THE INDIAN MERCHANTS CHAMBERS, MUMBAI V. DDIT (E) -II(1), MUMBAI

ITA 4076/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2980 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 08-09-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 21-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ARVIND SONDE
• Keywords: Business income; Charitable institution; Rule of consistency
• Section: 12A; 28; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL I, BENC H MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI MAHAVIR SINGH, JM ./ ITA NO.4076/MUM/2013 ( / ASSESSMENT YEAR :2009-2010) THE INDIAN MERCHANTS CHAMBERS, IMC BUILDING, IMC MARG, MUMBAI-400020 VS. DDIT(EXEMPTION)-II(1), PIRAMAL CHAMBERS, PAREL, MUMBAI ./ ./PAN/GIR NO. : AAATI 00047 H ( /APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI ARVIND SONDE /REVENUE BY : SHRI V.S.JADHAV / DATE OF HEARING : 31/03/2016 /DATE OF PRONOUNCEMENT 29/ 06/2016 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A)- MUMBAI, FOR THE ASSESSMENT YEAR 2009-2010. 2. IN THIS APPEAL, THE ASSESSEE IS BASICALLY AGGRI EVED FOR DECLINE OF EXEMPTION U/S.11 ON THE PLEA THAT PROVISO TO SECTIO N 2(15) WAS APPLICABLE TO THE ASSESSEE WHICH WAS INTRODUCED W.E.F. ASSESSM ENT YEAR 2009-2010. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS REGISTERED AS A COM PANY U/S.25 OF THE COMPANIES ACT, 1956. THE MAIN OBJECTS OF THE ASSESS EE TRUST INTER ALIA ARE TO PROMOTE, ADVANCE AND PROTECT TRADE, COMMERCE AND INDUSTRY IN INDIA. THE AO HELD THAT THE ASSESSEE WAS NOT IMPART ING EDUCATION IN PURSUANCE OF ITS OBJECTS. HE HELD THAT THE ACTIVITY OF ORGANIZING SEMINARS, ITA NO.4076/13 2 TRAINING COURSES AND HOLDING COMMERCIAL EXAMINATION S DO NOT FALL WITHIN THE DEFINITION OF EDUCATION. THE ASSESSEE WAS RUNNI NG CERTAIN SEMINARS AND TRAINING PROGRAMMES ON ACCOUNT OF WHICH IT COLL ECTED RS.31401915/- AND CONDUCTED EXAMINATIONS FOR WHICH IT COLLECTED F EES OF RS1224751/-. THESE TWO ACTIVITIES WERE CLASSIFIED AS ACTIVITIES TO PROMOTE EDUCATION. THE AO RELYING ON THE HON. SUPREME COURT DECISION I N THE CASE OF LOKA SHIKSHANA TRUST 101 ITR 234 AND BIHAR INSTITUTE OF MINING 208 ITR OQ4 PATNA, SAURASHTRA EDUCATIO.N FOUNDATION VS. CIT 273 ITR 139 (GUJ), GUJARAT STATE CO. OP. UNION VS. CIT 195 ITR 279 (GU J) HELD THAT THE ACTIVITY OF HOLDING COMMERCE CLASSES, ARRANGING SEM INARS AND LECTURES AND THE ACTIVITY OF RUNNING OF PRIVATE COMMERCIAL C OURSES AND CONSEQUENT CONDUCTING OF EXAMINATIONS WOULD NOT COME UNDER THE HEAD EDUCATION. HE HELD THAT THE ASSESSEE'S ACTIVITIES WOULD FALL U NDER THE SIXTH CATEGORY OF CHARITABLE PURPOSE THAT IS THE ADVANCEMENT OF AN Y OTHER OBJECT 'OF GENERAL PUBLIC UTILITY .. HE FURTHER HELD THAT IN. VIEW OF AMENDMENT TO SECTION 2(15) BY INSERTION OF PROVISO W.E.F. 1.4.20 09 FOR AY:2009-10 ONWARDS THE ASSESSEE WOULD NOT BE ENTITLED TO EXEMP TION AS IT IS CONDUCTING ACTIVITIES IN THE NATURE OF BUSINESS EAR NING HUGE PROFITS IN A SYSTEMATIC AND ORGANIZED MANNER. HE ALSO HELD THAT EARNING SUCH HUGE PROFIT IN A SYSTEMATIC AND ORGANIZED MANNER WOULD N OT MAKE IT AN ENTITY EXISTING FOR CHARITABLE PURPOSE. 4. IN VIEW OF THE ABOVE DISCUSSION, HE DECLINED ASS ESSEES CLAIM OF EXEMPTION BY OBSERVING THAT IN VIEW OF AMENDMENT TO SECTION 2(15) BY INSERTION OF PROVISO W.E.F.1-4-2009, ASSESSEE WOULD NOT BE ENTITLED TO ITA NO.4076/13 3 EXEMPTION AS IT IS CONDUCTING ACTIVITIES IN THE NAT URE OF BUSINESS EARNING HUGE PROFITS. BY THE IMPUGNED ORDER THE CIT(A) CONF IRMED THE ACTION OF AO, AGAINST WHICH ASSESSEE IS IN FURTHER APPEAL BEF ORE US. 5. IT WAS CONTENDED BY LD. AR THAT NONE OF THE ACTI VITIES OF THE ASSESSEE WAS IN THE NATURE OF BUSINESS TRADE OR PRO FESSION. HE PLACED ON RECORD DECISION OF COORDINATE BENCH IN THE CASE OF INDIAN CHAMBER OF COMMERCE, ITA NO.1491/KOL/2012 AND ITA NO.1284/KOL/ 2012, ORDER DATED 2-12-2014, WHEREIN AMENDMENT BROUGHT IN SECTI ON 2(15) HAS BEEN ELABORATELY DISCUSSED AND IT WAS HELD THAT ASSESSEE BEING ENGAGED IN MAIN OBJECT OF THE INSTITUTION WAS CHARITABLE IN NATURE THEN THE ACTIVITIES CARRIED OUT TOWARDS ACHIEVEMENT OF THE SAID OBJECT BEING INCIDENTAL OR ANCILLARY TO THE MAIN ACTIVITY, EVEN IF CARRIED OUT FOR PROFIT, WOULD NOT MITIGATE OR CHANGE THE CHARITABLE IN NATURE. RELI ANCE WAS PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF AN DHRA CHAMBER OF COMMERCE (1965) 55 ITR 722 (SC), WHEREIN PRINCIPLE WAS LAID DOWN TO THE EFFECT THAT IF THE PRIMARY PURPOSE BE ADVANCEME NT OF OBJECTS OF GENERAL PUBLIC UTILITY, IT WOULD REMAIN CHARITABLE EVEN IF AN INCIDENTAL ENTRY INTO THE POLITICAL DOMAIN FOR ACHIEVING THE MAIN PU RPOSE, WAS PROFITABLE IN NATURE. IT WAS FURTHER OBSERVED THAT BASIC PRINCIPL E UNDERLYING THE DEFINITION OF CHARITABLE PURPOSE REMAINED UNALTER ED EVEN ON AMENDMENT IN THE SECTION 2(15) OF THE ACT W.E.F.01-04-2009, T HOUGH THE RESTRICTIVE FIRST PROVISO WAS INSERTED THEREIN. THE PRECISE OBSERVATI ON OF THE TRIBUNAL WAS AS UNDER :- NOW ITA NO 1284/KOL/2012 OF THE ASSESSEES APPEAL F OR AY 2009- 10 31. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINST THE ORDER ITA NO.4076/13 4 OF CIT(A) CONFIRMING DENIAL OF EXEMPTION U/S11 OF T HE ACT FOR THE REASON THAT THE ACTIVITIES OF ASSESSEE ASSOCIATION IS HIT BY THE NEWLY INSERTED PROVISO BY THE FINANCE (NO.2)ACT IN SECTIO N 2(15) OF THE ACT W.R.E.F. 01.04.2009 AND THEREBY FALLING U/S 28(III) OF THE ACT BEING PROFIT OF BUSINESS. FOR THIS ASSESSEE ASSOCIATION H AS RAISED FOLLOWING SEVEN GROUNDS. . 1. THAT ON THE ACTS AND THE CIRCUMSTANCES OF THE C ASE OF THE APPELLANT THE LD. CIT(A) ERRED IN CONFIRMING THE DE NIAL OF EXEMPTION U/S 11 OF THE IT ACT, 1961 FAILING TO OBS ERVE THAT ON THE SAME FACTS SUCH EXEMPTION WAS CONSISTENTLY ALLO WED TO THE APPELLANT SINCE THE AY 1984-85. 2. THAT ON THE ACTS AND THE CIRCUMSTANCES OF THE CA SE OF THE APPELLANT THE LD. CIT(A) ERRED IN CONFIRMING THE AL LEGATION OF THE LD. AO THAT THE APPELLANTS CASE WAS COVERED WITHIN CLAUSE (III) OF SECTION 28 OF THE I.T ACT, 1961 WHEREBY INCOME D ERIVED BY A TRADE, PROFESSIONAL OR SIMILAR ASSOCIATION FROM ITS SPECIFIC PERFORMANCE FOR ITS MEMBERS WAS HELD TO BE TAXABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. 3. THAT ON THE ACTS AND THE CIRCUMSTANCES OF THE CA SE OF THE APPELLANT THE LD. CIT(A) ERRED IN CONFIRMING THE AL LEGATION OF THE LD. AO THAT THE APPELLANT WAS HIT BY THE FIRST PROV ISO TO SECTION 2(15) OF THE INCOME TAX ACT INSERTED W.E.F. 01/04/2 009, INASMUCH AS THE APPELLANT WAS ALLEGEDLY INVOLVED IN THE RENDERING OF SERVICE IN RELATION TO ANY TRADE, COMM ERCE OR BUSINESS, FOR CESS OR FEE OR ANY OTHER CONSIDERATIO N. 4. THAT ON THE ACTS AND THE CIRCUMSTANCES OF THE CA SE OF THE APPELLANT THE LD. CIT(A) ERRED IN CONFIRMING THE AL LEGATION OF THE LD. AO THAT THE APPELLANTS ACTIVITIES OF CONDUCTIN G THE ENVIRONMENT MANAGEMENT CENTRES, MEETINGS, CONFERENC ES & SEMINARS AND THE ISSUANCE OF CERTIFICATE OF ORIGIN WERE ALL IN THE NATURE OF BUSINESS CARRIED ON SYSTEMATICALLY AND CO NTINUOUSLY WITH A MOTIVE TO EARN PROFIT FROM THE SAME. 5. THAT ON THE ACTS AND THE CIRCUMSTANCES OF THE CA SE OF THE APPELLANT THE LD. CIT(A) ERRED IN HOLDING THAT THE RELIANCE PLACED BY THE LD. AO ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE APPELLANTS OWN CASE VIZ. INDIAN CHAMB ER OF COMMERCE VS CIT (191 ITR 796 S.C) WAS JUSTIFIED AS THE APPELLANT DID NOT GET THE SAID JUDGMENT REVERSED BY FILING A REVIEW PETITION BEFORE THE HON'BLE S.C. 6. THAT ON THE ACTS AND THE CIRCUMSTANCES OF THE CA SE OF THE APPELLANT THE LD. CIT(A) ERRED IN HOLDING THAT DECI SION OF THE HON'BLE S.C VIDE ITS CONSTITUTIONAL BENCH, IN A FIV E-JUDGES BENCH, BY A MAJORITY OF 4 TO 1, IN ADDL. CIT V. SUR AT ART SILK CLOTH MANUFACTURERS ASSOCIATION (121 ITR 1 S.C) AND THE MAJORITY DECISION OF THE LARGER BENCH IN THE CASE O F COMMISSIONER OF INCOME-TAX V. FEDERATION OF INDIAN CHAMBERS ITA NO.4076/13 5 OF COMMERCE & INDUSTRY (130 ITR 186 S.C) WAS NOT AP PLICABLE TO THE CASE OF THE APPELLANT IN VIEW OF THE AMENDME NT IN THE SAID SECTION 2(15) OF THE ACT WITHOUT APPRECIATING THE BASIC PRINCIPLE LAID DOWN BY THE COURT BASED ON THE FACTS OF THE CASE. 7. THAT ON THE ACTS AND THE CIRCUMSTANCES OF THE CA SE OF THE APPELLANT THE LD. CIT(A) ERRED IN CONFIRMING THE TD S DISALLOWANCE OF RS.2,50,874/-. 32. WE HAVE ALREADY DISCUSSED THE FACTS ABOVE IN IT A NO1491/KOL/2012 FOR AY 2008-09, WHICH ARE UNCHANGED IN THIS APPEAL ALSO I.E. FOR AY 2009-10 BUT IN VIEW OF AMEN DMENT IN SECTION 2(15) OF THE ACT VIDE FINANCE ACT 2008, W.E.F. 01/0 4/2009, WHEREBY NEW PROVISO WAS INSERTED AND ACCORDING TO LOWER AUT HORITIES THE ACTIVITIES OF ASSESSEE ASSOCIATION OF CONDUCTING EN VIRONMENT MANAGEMENT CENTRES, MEETINGS, CONFERENCES & SEMINAR S AND ISSUANCE OF CERTIFICATE OF ORIGIN WERE ALL IN THE N ATURE OF RENDERING OF SERVICE IN RELATION TO BUSINESS, FOR CONSIDERATION AND FALLING UNDER THE LAST LIMB OF CHARITABLE PURPOSE, I.E. ADVANCEM ENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY, THUS COVERED BY THE PROVISO TO SECTION 2(15) OF THE ACT. IN CONNECTION TO THE ABOV E IT WOULD BE RELEVANT TO KNOW THE AMENDED SECTION 2(15) OF THE A CT IN VIEW OF LEGISLATIVE INTENT BEHIND SUCH AMENDMENT. WE HAVE G ONE THROUGH SECTION 2(15) OF THE ACT, WHICH IS RELEVANT FOR ASS ESSMENT YEAR 2009-10 YEAR UNDER CONSIDERATION, WHICH LAYS DOWN T HE DEFINITION OF CHARITABLE PURPOSE AS UNDER: (15) CHARITABLE PURPOSE INCLUDES RELIEF OF THE P OOR, EDUCATION, MEDICAL RELIEF, 79 [PRESERVATION OF ENVIRONMENT (IN CLUDING 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 U TILITY: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT O F GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT IN VOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO AN Y TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDE RATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, O R RETENTION, OF THE INCOME FROM SUCH ACTIVITY; THE RATIONALE FOR BRINGING THIS PROVISO CAN BE UNDE RSTOOD BY REFERRING TO THE RELEVANT PORTION OF THE MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE BILL, 2008 REPORTED IN 29 8 ITR (ST) 2000- 01 WHICH READS AS UNDER: (CLAUSE 3) IT HAS BEEN NOTICED THAT A NUMBER OF ENTITIES OPER ATING ON COMMERCIAL LINES ARE CLAIMING EXEMPTION ON THEIR IN COME EITHER UNDER SECTION 10(23C) OR SECTION 11 OF THE ACT ON T HE GROUND THAT THEY WARE CHARITABLE INSTITUTIONS. THIS IS BASED ON THE ARGUMENT THAT THEY ARE ENGAGED IN THE ADVANCEMENT OF AN OBJECT O F GENERAL PUBLIC UTILITY AS IS INCLUDED IN THE FOURTH LIMB O F THE CURRENT DEFINITION ITA NO.4076/13 6 OF CHARITABLE PURPOSE. SUCH A CLAIM WHEN MADE IN RESPECT OF AN ACTIVITY CARRIED OUT ON COMMERCIAL LINES IS CONTRAR Y TO THE INTENTION OF THE PROVISO. WITH A VIEW TO LIMITING THE SCOPE OF T HE PHRASE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY, IT IS PROPOSED TO AMEND SECTION 2(15) SO AS TO PROVIDE TH AT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY SHALL NOT A CHARITABLE PURPOSE IF IT INVOLVES THE CARRYING ON O F FOLLOWING ACTIVITIES: (A) ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE O R BUSINESS OR, (B) ANY ACTIVITY OR RENDERING OF ANY SERVICE IN REL ATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A FEE OR CESS OR ANY OTHE R CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION OF THE INCOME FROM SUCH ACTIVITY, OR THE RETENTION OF SUCH INCOME, BY THE CONCERNED ENTITY. FURTHER CBDT EXPLAINED THIS PROVISO VIDE ITS CIRCU LAR NO. 11 OF 2008, DT. 19TH DEC., 2008 (2009) 308 ITR (ST) 5 ON THE ISSUE WHICH READS AS UNDER: CBDT CIRCULAR NO. 11/2008 19TH DECEMBER, 2008 SUBJECT:- DEFINITION OF CHARITABLE PURPOSE UNDER SECTION 2(15) OF THE INCOME TAX ACT, 1961-REG. SECTION 2(15) OF THE INCOME TAX ACT, 1961 (ACT) D EFINES CHARITABLE PURPOSE TO INCLUDE THE FOLLOWING:- I) RELIEF OF THE POOR II) EDUCATION III) MEDICAL RELIEF, AND IV) THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. AN ENTITY WITH A CHARITABLE OBJECT OF THE ABOVE NAT URE WAS ELIGIBLE FOR EXEMPTION FROM TAX UNDER SECTION 11 OR ALTERNAT IVELY UNDER SECTION 10(23C) OF THE ACT. HOWEVER, IT WAS SEEN TH AT A NUMBER OF ENTITIES WHO WERE ENGAGED IN COMMERCIAL ACTIVITIES WERE ALSO CLAIMING EXEMPTION ON THE GROUND THAT SUCH ACTIVITI ES WERE FOR THE ADVANCEMENT OF OBJECTS OF GENERAL PUBLIC UTILITY IN TERMS OF THE FOURTH LIMB OF THE DEFINITION OF CHARITABLE PURPOS E. THEREFORE, SECTION 2(15) WAS AMENDED VIDE FINANCE A CT, 20008 BY ADDING A PROVISO WHICH STATES THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CH ARITABLE PURPOSE IF IT INVOLVES THE CARRYING ON OF A) ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS; OR B) ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATIO N TO ANY TRADE, COMMERCE OR BUSINESS; FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRES PECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION OF THE I NCOME FROM SUCH ACTIVITY. 2. THE FOLLOWING IMPLICATIONS ARISE FROM THIS AMEND MENT 2.1 THE NEWLY INSERTED PROVISO TO SECTION 2(15) WIL L NOT APPLY IN RESPECT OF THE FIRST THREE LIMBS OF SECTION 2(15), I.E., RELIEF OF THE ITA NO.4076/13 7 POOR, EDUCATION OR MEDICAL RELIEF. CONSEQUENTLY, WH ERE THE PURPOSE OF A TRUST OR INSTITUTION IS RELIEF OF THE POOR, ED UCATION OR MEDICAL RELIEF, IT WILL CONSTITUTE CHARITABLE PURPOSE EVE N IF IT INCIDENTALLY INVOLVES THE CARRYING ON OF COMMERCIAL ACTIVITIES. 2.2 RELIEF OF THE POOR ENCOMPASSES A WIDE RANGE O F OBJECTS FOR THE WELFARE OF THE ECONOMICALLY AND SOCIALLY DISADVANTA GED OR NEEDY. IT WILL, THEREFORE, INCLUDE WITHIN ITS AMBIT PURPOSES SUCH AS RELIEF TO DESTITUTE, ORPHANS OR THE HANDICAPPED, DISADVANTAGE D WOMEN OR CHILDREN, SMALL AND MARGINAL FARMERS, INDIGENT ARTI SANS OR SENIOR CITIZENS IN NEED OF AID. ENTITIES WHO HAVE THESE OB JECTS WILL CONTINUE TO BE ELIGIBLE FOR EXEMPTION EVEN IF THEY INCIDENTA LLY CARRYON A COMMERCIAL ACTIVITY, SUBJECT, HOWEVER, TO THE CONDI TIONS STIPULATED UNDER SECTION 11(4A) OR THE SEVENTH PROVISO TO SECT ION 10(23C) WHICH ARE THAT I) THE BUSINESS SHOULD BE INCIDENTAL TO THE ATTAIN MENT OF THE OBJECTIVES OF THE ENTITY, AND II) SEPARATE BOOKS OF ACCOUNT SHOULD BE MAINTAINED IN RESPECT OF SUCH BUSINESS. SIMILARLY, ENTITIES WHOSE OBJECT IS EDUCATION OR MEDICAL RELIEF WOULD ALSO CONTINUE TO BE ELIGIBLE FOR EXEMPTION AS CHARITABLE INSTITUTIONS EVEN IF THEY INCIDENTALLY C ARRY ON A COMMERCIAL ACTIVITY SUBJECT TO THE CONDITIONS MENTIONED ABOVE. 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 CHARITABLE PURPOSE CONTAINED IN SECTION 2(15). HE NCE, SUCH ENTITIES WILL NOT BE ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OR UNDER SECTION 10(23C) OF THE ACT IF THEY CARRY ON COMMERCIAL ACTI VITIES. WHETHER SUCH AN ENTITY IS CARRYING ON AN ACTIVITY IN THE NA TURE OF TRADE, COMMERCE OR BUSINESS IS A QUESTION OF FACT WHICH WI LL BE DECIDED BASED ON THE NATURE, SCOPE, EXTENT AND FREQUENCY OF THE ACTIVITY. 3.1 THERE ARE INDUSTRY AND TRADE ASSOCIATIONS WHO C LAIM EXEMPTION FROM TAX U/S 11 ON THE GROUND THAT THEIR OBJECTS AR E FOR CHARITABLE PURPOSE AS THESE ARE COVERED UNDER ANY OTHER OBJEC T OF GENERAL PUBLIC UTILITY. UNDER THE PRINCIPLE OF MUTUALITY, IF TRADING TAKES PLACE BETWEEN PERSONS WHO ARE ASSOCIATED TOGETHER AND CON TRIBUTE TO A COMMON FUND FOR THE FINANCING OF SOME VENTURE OR OB JECT AND IN THIS RESPECT HAVE NO DEALINGS OR RELATIONS WITH ANY OUTS IDE BODY, THEN ANY SURPLUS RETURNED TO THE PERSONS FORMING SUCH AS SOCIATION IS NOT CHARGEABLE TO TAX. IN SUCH CASES, THERE MUST BE COM PLETE IDENTITY BETWEEN THE CONTRIBUTORS AND THE PARTICIPANTS. THEREFORE, WHERE INDUSTRY OR TRADE ASSOCIATIONS CLA IM BOTH TO BE CHARITABLE INSTITUTIONS AS WELL AS MUTUAL ORGANIZAT IONS AND THEIR ACTIVITIES ARE RESTRICTED TO CONTRIBUTIONS FROM AND PARTICIPATION OF ONLY THEIR MEMBERS, THESE WOULD NOT FALL UNDER THE PURVIEW OF THE PROVISO TO SECTION 2(15) OWING TO THE PRINCIPLE OF MUTUALITY. HOWEVER, IF SUCH ORGANIZATIONS HAVE DEALINGS WITH N ON-MEMBERS, THEIR CLAIM TO BE CHARITABLE ORGANIZATIONS WOULD NO W BE GOVERNED BY THE ADDITIONAL CONDITIONS STIPULATED IN THE PROVISO TO SECTION 2(15). 3.2 IN THE FINAL ANALYSIS, HOWEVER, WHETHER THE ASS ESSEE HAS FOR ITS OBJECT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENE RAL PUBLIC UTILITY IS A QUESTION OF FACT. IF SUCH ASSESSEE IS ENGAGED IN ANY ACTIVITY IN ITA NO.4076/13 8 THE NATURE OF TRADE, COMMERCE OR BUSINESS OR RENDER S ANY SERVICE IN RELATION TO TRADE, COMMERCE OR BUSINESS, IT WOULD N OT BE ENTITLED TO CLAIM THAT ITS OBJECT IS CHARITABLE PURPOSE. IN SUC H 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 O R THE RENDERING OF ANY SERVICE IN RELATION TO TRADE, COMMERCE OR BU SINESS. EACH CASE WOULD, THEREFORE, BE DECIDED ON ITS OWN FACTS AND NO GENERALIZATION IS POSSIBLE. ASSESSEE, WHO CLAIM THA T 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 THE RENDERING OF ANY SERVIC E IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS. 33. FROM THE MEMO EXPLAINING THE PROVISIONS OF FINA NCE BILL 2008 & CBDT CIRCULAR DATED 19-12-2008, WHAT WILL BE POSITI ON OF AN ENTITY ENGAGED IN THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY, WHETHER THE SAME WILL BE HIT BY COMMERCIA L ACTIVITIES IN VIEW OF THE NEWLY INSERTED PROVISO TO SECTION 2(15) OF T HE ACT OR NOT? THE PROVISO WAS INTRODUCED WITH THE SOLE AIM OF BRINGIN G INTO AMBIT OF TAXATION SUCH ENTITIES WHICH WERE ENGAGED IN COMMER CIAL ACTIVITIES. HERE, WE NEED TO APPRECIATE THE CONCEPT OF AN ENTI TY ENGAGED IN COMMERCIAL ACTIVITIES. IN VERY SIMPLE WORDS, ANY E NTITY WHOSE MAIN OR DOMINANT OBJECT IS COMMERCIAL CAN ONLY BE SAID T O BE A COMMERCIAL ENTITY. AN ENTITY WHOSE MAIN PURPOSE IS UNDOUBTEDLY CHARITABLE IN NATURE WITHOUT AN IOTA OF COMMERCIALI TY IN IT CANNOT BE SAID TO BE ENGAGED IN COMMERCIAL ACTIVITY. ALSO WE NEED TO NOTE THAT ANOTHER POINT THAT EMERGES FROM THE ABOVE IS T HAT WHETHER AN ENTITY IS CARRYING ON AN ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS ALWAYS REMAINS A QUESTION OF FACT WHICH WI LL HAVE TO BE DETERMINED ON THE BASIS OF THE FACTS OF THE INDIVID UAL CASE. NO GENERALIZATION FOR SUCH DETERMINATION IS POSSIBLE. IN VIEW OF THE ABOVE, IT IS SEEN THAT THE PROVISO CAN BE APPLIED T O FACT BASED ON THE FACTS AND THE PAST HISTORY OF THE ASSESSEE, WHI CH IS DISCUSSED IN DETAIL ABOVE. FROM THE ABOVE FACTS, WE ARE CLEAR TH AT THE ASSESSEE HAS NEVER BEEN DOMINANTLY ENGAGED IN ANY COMMERCIAL ACTIVITIES AND IS A CHARITABLE INSTITUTION REGISTERED AS SUCH U/S 12A OF THE ACT, SET UP FOR THE PROMOTION AND PROTECTION OF INDIAN B USINESS AND INDUSTRY. THE MAIN PURPOSE OF THIS INSTITUTION IS P ROMOTION AND PROTECTION OF TRADE AND COMMERCE IN THE COUNTRY AND NOT TO CONDUCT ANY COMMERCIAL ACTIVITIES. FURTHER, IT HAS ALSO NEV ER BEEN THE CONTENTION OF THE REVENUE THAT THE ASSESSEE IS ENGA GED IN COMMERCIAL ACTIVITIES BUT IT IS HIT BY THE PROVISO TO SECTION 2(15) OF THE ACT AND THUS WILL BE DEEMED TO BE ENGAGED IN CO MMERCIAL ACTIVITIES. WHAT WILL BE THE POSITION TO AN INSTITU TION ENGAGED IN ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY, WHICH LAYS DOWN THAT SUCH AN INSTITUTE WILL BE DEEMED TO BE NO T CHARITABLE IF IT IS INVOLVED IN CARRYING ON ANY ACTIVITY IN THE NAT URE OF TRADE, COMMERCE OR BUSINESS OR ANY ACTIVITY OF RENDERING A NY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS. ACCOR DING TO US, PART OF THE PROVISO BEING ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS INTENDS TO EXPA ND THE SCOPE ITA NO.4076/13 9 OF THE PROVISO TO INCLUDE SERVICES, WHICH ARE RENDE RED IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS. THE PROVISO FURTHE R STIPULATES THAT THE ACTIVITY IN RELATION TO THE TRADE COMMERCE OR BUSINESS MUST BE FOR A CESS OR FEE OR ANY OTHER CONSIDERATION. FR OM THE PROVISO, IT IS SEEN THAT THE MOST MATERIAL AND RELEVANT WORDS I N THE PROVISO ARE TRADE, BUSINESS OR COMMERCE. THE ACTIVITIES WHICH ARE UNDERTAKEN BY THE INSTITUTE SHOULD BE IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR ANY ACTIVITY OF RENDERING ANY SERVICE I N RELATION TO ANY TRADE, COMMERCE OR BUSINESS. WE WILL ANALYSE THE TE RM BUSINESS FROM THE DEFINITION OF THE TERM BUSINESS AS DEFIN ED IN SECTION 2(13) OF THE ACT AND WHETHER ASSESSEES ACTIVITIES FALLS WITHIN THE TERMINOLOGY OF BUSINESS. THE TERM BUSINESS READ AS UNDER:- 2. DEFINITIONS: (13) BUSINESS INCLUDES ANY TRADE, COMMERCE OR MAN UFACTURE OR ANY ADVENTURE OR CONCERN IN THE NATURE OF TRADE, CO MMERCE OR MANUFACTURE THE WORD BUSINESS IS OF LARGE AND INFINITE IMPORT . SECTION 2(13) DEFINES BUSINESS TO INCLUDE ANY TRADE, COMMERCE OR MANUFACTURE OR ANY ADVENTURE OR CONCERN IN THE NATURE OF TRADE, CO MMERCE OR MANUFACTURE. THE INTENTION OF THE LEGISLATURE IS TO MAKE THE DEFINITION EXTENSIVE AS THE TERM INCLUDES HAS BEE N USED. THE LEGISLATURE HAS DELIBERATELY DEPARTED FROM GIVING A DEFINITE IMPORT TO THE TERM BUSINESS BUT HAS MADE REFERENCE TO SEVER AL OTHER GENERAL TERMS LIKE TRADE, COMMERCE, MANUFACTUR E AND ADVENTURE OR CONCERN IN THE NATURE OF TRADE, COMME RCE AND MANUFACTURE. THE TERM BUSINESS HAS BEEN EXPLAINE D BY VARIOUS JUDICIAL DECISIONS AND THE LANDMARK DECISION OF THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF CST V. SAI PU BLICATION FUND [2002] 258 ITR 70 INTERPRETED THE WORD BUSINESS U NDER SECTION 2(5-A) OF THE BOMBAY SALES TAX ACT, 1959 AS FOLLOWS :- NO DOUBT, THE DEFINITION OF BUSINESS GIVEN IN SECTION 2(5-A) OF THE ACT EVEN WITHOUT PROFIT MOTIVE IS WIDE ENOUGH T O INCLUDE ANY TRADE, COMMERCE OR MANUFACTURE OR ANY ADVENTURE OR CONCERN IN THE NATURE OF TRADE COMMERCE OR MANUFACTURE AND ANY TRA NSACTION IN CONNECTION WITH OR INCIDENTAL OR ANCILLARY TO THE C OMMENCEMENT OR CLOSURE OF SUCH TRADE, COMMERCE, MANUFACTURE, ADVEN TURE OR CONCERN. IF THE MAIN ACTIVITY IS NOT BUSINESS, THEN ANY TRANSACTION INCIDENTAL OR ANCILLARY WOULD NOT NORMALLY AMOUNT T O BUSINESS UNLESS AN INDEPENDENT INTENTION TO CARRY ON BUSINE SS IN THE INCIDENTAL OR ANCILLARY ACTIVITY IS ESTABLISHED. IN SUCH CASES, THE ONUS OF PROOF OF AN INDEPENDENT INTENTION TO CARRY ON B USINESS CONNECTED WITH OR INCIDENTAL OR ANCILLARY SALES WIL L REST ON THE DEPARTMENT. THUS, IF THE MAIN ACTIVITY OF A PERSON IS NOT TRADE, COMMERCE ETC., ORDINARILY INCIDENTAL OR ANCILLARY A CTIVITY MAY NOT COME WITHIN THE MEANING OF BUSINESS. TO PUT IT DI FFERENTLY, THE INCLUSION OF INCIDENTAL OR ANCILLARY ACTIVITY IN TH E DEFINITION OF BUSINESS PRESUPPOSES THE EXISTENCE OF TRADE, COMM ERCE ETC. ITA NO.4076/13 10 THE DEFINITION OF DEALER CONTAINED IN SECTION 2(1 1) OF THE ACT CLEARLY INDICATES THAT IN ORDER TO HOLD A PERSON TO BE A DEALER HE MUST CARRY ON BUSINESS AND THEN ONLY HE MAY ALSO BE DEEMED TO BE CARRYING ON BUSINESS IN RESPECT OF TRANSACTION I NCIDENTAL OR ANCILLARY THERETO. WE HAVE STATED ABOVE THAT THE MA IN AND DOMINANT ACTIVITY OF THE TRUST IN FURTHERANCE OF ITS OBJECT IS TO SPREAD MESSAGE. HENCE, SUCH ACTIVITY DOES NOT AMOUNT TO B USINESS. PUBLICATION FOR THE PURPOSE OF SPREADING MESSAGE IS INCIDENTAL TO THE MAIN ACTIVITY WHICH THE TRUST DOES NOT CARRY ON AS BUSINESS. IN THIS VIEW, THE ACTIVITY OF THE TRUST IN BRINGING OU T PUBLICATIONS AND SELLING THEM AT COST PRICE TO SPREAD MESSAGE OF SAI BABA DOES NOT MAKE IT A DEALER UNDER SECTION 2(11) OF THE ACT. FURTHER HON'BLE SUPREME COURT IN PARA16 ELABORATED THE TERM BUSINESS AS UNDER:- 16. THE WORDS CARRYING ON BUSINESS REQUIRE SOMET HING MORE THAN MERELY SELLING OR BUYING, ETC. WHETHER A PERSON CA RRIES ON A BUSINESS IN A PARTICULAR COMMODITY MUST DEPEND UPO N THE VOLUME, FREQUENCY, CONTINUITY AND REGULARITY OF TRANSACTION S OF PURCHASE AND SALE IN A CLASS OF GOODS AND THE TRANSACTIONS MUST ORDINARILY BE ENTERED INTO WITH A PROFIT MOTIVE (BOARD OF REVENUE V. A. M. ANSARI (1976) 38 STC 577 (SUPREME COURT); (1976) 3 SCC 512 ). SUCH PROFIT MOTIVE MAY, HOWEVER, BE STATUTORILY EXCLUDED FROM T HE DEFINITION OF BUSINESS BUT STILL THE PERSON MAY BE CARRYING ON BUSINESS. FURTHER IN PARA 30 OF THE SAME JUDGMENT, IT IS STAT ED THUS: 30. IN OUR VIEW, IF THE MAIN ACTIVITY WAS NOT BUS INESS, THEN THE CONNECTED, INCIDENTAL OR ANCILLARY ACTIVITIES OF SA LES WOULD NOT NORMALLY AMOUNT TO BUSINESS UNLESS AN INDEPENDENT INTENTION TO CONDUCT BUSINESS IN THESE CONNECTED, INCIDENTAL O R ANCILLARY ACTIVITIES IS ESTABLISHED BY THE REVENUE. IT WILL T HEN BE NECESSARY TO FIND OUT WHETHER THE TRANSACTIONS WHICH ARE CONNECT ED, INCIDENTAL OR ANCILLARY ARE ONLY AN INFINITESIMAL OR SMALL PART O F THE MAIN ACTIVITIES. IN OTHER WORDS, THE PRESUMPTION WILL BE THAT THESE CONNECTED, INCIDENTAL OR ANCILLARY ACTIVITIES OF SALES ARE NOT BUSINESS AND THE ONUS OF PROOF OF AN INDEPENDENT INTENTION TO DO BU SINESS IN THESE CONNECTED, INCIDENTAL AND ANCILLARY SALES WILL REST ON THE DEPARTMENT. IF, FOR EXAMPLE, THESE CONNECTED, INCID ENTAL OR ANCILLARY TRANSACTIONS ARE SO LARGE AS TO RENDER THE MAIN ACT IVITY INFINITESIMAL OR VERY SMALL, THEN OF COURSE THE CASE WOULD FALL U NDER THE FIRST CATEGORY REFERRED TO EARLIER. (EMPHASIS SUPPLIED. FURTHER, HON'BLE SUPREME COURT IN THIS VERY SAME CA SE HELD AS UNDER: THIS DECISION IS DIRECTLY ON THE POINT SUPPORT ING THE CASE OF THE RESPONDENT AFTER NOTICING NUMBER OF DECISIONS O N THE POINT INCLUDING THE DECISIONS CITED BY THE LEARNED COUNSE L BEFORE US. IT MAY BE STATED THAT THE QUESTION OF PROFIT MOTIVE OR NO-PROFIT MOTIVE WOULD BE RELEVANT ONLY WHERE A PERSON CARRIES ON TR ADE, COMMERCE, MANUFACTURE OR ADVENTURE IN THE NATURE OF TRADE, CO MMERCE ETC. ON ITA NO.4076/13 11 THE FACTS AND IN THE CIRCUMSTANCES OF THE PRESENT C ASE IRRESPECTIVE OF THE PROFIT MOTIVE, IT COULD NOT BE SAID THAT THE TRUST EITHER WAS DEALER OR WAS CARRYING ON TRADE, COMMERCE ETC. TH E TRUST IS NOT CARRYING ON TRADE, COMMERCE ETC., N THE SENSE OF OC CUPATION TO BE A DEALER AS ITS MAIN OBJECT IS TO SPREAD MESSAGE OF SAIBABA OF SHIRDI AS ALREADY NOTICED ABOVE. HAVING REGARD TO A LL ASPECTS OF THE MATTER, THE HIGH COURT WAS RIGHT IN ANSWERING THE Q UESTION REFERRED BY THE TRIBUNAL IN THE AFFIRMATIVE AND IN FAVOUR OF THE RESPONDENT- ASSESSEE. WE MUST HOWEVER ADD HERE THAT WHETHER A P ARTICULAR PERSON IS A DEALER AND WHETHER HE CARRIES ON BUS INESS, ARE THE MATTES TO BE DECIDED ON FACTS AND IN THE CIRCUMSTAN CES OF EACH CASE. 34. THUS FROM THE ABOVE, THE LOGICAL COROLLARY WHIC H INEXORABLY FLOWS FROM A CAREFUL PERUSAL OF THE ABOVE LAID DECI SION IS THAT IN THE CASES OF MANY INSTITUTIONS / ASSOCIATIONS WHOSE MAI N ACTIVITY IS NOT BUSINESS THE CONNECTED INCIDENTAL OR ANCILLARY AC TIVITIES OF SALES CARRIED OUT IN FURTHERANCE OF AND TO ACCOMPLISH THE IR MAIN OBJECTS WOULD NOT, NORMALLY, AMOUNT TO BUSINESS, UNLESS AN INDEPENDENT INTENTION TO CONDUCT BUSINESS IN THESE CONNECTED, INCIDENTAL OR ANCILLARY ACTIVITIES IS ESTABLISHED BY THE REVENUE. THEREFORE, THE ISSUE WHETHER A PROFESSIONAL INSTITUTION IS OR IS N OT HIT BY THE PROVISO TO SECTION 2(15) OF THE ACT WILL ESSENTIALLY DEPEND UPON THE INDIVIDUAL FACTS OF THE CASE OF THE INSTITUTIONS WH EREIN DISCUSSING THE NATURE OF THE INDIVIDUAL ACTIVITIES IT WILL HAVE TO BE DECIDED WHETHER THE SAME FORM INCIDENTAL, ANCILLARY AND CONNECTED A CTIVITIES AND WHETHER THE SAME WERE CARRIED OUT PREDOMINANTLY WIT H A PROFIT MOTIVE. THE AO AND CIT(A) IN THEIR ORDERS RELIED UP ON THE FOLLOWING JUDICIAL DECISIONS: * BARENDRA PRASAD RAY V. INCOME-TAX OFFICER (129 IT R 295) SC * COMMISSIONER OF INCOME-TAX V. DHARMA REDDY (A) (73 ITR 751) SC * SOLE TRUSTEE, LOKA SHIKSHANA TRUST V. COMMISSIONE R OF INCOME- TAX (101 ITR 234 SC) WE HAVE ALREADY DISCUSSED THE CASE LAW OF HON'BLE D ELHI HIGH COURT IN THE CASE OF PHD CHAMBER OF COMMERCE & INDUSTRY(SUPRA), WHEREIN VERY CATEGORICALLY HELD TH AT ACTIVITIES AND SERVICES PERFORMED FOR A FEE OR AGAINST A PAYMENT, BY A TRADE, PROFESSIONAL OR SIMILAR ASSOCIATION, SUCH AS A CHAM BER OF COMMERCE AND INDUSTRY COULD NOT BE HELD TO BE BUSINESS IN NATURE CARRIED OUT WITH A PROFIT MOTIVE. FROM ALL THE ABOVE WHAT THUS TRANSPIRES IS THAT IT IS THE PRIMARY OR DOMINANT PURPOSE OF THE INSTIT UTION, WHICH MUST BE CHARITABLE. WHERE THE MAIN ACTIVITY IS CHARITAB LE THEN THE ACTIVITIES WHICH ARE INCIDENTAL OR ANCILLARY TO THE MAIN ACTIVITY, EVEN IF CARRIED OUT FOR PROFIT, WOULD NOT MITIGATE OR CHANG E THE CHARITABLE CHARACTER OF THE INSTITUTION. THUS IN THE CASES OF MANY PROFESSIONAL INSTITUTION WHOSE MAIN ACTIVITY IS NOT BUSINESS, THE CONNECTED INCIDENTAL OR ANCILLARY ACTIVITIES OF SALES CARRIED OUT IN FURTHERANCE OF AND TO ACCOMPLISH THEIR MAIN OBJECTS WOULD NOT, NOR MALLY, AMOUNT TO BUSINESS, UNLESS AN INDEPENDENT INTENTION TO CONDUC T BUSINESS IN ITA NO.4076/13 12 THESE CONNECTED, INCIDENTAL OR ANCILLARY ACTIVITIES IS ESTABLISHED BY THE REVENUE. THE TEST, THEREFORE, TO BE APPLIED IS WHETHER THE ACTIVITY WHICH IS PURSUED IS ANCILLARY TO A DOMINAN T OBJECT OR IS INDEPENDENT TO THE MAIN OBJECT AND FORMS A SEPARATE OBJECT IN ITSELF. THE ISSUE WHETHER A PROFESSIONAL INSTITUTION IS NOT HIT BY THE PROVISO TO SECTION 2(15) OF THE ACT WILL ESSENTIALLY DEPEND UPON THE INDIVIDUAL FACTS OF THE CASE OF THE INSTITUTIONS WH EREIN DISCUSSING THE NATURE OF THE INDIVIDUAL ACTIVITIES IT WILL HAVE TO BE DECIDED WHETHER THE SAME FORM INCIDENTAL, ANCILLARY AND CONNECTED A CTIVITIES AND WHETHER THE SAME WERE CARRIED OUT PREDOMINANTLY WIT H A PROFIT MOTIVE. 35. IN VIEW OF THE ABOVE, WE THUS NOW TURN TO EXAMI NE AND ANALYSE IN FULL DETAILS THE PARTICULAR FACTS OF THE PRESENT CASE. THAT THE ASSESSEE ASSOCIATION IS A CHARITABLE INSTITUTION, D ULY REGISTERED AS SUCH U/S. 12A OF THE ACT, CARRYING ON ITS MAIN OBJE CT OF DEVELOPMENT OF TRADE, INDUSTRIES AND COMMERCE. THE MAIN OBJECTS FOR WHICH THE ASSOCIATION CAME INTO EXISTENCE, ARE CLEARLY SET OU T IN CLAUSE 3 OF THE MEMORANDUM OF ASSOCIATION WHICH DULY RECORDS AN D READS AS UNDER: 3(A) TO PROMOTE AND PROTECT THE TRADE, COMMERCE AN D INDUSTRIES AND IN PARTICULAR THE TRADE, COMMERCE AND INDUSTRIE S IN OR WITH WHICH INDIANS ARE ENGAGED OR CONCERNED. THE ACTIVITIES OF CONDUCTING ENVIRONMENT MANAGEMENT CENTRE, MEETINGS, CONFERENCES & SEMINAR AND ISSUANCE OF CER TIFICATE OF ORIGIN, BEING THE ACTIVITIES STATED TO BE SERVICES IN RELATION TO TRADE, COMMERCE OR BUSINESS WERE ALL WELL COVERED BY THE MAIN OBJECT BEING FULLY CONNECTED, INCIDENTAL AND ANCILLARY TO THE MAIN PURPOSE AND WERE CONDUCTED SOLELY FOR THE EMPOWERMENT, BETT ERMENT AND FOR CREATING AWARENESS AMONGST THE INDUSTRIALISTS I N ORDER TO BRING ABOUT THE DEVELOPMENT OF TRADE AND INDUSTRIES IN IN DIA. FURTHER IT IS TO BE NOTICED THAT THE MEMORANDUM HAS ALSO SPECIFIC ALLY AUTHORIZED THE CHAMBER TO DO ALL OTHER THINGS AS MAY BE CONDU CTIVE TO THE DEVELOPMENT OF TRADE, COMMERCE AND INDUSTRIES, OR I NCIDENTAL TO ATTAINMENT OF THE ABOVE OBJECTIVES OR ANY OF THEM. THUS IT WAS ONLY FOR THE PURPOSE OF SECURING ITS PRIMARY AIMS OF PRO PER DEVELOPMENT OF BUSINESS IN INDIA THAT THE ASSESSEE WAS TAKING T HE SAID ANCILLARY STEPS. THE SAID ACTIVITIES WERE NOT CARRIED OUT IND EPENDENT OF THE MAIN PURPOSE OF THE ASSOCIATION OF THE INSTITUTION BEING THE DEVELOPMENT AND PROTECTION OF TRADE. THERE WAS NO I NDEPENDENT PROFIT MOTIVE IN ANY OF THE SAID ACTIVITIES. THE SU RPLUS ARISING OUT OF THE SAME WAS MERELY INCIDENTAL TO THE MAIN OBJECT T O CHARITY. THE MAJORITY OF THE RECEIPTS IN THE SAID ACTIVITIES WER E OUT OF THE SPONSORSHIPS AND DONATIONS. THE EXPENSES INCURRED O N THE SAID ACTIVITIES AS AND WHEN INCURRED WERE ALL SEPARATELY DEBITED TO THE SAID ACCOUNTS AND THE BALANCE WAS SHOWN AS SURPLUS OVER RECEIPTS. THUS IN VIEW OF THE ABOVE IT IS CLEAR THAT THE ALLE GED ACTIVITIES WERE ALL MERELY INCIDENTAL TO THE MAIN OBJECT OF THE ASS ESSEE AND THE PREDOMINANT OBJECT OF THE ASSOCIATION BEING THE PRO MOTION ITA NO.4076/13 13 DEVELOPMENT AND PROTECTION OF TRADE AND COMMERCE WH ICH IS AN OBJECT OF GENERAL PUBLIC UTILITY, IT CAN NEVER BE T HE CASE THAT IT IS ENGAGED IN BUSINESS, TRADE OR COMMERCE OR IN ANY SERVICE IN RELATION TO BUSINESS, TRADE OR COMMERCE. THE INDIV IDUAL NATURE AND PURPOSE OF THE SPECIFIC ACTIVITIES, IT IS STATED TH AT THE ACTIVITIES HELD BY AO AND THE (A) TO BE BUSINESS IN NATURE, WERE AS FOLLOWS: (A) MEETINGS, CONFERENCES & SEMINARS (B) ENVIRONMENT MANAGEMENT CENTRE FEES FOR CERTIFICATE OF ORIGIN FACTS RELATING TO THESE ACTIVITIES ARE DISCUSSED IN DETAIL IN PARA 23 TO 25 OF THIS ORDER ABOVE, WHICH NEED NOT BE REPEATED. 36. FROM FACTS IN ENTIRETY, NOW THE QUESTION ARISES IS WHETHER PRINCIPLE OF CONSISTENCY WILL APPLY OR NOT? FROM AY 1985-86 TO 2007-08 EXEMPTION U/S 11 OF THE ACT WAS ALLOWED. NO W, HAVING EXTENSIVELY WITH THE NEWLY AMENDED SECTION 2(15) OF THE ACT AND ITS ABSOLUTE INAPPLICABILITY TO THE CASE OF ASSESSEE SU PPORTED BY VARIOUS JUDICIAL DECISIONS, WE WILL DISCUSS THIS IS SUE. WE FIND THAT CIT(A) WITHOUT APPRECIATING THAT THE BASIS PRINCIPL E UNDERLYING THE DEFINITION OF CHARITABLE PURPOSE REMAINED UNALTER ED, AND ON AMENDMENT IN THE SECTION 2(15) OF THE ACT W.E.F. 01 /04/2009, WHEREBY THE RESTRICTIVE FIRST PROVISO WAS INSERTED THEREIN, LOWER AUTHORITIES HELD THAT THE SAME SUBSTANTIALLY CHANGE D THE POSITION OF LAW AND THUS THE PRINCIPLE OF CONSISTENCY DID NOT A PPLY. BUT WE ARE OF THE VIEW THAT A DETAILED READING OF THE VARIOUS JUDICIAL DECISIONS THROUGH THE YEARS, INTERPRETING THE DEFINITION OF CHARITABLE PURPOSE AS LAID OUT IN SECTION 2(15) OF THE ACT AND ALSO TH E DEFINITION OF BUSINESS IN RELATION TO THE SAID SECTION AMPLY RE VELS THAT THE THEORY OF DOMINANT PURPOSE HAS ALWAYS, ALL THROUGH THE YEARS, BEEN UPHELD TO BE THE DETERMINING FACTOR LAYING DOWN WHE THER THE INSTITUTION IS CHARITABLE IN NATURE OR NOT. WHERE T HE MAIN OBJECT OF THE INSTITUTION WAS CHARITABLE IN NATURE, THEN TH E ACTIVITIES CARRIED OUT TOWARDS THE ACHIEVEMENT OF THE SAID, BEING INCI DENTAL OR ANCILLARY TO THE MAIN OBJECT, EVEN IF RESULTING IN PROFIT AND EVEN IF CARRIED OUT WITH NON MEMBERS, WERE ALL HELD TO BE CHARITABLE IN NATURE. HON'BLE APEX COURT IN THE EARLIEST CASE OF ANDHRA CHAMBER OF COMMERCE (SUPRA) HAD CLEARLY LAID OUT THE PRINCI PLE THAT IF THE PRIMARY PURPOSE OF AN INSTITUTION WAS ADVANCEMENT O F OBJECTS OF GENERAL PUBLIC UTILITY, IT WOULD REMAIN CHARITABLE EVEN IF AN INCIDENTAL OR ANCILLARY ACTIVITY OR PURPOSE, FOR ACHIEVING THE MAIN PURPOSE, WAS PROFITABLE IN NATURE. IT WAS LAID OUT BY THE COURT THAT, THAT IF THE PRIMARY PURPOSE BE ADVANCEMENT OF OBJE CTS OF GENERAL PUBLIC UTILITY, IT WOULD REMAIN CHARITABLE EVEN IF AN INCIDENTAL ENTRY INTO THE POLITICAL DOMAIN FOR ACHIEVING THAT PURPOS E, E.G. PROMOTION OF OR OPPOSITION TO LEGISLATION CONCERNING THAT PUR POSE, WAS CONTEMPLATED. IT WAS ONLY FOR THE PURPOSE OF SECURING ITS PRIMARY AIMS THAT IT WAS MENTIONED IN THE MEMORANDUM OF ASSOCIATION THAT THE CHAMBER ITA NO.4076/13 14 MIGHT TAKE STEPS TO URGE OR OPPOSE LEGISLATIVE OR O THER MEASURES AFFECTING TRADE, COMMERCE OR MANUFACTURES. SUCH AN OBJECT OUGHT TO BE REGARDED AS PURELY ANCILLARY OR SUBSIDIARY AN D NOT THE PRIMARY OBJECT. IN CONNECTION TO THE ABOVE CASE IT IS LAID OUT THE SAID CASE DEALT WITH THE ASSESSMENT OF THE ASSESSEE IN THE A. YS 1948-49 TO WHEREIN RELEVANT TO THE SAID AYS 1948-49 TO 1952-53 , BY THE LAST PARAGRAPH OF SUB-SECTION (3) OF THE IT ACT, 1922, CHARITABLE PURPOSES WAS DEFINED AS .. IN THIS SUB-SECTION CHARITABLE PURPOSE INCL UDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY, BUT NOTHING CONTA INED IN CLAUSE (I) OR CLAUSE (II) SHALL OPERATE TO EXEMPT FROM THE PROVIS IONS OF THIS ACT PART OF THE INCOME FROM PROPERTY HELD UNDER A TRUST OR OTHER LEGAL OBLIGATION FOR PRIVATE RELIGIOUS PURPOSES WHICH DOE S NOT ENURE FOR THE BENEFIT OF THE PUBLIC. THE ADDING OF THE WORDS NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT: WAS INTRODUCED BY THE INCOME T AX ACT, 1961. HON'BLE APEX COURT IN THE EARLIEST DECISION IN THE CASE OF SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION (SUPRA) HELD T HE THEORY OF DOMINANT OR PRIMARY OBJECT OF THE TRUST TO BE THE D ETERMINING FACTOR SO AS TO TAKE THE CARRYING ON OF THE BUSINESS ACTIV ITY MERELY ANCILLARY OR INCIDENTAL TO THE MAIN OBJECT. IT WAS HELD AS FOLLOWS:- (I) THAT THE DOMINANT OR PRIMARY PURPOSE OF THE ASS ESSEE WAS TO PROMOTE COMMERCE AND TRADE IN ART SILK YARN, RAW SI LK, COTTON YARN, ART SILK CLOTH, SILK CLOTH AND COTTON CLOTH A SET O UT IN CLAUSE (A) AND THE OBJECTS SPECIFIED IN CLAUSES (B) TO (E) WERE ME RELY POWERS INCIDENTAL TO THE CARRYING OUT OF THAT DOMINANT AND PRIMARY PURPOSE; (II) THAT THE DOMINANT OR PRIMARY PURPOSE OF THE PR OMOTION OF COMMERCE AND TRADE IN ART SILK, ETC., WAS AN OBJECT OF PUBLIC UTILITY NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR P ROFIT WITHIN THE MEANING OF S.2(15) AND THAT THE ASSESSEE WAS ENTITL ED TO EXEMPTION UNDER S 11(1)(A) AGAIN THE HON'BLE APEX COURT IN THE CASE OF FEDERAT ION OF INDIAN CHAMBERS OF COMMERCE & INDUSTRY (SUPRA) HELD THAT THAT THE DOMINANT OBJECT WITH WHICH THE FEDERATION WAS CONSTITUTED BEING A CHARITABLE PURPOSE VIZ. PROMOTION, PROTECTI ON AND DEVELOPMENT OF TRADE, COMMERCE AND INDUSTRY, THERE BEING NO MOTIVE TO EARN PROFITS, THE RESPONDENT WAS NOT ENGA GED IN ANY ACTIVITY IN THE NATURE OF BUSINESS OR TRADE, AND, I F ANY INCOME AROSE FROM SUCH ACTIVITY, IT WAS ONLY INCIDENTAL OR ANCIL LARY TO THE DOMINANT OBJECT FOR THE WELFARE AND COMMON GOOD OF THE COUNT RYS TRADE, COMMERCE AND INDUSTRY, AND ITS INCOME WAS, THEREFOR E, EXEMPT FROM TAX UNDER S.11 OF THE IT ACT, 1961 AGAIN REITERATING THE DOMINANT PURPOSE THEORY, THE HON'BLE SC IN THE CASE OF SAI PUBLICATION FUND (SUPRA) LAID OUT A S FOLLOWS: ITA NO.4076/13 15 IF THE MAIN ACTIVITY IS NOT BUSINESS, THEN ANY T RANSACTION INCIDENTAL OR ANCILLARY WOULD NOT NORMALLY AMOUNT T O BUSINESS UNLESS AN INDEPENDENT INTENTION TO CARRY ON BUSINE SS IN THE INCIDENTAL OR ANCILLARY ACTIVITY IS ESTABLISHED. IN SUCH CASES, THE ONUS OF PROOF OF AN INDEPENDENT INTENTION TO CARRY ON B USINESS: CONNECTED WITH OR INCIDENTAL OR ANCILLARY SALES WIL L 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. IN THE RECENT DECISION WHICH DEALS SPECIFICALLY WIT H THE NEWLY AMENDED SECTION 2(15) OF THE ACT, IN THE CASE OF IN STITUTE OF CHARTERED ACCOUNTANTS OF INDIA V. DIRECTOR GENERAL OF INCOME-TAX (EXEMPTIONS) [2012] 347 ITR 0099 DEL HC, LAYING DOW N THE VERY SAME PRINCIPLE IT WAS AGAIN LAID: THAT THE FUNDAMENTAL OR DOMINANT FUNCTION OF THE I NSTITUTE WAS TO EXERCISE OVERALL CONTROL AND REGULATE THE ACTIVITIE S OF THE MEMBERS/ENROLLED CHARTERED ACCOUNTANTS. A VERY NARR OW VIEW HAD BEEN TAKEN THAT THE INSTITUTE WAS HOLDING COACHING CLASSES AND THAT THIS AMOUNTED TO BUSINESS. AGAIN, HON'BLE BOMBAY HIGI COURT IN THE WP OF BAUN FOUNDATION TRUST (WRIT PETITION NO. 1206 OF 2010 IN THE HIGH C OURT OF JUDICATURE AT BOMBAY 27 MARCH 2012) IT WAS HELD THAT 4 IT IS A WELL SETTLED POSITION IN LAW THAT THE D OMINANT NATURE OF THE PURPOSE FOR WHICH THE TRUST EXISTS HAS TO BE CO NSIDERED. THE CHIEF COMMISSIONER HAS NOT DOUBTED THE GENUINENESS OF THE TRUST OR THE FACT THAT IT IS CONDUCTING A HOSPITAL. THUS FROM ALL THE ABOVE IT IS SEEN THAT THOUGH THE DEFINITION OF CHARITABLE PURPOSE UNDER SECTION 2(15) HAS UNDERG ONE CHANGES, THE PRINCIPLE UNDERLYING THE SAME HAS REMAINED THE SAME. IN CONTEXT OF THE ABOVE, WITH REGARD TO THE PRINCIPLE OF CONSISTENCY IT WOULD BE OF RELEVANCE HERE TO QUOTE THE DECISION OF THE APEX COURT IN THE CASE OF RADHASOAMI SATSANG V. COMMISSIONER O F INCOME-TAX (193 ITR 321 SC) WHEREIN IT WAS HELD THAT: . (II) THAT, IN THE ABSENCE OF ANY MATERIAL CHANG E JUSTIFYING THE DEPARTMENT TO TAKE A DIFFERENT VIEW FROM THAT TAKEN IN EARLIER PROCEEDINGS, THE QUESTION OF THE EXEMPTION OF THE A SSESSEE APPELLANT SHOULD NOT HAVE BEEN REOPENED. STRICTLY SPEAKING, RES JUDICATA DOES NOT APPLY TO I NCOME-TAX PROCEEDINGS. THOUGH, EACH ASSESSMENT YEAR BEING A U NIT, WHAT WAS DECIDED IN ONE YEAR MIGHT NOT APPLY IN THE FOLL OWING YEAR; WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE D IFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY O R THE OTHER ITA NO.4076/13 16 AND PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAI NED BY NOT CHALLENGING THE ORDERED, IT WOULD NOT BE AT ALL APP ROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. 37. NOW COMING TO APPLICATION OF SECTION 28(III) OF THE ACT. WE FIND THAT SECTION 28(III) OF THE ACT PROVIDES THAT THE I NCOME DERIVED BY A TRADE, PROFESSIONAL OR SIMILAR ASSOCIATION FROM SPE CIFIC SERVICES PERFORMED FOR ITS MEMBERS WILL BE BROUGHT TO CHARGE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. THE UNDERLYING IDEA BEHIND S. 28(III) IS THAT THERE MUST BE A BUSINESS FROM WHICH INCOME IS DERIVED AND THAT IN THE COURSE OF SUCH BUSINESS SPECIFIC SERVICES MUST BE RENDERED FOR ITS MEMBERS. THE CONCEPT BEHIN D S.28(III) IS TO CUT AT THE MUTUALITY PRINCIPLE BEING RELIED ON IN S UPPORT OF A CLAIM FOR EXEMPTION, WHEN THE ASSESSEE WAS ACTUALLY DERIVING INCOME OR MAKING PROFITS AS A RESULT OF RENDERING SPECIFIC SE RVICES FOR ITS MEMBERS IN A COMMERCIAL WAY. THE REASON FOR THE INT RODUCTION OF SECTION 28(III) OF ACT, TO IGNORE THE PRINCIPLE OF MUTUALITY AND REACH THE SURPLUS ARISING TO THE MUTUAL ASSOCIATION AND T HIS IS CLEAR FROM THE FACT THAT THESE PROVISIONS ARE CONFIRMED TO SER VICES PERFORMED BY THE ASSOCIATION FOR ITS MEMBERS. SUCH INCOME W OULD EITHER BE CHARGED AS BUSINESS INCOME OR UNDER THE RESIDUAL HE AD, DEPENDING UPON THE QUESTION WHETHER THE ACTIVITIES OF THE ASS OCIATION WITH THE NON-MEMBERS AMOUNT TO A BUSINESS OR OTHERWISE. SECT ION 28(III) CONSTITUTES CERTAIN INCOME OF THE ASSOCIATION TO BE BUSINESS INCOME WITHOUT AFFECTING THE SCOPE OF THE EXEMPTION UNDER SECTION 11. SECTION 2(15) WHICH INCORPORATES THE DEFINITION OF CHARITABLE PURPOSES SIMPLY SHOWS THAT SEVERAL MUTUAL ASSOCIAT IONS MAY ALSO FALL WITHIN THE DEFINITION. THE RECEIPTS DERIVED BY A CHAMBER OF COMMERCE AND INDUSTRY FOR PERFORMING SPECIFIC SERVI CES TO ITS MEMBERS, THOUGH TREATED AS BUSINESS INCOME UNDER SE CTION 28(III) WOULD STILL BE ENTITLED TO THE EXEMPTION UNDER SECT ION 11 R.W.S. 2(15) OF THE ACT, PROVIDED THERE IS NO PROFIT MOTIVE. THU S, ASSESSEE BEING A CHARITABLE INSTITUTION CARRYING ON THE OBJECT OF PROMOTION AND DEVELOPMENT OF TRADE AND COMMERCE AND WHICH IS NOT INVOLVED IN THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF B USINESS, THE SAID SECTION 28(III) OF THE ACT DOES NOT APPLY. 38. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE CONSIDERED VIEW THAT IN THE GIVEN FACTS AND DETAILED READING OF THE VARIOUS JUDICIAL DECISIONS THROUGH THE YEARS, INTERPRETING THE DEFIN ITION OF CHARITABLE PURPOSE AS LAID OUT IN SECTION 2(15) OF THE ACT AN D ALSO THE DEFINITION OF BUSINESS IN RELATION TO THE SAID SE CTION AMPLY REVELS THAT THE THEORY OF DOMINANT PURPOSE HAS ALWAYS, ALL THROUGH THE YEARS, BEEN UPHELD TO BE THE DETERMINING FACTOR LAY ING DOWN WHETHER THE INSTITUTION IS CHARITABLE IN NATURE OR NOT. WHERE THE MAIN OBJECT OF THE INSTITUTION WAS CHARITABLE IN NATURE, THEN THE ACTIVITIES CARRIED OUT TOWARDS THE ACHIEVEMENT OF T HE SAID, BEING INCIDENTAL OR ANCILLARY TO THE MAIN OBJECT, EVEN IF RESULTING IN PROFIT AND EVEN IF CARRIED OUT WITH NON MEMBERS, WERE ALL HELD TO BE CHARITABLE IN NATURE. HON'BLE APEX COURT IN THE E ARLIEST CASE OF ANDHRA CHAMBER OF COMMERCE (SUPRA) HAD CLEARLY LAID OUT THE PRINCIPLE THAT IF THE PRIMARY PURPOSE OF AN INSTITU TION WAS ITA NO.4076/13 17 ADVANCEMENT OF OBJECTS OF GENERAL PUBLIC UTILITY, I T WOULD REMAIN CHARITABLE EVEN IF AN INCIDENTAL OR ANCILLARY ACTIV ITY OR PURPOSE, FOR ACHIEVING THE MAIN PURPOSE, WAS PROFITABLE IN NATUR E. IN OUR VIEW THE BASIC PRINCIPLE UNDERLYING THE DEFINITION OF C HARITABLE PURPOSE 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. ACCORDINGLY, IN THE GIVEN FACTS O F THE CASE AS DISCUSSED ABOVE IN DETAIL, THE ASSESSEE ASSOCIATION S PRIMARY PURPOSE WAS ADVANCEMENT OF OBJECTS OF GENERAL PUBLI C UTILITY AND IT WOULD REMAIN CHARITABLE EVEN IF AN INCIDENTAL OR AN CILLARY ACTIVITY OR PURPOSE, FOR ACHIEVING THE MAIN PURPOSE WAS PROFITA BLE IN NATURE. HENCE, ASSESSEE IS NOT HIT BY NEWLY INSERTED PROVIS O TO SECTION 2(15) OF THE ACT. THIS ISSUE OF ASSESSEES APPEAL I S ALLOWED. 6. FACTS AND CIRCUMSTANCES IN THE INSTANT CASE BEFO RE US ARE EXACTLY SIMILAR VIS.A.VIS NATURE OF ACTIVITY BEING CARRIED OUT BY T HE ASSESSEE. RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH IN THE CASE OF INDIAN CHAMBERS OF COMMERCE & INDUSTRY, WHEREIN AFTER DISCUSSING VARIO US HIGH COURT AND SUPREME COURT JUDGEMENT THE TRIBUNAL REACHED TO THE CONCLUSION THAT EVEN OF AMENDMENT OF SECTION 2(15) OF THE ACT W.E.F. 01.04. 2009, ASSESSEE ASSOCIATIONS HAVING PRIMARY PURPOSE OF ADVANCEMEN T OF OBJECTS OF GENERAL PUBLIC UTILITY AND IT WOULD REMAIN CHARITABLE EVEN IF AN INCIDENTAL OR ANCILLARY ACTIVITY OR PURPOSE, FOR ACHIEVING THE MAIN PURPOSE WAS PROFITABLE IN NATURE. HENCE, ASSESSEE IS NOT HIT BY NEWLY INSERTED PROVIS O TO SECTION 2(15) OF THE ACT. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 29 /0 6 / 2016. SD/- (MAHAVIR SINGH) SD/ - (R.C.SHARMA) $ / JUDICIAL MEMBER %$ / ACCOUNTANT MEMBER MUMBAI ; '( DATED 29 / 06 /2016 . .*/PKM , . / PS ITA NO.4076/13 18 &'() *)' / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / ( ) / THE CIT(A), MUMBAI. 4. / / CIT 5. 012 3 , 3 , / DR, ITAT, MUMBAI 6. 24 / GUARD FILE. 0 //TRUE COPY//