ACIT(E), New Delhi V. India International Centre, New Delhi

ITA 5191/DEL/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1157 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 03-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JANARDAN DAS
• Assessee Lawyers: ANGAD GULATI
• Keywords: Depreciation; Charitable institution; Capital expenditure; Set aside
• Section: 263; 143(3); 12A; 10B; 208; 2

Judgement Text

ITA NO.- 5191/DEL/2016 INDIA INTERNATIONAL CENTRE. PAGE 1 OF 21 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH: C: NEW DELHI) BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER ITA NO:- 5191/DEL/2016 ( ASSESSMENT YEAR: 2012-13) ASSTT. COMMISSIONER OF INCOME TAX (E), CIRCLE1(1), E-2 BLOCK, PRATYAKSH KAR BHAWAN, NEW DELHI-110002. VS. INDIA INTERNATIONAL CENTRE, 40, MAX MULLER MARG, LODHI ESTATE, NEW DELHI-110003. PAN NO: AAATI0669C APPELLANT RESPONDENT REVENUE BY : SHRI JANARDAN DAS, SR. DR ASSESSEE BY : SHRI ANGAD GULATI, ADV. ORDER PER ANADEE NATH MISSHRA, AM (A) THIS APPEAL BY REVENUE IS FILED AGAINST THE IMPUGN ED ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 40 (EXEMPTION) , NEW DELHI, [LD. CIT(A), FOR SHORT], DATED 08.07.2016 FOR ASSESSMENT YEAR 2012-1 3. THE GROUNDS OF APPEAL ARE AS UNDER: 1. LD. CIT(A) HAS ERRED IN ALLOWING THE APPEAL OF T HE ASSESSEE BY IGNORING THE FACT THAT THE ACTIVATES OF THE ASSESSEE FALLS W ITHIN THE PURVIEW OF COMMERCIAL ACTIVITIES AS IT HAD PROVIDED BENEFITS O NLY TO SELECTED PERSONS AND NOT TO PUBLIC AT LARGE. THESE ACTIVITIES, WITH ANY STRETCH TO THE ITA NO.- 5191/DEL/2016 INDIA INTERNATIONAL CENTRE. PAGE 2 OF 21 IMAGINATION, CANNOT BE CALLED AS CHARITABLE ACTIVIT Y WITHIN THE PURVIEW OF SECTION 2(15) OF THE ACT. ALSO, REVENUE PREFERRED A N APPEAL BEFORE HONBLE HIGH COURT AGAINST THE DECISION OF ITAT IN ASSESSEES FAVOUR ON THE ISSUE, IN EARLIER YEAR. 2. LD. CIT(A) HAS ERRED IN ALLOWING THE APPEAL OF T HE ASSESSEE BY IGNORING THE IGNORING THE FACT THAT MERELY BEING NOTIFIED U/ S. 10(23C)(IV) DOES NOT MAKE ASSESSEE ENTITLED TO CLAIM EXEMPTION TILL IT I S PROVED THAT THE ACTIVITIES CARRIED OUT BY IT ARE WITHIN THE SCOPE O F ACTIVITIES ENUMERATED IN THE SAID SECTION. THE ASSESSEE INSTITUTION IS ALSO HIT BY 7 PROVISO TO SECTION 10(23C) AS THE ACTIVITIES OF SALE OF FOOD A ND BEVERAGES AND LICENSE FEE ETC. ARE THE ACTIVITY OF PROFIT OR GAIN OF BUSINESS WHICH IS NOT INCIDENTAL TO THE ATTAINMENT OF ITS OBJECTIVE FOR W HICH IT HAS BEEN MAINTAINING ACCOUNTS FOR THE SAID ACTIVITY. ALSO RE VENUE PREFERRED AN APPEAL BEFORE HONBLE HIGH COURT AGAINST THE DECISI ON OF ITAT IN ASSESSEES FAVOUR ON THIS ISSUE, IN EARLIER YEAR. 3. LD. CIT(A) HAS ERRED IN ALLOWING THE APPEAL OF T HE ASSESSEE BY IGNORING THE FACT THAT ALLOWANCE OF DEPRECIATION ON THE FIXE D ASSETS ACQUISITION OF WHICH HAS BEEN ALLOWED AS APPLICATION OF INCOME IN EARLIER YEARS WILL TANTAMOUNT TO DOUBLE DEDUCTION. 4. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER OR A MEND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING. ( B) ASSESSMENT ORDER DATED 31.03.2012 WAS PASSED BY TH E ASSESSING OFFICER (AO, FOR SHORT) U/S 143(3) OF INCOME TAX ACT, 1961 (I.T . ACT, FOR SHORT) WHEREIN PROVISO 1 & 2 TO SECTION 2(15) OF I.T. ACT READ WITH 3 RD PROVISO TO SECTION 143(3) OF I.T. ACT WAS INVOKED AND EXEMPTION U/S 10(23C)(IV) WAS DENIED TO THE ASSESSEE. FURTHER, OUT OF ASSESSEES CLAIM FOR DEPRECIATION AMOUNTING TO RS. 2,74,65,815/- ONLY RS. 35,44,750/- WAS ALLOWED BY THE AO AND THE REMAINING AMOUNT OF R S. 2,39,21,065/- WAS DISALLOWED ON THE GROUND THAT CAPITAL EXPENDITURE INCURRED ON ACQUISITION OF FIXED ASSETS IN THE EARLIER YEARS HAD BEEN ALREADY ALLOWED TO THE ASSES SEE AS APPLICATION OF INCOME. THE AO TOOK THE VIEW THAT DEPRECIATION WAS TO BE ALLOWED O NLY ON THE VALUE OF ASSETS ACQUIRED ITA NO.- 5191/DEL/2016 INDIA INTERNATIONAL CENTRE. PAGE 3 OF 21 DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE FILED APPEAL BEFORE LD. CIT(A) AGAINST THE AFORESAID ASSESSMENT ORDER. THE LD. CIT (A) FOLLOWED THE ORDER OF HIS PREDECESSOR FOR ASSESSMENT YEAR 2011-12 AND HELD IN HIS APPELLATE ORDER DATED 08.07.2016 THAT MISCHIEF OF PROVISO OF SECTION 2(15 ) OF I.T. ACT WAS NOT ATTRACTED ON THE FACTS ON THE ASSESSEES CASE. THE LD. CIT(A) ALSO BASED HIS DECISION ON THE ORDER OF INCOME TAX APPELLATE TRIBUNAL (ITAT, FOR SHORT) F OR ASSESSMENT YEAR 2009-10 IN ASSESSEES OWN CASE IN APPEAL VIDE ITA NO. 3124/DEL /2014 IN WHICH IT WAS HELD BY ITAT THAT THE ASSESSEE WAS NOT ENGAGED IN ANY SORT OF CO MMERCIAL ACTIVITY AND ALL THE ACTIVITIES WERE IN FURTHERANCE OF MAIN OBJECTS OF T HE ASSESSEES SOCIETY, WHICH REMAINED CHARITABLE AND FURTHER HELD THAT AUTHORITIES BELOW WERE NOT JUSTIFIED IN DENY THE EXEMPTION OF THE ASSESSEE SOCIETY. THE LD. CIT(A) FURTHER NOTICED THAT THE ORDER OF THE AO WAS IDENTICAL TO THE ORDER OF THE AO FOR ASSESSM ENT YEAR 2009-10. THE FINDING OF THE LD. CIT(A) IS CONTAINED IN PARAGRAPHS 5 AND 6 O F AFORESAID APPELLATE ORDER DATED 08.07.2016. THE RELEVANT PORTION OF THE ORDER OF L D. CIT(A) IS REPRODUCED AS UNDER: 4. THE MAIN GRIEVANCES OF APPELLATE IS THAT THE AS SESSING OFFICER HAS PASSED THE ORDER IGNORING THE ESTABLISHED PAST HISTORY OF THE ASSESS EE. WHEREIN THE APPELLATE REMAINS REGISTERED U/S 12A OF THE INCOME TAX ACT AS ALSO AP PROVED INSTITUTE U/S 10(23C)(IV) OF THE INCOME TAX ACT. THE APPELLANT HAS FILED THE DETAILE D WRITTEN SUBMISSIONS VIDE ITS LETTER DATED 15.06.2016, WHICH FOR THE SAKE OF READY REFERENCE A RE BEING REPRODUCED AS UNDER:- THE FACTS IN BRIEF ARE THAT: 1) THE ASSESSEE SOCIETY IS REGISTERED U/S 12A VIDE RE GISTRATION NO. DLI(C)(I-347) 1974-75 SINCE 18.06.1973 AN ALSO APPROVED U/S 80G(5 )(VI) VIDE APPROVAL NO. DIT(E)/2012- 13/I- 205/426 DATED 30.05.2012 VALID FROM AY 2013-1 4 ONWARDS TILL IT IS RESCINDED. THE ASSESSEE IS NOTIFIED U/S 10(23C)(IV) OF THE INCOME TAX ACT 1961 FOR THE ASSESSMENT YEAR 2006-07 AND ONWARDS VIDE NOTIFICATION NO. 13/2007 D ATED 19.02.2007. THERE IS NO DISPUTE ON THESE FACTS. COPIES OF CERTIFICATE U/S 12A, 80G, 10(23C)(IV) OF THE ACT, ARE ENCLOSED FOR YOUR READY REFERENCE & RECORDS. ITA NO.- 5191/DEL/2016 INDIA INTERNATIONAL CENTRE. PAGE 4 OF 21 2) THE ASSESSEE IS AN INSTITUTION, WHICH CAME INTO EX ISTENCE BY WAY OF CREATION OF A TRUST VIDE TRUST DEED DATED 23.05.1961. THE ASSESSE E, AS PER ITS MEMORANDUM OF ASSOCIATIONS (MOA) RULES & REGULATIONS (R&R), IS ENGAGED IN CULT URAL AND INTELLECTUAL ACTIVITIES. DURING THE YEAR UNDER CONSIDERATION, IT HAS CONTINU ED TO CONDUCT SEMINARS, TALKS, DISCUSSIONS AND CULTURAL ACTIVITIES AS IN THE PAST RULE 3 OF THE MOA OF THE ASSESSEE COMPRISES OF ITS OBJECTS. THE SALIENT OBJECTS OF TH E ASSESSEE ARE AS UNDER:- (I) TO PROMOTE UNDERSTANDING AND AMITY BETWEEN THE DIFF ERENT COMMUNITIES OF THE WORLD BY UNDERTAKING OR PROMOTING THE STUDY-OF THEIR PAS T AND PRESENT CULTURES, BY DISSEMINATING OR EXCHANGING KNOWLEDGE THEREOF, AND BY PROVIDING SUCH OTHER FACILITIES AS WOULD LEAD TO THEIR UNIVERSAL APPREC IATION; (II) TO UNDERTAKE, ORGANIZE AND FACILITATE STUDY COURSES , CONFERENCES, SEMINARS, LECTURES AND RESEARCH IN MATTERS RELATING TO DIFFERENT CULT URAL PATTERNS OF THE WORLD; (III) TO UNDERTAKE, FACILITATE AND PROVIDE FOR THE PUBLI CATION OF NEWS-LETTERS, RESEARCH PAPERS AND BOOKS AND OF A JOURNAL FOR THE EXPOSITI ON OF CULTURAL PATTERNS AND VALUES PREVAILING IN DIFFERENT PARTS OF THE WORLD; (IV) TO ESTABLISH AND MAINTAIN LIBRARIES AND INFORMATIO N SERVICES TO FACILITATE THE STUDY OF WORLD CULTURES AND SPREADING INFORMATION IN REG ARD THERETO; (V) TO CONSTITUTE OR CAUSE TO BE CONSTITUTED REGIONAL CENTERS AT CONVENIENT PLACES IN INDIA TO PROMOTE THE OBJECTIVES OF THE SOCIETY. (VI) TO COOPERATE WITH APPROVAL INSTITUTIONS AND INTERES TED BODIES FOR THE PURPOSES OF HELPING THE CAUSE OF UNDERSTANDING AMONGST PEOPLE OF DIFFERENT CULTURES; (VII) TO ORGANIZE AND MAINTAIN AS FAR AS POSSIBLE O N NO-PROFIT NO-LOSS BASIS, LIMITED RESIDENTIAL ACCOMMODATION, WITH CULTURAL AND EDUCA TIONAL AMENITIES, FOR THE MEMBERS OF THE SOCIETY COMING TO PARTICIPATE IN TH E ACTIVITIES OF THE SOCIETY AND OTHER BODIES WITH COGNATE OBJECTIVES, AS WELL AS N ON-MEMBERS SPECIALLY INVITED TO PARTICIPATE IN THE ACTIVITIES OF THE SOCIETY. (VIII) TO INVITE AS AND WHEN FEASIBLE, CULTURAL LEA DERS, SCHOLARS, SCIENTISTS AND CREATIVE ARTISTS, WHO MAY OR MAY NOT BE MEMBERS OF THE SOCI ETY, TO TAKE ADVANTAGE OF THE FACILITIES OFFERED BY THE SOCIETY THERE IS NO DISPUTE ON THIS ISSUE AS WELL. 3) RULES & REGULATIONS (R&R) OF THE ASSESSEE MAINLY D EAL WITH THE QUALIFICATIONS FOR BECOMING MEMBERS OF THE ASSESSEE TYPES OF MEMBERSHI P, PRIVILEGES OF MEMBERS, SUBSCRIPTION ETC. AS PER RULE 4(A), THERE ARE CORPORATE FOUNDATI ON MEMBERS/CORPORATE MEMBERS, WHICH ARE UNIVERSITIES, NATIONAL LABORATORIES, AND NATION AL ACADEMIES ETC. AS PER THE ASSESSEE WHILE ITS CULTURAL AND INTELLECTUAL ACTIVITIES ARE OPEN TO GENERAL PUBLIC, HOSTEL AND RESTAURANT FACILITIES ARE LIMITED TO ITS MEMBERS AND THEIR GUE ST ONLY. 4) ALTHOUGH, AS MANY AS 7 GROUNDS HAVE BEEN RAISED IN THE APPEAL FILED BEFORE YOUR HONOUR, BUT IN ESSENCE THE MAIN GROUND THAT ARISES FOR CONSIDERATION BEFORE YOUR HONOUR IS - AS TO WHETHER THE AO WAS CORRECT IN DENYING EXEMPTI ON U/S.10(23C)(IV) OF THE I.T. ACT OR AS WAS CLAIMED BY THE ASSESSEE ON THE PRINCIPLE OF MUT UALITY ON THE GROUND THAT THE ACTIVITIES OF THE ASSESSEE CENTRE ARE HIT BY THE FIRST PROVISO TO SECTION 2(15) READ WITH THIRD PROVISO TO SECTION 143(3) OF THE I.T. ACT. ITA NO.- 5191/DEL/2016 INDIA INTERNATIONAL CENTRE. PAGE 5 OF 21 5) THE MAIN CONTENTION OF THE AO WAS THAT IN FORM 10B B FILED BY THE ASSESSEE, IT HAD DISCLOSED ONLY PART OF THE AMOUNT AS COVERED U/S. 1 0(23C)(IV) OF THE I.T. ACT AND THAT FOR THE BALANCE INCOME OR EXPENSES DISCLOSED IN THE INCOME AND EXPENDITURE ACCOUNT OR THE RETURN FILED BY THE ASSESSEE, THERE IS NO MENTION AND THE ASSESSEE IS SILENT ABOUT THE SAME. SUCH OBSERVATIONS, IT IS RESPECTFULLY SUBMITTED ARE FACT UALLY INCORRECT. WE ARE FILING HEREWITH A DETAILED PAPER BOOK, WHICH INCLUDE A COPY OF INCOME AND EXPENDITURE A/C, COPY OF ITR FILED AS ALSO THE OTHER RELEVANT DOCUMENTS, FROM WHERE IT WOULD BE CLEAR THAT ASSESSEE IS NOT SILENT ABOUT THE BALANCE INCOME OR EXPENSES AS PER INCOME AND EXPENDITURE A/C, BUT THE SAME HAS BEEN CLAIMED AS NOT FORMING PART OF TOTAL INCOME ON THE PRINCIPLE OF MUTUALITY. 6) IN FACT, IT WILL NOT BE OUT OF PLACE TO MENTION TH AT THE BASIS OF MAKING CLAIM WAS IDENTICAL AS HAD BEEN DONE IN EARLIER YEARS; AND TH ERE WAS NEITHER ANY CHANGE IN THE FACTS OR IN THE OBJECTS OR IN THE FORM OF MAKING CLAIMS WITH RESPECT TO THE ACTIVITIES OF THE CENTRE AS COMPARED TO THE EARLIER YEARS. WE WOULD LIKE TO ENC LOSE HEREWITH COPY OF ASSESSMENT ORDER PASSED BY THE AO PERTAINING TO ASSESSMENT YEAR 2010 -11 AND A.Y. 2009-10, FROM WHERE IT WOULD BE CATEGORICALLY KNOWN THAT SUCCESSOR AOS HAV E CATEGORICALLY OBSERVED AND APPROVED THESE ACTIVITIES, AS HAVING BEEN COVERED U NDER THE VARIOUS PROVISIONS OF THE INCOME-TAX ACT AND ALSO PRINCIPLES OF MUTUALITY AND ASSESSMENTS HAVE BEEN FRAMED AT THE DECLARED NIL ASSESSABLE INCOME. IT IS A DIFFERENT M ATTER THAT THE DIT (E) FOR THE FIRST TIME IN ASSESSMENT YEAR 2009-10 AND SUBSEQUENTLY IN ASSESSM ENT YEAR 2010-11 HAS SET-ASIDE THESE ORDERS U/S.263 OF THE I.T. ACT AND THE ORDERS OF TH E DIT(E) HAVE BEEN CHALLENGED IN THE ITAT. WE ARE PLEASED TO INFORM YOU THAT THE HONBLE ITAT HAS SET ASIDE THE FINDINGS GIVEN BY THE DEPUTY COMMISSIONER OF INCOME TAX U/S 263 AND HAVE CATEGORICALLY HELD THAT THE PREDOMINANT ACTIVITIES OF THE CENTRE WAS NOT TO EAR N INCOME BUT TO PROVIDE FACILITIES FOR DISSEMINATING OR EXCHANGING KNOWLEDGE AS PER THE OB JECT OF THE SOCIETY. THE RELEVANT OBSERVATIONS AND FINDINGS GIVEN BY THE HONBLE ITAT IN PARAS 6.12 AND 6.13 ARE AS UNDER: 6.12 THE PREDOMINANT ACTIVITIES OF THE CENTRE WAS NOT TO EAR N INCOME BUT TO PROVIDE FACILITIES FOR DISSEMINATING OR EXCHANGING KNOWLEDG E AS PER THE OBJECT OF THE SOCIETY. THERE IS NO GAINSAYING THAT WITHOUT CREATING A PRO PER PLATFORM THE PRIMARY OBJECT OF DISSEMINATION AND EXCHANGING OF KNOWLEDGE COULD NOT BE ACHIEVED. THEREFORE, MERELY BECAUSE INCIDENTAL INCOME WAS EARNED BY ASSESSEE SOCIETY FOR ACHIEVING ITS DOMINANT OBJECT FROM PROVIDING HOSTEL AND CA TERING ACTIVITIES, IT CANNOT BE SAID THAT THE ASSESSEE WAS DOING TRADE OR BUSINESS AS CO NTEMPLATED UNDER PROVISO TO SECTION 2(15). THE CENTRE HAD TO NECESSARILY CHARGE FOR THE HOSTEL, CATERING AND USE OF SUCH FACILITIES FROM MEMBERS/PARTICIPANTS SINCE IT HAD TO RECOVER COST AND AT THE SAME TIME HAVE ENOUGH FUNDS TO CARRY OUT THE CHARITABLE ACTIVITIES . WE ARE REMINDED AT THIS JUNCTURE OF AN OLD SAYING - EVERYTHING COMES AT A PRICE. IT IS INCOMPREHENSIBLE THAT AN INSTITUTION WHICH IS CARRYING OUT CHARITABLE OBJECTS WI LL PROVIDE THE ESSENTIAL FACILITIES FREE OF CHARGE. IT IS NOT THE ALLEGATION OF ID. DIT(E) THAT THE MAIN OBJECT OF ASSESSEE, IN ANY MANNER, DID NOT FULFILL THE CRITERIA OF CHA RITABLE ACTIVITY. ON THE CONTRARY SHE HERSELF HAS OBSERVED THAT THE FIRST CATEGORY DOES F ULFILL THE CHARITABLE PURPOSE/CRITERIA AND IT IS ONLY THE SECOND CATEGORY I.E. GIVING OF HOSTEL, CATERING ETC. THAT THE ASSESSEES ACTIVITIES ARE CAUGHT WITHIN THE MISCHIEF O F SECOND PROVISO TO SECTION 2(15). IT IS ALSO NOT THE CASE OF ID. DIT(E) THA T THERE WAS NO FREE ACCESS TO THE GENERAL PUBLIC FOR PROGRAMMES SUCH AS DANCE, MUSIC, SEMINA RS ETC. IN ITS REPLY THE ASSESSEE HAD ALSO POINTED OUT THAT THERE WERE NUMBER OF OCCASI ONS WHEN THE CENTRE DID ITA NO.- 5191/DEL/2016 INDIA INTERNATIONAL CENTRE. PAGE 6 OF 21 NOT CHARGE INSTITUTIONS FOR HOLDING THEIR PROGRAMMES SU CH AS LECTURES, DISCUSSIONS OR SEMINARS ETC. ADMITTEDLY THERE IS NO FUNDING FROM GOVERNMENT OR ANY OTHER OUTSIDE BODIES TO SUSTAIN ACTIVITIES OF PROMOTION OF CULTURAL A ND INTELLECTUAL ACTIVITIES AND, THEREFORE, THE ASSESSEE HAD TO BE TOTALLY SELF SUPPORTING AND SELF FINANCING AND FOR THIS PURPOSE, IN ORDER TO ACHIEVE ITS MAIN OBJECTIVE, IT HAD TO CH ARGE AND EARN RECEIPTS FROM MEMBERS SO THAT THE ACTIVITIES COULD BE CARRIED OUT. ADMIT TEDLY, THE ASSESSEE IS DISSEMINATING KNOWLEDGE TO GENERAL PUBLIC ON SUBJECTS RANG ING FROM ART, DANCE, URBAN DEVELOPMENT MEANS ETC. THROUGH CONFERENCES, LECTURES ETC. IT WAS FU RTHER POINTED OUT BEFORE AO THAT EVEN WHILE CHARGING THE MEMBERS, THERE WAS NO COMMERCIAL MOTIVE IN FIXING THE RATES. THE RATES WERE NOWHERE NEAR THE COMMERCIAL RATES AND WERE GENERALLY FIXED TO RECOVER THE COST AND COST OF ACTIVITIES TO RU N THE CENTRE. THESE ACTIVITIES COULD NOT BE TREATED IN THE NATURE OF TRADE OR CO MMERCE. 6.13 AS REGARDS HOSTEL ACCOMMODATION, THERE WERE NUMBER OF ROOMS AND GUIDELINES FOR HIRING OF THE ACCOMMODATION AND ALSO THER E WERE RESTRICTIONS. IT WAS ALSO POINTED OUT THAT, AS COULD BE SEEN FROM THE LIST OF PROGRAMMES, THE ASSESSEE CONDUCTED VERY LARGE NUMBER OF PROGRAMMES DURING THE YEAR WHICH COVERED DISCUSSIONS, MUSIC, DANCES, EXHIBITIONS AND ALSO CERTAIN S PECIAL PROGRAMMES SUCH AS FESTIVALS DURING THE COURSE OF THE YEAR. THESE PROGRAMMES WERE P UBLISHED THROUGH THE NEWSPAPERS AND WEBSITE. FURTHER E-MAILS WERE SENT TO MEMBERS AS WELL AS NON- MEMBERS. PERIODICAL ARTICLES ALSO APPEARED IN THE VARIOUS NE WSPAPERS HIGHLIGHTING SOME OF THE SPECIAL PROGRAMMES CONDUCTED BY THE CENTRE. WE ARE ENCLOSING HEREWITH A COPY OF ORDER OF HONBL E ITAT FOR YOUR HONOURS PERUSAL AND RECORD FROM WHERE IT WOULD BE NOTED OF THE ALLEGATI ONS AS WERE MADE B Y THE CIT AT THE FIRST PLACE WHILE ORDERING AN ACTION U/S 263 OF THE INCOM E TAX ACT AND THE SIMILAR OBJECTIONS MADE BY THE AO IN THE ASSESSMENT ORDER BEFORE YOUR HONOUR HAVE BEEN DULY MET AND SET ASIDE BY THE HONBLE ITAT. THE ISSUES INVOLVED ARE THUS FULLY COVERED IN FAVOUR OF ASSESSEE AND RELIEF IS PRAYED ON THIS BASIS ONLY. THE OBSERVATIONS OF THE AO THAT IT IS ONLY DURING T HE COURSE OF ASSESSMENT PROCEEDINGS THAT THE ASSESSEE SUBMITTED ABOUT REST OF INCOME HAVING BEEN EXCLUDED ON THE PRINCIPLE OF MUTUALITY, IT IS RESPECTFULLY SUBMITTED, IS FACTUAL LY INCORRECT. IT WOULD ALSO BE EVIDENT WHEN EXAMINED FORM NO.10 UNDER RULE 17 DULY FILED WITH T HE AO HAVING JURISDICTION OVER THE CASE WHEREIN WHILE EXERCISING THE OPTION U/S 11(2), A DE TAILED NOTE HAS BEEN GIVEN, AS NOTE NO.2, AS UNDER: - 2. THE CENTRE CLAIMS THAT ADMISSION FEE, SUBSCRIPTION, INCOME FROM HOSTEL ROOMS, FOOD AND BEVERAGES SALE BEING FROM MEMBERS OF THE CENTRE , THE SAME ARE EXEMPT FROM TAX UNDER PRINCIPLES OF MUTUALITY-AND THEREFORE INCOME AND EX PENSES IN RESPECT THEREOF HAVE NOT BEEN INCLUDED IN THE ABOVE. 7) THEREFORE, THE ALLEGATION MADE IN THE ASSESSMENT O RDER THAT SUCH INFORMATION CAME TO BE KNOWN DURING THE COURSE OF ASSESSMENT PROCEED INGS ONLY HAS TO BE REJECTED AS INCORRECT LOOKING TO THE PAST ASSESSMENT ORDERS FOR EARLIER YEARS AS WELL AS FORM 10 BEING A DECLARATION U/S. 11(2) OF THE I.T. ACT FILED WITH T HE AO BEFORE FILING OF THE RETURN. THUS, THE WHOLE BASIS OF MAKING ASSESSMENT IS ON MIS-APPRECIA TION OF CORRECT FACTS; AND THEREFORE, THE ITA NO.- 5191/DEL/2016 INDIA INTERNATIONAL CENTRE. PAGE 7 OF 21 FINAL CONCLUSION DRAWN BASED ON SUCH INCORRECT OBSE RVATION IS CLAIMED AS EQUALLY INCORRECT. 8) THE OTHER MAIN CONTENTION OF THE AO IS REGARDING A PPLICABILITY OF THE FIRST AND SECOND PROVISOS TO SECTION 2(15) OF THE I.T. ACT, W HICH HAVE BEEN INSERTED ON THE STATUTE BOOK W.E.F. 1.4.2008. IT IS RESPECTFULLY SUBMITTED THAT VARIOUS AUTHORITIES HAVE TIME AND AGAIN REITERATED THAT SO LONG AS THE DOMINANT OBJECTS OF A SOCIETY REMAINS OF CHARITABLE NATURE AND ANY INCIDENTAL ACTIVITIES FOR A FEE TO FURTHER THE MAIN OBJECTS DO NOT FALL IN THE CATEGORY OF CARRYING OUT ANY TRADE, COMMERCE OR BUSINESS. SOME OF THE JUDGMENTS ARE GIVEN IN THE NEXT FEW PARAGRAPHS & ARE RELIED UPON. 9) THE ASSESSEE INSTITUTION ADMITTEDLY IS ENGAGED IN CULTURAL ACTIVITIES AND DURING THE YEAR UNDER CONSIDERATION, IT HAS CONTINUED TO CONDU CT SEMINARS, TALKS, DISCUSSIONS AND CULTURAL ACTIVITIES AS IN THE PAST. THE INSTITUTION HAS BEEN HELD TO BE ENGAGED IN PURSUING THE OBJECTS OF GENERAL PUBLIC UTILITY FALLING WITHIN TH E MEANING OF CHARITABLE PURPOSE CONTINUOUSLY FOR OVER FOUR DECADES. 10) THE FINANCE MINISTER DURING THE COURSE OF DISCUSSI ON ON THE INTRODUCTION OF FIRST PROVISO TO SECTION 2(15) INSERTED RETROSPECTIVELY W .E.F. 1 ST APRIL 2009 BY THE FINANCE BILL 2010 HAD GIVEN ASSURANCE ON THE FLOOR OF THE HOUSE THAT ORGANIZATIONS ENGAGED GENUINELY IN ADVANCEMENT OF OBJECTS OF GENERAL PUBLIC UTILITY WI LL NOT, IN ANY WAY, BE EFFECTED BY THE PROPOSED AMENDMENT. THE FINANCE MINISTER FURTHER WE NT ON TO EXPLAIN THAT ORDINARILY CHAMBER OF COMMERCE AND SIMILAR ORGANIZATIONS RENDE RING SERVICES TO THE MEMBERS WILL NOT BE EFFECTED BY THE AMENDMENT AND THEIR ACTIVITIES W OULD CONTINUE TO BE REGARDED AS ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY . IN CONSONANCE WITH SUCH ASSURANCE BY THE FINANCE MINISTER ON THE FLOOR OF T HE HOUSE, THE CBDT ISSUED A CIRCULAR NO. 2008 DATED DECEMBER 19, 2008 TO THE EFFECT THAT ONLY WHERE THE ASSESSEE IS ENGAGED IN ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BU SINESS OR RENDER ANY SERVICES IN RELATION TO TRADE, COMMERCE OR BUSINESS WOULD NOT BE ENTITLE D TO CLAIM ITS OBJECT AS CHARITABLE. IT IS ONLY ORGANIZATIONS WHO ARE ADMITTEDLY ENGAGED IN RE GULAR TRADING IN THE GUISE OF CHARITABLE ACTIVITY WILL HENCEFORTH NOT BE ELIGIBLE TO CLAIM E XEMPTION U/S.2(15). THERE IS NO DISPUTE THAT PREDOMINANT ACTIVITY OF THE ASSESSEE TO ENGAGE IN C ULTURAL AND INTELLECTUAL ACTIVITIES AND THE PROVISION OF FACILITIES TO THE MEMBERS AND THEIR GU ESTS WAS ALSO IS A SECONDARY ACTIVITY IN PURSUANCE OF THE MAIN ACTIVITY. VIDE ITS MEMORANDUM AND ARTICLES, THE ASSESSEE INSTITUTION IS PROHIBITED IN ENGAGING IN ANY ACTIVITY IN THE NA TURE OF TRADE, COMMERCE OR BUSINESS FOR PROFIT. THE DELHI HIGH COURT RECENTLY IN THE CASE O F INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA VS. DIRECTOR GENERAL OF INCOME-TAX (EXEMPTION ) [2013] 358 ITR 91, HAS HELD THAT THE PURPOSE OF FIRST PROVISO TO SECTION 2(15) IS NO T TO EXCLUDE ENTITIES WHICH ARE ESSENTIALLY FOR CHARITABLE PURPOSE, BUT ARE CONDUCTING SOME ACT IVITIES FOR A CONSIDERATION OR FEE, BUT TO EXCLUDE ORGANIZATIONS, WHICH ARE CARRYING OUT REGUL AR BUSINESS FROM THE SCOPE OF CHARITABLE PURPOSES. THE JURISDICTIONAL COURT WENT ON TO HOLD THAT REGISTRATION U/S,10(23C) COULD NOT BE DENIED AS THE FUNCTIONS PERFORMED BY THE INSTITU TION WERE THE GINNERY OF PUBLIC WORK AND NOT FOR PRIVATE GAIN OR PROFIT. ALSO SEE - GSI INDIA VS. DIRECTOR GENERAL OF INDIA (EXEMPTION) [20 13] 262 CTR 585 (DEL.); BUREAU OF INDIAN STANDARDS VS. DGIT (E) [2013] 358 ITR 78 (DEL.); DIRECTOR OF INCOME-TAX (E) V. SABARMATI ASHRAM GAU SHALA TRUST [2014] 362 ITR 539 (GUJ.) ITA NO.- 5191/DEL/2016 INDIA INTERNATIONAL CENTRE. PAGE 8 OF 21 11) THE MAIN CONTENTION OF THE AO IS THAT ACTIVITIES O F PROVIDING ACCOMMODATION AND CATERING FACILITIES TO MEMBERS CONSTITUTES TRADE, C OMMERCE OR BUSINESS. HOWEVER, THE ACTIVITIES OF PROVIDING ACCOMMODATION AND CATERING FACILITIES TO THE MEMBERS ARE ON NOPROFIT NO-LOSS BASIS, WHICH IS ONE OF THE OBJECTIVES OF TH E INSTITUTION. AS PER AUDITORS REPORT IN THE PRESCRIBED FORM, THESE ACTIVITIES ARE BASED ON PRIN CIPLE OF MUTUALITY WHICH IS BASED ON THE PRINCIPLE NO PERSON CAN MAKE PROFIT OUT OF HIMSELF. THERE IS NO DISPUTE THAT THESE ACTIVITIES DID NOT AMOUNT TO CARRYING ANY TRADE WITH A PROFIT MOTIVE. THERE IS NO TAINT OF COMMERCIALITY IN THESE ACTIVITIES. THERE IS ALSO NO DISPUTE THAT ALL PARTICIPANTS ARE CONTRIBUTORIES TO THE COMMON FUNDS AND IT IS NOT NECESSARY THAT ALL THE C ONTRIBUTORIES MUST BE PARTICIPANTS IN ITS MANAGEMENT. SEE CIT VS. ROYAL WESTERN INDIA TURF CL UB LTD., 24 12) ITR 551 (SC). THERE IS NO CASE THAT THE ASSESSEE IS DERIVING ANY PROFIT FROM THE NON- MEMBERS OR IS ENGAGED IN ACTIVITIES OF PROVIDING AC COMMODATION OR CATERING FACILITIES TO THE NON-MEMBERS OR THE CENTRE IS CARRYING ANY COMMERCIA L ACTIVITY. IN ANY CASE, ALL THESE ALLEGATIONS HAVE BEEN REJECT ED BY THE HONBLE ITAT IN THE ORDER FOR THE ASSESSMENT YEAR 2009-10, A COPY OF WHICH IS BEI NG FILED BEFORE YOUR HONOURS READY REFERENCE AND RECORD AND THEREFORE ASSESSING OFFICE RS CONTENTIONS ON THIS ISSUE HAVE ALREADY BEEN RENDERED GROUNDLESS, IT IS RESPECTFULL Y SUBMITTED. 13) THE CENTRE HAS BEEN APPROVED AS A FUND OR INSTITUT ION ESTABLISHED FOR CHARITABLE PURPOSES BY THE GOVT, OF INDIA, MINISTRY OF FINANCE , CENTRAL BOARD OF DIRECT TAXES, VIDE NOTIFICATION DATED 19 TH JANUARY 2007. THE VALIDITY OF THE GOVERNMENT NOTIF ICATION/APPROVAL GRANTING EXEMPTION TO THE CENTRE CANNOT BE CHALLENG ED BY THE REVENUE OFFICERS, ONLY THE GOVT, OF INDIA CAN RESTRICT THIS NOTIFICATION THAT TOO UPON CERTAIN CONDITION, IT IS RESPECTFULLY SUBMITTED. THE CENTRE AS HAVING BEEN ESTABLISHED FO R CHARITABLE PURPOSES, AS REGARDS THE OBJECTIVES OF THE FUND OR THE INSTITUTION AND ITS I MPORTANCE THROUGHOUT INDIA OR THROUGHOUT ANY STATE OR STATES AND THE FUND OR THE INSTITUTION IS ADMITTEDLY NOT ENGAGED IN ANY COMMERCIAL ACTIVITY, AS HELD BY THE AO IN THE ASSES SMENT ORDER ITSELF THAT THE CENTRE IS ENGAGED IN CULTURAL, EDUCATIONAL AND INTELLECTUAL A CTIVITIES AND HAS CONDUCTED DURING THE YEAR UNDER CONSIDERATION SEMINARS, TALKS, DISCUSSIO NS AND CULTURAL ACTIVITIES. 14) THE ACTIVITY OF PROVIDING ACCOMMODATION, FOOD AND BEVERAGES TO THE MEMBERS WAS ALSO COVERED BY THE PRINCIPLE OF MUTUALITY. EVEN OT HERWISE, THE INCOME IS EXEMPT U/S.L0(23C)(IV) OF THE I.T. ACT.. 15) THESE OBSERVATIONS, IT IS RESPECTFULLY SUBMITTED, ARE NOT LEGALLY TENABLE IN VIEW OF THE JUDGMENTS OF THE SUPREME COURT IN THE FOLLOWING CASES: - IN ADITANARS EDUCATIONAL INSTITUTIONS CASE, 224 ITR 3 10, THE APEX COURT WHILE DEALING WITH THE FACTUM OF EXEMPTION HAS HELD THUS: - THE LANGUAGE OF SECTION 10(22) OF THE ACT IS PLAIN AND CLEAR AND THE AVAILABILITY OF THE EXEMPTION SHOULD BE EVALUATED EACH YEAR TO FIND OUT WHETHER THE INSTITUTION EXISTED DURING THE RELEVANT YEAR SOLELY FOR EDUCATI ONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT. AFTER MEETING THE EXPENDITURE, IF ANY SURPLUS RESULTS INCIDENTALLY FROM THE ACTIVITY LAWFULLY CARRIED ON BY THE EDUCAT IONAL INSTITUTION, IT WILL NOT CEASE TO BE ONE EXISTING SOLELY FOR EDUCATIONAL PURPOSES, SINCE THE OBJECT IS NOT ONE TO ITA NO.- 5191/DEL/2016 INDIA INTERNATIONAL CENTRE. PAGE 9 OF 21 MAKE PROFIT. THE DECISIVE OR ACID TEST IS WHETHER, ON AN OVERALL VIEW OF THE MATTER, THE OBJECT IS TO MAKE PROFIT. IN AMERICAN HOTEL AND LODGING ASSOCIATION EDUCATIONAL INSTITUTE V. CBDT [2008] 301 ITR 86 (SC), THEIR LORDSHIPS HAVE LAID DOWN THE PRINCIPLE ON FO LLOWING TERMS: - IN ADDL. CIT V. SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION REPORTED IN [1980] 121 ITR 1 (SC), IT HAS BEEN HELD BY THIS COURT THAT THE TEST OF PREDOMINANT OBJECT OF THE ACTIVITY IS TO BE SEEN WHETHER IT EXISTS SOLELY FOR EDUCATION AND NOT TO EARN PROFIT. HOWEVER, THE PURPOSE WOULD NOT LOSE ITS CHARACTER M ERELY BECAUSE SOME PROFIT ARISES FROM THE ACTIVITY. THAT, IT IS NOT POSSIBLE TO CARRY ON EDUCATIONAL ACTIVITY IN SUCH A WAV THAT THE EXPENDITURE EXACTLY BALANCES TH E INCOME AND THERE IS NO RESULTANT PROFIT, FOR, TO ACHIEVE THIS, WOULD NOT O NLY BE DIFFICULT TO PRACTICAL REALIZATION BUT WOULD REFLECT UNSOUND PRINCIPLES OF MANAGEMENT. IN ORDER TO ASCERTAIN WHETHER THE INSTITUTE IS CARRIED ON WITH OBJECT OF MAKING PROFIT OR NOT IT IS DUTY OF THE PRESCRIBED AUTHORITY TO ASCERTAIN WHETH ER THE BALANCE OF INCOME IS APPLIED WHOLLY AND EXCLUSIVELY TO THE OBJECTS FOR W HICH THE APPLICANT IS ESTABLISHED. IN ST. LAWRENCE EDUCATIONAL SOCIETY (REGD.) V. CIT (2011) 197 TAXMAN 504/9 TAXMANN.COM 233 (DELHI) MERELY BECAUSE EDUCATIONAL INSTITUTIONS RUN BY ASS ESSEE-SOCIETY WERE GENERATING SURPLUS YEAR AFTER YEAR, IT COULD NOT BE A GROUND T O SAY THAT SAID EDUCATIONAL INSTITUTIONS EXISTED FOR PURPOSE OF PROFIT AND NOT FOR PURPOSE OF EDUCATION [ASSESSMENT YEAR 2009-10] 16) RECENTLY, THE HONBLE SUPREME COURT HAS REITERATED THESE PRINCIPLES IN THE CASE OF QUEEN EDUCATION SOCIETY VS. CIT, TS-119-SC-2015. THEREFORE, THE UNDERSTANDING OF THE AO ON THIS ASPECT IS TOTALLY ERRONEOUS AND NOT AS P ER PROVISIONS OF LAW. (A) THE HONBLE SUPREME COURT IN THE AFORESAID JUDGMENT IN PARA 8 WHILE RELYING UPON ITS EARLIER JUDGMENT IN THE CASE OF CIT VS. SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION, 121 ITR PAGE 1, ON THE INTERPRETATION OF THE DEFINITION OF CHARITA BLE PURPOSE U/S.2(15), HAS HELD AS UNDER: - '17. THE NEXT QUESTION THAT ARISES IS AS TO WHAT I S THE MEANING OF THE EXPRESSION 'ACTIVITY FOR PROFIT'. EVERY TRUST OR IN STITUTION MUST HAVE A PURPOSE FOR WHICH IT IS ESTABLISHED AND EVERY PURPO SE MUST FOR ITS ACCOMPLISHMENT INVOLVE THE CARRYING ON OF AN ACTIVI TY. THE ACTIVITY MUST, HOWEVER, BE FOR PROFIT IN ORDER TO ATTRACT THE EXCL USIONARY CLAUSE AND THE QUESTION THEREFORE IS WHEN CAN AN ACTIVITY BE SAID TO BE ONE, FOR PROFIT? THE ANSWER TO THE QUESTION OBVIOUSLY DEPENDS ON THE CORRECT CONNOTATION OF ITA NO.- 5191/DEL/2016 INDIA INTERNATIONAL CENTRE. PAGE 10 OF 21 THE PREPOSITION 'FOR'. THIS PREPOSITION HAS MANY SH ADES OF MEANING BUT WHEN USED WITH THE ACTIVE PARTICIPLE OF A VERB IT M EANS 'FOR THE PURPOSE OF AND CONNOTES THE END WITH REFERENCE TO WHICH SOMETH ING IS DONE. IT IS NOT THEREFORE ENOUGH THAT AS A MATTER OF FACT AN ACTIVI TY RESULTS IN PROFIT BUT IT MUST BE CARRIED ON WITH THE OBJECT OF EARNING PROFI T. PROFIT-MAKING MUST BE THE END TO WHICH THE ACTIVITY MUST BE DIRECTED OR I N OTHER WORDS, THE PREDOMINANT OBJECT OF THE ACTIVITY MUST BE MAKING A PROFIT. WHERE AN ACTIVITY IS NOT PERVADED BY PROFIT MOTIVE BUT IS CA RRIED ON PRIMARILY FOR SERVING THE CHARITABLE PURPOSE, IT WOULD NOT BE COR RECT TO DESCRIBE IT AS AN ACTIVITY FOR PROFIT. BUT WHERE, ON THE OTHER HAND, AN ACTIVITY IS CARRIED ON WITH THE PREDOMINANT OBJECT OF EARNING PROFIT, IT W OULD BE AN ACTIVITY FOR PROFIT, THOUGH IT MAY BE CARRIED ON IN ADVANCEMENT OF THE CHARITABLE PURPOSE OF THE TRUST OR INSTITUTION. WHERE AN ACTIV ITY IS CARRIED ON AS A MATTER OF ADVANCEMENT OF THE CHARITABLE PURPOSE OR FOR THE PURPOSE OF CARRYING OUT THE CHARITABLE PURPOSE, IT WOULD NOT B E INCORRECT TO SAY AS A MATTER OF PLAIN ENGLISH GRAMMAR THAT THE CHARITABLE PURPOSE INVOLVES THE CARRYING ON OF SUCH ACTIVITY, BUT THE PREDOMINANT O BJECT OF SUCH ACTIVITY MUST BE TO SUBSERVE THE CHARITABLE PURPOSE AND NOT TO EARN PROFIT. THE CHARITABLE PURPOSE SHOULD NOT BE SUBMERGED BY THE P ROFIT MAKING MOTIVE: THE LATTER SHOULD NOT MASQUERADE UNDER THE GUISE OF THE FORMER. THE PURPOSE OF THE TRUST, AS POINTED OUT BY ONE OF US (PATHAK,J .) IN DHARMADEEPTI V. CIT [(1978) 3 SEC 499 : 1978 SEC (TAX) 193] MUST BE ''E SSENTIALLY CHARITABLE IN NATURE' ANDIT MUST NOT BE A COVER FOR CARRYING ON AN ACTIVITY WHICH HAS PROFIT MAKING AS ITS PREDOMINANT OBJECT. THIS INTE RPRETATION OF THE EXCLUSIONARY CLAUSE IN SECTION 2 CLAUSE (15) DERIVE S CONSIDERABLE SUPPORT FROM THE SPEECH MADE BY THE FINANCE MINISTER WHILE INTRODUCING THAT PROVISION. THE FINANCE MINISTER EXPLAINED THE REASO N FOR INTRODUCING THIS EXCLUSIONARY CLAUSE IN THE FOLLOWING WORDS: 'THE DEFINITION OF 'CHARITABLE PURPOSE' IN THAT CLA USE IS AT PRESENT SO WIDELY WORDED THAT IT CAN BE TAKEN ADVANTAGE OF EVEN BY CO MMERCIAL CONCERNS ITA NO.- 5191/DEL/2016 INDIA INTERNATIONAL CENTRE. PAGE 11 OF 21 WHICH, WHILE OSTENSIBLY SERVING A PUBLIC PURPOSE, G ET FULLY PAID FOR THE BENEFIT PROVIDED BY THEM NAMELY, THE NEWSPAPER INDU STRY WHICH WHILE RUNNING ITS CONCERN ON COMMERCIAL LINES CAN CLAIM THAT BY CIRCULATING NEWSPAPERS IT WAS IMPROVING THE GENERAL KNOWLEDGE O F THE PUBLIC. IN ORDER TO PREVENT THE MISUSE OF THIS DEFINITION IN SUCH CA SES, THE SELECT COMMITTEE FELT THAT THE WORDS 'NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT' SHOULD BE ADDED TO THE DEFINITION.' IT IS OBVIOUS THAT THE EXCLUSIONARY CLAUSE WAS ADDE D WITH A VIEW TO OVERCOMING THE DECISION OF THE PRIVY COUNCIL IN THE TRIBUNE CASE [AIR 1939 PC 208 : IN RE THE TRUSTEES OF THE TRIBUNE, (1939) 7 ITR 415] WHERE IT WAS HELD THAT THE OBJECT OF SUPPLYING THE COMMUNITY WIT H AN ORGAN OF EDUCATED PUBLIC OPINION BY PUBLICATION OF A NEWSPAPER WAS AN OBJECT OF GENERAL PUBLIC UTILITY AND HENCE CHARITABLE IN CHARACTER, E VEN THOUGH THE ACTIVITY OF PUBLICATION OF THE NEWSPAPER WAS CARRIED ON COMMERC IAL LINES WITH THE OBJECT OF EARNING PROFIT. THE PUBLICATION OF THE NE WSPAPER WAS AN ACTIVITY ENGAGED IN BY THE TRUST FOR THE PURPOSE OF CARRYING OUT ITS CHARITABLE PURPOSE AND ON THE FACTS IT WAS CLEARLY AN ACTIVITY WHICH HAD PROFIT MAKING AS ITS PREDOMINANT OBJECT, BUT EVEN SO IT WAS HELD BY THE JUDICIAL COMMITTEE THAT SINCE THE PURPOSE SERVED WAS AN OBJECT OF GENE RAL PUBLIC UTILITY, IT WAS A CHARITABLE PURPOSE. IT IS CLEAR FROM THE SPEECH O F THE FINANCE MINISTER THAT IT WAS WITH A VIEW TO SETTING AT NAUGHT THIS D ECISION THAT THE EXCLUSIONARY CLAUSE WAS ADDED IN THE DEFINITION OF 'CHARITABLE PURPOSE'. THE TEST WHICH HAS, THEREFORE, NOW TO BE APPLIED IS WHETHER THE PREDOMINANT OBJECT OF THE ACTIVITY INVOLVED IN CARRYING OUT THE OBJECT OF GENERAL PUBLIC UTILITY IS TO SUBSERVE THE CHARITABLE PURPOSE OR TO EARN PROFIT. WHERE PROFIT MAKING IS THE PREDOMINANT OBJECT OF THE ACTIVITY, T HE PURPOSE, THOUGH AN OBJECT OF GENERAL PUBLIC UTILITY, WOULD CEASE TO BE A CHARITABLE PURPOSE. BUT WHERE THE PREDOMINANT OBJECT OF THE ACTIVITY IS TO CARRY OUT THE CHARITABLE PURPOSE AND NOT TO EARN PROFIT, IT WOULD NOT LOSE I TS CHARACTER OF A CHARITABLE PURPOSE MERELY BECAUSE SOME PROFIT ARISE S FROM THE ACTIVITY. THE ITA NO.- 5191/DEL/2016 INDIA INTERNATIONAL CENTRE. PAGE 12 OF 21 EXCLUSIONARY CLAUSE DOES NOT REQUIRE THAT THE ACTIV ITY MUST BE CARRIED ON IN SUCH A MANNER THAT IT DOES NOT RESULT IN ANY PROFIT . IT WOULD INDEED BE DIFFICULT FOR PERSONS IN CHARGE OF A TRUST OR INSTI TUTION TO SO CARRY ON THE ACTIVITY THAT THE EXPENDITURE BALANCES THE INCOME A ND THERE IS NO RESULTING PROFIT. THAT WOULD NOT ONLY BE DIFFICULT OF PRACTIC AL REALISATION BUT WOULD ALSO REFLECT UNSOUND PRINCIPLE OF MANAGEMENT. WE, T HEREFORE, AGREE WITH BEG, J., WHEN HE SAID IN SOLE TRUSTEE, LOKA SHIKSHA NA TRUST CASE [(1976) 1 SCC 254 : 1976 SCC (TAX) 14 : (1975) 101 ITR 234] T HAT 'IF THE PROFITS MUST NECESSARILY FEED A CHARITABLE PURPOSE UNDER TH E TERMS OF THE TRUST, THE MERE FACT THAT THE ACTIVITIES OF THE TRUST YIELD PR OFIT WILL NOT ALTER THE 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 CHARI TY'. THE LEARNED JUDGE ALSO ADDED THAT THE RESTRICTIVE CONDITION 'THAT THE PURPOSE SHOULD NOT INVOLVE THE CARRYING ON OF ANY ACTIVITY FOR PROFIT WOULD BE SATISFIED IF PROFIT MAKING IS NOT THE REAL OBJECT' (EMPHASIS SUPPLIED). WE WHOLLY ENDORSE THESE OBSERVATIONS. (B) THE HONBLE SUPREME COURT WHILE EXPLAINING THE PROVISIONS OF SECTION 2(15), HAS IN THIS JUDGMENT THE OCCASION TO THE EX TENT OF GIVING AN EXAMPLE IN ITS JUDGMENT IN ORDER TO CLARIFY AS TO WHAT WOULD CONS TITUTE CHARITABLE PURPOSE U/S.2(15) OF THE I.T. ACT, AS UNDER:- THE APPLICATION OF THIS TEST MAY BE ILLUSTRATED BY TAKING A SIMPLE EXAMPLE. SUPPOSE THE GANDHI PEACE FOUNDATION WHICH HAS BEEN ESTABLI SHED FOR PROPAGATION OF GANDHIAN THOUGHT AND PHILOSOPHY, WHICH WOULD ADMIT TEDLY BE AN OBJECT OF GENERAL PUBLIC UTILITY, UNDERTAKES PUBLICATION OF A MONTHL Y JOURNAL FOR THE PURPOSE OF CARRYING OUT THIS CHARITABLE OBJECT AND CHARGES A SMALL PRICE WHICH IS MORE THAN THE COST OF THE PUBLICATION AND LEAVES A LITTLE PROFIT , WOULD IT DEPRIVE THE GANDHI PEACE FOUNDATION OF ITS CHARITABLE CHARACTER? THE PRICIN G OF THE MONTHLY JOURNAL WOULD UNDOUBTEDLY BE MADE IN SUCH A MANNER THAT IT LEAVE S SOME PROFIT FOR THE GANDHI PEACE FOUNDATION, AS, INDEED, WOULD BE DONE BY ANY PRUDENT AND WISE MANAGEMENT, BUT THAT CANNOT HAVE THE EFFECT OF POLLUTING THE C HARITABLE CHARACTER OF THE PURPOSE, BECAUSE THE PREDOMINANT OBJECT OF THE ACTIVITY OF PUBLICATION OF THE MONTHLY JOURNAL WOULD BE TO CARRY OUT THE CHARITABLE PURPOSE BY PR OPAGATING GANDHIAN THOUGHT AND PHILOSOPHY AND NOT TO MAKE PROFIT OR IN OTHER WORD S, PROFIT MAKING WOULD NOT BE THE DRIVING FORCE BEHIND THIS ACTIVITY. BUT IT IS POSS IBLE THAT IN A GIVEN CASE THE DEGREE OR EXTENT OF PROFIT MAKING MAY BE OF SUCH A NATURE AS TO REASONABLY LEAD TO THE ITA NO.- 5191/DEL/2016 INDIA INTERNATIONAL CENTRE. PAGE 13 OF 21 INFERENCE THAT THE REAL OBJECT OF THE ACTIVITY IS PROFIT MAKING AND NOT SERVING THE CHARITABLE PURPOSE. IF, FOR EXAMPLE, IN THE ILLUSTR ATION GIVEN BY US, IT IS FOUND THAT THE PUBLICATION OF THE MONTHLY JOURNAL IS CARRIED ON WH OLLY ON COMMERCIAL LINES AND THE PRICING OF THE MONTHLY JOURNAL IS MADE ON THE SAME BASIS ON WHICH IT WOULD BE MADE BY A COMMERCIAL ORGANISATION LEAVING A LARGE MARGIN OF PROFIT, IT MIGHT BE DIFFICULT TO RESIST THE INFERENCE THAT THE ACTIVITY OF PUBLICATI ON OF THE JOURNAL IS CARRIED ON FOR PROFIT AND THE PURPOSE IS NON-CHARITABLE. WE MAY TA KE BY WAY OF ILLUSTRATION ANOTHER EXAMPLE GIVEN BY KRISHNA IYER, J., IN T H E INDIAN CHAMBER O F COMMERCE CAST [(1976) 1 SEC 324 : 1976 SEC (TAX) 41 : (1975) 101 ITR 796] WHERE A BLOOD BANK COLLECTS BLOOD ON PAYMENT AND SUPPLIES BLOOD FOR A HIGHER PRICE ON COMMERCIAL BASIS. UNDOUBTEDLY, IN SUCH A CASE, THE BLOOD BANK WOULD BE SERVING AN OBJECT OF GENERAL PUBLIC UTILITY BUT SINCE IT ADVANCES THE CH ARITABLE OBJECT BY SALE OF BLOOD AS AN ACTIVITY CARRIED ON WITH THE OBJECT OF MAKING PR OFIT, IT WOULD BE DIFFICULT TO CALL ITS PURPOSE CHARITABLE. ORDINARILY THERE SHOULD BE NO D IFFICULTY IN DETERMINING WHETHER THE PREDOMINANT OBJECT OF AN ACTIVITY IS ADVANCEMEN T OF A CHARITABLE PURPOSE OR PROFIT MAKING. BUT CASES ARE BOUND TO ARISE IN PRAC TICE WHICH MAY BE ON THE BORDERLINE AND IN SUCH CASES THE SOLUTION OF THE PR OBLEM WHETHER THE PURPOSE IS CHARITABLE OR NOT MAY INVOLVE MUCH REFINEMENT AND P RESENT READ DIFFICULTY. (C) AGAIN, THE HONBLE SUPREME COURT ISSUED A WORLD OF CAUTION AS TO WHAT WOULD CONSTITUTE CHARITABLE OBJECTS AND WHAT IS THE DIFFE RENCE BETWEEN CARRYING ON A TRADE, COMMERCE OR BUSINESS. IT HAS BEEN CLARIFIED THAT IF THERE ARE NO RESTRICTIONS ON MAKING OF PROFIT, THE COURT WOULD BE WELL JUSTIF IED IN ASSUMING THAT THE TRUST INVOLVED IN CARRYING ON OF ACTIVITY OF PROFIT. HOWE VER, IF THERE ARE EXPRESS RESTRICTIONS ON THE MAKING OF PROFIT, THEN THE COUR T WOULD NOT BE JUSTIFIED IN DRAWING ANY SUCH INFERENCE MERELY BECAUSE THE ACTIV ITY RESULTS IN PROFITS. (D) FURTHER, THE HONBLE SUPREME COURT IN ITS LATEST J UDGEMENT RELYING UPON THE JUDGEMENT IN THE CASE OF AIDTANAR EDUCATIONAL INSTI TUTION VS. ADDITIONAL COMMISSIONER OF INCOME-TAX, 224 ITR 310, HAS REITER ATED ITS EARLIER PRINCIPLES AS TO HOW IN A PRACTICAL WAY THE ACTIVITIES OF A CHARI TABLE ASSOCIATION CAN ALSO RESULT INTO SOME SURPLUS AND THAT BY ITSELF DOES NOT MEAN THAT THE ORGANIZATION IS EXISTING FOR THE PURPOSE OF MAKING PROFIT, AS OBSER VED IN PARA 9 AS UNDER: - 'THE HIGH COURT HAS MADE AN OBSERVATION THAT ANY IN COME WHICH HAS A DIRECT RELATION OR INCIDENTAL TO THE RUNNING OF THE INSTIT UTION AS SUCH WOULD QUALIFY FOR EXEMPTION. WE MAY STATE THAT THE LANGUAGE OF SECTIO N 10(22) OF THE ACT IS PLAIN AND CLEAR AND THE AVAILABILITY OF THE EXEMPTION SHO ULD BE EVALUATED EACH YEAR TO FIND OUT WHETHER THE INSTITUTION EXISTED DURING THE RELEVANT YEAR SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR THE PURPOSES OF PR OFIT. AFTER MEETING THE EXPENDITURE, IF ANY SURPLUS RESULTS INCIDENTALLY FR OM THE ACTIVITY LAWFULLY CARRIED ON BY THE EDUCATIONAL INSTITUTION, IT WILL NOT CEAS E TO BE ONE EXISTING SOLELY FOR EDUCATIONAL PURPOSES SINCE THE OBJECT IS NOT ONE TO MAKE PROFIT. THE DECISIVE OR ACID TEST IS WHETHER ON AN OVERALL VIEW OF THE MATT ER, THE OBJECT IS TO MAKE PROFIT. IN EVALUATING OR APPRAISING THE ABOVE, ONE SHOULD A LSO BEAR IN MIND THE DISTINCTION/DIFFERENCE BETWEEN THE CORPUS, THE OBJE CTS AND THE POWERS OF THE CONCERNED ENTITY.' ITA NO.- 5191/DEL/2016 INDIA INTERNATIONAL CENTRE. PAGE 14 OF 21 17) EVEN AFTER INSERTION OF PROVISO TO SECTION 2(15) O F THE I.T. ACT, VARIOUS COURTS HAVE HELD THAT MERELY CHARGING A FEE FOR SOME OF THE ACT IVITIES, WHICH MAY RESULT IN SURPLUS DOES NOT IPSO-FACTO MEANS THAT THE ACTIVITIES OF THE SOC IETY ARE COMMERCIAL IN NATURE. THE TRADE OR COMMERCE IN THE NORMAL COURSE IS DIFFERENT THAN WHA T IS REQUIRED U/S. 2(15) OF THE I.T. ACT. FOLLOWING JUDGMENTS ARE RELEVANT FOR THIS PROPOSITI ON - (I) ICAI VS. DGIT(EXEMPTIONS), 347 ITR 99 (DEL); (II) DIT(EXEMPTIONS) VS. C.A. STUDY CIRCLE, 347 ITR 321 (MAD.); (III) TOLANI EDUCATION SOCIETY VS. DIT(EXEMPTIONS), (201 3) 259 CTR (BOM.) 26 (IV) BUREAU OF INDIAN STANDARDS V. DGIT (EXEMPTION), 358 ITR 78 (DEL.); (V) ICAI V. DGIT (EXEMPTIONS), 358 ITR 91 (DEL.) (VI) DIT (EXEMPTION) V. SABARMATI ASHRAM, 362 ITR 539 (G UJ.) (VII) COUNCIL FOR THE INDIAN SCHOOL CERTIFICATE EXAMINATI ONS V. DGIT, 2014- TIOL- 855-HC-DEL-IT 18) FROM THE BALANCE SHEET BEING FILED BEFORE YOUR HON OUR, IT WOULD BE SEEN THAT THE GROSS RECEIPTS OF THE ASSESSEE SOCIETY FOR THE YEAR ENDED 31 ST MARCH, 2012 IS RS.3,603.68 LAKHS WHICH INCLUDES INTEREST AND DIVIDEND INCOME O F RS. 604.01 LAKHS. AS AGAINST THIS, THE TOTAL EXPENDITURE IS RS.3,300.09 LAKHS. THE OVERALL SURPLUS, AS ALSO STATED BY THE AO IS RS.303.59 LAKHS. THEREFORE, NO ACTIVITY WHATSOEVER OF THE SOCIETY CAN BE SAID OR ALLEGED TO BE GENERATING ANY SURPLUS. THE SURPLUS, IF ANY, HAS RESULTED ONLY BECAUSE OF INTEREST INCOME BEING EARNED BY THE SOCIETY ON THE ACCUMULATED FUND S OF EARLIER YEARS. THEREFORE, THE ALLEGATION OF THE DIT (E) IN THE ORDER U/S. 143(3) THAT ASSESSEE SOCIETY IS GENERATING SURPLUS BY CARRYING OUT COMMERCIAL ACTIVITIES HAS TO BE DIS MISSED, AS FACTUALLY INCORRECT AND BASED ON CONJECTURES AND SURMISES. 19) IT IS FURTHER SUBMITTED THAT IT IS PREDOMINANT PUR POSES WHICH REALLY MATTER IN THE CASE OF THE SOCIETY. SO LONG AS THE PREDOMINANT PUR POSE OR OBJECTIVE OF THE SOCIETY IS NOT TO EARN PROFIT, THE SAME IS LIABLE TO BE TREATED AS CH ARITABLE AS HAS BEEN HELD IN THE CASE OF PHD CHAMBER OF COMMERCE & INDUSTRY V. DIT (DELHI)357 ITR 296 (DEL.). 20) RECENT JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF INDIA TRADE PROMOTION ORGANIZATION V . D.G. OF INCOME TAX (EXEMPTIONS) AND OTHERS IS DIRECTLY ON THIS ISSUE AND IN FACT MAKES THE ORDER OF LD. DIT (EXEMP TION) AS OF NO CONSEQUENCE. THE HONBLE DELHI HIGH COURT WHILE UPHOLDING THE CONSTITUTIONAL VALIDITY OF THE FIRST PROVISO TO SECTION 2(15) INTRODUCED W.E.F. 01.04.2009 HAS HELD THAT EV EN AFTER INSERTION OF FIRST PROVISO TO SECTION 2(15), WHAT IS REQUIRED TO BE SEEN IS THAT IT IS THE DOMINANT AND MAIN OBJECT THAT IS PREDOMINANT. SO LONG AS PROFIT MAKING IS NOT THE DR IVING FORCE AND OBJECTIVE OF THE ASSESSEE, THEN MERELY CHARGING SOME FEE FOR SOME OF THE ACTIV ITIES DOES 21) NOT PUT IT IN-THE CATEGORY OF NON-CHARITABLE ENTIT Y IN RESPECT OF THE OBJECTS FALLING IN THE- CATEGORY OF ADVANCEMENT OF ANY OTHER OBJECT O F GENERAL PUBLIC UTILITY21 A COPY OF THIS JUDGEMENT DATED 22.01.2015 IS ENCLOSED: 20R5-TIOL-2 27-HC-DE!HI-IT. (A) THE HONBLE DELHI HIGH COURT IN THE AFORESAID J UDGEMENT AFTER CAREFULLY ANALYZING THE DEFINITION OFCHARITABLE OBJECTS U/S.2(15) READ WI TH ITS FIRST PROVISO INTRODUCED BY FINANCE ACT, 2008 W.E.F. 1.4.2009 AS ALSO THE DEFINITION OF TRADE, COMMERCE AND BUSINESS AS HAS ITA NO.- 5191/DEL/2016 INDIA INTERNATIONAL CENTRE. PAGE 15 OF 21 BEEN LAID DOWN BY VARIOUS COURTS INCLUDING THE APEX COURT HAS IN THE FINAL ANALYSIS HELD AS UNDER: - 58. IN CONCLUSION, WE MAY SAY THAT THE EXPRESSION 'CHARITABLE PURPOSE', AS DEFINED IN SECTION 2(15) CANNOT BE CONSTRUED LITERALLY AND IN ABSOLUTE TERMS. IT HAS TO TAKE COLOUR AND BE CONSIDERED IN THE CONTEXT OF SECTION 10(23C)(IV) OF THE SAID ACT. IT IS ALSO CLEAR THAT IF THE LITERAL INTERPRETATION IS GIVEN TO THE PROVISO TO S ECTION 2(15) OF THE SAID ACT, THEN THE PROVISO WOULD BE AT RISK OF RUNNING FOWL OF THE PRINCIPLE O F EQUALITY ENSHRINED IN ARTICLE 14 OF THE CONSTITUTION INDIA. IN ORDER TO SAVE THE CONSTITUTI ONAL VALIDITY OF THE PROVISO, THE SAME WOULD HAVE TO BE READ DOWN AND INTERPRETED IN THE C ONTEXT OF SECTION 10(23C)(IV) BECAUSE, IN OUR VIEW, THE CONTEXT REQUIRES SUCH AN INTERPRET ATION. THE CORRECT INTERPRETATION OF THE PROVISO TO SECTION 2(15) OF THE SAID ACT WOULD BE T HAT IT CARVES OUT AN EXCEPTION FROM THE CHARITABLE PURPOSE OF ADVANCEMENT OF ANY OTHER OBJE CT OF GENERAL PUBLIC UTILITY AND THAT EXCEPTION IS LIMITED TO 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. IN BOTH THE ACTIVITIES, IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR THE ACTIVITY OF RENDERING ANY SERVICE IN RELATIO N TO ANY TRADE, COMMERCE OR BUSINESS, THE DOMINANT AND THE PRIME OBJECTIVE HAS TO BE SEEN. IF THE DOMINANT AND PRIME OBJECTIVE OF THE INSTITUTION, WHICH CLAIMS TO HAVE BEEN ESTABLISHED FOR CHARITABLE PURPOSES, IS PROFIT MAKING, WHETHER ITS ACTIVITIES ARE DIRECTLY IN THE NATURE O F TRADE, COMMERCE OR BUSINESS OR INDIRECTLY IN THE RENDERING OF ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, THEN IT WOULD NOT BE ENTITLED TO CLAIM ITS OBJECT TO BE A 'CHARIT ABLE PURPOSE'. ON THE FLIP SIDE, WHERE AN INSTITUTION IS NOT DRIVEN PRIMARILY BY A DESIRE OR MOTIVE TO EARN PROFITS, BUT TO DO CHARITY THROUGH THE ADVANCEMENT OF AN OBJECT OF GENERAL PUB LIC UTILITY, IT CANNOT BUT BE REGARDED AS AN INSTITUTION ESTABLISHED FOR CHARITABLE PURPOSES. (B) THEREFORE, WHEN THE LATEST THINKING OF THE COURTS O N THE FIRST PROVISO U/S.2(15) OF THE I.T. ACT IS SEEN, IT WOULD BE NOTED THAT THE COURTS ARE HOLDING THAT THE FIRST PROVISO CANNOT TAKE AWAY THE CHARITABLE CHARACTER OF AN INSTITUTIO N SO LONG AS THE DOMINANT OBJECT AND THE PRIME MOTIVE IS TO CARRY ON CHARITABLE ACTIVITY AND THERE IS NO PROFIT MOTIVE INVOLVED IN CHARGING SOME FEE FOR THE SERVICES RENDERED BY IT. (C) WHEN THESE JUDGMENTS ARE SEEN WITH REFERENCE TO ASS ESSEE TRUST, THEN IT IS RESPECTFULLY SUBMITTED THAT WHOLE OF THE RECEIPTS O F THE ASSESSEE TRUST ARE LIABLE TO BE TREATED AS EXEMPT AND NOT INCLUDABLE IN THE TOTAL INCOME IR RESPECTIVE OF THE FACT WHETHER THEY HAVE BEEN CLAIMED AS EXEMPT U/S,10(23C)(IV) OR ON THE PR INCIPLES OF MUTUALITY. SO LONG AS THE TRUST REMAINS NOTIFIED U/S.10(23C)(IV) AS A CHARITA BLE SOCIETY, WHOLE OF ITS INCOME FROM WHATEVER ACTIVITIES HAS TO BE TREATED AS EXEMPT, AS HAVING BEEN ARISEN OUT OF CHARITABLE OBJECTS AND NOT DRIVEN BY THE PROFIT MOTIVE. WE HAV E ALREADY CLARIFIED IN OUR SUBMISSIONS ABOVE THAT, IN ANY CASE, NONE OF THE ACTIVITIES OF THE ASSESSEE TRUST ARE RESULTING IN ANY PROFIT OR ARE DRIVEN BY PROFIT MOTIVE AND THE SURPLUS, IF ANY, DURING THE YEAR ARISES MAINLY OUT OF INTEREST INCOME, WHICH HAS BEEN EARNED FROM THE PAS T ACCUMULATIONS AS PER PROVISIONS OF LAW. (D) ANOTHER FACT THAT NEEDS TO BE CLARIFIED IS THAT PRI OR TO INTRODUCTION OF FIRST PROVISO, THE ASSESSEE HAS ALWAYS BEEN REGARDED AND TREATED AS A CHARITABLE ORGANIZATION AND THE PROBLEM APPEARS TO HAVE ARISEN ONLY BECAUSE OF INTR ODUCTION OF FIRST PROVISO TO SECTION ITA NO.- 5191/DEL/2016 INDIA INTERNATIONAL CENTRE. PAGE 16 OF 21 2(15), AS WERE THE FACTS IN THE CASE OF INDIA TRADE PROMOTION ORGANIZATION AND THE HONBLE DELHI HIGH COURT HAS INTERPRETED THE FIRST PROVISO TO SECTION 2(15) TO CONVEY THAT IT IS A DOMINANT OBJECT, WHICH REALLY MATTER AND MERELY CHA RGING FEE FOR SOME ACTIVITIES DOES NOT IPSO FACTO LEAD TO A CONCLUSION THAT THE ORGANIZATI ON IS EXISTING FOR THE PURPOSE OF MAKING PROFITS. 22) THE FOLLOWING FACTS ARE UNDISPUTED: - A) REGISTRATION OF THE ASSESSEE U/S 12A(A) OF THE INC OME TAX ACT SINCE 18 TH JUNE, 1973. B) CONTINUOUS GRANT OF APPROVAL U/S 80G(5)(VI) OF THE INCOME TAX FOR THE LAST MANY YEARS. STILL VALID. C) CONTINUOUS REGISTRATION OF ASSESSEE AS A NOTIFIED INSTITUTION U/S 10(23C)(IV) OF THE INCOME TAX ACT FOR THE LAST MANY YEARS. STILL VALI D. D) EXAMINATION OF THE NATURE OF ACTIVITIES OF THE AS SESSEE- WITH REFERENCE TO RECENT AMENDMENTS U/S. 2(15) OF THE I.T. ACT. E) EXAMINATION OF BOOKS OF ACCOUNTS OF THE ASSESSEE. F) ALL PAST ASSESSMENTS ARE COMPLETED ALLOWING EXEMPT ION U/S. 11, 12 AND 10(23C)(IV) OF THE I.T. ACT. ALTHOUGH ASSESSMENTS FOR TWO ASSES SMENT YEARS I.E. A.Y. 2009-10 AND AY 2010-11 HAVE NOW BEEN SET-ASIDE U/S.263 OF THE I .T. ACT. AS ALREADY CLARIFIED, THE ACTION OF THE DCIT U/S 263 FOR THE ASSESSMENT YEAR 2009-10 HAS ALREADY BEEN SET ASIDE BY THE HONBLE ITAT AND IT HAS BEEN CATEGORIC ALLY HELD THAT THE CENTRE REMAINS A CHARITABLE INSTITUTION AND IS ELIGIBLE FO R THE BENEFITS U/S 11, 12 AND 10(23C)(IV) OF THE INCOME TAX ACT. THEREFORE, THE I SSUE AND ALL THE FACTS INVOLVED IN THIS APPEAL ARE IDENTICAL WITH IDENTICAL OBSERVATIO NS/ALLEGATIONS OF THE ASSESSING OFFICER ARE FULLY COVERED IN FAVOUR OF THE ASSESSEE FROM ALL CORNERS OF THE CASE. THERE IS NO SCOPE OF MAKING DIFFERENT INTERPRETATIO N OF THE PROVISIONS OF SECTION 11, 12 AND 20(23C)(IV), 2(15) OF THE INCOME TAX ACT, IT IS RESPECTFULLY SUBMITTED. THE ASSESSEE INSTITUTION HAS BEEN IN EXISTENCE FO R MORE THAN 5 DECADES NOW AND IT IS CONTINUOUSLY BEEN ASSESSED FOR MANY YEARS AND IN AL L THE YEARS THE FACTS HAVE BEEN EXAMINED IN DETAIL AND ASSESSEE HAS BEEN ALLOWED EXEMPTION U /S 11 AND 12 OF THE INCOME TAX ACT. THERE IS NEITHER ANY CHANGE IN LAW OR IN THE FACTS OR IN THE OBJECTIVES OF THE ASSESSEE OR IN THE ACTIVITIES OF THE TRUST TO TAKE A DIFFERENT VIE W OF THE MATTER AS HAS BEEN DONE BY THE DIRECTOR OF INCOME TAX (EXEMPTION). THE RULE OF CON SISTENCY STRICTLY IS IN FAVOUR OF THE ASSESSEE AS PER THE FOLLOWING JUDGMENTS: (I) DY. DIRECTOR OF INCOME TAX VS. SHANTI DEVI PROGRES SIVE EDUCATIONS SOCIETY [2012] 340 ITR 320 (DELHI). (II) EXCEL INDUSTRIES SC-2013-TIOL-52-SC-IT THE PRINCIPLE OF MUTUALITY IS VERY MUCH APPLICABLE ON THE FACTS OF THE ASSESSEES CASE AND THE SAME HAS ALSO-BEEN ACCEPTED IN THE PREVIOUS YEARS I N ASSESSEES OWN CASE. 23) ANOTHER IMPORTANT ASPECT THAT NEEDS TO BE HIGHLIGHT ED IS THAT WHILE OBTAINING THE APPROVAL U/S 10(23C)(IV) OF THE I.T. ACT, THE HONB LE CBDT HAD RAISED VARIOUS ISSUES INCLUDING THE ISSUE OF PROVIDING CATERING SERVICES ETC. THE ASSESSEE HAD FILED LETTERS DATED 18 TH SEPTEMBER 2006 AND AGAIN 12 TH DECEMBER 2006 AND HAD EXPLAINED THE ASSESSEES STA ND ITA NO.- 5191/DEL/2016 INDIA INTERNATIONAL CENTRE. PAGE 17 OF 21 AND THE ACTIVITIES BEING UNDERTAKEN BY THE ASSESSEE . ONLY ON BEING SATISFIED THAT THE DOMINANT OBJECT IS NOT TO CARRY ON TRADE, COMMERCE OR BUSINESS OF CATERING SERVICES, THE ASSESSEE WAS NOTIFIED U/S. 10(23C)(IV) OF THE I.T. ACT. WE ARE ENCLOSING HEREWITH COPIES OF CORRESPONDENCE BEING LETTER DATED 21 ST JULY 2006 AND 27 TH NOVEMBER 2006 ISSUED BY THE CBDT AS ALSO THE ASSESSEES COMPLIANCE VIDE LETTER DATED 18 TH SEPTEMBER 2006 AND 12 TH DECEMBER 2006, WHICH WOULD CLEARLY ESTABLISH THAT A PPROVAL HAS BEEN GRANTED BY THE CBDT ON BEING FULLY SATISFIED THAT THE ACTIVITIES OF THE ASSESSEE BEING UNDERTAKEN ARE IN CONSONANCE WITH THE OBJECTS OF THE ASSESSEE CENTRE. THEREFORE, THE ALLEGATIONS/ OBSERVATIONS BEING MADE NOW IN THE ASSESSMENT ORDER ARE NOT DIFFERENT THAN THOSE WHICH WERE MADE EVEN BY THE CBDT, BUT HOWEVER, NO ADVERSE INFERENCE WAS DRAWN B Y THE CBDT WHILE NOTIFYING THE ASSESSEE AS AN INSTITUTE ELIGIBLE FOR BENEFIT U/S. 10(23C)(IV) OF THE I.T. ACT. ON THIS COUNT ALSO, THE AOS OBSERVATIONS IN THE PRESENT ASSESSME NT ORDER ARE NOT PROPER; AND IN ANY CASE, CANNOT LEAD TO AN INFERENCE THAT ASSESSEES MAIN OB JECT IS TO CARRY ON ANY TRADE, COMMERCE OR BUSINESS, IT IS RESPECTFULLY SUBMITTED. THEREFORE, WHEN THE FACTS OF THE ASSESSEE ARE COMPA RED WITH VARIOUS JUDICIAL PRONOUNCEMENTS AS HAVE BEEN REFERRED TO IN THESE SU BMISSIONS, IT WOULD LEAD TO AN INEVITABLE CONCLUSION THAT THE ACTION OF THE AO IN HOLDING THA T ASSESSEE IS CARRYING OUT TRADE, COMMERCE OR BUSINESS ARE ERRONEOUS AND THE SAME ARE PRAYED TO BE QUASHED AND IT MAY PLEASE BE HELD THAT ASSESSEE REMAINS A CHARITABLE I NSTITUTION. THE FIRST AND SECOND PROVISOS TO SECTION 2(15) DO NOT EFFECT THE STATUS OF THE AS SESSEE OF A CHARITABLE INSTITUTION, IT IS RESPECTFULLY SUBMITTED. 5. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT ALONG WITH THE ORAL ARGUMENTS RAISED DURING THE HEARING OF THIS APPEAL. I AGREE WITH THE CONTENTIONS OF THE AUTHORIZED REPRESENTATIVE/APPELLANT THAT THE REASON ING GIVEN BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER IS IDENTICAL AS WAS IN THE ORDER M ADE BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 2009H0. THE ASSESSMENT ORDER FOR TH E ASSESSMENT YEAR 2009-10 WAS PASSED BASED ON THE DIRECTIONS ISSUED BY THE DIT (E XEMPTION) U/S 263 OF THE INCOME TAX ACT. THAT ORDER OF LD. DIT (EXEMPTION) HAS BEEN QUASHED BY THE HONBLE ITAT IN ITA NO. 3124/DEL/2014. THE FACTS AND THE CIRCUMSTANCES AND THE REASONS OF THE AO TO DENY THE EXEMPTION TO THE APPELLANT DURING THE YEAR ARE IDEN TICAL AND THERE IS NO DIFFERENCE IN THE FACTS OR IN THE LAW ON THE ISSUE INVOLVED IN THIS A PPEAL. THEREFORE, THERE IS NO REASON FOR ME TO TAKE A DIFFERENT VIEW OF THE MATTER, AS THE ISSU E HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE HONBLE ITAT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009-10. RESPECTFULLY FOLLOWING SAID JUDGMENT, I HOLD THAT A O WAS NOT JUSTIFIED IN DENYING THE EXEMPTION TO THE APPELLANT. I FURTHER NOTICE THAT MY PREDECESSOR HAS ALSO PASSE D ON ORDER IN APPEAL NO. 169/2014-15 FOR THE ASSESSMENT YEAR 2011-12, WHERE ALSO IDENTIC AL FACTS AND LEGAL ISSUES WERE INVOLVED BY FOLLOWING THE JUDGMENT OF HONBLE ITAT IN ASSESS EES OWN CASE FOR THE ASSESSMENT YEAR 2009-10. RELIEF HAS BEEN ALLOWED TO THE APPELLANT I N ASSESSMENT YEAR 2011-12 AS WELL ON IDENTICAL BASIS. A. RESPECTFULLY FOLLOWING THE ORDER OF MY PREDECESSOR FOR THE ASSESSMENT YEAR 2011- 12 AS ALSO ORDER OF THE HONBLE ITAT IN ITA NO. 312 4/DEL/2015 I HOLD THAT MISCHIEF OF THE PROVISO OF SECTION 2(15) OF THE INCOME TAX A CT IS NOT ATTRACTED ON THE FACTS OF ITA NO.- 5191/DEL/2016 INDIA INTERNATIONAL CENTRE. PAGE 18 OF 21 THE APPELLANT CASE. THE HONBLE ITAT HAS CATEGORICA LLY HELD IN ITS ORDER IN PARA 6.12 AND 6.13 THAT THE ASSESSEE WAS NOT ENGAGED IN ANY SORT OF COMMERCIAL ACTIVITIES AND ALL THE ACTIVITIES OF HOSTEL ACCOMMO DATION, PROVIDING OF FOOD, BEVERAGES ETC. WERE IN FURTHERANCE OF MAIN OBJECTS OF THE SOCIETY, WHICH REMAIN CHARITABLE AND THEREFORE THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN DENYING THE EXEMPTION TO THE SOCIETY. THEREFORE, THE ORDER PASSED BY THE AO IS HELD TO BE NON-MAINTAINABLE ON FACTS AND LAW AND AO IS DIRECTED TO ALLOW THE EXEMPTION U/S 1 1 AND 10(23C)(IV) OF THE INCOME TAX ACT ' WITH ALL THE CONSEQUENTIAL BENEFITS. (B.1) THE PRESENT APPEAL HAS BEEN FILED BY REVENUE IN INCOME TAX APPELLATE TRIBUNAL (ITAT, FOR SHORT) AGAINST THE AFORESAID IMPUGNED ORDER DATED 08.07.2016 OF LD. CIT(A). DURING THE APPELLATE PROCEEDINGS IN IT AT, A PAPER BOOK CONTAINING FOLLOWING PARTICULARS WAS FILED FROM ASSESSEES SID E: 1. COPY OF ORDER PASSED BY ITAT FOR A.Y. 2010-11 IN ITA NO. 3110/DEL/2015 DATED 14.01.2019 2. COPY OF ORDER PASSED BY HONBLE HIGH COURT FOR A Y 2011-12 IN ITA NO. 300/2018 DATED 14.03.2018 3. COPY OF ORDER PASSED BY HONBLE HIGH COURT FOR A Y 2011-12 IN ITA NO. 5228/DEL/2015 DATED 09.10.2017 4. COPY OF ORDER OF ITAT IN ITA NO. 3124/DEL/2014 FOR AY 2009-10 DATED 14.05.2015 (C) AT THE TIME OF HEARING BEFORE US, THE LEARNED C OUNSEL FOR ASSESSEE SUBMITTED THAT ALL THE ISSUES IN THE PRESENT APPEAL ARE SQUAR ELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDERS OF ITAT / HONBLE HIGH COURT IN ASSES SEES OWN CASE, IN IDENTICAL FACTS AND CIRCUMSTANCES; COPIES WHEREOF WERE FILED FROM ASS ESSEES SIDE IN THE AFORESAID PAPER BOOK. [WE HAVE ALREADY REFERRED TO THESE ORDERS IN THE FOREGOING PARAGRAPH (B.1) OF ITA NO.- 5191/DEL/2016 INDIA INTERNATIONAL CENTRE. PAGE 19 OF 21 THIS ORDER] FROM REVENUES SIDE, THE LEARNED DEPART MENTAL REPRESENTATIVE (LD. DR, FOR SHORT) AGREED WITH THE LD. COUNSEL FOR THE ASSE SSEE THAT ALL THE ISSUES IN THE PRESENT APPEAL ARE SQUARELY COVERED IN FAVOUR OF THE ASSESS EE BY THE AFORESAID ORDER OF ITAT/ HONBLE HIGH COURT IN ASSESSEES OWN CASE, IN IDENT ICAL FACTS AND CIRCUMSTANCES. HE ALSO DID NOT BRING OUT ANY DISTINGUISHING FACTS AND CIRCUMSTANCES TO OUR ATTENTION FOR THIS YEAR IN COMPARISON TO THE YEARS FOR WHICH THE AFORESAID ORDERS HAVE BEEN PASSED IN FAVOUR OF THE ASSESSEE. (C.1) WE HAVE HEARD BOTH SIDES. WE HAVE PERUSED TH E MATERIALS ON RECORD. WE HAVE CONSIDERED THE JUDICIAL PRECEDENTS REFERRED TO IN THE RECORDS, OR BROUGHT TO OUR ATTENTION AT THE TIME OF HEARING. BOTH SIDES ARE I N AGREEMENT THAT ALL THE DISPUTED ISSUES IN THIS APPEAL ARE COVERED IN FAVOUR OF THE ASSESSEE BY ORDERS OF ITAT / HONBLE HIGH COURT, IN ASSESSEES OWN CASE, IN IDENTICAL FA CTS AND CIRCUMSTANCES. ON PERUSAL OF GROUNDS 1 AND 2 IN THIS APPEAL, WE FURTHER FIND THA T THERE IS ALREADY AN ADMISSION FROM REVENUES SIDE THAT ITAT HAS DECIDED THESE ISSUES I N FAVOUR OF THE ASSESSEE IN EARLIER YEAR (THOUGH REVENUE HAS PREFERRED APPEAL IN HONBL E HIGH COURT). WE ARE FURTHER AWARE THAT THE ISSUE RAISED IN THIRD GROUND OF PRES ENT APPEAL IS COVERED IN FAVOUR OF THE ASSESSEE BY ORDER OF HONBLE SUPREME COURT IN THE C ASES OF CIT VS. RAJASTHAN & GUJARATI CHARITABLE FOUNDATION POONA [2018] 89 TAXM ANN.COM 127 (SC) / 402 ITR 441 (SC) AND BY ORDER OF HONBLE DELHI HIGH COURT IN TH E CASE OF DIT (EXEMPTION) VS. INDRAPRASTHA CANCER SOCIETY 229 TAXMAN 93 (DEL); AN D FURTHER, BY ORDER DATED 02.07.2018 IN ITA NO. 2555/DEL/2015 OF CO-ORDINATE BENCH OF ITAT, DELHI IN THE CASE ITA NO.- 5191/DEL/2016 INDIA INTERNATIONAL CENTRE. PAGE 20 OF 21 OF INDRAPRASTHA CANCER SOCIETY, FOR ASSESSMENT YEAR 2010-11. IN VIEW OF THE FOREGOING, AND RESPECTFULLY FOLLOWING THE AFORESAID PRECEDENTS, WE DECIDE THE DISPUTED ISSUES RAISED IN THIS APPEAL IN FAVOUR OF THE ASSES SEE; AND DISMISS ALL THE GROUNDS OF APPEAL IN THIS APPEAL FILED BY REVENUE. (D) IN THE RESULT, THIS APPEAL OF REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/9/2019 SD/- SD/- (AMIT SHUKLA) (ANADEE NATH MISSHRA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 13/9/2019 (POOJA) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI ITA NO.- 5191/DEL/2016 INDIA INTERNATIONAL CENTRE. PAGE 21 OF 21 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER