Society of Indian Automobile Manufacturers, New Delhi V. ITO (E), Delhi

ITA 4837/DEL/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7560 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 25-05-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 11-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIMA BERNWAL
• Assessee Lawyers: RUPESH J AIN; BHAVITA KUMAR S
• Keywords: Charitable institution
• Section: 80G; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : G : NEW DELHI BEFORE SHRI R.S. SYAL, AM & SHRI KULDIP SINGH, JM ITA NO.4837/DEL/2012 ASSESSMENT YEAR : 2009-10 SOCIETY OF INDIAN AUTOMOBILE MANUFACTURERS, CORE 4-B, 5 TH FLOOR, INDIAN HABITAT CENTRE, LODHI ROAD, NEW DELHI. PAN: AAATS4258A VS. ITO (E), TRUST WARD II, DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RUPESH JAIN & MS BHAVITA KUMAR, ADVOCATES DEPARTMENT BY : MS ANIMA BERNWAL, SR. DR DATE OF HEARING : 25.05.2016 DATE OF PRONOUNCEMENT : 06.06.2016 ORDER PER R.S. SYAL, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER PASSED BY THE CIT(A) ON 1.6.2012 UPHOLDING THE DENIAL OF B ENEFIT OF SECTIONS 11 ITA NO.4837/DEL/2012 2 AND 12 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER ALS O CALLED `THE ACT) IN RELATION TO THE ASSESSMENT YEAR 2009-10. 2. SUCCINCTLY, THE FACTS OF THE CASE ARE THAT THE A SSESSEE SOCIETY WAS REGISTERED U/S 12A(A) OF THE ACT BY THE ORDER DATED 12.10.1998 OF THE DIRECTOR OF INCOME-TAX (EXEMPTIONS). THE ASSESSEE ALSO ENJOYED EXEMPTION U/S 80G OF THE ACT. SUCH GRANT OF THE BEN EFITS CONTINUED AS SUCH FOR ALL THE FOLLOWING YEARS EXCEPT FOR THE YEA R UNDER CONSIDERATION, DURING THE COURSE OF WHOSE ASSESSMENT PROCEEDINGS, THE AO OBSERVED FROM THE INCOME & EXPENDITURE ACCOUNT OF THE ASSESS EE THAT THERE WAS INCOME FROM SEMINAR AND CONFERENCES AMOUNTING TO RS .1.85 CRORE; FROM PROVIDING STATISTICAL INFORMATION AT RS.40.41 LAC; AND FROM AUTO EXPO 2008 AT RS.1 CRORE. SINCE THE ASSESSEE CLAIMED THES E ACTIVITIES TO BE CHARITABLE AS WAS DONE IN THE PAST, THE AO CALLED U PON THE ASSESSEE TO SHOW CAUSE AS TO WHY ITS ACTIVITIES BE NOT CONSIDER ED AS NOT CHARITABLE IN THE LIGHT OF THE AMENDED PROVISIONS OF SECTION 2(15 ) OF THE ACT. THE ASSESSEE SUBMITTED EXPLANATION FORTIFYING ITS CLAIM OF CHARITABLE CHARACTER, WHICH HAS BEEN REPRODUCED IN THE ASSESSMENT ORDER. NOT CONVINCED, THE AO HELD THAT THE ACTIVITIES OF THE ASSESSEE WERE HI T BY THE AMENDED ITA NO.4837/DEL/2012 3 PROVISIONS OF SECTION 2(15) OF THE ACT. IN HIS OPI NION, THE RECEIPTS FROM SEMINAR, STATISTICAL INFORMATION AND AUTO EXPO 2008 WERE NOT CHARITABLE ACTIVITIES. RELYING UPON THE AMENDED PROVISIONS OF SECTION 2(15), THE AO DENIED THE BENEFIT OF SECTIONS 11/12 AND COMPUTED T OTAL INCOME AT RS.3.02 CRORE. THE LD. CIT(A) APPROVED THE ACTION OF THE A O IN HOLDING THAT THE ASSESSEES ACTIVITIES WERE NOT IN THE NATURE OF CHA RITABLE ACTIVITIES AS DEFINED U/S 2(15) OF THE ACT AS THE SAME WERE MARRE D BY THE PROVISO INSERTED W.E.F. ASSESSMENT YEAR 2009-10. THE ASSESS EE IS AGGRIEVED AGAINST THE IMPUGNED ORDER. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. UNDISPUTEDLY, THE ASSESSEE SOCI ETY WAS REGISTERED U/S 12A(A) OF THE ACT VIDE THE ORDER OF THE DIRECTOR OF INCOME-TAX (EXEMPTIONS) DATED 12.10.1998, A COPY OF WHICH IS A VAILABLE ON PAGES 42 AND 43 OF THE PAPER BOOK. EXEMPTION WAS GRANTED BY HOLDING THAT: THE ACTIVITIES OF THE TRUST CAN BE HELD TO BE GENUINE A ND THAT IT IS CARRYING OUT CHARITABLE ACTIVITIES. THUS, IT BECOMES CLEAR THA T THE ACTIVITIES OF THE ASSESSEE WERE ADMITTED BY THE REVENUE TO BE CHARITA BLE. IT IS ONLY BECAUSE OF THE AMENDMENT MADE BY THE FINANCE ACT, 2 008 TO SECTION ITA NO.4837/DEL/2012 4 2(15) W.E.F. 1.4.2009 THAT THE AO PROCEEDED TO TREA T THE ACTIVITIES OF THE ASSESSEE AS NOT CHARITABLE. IN ORDER TO APPRECIATE THE RIVAL CONTENTIONS, WE DEEM IT EXPEDIENT TO REPRODUCE THE RELEVANT PARTS O F SECTION 2(15) AT THE MATERIAL TIME, READING AS UNDER:- 'CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF, PRESERVATION OF ENVIRONMENT (INCLUDING WATE RSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES O R OBJECTS OF ARTISTIC OR HISTORIC INTEREST, AND THE ADVANCEMENT OF ANY OT HER OBJECT OF GENERAL PUBLIC UTILITY: 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 BU SINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO AN Y TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERAT ION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY: PROVIDED FURTHER THAT THE FIRST PROVISO SHALL NOT A PPLY IF THE AGGREGATE VALUE OF THE RECEIPTS FROM THE ACTIVITIES REFERRED TO THEREIN IS TWENTY- FIVE LAKH RUPEES OR LESS IN THE PREVIOUS YEAR; 4. A CAREFUL PERUSAL OF THE ABOVE PROVISION INDICAT ES THAT THE CHARITABLE PURPOSE, INTER ALIA, INCLUDES: THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. THE ASSESSEE WA S GRANTED REGISTRATION IN 1998 BY IMPLIEDLY COVERING IT UNDER THIS PART OF TH E DEFINITION OF `CHARITABLE PURPOSE. THE AO HAS HEAVILY BANKED ON THE FIRST PROVISO TO ITA NO.4837/DEL/2012 5 SECTION 2(15) FOR JETTISONING THE ASSESSEES CLAIM OF EXEMPTION U/SS 11 AND 12 OF THE ACT, WHICH PROVIDES THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PU RPOSE, IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADIN G, COMMERCE OR BUSINESS OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATIO N TO ANY TRADE, COMMERCE OR BUSINESS FOR CONSIDERATION IRRESPECTIVE OF THE N ATURE OF USE OF THE INCOME FROM SUCH ACTIVITY. IF WE CLOSELY PERUSE TH E MANDATE OF THE PROVISO, IT TRANSPIRES THAT ANY OTHER OBJECT OF GEN ERAL PUBLIC UTILITY SHALL NOT BE CONSIDERED AS A CHARITABLE PURPOSE IF THE AC TIVITIES OF THE ASSESSEE ARE EITHER THE CARRYING ON OF OR RENDERING OF ANY S ERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS FOR A CONSIDERATION. I T IS FURTHER CLEAR THAT THE USER OF THE INCOME EARNED FROM THE CARRYING ON OF OR RENDERING OF ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSIN ESS DOES NOT, IN ANY MANNER, ALTER THE NON-CHARITABLE PURPOSE OF THE CH ARACTER OF THE INCOME DERIVED FROM SUCH ACTIVITIES. THE ESSENCE OF THE P ROVISO IS THAT THE ASSESSEE MUST CARRY ON ANY ACTIVITY IN THE NATURE O F TRADE, COMMERCE OR BUSINESS OR RENDER ANY SERVICE IN RELATION TO ANY T RADE, COMMERCE OR BUSINESS SO AS TO BE TAGGED AS AN ACTIVITY OF A NON -CHARITABLE PURPOSE. ITA NO.4837/DEL/2012 6 THUS, IT BECOMES IMPORTANT TO ASCERTAIN IF THE ASSE SSEE WAS CARRYING ON ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BU SINESS OR WAS RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR B USINESS. 5. THIS CAN BE VIEWED IN THE LIGHT OF THE ACTIVITIE S ACTUALLY CARRIED OUT BY THE ASSESSEE AND ITS MEMORANDUM OF RULES AND REG ULATIONS AS ARE AVAILABLE ON PAGE 1 ONWARDS OF THE PAPER BOOK. THE AIMS AND OBJECTIVES HAVE BEEN SET OUT IN CLAUSE 3 OF THE ME MORANDUM OF ASSOCIATION, WHICH READ AS UNDER :- 1. THE AIMS AND OBJECTS FOR WHICH THE SOCIETY IS E STABLISHED ARE AS UNDER: I) TO ACT AS AN APEX BODY OF INDIAN AUTOMOBILE MANU FACTURERS FOR AUTOMOBILE SECTOR IN INDIA. II) TO FOCUS ON OBJECTS RELATING TO IMPROVEMENT , PROTECTION OF ENVIRONMENT, INCLUDING GLOBAL WARMING, POLLUTION CO NTROL AND SAFETY OF AUTOMOBILE VEHICLE - USERS AND PUBLIC AT LARGE. III) TO WORK TOWARDS THE SUSTAINABLE GROWTH OF AUT OMOBILE INDUSTRY IN INDIA. 6. THE ABOVE REFERRED THREE OBJECTS ARE THE PRINCIP AL OBJECTS OF THE ASSESSEE. THE OBJECTS STATED IN SUBSEQUENT SUB-PAR AS OF PARA 3 HAVE BEEN ITA NO.4837/DEL/2012 7 DESCRIBED AS ANCILLARY OBJECTS OF THE SOCIETY. SOM E OF THE ANCILLARY OBJECTS, WHICH ARE RELEVANT FOR OUR PURPOSE, READ A S UNDER:- 2) TO PROMOTE AND DIFFUSE USEFUL KNOWLEDGE ON AUTO MOBILE TECHNOLOGY AND INDUSTRY, SO AS TO - I. ENHANCE THE CONTRIBUTION OF AUTOMOBILE INDUSTRY TO THE GROWTH AND DEVELOPMENT OF THE INDIAN NATIONAL ECONOMY AND TO ASSIST THE AUTOMOBILE INDUSTRY TO MEET ITS SOCIAL OBLIGATIONS; II. ENCOURAGE THE EFFICIENCY OF INDUSTRY IN GENERAL AND THE AUTOMOBILE INDUSTRY IN PARTICULAR, IN INDIA; ILL. MAINTAIN CORDIAL DIALOGUE AND TO EXCHANGE DATA & INFORMATION WITH GOVERNMENT, AUTHORITIES, NON-GOVERNMENTAL ORGA NIZATIONS, INSTITUTIONS, PROFESSIONAL BODIES AND OTHER SECTORS OF' TRADE, COMMERCE AND INDUSTRY, WITHIN OR OUTSIDE INDIA, ON MATTERS C ONNECTED DIRECTLY OR INDIRECTLY WITH THE AUTOMOBILE INDUSTRY; IV. FOSTER GOOD RELATIONS WITH MANUFACTURERS, SUP PLIERS OF GOODS AND SERVICES AND END-CONSUMERS OF AUTOMOBILES; . . V. ENCOURAGE HEALTHY INDUSTRIAL RELATIONS IN THE AU TOMOBILE INDUSTRY; VI. FURTHER MUTUAL HELP AND CO-OPERATION AMONGST TH E SOCIETY'S MEMBERS AND WITH THE GOVERNMENT, OTHER PUBLIC BODIE S, INSTITUTIONS, ORGANIZATIONS AND SOCIETIES AND TO MAKE REPRESENTAT IONS TO GOVERNMENT AND OTHER PUBLIC BODIES, INSTITUTIONS, O RGANIZATIONS AND COMMITTEES THEREOF IN REGARD TO MATTERS COVERING MA NUFACTURE, QUALITY OF AUTOMOBILES, ENVIRONMENT AND SAFETY STANDARD, RO AD INFRASTRUCTURE AND FISCAL MEASURES RELATING TO THE INDUSTRY IN GEN ERAL AND AUTOMOBILE INDUSTRY IN PARTICULAR. VII. TO ENCOURAGE FRIENDLY FEELINGS AND UNANIMITY A MONGST THE MANUFACTURERS OF AUTOMOBILES AND AUTOMOBILE PRODUCT S AND ALL THOSE ENGAGED IN COMMERCE AND INDUSTRY ON ALL SUBJECTS IN VOLVING THEIR COMMON GOOD; ITA NO.4837/DEL/2012 8 3) TO ORGANIZE OR FORM ORGANIZATIONS FOR THE DEVELO PMENT AND REGULATION OF THE SALE OF AUTOMOBILES AND/OR COMPON ENTS, AND ESTABLISH BRANCH OFFICES, MARKETS, SYNDICATES OR BO ARDS, WITH SUCH. POWERS AS MAY BE THOUGHT FIT WITHIN INDIA AND IN AN Y OTHER COUNTRY OR COUNTRIES; 4). TO ENCOURAGE., ASSIST, AND EXTEND KNOWLEDGE, ED UCATION AND INFORMATION CONNECTED WITH ENVIRONMENT AND SAFETY A ND TRADE, COMMERCE AND INDUSTRIES AND MANUFACTURERS IN INDIA, WHETHER BY ESTABLISHMENT AND PROMOTION OF LECTURES, DISCUSSION S OR CORRESPONDENCE, BY HOLDING CONFERENCES, BY FORMATI ON OF LIBRARIES, BY PUBLICATION OF PAPERS, PERIODICALS, MAGAZINES, B OOKS, MAPS AND ANY OTHER KINDS OF LITERATURE USING PRINT, ELECTRON IC OR ANY OTHER DEVICES OR BY FOUNDATION AND ENDOWMENT OF PROFESSOR SHIP. STUDENTSHIP, OR SCHOLARSHIP, OR BY ENCOURAGING RESE ARCH WORK OR HOWSOEVER OR OTHERWISE, AND BY ESTABLISHING MUSEUMS , OR ORGANIZING EXHIBITIONS INDUSTRIAL AND TRADE FAIRS, EITHER ON B EHALF OF THE SOCIETY OR IN COOPERATION WITH OTHERS MORE PARTICULARLY BY ORGANIZING EXHIBITIONS, INDUSTRIAL AND TRADE FAIRS OF THE AUTO MOBILE INDUSTRY'S AND ALLIED PRODUCTS AND SERVICES FROM TIME TO TIME; 6). TO MAKE REPRESENTATIONS AND TO NOMINATE REPRESE NTATIVE OR REPRESENTATIVES TO THE CENTRAL OR STATE AUTHORITIES OR BODIES, EXECUTIVE OR LEGISLATIVE, ON ANY MATTER AFFECTING THE TRADE A ND FOR THE BEST INTERESTS OF THE TRADE, COMMERCE AND MANUFACTURERS CONNECTED WITH THE AUTOMOBILE INDUSTRY; . 10) TO ORGANIZE AND ENCOURAGE RESEARCH WORK IN THE PROCESS OF MANUFACTURE OF AUTOMOBILES ARID AUTOMOBILE ENGINES AND ANCILLARY PARTS, AND TO ENCOURAGE INVENTIONS AND TO AID THE S AME FOR THE SAID PURPOSE BY ASSISTING IN THE FINANCING FOR RESEARCH FACILITIES SUCH AS LABORATORIES, TEST CENTRES, R&D CENTRES, HIGH SPEED TRACKS AND OTHER AIDS TO RESEARCH INCLUDING EQUIPMENT MANPOWER AND I NFRASTRUCTURE REQUIRED IN CONNECTION THEREWITH; ITA NO.4837/DEL/2012 9 11 ) TO COLLECT, TABULATE AND CIRCULATE INFORMATION AND STATISTICS OF VALUE TO AUTOMOBILE MANUFACTURERS; .. 13) TO PROVIDE TO AUTOMOBILE MANUFACTURERS IN INDIA THE MEANS OF FORMULATING, MAKING KNOWN AND INFLUENCING GENERAL P OLICY IN REGARD TO ECONOMIC, FISCAL, COMMERCIAL, LABOUR, SOCIAL, FI NANCIAL, TECHNICAL, LEGAL, SAFETY AND ENVIRONMENTAL, AND EDUCATIONAL MA TTERS; .. 15)TO MAKE REPRESENTATIONS TO THE VARIOUS AUTHORITI ES, AND TO APPEAR BEFORE ANY AUTHORITY IN. THE INTEREST OF PROTECTION AND BETTERMENT OF THE SOCIETY'S MEMBERS; 7. ON GOING THROUGH THE ABOVE PRINCIPAL OBJECTS AND ANCILLARY OBJECTS, IT BECOMES PATENT THAT THE ASSESSEE HAS BEEN SET UP AS A BODY OF INDIAN AUTOMOBILE MANUFACTURERS WITH A VIEW TO IMPROVE AND PROTECT THE ENVIRONMENT AND SAFETY OF AUTOMOBILE VEHICLES AND A LSO TO WORK TOWARDS THE GROWTH OF AUTOMOBILE INDUSTRY IN INDIA. ALL TH E ANCILLARY OBJECTS ARE DIRECTED TOWARDS THE ATTAINMENT OF PRINCIPAL OBJECT S IN A MEANINGFUL MANNER. 8. AGAIN REVERTING TO THE PROVISO TO SECTION 2(1 5), WHICH HAS BEEN INVOKED BY THE AUTHORITIES FOR DENYING THE BENEFIT, WE FIND THAT THE SAME STATES THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY ITA NO.4837/DEL/2012 10 SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES T HE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINE SS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COM MERCE OR BUSINESS. THUS CARRYING ON AN `ACTIVITY IN THE NATURE OF TRAD E, COMMERCE OR BUSINESS OR RENDERING OF ANY SERVICE IN RELATION T O TRADE ETC. IS SINE QUA NON FOR TAKING AWAY THE CHARACTER OF CHARITABLE PURPOSE . AN ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS IS ALWAYS CARRIED ON WITH THE PRIOR OBJECT OF EARNING INCOME. WHAT IS RELEVANT IS THE INTENTION OF THE PERSON BEFORE UNDERTAKING SUCH ACTIVITY. A LINE OF DISTINCTION NEEDS TO BE DRAWN BETWEEN THE ACTIVITIES UNDERTAKEN BY A SOCIET Y, OTHERWISE SATISFYING THE PRESCRIPTION OF SECTION 2(15) PRIOR TO THE INSE RTION OF PROVISO, WHICH ARE AIMED AT EARNING INCOME DIVORCED FROM THE OBJEC TS FOR WHICH IT IS CHARITABLE POR UNA PARTE AND THE ACTIVITIES WHICH ARE AIMED AT THE ATTAINMENT OF THE OBJECTS FOR WHICH IT WAS SET UP POR OTRA PARTE . WHEREAS THE FORMER FALL WITHIN THE MANDATE OF THE PROVISO T O SECTION 2(15), THE LATTER DO NOT. THE OBVIOUS REASON IS THAT THE LATTE R ACTIVITIES ARE IN FURTHERANCE OF THE CHARITABLE OBJECTS OF SUCH SOCIE TY AND INCOME, IF ANY, RESULTING FROM SUCH ACTIVITIES DOES NOT CONVERT THE OTHERWISE CHARITABLE ITA NO.4837/DEL/2012 11 ACTIVITY [WITHIN THE DEFINITION OF SECTION 2(15)] I NTO CARRYING ON OF A BUSINESS, TRADE OR COMMERCE. IT CAN BE UNDERSTOOD W ITH THE HELP OF A SIMPLE ILLUSTRATION. SUPPOSING AN ASSOCIATION SET U P FOR THE PROMOTION OF A PARTICULAR TRADE, HAS ITS OWN PREMISES, FROM WHICH IT CARRIES OUT THE ACTIVITIES FOR THE PROMOTION OF SUCH TRADE. IF THE ASSOCIATION LETS OUT ITS PREMISES FROM TIME TO TIME FOR ENHANCING ITS INCOME , WHICH LETTING OUT HAS NO RELATION WITH THE OBJECTS FOR WHICH IT WAS S ET UP AS A CHARITABLE INSTITUTION, NAMELY, THE PROMOTION OF THAT PARTICUL AR TRADE, THE RESULTANT ACTIVITY WILL AMOUNT TO CARRYING ON TRADE, COMMERCE OR BUSINESS SO AS TO FALL WITHIN PROVISO TO SECTION 2(15). ON THE OTHER HAND, IF IT USES ITS PREMISES FOR UNDERTAKING ACTIVITIES FOR WHICH IT WA S SET UP AND IS A CHARITABLE INSTITUTION, AND WHILE DOING SO, THERE R ESULTS SOME INCOME, SUCH INCOME WILL NOT AMOUNT TO CARRYING ON ANY TRADE, CO MMERCE OR BUSINESS. THE CRUX OF THE MATTER IS TO UNDERSTAND THE OBJECT OF CARRYING ON THE ACTIVITY WHICH RESULTED INTO INCOME. IF THE OBJECT IS TO SIMPLY EARN INCOME DE HORS THE PROMOTION OF OBJECTS FOR WHICH IT WAS SET UP, IT WILL FALL WITHIN THE AMBIT OF PROVISO TO SECTION 2(15) A ND IF THE OBJECT OF THE ACTIVITY IS TO PROMOTE THE OBJECTS FOR WHICH IT WAS SET UP, THEN IT WILL NOT ITA NO.4837/DEL/2012 12 BE CAUGHT WITH IN THE SWEEP OF THE PROVISO NOTWITHS TANDING THE FACT THAT THERE RESULTS SOME INCOME FROM CARRYING OUT SUCH AC TIVITY. THE CORE OF THE MATTER IS TO SEE WHETHER THE ACTIVITY WHICH RES ULTED INTO SOME INCOME OR LOSS WAS CARRIED ON WITH THE OBJECT OF DOING SOM E TRADE, COMMERCE OR BUSINESS, ETC., OR IT WAS IN FURTHERANCE OF THE OBJ ECTS (NON-BUSINESS) ETC., FOR WHICH THE ASSESSEE WAS SET UP. IN OTHER WORDS, THE PREDOMINANT OBJECT OF THE ACTIVITIES SHOULD BE SEEN AS TO WHETHER IT I S AIMED AT CARRYING ON SOME BUSINESS, TRADE OR COMMERCE OR THE FURTHERANCE OF THE OBJECT FOR WHICH IT WAS SET UP. IF IT FALLS IN THE FIRST CATE GORY, THEN, THE CASE WOULD BE COVERED WITHIN THE PROVISO TO SECTION 2(15) AND, IN THE OTHERWISE SCENARIO, THE ASSESSEE WILL BE CONSTRUED TO HAVE CA RRIED ON ITS ACTIVITIES OF GENERAL PUBLIC UTILITY. 9. THE HONBLE DELHI HIGH COURT IN THE INSTITUTE OF CHARTERED ACCOUNTS OF INDIA VS. DIRECTOR GENERAL OF INCOME-TAX (EXEMPT IONS) (2013) 358 ITR 91 (DEL), OBSERVED, WHILE DISPOSING OF A WRIT PETITION, THAT HOLDING INTERVIEWS FOR A FEES FOR THE PURPOSE OF CAMPUS PLA CEMENTS OF ITS STUDENTS DOES NOT AMOUNT TO CARRYING ON A BUSINESS SO AS TO DENY EXEMPTION U/S 11 ITA NO.4837/DEL/2012 13 OF THE ACT. IT FURTHER OBSERVED THAT IF THE OBJECT OR PURPOSE OF AN INSTITUTION IS CHARITABLE, THE FACT THAT THE INSTIT UTION COLLECTS CERTAIN CHARGES DOES NOT ALTER THE CHARACTER OF THE INSTITUTION. T HE HONBLE HIGH COURT FURTHER OBSERVED IN PARA 67 THAT: 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 ACTIVIT IES FOR A CONSIDERATION OR A FEE. THE OBJECT OF INTRODUCING THE FIRST PROV ISO IS TO EXCLUDE ORGANIZATIONS WHICH ARE CARRYING ON REGULAR BUSINES S FROM THE SCOPE OF CHARITABLE PURPOSE. THE HONBLE HIGH COURT ALSO NOTICED THE PURPOSE OF INTRODUCING THE PROVISO TO SECTION 2(15) OF THE ACT FROM THE BUDGET SPEECH OF THE FINANCE MINISTER WHILE INTRODUCING TH E FINANCE BILL 2008 AND REPRODUCED THE RELEVANT EXTRACT TO THE SPEECH A S UNDER:- . CHARITABLE PURPOSE INCLUDES RELIEF OF THE PO OR, EDUCATION, MEDICAL RELIEF AND ANY OTHER OBJECT OF GENERAL PUBL IC UTILITY. THESE ACTIVITIES ARE TAX EXEMPT, AS THEY SHOULD BE. HOWEV ER, SOME ENTITIES CARRYING ON REGULAR TRADE, COMMERCE OR BUSINESS OR PROVIDING SERVICES IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS AND EARNING INCOMES HAVE SOUGHT TO CLAIM THAT THEIR PURPOSES WOULD ALSO FALL UNDER CHARITABLE PURPOSE. OBVIOUSLY, THIS WAS NOT THE I NTENTION OF PARLIAMENT AND, HENCE, I PROPOSE TO AMEND THE LAW T O EXCLUDE THE AFORESAID CASES. GENUINE CHARITABLE ORGANIZATIONS W ILL NOT IN ANY WAY BE AFFECTED. ITA NO.4837/DEL/2012 14 THE EXPRESSIONS BUSINESS, TRADE OR COMMERCE A S USED IN THE FIRST PROVISO MUST, THUS, BE INTERPRETED RESTRICTIVELY AN D WHERE THE DOMINANT OBJECT OF AN ORGANIZATION IS CHARITABLE ANY INCIDEN TAL ACTIVITY FOR FURTHERANCE OF THE OBJECT WOULD NOT FALL WITHIN THE EXPRESSIONS BUSINESS, TRADE OR COMMERCE . 10. ALMOST SIMILAR OBSERVATIONS HAVE BEEN MADE BY THE HONBLE DELHI HIGH COURT IN INDIA TRADE PROMOTION ORGANIZATION VS. DGIT (E) AND ORS. (2015) 374 ITR 333 (DEL). WHILE DISPOSING A WRIT PETITION FILED BY THE ASSESSEE, THE HONBLE HIGH COURT HELD: MERELY BECAUSE A FEES OR SOME OTHER CONSIDERATION IS COLLECTED OR RECEIVED B Y AN INSTITUTION, IT WOULD NOT LOSE ITS CHARACTER OF HAVING BEEN ESTABLI SHED 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 QUESTIO N. IF THE DOMINANT ACTIVITY OF THE INSTITUTION WAS NOT BUSINESS, TRADE OR COMMERCE, THEN ANY SUCH INSTITUTIONAL OR ANCILLARY ACTIVITY WOULD ALSO NOT FALL WITHIN THE CATEGORIES OF TRADE, COMMERCE OR BUSINESS. ON GOI NG THROUGH THE ABOVE JUDGMENTS OF THE HONBLE JURISDICTIONAL HIGH COURT, IT BECOMES VIVID THAT IF THE OBJECT OF AN ASSESSEE IS CHARITABLE, THE FAC T THAT IT COLLECTS CERTAIN CHARGES, DOES NOT MILITATE AGAINST ITS CHARITABLE C HARACTER. IN VIEW OF THE EXPLICIT OPINION AVAILABLE ON THE POINT FROM THE HO NBLE JURISDICTIONAL ITA NO.4837/DEL/2012 15 HIGH COURT, THERE IS HARDLY ANY NEED TO CONSIDER CO NTRARY DECISIONS OF THE TRIBUNAL TAKEN NOTE OF IN THE ASSESSMENT ORDER OR R ELIED BY THE LD. DR. THE NITTY GRITTY OF THE MATTER IS THAT SO LONG AS T HE DOMINANT ACTIVITY OF THE ASSESSEE IS NOT BUSINESS, THEN, ANY INSTITUTIONAL A CTIVITY WOULD NOT FALL WITHIN THE MEANING OF BUSINESS, TRADE OR COMMERCE, ETC., EVEN IF THERE IS SOME SURPLUS IN DOING SUCH ACTIVITY. 11. COMING BACK TO THE FACTUAL MATRIX OF THE CASE , WE FIND THAT THE ASSESSEE SOCIETY WAS SET UP WITH THE OBJECT OF PROM OTING THE GROWTH OF AUTOMOBILE INDUSTRY IN INDIA AND ALSO TO IMPROVE AN D PROTECT THE ENVIRONMENT WHICH IS NOTHING, BUT, AN OBJECT OF GEN ERAL PUBLIC UTILITY WHICH IS OTHERWISE CHARITABLE WITHIN THE MAIN PROVI SION OF SECTION 2(15). THE REVENUE HAS ALSO ACCEPTED SUCH OBJECTS AS CHARI TABLE IN NATURE AND GRANTED REGISTRATION IN THE YEAR 1998. HOWEVER, IT NEEDS TO BE EXAMINED AS TO WHETHER OR NOT THE ACTIVITIES UNDERTAKEN BY T HE ASSESSEE DURING THE YEAR AMOUNT TO CARRYING ON ANY ACTIVITY IN THE NATU RE OF BUSINESS, TRADE OR COMMERCE OR RENDERING OF SERVICES IN BUSINESS, TRAD E OR COMMERCE SO AS TO ATTRACT THE PROVISO TO SECTION 2(15). FOR THAT W E WILL VENTURE TO EXAMINE THE ACTUAL ACTIVITIES CARRIED OUT BY THE ASSESSEE D URING THE YEAR, WHICH CAN ITA NO.4837/DEL/2012 16 BE TRACED FROM THE INCOME SIDE OF THE ASSESSEES IN COME AND EXPENDITURE ACCOUNT, A COPY OF WHICH IS AVAILABLE ON PAGE 59 OF THE PAPER BOOK. FIRST ITEM IS ANNUAL MEMBERSHIP SUBSCRIPTION AMOUNTING TO RS.1.81 CRORE. THIS COMPRISES OF ANNUAL MEMBERSHIP SUBSCRIPTION AND ADM ISSION FEES. THE LD. AR SUBMITTED THAT THE ASSESSEE HAS 46 REGULAR MEMBE RS WHO PAY ANNUAL FEES OF RS.7.50 LAC AND THERE ARE ROUGHLY 350 TEMPO RARY MEMBERS WHO PAY @ RS.50,000/- PER ANNUM. NO CARRYING ON OF ANY BUSINESS CAN BE INFERRED FROM RECEIPT OF ANNUAL MEMBERSHIP SUBSCRIP TION BY THE ASSESSEE, WHICH IS A REGULAR FEATURE AB INITIO . NEXT ITEM IS TECHNICAL LITERATURE PUBLICATIONS RECEIPT AMOUNTING TO RS.1.93 LAC. THI S WAS STATED TO BE RECEIPT OF SOME AMOUNT FOR BRINGING OUT PUBLICATION S IN RELATION TO THE AUTOMOBILE INDUSTRY ETC. THIS AMOUNT RECEIVED FOR P UBLICATION OF SOME TECHNICAL LITERATURE CONCERNING THE AUTOMOBILE INDU STRY CANNOT BE CONSIDERED AS CARRYING ON OF ANY TRADE, BUSINESS OR COMMERCE. THE NEXT ITEM IS INTEREST RECEIVED AMOUNTING TO RS.1.60 LAC, WHICH HAS BEEN EARNED FROM BANKS, BONDS, ETC. THIS RECEIPT ALSO CANNOT BE CONSIDERED AS ARISING FROM CARRYING ON OF ANY TRADE, COMMERCE OR BUSINESS . THE NEXT IMPORTANT RECEIPT IS RS.1 CRORE FROM AUTO EXPO 2008. THE AO HAS ALSO ACCENTUATED ITA NO.4837/DEL/2012 17 ON THIS AMOUNT TO HOLD THAT THE ASSESSEE WAS CARRYI NG OUT BUSINESS. THE ASSESSEE IS ANNUALLY ORGANIZING AUTO EXPO, WHICH IS A TRADE FAIR CONFINED TO AUTOMOBILE INDUSTRY. THE AUTOMOBILE MANUFACTURE RS GIVE ADVERTISEMENTS OF THEIR PRODUCTS WHICH IS THE MAJOR SOURCE OF RECEIPTS FROM AUTO EXPO APART FROM SALE OF TICKETS. SINCE A LL THE MANUFACTURERS OF AUTOMOBILES ARE THE MEMBERS OF THE ASSESSEE SOCIETY AND THE AUTO FAIR IS ORGANIZED DISPLAYING VARIOUS PRODUCTS OF AUTOMOBILE S, BEING THE OBJECT FOR WHICH THE ASSESSEE WAS SET UP, IT CANNOT BE DES CRIBED AS CARRYING ON BUSINESS, TRADE OR COMMERCE. THE NEXT MAJOR ITEM IS SEMINARS AND CONFERENCES AGAINST WHICH RECEIPT OF RS.1.85 CRORE HAS BEEN SHOWN. THE ASSESSEE HELD FOUR SEMINARS/CONFERENCES, NAMELY, SI AM ANNUAL SESSION, TECHNICAL SEMINAR, AOTS KAIZEN/MTP PROGRAMME AND WHTC- AUGUST, 2009. TOTAL RECEIPTS FROM THESE FOUR CONFE RENCES/SEMINARS HAS TOTALED TO RS.1.85 CRORE. THE MAJOR ITEM OF RECEIP T IS RS.1.59 CRORE FROM SIAM ANNUAL SESSION, THE DETAILS OF WHICH ARE AV AILABLE ON PAGE 89 OF THE PAPER BOOK. WHEN WE PERUSE THESE RECEIPTS, IT EMERGES THAT THESE ARE LARGELY SPONSORSHIP AMOUNTS RECEIVED FROM AUTOMOBIL E COMPANIES. DETAILS OF EXPENSES INCURRED ON SEMINARS AND CONFER ENCES HAVE BEEN SET ITA NO.4837/DEL/2012 18 OUT ON PAGE 106 OF THE PAPER BOOK. THESE DETAILS R EVEAL THAT FOR SOME CONFERENCES, INCOME IS HIGHER THAN THE EXPENSES, WH ILE FOR OTHERS, IT IS VICE VERSA . ABOVE NARRATION OF THE ACTIVITIES ACTUALLY UNDERT AKEN BY THE ASSESSEE TRANSPIRES THAT THESE ARE AIMED AT THE OVE RALL PROMOTION OF THE AUTOMOBILE SECTOR. EVEN IF THERE HAS RESULTED SOME SURPLUS IN ORGANIZING THESE CONFERENCES AND SEMINARS ETC., IT CANNOT BE SAID THAT THE ASSESSEE CARRIED OUT ANY TRADE, COMMERCE OR BUSINESS OR REND ERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS. IT IS MANIFEST THAT NONE OF THE ACTIVITIES UNDERTAKEN BY THE ASSESSEE WAS PURSU ED WITH THE PRIOR OBJECT OF EARNING INCOME. AU CONTRAIRE , ALL SUCH ACTIVITIES WERE PERFORMED WITH THE PRIOR OBJECT OF PROMOTION OF GROWTH OF THE AUTO MOBILE INDUSTRY IN INDIA WHICH IS AN OBJECT OF GENERAL PUBLIC UTILITY. THE ACTIVITIES OF THE ASSESSEE IN ORGANIZING SEMINARS AND CONFERENCES, ET C. CAN BE SEEN DE HORS ITS MAIN OBJECT OF GENERAL PUBLIC UTILITY SO AS TO BRING THE CASE WITHIN THE AMBIT OF FIRST PROVISO TO SECTION 2(15). EVEN IF T HERE HAS GENERATED SOME EXCESS OF RECEIPTS OVER EXPENSES IN DOING THESE ACT IVITIES, THE SAME IS A NORMAL INCIDENCE OF THE ACTIVITY OF PROMOTION OF AU TOMOBILE INDUSTRIES AND CANNOT BE CHARACTERIZED AS DOING ANY BUSINESS ETC. OR RENDERING OF ITA NO.4837/DEL/2012 19 ANY SERVICES IN CONNECTION WITH BUSINESS ETC. SINC E THE AO HAS DENIED THE BENEFIT OF SECTIONS 11 AND 12 ON THE GROUND THA T THE ASSESSEE DID NOT FALL WITHIN THE SCOPE OF CHARITABLE PURPOSE DEFINED IN SECTION 2(15) OF THE ACT BECAUSE OF CARRYING ON OR RENDERING OF ANY SERV ICES IN BUSINESS, TRADE AND COMMERCE, WHICH IN OUR CONSIDERED OPINION IS NO T A CORRECT INTERPRETATION OF THE PROVISION, WE DIRECT TO GRANT SUCH BENEFIT TO THE ASSESSEE. THE IMPUGNED ORDER IS OVERTURNED PRO TANTO . 12. IN THE RESULT, THE APPEAL IS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 06.06.201 6. SD/- SD/- [KULDIP SINGH] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED,6 TH JUNE, 2016. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.