Gujarat State Plastic Manufacturers Association, Ahmedabad V. The DDIT(E), Ahmedabad

ITA 2840/AHD/2014

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6394 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 19-09-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 21-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Benefit of exemption; TDS
• Section: 80G; 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER) ITA. NO: 2840/AHD/2014 (ASSESSMENT YEAR: 2010-11) GUJARAT STATE PLASTIC MANUFACTURES ASSOCIATION C/O. VINOD & NARENDRA 101/102, SHAILY NR. OLD GUJARAT HIGH COURT, NAVRANGPURA, AHMEDABAD-380009 V/S DDIT(EXEMPTION), AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAATG3563A APPELLANT BY : SHRI HARDIK VORA, A.R. RESPONDENT BY : SHRI MUDIT NAGPAL, SR. D.R. ( )/ ORDER DATE OF HEARING : 19 -09-201 9 DATE OF PRONOUNCEMENT : 22 -10-2019 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. CIT(A)-XXI, AHMEDABAD DATED 25.08.2014 PERTAINING T O A.Y. 2010-11 AND ASSESSEE HAS TAKEN FOLLOWING THAT LD. CIT(A) ERRED IN CONFIRMING ACTION OF ITA NO. 2840 /AHD/2014 . A.Y. 2010-11 2 DDIT(E) THAT APPELLANTS CASE IS COVERED BY THE FIR ST PROVISO TO SECTION 2(15) OF THE ACT. (II) THE LD. CIT(A) ERRED IN NOT DEALING WITH THE G ROUND THAT BENEFIT U/S 11(1) & 11(2) ARE DENIED HOLDING THAT SECTION 13(8) APPLI ES. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A TR UST NAMED AS GUJARAT STATE PLASTIC MANUFACTURES ASSOCIATION WHICH IS ESTABLISH ED TO SAFEGUARD THE INTEREST AND PROMOTE DEVELOPMENT & GROWTH OF PLASTIC INDUSTR Y OF GUJARAT STATE. ITS PRIME OBJECT IS TO ORGANIZES SEMINARS, CONFERENCE T ECHNICAL TALKS, PLASTIC EXHIBITIONS OTHER PROGRAMME, ETC. AND LIAISONS BETW EEN GOVERNMENT & AND INDUSTRY. AND ASSESSEE ALSO ORGANIZE TOURS & INTERN ATIONAL DELEGATIONS TO VISIT PLASTIC TRADE FAIRS HELD ACROSS THE GLOBE AND TRUST IS REGISTERED U/S. 12AA OF THE INCOME TAX ACT VIDE ORDER NO. HQ-III/32/G-5/88-89 D ATED 10.07.1998. 3. ON VERIFICATION OF THE TRUST, IT IS FOUND THAT THER E IS NOWHERE MENTIONED IN THE CONSTITUTION OF THE ASSOCIATION THAT ASSESSEE CAN A RRANGE THE FAIR/EXHIBITION, EXPO AND FAIRS FOR PROMOTION OF THE PLASTIC INDUSTR IES. THE FUND WAS RAISED BY WAY OF MEMBERSHIP FEES, ADVERTISEMENT INCOME AND PL EXPO INCOME. AND LOWER AUTHORITIES DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT ACTIVITY OF TRUST IS NOTHING BUT DEVISE BY EMINENT INDUSTRIALIS T TO PROMOTE THEIR OWN BRAND/PROFILE AND SAME LEADS TO INCREASE BUSINESS O F THE PARTICIPANT INDUSTRIES WHICH CANNOT BE CONSIDERED AS CHARITABLE ACTIVITIES . 4. ON THE OTHER HAND, ASSESSEE CONTENTION IS THAT ASSE SSEE IS DOING WORK TOWARDS THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBL IC UTILITY . BUT LOWER AUTHORITIES WERE NOT AGREE WITH THE CONTENTION OF T HE ASSESSEE AND HELD THAT THIS ITA NO. 2840 /AHD/2014 . A.Y. 2010-11 3 CASE IS COVERED BY THE FIRST PROVISO TO SECTION 2(1 5) OF THE ACT AND BENEFIT OF TRUST CANNOT BE GRANTED TO THE ASSESSEE. 5. NOW ASSESSEE HAS COME BEFORE US BY WAY OF FILING SE COND APPEAL. 6. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGN ED ORDER. THE TRUST IS REGISTERED U/S. 12AA OF THE I.T. ACT DATED 10.07.19 98 SINCE THEN TRUST IS CARRYING OUT ITS ACTIVITIES WITHOUT ANY HINDRANCE A ND PRIOR TO ASSESSMENT YEAR 2010-11. ACTIVITIES OF THE TRUST WERE GOING ON WITH OUT ANY HINDRANCE AND RETURNS OF THE TRUST WERE DULY ACCEPTED BY THE DEPA RTMENT. 7. AT THE OUTSET, LD. A.R. CITED AN ORDER OF OUR OWN B ENCH IN THE CASE OF ITO VS. INDIAN STAINLESS STEEL DEVELOPMENT ORGANISATIONS IT A NO. 2441/AHD/2015 DATED 14.05.2018 WHEREIN IN SIMILAR FACTS AND CIRCU MSTANCES RELIEF WAS GRANTED TO THE ASSESSEE AND APPEAL OF THE REVENUE WAS DISMI SSED AND OPERATIVE PARA OF THE SAID ORDER IS REPRODUCED HEREIN: 7. WE HAVE GONE THROUGH THE RELEVANT RECORD IN THE IMPUGNED ORDER IN SUPPORT OF ITS CONTENTION. LD. D.R. STATED THAT LD. CIT(A) HAS WRONGLY GIVEN THE RELIEF TO THE ASSESSEE AND STATED THAT THE FUND WAS RAISED BY WAY OF EXHIBITION SPACE CHARGES AND ADVERTISEMENT INCOME AND TDS WAS ALSO DEDUCTED. THE OBJECTS AND ACTIVITY OF THE ASSESSEE HAS TO SEEN IN THE LIGHT OF THE PROVISIONS OF SECTION 2(15) OF THE INCOME TAX ACT. CHARITABLE OBJ ECTS DEFINED IN THE SECTION 2(15) OF THE ACT ARE: * RELIEF OF THE POOR, * EDUCATION, * MEDICAL RELIEF, ITA NO. 2840 /AHD/2014 . A.Y. 2010-11 4 *PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF A RTISTIC OR HISTORIC INTEREST, AND * THE ADVANCEMENT OF ANY OTHER OBJECTION OF GENERAL PUBLIC UTILITY. 8. ON THE OTHER HAND, LD. A.R. STATED THAT IT IS VE RY CLEAR FROM THE OBJECTS OF THE TRUST AS MENTIONED IN ITS ARTICLE OF MEMORANDUM THE MAIN OBJECTS ARE TO PROMOTE TRADING, DEALING AND MANUFACTURING STAINLES S STEEL AND TO PROTECT THE INTEREST OF MEMBERS .THE ASSESSEE TRUST HAD ORGANIZ ED STAINLESS STEEL FAIR CALLED 'INDIANOX-2010' AT AHMEDABAD DURING 16TH TO 19TH JANU ARY, 2010 FROM ITS BROCHURE IT IS NOTICED FROM THERE WERE 800 DOMESTIC EXHIBITORS AND 30 INTERNATIONAL EXHIBITORS. THE ACTIVITY OF THE ASSES SEE WAS ON THE CHARGING BASIC. THE ASSESSEE CHARGE ENTRANCE FEES, EARN THROUGH THE SELLING OF EXHIBITION SPACE AND ALSO FROM THE EXHIBITION ADVERTISEMENT CHARGES. THEREFORE THE ASSESSEE CLEARLY FALLS UNDER THE CATEGORY 'ADVANCEMENT OF AN Y OTHER OBJECT OF GENERAL PUBLIC UTILITY'. THE ASSESSEE EARNED THROUGH THE SEL LING OF EXHIBITION SPACE AMOUNTS TO RS. 37108743/-. ON THE TDS CERTIFICATE I SSUED BY DEDUCTING PERSON SHOWS THE NATURE OF PAYMENT AS CONTRACTOR, RENT AND FEES AND IN SUPPORT OF ITS CONTENTION. LD. A.R. CITED AN ORDER OF ITAT KOLKATA BENCH IN ITA NO. 1491/KOL/2012 & ITA NO. 1284/KOL/2012 FOR ASSESSMEN T YEARS 2008-09 & 2009- 10 TITLED AS INDIAN CHAMBER OF COMMERCE VS. ITO WHE REIN IN SIMILAR CIRCUMSTANCES ITAT KOLKATA BENCH GRANTED RELIEF TO THE ASSESSEE WITH FOLLOWING OBSERVATION:- 38. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE CONSIDERED VIEW THAT IN THE GIVEN FACTS AND DETAILED READING OF THE VARIOUS JUD ICIAL DECISIONS THROUGH THE YEARS, INTERPRETING THE DEFINITION OF 'CHARITABLE PU RPOSE' AS LAID OUT IN SECTION 2(15) OF THE ACT AND ALSO THE DEFINITION OF 'BUSINES S' IN RELATION TO THE SAID SECTION AMPLY REVELS THAT THE THEORY OF DOMINANT PU RPOSE HAS ALWAYS, ALL THROUGH THE YEARS, BEEN UPHELD TO BE THE DETERMINING FACTOR LAYING DOWN WHETHER THE INSTITUTION IS CHARITABLE IN NATURE OR NOT. WHERE T HE MAIN OBJECT OF THE INSTITUTION ITA NO. 2840 /AHD/2014 . A.Y. 2010-11 5 WAS 'CHARITABLE' IN NATURE, THEN THE ACTIVITIES CARRI ED OUT TOWARDS THE ACHIEVEMENT OF THE SAID, BEING INCIDENTAL OR ANCILL ARY TO THE MAIN OBJECT, EVEN IF RESULTING IN PROFIT AND EVEN IF CARRIED OUT WITH NO N MEMBERS, WERE ALL HELD TO BE 'CHARITABLE' IN NATURE. HON'BLE APEX COURT IN THE EAR LIEST CASE OF ANDHRA CHAMBER OF COMMERCE (SUPRA) HAD CLEARLY LAID OUT THE PRINCI PLE THAT IF THE PRIMARY PURPOSE OF AN INSTITUTION WAS ADVANCEMENT OF OBJECTS OF GEN ERAL PUBLIC UTILITY, IT WOULD REMAIN CHARITABLE EVEN IF AN INCIDENTAL OR ANCILLAR Y ACTIVITY OR PURPOSE, FOR ACHIEVING THE MAIN PURPOSE, WAS PROFITABLE IN NATUR E. IN OUR VIEW THE BASIC PRINCIPLE UNDERLYING THE DEFINITION OF 'CHARITABLE P URPOSE' REMAINED UNALTERED EVEN ON AMENDMENT IN THE SECTION 2(15) OF THE ACT W .E.F. 01/04/2009, THOUGH THE RESTRICTIVE FIRST PROVISO WAS INSERTED THEREIN. ACC ORDINGLY, IN THE GIVEN FACTS OF THE CASE AS DISCUSSED ABOVE IN DETAIL, THE ASSESSEE ASS OCIATION'S PRIMARY PURPOSE WAS ADVANCEMENT OF OBJECTS OF GENERAL PUBLIC UTILITY AN D IT WOULD REMAIN CHARITABLE EVEN IF AN INCIDENTAL OR ANCILLARY ACTIVITY OR PURP OSE, FOR ACHIEVING THE MAIN PURPOSES PROFITABLE IN NATURE. HENCE, ASSESSEE IS N OT HIT BY NEWLY INSERTED PROVISO TO SECTION 2(15) OF THE ACT. THIS ISSUE OF ASSESSED APPEAL IS ALLOWED. 39. IN THE RESULT, BOTH APPEALS OF ASSESSEE ARE ALLOWED. 9. ASSESSEE ALSO CITED AN ORDER OF ITAT KOLKATA BEN CH IN ITA NO. 735/KOL/2013 TITLED AS ITO VS. INDIAN LEATHER PRODU CTS ASSOCIATION WHEREIN IN SIMILAR CIRCUMSTANCES RELIEF WAS GRANTED TO THE ASS ESSEE WITH FOLLOWING OBSERVATION:- CHARITABLE TRUSTINCOME OF CHARITABLE TRUSTS-BENEFI T U/S. 11ASSESSEE WAS ASSOCIATION DULY REGISTERED U/S 12AASSESSEE ALSO H ELD CERTIFICATE U/S 80G ASSESSEE WAS CARRYING ON CHARITABLE ACTIVITIES SINC E 1988ASSOCIATION OF ASSESSEE WAS FORMED BY LEATHER MERCHANTS FOR VARIOU S ACTIVITIES SUCH AS SPREADING, KNOWLEDGE AMONG MEMBERS, REGARDING THE T RADE TO REMOVE HARDSHIP OF MEMBERS, TO ASSIST MEMBERS IN INCREASING VOLUME BY ORGANIZING TRADE SHOWS, FAIRS, SEMINARS AND PUBLISHING OF MAGAZINES FOR SOL E BENEFIT AND ADVANTAGES OF ITA NO. 2840 /AHD/2014 . A.Y. 2010-11 6 LEATHER INDUSTRYPRIME OBJECT OF ASSESSEE WAS TO PR OMOTE LEATHER TRADE DURING PREVIOUS YEAR, ASSESSEE DERIVED INCOME FROM CONDUCTING TRADE SHOWS, SEMINARS, FAIRS, SVHC TESTING, LEATHER GOODS PARK B OOKING FEES, FASHION MAGAZINE AND ENTRY TICKETS FOR VARIOUS TRADE SHOWSAO WAS OF VIEW THAT, ASSESSEE WAS ALLOWING OUTSIDERS ALSO TO PARTICIPATE BY KEEPING T HEIR STALL IN TRADE FAIR ORGANIZED BY ASSESSEEAO WAS THEREFORE OF VIEW THAT, ASSESSEE WAS HAVING DEALINGS OR RELATIONS WITH OUTSIDE BODY AND GENERATING INCOMEA O THEREFORE CONCLUDED THAT, ASSESSEE WAS DERIVING INCOME BY CARRYING ON A CTIVITY IN NATURE OF TRADE, COMMERCE OR BUSINESSAO ACCORDINGLY DENIED BENEFIT OF EXEMPTION U/S 11 OF THE ACT TO ASSESSEEAO BROUGHT TO TAX GROSS RECEIPTS AS PER INCOME AND EXPENDITURE ACCOUNT AFTER DEDUCTING EXPENDITURE INCURRED TO TAX BEFORE CIT(A) ASSESSEE EXPLAINED CHARITABLE NATURE OF ASSESSEE AND SUBMITT ED THAT, IT WAS EXISTING FOR CHARITABLE PURPOSECIT(A) WAS OF VIEW THAT, MAIN CO NTRIBUTION FROM NON- MEMBERS WAS STALL BOOKING CHARGES IN TRADE FAIR ORG ANIZED BY ASSESSEE DURING PREVIOUS YEAR-HE WAS OF VIEW THAT, AS PER FIRST PRO VISO TO S. 2(15), ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHOUL D NOT BE CHARITABLE PURPOSE, IF IT INVOLVED CARRYING ON ACTIVITY IN NATURE OF TRADE, C OMMERCE OR BUSINESSASSESSEE HAD NOT CARRIED OUT ANY SUCH ACTIVITY BY CHARGING R ENT FROM NON-MEMBERS FOR STALLS IN TRADE FAIR ORGANIZED BY ASSESSEECIT(A) A CCORDINGLY DIRECTED AO TO COMPUTE INCOME OF ASSESSEE WITHOUT INVOKING FIRST P ROVISO TO SECTION 2(15) HELD, IT COULD BE SEEN FROM BYE-LAWS OF ASSESSEE TH AT, DOMINANT AND PRIME OBJECTIVE OF ASSESSEE WAS NOT PROFIT MAKINGPRIOR T O INTRODUCTION OF THE PROVISO TO S 2(15), THERE WAS NO DISPUTE THAT, ASSESSEE WAS ESTABLISHED FOR CHARITABLE PURPOSESCONTRIBUTION ASSESSEE RECEIVED FROM NON-ME MBERS IN CONDUCTING TRADE FAIR WAS RS.15,64,556 TOTAL RECEIPTS OF ASSE SSEE DURING PREVIOUS YEAR WAS SUM OF RS.L,30,26,506IT COULD NOT BE SAID THAT REC EIPTS FROM NON-MEMBERS CONSTITUTED MAJOR RECEIPTS OF ASSESSEEEXPENSES INC URRED IN CONNECTION WITH TRADE FAIRS AND PROMOTION EVENTS WAS RS.29,03,411I T COULD NOT THUS BE SAID THAT, ACTIVITY OF ORGANIZING TRADE FAIRS AND EXHIBI TIONS AND THE ACT OF COLLECTING ITA NO. 2840 /AHD/2014 . A.Y. 2010-11 7 CONTRIBUTION FROM NON-MEMBERS RENDERED ASSESSEE AS ORGANIZATION EXISTING FOR PROFIT OR WAS DOING BUSINESS OR TRADEFACTUAL ASPEC TS AND OBJECTS OFASSESSEE WOULD CLEARLY SHOW THAT, ASSESSEE DID NOT DRIVEN PR IMARILY BY DESIRE OR MOTIVE TO EARN PROFITS BUT TO DO CHARITY THROUGH ADVANCEMENT OF OBJECT OF GENERAL PUBLIC UTILITYTHIS WAS SUBSTANTIATED BY ACTUAL INCOME REC EIVED ON OPERATIONS OF ASSESSEE AND EXPENDITURE INCURRED SET OUT IN EARLIE R PARAGRAPHS OF THIS ORDER PROVISO TO S.2(15) WAS THEREFORE NOT APPLICABLE TO CASE OF ASSESSEEASSESSEE WAS ENTITLED TO BENEFITS OF S.L1AO HAD NOT DISPUTE D CONDITIONS NECESSARY FOR ALLOWING EXEMPTION U/S.11, EXCEPT APPLICABILITY OF PROVISO TO S.2(15)SAID PROVISO WAS NOT APPLICABLE TO CASE OF ASSESSEEORDE R OF CIT(A), UPHELD ASSESSEE'S INCOME WAS NOT INCLUDIBLE IN TOTAL INCOM EAPPEAL BY REVENUE WAS DISMISSED. 10. AS WE CAN SEE, THE ASSESSEE IS IN FACT CARRYING OUT ACTIVITIES FOR CHARITABLE PURPOSES AND THERE IS AN EXCESS OF EXPENDITURE OVER INCOME YEAR AFTER YEAR AND IN SIMILAR CIRCUMSTANCES RELIEF HAVE BEEN GRANTED BY T HE ITAT KOLKATA BENCHES AND IN OUR CONSIDERED OPINION, THE ASSESSEE IS ENTITLED FOR CLAIM OF DEDUCTION U/S. 11 & 12 OF INCOME TAX ACT. AFTER CONSIDERING THE ABOVE F ACTS, WE OBSERVE THAT THE AIMS AND OBJECT OF THE ASSESSEE TRUST WERE CHARITABLE IN NATURE. THE ASSESSEE HAS BEEN GRANTED REGISTRATION U/S. 12AA OF THE ACT AND SINCE ITS 1ST YEAR THE ASSESSEE TRUST HAS CARRIED OUT ACTIVITIES FOR CHARITABLE PURPOSES. ON PERUSAL OF THE AUDITED ANNUAL ACCOUNTS FOR A.Y. 2011-12 TO 2013-14 SHOW TH AT THE ASSESSEE TRUST HAS SPENT MORE AMOUNTS ON THE OBJECT OF THE TRUST THAN THE TOTAL RECEIPTS AS MENTIONED BELOW:- A.Y. AMOUNT SPENT FOR OBJECT OF TRUST TOTAL 2011-12 34,53,361/- 5,41,889/- 2012-13 12,57,968/- 4,62,409/- 2013-14 10,76,392/- 33,240/- ITA NO. 2840 /AHD/2014 . A.Y. 2010-11 8 11. IT IS CLEAR THAT THERE IS AN EXCESS OF EXPENDIT URE OVER INCOME YEAR AFTER YEAR AND THE ASSESSEE TRUST HAS BEEN CARRYING OUT A CTIVITIES FOR CHARITABLE PURPOSES. WE CONSIDER THAT THE MAIN OBJECT OF THE A SSESSEE TRUST WAS THE PROMOTION, PROTECTION AND DEVELOPMENT OF TRADE COMM ERCE AND INDUSTRY, THEREFORE ITS INCOME GENERATED FROM TRADE FAIR ETC. WOULD BE EXEMPTED FROM TAX U/S. 11 R.W.S. 2(15) OF THE ACT. IN VIEW OF THE ABO VE FACTS AND FINDINGS, WE ARE INCLINED WITH THE DECISION OF LD. CIT(A). THEREFORE , THE APPEAL OF THE REVENUE IS DISMISSED. 12. IN THE RESULT, THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED. 8. ON THE OTHER HAND, LD. D.R. VEHEMENTLY RELIED ON TH E ORDER OF THE LD. CIT(A). BUT WE ARE NOT AGREE WITH THE CONTENTION OF THE LD. D.R. SINCE MATTER IS FAIRLY COVERED IN FAVOUR OF THE ASSESSEE. 9. THUS IN PARITY WITH OUR OWN ORDER IN SIMILAR FACTS AND CIRCUMSTANCES, WE ALLOW THE APPEAL OF THE ASSESSEE. 10. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN OPEN COURT ON 22 - 10- 2019 SD/- SD/- (AMARJIT SINGH) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 22/10/2019 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT.