihood. Activity or enterprises for gain, benefit, advantage or livelihood. b. The which habitually busies or occupies or engages the time, attention, labour and effort of persons as principal serious concerns or interest or for livelihood or profit. Oxford Dictionary Vth edition, Year 2002 a. A habitual occupation, a profession a trade." Tax Dictionary, Year 2013 edition. a. Business includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. Stephenson defines business as, "The regular production or purchase and sale of goods undertaken with an objective of earning profit and acquiring wealth through the satisfaction of human wants." According to Dicksee, "Business refers to a form of activity conducted with an objective of earning profits for the benefit of those on whose behalf the activity is conducted." Lewis Henry defines business as, "Human activity directed towards producing or acquiring wealth through buying and selling of goods." According to Urwick and Hunt, "Business is any enterprise which makes, distributes or provides any service which other members of the community need and are willing to pay for it". Similarly, in sec. 2(13) of the Income Tax Act, 1961, the definition of business is given as under: "Business" includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture". From the above, one can understand the term "Business", the same is to be seen from the angle of the businessman who carries an activity to earn profits and maximize wealth for own use instead of use by general public. Thus, "Business" simply means any economic activity carried on for earning profits. A business is also defined as an organization or enterprising entity engaged in commercial, 25 ITA No. 161/Jodh/2020 TatpadamUpavan industrial, or professional activities. Business exists only to earn profits by providing goods and services to customers. Business activities are performed with the primary objective of earning income by way of profit. Any organization or economic system where goods and services are exchanged between one another for money is also referred to as business. Thus, business activity can be considered a business if it has Continuity and regularity of the activity in dealing with profit motive. Any activity can only be termed as business when it is done with profit motive. Thus, motive is more important than anything else while considering an activity as business. In the instant case, we are dealing with the activity of a charitable Institution, to whom exemption u/s 11 has been denied for violation of provision of Sec. 2(15) of the Act. At this juncture, I may refer to the decision of the Hon'ble Delhi High Court in the case of The Institute of Chartered Accountants of India Vs. The Director General of Income Tax (Exemptions), Delhi (2012) 347 ITR 99, 202 Taxman 140 defining the term "business" in relation to charitable institutions, post the amendment carried out in section 2(15), relevant extracts are as under: 57. After discussing various decisions with regard to the scope of the words trade, commerce & business, this court in The Institute of Chartered Accountant of India v. Director General of Income-tax (Exemption) (supra) held that while construing the term business for the purpose of Section 2(15) of the Act the object and purpose of the Section must be kept in mind and a broad and extended definition of business would not be applicable for the purpose of interpreting and applying the first proviso to Section 2(15) of the Act. The relevant extract of the said judgment is as under:- "Section 2(15) defines the term "charitable purpose". Therefore, while construing the term "business" for the said section, the object and purpose of the section has to be kept in mind. We do not think that a very broad and extended definition of the term "business" is intended for the purpose of interpreting and applying the first proviso to section 2(15) of the Act to include any transaction for a fee or money. 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 business even afafafhen 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 furt() should be facts and other circumstances which justify and show that the activity 26 ITA No. 161/Jodh/2020 TatpadamUpavan undertaken is in fact in the nature of business. The test as prescribed in Raipur. Manufacturing Company [1967] 19 STC 1 (SC) and Sai Publication Fund [2002] 258 TTR 70 (SC): [2002] 126 STC 288 (SC) can be applied. The six indicia stipulated in Lord Fisher [1981] STC 238 are also relevant. Each case, therefore, has to be examined on its own facts." 58. In the case of Commissioner of Sales Tax v Sai Publication Fund: [20021.258 ITR 70 (SC), the Supreme Court while interpreting the word "business" in the context of Section 2(54) of the Bombay Sales Tax Act, 1959 held that the inclusion of incidental or ancillary activity in the definition of business presupposes the existence of trade, commerce and business. 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. In that case, the Supreme Court was examining the issue whether the activity of the trust in bringing out and selling a publication to spread the message of Sai Baba would make the assessee trust a dealer. The Supreme Court also referred to various other decisions wherein it was held that if the principal object or purpose of an assessee was not business then an incidental activity would also not be exigible to sales tax and constitute the assessee as a dealer. In the case of State of Gujarat v. Raipur Manufacturing Co. Ltd.: (1967) 19 STC 1 (SC), the Supreme Court held that in order for any activity to be considered as business, there must be a course of dealings either actually continued or contemplated to be continued with the motive to earn profit and not for sport or pleasure.......... The Hon'ble Supreme Court in the case of Commissioner of Sale Tax v. Sai Publication Fund 258 ITR 70 (SC) held as under: "There is no dispute that the primary and dominant activity of the trust is to spread the message of Saibaba. This main activity does not amount to "business". The activity of publishing and selling literature, books and other literature is obviously incidental or ancillary to the main activity of spreading the message of Saibaba and not to any business as such even without a profit motive and it is in a way a means to achieve the object of the trust though which the message of Saibaba is spread. It is clear from the trust deed and objects contained therein that in was not established with an 27 ITA No. 161/Jodh/2020 TatpadamUpavan intention of carrying on the business/occupation of selling or supplying goods. This being the position, it cannot be said that the trust carries on the business of selling and supplying goods so as to fall within the meaning of "dealer" under section 2(11) of the Act. No doubts, the definition of "business" given in section 2(5A) of the Act even without profit motive is wide enough to include any trade, commerce or manufacture or any adventure or concem in the nature of trade, commerce or manufacture and any transaction in connection with or incidental or ancillary to the commencement or closure of such trade, commerce, manufacture, adventure or concem. If the main activity is not business, then any transaction incidental or ancillary would not normally amount to "business" unless an independent intention to carry on "business" in the incidental or ancillary activity is established. In such cases, the onus of proof of an independent intention to carry on "business" connected with or incidental or ancillary sales will rest on the department. Thus, if the main activity of a person is not trade, commerce, etc., ordinarily incidental or ancillary activity may not come within the meaning of "business". To put if differently, the inclusion of incidental or ancillary activity in the definition of "business" presupposes the existence of trade, commerce, etc." In the light of the above judgments, it can be safely inferred that 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 organized 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". 23. It is also settled judicial principle that before mechanically applying the proviso to section 2(15) of the Act, it is first required to examine whether such trust institution is carrying out activities on commercial lines or not. Therefore, wider meaning of the terms "trade", "commerce" or "business" cannot be adopted blindly in case of any institution to apply the proviso to Section 2(15) in its case. In this regard, reference is invited to the decision of the Hon'ble Delhi High Court in 28 ITA No. 161/Jodh/2020 TatpadamUpavan the judgment dated 26.09.2013, in the case of M/s GSI India Vs DGIT in civil writ petition No. 7797/2009 wherein it was held as under:- "22. Business activity has an important pervading element of self interest, though fair dealing should and can be present, whilst charity or charitable activity is anti-thesis of activity undertaken with profit motive or activity undertaken on sound or recognized business principles. Charity is driven by preservation may be present. For charity, benevolence should be omnipresent and demonstrable but it is not definition of charity, which entails giving and receiving nothing in return is outdated. A mandatory feature would be; charitable activity should be devoid of selfishness or illiberal spirit. Enrichment of oneself or self-gain should be missing and the predominant purpose of the activity should be to serve and benefit others. A small contribution by way of fee that the beneficiary pays would not convert charitable activity into business, commerce or trade in the absence of contrary evidence." At this juncture, it is relevant to note that proviso to Section 2(15) was also amended by the Finance Act, 2015, w.e.f. 1-4-2016, which reads as follows: "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, unless- (i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and (ii) the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year;" 24. Further, it is also relevant to refer to Memorandum of the Finance Bill, 2015 which under Rationalization of definition of charitable purpose in the Income-tax Act measures, provides as follows: 29 ITA No. 161/Jodh/2020 TatpadamUpavan "The primary condition for grant of exemption to a trust or institution under section 11 of the Act is that the income derived from property held under trust should be applied for charitable purposes in India. Charitable purpose' is defined in section 2(15) of the Act. The section, inter alia, provides that advancement of any other object of ufafafa 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 fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity. However, this restriction shall not apply if the aggregate value of the receipts from the activities referred above is twenty five lakh rupees or less in the previous year. The institutions which, as part of genuine charitable activities. undertake activities like publishing books or holding program on yoga or other programs as part of actual carrying out of the objects which are of charitable nature are being put to hardship due to first and second proviso to section 2/15). The activity of Yoga has been one of the focus areas in the present times and international recognition has also been granted to it by the United Nations. Therefore, it is proposed to include yoga as a specific category in the definition of charitable purpose on the lines of education. In so far as the advancement of any other object of general public utility is concerned, there is a need is to ensure appropriate balance being drawn between the object of preventing business activity in the garb of charity and at the same time protecting the activities undertaken by the genuine organization as part of actual carrying out of the primary purpose of the trust or institution. It is, therefore, proposed to amend the definition of charitable purpose 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 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, unless,- (i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and (ii) the aggregate receipts from such activity or activities, during the previous year, do not exceed twenty percent of the total receipts, of the 30 ITA No. 161/Jodh/2020 TatpadamUpavan trust or institution undertaking such activity or activities, for the previous year." The above explanatory statement to the Memorandum to Finance Bill 2015 clearly provides that the advancement of any other object of general public utility shall be a charitable purpose, unless it involves the carrying on of any activity in the nature of trade, commerce or business and the receipts from such activity do not exceed 20% of total receipts. Two conditions need to be satisfied to infer that any activity is not for charitable purpose which are as under:- (i) Carrying on any activity in the nature of trade, commerce or business and (ii) Activity is carried out or undertaken in the course of actual carrying out of such advancement of any other object of general public utility. As explained by the appellant and on perusal of objects referred to in its MOU, the case of the appellant falls under such category of institutions which are genuinely carrying out their charitable activities in accordance with their objects. By now, it has been clear that an activity can only said to be business if it is done with profit motive, but while invoking the provisions of 2(15), term "business" must be read in the context of the intent and purport of section 2(15) of the Act and only the predominant purpose of the activity should be considered. Thus, much emphasis is on primary or dominant objects of trust. The Hon'ble Supreme Court in the case of CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC) held that if the primary or dominant purpose of a trust or institution is charitable, another object which by itself may not be charitable but which is merely ancillary or incidental to the primary or dominant purpose would not prevent the trust or institution from being a valid charity. Similarly, the Hon'ble Supreme Court in the case of Addl. CIT v. Surat Art Silk Cloth Manufactures Association [1979] 2 Taxman 501/[1978] 121 ITR 1, held that where the activity is not pervaded by profit motive but is carried on primarily for serving the charitable purpose, it would not be correct to describe it as an activity for profit. The head note is reproduced as under:- "Section 2(15), read with section 11, of the Income-tax Act, 1961- gfaff charitable purpose - Words 'not involving carrying on of any activity for profit' occurring in section 2(15) Scope and meaning of Assessee- efort (2) association set up to promote commerce and trade in specified commodities and, inter alia, to undertake, on behalf of members, certain business operations incidental or conducive to attainment of Said objectives-entire income or property applicable solely and exclusively for 31 ITA No. 161/Jodh/2020 TatpadamUpavan promotion of said objects without its distribution amongst members in any form or guise and without its utilisation for members' benefit-ITO disallowed claim for exemption under section 11 since objects not charitable within the meaning of section 2(15) - Tribunal allowed appeal. Case referred by tribunal under section 257 direct to supreme court Whet tribunal right in law in holding that purpose for which assessee was established, though falling within "advancement of an object of general public utility", was a charitable purpose under section 2(15) Held, yes Whether assessee's income exempt from tax under section 11-Held, yes." The Hon'ble ITAT, Jaipur Bench in the case of Rajasthan Cricket Association vs. Addl.CIT [2017] 79 taxmann.com 464 (Jaipur - Trib.) held that where In case of assessee association registered under section 12A, predominant activity of assessee was conducting matches of cricket which fell under category of general public utility, mere fact that it earned certain ancillary income in form of TV subsidy, sale of advertisement and surplus of match receipts, would not lead to conclusion that assessee's case was hit by proviso to section 2(15). The head note is reproduced as under:- "Section 2(15), read with section 11, of the Income-tax Act, 1961- Charitable purpose (Objects of general public utility)- Assessment years 2008-09 and 2009-10- Assessee-association was formed with objective of promoting sport of cricket within State of Rajasthan - It was granted registration under section 12A - During relevant years, assessee filed its return claiming exemption of Income under section 11 Assessing Officer opined that major source of income were from TV Subsidy, salo of advertisement, surplus from matches and interest income - He thus taking a view that activities of assessee were hit by proviso to section 2(15), rejected assessee's claim - Whether since predominant activity of assessee was conducting matches of cricket which fell under category of general public utility, mere fact that it earned certain ancillary income not lead to conclusion that assessee's case was hit by proviso to section 2(15) Held, yes Whether, therefore, Assessing officer was assessed]." The ratio as laid down in the aforesaid judgments of the Hon'ble Apex Court and various High Courts / Tribunals is that if the primary or predominant object of an institution is charitable, any other object which might not be charitable but which is ancillary or incidental to the dominant purpose, would not prevent the institution from being a valid charity. Applying this dominant purpose test in the instant case, there remains no doubt that it has been established for charitable purpose and its predominant objects are promotion of art, science and to develop, 32 ITA No. 161/Jodh/2020 TatpadamUpavan construct and maintain Statute of Lord Shiva. Since the dominant objects of the appellant company are promotion of art, science and to develop, construct and maintain Statute of Lord Shiva etc, then conducting of cultural and social event by the appellant with the ancillary objects of promoting organized arts, recreation & education, cannot be said to be business. The objects of the appellant Company are purely for the advancement of the object of the general public utility which has no connection with carrying out any trade, commerce or business. The generation of profit from the dance programme amounting to Rs. 4,61,24,845/- is merely incidental to main objects of the appellant trust. In the instant case, predominant object of the appellant company is development, operation & Maintenance of the project of recreation park including erection of Lord Shiva statue and other recreational facilities for general public utility on non-profit basis to facilitate tourism, recreation & socio cultural activities which is nothing but for the public welfare comprising of enlightening the general public about our art and culture. Thus, the predominant object of the appellant is not to earn profit but to contribute for public welfare, carrying out an event for raising awareness amongst the general public cannot be said to be in the nature of -trade, commerce or business. 25. It appears that the AO got carried away by the fact that programme organized by the appellant was a dance programme which was performed by a bollywood actress. But in fact, it was an activity carried out in furtherance of predominant objects of the trust. Merely because some incidental or ancillary activity carried out in furtherance of its predominant objects generates surplus, it could not be said that there was any profit motive so as to invite the restriction contained in the first proviso to Sec. 2(15) of the Act. The test now is more clearly than in the past, the genuineness of the purpose tested by the obligation created to spend the money exclusively or essentially on "charity". If that obligation is there, the income becomes entitled to exemption. That, in my opinion, is the most reliable test. The Hon'ble Supreme Court in the case of Aditanar Educational Institution v. Addl. CIT [1997] 224 ITR 310 (SC) held that the acid test is whether, on an overall view of the matter, the object is to make profit. The Court held that if after meeting the expenditure, if any surplus results incidentally from the activity lawfully carried on by the educational institution, it will not cease to be one existing solely for educational purposes," since the object is not to make profit. It is inevitable that in carrying on the activities, certain surplus may ensue. The earning of surplus itself would not mean that the appellant existed for profit. 'Profits' means that surplus over which the owners of the entity have a right to withdraw for any purpose including the personal purpose. Profit making would therefore means private profit. Profit making would not mean the surplus that results from certain activities for which the organization is devoted, is ploughed back for the promotion of the very same activities. In the present case, the appellant has conducted a dance 33 ITA No. 161/Jodh/2020 TatpadamUpavan event which has yielded a surplus. The appellant has not been formed and is not carrying on activities with profit motive. There is no intention to make profits. The objects of appellant include promotion of arts, science and culture. The surplus, if any, arising from the activities are solely utilized for the achievement of its objects and no portion is utilized for distribution of any income or profits. 26. Cultural event and sale of tickets:- The AO while invoking the provisions of sec. 2(15), laid much emphasis on the fact that organizing of a cultural event is in the nature of business and falls within the scope of expression "Trade, Commerce or business" in the context of 2(15) as it sold event tickets for very high rates. By way of referring to the appellant's objects, provisions of sec. 2(15) and various judicial precedents, it has already been held that organizing of a cultural event in fulfillment of its main objects of development and promotion of arts, education and culture and construction of statute of Lord Shiva, cannot be termed as "trade", "commerce" or "business" and this activity was carried out without any profit motive just for fulfillment of predominant objects of the appellant company/trust. Merely because tickets were sold at high price, it cannot be said that there was any profit motive in organizing this cultural activity or the activity was in the nature of trade, commerce or business. The appellant explained that the object behind the value/ price of ticket was just to get contribution for the charitable objective which included the prime cause of construction of world class Shiva Statue of 351 feet at Nathdwara and the amount mentioned on the entry pass could by no chance be considered as 'consideration' for the services. The second object of the MOU of the appellant company is that "No object of the company will carry out on commercial basis". It is relevant to note here that during the year under consideration, the amount spent towards construction of Statute of Lord Shiva at the end of the year for the relevant financial year ended on 31.03.2017 stood at Rs.92.36 Crs as per audited Balance sheet as against Rs. 39.16 Crs at the beginning of the previous year. Thus, it is evident that a sum of Rs. 53.20 Crs (Rs.92.36 Crs less Rs. 39.16 Crs) was spent during the relevant previous year as per audited Balance sheet of the appellant towards main object and there is no dispute on the spending of this money. Thus, it is explicitly clear that amount collected from sale of tickets l.e. Rs.4.85 Crs stood utilised and included in Rs. 53.20 Crs. spent for the Main Object of the appellant trust which comes to less than 10% of the total funds utilised during the year. The AO worked out total receipts at Rs.17,15,34,382/ including Rs.4,85,15,000/ being receipts from the event and worked out percentage of receipts as 28% of total receipts. The appellant has explained that receipts from the event were Rs.4,85,15,000/ which is about 15.56% only of the 34 ITA No. 161/Jodh/2020 TatpadamUpavan total receipts of Rs.31,16,81,003/- during the year from various sources, as shown below:- (a) Donation Rs. 11,34,36,207/- (b) Other Income Rs. 4,85,15,000/- Interest Income Rs. 95,83,275/- (c) Proceeds of FDRs Rs. 9,70,73,651/- (d) Loan from Miraj Rs. 2,00,00,000/- (e) Bank Overdraft Rs. 2,30,72,870/- Total Rs.31,16,81,003/-, This factual aspect has not been correctly considered by the AO. The appellant has clarified that the receipts from event l.e. Rs.4,85,15,000/- were about 15.56% of the total receipts of Rs.31,16,81,003/- and therefore, the second condition as mentioned in the proviso to sec. 2(15) of the Act, was not attracted in its case. Income-tax Act provides exemption to income of charitable societies/institutions under section 11 of the Act. For this purpose, the term "Charitable purpose" has been defined in section 2(15) of the Income-tax Act. This is an inclusive definition and prior to its amendment vide Finance Act, 2008, w.e.f. 1-4-2009, it was as under- "Charitable purpose' includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility." Vide Finance Act, 2008 and thereafter amendments have been made to the section. At present, section 2(15) reads as under- "2(15) "charitable purpose" includes relief of the poor, education, yoga, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic 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 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 35 ITA No. 161/Jodh/2020 TatpadamUpavan consideration, irrespective 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 actual carrying out of such advancement of any other object of general public utility; and (ii) the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year;" A plain reading of the proviso to Section 2(15) reveals that two conditions which disqualifies a trust to be eligible for exemption u/s 11/12 of the Act are: (1) if it carries on any activity in the nature of trade, commerce or business which is NOT in the course of carrying out of advancement of any other object of general public utility: AND (2) the aggregate receipts from such activity or activities during the previous year, exceed twenty per cent of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year. Here, it may be noted that these two conditions are connected by the word "AND", not "OR", which means that both these conditions should be satisfied simultaneously, only then a trust would be disqualified to avail the exemption u/s 11/12 of the Act. As has been explained above, the appellant trust's receipts from the dance event were 15.56% of its total receipts and therefore, second condition for disqualification was not satisfied in its case. That being so, the benefit of exemption u/s 11/12 of the Act could not be denied the appellant trust, even if, presuming but not accepting that first condition was satisfied in its case. Moreover, in the case of the appellant trust, as has been discussed in detail in preceding and subsequent paras, the first condition also is not satisfied and therefore, the appellant trust is absolutely eligible for exemption u/s 11/12 of the Act. 27. Further, it may be noted that the money received from organizing the event was duly spent for construction of Lord Shiva Statute which was the predominant object of the appellant trust. In the case of ICAI Accoun Research Foundation and Anr. vs. Director General of Income Tax (Exemptions) and Ors. [(2009) 226 CTR (Del) 27]: 321 ITR 73, the Hon'ble Delhi High Court held that as long as the 36 ITA No. 161/Jodh/2020 TatpadamUpavan money received by the charitable institution is put to charitable use, it cannot be said that charitable institution is carrying out commercial activity, the relevant portion of the said judgment is reproduced as below:-: “18. The first case which may be relevant on this aspect the judgment of this court in the case of Additional CIT v. Hamdard Dawakhana MANU/DE/0104/1985: (1986) 157 ITR 639 (Del) In that judgment unamended definition of charitable purpose contained in Section 2(15) of the Act was considered Following discussion contained in the judgment reproduced unamended definition as well along with its interpretation: 17. We find that on a proper construction of the Act, this is not the meaning to be given to the definition. In order to have a charity, you must have a source of income. The income may come from gifts, or it may come from running a business. In this case, the trust is of a portion of the income of the Hamdard Dawakhana. Although the source of the income is a business, the object of the trust is not to run that business, but to utilise the income of that business for a charitable purpose. The income has been divided into two portions, i.e., khandani income and the qaumi income. That portion of the income which is not earmarked for charity is subject to tax, but the remaining portion has to be used for charitable purposes. 18. In our view, the entire point is now covered by the Supreme Courts judgment in Addl. CIT v. Surat Art Silk Cloth Manufacturers Association MANU/SC/0296/1979: (1980) 121 ITR 1. The court pointed out in that case that when the object of a trust was the carrying on of an object of general public utility, it is that object of general public utility which must not involve the carrying on of an activity for profit. It was pointed out that it was immaterial how the money for achieving or implementing such purpose was found. Whether that money was obtained by the running of an activity for profit or not, did not make the charity trust earns the money from the Hamdard Dawakhana. If that money is used for charitable purpose and not for the carrying on of any business at a profit, then the object of the trust is charitable, not with standing the source of the income. 19. It is hardly possible for a charitable trust to work with no source of income. So, the makers of the trust in the present case, dedicated a portion of the income of the business for being used for charitable 37 ITA No. 161/Jodh/2020 TatpadamUpavan purpose As long as the user of that money is charitable, the exemption has to be granted. 23. One significant aspect which is totally ignored by the respondent No. 1 is that the Petitioner Foundation is a deemed company under Section 25 of the Companies Act. This Section reads as under: 25. Power to dispense with "Limited" in name of charitable or other company.- (1) Where it is proved to the satisfaction of the Central.. 24. Thus, the status which is granted by the Government itself is the recognition of the fact that the Petitioner Foundation is essentially established for the purpose of education and/or for advancement of any other project of general public utility." 28. The Hon'ble Gujarat High Court in the case of Director of Income-tax (Exemption) vs. Gujarat Cricket Association [2019] 419 ITR 561 (Guj.), analyzed in detail the issue of applicability of amended sec. 2(15) w.e.f. 01-04- 2009 and held that conduct of activities in the organized manner does not make it business, the relevant extract from this order is reproduced as under:- "a. The Gujarat Cricket Association is a non-profit organization and applies its surplus for the promotion of the game of cricket, and that its objects prohibit the distribution of any surplus amongst its members. On the international matches, charge is levied, but the same would be a nominal charge as it would be impossible to manage the affairs if the viewing is free of cost. d. For achieving its main charitable object, if an institution carries on some commercial activity and there is profit, it cannot be considered to be a business activity, with profit motive, so long as, the profit earned is utilized for the purpose of achieving the main charitable object. c. We have gone through the entire judgment of the Madras High Court in the case of Tamil Nadu Cricket Association (supra). We are convinced with the line of reasoning assigned 6.44 by the Madras High Court and the view taken on the subject. It is true that the decision of the Madras High Court has been f() challenged before the Supreme Court. The Supreme Court has yet to look into the issue and consider whether the view taken by the Madras High Court is the correct reposition of law or not ? However, as on date, the view taken by the Madras High Court on the subject holds the field. 38 ITA No. 161/Jodh/2020 TatpadamUpavan d. We are quite amazed with some of the findings recorded by the Assessing Officer as well as the Commissioner of Income- tax (Appeals). One of the findings recorded is that the association should not sell tickets for watching the cricket matches. Are the authorities trying to convey that the association should not sell tickets even when it comes to international matches. How does the Revenue expect the association to distribute the tickets in such circumstances. e. Having regard to the materials on record, we are convinced that the main and predominant object and activity of the assessee is to promote, regulate and control the game of cricket in the State of Gujarat. The undisputed fact is that over a period of years, this activity has been recognized by the Income-tax Department as a charitable activity and the registration under section 12A of the Act was granted to the assessee. A number of assessment orders under section 143(3) were passed, wherein the assessee was held eligible for the exemption under sections 11 and 12 of the Act. It appears that it is only after the proviso came to be inserted that, all of a sudden, the Department now believes that the activity of the assessee is commercial in nature and no longer charitable. It is difficult for us to take the view that the assessee could be said to be carrying on "trade, commerce or business" under the garb of the activity being "general public utility". Merely because an activity is performed in an organized manner, that alone, will not make such activities as business/commercial activity. The profit motive is one essential ingredient which is apparently missing in the case on hand. In carrying out an activity, one may earn profit or one may incur loss. But for making it as a business activity, the presence of the profit motive is sine qua non. f. In the case on hand, the ultimate beneficiary is either the cricketer or the game of cricket. The assessee is not charging any fees or revenue from the cricketer who is the ultimate beneficiary. Thus there is no quid pro quo relationship with the t gfaffcricketer. The assessee is promoting cricket on the charitable basis as far as real beneficiary is concerned. Whenever the revenue is earned, the same is not on commercial lines and the same could be said to be earned without any commercial attributes. The revenue is generated for recovering the cost, at least partly if not in full. g. In the aforesaid view of the matter, we are not convinced with the case put up by the Revenue, It is not the case of the Revenue that the objects of the trust are not charitable, but the case of the Revenue in that the 39 ITA No. 161/Jodh/2020 TatpadamUpavan activities undertaken by the association are not charitable in nature. In the result, this appeal fails and is hereby dismissed. The substantial question of law, as formulated by this court, is answered in favour of the assessee and against the Revenue." As observed by the Hon'ble Gujrat High Court, it is not possible that game of cricket could be played without sale of tickets to organize the huge public. Similarly, in appellant's case also, a classical dance event cannot be organized without sale of tickets as general public was invited in garden having capacity of thousands of persons, that too when the dance was going to be performed by the veteran actress Ms. Hema Malini. In case of the appellant, profit element is clearly missing and merely because tickets were sold, it cannot be assumed that the appellant was engaged in carrying out activities for earning profit. The ultimate beneficiary of the said cultural Event was general public only. There are various decisions wherein it has been held that selling of tickets for the purpose of organizing an event or doing any activity for the advancement of general public utility shall not alter or vitiate the nature of charitable purpose of any trust/ institution, few of them are discussed as under:- 1. Tamil Nadu Cricket Association vs. Director of Income-tax (Exemptions) TAX CASE (APPEAL) NO. 450 OF 2013 [2013] 40 taxmann.com 250 (Madras): "56. The assessee is a member of Board of Control for Cricket in India (BCCI), which in turn is a member of ICC (International Cricket Council). BCCI allots test matches with visiting foreign team and one day international matches to various member cricket association which organise the matches in their stadia. faff The franchisees conduct matches in the Stadia belonging to the State Cricket Association. The State Association is entitled to all 1987 safras (2) in-stadia sponsorship advertisement and beverage revenue and it incurs expenses for the conduct of the matches. BCCI earns revenue by way of sponsorship and media rights as well as franchisee revenue for IPL and it distributes 70% of the revenue the member cricket association. Thus the assessee is also the recipient of the revenue. Thus, for invoking Section 12AA read with Section 2015) of the Act, Revenue has to show that the activities are not fitting with the objects of the Association and the dominant activities are in the nature of trade, commerce and business 40 ITA No. 161/Jodh/2020 TatpadamUpavan We do not think that by the volume of receipt one can draw the inference that the activity is commercial. The Income Tax Appellate Tribunal's view that it is an entertainment and hence offended Section 2(15) of the Act does not appear to be correct and the same is based on its own impression on free ticket, payment of entertainment tax and presence of cheer group and given the irrelevant consideration. These considerations are not germane in considering the question as to whether the activities are genuine or carried on in accordance with the objects of the Association. We can only say that the Income Tax Appellate Tribunal rested its decision on consideration which are not relevant for considering the test specified under Section 12AA(3) to impose commercial character to the activity of the Association. In the circumstances, we agree with the assessee that the Revenue has not made out any ground to cancel the registration under Section 12AA(3) of the Act." 2. DDIT vs. The Booksellers & Publishers Association of South India ITA No.1602/Mds/2014: "Therefore, the receipts in question are incidental to the activities carried on by the assessee. In fact, this Tribunal in the order dated 03.12.2013 has observed as follows:- Taking cue from the aforesaid case law, we hold that since the DIT(E) had already considered the charitable nature of assessee's objects at the time of granting registration and there is no change in the said factual position, impugned cancellation of registration under challenge does not hold good. So far as receipts in question are concerned, they are incidental to the activities carried out as per assessee's objects of conducting book fairs etc. In view of this finding of the Tribunal, the receipt in question is only incidental to the activity of the assessee. In fact, the registration granted to the assessee was cancelled on the ground that the assessee is collecting sale of tickets on book fair, rent on stalls and service tax. For the very same assessment year under consideration, this Tribunal found that the cancellation of registration is not justified. In view of the decision of co- ordinate Bench of this Tribunal, to which the Ld. Accountant Member is a party, this Tribunal is of the considered opinion that the collection of sale of tickets, rent on stalls and service tax are incidental to the main activity of the assessee. Therefore, it cannot be construed as trade or commerce. 41 ITA No. 161/Jodh/2020 TatpadamUpavan Hence, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly allowed the claim of the assessee under Section 11 of the Act." 3. Director of Income Tax (Exemption) Vs Gujarat Cricket Association R/TAX APPEAL NO. 268 of 2012: "141. From the aforesaid decisions, it is apparent that merely because the Association puts up tickets of the international cricket matches for sale and earns some profit out of the same, it would not lose its character of having been established for a charitable purpose. It is also important to note that we must examine as to what is the dominant activity of the institution in question. If the dominant activity of the institution was not business or trade or commerce, then any such incidental or ancillary activity would also not fall within the categories of the trade, commerce or business. It is clear from the facts of the present case that the driving force is not the desire to earn profit but the object is to promote the game of cricket and nurture the best of the talent." 4. Chhattisgarh State Cricket Sangh vs. Deputy Commissioner of Income-tax, (Exemption) Raipur IT Appeal No. 265 (RPR) of 2017: "In order to adjudicate the proviso to section 2(15), the factual position with regard to issue in hand is to be reverted. Cricket is indeed an immensely popular game in this part of the world, and anything to do with cricket results in mass involvement of public at large. The sheer strength of these numbers results in higher visibility of cricketing activities and the scale of operations on which the work for development of the cricket is to be carried out. These facts, by itself and without the assessee deviating from their objects or venturing into trade, commerce or business, cannot require the activities to be treated as commercial activities. When a cricket stadium is to be built, it has to accommodate a very large number of persons but the size of the stadium would not mean that the activity is for anything other than promotion of cricket. When the scale of operations are larger, even the surplus or deficit could be which commercial activities could be carried out but that fact cannot convert an object of general public utility into a commercial activity. The objects of the assessee are carefully analysed and no any objects were found, other than object of cricket, being pursued by these cricket associations. The objects of these cricket associations clearly demonstrate that these cricket associations exist and operate purely for the purpose of promoting cricket. Therefore, the proviso to section 2(15) cannot be invoked in the case of the assessee." 42 ITA No. 161/Jodh/2020 TatpadamUpavan "In the present case, the assessee is receiving money from BCCI as subsidy for providing services in the IPL matches, for conducting cricket matches for hiring ground only to promote the cricket and encouraging new talent in the field of cricket and objects of all the other cricket associations of any other state are similar in nature. Therefore, the assessee has not provided any services to any trade, commerce or industry as defined in the proviso to section 2(15)." 29. The AO, while holding that the selling of tickets at high rates is advancement of their own commercial interest and is hit by provisions of sec. 2(15) of the Act, relied on the judgment of the Hon'ble ITAT, Jaipur in the case of ITO vs. Rajasthan Cricket Association (supra). The appellant has brought to my knowledge that the said judgment was decided by the Hon'ble ITAT, Jaipur Bench-B, Jaipur ex-parte in the absence of the assessee and therefore, the Hon'ble bench has merely relied upon the version of the department and the case of Punjab Cricket Association Vs ACIT IT Appeal No. 427 (Chd.) of 2017 as tendered by the department. But subsequently, a miscellaneous application was filed by the assessee in the said case before the Hon'ble ITAT, Jaipur and the said judgment has been duly recalled by the Hon'ble ITAT, Jaipur and now appeal nos. 1355 & 1356/JP/2018 in case of Rajasthan Cricket Association (supra) are pending for final adjudication before the Tribunal. 30. The appellant has contended that the AO failed to consider the judgments passed by the jurisdictional high court in favour of Rajasthan Cricket Association in earlier years. I have gone through the assessment order and it is found that the AO while applying the ratio of the Hon'ble ITAT's judgment in the appellant's case, totally ignored the facts of the cases relied on by the appellant and very conveniently mentioned that facts of these cases are not applicable to the assessee's case. I have also gone through the judgment of the Hon'ble Rajasthan High Court in the case of Commissioner of Income-tax (Exemptions) vs. Rajasthan Cricket Association [2018] 98 taxmann.com 425 (Rajasthan), and it is observed that various substantial questions related to different appeals were dealt by the jurisdictional High Court. In appeal no. DBITA 257/2017 admitted on 29.08.2017, the question of law with respect to the exemption u/s 11 read with Section 2(15) and its proviso was raised before the Hon'ble Rajasthan High Court. The Hon'ble Court held that while considering the matter, the real purpose of registration is to be seen that the object falls within the definition of Section 12AA and proviso. In case of the appellant also, the real purpose for the registration is social welfare and to do charitable activities to attain objects of promotion of art, culture and to construct the tallest statue of Lord Shiva. To attain these objects, 43 ITA No. 161/Jodh/2020 TatpadamUpavan the appellant can also conduct shows and organize cultural events. In order to attain it predominant objects, the appellant organized a Cultural Event ie "Yashoda Krishna Nritya Natika" on 15-10-2016, which was for the advancement of the object of general public utility and the same was not in the nature of trade, commerce or business to fall within the scope of proviso to Section 2(15) of the Act. This view gets further support from the following judicial pronouncements:- The Hon'ble Andhra Pradesh High Court in the case of CIT vs. Riding Club [1987] 32 Taxman 295 (Andhra Pradesh) held that mere selling of ticket for music programme does not alter the assessee's claim where objects of assessee were of general public utility not involving carrying on of any activity for profit, the relevant para 18 of this order is reproduced as under:- "18. Therefore, in the light of the above law, we have to see what is the object and purpose of the club and whether the profit derived is incidental to advance the object and purpose of the club, or its main purpose is to earn profits in carrying on racing? The restrictive clause must be, as held by the gfafaf R. Supreme Court, read along with 'the advancement of any other object of furt (ge) general public utility. The object of the club is to impart training to its members equestrian games to make them perfect in the art of horsemanship. Its object is not conducting races as such. It is not in the nature of carrying on any business activity. The imparting of training in the art of horsemanship especially to student members is of the purpose. So the restrictive clause must be read with the advancement of the art of horsemanship which is of general public utility and not with the object of racing as such. The charitable purpose is imparting training in equestrian games to make the trainee to acquire perfection and proficiency in the art of the equestrian games. Horsemanship is an essential part of the game. Without acquiring proficiency in racing it would appear to be incomplete to have perfection in the art of horsemanship. Racing is thus an integral facet of equestrian games, such as, mounted sports, polo and riding. The object of the club thus is a definite one, viz, the charitable purpose, and in the advancement of that. object incidentally it conducts races as means to achieve the object and the income derived there from is applied to defray the expenses being incurred to maintain staple and the salaries of the staff required for imparting training to its members. Application of money for providing the means of healthy recreation or sporting endurance is a good charitable public purpose. The subscription fee and riding fee is a pittance when compared to the expenditure incurred to maintain horses, etc. As held by 44 ITA No. 161/Jodh/2020 TatpadamUpavan the Supreme Court, the activity of advancement must not involve carrying on of an activity for profit. If the activity is intended to yield profit for the continued existence of the club as such, then the club is not carrying on the business exclusively for the purpose of making profit but is carrying on the activity incidental to the main object, viz., to impart training to its members in the art of horsemanship. Take an illustration that if the club, with a view to generate its resources to meet the expenses required for maintaining the horses and for payment of salaries to the employees, seeks assistance of philanthropic and reputed musicians and conducts a musical concert and accordingly some amount is received in conducting the musical night by sale of tickets, then the question that arises is whether the income earned is a profit. It is needless to mention that conducting musical concert is only incidental to the advancement of the main object of the club. It is true, as found by the appellate authority and the ITO, that the horses of the assessee participate in the Gymkhana races conducted by the Hyderabad Race Club and earn income, but, as stated earlier, it is only with a view to generate the income of the club, its horses are allowed to be participated in the Gymkhana races. In that regard some income is derived. But as already held, the sole main object is to impart training in equestrian necessarily involve betting or gambling. There is no express prohibition granted the benefit of section 11. In Breach Candy Swimming Bath Trust's case (supra), selling eatables, etc., and deriving income there from is only incidental to running the swimming pool and is exempt from taxation. The ratio too applies to the facts of this case. Therefore, the contention of the revenue that the assessee is engaged in the activity of earning profits is devoid of force and conducting races is only a fund- raising activity as a means to achieve the end of promoting equestrian games. Its primary and dominant object is only promotion of equestrian games. The assessee had applied the surplus only for the purpose of equestrian activities. It is also of necessity to note that article 39 of the club provides that on dissolution of the club the general body has to sell the property and make over the sale proceeds to any charitable or educational institution as decided upon by a majority of the members of the club. Thereby, no member of the club has any direct or incidental personal advantage in the property of the club. The entire property has to be made over to any charitable or educational institution. No doubt, so long as he is a member of the club, he is entitled to receive the advantage of training. It is only incidental to his membership in the club. Thereby, he is not having any independent profit or share in the profit for himself..." 45 ITA No. 161/Jodh/2020 TatpadamUpavan 31. The Hon'ble Madras High Court in the case of Tamil Nadu Cricket Association [2014] 360 ITR 633 (Mad.) held that the amounts received by the assessee from (a) ground booking charges, (b) health club charges, (c) income from corporate boxes, (d) lawn booking income, (e) sponsorship money and sale of tickets, advertisement, souvenirs and other such receipts do not result in the assessee being held as undertaking activities in the nature of "trade, commerce or business". These receipts are intrinsically related, interconnected and interwoven with the charitable activity and cannot be viewed separately. The activities resulting in the said receipts are also charitable activities and not "trade, commerce or business" activities. 32. In the case of Gangabai Charities [1992] 197 ITR 416 (SC), the Hon'ble Apex Court held that for the purpose of claiming the benefit of exemption from tax for the income of a charitable trust, the conditions laid down in Section 11(1)(a) of the Act must be met. That section as analysed by the court has three fold requirements, viz., that the income is derived from property held under the trust, the trust is wholly for charitable or religious purposes; and the exemption is permissible to the extent to which such income is applied to such purposes in India. 33. A five-Judge Constitution Bench of the Hon'ble Supreme Court in the case of Addl. CIT Vs. Surat Art Silk Cloth Manufacturers Association, [1980] 121 ITR 1 (SC): The (1979) 13 CTR (SC) 378, dealt with the question of interpretation of clause (15) of Section 2 of the Act and the Apex Court held as under: "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 46 ITA No. 161/Jodh/2020 TatpadamUpavan 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. “......where the predominant object of the activity is to carry out the charitable purpose and not to earn profit, it would not lose its character of a charitable purpose merely because some profit arises from the activity. The exclusionary clause does not require that the activity must be carried on in such manner that it does not result in any profit. It would indeed be difficult for a person in charge of a trust or institution to so carry on the activity that the expenditure would not only be difficult of practical realization but would also reflect unsound principle of management. We, therefore, agree with Beg, J. when he said in Sole Trustee, Loka Shikshana Trust Vs. CIT 1975 CTR (SC) 281: (1975) 101 ITR 234 (SC), 256 that: 'If the profits must necessarily feed a charitable purpose under the terms of the trust, the mere fact that the activities of the trust yield profit will not alter charitable character of the trust. The test now is, more clearly than in the past, the genuineness of the purpose tested by the obligation created to spend the money exclusively or essentially on charity"." The Hon'ble Apex Court reiterated its earlier view in CIT v. Andhra Chamber of Commerce, [(1965) 55 ITR 722] holding 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. 34. The Hon'ble Apex Court, dealing with this issue in various other cases viz. Aditanar Educational Institution v. Addl. CIT [1997] 90 Taxman 528/224 ITR 310 (SC), American Hotel and Lodging Association Educational Institute v. CBDT [2008] 170 Taxman 306/301 ITR 86, Queen's Educational Society v. CIT [2015] 55 taxmann.com 255/231 Taxman 286/372 ITR 699 expressed the similar view holding that where an educational institution carries on activity of education primarily for educating persons, the fact that it does make a surplus does not lead to a conclusion that it becomes an institution for the purpose of making profit. The Hon'ble Jurisdiction! ITAT in the case of Mehrangarh Museum Trust v. Assistant Commissioner of Income-tax, Circle-1, Jodhpur [2014] 48 taxmann.com 129 (Jodhpur - Trib.) held as under:- 47 ITA No. 161/Jodh/2020 TatpadamUpavan “3.23 As elaborately explained supra, the appellant is engaged in preservation of monuments and articles/things of historic nature, which is the predominant object of the appellant. The aforesaid activities are incidental to the main object only. As has been held in various decisions relied upon charitable services cannot, result in the services being regarded as business activities and, accordingly, the appellant does not cease to be a charitable institution, notwithstanding proviso to section 2(15) of the Accordingly, Ground No. 2 of this appeal is allowed.” Similar view has been expressed by the Hon'ble Mumbai Tribunal in the case of All India Rubber Industries Association v. Additional Director of Income- tax(E), Mumbai [2018] 100 taxmann.com 7 (Mumbai - Trib.) observing as under- “16. From the perusal of the aforesaid, what stands out is that in order to invoke the proviso to Sec. 2(15) of the Act, it is imperative for the Revenue to establish that there is an element of profit motive in the activities of the assessee. Notably, the fact that some of the activities carried out by an entity involving charging of fee, etc. have resulted in a surplus could not ipso facto be determinative of the fact that there was an element of profit motive........ 18. In this background, if we are to examine the case made out by the Revenue in the instant, we do not find any finding at all by the Assessing Officer or even by the CIT(A) that any of the activities of the assessee are with a profit motive so as to attract proviso to Sec. 2(15) of the Act. The stream of incomes noted by the Assessing Officer in para 10 of the assessment order on account of advertisement and subscription income, seminar income, sale of books and periodicals, etc. are not shown to be carried out with any profit motive and rather, the explanation consistently advanced by the assessee has been to the effect that such activities are only incidental to its object of promoting and safeguarding rubber industry. In fact, in para 6 of the assessment order, a portion of the submissions furnished by the assessee have been reproduced wherein assessee specifically asserted that dissemination of information and publication of magazine relating to Rubber industry in India and developments abroad was a substantive activity carried out, which was for the charitable purpose of promoting the interests of Rubber industry and trade. Therefore, in view of the aforesaid discussion, in our view, the Assessing Officer erred in invoking proviso to Sec. 2(15) of the Act to treat the activities of the assessee as being non-charitable specifically considering the fact that no 48 ITA No. 161/Jodh/2020 TatpadamUpavan material or evidence has been led to show that there was any profit motive in carrying out such activities. Pertinently, there is no rebuttal at any stage to the assertions of the assessee that its activities in the instant years are similar to the activities in the past years. 19. Therefore, in view of the aforesaid discussion, we set- aside the order of CIT(A) and direct the Assessing Officer to allow the exemption u/s 12A of the Act to the assessee." Further, ratio laid down in aforesaid cases also finds echo with the ratio laid down in the following judicial precedents as relied on by the appellant:- i. Advertising Agencies Association of India v. Assistant Director of Income-tax (E), Mumbai [2019] 104 taxmann.com 218 (Mumbai - Trib.) ii. Credai Bengal v. Income-tax Officer (Exemptions), Ward-1(1), Kolkata [2019] 110 taxmann.com 113 (Kolkata - Trib.) iii. India Trade Promotion Organization vs. DGIT(E) 371 ITR 333 (Delhi) iv. Commissioner of Income-tax-1. Jodhpur VS. Jodhpur Development Authority [2017] 79 taxmann.com 361 (Rajasthan) v. CIT vs. Dr. Virendra Swaroop Educational Foundation [2017] 77 taxmann.com 313 (Allahabad) vi. ACIT (E) vs. Mahima Shiksh Samiti [2017] 79 taxmann.com 38 (Jaipur - Trib.),- vii. Baba Gandha Singh Education Trust vs. CIT [2012] 20 taxmann.com 111 (Chandigarh ITAT) viii. CIT (E) vs. Ambala Public Educational Society [2020] 113 taxmann.com 404 (SC) 35. The appellant has also furnished copies of orders recently passed by the Hon'ble Mumbai ITAT in the cases of National Payment Corporation of India, bearing appeal No. I.T.A. No.5431/Mum/2015 dated 06-07-2020 allowing exemption u/s. 11 of the Act interpreting the first proviso to Section 2(15) of the Act and the Hon'ble Gujarat High Court in the case of CIT (Exemption) vs. United Way of Baroda (2020) 596 ITR 443 pronounced on 25-02-2020. The facts of the case of United Way of Baroda are almost identical to the appellant's case. In that case also, the assessee organized a Garaba Event and charged tickets from participates. The AO considered the sale of entry tickets and hiring out of stalls as commercial activity and concluded that the activity of the assessee fell within the ambit of trade, commerce or business. Accordingly, he held that the activities of the assessee as per the amended provision of Section 2(15) of the Act could not be said to be advancement of any other object of general public utility and, therefore, the assessee was not liable to claim the benefit under Sections 11 and 49 ITA No. 161/Jodh/2020 TatpadamUpavan 12 of the Act. Both CIT(A) and the Hon'ble Tribunal decided the case/issue in favour of the assessee holding that activities carried out by the assessee are in the nature of education, medical relief and help to poor which are specifically covered by section 2(15) and not by its residuary segment. On appeal, the Hon'ble Gurjarat High Court held as under:- "12. Section 2(15) of the Act, 1961 reads thus; "2(15) "charitable purpose" Includes relief of the poor, education, yoga, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic 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 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, unless- (i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and (ii) the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year;" 13. Prior to the introduction of the Proviso to Section 2(15) of the Act, there was no dispute that the assessee herein was established for charitable purposes and, therefore, its income was not to be included in the total income and was, therefore, C/TAXAP/95/2020 ORDER granted the benefit of exemption. The Income received by the assessee is from organizing the event of Garba by sale of tickets and also leasing out food and beverages outlets at the venue of the event. However, the dominant and main object of the assessee cannot be said to be organizing the event of Garba. The charitable activities which the assessee has been undertaking has been discussed by the Appellate Tribunal. We take notice of the fact that the assessee has been supporting 120 non-government organizations. The 50 ITA No. 161/Jodh/2020 TatpadamUpavan assessee is into health and human services for the purpose of improving the quality of life in the society. The objectives of the Society includes mobilizing resources from the local communities. It organizes medical camps for thalassemia affected children. It also provides vocational training to the disabled orphans, undertakes various program for empowering women including providing midday meal to the poor students. The activities like organizing the event of Garba including the sale of tickets and issue of passes etc. cannot be termed as business. The two authorities have taken the view that the profit making is not the driving force or the objective of the assessee. This is indicative of the fact that any Income generated by the assessee from events like Garba does not find its way into the pockets of any individual or entities. It is to be utilized fully for the purposes of the objects of the assessee. As held in many pronouncements, the expression "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 organized manner. The purpose and the dominant object for which an institution carries on its activities is material to determine whether the C/TAXAP/95/2020 ORDER same is business or not. The object of introducing the first proviso is to exclude the organizations which are carrying on regular business from the scope of "charitable purpose". 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 the activity may be regarded as a business even when the 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. 14. In the overall view of the matter, more particularly, having regard to the concurrent findings recorded by the two authorities, we are of the view that we should not interfere with the order passed by the Appellate Tribunal. 15. In the result, this appeal fails and is hereby dismissed." Keeping in view the facts and circumstances of the case, legal position and precedents as discussed above and authoritative judicial precedents cited supra in para nos. 19 to 25 (Supra), it is held that the Cultural Event organized by the appellant was for the advancement of "the object of general public utility" and the 51 ITA No. 161/Jodh/2020 TatpadamUpavan same was not in the nature of trade, commerce or business to fall within the scope of proviso to Section 2(15) of the Act. Therefore, proviso to Section 2(15) is not applicable in case of the appellant and the appellant is entitled to exemption u/s 11 of the Act. 36. The conspectus of facts and circumstances of the case and judicial precedents discussed in preceding paras, clearly illustrate that the AO denied the exemption u/s. 11 of the appellant by holding that its case is hit by proviso to sec. 2(15) as selling tickets for a dance programme amounted to business with profit motive. On the contrary, the appellant company duly established that it is incorporated as Special Purpose Vehicle (SPV) for the development, operation & maintenance of the project of recreation Park including erection of Lord Shiva statue, amusement park and other recreational facilities for general public on non- profit basis. The appellant company is duly registered u/s. 12AA and also granted approval u/s. 80G of the Act. Since the dominant objects of the appellant company are charitable in nature, conducting of cultural and social event by the appellant within the scope of the main objects of promoting organized arts, recreation & education for general public, cannot be said to be business. Moreover, organizing cultural and social events/programs was aimed at attainment of main objects of charitable nature, which does not involve carrying on any activity in the nature of trade, commerce or business. The stream of income on account of sale of tickets was only incidental to its main object. As the profit motive does not exist in case of the appellant Company/trust, therefore the organization of event cannot be considered to be in the nature of trade, commerce or business. In order to invoke the proviso to Sec. 2(15) of the Act, it is essential to establish that the activities in question are carried out with a profit motive, which the AO has failed to establish. The programme was for promotion of organized arts, which was performed by the renowned Bharatnatyam Dancer Ms. Hema Malini without any honorarium and the surplus generated was spent towards construction of Statue of Lord Shiva with non-profit motive. The total receipts from the event were Rs.4,85,15,000/- which were 15.56% of the total receipts of Rs.31,16,81,003/ from various sources to the appellant during the year as has been explained in para no. 23 (supra), thus less than 20% of the total receipts. The appellant duly spent amount collected from sale of tickets at Rs.4.85 Cr towards the main object of the appellant. Keeping in view the facts and circumstances of the case and authoritative judicial precedents as discussed above in para nos. 19 to 25 (supra), it is held that the AO is not justified in denying exemption u/s 11 & 12 to the appellant. The ground no. 2 rasied by the appellant regarding this issue is allowed.” 52 ITA No. 161/Jodh/2020 TatpadamUpavan 39. I have considered the facts of the case, assessment order and appellant's written submissions. The AO noted that, during the year under consideration, the assessee claimed total expenditure of Rs. 22,87,80,253/- in the capital account, which was claimed as application of income u/s 11 of the Act. The AO disallowed the said amount as capital expenditure of Rs.22,87,80,253/- and added the same to the total income after having denied the benefit of exemption of income u/s 11 of the Act. The appellant company claimed that it applied this expenditure towards Construction/Erection of Lord Shiva Statue during the relevant financial year in terms of main object of the Memorandum & Article of Association and there is no dispute regarding the genuineness of these expenses. The appellant submitted that in the income and expenditure account, its total receipts were Rs. 17,15,61,482/- against which application under capital account of Rs. 22,87,80,253/- was claimed but since the AO denied exemption u/s 11 of the Act, therefore, the capital expenditure of Rs. 22,87,80,253/- was also disallowed. The appellant further submitted that it has already explained that there was no violation of provisions of sec. 2(15), therefore, exemption u/s. 11 may be allowed to it along with consequential benefit. I have already held in para no. 26 (Supra) that there was no violation of provisions of sec. 2(15). organizing the Cultural Event was for the advancement of the object of general public utility and the same was not in the nature of trade, commerce or business as held by the AO. After holding that the appellant is a charitable institution, eligible for exemption u/s 11/12 of the Act, the appellant society automatically becomes eligible for claim of both capital and revenue expenditure incurred for the objects/ charitable purposes which would be regarded as application of income. Hence, the AO is directed to adopt the appellant trust's status as AOP (Trust) and allow benefits of sec. 11/32 of the Act to the appellant trust. The addition made at Rs. 22,87,80,253/- by way of disallowing capital expenditure is directed to be deleted. The ground no. 3 raised by the appellant regarding this issue is allowed.” 5. Feeling displeased from the finding of the ld. CIT(A), the revenue has preferred the present appeal challenging the finding of the ld. CIT(A) on the grounds as reiterated here in above. The ld. DR representing the revenue apropos to the grounds so raised relied upon the decision of Hon’ble Supreme Court in case of ACIT (Exemptions) 53 ITA No. 161/Jodh/2020 TatpadamUpavan vs. Ahmedabad Urban Development Authority [2022] 143 taxmann.com 278 (SC) and submitted that as it is already by a detailed finding recorded in the order of the assessment proved that the assessee is engaged in the commercial activity. Thus, the ld. DR relying on the judgment of the apex court (Auda’s case supra) submitted that the assessee has undertaken a musical show in which sold tickets for an amount of Rs. 4,85,00,000/- for a different price. As against this income of Rs. 4,85,00,000/-, expenditure is only Rs. 23,96,155/- so the margin of these activity is 95%. Considering the decision of the Hon’ble Supreme Court in the case of Ahmedabad Urban Development Authority (supra), the assessee trust cannot undertake the business activities and therefore, denial of exemption u/s 11 is correct and the finding of the ld. CIT(A) is required to be reversed. 5.1 The ld. DR further referring to the finding of the ld. AO recorded at page 7 of the assessment order wherein the assessee conducted dance performance of Ms. Hema Malini wherein the price tickets were sold for different type of entry and thereby income of Rs. 4,85,00,000/- was earned by the assessee. This is nothing but a business activity 54 ITA No. 161/Jodh/2020 TatpadamUpavan conducted by the assessee. Further, referring to finding of ld. AO recorded at page 21, 22 & 23 of the assessment order. The ld. DR demonstrated that activities of the trust are not to be considered as charitable in nature but are commercial in nature. The whole dance show of Ms. Hema Malini was completely for-profit motive and high price tickets were sold. This action of the assessee is not charitable in nature and can be considered by common person as in the nature of trade, commerce or business. If the legislation intended to apply the above proviso to the trust to the society which are in trade commercial of business nothing stops them from using suitable words. Therefore, the provision of section 2(15) of the Act explicitly confirmed the phrase irrespective of the nature of use or application or intention of the income from such activities which means that the application or expenditure part has no relevance while considering the case for application by said proviso. It is not necessary to be proved by the Department before applying proviso that the assessee is actually doing trade, commerce or business but it will be sufficient to prove that the activities are in the nature of trade, commerce or business. Therefore, the contention of the ld. AO that the activity carried out by the trust by executing sale of tickets at higher rates for organizing or 55 ITA No. 161/Jodh/2020 TatpadamUpavan program is not charitable in activity as per definition of charitable purpose u/s 2(15) of the Act is correct and should be accepted. The selling of tickets against organizing of Dance program Bollywood Star cannot be said to be charitable activity and it is purely an activity in the nature of trade, commerce, and business. To support the contentions so raised, the ld. DR relied on the following paragraph of the judgment of Ahmedabad Urban Development Authority (supra) as under:- “133. The position, therefore, with respect to what kind activities GPU charities could legitimately undertake, was in a state of flux till 2015. However, the amendments cumulatively point to prohibitions that were constant: (1) the prohibition applicable to such charities involved in carrying on activities "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" (2) "irrespective of the nature of use or application, or retention, of the income from such activity" (i.e. activity in the nature of trade, commerce or business for a cess, fee or other consideration). 134. By retrospective amendment, in section 2(15), after the proviso, a second proviso was inserted with effect from 1-4-2009 .- "Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is ten lakh rupees or less in the previous year;"; With the introduction of the second proviso, the resulting situation was that the first proviso (of exclusion of income through an activity as referred to) was inapplicable if the aggregate value of the receipts of such activity did not exceed Rs. 10,00,000, and later by Finance Act, 2012 - this was enhanced to Rs. 25,00,000. 135. The next important change took place through the Finance Act, 2015, which, w.e.f. 1-4-2016 substituted the two provisos to section 2(15) with the following proviso: "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, unless— 56 ITA No. 161/Jodh/2020 TatpadamUpavan (i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and (ii) the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year;" 139. Counsel on both sides went to great lengths and cited several judgments for the proposition that "trade or business" are terms which imply profit-making. They relied on Khoday Distilleries (supra); Raipur Manufacturing (supra); Board of Trustees of the Port of Madras (supra), and Physical Research Laboratory v. K. G. Sharma [1997] 4 SCC 257. It was contended by the revenue, that the reference to terms "business, trade or commerce" and "service in relation to" such activities are meant to imply that profit motive should be completely absent. At the same time - on behalf of the assessees, it was contented that if the proscribed activities i.e., business, commerce or trade or service in relation to such activities - is not the main or dominant object of the GPU charity, any incidental involvement in such activities is permissible. Counsel on behalf of many assessees urged that some of them are statutory corporations charged with developing housing industrial infrastructure sector, regulation of professions (such as chartered accountants, etc.). It was underlined that such corporations are agencies of the state, recognized as "State" under Article 12 of the Constitution, and carry out the essential purposes for which they were set up, which otherwise state departments would have been expected to carry out. It was then emphasized that the activities of such corporations cannot be characterized as motivated by profit- rather their essential purposes are to achieve objects of general public utility. 142. What then is the true meaning of the expressions "fee, cess or consideration"? The careful analysis of the amended proviso to section 2(15), reveal that the prohibition applies in a four-fold manner- (a) The bar to engaging in trade, commerce or business, (b) The bar to providing any service in relation to trade, commerce or business, (c) wherein "for a fee, cess or any other consideration" is the controlling phrase for both (a) and (b) (which are collectively referred to as "prohibited activities" for brevity) (d) irrespective of the application of the income derived from such 'prohibited activities'. 144. "Fee, cess and any other consideration" has to receive a purposive interpretation, in the present context. If fee or cess or such consideration is collected for the purpose of an activity, by a state department or entity, which is set up by statute, its mandate to collect such amounts cannot be treated as consideration towards trade or business. Therefore, regulatory activity, necessitating fee or cess collection in terms of enacted law, or collection of amounts in furtherance of activities such as education, regulation of profession, etc., are per se not business or commercial in nature. Likewise, statutory boards and authorities, who are under mandate to develop housing, industrial and other estates, including development of residential housing at reasonable or subsidized costs, which might entail charging higher amounts from some section of the beneficiaries, to cross- subsidize the main activity, cannot be characterized as engaging in business. The character of being 'state', and such corporations or bodies set up under specific laws (whether by states or the centre) would, therefore, not mean that the amounts are 'fee' or 'cess' to provide some commercial or business service. In each case, at the same time, the mere nomenclature of the consideration being a "fee" or "cess", is not conclusive. If the fee or cess, or other consideration is to provide an essential service, in larger public interest, such as water cess or sewage cess or fee, such 57 ITA No. 161/Jodh/2020 TatpadamUpavan consideration, received by a statutory body, would not be considered "trade, commerce or business" or service in relation to those. Non-statutory bodies, on the other hand, which may mimic regulatory or development bodies - such as those which promote trade, for a section of business or industry, or are aimed at providing facilities or amenities to improve efficiencies, or platforms to a segment of business, for fee, whether charged by subscription, or specific fee, etc, may not be charitable; when they claim exemption, their cases would require further scrutiny. 153. The paradigm change achieved by section 2(15) after its amendment in 2008 and as it stands today, is that firstly a GPU charity cannot engage in any activity in the nature of trade, commerce, business or any service in relation to such activities for any consideration (including a statutory fee etc.). This is emphasized in the negative language employed by the main part of section 2(15). Therefore, the idea of a predominant object among several other objects, is discarded. The prohibition is relieved to a limited extent, by the proviso which carves out the condition by which otherwise prohibited activities can be engaged in by GPU charities. The conditions are: (a) That such activities in the nature of trade, commerce, business or service (in relation to trade, commerce or business for consideration) should be in the course of "actual carrying on" of the GPU object, and (b) The quantum of receipts from such activities should be exceed 20% of the total receipts. (c) Both parts of the proviso: (i) and (ii) (to Section 2 (15)) have to be read conjunctively- given the conscious use of "or" connecting the two of them. This means that if a charitable trust carries on any activity in the nature of business, trade or commerce, in the actual course of fulfilling its objectives, the income from such business, should not exceed the limit defined in sub-clause (ii) to the proviso. C. Sections 10, 11, 12, 12A, 12AA and 13 of the IT Act 167. Thus, the journey which began with Surat Art Silk was interpreted in Thanthi Trust to mean that the carrying on of business by GPU charity was permissible as long as it inured to the benefit of the trust. The change brought about by the amendments in questions, however, place the focus on an entirely different perspective: that if at all any activity in the nature of trade, commerce or business, or a service in the nature of the same, for any form of consideration is permissible, that activity should be intrinsically linked to, or a part of the GPU category charity's object. Thus, the test of the charity being driven by a predominant object is no longer good law. Likewise, the ambiguity with respect to the kind of activities generating profit which could feed the main object and incidental profit-making also is not good law. What instead, the definition under section 2(15) through its proviso directs and thereby marks a departure from the previous law, is - firstly that if a GPU charity is to engage in any activity in the nature of trade, commerce or business, for consideration it should only be a part of this actual function to attain the GPU objective and, secondly - and the equally important consideration is the imposition of a quantitative standard - i.e., income (fees, cess or other consideration) derived from activity in the nature of trade, business or commerce or service in relation to these three activities, should not exceed the quantitative limit of Rs. 10,00,000 (w.e.f. 1-4-2009), Rs. 25,00,000 (w.e.f. 1-4-2012), and 20% (w.e.f. 1-4-2016) of the total receipts. Lastly, the "ploughing" back of business income to "feed" charity is an irrelevant factor - again emphasizing the prohibition from engaging in trade, commerce or business. 58 ITA No. 161/Jodh/2020 TatpadamUpavan 168. If one understands the definition in the light of the above enunciation, the sequitur is that the reference to "income being profits and gains of business" with a further reference to its being incidental to the objects of the Trust, cannot and does not mean proceeds of activities incidental to the main object, incidental objects or income derived from incidental activities. The proper way of reading reference to the term "incidental" in section 11(4A) is to interpret it in the light of the sub- clause (i) of proviso to section 2(15), i.e., that the activity in the nature of business, trade, commerce or service in relation to such activities should be conducted actually in the course of achieving the GPU object, and the income, profit or surplus or gains can then, be logically incidental. The amendment of 2016, inserting sub clause (i) to proviso to section 2(15) was therefore clarificatory. Thus interpreted, there is no conflict between the definition of charitable purpose and the machinery part of section 11(4A). Further, the obligation under section 11(4A) to maintain separate books of account in respect of such receipts is to ensure that the quantitative limit imposed by sub-clause (ii) to section 2(15) can be computed and ascertained in an objective manner. 172. Yet another manner of looking at the definition together with sections 10(23) and 11 is that for achieving a general public utility object, if the charity involves itself in activities, that entail charging amounts only at cost or marginal mark up over cost, and also derive some profit, the prohibition against carrying on business or service relating to business is not attracted - if the quantum of such profits do not exceed 20% of its overall receipts. 173. It may be useful to conclude this section on interpretation with some illustrations. The example of Gandhi Peace Foundation disseminating Mahatma Gandhi's philosophy (in Surat Art Silk) through museums and exhibitions and publishing his works, for nominal cost, ipso facto is not business. Likewise, providing access to low-cost hostels to weaker segments of society, where the fee or charges recovered cover the costs (including administrative expenditure) plus nominal mark up; or renting marriage halls for low amounts, again with a fee meant to cover costs; or blood bank services, again with fee to cover costs, are not activities in the nature of business. Yet, when the entity concerned charges substantial amounts- over and above the cost it incurs for doing the same work, or work which is part of its object (i.e., publishing an expensive coffee table book on Gandhi, or in the case of the marriage hall, charging significant amounts from those who can afford to pay, by providing extra services, far above the cost-plus nominal markup) such activities are in the nature of trade, commerce, business or service in relation to them. In such case, the receipts from such latter kind of activities where higher amounts are charged, should not exceed the limit indicated by proviso (ii) to section 2(15). 253 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, 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. 59 ITA No. 161/Jodh/2020 TatpadamUpavan The ld. DR thus, relying on the finding of the apex Court in para 172 [ as reiterated herein below:- “yet another manner of looking at the definition together with sections 10(23) and 11 is that for achieving a general public utility object, if the charity involves itself in activities, that entail charging amounts only at cost or marginal mark up over cost, and also derive some profit, the prohibition against carrying on business or service relating to business is not attracted-if the quantum of such profits do not exceed 20% of its overall receipts.” ] submitted that if the quantum of profit exceeds 25% of its overall receipt then it can be considered as business activities. Therefore, the decision of ld. CIT(A) is not in accordance with the detailed judgment given by the Hon’ble Apex Court and finding recorded by the ld. AO be upheld and the benefit has rightly been denied by the ld. AO. Based on these arguments the ld. DR prayed that the order of ld. CIT(A) be quashed and that of the ld. AO be restored. 6. Per contra, the ld. AR appearing on behalf of the assessee has placed their written submission which is reproduced here in below; “1. Assessee would like to reiterate that written submissions have been made before the Ld. CIT(A), and copies of the same along with the documents relied upon have also been filed before Your Honour. 1.1. Assessee is a company registered u/s 12AA and 80G of the Income tax Act 1961. The main objective of the Assessee is to erect, develop and operate a Lord Shiva statue for general public utility. The objectives include the following: 60 ITA No. 161/Jodh/2020 TatpadamUpavan "(III) (A) The objects to be pursued by the company on its incorporation are: (AA) No object of the Company will carry out on commercial basis. 1. To construct, develop, erect, operate, promote and maintain, statue of Lord shiva, Landscaping Garden, Amusement Park, children park, Recreational park, Prayer Hall and other recreational facilities for general public utility. 2. To receive/provide funds by way of voluntary donations from/to other persons, companies, trusts, societies, organisations including companies within the Miraj Group for the purpose of undertaking the aforesaid activities. 3. To promote co-operation among associations, firms, companies, and persons engaged in/or connected with charitable purposes with a view to adopt a common policy and collectively taking such steps as may be deemed necessary or expedient to promote the objects of the Company. 4. To bring about publications and organise activities that will help promote charity and social service, the income generated if any, from which shall accrue, form part of the Company fund to be utilised for all or any of the objects of the Company. 5. To collect, analyse and circulate information and statistics relating to the aims and objects of the company; and to print and publish pamphlets, leaflets, circulars or other literature or material that may be considered desirable for the promotion of or carrying out of the objects of the Company and disseminate it through any medium of communication. 6. To accept any donations or property whether subject to any trust or not and apply the same for any of the objects of the Company." ................. .............. 22. To accept donations in cash or in kind, raise subscriptions from the members of the company or any other person or association of persons, necessary for the fulfillment of the aims and objects of the company and to further its interests enumerated above." 37. The Company will not carry out any business or activity with the objective to earn any profit or pass any direct or indirect benefit to its members or contributors." 61 ITA No. 161/Jodh/2020 TatpadamUpavan The objects as mentioned in the MOA of the Assessee is submitted herewith and marked as Annexure -1. 1.2. In view of the aforesaid objects of establishment of the Assessee, it is evident that the main objects of the Assessee include the promotion of art, conducting cultural shows and construct, develop, erect, operate, promote and maintain the Statue of Lord Shiva, etc for general public utility (GPU) and not for profit motive. 1.3. For an activity to be classified as trade, commerce, or business, it must be profit-driven. The profit motive is a fundamental element, and trade, commerce, or business cannot exist without it. The proviso added to section 2(15) of the Act as of 1 April 2016 does not prohibit merely earning income and/or charging a fee; rather, it prohibits engaging in any activity of a commercial or business nature or providing corresponding services. The charging of any amount as consideration for such an activity (advancing GPU), cannot be regarded as trade, commerce, business, or a related service. 1.4. In accordance with the aforementioned legal principle, the provision of section 2(15) is inapplicable in light of the following: i. The assesse has not engaged in trade, commerce, or business, as its primary purpose is to build/ construct/ erect a statue of Lord Shiva and to promote art, culture, and heritage. ii. During the year, only one event was held to protect and promote ancient/historic Indian art and culture, which is not in the essence of trade, commerce, and business. In addition, no similar incidents occurred in subsequent years. iii. Such events/programs/shows do not occur on a regular basis; consequently. they do not constitute trade, commerce, or business. iv. The amount contributed by visitors/contributors during the event differs according to their ability to pay for construction /donation of a statue of Lord Shiva. v. The primary objectives of the Assessee trust include the receipt of contributions/donations; accordingly, contributions ranging from Rs.5000/ to 62 ITA No. 161/Jodh/2020 TatpadamUpavan Rs.15000/ made by visitors are not in the nature of fees or consideration for any activity or service, but rather are donations towards the Trust's primary objectives. 1.5. Therefore, all the prerequisite conditions for any activity to be rendered as trade or commerce, has been rendered moot, because the receipts at the hands of the assessee were in the form of donation receipts that would be utilised towards the objects of the company, as laid down in the MoA. Further, your good self is well aware that fund of a charitable institution is used to finance a specific goal or purpose, which has been clearly elucidated in the MoA of the assessee company. There is a restriction on the end use of such a fund, as laid down in the provisions of S.11(5) r.w. Rule 17C, and this end use must coalesce with the charitable objective of the company in order to be eligible for exemption. 2. In this connection, we invite your kind attention to para 5.10 page 22 of the assessment order wherein Id. AO ignored the assessee's submission by erroneous interpreting the intent and the conduct of the assessee. The fallacious interpretation of the Ld. AO has been reproduced below: "On perusing the objects viz MOU of the company it is evident that the organization of shows is as per the object of the company which the assessee has repeatedly claimed in its submission. But simultaneously it has explicitly been mentioned in the MOU that No object of the Company will carry out on commercial basis. Here the activities of the trust are contrary to the version of its own MOU. Selling of tickets for organizing a programme is obviously commercial in nature and the same cannot be denied. The assessee in its submission has taken plea that this programme was organized in order to collect subscription for erecting the Lord Shiva Statue. By organizing of entertainment programme the trust is no way is engaged in the activities for charitable purposes but rather it is engaged in this event only for advancement of their own commercial interest. However, incidentally this activity may be in nature of advancement of any other objects of public utility as this programme is organized merely for entertainment of public in general. If for a while it is assumed that such business activity is incidental in nature, still the assessee would have no escape from intention of legislature. The intention of legislature is very much vivid that a trust with object of advancement of general public utility may carry out commercial activity but the receipt from such activity should not exceed ceiling of 20% of total receipt. In case of assessee its exceeded 20% and therefore, explicitly falls in ambit of section 2(15)." 63 ITA No. 161/Jodh/2020 TatpadamUpavan 2.1. In the case of GPU category charitable organisations, qualification requirements apply only if the primary objectives are in the nature of trade, commerce, or business conducted for a fee, cess, or other consideration. Consequently, if the primary activity is not 'business,' the connected, incidental, or ancillary activities carried out in furtherance of and to achieve the primary objective would not ordinarily constitute 'business'. For an endeavour to be considered "trade, commerce, or business," it is essential that it be profit-driven. 2.2. Donations are a significant source of revenue for a charitable institution. Such contributions may be mandatory or voluntary. The Income Tax Law provides an umbrella immunity for contributions (such as those received for the construction of a monument). 2.3. The sole purpose of the assessee's cultural event was to solicit contributions for the construction of a statue of Lord Shiva, the proceeds of whose operation would be allocated to GPU. This is abundantly evident not only from the assessee's submissions to the Ld. AO and Ld. CIT(A), but also from the assessee's Memorandum of Association. 2.4. As the assessee was not engaged in any trade, commerce, or business-like activity, the Ld. AO's argument that GPU category charitable organisations are permitted to conduct business only if it is in the course of achieving charitable objectives, subject to the prescribed threshold, is irrelevant in the present case. Donation receipts are not payment receipts, and the Act does not define them similarly. Further, not only has the Ld. AO wrongly invoked the first proviso of S.2(15), but he has proceeded in erroneous application of the same, as well. The receipts from event amounted to Rs.485,15,000/-, which is about 15.56% [(CIT(A) Order page 77)]. Therefore, Ld. AO has applied the proviso's of Section 2(15) without any sound application of mind. 2.5. The phrase 'fee, cess, and any other consideration' must be interpreted with intent. Regulatory activity, necessitating fee or cess collection in accordance with the enacted law, or collection of amounts in furtherance of activities such as education, regulation of profession, etc., may not necessarily be considered to be business or commercial in nature. 2.6. It is not uncommon for a charity to raise funds through entertainment or cultural activities. Art, culture, etc. are instruments that bring people together and instil a sense of unity and belonging, which translates into a sense of duty towards contributing to a cause, which explains its global prevalence. The event that the 64 ITA No. 161/Jodh/2020 TatpadamUpavan assessee company organised by inviting the well-known arts aficionado and animal rights activist Hema Malini was a similar effort to bring like-minded people together and raise funds for a cause that the assessee adequately described. 2.7. The Ld. AO committed gross injustice by relying on assumptions, conjectures, and preconceived notions when issuing the contested assessment order, and by ignoring the legal maxim "a verbis legis non est recedendum," which states that the words of a statute must not be changed when interpreting it. Each section of a statute must be read and interpreted in a unified and consistent manner, with no arbitrary or fanciful interpretations. The Ld. AO relied on the latter when making the assessment; consequently, this impugned order is subject to be quashed. 3. Reliance placed by the Id. DR on Hon'ble SC citation in case of Ahmedabad Urban Development (AUD) 2022 livelaw(SC) 865:2022(144) Taxman78 DC pronounced on 19.10.2022 is not applicable on the facts of the Case of the assesse in view of the following: i. AUD regularly engages in development-related endeavours. In the case of the assessee, however, there is no regular/continuous activity, which is a requirement for falling under the definition of Trade, Business, and Commerce. ii. Furthermore, in order to comprise a business, there must be a series of transactions that are to be continued for profit, as well as volume, frequency, continuity, etc. (para- 131 SC Citation) iii. During the relevant year, the Assessee organised a cultural dance programme titled "Yashoda Krishna Nirtya" to preserve and promote Indian ancient/historical art and culture, which is not in the nature of trade, commerce, or business. iv. The proceeds in the form of donation received from the aforementioned programme will be used to finance/ meet the Assessee's primary objective, which is to build/ construct/ erect a statue of Lord Shiva, as well as to promote art, culture, and heritage. v. Due to the lack of regularity of these events/programmes/shows, the activities conducted do not constitute trade, commerce, or business. vi. Amount contributed by visitors/contributors during the event varies based on their paying capacity towards construction of Shiva Statue and main objects of the Assessee trust, which includes free entry in addition to contributions ranging from 65 ITA No. 161/Jodh/2020 TatpadamUpavan Rs.5000/ to Rs.15000/, which are not in the nature of charges or consideration for any activity or service but rather donations towards main objects of the Trust. vii. The art and culture exhibition was not intended or conducted for monetary gain. xiii. Ticket price is not the price/charges or consideration for any service, but rather a donation by donors based on their ability to pay. ix. As a result, the donation received from the audience for organising an event to develop/protect ancient art without a profit motive will be used solely for the primary objective of the grantee, which is the construction of a Shiva statue. 3.1. Further, the Id. AO has accepted that the assessee is eligible for exemption u/s 11 & 12 considering the activities carried out as per objects and registration granted by the Id. CIT(E). In this regard, reliance is being placed on: (i) Appeal effect order dated 03.11.2020 passed by the ld. AO, copy enclosed marked as Annexure -2 herewith wherein it was held that: "The assessee is eligible for exemption u/s 11 & 12. The income of the assessee is assessed at NIL (ii) The Id. AO dropped the penalty proceedings vide order dated 12.01.2022 in relation to aforesaid appeal filed by the department, copy enclosed and marked as Annexure -3. (iii) The Id. AO accepted that all documents including Form 108 furnished during the course of assessment proceedings. (iv) The activities in the year under consideration are similar to activities in previous years, which were accepted by Ld. AO and granted exemption (Assessment order passed dated 18.10.2018 u/s 143(3) for Assessment year 2016-17), Copy enclosed herewith and marked as Annexure-4. (v) The Ld. AO also granted exemption after considering source of funds also includes voluntary contributions, donations, receipt from cultural events to achieve the goal as per objects of the assesse. (Assessment order passed dated 28.12.2016 u/s 143(3) for Assessment year 2014-15), Copy enclosed herewith and marked as Annexure-5. (vi) The Id. CIT(E) granted certificate u/s 12AA after 66 ITA No. 161/Jodh/2020 TatpadamUpavan considering objects of the Assessee which remains unchanged and activities conducted were towards fulfillment of the said objects only. (vii) Further, Id. CIT(E) while passing order dated 30.03.2021 u/s 263 in relation to Assessment year 2016-17 held that: "After careful consideration of the assessment records, paper book, written submissions and oral submissions of assessee during hearings and notice u/s 263, it is found that the dominant purpose & activities of the trust are charitable in nature. So, revision u/s 263 of assessment order u/s 143(3) is not required. Hence, 263 proceedings are hereby dropped." Copy of order dated 30.03.2021 passed u/s 263 by Id. CIT(E) is enclosed herewith and marked as Annexure-6. (viii) Accordingly, following the principle of consistency, as laid down in the case of Radhaswami Satsang (1992) 192 ITR 321 SC, the denial of exemption u/s 11 of the Act by misinterpreting the provisions is not justified. 3.2. Findings of the Id. CIT(A) Page 76 keeping in view the facts and circumstances of the case, legal position and precedents as discussed above and authoritative judicial precedents cited supra in para nos. 19 to 25 (supra), it is held that cultural event organized by the appellant was for the advancement of "the object of general public utility and the same was not in the nature of trade, commerce or business to fall within the scope of proviso to section 2(15) of the Act. Therefore, provisio to section 2(15) is not applicable in case of the appellant and the appellant is entitled to exemption u/s 11 of the Act." Page 77: "it is essential to establish that the activities in question are carried out with a profit motive, which the Id. AO failed to establish. The program was for promotion of organized arts, which was performed by the renowned Bharatnatayam Dancer Ms. Hema Malini without any honorarium and surplus generated was spent towards construction of Statute of Lord Shiva with non- profit motive." 3.3. In this regard, it is also pertinent to note that the Assessing Officer has not considered the assessee's objects and has reached the conclusion in the impugned order that the assessee's activity is a business activity based solely on the assumption that conducting a programme by inviting a celebrity and charging a 67 ITA No. 161/Jodh/2020 TatpadamUpavan fee for tickets is a business activity and cannot be for a charitable purpose, whereas a bare reading of the assesse's objects would lead to a determination that the assessee' purpose was that of advancement of organized arts and the event in question was for a performance of Bharatnatyam which is an ancient form of Indian art which falls under the category of organized arts. Thus, the assessment officer's conclusion is devoid of factual support and is based solely on assumptions and presumptions. Moreover, the Ld. AO has not even contested the assessee's objectives and has merely deemed the activity in question to be a business without even determining the character of the activity and whether it constitutes a for-profit enterprise. 3.4. Ld. AO has never doubted that the Assessee's object/purpose is charitable in nature; therefore, the Assessee cannot be said to be carrying out any activity in the nature of trade, commerce, or business, as the Assessee Trust's objective is not to generate a profit or to conduct business. Assessee's activities are not related to any trade, commerce, or business, so the first exception to Section 2(15) of the Act does not apply. The first proviso to Section 2(15) does not apply to the Assessee because he/she organised an event to protect/preserve ancient art in which neither the purchasing nor selling of products nor the provision of services for profit occurred. Once it is established that activities conducted by the Assessee Trust are within the ambit of Section 2(15) of the Act, it cannot be validly held that there was violation of provisions of sec. 2(15) of the Act. The Honble Apex Court in the case of CIT (E) vs. Ambala Public Educational Society [2020] 113 taxmann.com 404 (SC) dismissed the SLP filed against High Court ruling that where the Commissioner had not doubted genuineness of its aims and objects. Thus, Ld. AO's denial of exemption under section 11 of the Act is unjustified. 4. It is humbly submitted that Ld. AO has not appreciated the facts that during year under consideration, amount spent towards construction of Statute of Lord Shiva for the relevant financial year ended as on 31.03.2017 stood at Rs.92.35 Crs as per audited Balance sheet as against Rs. 39.16 Crs at the beginning of the previous year. Thus, it is evident that a sum of Rs. 53.20 Crs (Rs.92.36 Crs- Rs. 39.16 Crs) were spent during the relevant previous year as per audited Balance sheet of the Assessee towards main object which has been accepted by the ld. AO as there are no adverse findings whereas only amount of Rs.4.85 Crs received as contribution/ donation by entry tickets form show of ancient art presented to collect money for financing the erection of statute of lord Shiva. It is thus evident that amount collected represents contribution/donation by entry tickets Rs.4.85 Crs for the Main Objects of the Assessee. It is also relevant that there is no allegation as well as any conclusive finding of the Id. AO that program was organised for 68 ITA No. 161/Jodh/2020 TatpadamUpavan profit motive rather than for the main objects of the Assessee, which is to finance the cost of building/erecting statue of lord Shiva. Therefore, such activity cannot be called as carrying out of trade, commerce or business by the Assessee; therefore, Id. AO has erred in denying the exemption u/s 11 of the Act and making consequential impugned additions, which has been rightly deleted by Ld. CIT(A) in accordance with the law. Thus, the order of Ld.CIT(A) is duly supported and does not call for any interference. 5. The Ld. AO relied upon the judgment delivered by Hon'ble ITAT, Jaipur Bench- B, Jaipur in the case of Income Tax officer (Exemption), Ward 1, Jaipur vs Rajasthan Cricket Association, Jaipur, ITA No. 1355 & 1356/JP/2018 dated 09/12/2019 for A.Y. 2010-11 & 2011-12 at Para 5.13 Page No.26 of the Assessment order. The aforesaid order has been recalled and has no binding force under law and decided the fresh vide order dated 25.11.2020 against the department as below. "We have heard the rival contentions and purused the material available on record. Further, there is no dispute that the assessee is duly registered u/s 12A of the Act and is eligible for exemption under section 11 and 12 of the Act and therefore, the said expenditure is clearly in nature of application of income as the same has a direct nexus with the objectives of the assessee society in terms of promotion of sport of cricket in the state of Rajasthan. In the result, the matter is decided in favour of the assessee and against the Revenue and the ground of appeal so taken by the assessee society is thus allowed. In the result, both the appeals of the Revenue are dismissed and the appeal of the assessee is allowed in light of aforesaid directions." Thus, reliance placed on Jaipur ITAT judgment is unwarranted and misplaced. It demonstrates a casual and callous attitude adopted by the Ld. AO while drafting the assessment order. 6. The facts of the Assessee is squarely covered by the recent judgment of the Hon'ble Gujrat High Court in the case of the CIT (Exemption) VS. United Way of Baroda (2020) 596 ITR 443 pronounced on 25.02.2020. Relevant Para of the aforesaid judgment of the Hon'ble Gujrat High Court are being reproduced as below. "2.1 The assessee is a charitable institution registered u/s 12 A of the Act, 1961. The assessee filed its return of income. The assessing officer come to the conclusion that the assessee had received total income Rs.548,04,054/ which included Rs.437,67,637/ as income received from organising the event of Garba during the Navratri festival. - 9. The 69 ITA No. 161/Jodh/2020 TatpadamUpavan assessing officer recorded the following findings: "4.6 At the outset, it is to mention here that the assessee is organising the Garba event on the eve of Navratri. Amongst total income of Rs.548,04,054/, Rs.437, 67,637/ as generated from the said Graba Events. Thus, out of total income, 79.85% pertakes from Garba event only.- --.......................13....................... The activities like organizing the event of garba including the sale of tickets and issue of passes, etc., cannot be termed as business. The two authorities have taken the view that the profit making is not the driving force or the objective of the assessee. This is indicative of the fact that any income generated by the assessee from events like garba does not find its way into the pockets of any individual or entities. It is to be utilised fully for the purposes of the objects of the assessee." 6.1. Even otherwise, it is also submitted that the case of the Assessee is squarely covered by the judgments of High Court and Hon'ble Apex Court. The assessee has also relied upon the following judicial pronouncements to further substantiate the contentions raised in this submission: i. Mehrangarh Museum Trust v. ACIT, Circle-1, Jodhpur [2014] 48 taxmann.com 129 (Jodhpur-Trib.) ii. CIT-1, Jodhpur vs. Jodhpur Development Authority [2017] 79 taxmann.com 361 (Rajasthan) iii. ACIT (E) vs. Mahima Shiksh Samiti [2017] 79 taxmann.com 38 (Jaipur - Trib.). iv. Institute of Chartered Accountants of India v. Director General of Income-tax (Exemptions), Delhi [2013] 35 taxmann.com 140 (Delhi) v Jhunjhunu Academy Sammittee v. ITO D.B. Income Tax Appeal No. 123 of 2006, decided on February 8, 2017 (Rajasthan High Court) 6.2. It has been held in a number of different pronouncements that the expressions "trade," "commerce," and "business," which appear 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 that is carried on in an organised manner. This is because the expressions "trade," "commerce," and "business," all appear in the same place in the Act. When deciding whether or not an organisation should be classified as a company, it is 70 ITA No. 161/Jodh/2020 TatpadamUpavan important to take into account both the institution's overall goal and the primary focus of its operations. The goal of establishing the first stipulation is to narrow the definition of "charitable purpose" so that it does not include organisations that are engaged in the operation of ordinary businesses. If an endeavour is pursued with the intention of realising a profit, then we may refer to that activity as a "business," however this factor alone might not always be decisive. The profit motive test must be passed in order for an action to be considered a business; nevertheless, under some circumstances, an activity may be considered a business even if a profit motive cannot be demonstrated or shown. In these kinds of circumstances, there ought to be proof and materials to prove that the activity has continued on solid and acknowledged business principles and been conducted with a fair amount of continuity. There should be evidence in the form of facts and other situations that both justify and demonstrate that the activity being carried out is, in fact, inherent to commercial enterprises. 6.3. In view of the above submission, it is evident that the real intention of the Assessee is discernible from the nature of activities undertaken by it, in pursuance of the charitable object. This intention has not been in dispute and doubt. Once it is established that activities conducted by the Assessee Trust are within the ambit of Section 2(15) of the Act, it cannot be validly held that there was violation of provisions of sec. 2(15) of the Act. 6.4. We may further state that order of Ld. CIT(A) is based on reasoning and in accordance with the law laid down, therefore, the same is duly supported and does not call for any interference against the Assessee. 6.5. In view of the above, Ld. AO has adopted two diametrically opposed views because on the one hand, he accepted the order of Ld. CIT(A) and dropped the penalty proceedings and on other hand, he filed the captioned appeal. 6.6. Reliance is being placed on the following citations in relation to amount received towards contribution/ subscription/ donation towards the event organized by the assessee is not a business activity but a fund raising activity to build/ erect/ construct statute of Lord Siva: (i) Distributers Baroda P. Ltd. (83 ITR 377 SC) (ii) CBI vs. VC Shulda ((1998) 3 SCC 410] (iii) H. Abdul Bakshi & Bros [1964] 15 STC 644 SC (iv) Bharat Diamond Bourse [2003] 126 Taxman 365 (SC) (v) Gangabai Charities [1992] 197 ITR 416 (SC) (vi) Yogiraj Charity Trust [1976] 103 ITR 777 (SC) 71 ITA No. 161/Jodh/2020 TatpadamUpavan (vii) FICCI [1981] 130 ITR 186(SC) 7. Therefore, we hereby pray before your kind honour to dismiss the Departmental appeal by upholding the decision of the Id. CIT(A) allowing exemption u/s 11 of the Act and consequential deletion of addition of Rs. 22,87,80,253/ made to total income. Accordingly, the grounds raised by department in their appeal may kindly be dismissed and appeal be also dismissed.” 6.1 In addition to the above written submission, the ld. AR appearing on behalf of the assessee submitted that the questioned program of Bollywood Star Ms. Hema Malini was not business activity but an activity to raise the fund for fulfilling charitable object and even to show the art and cultural to the youth by expressing the performance of Bharat Natyam and the life of Krishna and Yashoda. The assessment of assessee was completed for A. Y. 2014-15 u/s. 143(3) and A. Y. 2016-17 was subjected to proceeding initiated u/s. 263 and the same were dropped. This act itself shows that the department is not considering the activity of the trust as business activity. To support this contention the ld. AR of the assessee referring to para 253 of the judgment of the apex court in the case of AUDA (Supra) submitted that that finding of the apex court in fact support the case of the assessee. IV. Summation of conclusions 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. 1-4-2009), as well as the later amendments, and other related provisions of the IT Act. 72 ITA No. 161/Jodh/2020 TatpadamUpavan 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. 1-4-2016) 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. 1-4-2009; then Rs. 25 lakhs w.e.f. 1-4-2012; and now 20% of total receipts of the previous year, w.e.f. 1-4-2016); 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 the mischief of "cess, or fee, or any other consideration" towards "trade, commerce or business". 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. 1-4-2009), reaffirm this interpretation and bring uniformity across the statutory provisions. 6.2 Thus, relying on the definition test, the activity is not done in relation to any consideration or fees or both and the activity is purely conducted to raise the corpus to fulfill the object of the trust and it was 73 ITA No. 161/Jodh/2020 TatpadamUpavan also for promotion of art and cultural as part of the object of the assessee. Therefore, this activity cannot be considered as trade, commerce or business, not only that the activity is voluntarily not for any fees or consideration or any act by the trust. It is just voluntary contributions of the participants to support the activity and to finance the activity. Therefore, the judgment of the Ahmedabad Urban Development Authority (supra) is on different fact wherein Ahmedabad Urban Development Authority (supra) is under the guise of charitable activity selling the commercial and prime locations plots by way of auction and was earning explicitly undertaking the profitable activity which the revenue has disputed before the Hon’ble Apex Court. Thus the type of activity undertaken by trust engaged in charitable activity cannot be considered as business, trade or commerce. The ld. AR of the assessee referring to the memorandum of association of the trust governed under the companies Act submitted that memorandum restrict the assessee to undertake any commercial activities and that benefit is not denied under the companies act and not in the income tax in the proceedings in the preceding year completed subsequently. This action of the revenue itself shows that the assessee is engaged in 74 ITA No. 161/Jodh/2020 TatpadamUpavan charitable activity. Based on these arguments the ld. AR of the assessee supported the order of the ld. CIT(A). 6.3 The ld. AR of the assessee also submitted that while passing the order giving effect to the appellate order u/s. 250 of the Income Tax Act, the ld. AO himself given the benefit of exemption u/s 11 and 12 and therefore, the action of the revenue in filing, this appeal is not tenable. The ld. AR of the assessee referring to an order passed by the ld. AO u/s 270A of the Act on 12.01.2022 submitted that the ld. AO also dropped the levy of penalty proceeding because the assessee is eligible for exemption u/s 11 and 12. Therefore, even the penalty proceedings initiated were also dropped by the ld. AO by passing speaking order dated 12.01.2022. Both these orders were placed on record. Relying on these orders the ld. AR of the assessee submitted that on the one hand, the revenue is accepting the fact and decisions of the ld. CIT(A) consequently acting accordingly and on the other hand have challenged the order of ld. CIT(A) before this Tribunal which is contrary to each other. Considering the overall fact and circumstances of the case merely a single event cannot be considered as trade, commerce or business. As regards the computation of 75 ITA No. 161/Jodh/2020 TatpadamUpavan percentage of receipts considering overall receipt of the trust, the ld. AR of the assessee relied upon the finding of the ld. CIT(A) submitted that as against working of 28% receipt by the ld. AO, ld. CIT(A) based on the fact placed on record conclusively accepted and held that the receipt from this activity is about 15.56 % only of the total receipt of Rs. 31,16,81,003/-. The same is already worked out at page 58 and 59 of the order of the ld. CIT(A) and therefore, even on the Hon’ble Supreme Court finding given receipt of such kind of activity is below 20%. Therefore, the finding given para 171 in the order of Hon’ble Supreme Court is also complied by the trust alternatively. 6.4 To support the contentions so raised the ld. AR of the assessee placed reliance on the following decisions/evidences: S.No Particulars Page No 1 Submission (Separate Paper Book) 2 Memorandum of appeal in Form No.35 and the ground of appeal Appendix-A 1-3 3 Copy of the return filed u/s 139(1) of the IT Act for the A.Y 2017-2018 Appendix-B 4-36 4 Copy of Audited Balance Sheet and Profit and Loss Account as on 31 st March 2017 Appendix—C 37-61 5 Copy of Audited report ( Form 10B ) under section 12A(b) of the income tax Act,1961 Appendix--D 62-63 6 Copy of Assessment Order A.Y.2017-18 Appendix--E 64-90 7 Copy of the Memorandum of Understanding (MOU) executed with Municipal Corporation, Nathdwara and the Government of Rajasthan on 17 th April, 2013 Annexure-1 91-102 8 Copy of the Certificate of Incorporation and Memorandum of Association Annexure-2 103 76 ITA No. 161/Jodh/2020 TatpadamUpavan 9 Copy of the relevant extracts of section 8 of the Companies Act, 2013 and section 25 of the Companies Act, 1956 Annexure-3 104-134 10 Copy of the order granting registration U/s 12AA of Income tax Act, 1961 Annexure-4 135 11 Copy of the order for the purpose of section 80G of Income tax Act, 1961 Annexure- 5 136 12 Copy of Assessment Order A.Y.2016-17 Annexure-6 137-139 13 Copies of replies dated 21.01.2019, 22.02.2019, 12.08.2019, 25.11.2019 and 09.12.2019 alongwith copies of Notices Annexure-7 140-157 14 Copy of Show cause Notice dated 19.12.2019 and appellant’s reply dated 23.12.2019 Annexure-8 158-179 15 Copy of CBDT through the Circular No.11 of 2008 dated 19th December, 2008 Annexure-9 180-181 16 Copy of the Memorandum to the Finance Bill 2015 explaining the rationale for introduction of provision Annexure-10 182-289 17 Copy of Audited Balance Sheet and Profit and Loss Account as on 31 st March 2018 and 31 st March 2019 Annexure-11 290-305 18 Copy of Letter dated 22.02.2019 towards detail of expenditure which were incurred in construction / erection of Shiva Statue along with copies of ledger account and copies of invoices Annexure-12 306-307 19 Extract Section 2(15) of Income Tax Act and Section 11 to 13 of Income Tax Act. Annexure-13 308-322 Decision Paper book S. No Particulars Page No A Supreme Court Citation Relied:- (i) CIT vs. Gujarat Maritime Board [2008] 166 Taxman 58, [2007] 295 ITR 561 (SC) 1-6 (ii) Federation of Indian Chambers of Commerce & Industry [1981] 130 ITR 186(SC); 7-18 (iii) CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC). 19-31 (iv) Commissioner of Income-tax, A.P. v. Andhra Pradesh State Road Transport Corporation MANU/SC/0252/1986: [1986] 159 ITR1(SC) 32-34 (v) Gangabai Charities [1992] 197 ITR 416 (SC). 35-41 77 ITA No. 161/Jodh/2020 TatpadamUpavan (vi) Addl. CIT v. Surat Art Silk Cloth Manufacturers Association MANU/SC/0296/1979 : (1980) 121 SC 42-91 (vii) State of Andhra Pradesh v. H. Abdul Bakshi& Bros [1964] 15 STC 644 92-95 (viii) CBI vs. VC Shukla [(1998) 3 SCC 410] 96-117 B Jurisdictional Rajasthan High Court Case Law Relied:- (i) Jhunjhunu Academy Sammittee v. ITO D.B. Income Tax Appeal No. 123 of 2006, decided on February 8, 2017 (Rajasthan High Court) 118-133 (ii) CIT-I, Jodhpur vs. Jodhpur Development Authority [2017] 79 taxmann.com 361 (Rajasthan) 134-167 (iii) C.I.T. Udaipur vs. Geetanjali Educational Society delivered on 24.02.2018 168-183 C Other High Court Case Law Relied:- (i) M/s GS1 India and DGIT civil writ petition No. 7797/2009 Hon’ble Delhi High Court, 184-198 (ii) Bar Council of Maharashtra vs. CIT [1980] 126 ITR 27 (Bom.) 199-206 (iii) All India Spinners' Association vs. CIT [1944] 12 ITR 482 (PC) Bombay High Court, 207-212 (iv) Institute of Chartered Accountants of India vs. Director General of Income-tax (Exemptions), Delhi [2012] 347 ITR 99: [2011] 202 Taxman 1 213-242 (v) ICAI Accounting Research Foundation and Anr. vs. Director General of Income Tax (Exemptions) and Ors. [(2009) 226 CTR (Del) 27]: 243-254 (vi) Additional CIT v. Hamdard Dawakhana MANU/DE/0104/1985 : (1986) 157 ITR 639 (Del) 255-263 (vii) Tribune Trust v. CIT Chandigarh [2016] 76 taxmann.com 363 Punjab Hariyana High Court, 264-314 (viii) India Trade Promotion Organization vs. DGIT(E) 371 ITR 333 (Delhi) 315-343 (ix) Cricket Association vs. Director of Income-tax (Exemptions) TAX CASE (APPEAL) NO. 450 OF 2013 / [2013] 40 taxmann.com 250 (Madras) 344-362 (x) Director of Income-Tax (Exemptions) vs. Gujarat Cricket Association [2019] 419 ITR 561 delivered on 27.09.2019 363-566 78 ITA No. 161/Jodh/2020 TatpadamUpavan D Jurisdictional ITAT Case Law Relied:- (i) Mehrangarh Museum Trust v. ACIT, Circle-1, Jodhpur [2014] 48 taxmann.com 129 (Jodhpur - Trib.) 567-591 (ii) ACIT vs. Mahima Shiksha Samiti vide their order dated 03-03-2017 (Jaipur - Trib.) 592-644 E Other ITAT Case Law Relied:- (i) Bangalore Development Authority v. Additional CIT, Bengaluru [2019] 104 taxmann.com 266 (Bangalore - Trib.) 645-658 (ii) Credai Bengal v. Income-tax Officer (Exemptions), Ward-1(1), Kolkata [2019] 110 taxmann.com 113 (Kolkata - Trib.) 659-674 (iii) Sabarmati Ashram Gaushala Trust v.Assistant Director of Income-tax (Exemption) [2013] 35 taxmann.com 552 (Ahmedabad – Trib ) 675-683 (iv) Indian Chamber of Commerce v. Income-tax Officer, Exemption-I [2014] 52 taxmann.com 52 (Kolkata - Trib.) 684-730 (vii) All India Rubber Industries Association v. Additional Director of Income- tax(E),Mumbai [2018]100 taxmann.com7(Mumbai Trib ) 731-746 (viii) Deputy Director of Income-tax (E), Inv Cir-1, Delhi vs. All India Football Federation IT Appeal No. 6352 (Delhi) of 2013 747-774 (ix) Institute for Development and Research In Banking Technology (IDRBT), Hyderabad vs. Assistant DIT (E)-1, Hyderabad. 775-819 (x) DDIT vs. The Booksellers & Publishers Association of South India ITA No.1602/Mds/2014 820-835 (xi) Chhattisgarh State Cricket Sanghvs. Dy. CIT, (Exemption) Raipur IT Appeal No. 265 (RPR) of 2017 836-841 (xii) National Payments Corporation of India vs. DCIT (E)-2(1), (Mumbai – Trib ) decided on 06.07.2020 842-883 7. In the rejoinder, the DR relying on the judgment of V.S. Govindarajulu Chettiar v. Commissioner of Excess Profits tax reported at 34 ITR 594 submitted that in this case the court has held 79 ITA No. 161/Jodh/2020 TatpadamUpavan that even a single trade is business can be considered as business activities. 8. Heard the rival contentions, perused the material placed on record and gone through the judicial decision cited by both the parties to drive home their respective contentions so raised. The bench noted from the order of the assessing officer that the apple of discord is that the assessee in the year under consideration organized, a cultural dance program named “Yashoda Krishna Nirtya“ which has been performed by Bollywood actress Ms. Hema Malini. Whether based on the set of facts the said event organized by the assessee can be considered as trade, commerce or business activity of the assessee trust or not. 8.1 The assessee has received Rs. 4,85,00,000/- from the said program which is 15.56% of the total receipt of Rs.31,16,81,003/-. [ as confirmed by the ld. CIT(A) at page 58 and the revenue did not challenge this finding of the ld. CIT(A) ] The amount so received and collected from the program of the Bollywood star night named “Yashoda Krishna Nirtya“ by Bollywood star Ms Hema Malini were 80 ITA No. 161/Jodh/2020 TatpadamUpavan applied towards the construction of Lord Shiva statue, which is the part of the main object of the trust. The bench further noted that the assessee is registered under section 12AA and 80 G of the Income tax Act and the same is not revoked so far based on the evidence and argument advanced before us. It is also not under dispute that the main object of the assessee is to develop, operate and maintain the project of recreational park, including election of Lord Shiva statue and other recreational facilities for general public utility. The bench also notes from the record that the assessment in this case was made on 27.12.2019 for assessment year (A.Y.) 2017-18 and for A. Y. 2016-17 the show cause notice u/s. 263 of the Act was issued on 19.02.2021 by the PCIT. The said proceeding was dropped vide order dated 30.03.2021. The relevant finding of the ld. PCIT in that order is reproduced here in below : “After careful consideration of the assessment records, paper book and return submissions and oral submissions of assessee during hearing and notice u/s. 263, it is found that the dominant purpose and activities of the trust are charitable in nature. So, revision under section 263 of assessment order u/s. 143(3) is not required. Hence, 263 proceedings are here by dropped.” 8.2 Similar issue of organizing the cultural event was discussed in the assessment order for A.Y. 2014-15 and the assessee was given the benefit of section 11 & 12 for that year. The relevant finding from 81 ITA No. 161/Jodh/2020 TatpadamUpavan the order of that assessment year (APB-40) is reproduce here in below : During the assessment proceedings, the ld. AR has submitted written submissions in respect of the sources of funds to achieve the goal as per objects of the company, which is reproduced here under: i) Voluntary contribution and donation are accounted on the date of receipt. Such contributions received during the year are apprised towards the objective of the company. ii) Receipts from cultural events have been organised on the date of receipt and such receipts during the year are applied towards the objective of the company. iii) Interest income on saving bank accounts and fixed deposits are accounted on accrual basis. 8.3 Thus, the conflict or the dispute relates to the year under consideration that one event named “Yashoda Krishna Nritya Natika” performed by a Bollywood star Ms. Hema Malini wherein the assessee has earned huge amount of fund through sale of tickets were collected and in that activity the assessee trust has received Rs. 4,85,00,000/-. As against this receipt the assessee incurred a sum of Rs. 23,90,155/- as expenditure and thus earned a net margin of Rs. 4,61,24,845/-. Based on that set of facts ld. AO noted that the assessee has undertaken the activity in the nature of trade, commerce or business and considered the action of the assessee in violation of section 2(15) of the Act and thereby denied the benefit of section 11 of the Act to the assessee trust/company. 82 ITA No. 161/Jodh/2020 TatpadamUpavan 8.4 On this issue we have gone through the orders of the lower authority and also considered the arguments advanced by both the parties. It is not under dispute that the assessee has undertaken a Bollywood Star night in the name of “Yashoda Krishna Nirtya Natika” and from that activity the assessee has collected Rs.4,85,00,000 as receipts and earned net surplus of Rs. 4,61,24,845/- of the said program. We also note that the cultural dance event organised by the assessee trust was organised as social and cultural event for motivation of public to achieve the object of the trust. It was not only for the profit motive but also organised so that the people understand the art, culture, creation and educate the general public at large on the aspect of the dance related to Krishna and Yashoda. As the assessing officer vide para 5.13 invoked the provision of section 2(15) of the Act, it would be appropriate to peruse the relevant provision of the Act and the same is reiterated here in below : 2(15) "charitable purpose" includes relief of the poor, education, yoga, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic 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 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 83 ITA No. 161/Jodh/2020 TatpadamUpavan 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 actual carrying out of such advancement of any other object of general public utility; and (ii) the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year; 8.5 Thus, so far as the applicability of Section 2(15) of the act we note that recently the apex court in the case of AUDA (Supra) considered the applicability of section 2(15) [ para 171] and the relevant finding of the apex court [ para 253] is also reiterated here in below: 171. Therefore, pure charity in the sense that the performance of an activity without any consideration is not envisioned under the Act. If one keeps this in mind, what section 2(15) emphasizes is that so long as a GPU's charity's object involves activities which also generates profits (incidental, or in other words, while actually carrying out the objectives of GPU, if some profit is generated), it can be granted exemption provided the quantitative limit (of not exceeding 20%) under second proviso to section 2(15) for receipts from such profits, is adhered to. IV. Summation of conclusions 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. 1-4-2009), 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 84 ITA No. 161/Jodh/2020 TatpadamUpavan 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. 1-4-2016) 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. 1-4-2009; then Rs. 25 lakhs w.e.f. 1-4-2012; and now 20% of total receipts of the previous year, w.e.f. 1-4-2016); 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 the mischief of "cess, or fee, or any other consideration" towards "trade, commerce or business". 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. 1-4-2009), reaffirm this interpretation and bring uniformity across the statutory provisions. 8.6 Here the apex court has given two important finding (1) if in the course of achieving the object of general public utility, the concerned trust, society, or other such organization, carry on trade, commerce or business or provide services in relation thereto without any 85 ITA No. 161/Jodh/2020 TatpadamUpavan consideration and secondly with consideration. The apex court also held that that (i) the activities of trade, commerce or business are connected ("actual carrying out..." inserted w.e.f. 1-4-2016) 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. 1-4-2009; then Rs. 25 lakhs w.e.f. 1-4-2012; and now 20% of total receipts of the previous year, w.e.f. 1-4-2016). Thus, if the activity is undertaken without any consideration and the assessee has earned income that cannot be measured with the income and its percentage criteria and where consideration is also flowing, and the income is not more then 20 % of total receipt then also the provision of section 2(15) is not violated. Thus, the action of the ld. AO in holding that the assessee’s case is hit by the first proviso to section 2(15) of the Act and thereby denying the exemption claimed u/s. 11 of the Act is in incorrect appreciation of the fact. 8.7 The similar issue is also dealt by the PCIT in 263 proceeding even after the order of ld. AO which under attack and ld. AO in 143(3) proceeding considered the cultural activity in accordance with the 86 ITA No. 161/Jodh/2020 TatpadamUpavan object of the trust even though such activity undertaken given yet the benefit of cultural activity is considered as part of the object of the assessee trust/company. The relevant finding of the ld. AO and that of the PCIT is reiterated here in below: Assessment order for A.Y. 2014-15 (APB-40) During the assessment proceedings, the ld. AR has submitted written submissions in respect of the sources of funds to achieve the goal as per objects of the company, which is reproduced here under: 1. Voluntary contribution and donation are accounted on the date of receipt. Such contributions received during the year are apprised towards the objective of the company. 2. Receipts from cultural events have been organised on the date of receipt and such receipts during the year are applied towards the objective of the company. 3. Interest income on saving bank accounts and fixed deposits are accounted on accrual basis. A. Y. 2016-17 u/s. 263 dropped vide order dated 30.03.2021. “After careful consideration of the assessment records, paper book and return submissions and oral submissions of assessee during hearing and notice u/s. 263, it is found that the dominant purpose and activities of the trust are charitable in nature. So, revision under section 263 of assessment order u/s. 143(3) is not required. Hence, 263 proceedings are here by dropped.” 8.8 The bench also noted that the ld. AO while dropping the penalty proceeding independently taken a view for the year under consideration that based on the facts and circumstance of the case, benefit of section 11 cannot be denied is the correct appreciation of the facts. 87 ITA No. 161/Jodh/2020 TatpadamUpavan 8.9 We also note that the assessee in order to fulfill the main objects of promoting art and culture as per the object clause of the trust organized a cultural event i.e Nartiya Natika of Bollywood star Ms. Hema Malini on 15.10.2016 consisted of various several activities for the audience which included the youth so as to know & educate themselves about art, culture, customs, belief and ancient art for dance. Thus, the event was not only for the typical Bollywood dance just for entertainment but was based on the life incidents of Lord Krishna and his mother Yashoda, the Nritya Natika was performed by Ms. Hema Malini in “Kathak” art of classical dance and the same is part and parcel of the object of promoting the art to the society. As we read the provision of definition given in section 2(15) of the Act from where it is very much clear that the expression “Charitable purpose” is an inclusive definition. The restrictions imposed in the proviso relating to carrying of any activity in the nature of trade business or commerce is only in respect of the activity relating to ‘any other object of general public utility and not in relation to other activities specifically covered as charitable in nature. Thus, we note that in the instant case the activity carried out by the trust for promotional of art and culture and 88 ITA No. 161/Jodh/2020 TatpadamUpavan not of any other object of general public utility and therefore the criteria provided in section 2(15) would not fall in the any other general public utility. The intention of the legislature was only to exclude from exemption, entities carrying on business and earning income for which exemption was claimed on the basis that the purpose would fall under the charitable purpose as defined in the last limb of section 2(15) of the Act. 8.10 Even the central board of direct taxes also clarified by issuance of a circular number 11/2018 dated 19.12.2008 that : "The newly inserted proviso to Section 2(15) will not apply in respect of the first three limbs of Section 2(15) i.e. relief of the poor, education or medical relief. Consequently where the purpose of a trust or institution is relief of the poor, education or medical relief, it will constitute charitable purpose, even if it incidentally involves the carrying on of commercial activities. The Circular further stated as under- "3. The newly inserted proviso to Section 2(15) will apply only to entities whose purpose is advancement of any other object of general public utility' i.e. the fourth limb of the definition of the charitable purpose contained in Section 2(15). Hence such entities will not be eligible u/s 11 or u/s 10(23C) of the Act if they carry on commercial activity. Whether such an entity is carrying on an activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of the activity." Further, CBDT in paragraph 3.2 pointed out the scope of the provision in the circular as under:- "In the final analysis, however, whether the assessee has for its objects 'the advancement of any other object of general public utility is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, 89 ITA No. 161/Jodh/2020 TatpadamUpavan commerce or business, it would not be entitled to claim its objects are charitable purpose. In such a case, the object of 'general public utility' will be only a mask or a device to hide the true purpose, which is trade, commerce or business or the rendering of any service in relation to trade, commerce or business. Each case would, therefore, be decided on its own facts and no generalization is possible. Assessee, who claim that their object is 'charitable purpose' within the meaning: of Section 2(15), would be well advised to eschew any activity which is in the nature of trade, commerce or business or rendering of any service in relation to trade, commerce or business." 8.11 Thus, the proviso to Section 2(15) of the Act is only to check those institutions which attempt to gain exemption under the cloak of a trust and each case would, therefore, be decided on its own facts as per aforesaid circular. Here as already decided by the ld. CIT(A) in a detailed finding that the activity of dance program was not trade, business or commerce activity after analyzing the definition of trade, business and commerce after considering the various judicial decision cited before him and form part of his order. Even the ld. CIT(A) has touched upon the explanatory statement to the memorandum to Finance Bill 2015 clearly provides that the advancement of any other object of general public utility shall be charitable purpose, unless it involves the carrying on of any activity in the nature of trade, commerce or business and the receipts from such activity do not exceed 20 % of total receipts. Thus, the amended provision of section 90 ITA No. 161/Jodh/2020 TatpadamUpavan 2(15) prescribed two condition that activity is not for charitable purpose : i) Carrying on any activity in the nature of trade, commerce or business and; ii) Activity is carried out or undertaken in the course of actual carrying out of such advancement of any other object of general public utility. 8.12 Thus, as discussed here in above, based on the provision of law, decision cited and the consistent view taken by the revenue that the activity organizing the cultural event is for the purpose of object of the assessee and therefore, it cannot be said that the activity carried out falls under the trade, commerce or business and therefore, predominant purpose of the activity is to be considered. The view taken by the bench emanate from the decision of the apex court in the case of CIT Vs. Andhra Chamber of Commerce [ 55 ITR 722(SC) ] wherein the apex court held that if the primary or dominant purpose of a trust or institution is charitable, another object which by itself may not be charitable but which is merely ancillary or incidental to the 91 ITA No. 161/Jodh/2020 TatpadamUpavan primary or dominant purpose would not prevalent the trust or institution from being a valid charity. The Hon'ble ITAT, Jaipur Bench in the case of Rajasthan Cricket Association vs. Addl.CIT [2017] 79 taxmann.com 464 (Jaipur - Trib.) held that where in case of assessee association registered under section 12A, predominant activity of assessee was conducting matches of cricket which fell under category of general public utility, mere fact that it earned certain ancillary income in form of TV subsidy, sale of advertisement and surplus of match receipts, would not lead to conclusion that assessee's case was hit by proviso to section 2(15). The ratio as laid down in the aforesaid judgments of the Hon'ble Apex Court and various High Courts / Tribunals is that if the primary or predominant object of an institution is charitable, any other object which might not be charitable but which is ancillary or incidental to the dominant purpose, would not prevent the institution from being a valid charitable institute. Applying this dominant purpose test in the instant case, there remains no doubt that it has been established for charitable purpose and its predominant objects are promotion of art, science and to develop, construct and maintain Statute of Lord Shiva. The generation of profit from the dance programme amounting to Rs. 4,61,24,845/- is 92 ITA No. 161/Jodh/2020 TatpadamUpavan merely incidental to main objects of the appellant trust. In the instant case, predominant object of the assessee company is development, operation & Maintenance of the project of recreation park including erection of Lord Shiva statue and other recreational facilities for general public utility on non-profit basis to facilitate tourism, recreation & socio cultural activities which is nothing but for the public welfare comprising of enlightening the general public about our art and culture. Thus, the predominant object of the appellant is not to earn profit but to contribute for public welfare, carrying out an event for raising awareness amongst the general public cannot be said to be in the nature of -trade, commerce or business. The AO has given much emphasize to the fact that the event is organized of the Bollywood entity and the entry was paid and thus invoked the provisions of sec. 2(15) and coloured the event in the nature of business and consider it "Trade, Commerce or business" in the context of 2(15) as it sold event tickets for very high rates. Merely because tickets were sold at high price, it cannot be said that there was any profit motive in organizing this cultural activity or the activity was in the nature of trade, commerce or business. The object behind the value/ price of ticket was just to get contribution to get sufficient fund for the charitable 93 ITA No. 161/Jodh/2020 TatpadamUpavan object which included the primary object and thus the amount mentioned on the entry pass could by no chance be considered as 'consideration' for the services. 8.13 It is relevant to note here that during the year under consideration, the amount spent towards construction of Statute of Lord Shiva at the end of the year for the relevant financial year ended on 31.03.2017 stood at Rs.92.36 Crs as per audited Balance sheet as against Rs. 39.16 Crs at the beginning of the previous year. Thus, it is evident that a sum of Rs. 53.20 Crs (Rs.92.36 Crs less Rs. 39.16 Crs) was spent during the relevant previous year as per audited Balance sheet of the appellant towards main object and there is no dispute on the spending of this money. Thus, it is explicitly clear that amount collected from sale of tickets l.e. Rs.4.85 Crs stood utilised and included in Rs. 53.20 Crs. spent for the Main Object of the appellant trust which comes to less than 10% of the total funds utilised during the year. The AO worked out total receipts at Rs.17,15,34,382/ including Rs.4,85,15,000/ being receipts from the event and worked out percentage of receipts as 28% of total receipts. The assessee has explained that receipts from the event were Rs.4,85,15,000/ which is 94 ITA No. 161/Jodh/2020 TatpadamUpavan about 15.56% only of the total receipts of Rs.31,16,81,003/- during the year from various sources, as shown below:- (a) Donation Rs. 11,34,36,207/- (b) Other Income Rs. 4,85,15,000/- Interest Income Rs. 95,83,275/- (c) Proceeds of FDRs Rs. 9,70,73,651/- (d) Loan from Miraj Rs. 2,00,00,000/- (e) Bank Overdraft Rs. 2,30,72,870/- Total Rs.31,16,81,003/-, 8.14 This factual aspect has not been correctly considered by the AO but correctly appreciated by the ld. CIT(A) in his order. The assessee has clarified that the receipts from event i.e. Rs.4,85,15,000/- were about 15.56% of the total receipts of Rs.31,16,81,003/- and therefore, the second condition as mentioned in the proviso to sec. 2(15) of the Act, was also not attracted in the present case. Keeping in view the facts and circumstances of the case, legal position and judicial precedents as discussed above and authoritative judicial precedents cited here in above of the apex court, we are of the considered view 95 ITA No. 161/Jodh/2020 TatpadamUpavan that the Cultural Event organized by the assessee was for the advancement of the object of trust and the same was not in the nature of trade, commerce or business to fall within the scope of proviso to Section 2(15) of the Act. Therefore, proviso to Section 2(15) is not applicable in the instant case and the assessee is entitled to exemption u/s 11 of the Act. Thus, on the over all conspectus of facts and circumstances of the case and judicial precedents discussed in preceding paras, clearly illustrate that the AO denied the exemption u/s. 11 to the assessee by holding that its case is hit by proviso to sec. 2(15) as selling tickets for a dance programme amounted to business with profit motive. On the contrary, the appellant company duly established that it is incorporated as Special Purpose Vehicle (SPV) for the development, operation & maintenance of the project of recreation Park including erection of Lord Shiva statue, amusement park and other recreational facilities for general public on non-profit basis. The appellant company is duly registered u/s. 12AA and also granted approval u/s. 80G of the Act. Since the dominant objects of the assessee company are charitable in nature, conducting of cultural and social event by the assessee within the scope of the main objects of promoting organized arts, recreation & education for general public, 96 ITA No. 161/Jodh/2020 TatpadamUpavan cannot be said to be business. Moreover, organizing cultural and social events/programs was aimed at attainment of main objects of charitable nature, which does not involve carrying on any activity in the nature of trade, commerce or business. The flow of income on account of sale of tickets was only incidental to its main object. As the profit motive does not exist in case of the appellant Company/trust, therefore the organizing of event cannot be considered to be in the nature of trade, commerce or business. In order to invoke the proviso to Sec. 2(15) of the Act, it is essential to establish that the activities in question are carried out with a profit motive only, which the AO has failed to establish. The bench also noted that PCIT in the subsequent to the order under attack taken a view contrary to the view of the ld. AO. Thus, the programme was for promotion of organized arts, which was performed by the renowned Bharatnatyam Dancer Ms. Hema Malini without any honorarium and the surplus generated was spent towards construction of Statue of Lord Shiva with non-profit motive. The total receipts from the event were Rs.4,85,15,000/- which were 15.56% of the total receipts of Rs.31,16,81,003/ from various sources to the appellant during the year as has been explained (supra), thus less than 20% of the total receipts. The appellant duly spent amount 97 ITA No. 161/Jodh/2020 TatpadamUpavan collected from sale of tickets at Rs.4.85 Cr towards the main object of the appellant. Keeping in view the facts and circumstances of the case and authoritative judicial precedents as discussed above we hold that the AO is not justified in denying exemption u/s 11 & 12 to the appellant and we see no fault in the detailed finding of the ld. CIT(A) in the order passed in this case. Based on these observations the ground no. 1 raised by the revenue fails and the same is dismissed. 9. So, far as regards to the ground no. 2 is concerned the ld. AO noted that, during the year under consideration, the assessee claimed total expenditure of Rs. 22,87,80,253/- in the capital account, which was claimed as application of income u/s 11 of the Act. The AO disallowed the said amount as capital expenditure of Rs.22,87,80,253/- and added the same to the total income after having denied the benefit of exemption of income u/s 11 of the Act. The assessee claimed that it applied this expenditure towards Construction/Erection of Lord Shiva Statue during the relevant financial year in terms of main object of the Memorandum & Article of Association and there is no dispute regarding the genuineness of these expenses. The appellant submitted that in the income and 98 ITA No. 161/Jodh/2020 TatpadamUpavan expenditure account, its total receipts were Rs. 17,15,61,482/- against which application under capital account of Rs. 22,87,80,253/- was claimed but since the AO denied exemption u/s 11 of the Act, therefore, the capital expenditure of Rs. 22,87,80,253/- was also disallowed. The assessee further submitted that it has already explained that there was no violation of provisions of sec. 2(15), therefore, exemption u/s. 11 may be allowed to it along with consequential benefit. 9.1 As we have already held that there was no violation of provisions of section 2(15) and organizing the Cultural Event was for the advancement of the object of general public utility and the same was not in the nature of trade, commerce or business and therefore, the assessee is a charitable institution, eligible for exemption u/s 11/12 of the Act and upon hold such the assessee eligible for claim of both capital and revenue expenditure incurred for the objects/ charitable purposes which would be regarded as application of income. As we have already considered in ground no. 1 that the benefit of section 11 & 12 cannot be denied and confirmed the finding of the ld. CIT(A) and therefore, here also we see no fault in the finding 99 ITA No. 161/Jodh/2020 TatpadamUpavan of the ld. CIT(A) on this issue also. Based on these observation the ground no. 2 raised by the revenue fails and we find no infirmity in the order of the ld. CIT(A). 10. The ground no. 3 being general in nature does not require any adjudication. In the result, appeal of the revenue is dismissed. Order pronounced under rule 34(4) of the Appellate Tribunal Rules, 1963, by placing the details on the notice board. Sd/- Sd/- (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) Judcial Member Accountant Member D at e d : 0 6/ 0 9/2 02 3 *G an es h K u m a r , P S Copy to: 1. The Appellant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR 6. Guard File Assistant Registrar Jodhpur Bench