IP India Foundation, Hyderabad V. DIT (Exemptions), Hyderabad

ITA 739/HYD/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87267 (ITAT-HYDERABAD)
• Duration Of Justice: 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 19-01-2015
• Assessment Year: misc
• Appeal Filed On: 23-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G APARNA RAO
• Assessee Lawyers: SAMUEL NAGADESI
• Keywords: Business income; Charitable institution
• Section: 12; 11; 12AA

Judgement Text

ITA NO.739 OF 2014 IP INDIA FOUNDATION, HYDERABAD PAGE 1 OF 10 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SMT.ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.739/HYD/2014 (ASSESSMENT YEAR: NA) IP INDIA FOUNDATION HYDERABAD VS. DIRECTOR OF I NCOME TAX (EXEMPTIONS) HYDERABAD (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI SAMUEL NAGADESI, CA DEPARTMENT BY: SMT.G.APARNA RAO, (DR) DATE OF HEARING: 19/01/2015 DATE OF PRONOUNCEMENT: 30/01/2015 O R D E R PER SMT. ASHA VIJAYARAGHAVAN, J.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE DIRECTOIR OF INCOME TAX (EXEMPOTIONS) HYDERABAD DATED 28.02.2014 WITH REGARD TO REJECTION OF APPLICATION IN FORM 10A FOR REGISTRATION U/S 12AA OF THE I.T. ACT, 1961. 2. BRIEF FACTS OF THE CASE ARE THAT IP INDIA FOUNDA TION WAS INCORPORATED ON 20.06.2013 U/S 25 OF THE COMPANIES ACT, 1956. IT HAS FILED AN APPLICATION IN FORM NO.10A ON 01.08 .2013 SEEKING REGISTRATION U/S 12AA OF THE I.T. ACT, 1961. THE DI RECTOR OF INCOME TAX (EXEMPTION) HELD THAT FROM THE MEMORANDU M OF ASSOCIATION OF THE APPLICANT COMPANY, IT IS BEING N OTICED THAT ONE OF THE MAIN OBJECT OF THE COMPANY IS TO PROMOTE BUS INESS ACTIVITY. THE DIT (E) REFERRED TO OBJECT CLAUSE NO. 2, UNDER THE ITA NO.739 OF 2014 IP INDIA FOUNDATION, HYDERABAD PAGE 2 OF 10 MAIN OBJECTS TO BE PERUSED BY THE COMPANY AS MENTIO NED IN PART-A, READING AS FOLLOWS: TO PROMOTE ENVIRONMENTALLY AND SOCIALLY RESPONSIBL E BUSINESS PRACTICES BY ASSESSING AND MITIGATING THE ENVIRONMENTAL AND SOCIAL IMPACTS FOR SUSTAINABLE ECONOMIC GROWTH, TO ADDRESS.. 2.1 THE DIT (E) FURTHER OBSERVED THAT THE APPLICANT INTENDS TO ENGAGE BUSINESS PRACTICES FOR THE PURPOSE OF ECONOM IC GROWTH, WHICH DOES NOT COME UNDER THE PURVIEW OF CHARITABL E IN NATURE AS DEFINED U/S 2(15) OF THE ACT. THE DIT (E) IN THI S CONNECTION HELD AS FOLLOWS: 2.1..UNDER THE CIRCUMSTANCES AND WHEN ALL THE OBJECTS OF THE APPLICANT COMPANY ARE NOT CHARITABLE , IN MY VIEW, IT WILL NOT BE ELIGIBLE FOR REGISTRATION U /S 12AA OF THE ACT. FURTHER, IN THE SAID OBJECT CLAUSE WHICH IS DESCRIPTIVE IN NATURE, THERE IS ALSO REFER ENCE TO PROMOTING ENVIRONMENTAL SENSITIVITY OF THE EMPLOYEES OF THE COMPANY THROUGH CORPORATE SOCIAL RESPONSIBILITY ACTIVITIES. THE RELEVANT PART OF THA T OBJECT CLAUSE-2 IN THIS REGARD, IS REPRODUCED AS UNDER: . TO INCREASE THE ENVIRONMENTAL AND SOCIAL SENSIT IVITY OF EMPLOYEES AND OTHER STAKEHOLDERS THROUGH VARIOUS CO RPORATE SOCIAL RESPONSIBILITY ACTIVITIES BOTH DIRECTLY THRO UGH VOLUNTARY EMPLOYEE ENGAGEMENT PROGRAMMES.. 2.2 CARRYING ON ACTIVITIES UNDER CORPORATE SOCIAL RESPONSIBILITY PROGRAMME, MANDATED U/S 35 OF THE COMPANIES ACT, 2013, BY THE PARENT COMPANY INTERNATIONAL PAPER APPM LTD., IS ENTIRELY DIFFEREN T AS THE ACTIVITIES IN THAT REGARD ARE TO BE PERFORMED B Y THE SAID PARENT COMPANY. FUNDING FOR THE SAME ARE ALSO TO BE MADE BY THE SAID PARENT COMPANY. BRINGING AWARENESS ON ENVIRONMENTAL MATTER AND ON SOCIAL ISSUES OF THE EMPLOYEES OF THE COMPANY THROUGH SUCH ACTIVITY, CANNOT BE SAID TO BE OF CHARITABLE NATURE . 3. FROM THE INCIDENTAL OBJECTS OF THE ASSESSEE COMPANY, MENTIONED UNDER PART-B OF THE MOA, IT IS ITA NO.739 OF 2014 IP INDIA FOUNDATION, HYDERABAD PAGE 3 OF 10 NOTICED THAT THE ASSESSEE ALSO INTENDS TO LET OUT BUILDINGS, HOUSES AND INFRASTRUCTURAL FACILITY ETC. , TO DIFFERENT PERSONS. IN THIS CONTEXT, IT IS PERTINENT TO REFER TO THE OBJECT CLAUSE NO.3 UNDER THE OBJECTS INCIDEN TAL OR ANCILLARY AS MENTIONED IN THAT PARA, WHICH IS AS UNDER: TO CONSTRUCT OR LET OUT OR LEASE LOW-COST BUILDING S AND HOUSES OR ANY INFRASTRUCTURAL FACILITY FOR THE POOR, DISADVAN TAGED.. 3.1 SUCH ACTIVITY OF LETTING OUT HOUSES AND INFRASTRUCTURAL FACILITIES ETC., AS MAY BE NOTICED, DOES NOT COME UNDER THE PURVIEW OF CHARITABLE PURPOSE HAVING REGARD TO DEFINITION OF CHARITABLE PURPOSE A S CONTAINED IN SECTION 2(15) OF THE ACT. THOUGH, DURI NG THE PROCEEDINGS, IT WAS SUBMITTED THAT THESE ACTIVI TIES ARE MEANT FOR THE BENEFIT OF THE POOR, SUCH ACTIVIT Y OF LETTING OUT PROPERTIES BY THE COMPANY CANNOT BE SAI D TO BE CHARITABLE. THUS, UNDER THE CIRCUMSTANCES, WHEN THE ENTIRE OBJECTS IN THE CASE OF THE APPLICANT COM PANY ARE NOT CHARITABLE, IT WILL NOT BE ELIGIBLE FOR REG ISTRATION U/S 12AA OF THE ACT. 4. FURTHER, IT IS NOTICED THAT THE ABOVE COMPANY ALSO INTENDS TO ENGAGE IN LITIGATION IN DIFFERENT C OURTS OF LAW AGAINST DIFFERENT AUTHORITIES FOR DIFFERENT PURPOSES. THE OBJECT CLAUSE NO.11, IN THIS REGARD UNDER THE INCIDENTAL OBJECTS IN PART-B IS REPRODUCE D AS UNDER: TO CREATE AND PROMOTE ENLIGHTENED PUBLIC OPINION O N VARIOUS ISSUES AFFECTING THE CITIZENS OF INDIA AND IF NECES SARY TO TAKE UP, LITIGATIONS IN COMPETENT COURT OF LAW AND TAKE ANY OTHER LAWFUL MEASURES TO SAFEGUARD RIGHTS AND INTEREST OF ALL CI TIZEN. 4.1 FROM THE AFOREMENTIONED OBJECT, IT MAY BE NOTICED THAT THE APPLICANT COMPANY ALSO INTENDS TO FILE LITIGATION AGAINST DIFFERENT AUTHORITIES INCLUDING GOVERNMENT AUTHORITIES WHILE TAKING UP DIFFERENT ISSUES CONCERNING THE CITIZENS OF THE SOCIETY. IN T HE FACT OF SUCH AN OBJECT, WHICH IS NOT AT ALL CHARITABLE, IT MAY BE NOTICED THAT THE ENTIRE OBJECTS OF THE APPLICANT ITA NO.739 OF 2014 IP INDIA FOUNDATION, HYDERABAD PAGE 4 OF 10 COMPANY ARE NOT CHARITABLE AND HENCE UNDER THAT CIRCUMSTANCES, IT WILL NOT BE ELIGIBLE FOR REGISTRA TION U/S 12AA OF THE ACT. 4.2 FURTHER, THE OBJECT CLAUSES 1 & 18, UNDER THE INCIDENTAL OBJECTS MENTIONED UNDER PART-B OF THE MO A OF THE APPLICANT COMPANY ARE FOUND TO BE NOT OF CHARITABLE NATURE. THOSE CLAUSES ARE REPRODUCED AS UNDER: 1. TO CREATE AWARENESS ON VARIOUS SOCIAL, MORAL AND ECONOMIC ISSUES AFFECTING THE COUNTRY AND TO DIRECT THIS AWA RENESS TO DEVELOPING INNOVATIVE MEANS OF GENERATING RESOURCES FINANCIAL, MATERIAL AND PROFESSIONAL AND CHANNELIZE THESE RESO URCES THROUGH PEOPLE AND PROJECTS IN THE FIELD TOWARDS THE ATTAIN MENT OF THE MAIN OBJECTS. 18. TO ENTER INTO ANY ARRANGEMENT WITH THE GOVT. OR AUTHORITIES SUPREME, MUNICIPAL, LOCAL OR OTHERWISE THAT MAY SEE M CONDUCIVE TO THE COMPANYS OBJECT OR ANY OF THEM AND TO OBTAI N FROM ANY SUCH GOVT. OR AUTHORITY ANY RIGHTS, PRIVILEGES AND CONCESSIONS WHICH THE COMPANY MAY THINK IT DESIRABLE TO OBTAIN AND TO CARRY OUT, EXERCISE AND COMPLY WITH ANY SUCH ARRANGEMENT, RIGHTS, PRIVILEGES AND CONCESSIONS. 4.3 CREATING AWARENESS ON SOCIAL, MORAL AND ECONOMIC ISSUES ETC., CANNOT BE SAID TO BE CHARITAB LE HAVING REGARD TO THE MEANING OF CHARITABLE PURPOSE AS DEFINED IN SECTION 2(15) OF THE ACT. FURTHER, TH ERE IS NO CLARITY IN THE OTHER OBJECT CLAUSE 18 REFERRED A BOVE. AS MAY BE SEEN IN THAT CLAUSE THERE IS REFERENCE TO OBTAINING OF RIGHTS, PRIVILEGES AND CONCESSIONS FRO M THE GOVT. OR ANY OTHER AUTHORITY. HOWEVER, IN ABSENCE O F ANY CLARIFICATION REGARDING THE NATURE AND ALSO PURPOSE OF THE SAME, IT CANNOT BE SAID THAT THE SAM E AREA OF CHARITABLE. 4.4 FROM THE AFOREMENTIONED DISCUSSION, IT IS THUS EVIDENT THAT, ALL THE OBJECTS IN THE CASE OF THE AB OVE COMPANY ARE NOT CHARITABLE. IT SHOWS THE APPLICANT COMPANY HAS GOT BOTH CHARITABLE AND NON-CHARITABLE OBJECTS. UNDER THESE CIRCUMSTANCES, THE INCOME OF T HE ASSESSEE WOULD NOT BE ELIGIBLE FOR EXEMPTIONS U/S 1 1 ITA NO.739 OF 2014 IP INDIA FOUNDATION, HYDERABAD PAGE 5 OF 10 OF THE ACT. RATHER, IN VIEW OF EXISTENCE OF BOTH CHARITABLE AND NON-CHARITABLE OBJECTS, IT CANNOT BE CONSIDERED AS A VALID TRUST AND HENCE WOULD NOT BE ELIGIBLE FOR REGISTRATION U/S 12AA OF THE ACT. RELI ANCE IN THIS REGARD IS PLACED ON THE DECISION OF THE HON 'BLE SUPREME COURT IN YOGIRAJ CHARIT TRUST VS. CIT (103 ITR 777) WHEREIN THEIR LORDSHIPS MADE THE FOLLOWING OBSERVATIONS: THE QUESTION IS WHETHER EXEMPTION CAN BE GRANTED W HERE SOME OBJECTS ARE CHARITABLE AND SOME NON-CHARITABLE. WHE RE THERE ARE SEVERAL OBJECTS OF A TRUST, SOME OF WHICH ARE CHARI TABLE AND SOME NON-CHARITABLE, AND THE TRUSTEES IN THEIR DISCRETIO N ARE TO APPLY THE INCOME TO ANY OF THE OBJECTS, THE WHOLE TRUST FAILS AND NO PART OF THE INCOME IS EXEMPT FROM TAX. WHERE THE OBJECTS AR E DISTRIBUTIVE, EACH AND EVERY ONE OF THE OBJECTS MUS T BE CHARITABLE IN ORDER THAT THE TRUST MIGHT BE UPHELD AS A VALID CHARITY. IF NO DEFINITE PART OF THE PROPERTY OR ITS INCOME IS ALLO CATED TO CHARITABLE PURPOSES AND IT WOULD BE OPEN TO THE TRU STEES TO APPLY THE WHOLE INCOME TO ANY OF THE NON-CHARITABLE OBJEC TS, NO EXEMPTION CAN BE CLAIMED. (SEE EAST INDIA INDUSTRIES (MADRAS) PVT. LTD. V. COMMISSIONER OF IN COME [1967] 65 ITR 611 (SC)AND MOHAMMAD-IBRAHIM RIZA MALAK V. COMMISSIONER OF INCOME-TAX AIR 1930 PC 226 ). 5. FURTHER, IT IS NOTICED THAT THE APPLICANT COMPAN Y ALSO INTENDS TO CARRY ON BUSINESS ACTIVITY. IT IS PERTINENT TO REFER TO THE OBJECT CLAUSE NO.17 UNDER THE SAID INCIDENTAL OBJECTS UNDER PART B OF THE MOA, WHICH IS REPRODUCED AS UNDER: TO APPLY FOR AND OBTAIN ASSISTANCE FROM GOVT. AND O THER ORGANIZATIONS, COMPANIES, FIRMS OR OTHER INDIVIDUAL S, NATIONAL AND INTERNATIONAL FOR DEVELOPING ALL OR ANY OF THE BUSI NESS OR BUSINESS OF THE COMPANY. 5.1 FROM THE ABOVE, IT MAY BE NOTICED THAT, THERE I S NO REFERENCE TO ANY CHARITABLE PURPOSE. FROM THE SPECIFIC MENTION TO APPLY FOR ASSISTANCE FROM DIFFE RENT AUTHORITIES FOR ALL OR ANY OF THE BUSINESS ACTIVITY , IT SHOWS THAT THE ASSESSEE COMPANY INTENDS TO CARRY ON BUSINESS ACTIVITY WHICH HAS NO NEXUS WITH CHARITABL E ITA NO.739 OF 2014 IP INDIA FOUNDATION, HYDERABAD PAGE 6 OF 10 ACTIVITY. UNDER THIS CIRCUMSTANCES, IN MY VIEW THE APPLICANT COMPANY WOULD NOT BE ELIGIBLE FOR REGISTRATION U/S 12AA OF THE ACT. 6. FURTHER, IT IS NOTICED THAT THERE IS AMBIGUITY IN THE WINDING UP CLAUSE IN THE CASE OF THE ABOVE COMPANY. UNDER ARTICLE X AT PAGE 6 OF THE MOA OF THE ABOVE COMPANY, WHILE CLARIFYING IN THAT REGARD, IT IS MENTIONED AS UNDER: IF UPON THE WINDING UP OR DISSOLUTION OF THE COMPA NY THERE REMAINS, AFTER THE SATISFACTION OF ALL THE DEBTS AN D LIABILITIES, ANY PROPERTY WHATSOEVER, THE SUM SHALL NOT BE DISTRIBUT ED AMONGST THE MEMBERS OF THE COMPANY, BUT SHALL BE GIVEN OR T RANSFERRED TO SUCH OTHER COMPANY HAVING OBJECTS SIMILAR TO THE OB JECTS OF THIS COMPANY, TO BE DETERMINED BY THE MEMBERS OF THE COM PANY AT OR BEFORE THE TIME OF DISSOLUTION OR IN DEFAULT THEREO F BY THE HIGH COURT OF JUDICATURE THAT HAS OR MAY ACQUIRE JURISDI CTION IN THE MATTER . 6.1 FROM THE ABOVE, IT MAY BE NOTICED THAT ON WINDING UP/DISSOLUTION OF THE APPLICANT COMPANY, TH E REMAINING PROPERTY I.E. AFTER MEETING ALL THE LIABI LITIES, SHALL BE TRANSFERRED TO OTHER COMPANY HAVING SIMILA R OBJECTS AS THAT OF THE APPLICANT COMPANY. HOWEVER, UNDER ARTICLE 86 UNDER THE HEAD WINDING UP AT PAG E 14 OF THE ARTICLES OF ASSOCIATION OF THE ABOVE COMP ANY, WHERE ALSO THERE IS REFERENCE TO SUCH ISSUE, IT IS FURTHER MENTIONED AS UNDER: IF THE COMPANY SHALL BE WOUND-UP, THE ASSETS AVAIL ABLE FOR DISTRIBUTION AMONGST THE MEMBERS SHALL (SUBJECT TO ANY RIGHTS ATTACHED TO ANY NEW CLASS OF SHARES HEREAFTER CREAT ED) BE APPLIED IN REPAYMENT OF THE CAPITAL PAID UP ON THE ORDINARY SHARES AND ANY BALANCE SHALL BE DISTRIBUTED AMONGST THE HOLDER S THEREOF IN PROPORTION TO THE NUMBER OF ORDINARY SHARES HELD BY THEM RESPECTIVELY. 6.2 FROM THE ABOVE, IT MAY BE NOTICED, IN CASE OF WINDING UP OF THE APPLICANT COMPANY, THE BALANCE ASSETS OF THE COMPANY I.E. THE PROPERTY OF THE COMPANY, AFTER REPAYMENT OF THE PAID UP CAPITAL ON THE ORDINARY SHARES, SHALL BE PAID TO THE HOLDERS O F THE ITA NO.739 OF 2014 IP INDIA FOUNDATION, HYDERABAD PAGE 7 OF 10 SAME IN PROPORTION TO THE NUMBER OF ORDINARY SHARES HELD BY THEM. THIS PROVISION, AS MAY BE NOTICED, RATHER CONTRADICTS THE EARLIER WINDING UP CLAUSE REFERRED TO IN ARTICLE X OF THE MOA. IN THE FACE OF SUCH AMBIGUITY, THE APPLICANT COMPANY IN THIS CASE, IN M Y VIEW, CANNOT BE GRANTED REGISTRATION U/S 12AA OF TH E ACT. 2.2 HENCE THE REGISTRATION SOUGHT U/S 12AA OF THE A CT WAS REFUSED AND THE APPLICATION IN FORM NO.10A REJECTED . AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 2.3 THE LD COUNSEL FOR THE ASSESSEE SHRI SAMUEL NAG ADESI RELIED ON THE DECISION OF THE ITAT KOLKATA BENCH IN THE CASE OF INDIAN CHAMBER OF COMMERCE VS. INCOME TAX OFFICER (EXEMPTION)-1, KOLKATA (2014) 52 TAXMANN.COM, 52 (K OLKATA TRIB.) 2.4 THE LD DR ON THE OTHER HAND RELIED ON THE ORDER S OF THE DIT (EXEMPTION). 3. WE HEARD BOTH THE PARTIES. IT HAS BEEN CLEARLY E STABLISHED BY VARIOUS DECISIONS THAT WHEN THE MAIN OBJECT OF T HE INSTITUTION WAS CHARITABLE IN NATURE, THEN THE ACTIVITIES CAR RIED OUT TOWARDS THE ACHIEVEMENT OF THE SAID, BEING INCIDENTAL OR AN CILLARY TO THE MAIN OBJECT, EVEN IF RESULTING IN PROFIT AND EVEN I F IT IS CARRIED OUT WITH NON MEMBERS, WERE ALL HELD TO BE CHARITABLE I N NATURE. THE BASIC PRINCIPLE UNDERLINED THE DEFINITION OF CHARIT ABLE PURPOSES REMAINS UNALTERED EVEN BY AMENDMENT TO SECTION 2(15 ) OF THE ACT ITA NO.739 OF 2014 IP INDIA FOUNDATION, HYDERABAD PAGE 8 OF 10 W.E.F. 1.4.2009, THOUGH THE RESTRICTIVE FIRST PROVI SO WAS INSERTED THEREIN. IN THE GIVEN FACTS OF THE CASE, THE ASSESS EES ASSOCIATIONS PRIMARY PURPOSE WAS TO GIVE FOCUS ON AREAS OF EDUCA TION, ENVIRONMENT AND ENGAGEMENT (COMMUNITY AND EMPLOYEE) . IT HAS THROUGH CONSTANT AND WELL MONITORED SUPPORT AIMED T OWARDS COMMUNITY SUSTAINABILITY. THEREFORE, THEY HAVE FOCU SED ON AREAS OF EDUCATION AND ENVIRONMENT, WATERSHED MANAGEMENT, WOMEN EMPOWERMENT THROUGH SKILL DEVELOPMENT INITIATIVES, PROVISION OF DRINKING WATER, YOUTH EMPOWERMENT, MEDICAL HEALTH C AMPS, ENVIRONMENTAL CONSERVATION PROGRAM, AND PROMOTION O F SPORTS AND A HOST OF EXTRACURRICULAR ACTIVITIES AT LOCAL L EVELS AIMED TOWARDS COMMUNITY SUSTAINABILITY. HENCE, THE ASSES SEE ASSOCIATION PRIMARY PURPOSE WAS ADVANCEMENT OF OBJE CTIVE GENERAL PUBLIC UTILITY AND IT WOULD REMAIN CHARITAB LE EVEN IF AN INCIDENTAL OR ANCILLARY ACTIVITY OR PURPOSE OF ACHI EVING THE MAIN PURPOSE WAS PROFITABLE IN NATURE. HENCE THE FINDING OF THE DIRECTOR OF INCOME TAX (EXEMPTION) HAS MENTIONED IN THE OBJECT CLAUSE 17 UNDER THE SAID INCIDENTAL OBJECTS UNDER P ART B OF THE MOA AT PARA 5 OF HIS ORDER STATING IT TO BE NON-CHA RITABLE DOES NOT DISENTITLE THE ASSESSEE FOR AVAILING EXEMPTION U/S 12 OF THE I.T. ACT. THE RELEVANT PORTION OF THE DECISION OF T HE KOLKATA BENCH OF THE ITAT IN THE CASE OF INDIAN CHAMBERS OF COMME RCE (2014) 52 TAXMANN.COM 52 (KOLKATA-TRIB) IS REPRODUCED HERE UNDER: THE CONCEPT BEHIND SECTION. 28(III) IS TO CUT AT TH E MUTUALITY PRINCIPLE BEING RELIED ON IN SUPPORT OF A CLAIM FOR EXEMPTION, WHEN THE ASSESSEE WAS ACTUALLY DERIVING INCOME OR MAKING PROFITS AS A RESULT OF RENDERING SPECIFIC SERVICES FOR ITS MEMBERS IN A COMMERCIAL WAY. THE REASON FOR THE INTRODUCTION OF SECTION 28(III) IS TO IGNORE THE PRINCIPLE OF MUTUALITY AND REACH THE SUR PLUS ARISING TO THE MUTUAL ASSOCIATION AND THIS IS CLEAR FROM THE ITA NO.739 OF 2014 IP INDIA FOUNDATION, HYDERABAD PAGE 9 OF 10 FACT THAT THESE PROVISIONS ARE CONFIRMED TO SERVICE S PERFORMED BY THE ASSOCIATION 'FOR ITS MEMBERS'. SUC H INCOME WOULD EITHER BE CHARGED AS BUSINESS INCOME O R UNDER THE RESIDUAL HEAD, DEPENDING UPON THE QUESTIO N WHETHER THE ACTIVITIES OF THE ASSOCIATION WITH THE NON- MEMBERS AMOUNT TO A BUSINESS OR OTHERWISE. SECTION 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 MUT UAL ASSOCIATIONS MAY ALSO FALL WITHIN THE DEFINITION. T HE RECEIPTS DERIVED BY A CHAMBER OF COMMERCE AND INDUSTRY FOR PERFORMING SPECIFIC SERVICES TO ITS MEMBERS, THOUGH TREATED AS BUSINESS INCOME UNDER SECTION 28(III) WOULD STIL L BE ENTITLED TO THE EXEMPTION UNDER SECTION 11 READ WIT H SECTION 2(15), PROVIDED THERE IS NO PROFIT MOTIVE. THUS, AS SESSEE BEING A CHARITABLE INSTITUTION CARRYING ON THE OBJE CT OF PROMOTION AND DEVELOPMENT OF TRADE AND COMMERCE AND WHICH WAS NOT INVOLVED IN THE CARRYING ON OF ANY AC TIVITY IN THE NATURE OF 'BUSINESS', THE SAID SECTION 28(III) DOES NOT APPLY. APEX COURT IN THE EARLIEST CIT V. ANDHRA CHAMBER OF COMMERCE [1965] 55 ITR 722 HAD CLEARLY LAID OUT THE PRINCIPLE THAT IF THE PRIMARY PURPOSE OF AN INSTITU TION WAS ADVANCEMENT OF OBJECTS OF GENERAL PUBLIC UTILITY, I T WOULD REMAIN CHARITABLE EVEN IF AN INCIDENTAL OR ANCILLAR Y ACTIVITY OR PURPOSE, FOR ACHIEVING THE MAIN PURPOSE, WAS PRO FITABLE IN NATURE. THE BASIC PRINCIPLE UNDERLYING THE DEFINITION OF C HARITABLE PURPOSE REMAINED UNALTERED EVEN ON AMENDMENT IN SECTION 2(15) OF THE ACT W.E.F. 1.4.2009 THOUGH THE RESTRICTIVE FIRST PROVISO WAS INSERTED THEREIN . 4. RESPECTFULLY FOLLOWING THE COORDINATE BENCH DECI SION, WE ALLOW THE ASSESSEES APPEAL. ITA NO.739 OF 2014 IP INDIA FOUNDATION, HYDERABAD PAGE 10 OF 10 5. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JANUARY, 2015. S D/ - S D/ - (P.M. JAGTAP) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 30 TH JANUARY, 2015. VNODAN/SPS COPY TO: 1. SHRI SAMUEL NAGADESI,CA, 408 SRI RAMAKRISHNA TOWERS , BESIDES IMAGE HOSPITALS, AMEERPET, HYDERABAD 500073 2. DIRECTOR OF INCOME TAX (EXEMPTIONS), 3 RD FLOOR, ANNEX BUILDING, AYAKAR BHAVAN, BASHEERBAGH, HYDERABAD 500 004 3. THE DIRECTOR OF INCOME TAX (EXEMPTIONS) HYDERABAD 4. THE CIT HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE BY ORDER