DCIT(E)-2(1), MUMBAI V. NEHRU CENTRE, MUMBAI

ITA 7461/MUM/2018

• Counselvise Citation: [NaN] 107 COUNSELVISE.COM (IT) 1697 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 27-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DILIP KUMAR SHAH
• Keywords: Business income; Charitable institution; Rule of consistency
• Section: 12; 2; 11; 143(3); 142(1); 12A; 10B; 250; 64; 13; 10(23C)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (VIRTUAL COURT) “B” BENCH, MUMBAI BEFORE SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, HON'BLE JUDICIAL MEMBER ITA NO. 7461/MUM/2018 (A.Y: 2010-11) DCIT (E) – 2(1) Room No. 519, 5th Floor Piramal Chambers, Lalbaug Mumbai – 400 012 v. Nehru Centre Discovery of India Building 13 th Floor, Dr. Annie Besant Road Worli, Mumbai - 400018 PAN: AAATN2536J (Appellant) (Respondent) Assessee by : Shri Dilip Thakkar Department by : Shri Dilipkumar Shah Date of Hearing : 17.01.2022 Date of Pronouncement : 04.02.2022 O R D E R PER S. RIFAUR RAHMAN (AM) 1. This appeal is filed by the revenue against order of Learned Commissioner of Income Tax (Appeals)-1, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 20.09.2018 for the A.Y.2010-11. 2. Brief facts are, the assessee filed its return of income on 28.01.2011 along with the Income & Expenditure Account, Balance Sheet and Audit 2 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre report in Form No 10B claiming exemption u/s 11 and declared total income at ₹.NIL. The case was selected for scrutiny and notices u/s.143(2) and 142(1) of the Act are issued and served on the assessee. In response Ld. AR of the assessee attended and submitted the details as called for. 3. During Assessment proceedings, Assessing Officer analysed the objects of the assessee as given in the memorandum and the definition of charitable purpose in the section 2(15) of the Act in the following table: Sr. No Object as given in memorandum Relevant Charitable purpose mentioned in section 2(15) and if any actual activity undertaken 1. To inculcate and promote new social values, secularism and national integration and spread a humane, self-reliant and rational outlook on life. Advancement of General Public utility 2. To perpetuate the memory of late Shri Jawaharlal Nehru by undertaking educational social cultural medical relief and other charitable activities for the welfare of children and especially weaker sections of the community. No systematic education by normal schooling has been undertaken by the assessee. No activities related to medical relief are undertaken by assessee. The rest of the objects can be termed as Advancement of General Public utility. 3. To promote the cause of education, art, culture and communal harmony and to undertake scientific, statistical and other research in social and other sciences and technology for the advancement and emancipation of our countrymen. No systematic education by normal schooling has been* undertaken by the assessee. The rest of the objects can be termed as Advancement of General Public utility 4. To defuse useful knowledge relating to Nehru's ideas and philosophy and the aims and objects of the society by means of oral instructions, publication of literature and holding dramatic competitions, exhibitions and demonstrations on no profit basis calculated to advance and achieve the above objects No systematic education by normal schooling has been undertaken by the assessee. The rest of the objects can be termed as Advancement of General Public utility 3 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre Sr. No Object as given in memorandum Relevant Charitable purpose mentioned in section 2(15) and if any actual activity undertaken 5. Doing all such other lawful things as are incidental to the attainment of the above subjects No systematic education by normal schooling has been undertaken by the assessee. The rest of the objects can be termed as Advancement of General Public utility Further he analysed with the type of receipts as under: - Sr. No Nature of receipts Amount Nature of activity and relation with charitable purpose as defined in section 2(15) Whether incidental to charitable purposes of assessee and separate books of accounts maintained for the receipts other remarks as required u/s.11(4A) 1. Compensation received for providing space for 26 commercial exhibitions throughout the year 1,61,19,990 At the most as General Public utility. It is in the nature of business and rendering services to trade, commerce of parties. Hit by first proviso to section 2(15). Not incidental as its purely commercial activity. No separate books of accounts maintained. 2. Compensation received for providing auditorium for various outsiders programs like conferences, meetings, functions etc. 250 times during the year 1,05,54,300 At the most as General Public utility. It is in the nature of business and rendering services to trade, commerce of parties. Hit by first proviso to section 2(15). Not incidental as hall was used by outside agencies for 250 times while for assesses own programs it was used for only 45 times. No separate books of accounts maintained. 3. Compensation received for providing a Hall of culture to 124 outsiders conferences / seminars throughout the year 12,53,500 At the most as General Public utility. It is in the nature of business and rendering services to trade, commerce of parties. Hit by first proviso to section 2(15). Not incidental as hall was used by outside agencies mostly. No separate books of accounts maintained. 4. Compensation received for providing art persons throughout the year 9,77,850 At the most as General Public utility. It is in the nature of business and rendering services to trade, commerce of parties. Hit by first proviso to section 2(15). Not incidental as gallery was used by outside agencies mostly. No separate books of accounts maintained. 5 Compensation received for a providing Hall of harmony for 126 outsider conferences throughout the year 7,61,800 At the most as General Public utility. It is in the nature of business and rendering services to trade, commerce of parties. Hit by first proviso to section 2(15). Not incidental as hall was used by outside agencies mostly and that too for commercial purposes/conference s/meetings No separate books of accounts maintained. 6 Compensation received for providing lecture hail for various 258 outsiders functions throughout the year 5,59,277 At the most as General Public utility. It is in the nature of business and rendering services to trade, commerce of parties. Hit by first proviso to section 2(15). Not incidental as hall was used by outside agencies mostly. No separate books of accounts maintained. 4 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre Sr. No Nature of receipts Amount Nature of activity and relation with charitable purpose as defined in section 2(15) Whether incidental to charitable purposes of assessee and separate books of accounts maintained for the receipts other remarks as required u/s.11(4A) 7. Compensation received for providing preview theatre throughout the year 4,60,200 At the most as General Public utility. It is in the nature of business and rendering services to trade, commerce of parties. Hit by first proviso to section 2(15) Not incidental as it was used by outside agencies and that too for commercial purposes. No separate books of accounts maintained. 8. Compensation n received for providing dubbing unit throughout the year. 3,58,333 At the most as General Public utility. It is in the nature of business and rendering services to trade, commerce of parties. Hit by First proviso to section 2(15). Not incidental as unit was used by outside agencies and that too for commercial purposes. No separate books of accounts maintained 9. Compensation n received for providing Warli Hall who are we Hall and mezzanine floor 3,08,500 At the most as General Public utility. It is in the nature of business and rendering services to trade, commerce of parties. Hit by first proviso to section 2(15). Not incidental as unit was used by outside agencies and that too for commercial purposes. No separate books of accounts maintained. 10. Planetarium show receipts. 3,98,146 persons watched the show throughout the year. 1,24,36,540 General Public utility. Cannot be considered as education as no systematic formal education is involved. It is nature of business. Hit by first proviso to section 2(15). 11 Rent received from the sun and sand hotel for the space provided for running restaurant and cafeteria 1,62,90,000 --- As assessee's activities and objects are hit by first proviso to section 2(15); it has no more charitable purpose. Hence it is not income derived from property "held for charitable purpose". Hence cannot be claimed as exempt. 12. The rent received from yes bank and NFDC 4,59,08,654 — As assessee's activities and objects are hit by first proviso to section 2(15); it has no more charitable purpose. Hence it is not income derived from property "held for charitable purpose". Hence cannot be claimed as exempt. 13. Interest income 2,14,66,107 As assessee's activities and objects are hit by first proviso to section 2(15); it has no more charitable purpose. Hence it is not income derived from property "held for charitable purpose". Hence cannot be claimed as exempt. 5 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre 4. During assessment proceedings, the assessee was asked why receipts of the assessee should not be taxed denying exemption claimed u/s.11 of the Act vide letter dated 25/02/2013. In response, assessee submitted vide letter dated 6.3.2013 that basic objects of the Centre or to inculcate and promote Indian arts, educate children in the field of science, arts, history and social response by Centre not only educates people at large but about astronomy through professional astronomers but also generate interest in physics the Centre also conduct exhibitions to exhibit the art of poor artists, coming from remote parts of India and thus provides relief to the artists in the form of sale of their art as well as promoting their skills. It also conducts various competitions which include rowing competitions/poetry/painting and match fees for children including physically challenged children, thereby educating them and improving their artistic skills. All these activities are in the nature of education as well as relief to the poor in the context of definition of charitable purpose as defined in IT act 1961. As per Madras High Court judgement in the case of CIT v. Sri Theodore Brahma Gana Sabha [188 ITR 160], raising artistic tastes is also an educational purpose. Education, in the context of the law of charity as defined under section 2(15) of the Act is not limited to teaching in the narrow sense raising the artistic taste of the country by 6 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre public performances, dramas, music or show would be in the nature of education purpose. Also the word is defined in the Oxford dictionary as, is the process of receiving or giving systematic instruction, especially at a school or university, the theory and practice of teaching, a body of knowledge acquired while being educated, information or training a particular subject or example health education is education does not necessarily imply only that which is imparted in a classroom with fixed curriculum. 5. After considering the submissions of the Assessee, Assessing Officer rejected the claim of the assessee and treated the income earned by the assessee out of commercial exhibitions, auditorium etc., as not for charitable to the extent of ₹.426,62,090/- with the following observations: “10 Assessee submission with respect to some of the activities it undertakes is true in the sense that it spends some income on these activities. However as explained in detail above table when assessee is hit by proviso to section 2(15) how it spends its income is not relevant; what it primarily is doing is systematically exploiting its property in commercial way by rendering it services in relation to business of parties to whom it is allowing its space to be utilized commercially like exhibitions of commercial entities, professional artists, space for corporate meetings functions preview theatre dubbing unit etc. Here it may be mentioned that with reference to first proviso to section 2(15); object/activities need not be business itself but it being "in the nature of business,trade or commerce" is sufficient for disqualification. Further " rendering any service in relation to trade, commerce or business " of parties from whom consideration in lieu of is received is sufficient for disqualification 7 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre 10.2 It will be further seen that assessee is engaged in these commercial activities throughout the year. It pays service tax on the same and files service tax returns in respect of income earned this way. 10.3 It is giving its space for commercial exhibitions providing auditorium where there is outsiders programs like meetings, corporate functions, conferences, renting its gallery for professional artists letting its gallery theatre for outside theatre and media companies, providing dubbing units for outside media and theatre companies etc. considering its frequency, nature and volume of activities it can be said that its activities are in the nature of business and rendering services in relation to business and commerce of other parties like other commercial companies whose products are exhibited at its space and media companies and commercial entertaining companies whose shows etc are organized at its premises. Hence it is hit by provisions of proviso to section 2(15) of IT act 1961. 10.4. Assessee's argument that it is undertaking educational activities and activities of relief to poor is stretching the things to unrealistic limits in the light of of fact of what actually it is doing as its major activity. It claims that it is educating people in astronomy and in, enriching the cultural and artistic taste of people. However is not engaged in systematic educational manner about imparting the same. It might be spending some of its income on its own activities of the museum, cultural and artistic competition and exhibitions but that is part of spending its income. However what majorly it is undertaking is commercially exploiting its property. Getting income by way of providing space for commercial exhibitions, for professional and artists Gallery exhibits, preview shows, the dubbing unit, corporate functions meetings is in no way indulging in charitable purpose of social and cultural activities. In this connection it is worthwhile to study the definition of charitable purpose effective as on date: "Charitable purpose: includes "relief of the poor, education, medical relief and the advancement of any other object of general public utility." The line, "not involving the carrying on of any activity for profit" was omitted by the Finance Act, 1983, w.e.f. 1 --4-1984. 8 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre Thus with effect from 1 April 1984; whether there is any profit motive or not is not relevant. Further section 13 (8) provides that Nothing contained in section 11 or section 12 shall operate so as to exclude any income from the total income of the previous year of the person in receipt thereof if the provisions of the first proviso to clause (15) of section 2 become applicable in the case of such person in the said previous year. 10.5 Though assessee is spending some of its income on charitable and social activities as mentioned by it; when assessee is hit by proviso to section 2(15); how it spends its income is not material as mentioned in the said clause.” 6. Further Assessing Officer brought to tax the rental and interest income to extent of ₹.836,64,761/- derived from property as the same is not exempt since it is not derived from the property held for charitable purpose as the same is hit by the definition u/s. 2(15) of the Act. Therefore, he brought to tax all the revenue after allowing expenditure incurred by the assessee on the properties, establishment, planetarium, auditorium and other maintenance expenses. 7. Aggrieved, assessee preferred an appeal before CIT(A)-1, Mumbai. Before Ld.CIT(A) assessee filed detailed submissions and additional grounds of appeal. Ld.CIT(A) asked the Assessing Officer to file if there is any objection on admission of additional grounds. Based on the submissions of Assessing Officer, Ld.CIT(A) admitted the additional 9 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre grounds and decided the issues. The detailed submissions of the assessee are reproduced below: “During the assessee proceedings, the appellant made following submissions: Kindly refer to the aforesaid matter in which the written submission was made by the appellant Trust vide its submission dated 6" February 2016. Further the Additional Grounds were also filed. Consequently your predecessor was pleased to call for a Remand Report from the Learned AO on the Additional Grounds. During the course of the remand report proceedings we have also made written Submission to the AO. The Learned AO has already submitted the remand report in compliance to directions of your predecessor. As there are quite a few submissions been made in this case, thus as desired by your good-self we are submitting a Consolidated Written Submission herein under: 1) This is an appeal by the Appellant against the orders of DCIT(E) Mumbai. 2) Briefly stated, assessee, the appellant trust filed total income at NIL. The Assessee claimed exemption under section 11. AO denied the claim stating when assesse is hit by proviso to section 2(15) how it spends its income is not relevant; the assessee is primarily exploiting its property in a commercial way by rendering its services in relation to business of parties to whom it is allowing its space to be utilised commercially. With reference to first proviso to section 2(15); object/activities need not be business itself but it being ‘in nature of business, trade, or commerce’ is sufficient for disqualification. As rent and service charges are considered as business receipts and it contravened the provisions of section 11 of LT. Act, AO was of the opinion that assessee is not behaving as a charitable organization and the character and focus of assessee is commercial. For these reasons, AO denied the benefit of Section 11 and assessed the income at Rs. 7,12,93,545 by considering corpus receipt relating to the property and interest as income of the year and allowing the expenditure relating to such income. 3. The assessee was requested to explain why the receipt of the assessee Should not be taxed denying the exemption under section 11 of IT act 1961. 10 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre With reference to the above Appeal, the assessee made the following submission vide its letter dated 6" February 2016 as well as further submissions as under. 1. Ground of Appeal No.1 : On the basis of the facts and the position in law, the Assessing Officer erred in taking the view that all the activities carried out by the trust are in the nature of advancement of any other object of general public utility. Till the Assessment Year 2009-10 for which a scrutiny Assessment under Section 143(3) was made, the activities of the Appellant Pubic Charitable Trust was never considered as ‘any other object of general public utility even though the same existed in the definition of Charitable Purpose u/s 2(15) of the Act. It is only after the amendment to the proviso to Section 2(15) that the Assessing Officer has treated the activities of the Appellant Trust as object of general public utility which was earlier treated as educational activities, without there being any change in the activities during the year under Appeal. We submit that the activities of the Appellant Trust continues to be educational as can be seen from the following facts. Education has been defined as: The wealth of knowledge acquired by an individual after studying particular subject matters or experiencing life lessons that provide an understanding of something. Source — www businessdictionary com Education is the process of facilitating leaning, or the acquisition of knowledge, skills, values, beliefs, and habits. Educational methods include Storytelling, discussion, teaching, training, and drrected research. Education frequently takes place under the guidance of educators, but learners may also educate themselves. Education can take place in formal or informal settings and any experience that has a formative effect on the way one thinks, feels, or acts may be considered educational. Source — wikipedia. With reference to the promotion of educational activities undertaken by Nehru Centre, it has been stated that there is no systematic education by normal schooling method. It is submitted that apart from imparting instructions in a@ class room of a school following a prescribed syllabus, there are other methods of imparting education as well. Science, be it physics, chemistry or biology, can best be 11 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre taught through demonstrations in a laboratory. There are a large number of schools without laboratory facilities and students of those schools learn the basic principles of science through rote method. Nehru Centre organizes workshops in physics, chemistry, biology and microbiology for students (particularly of Vill to X Standards) of such schools in which focus is on demonstration of relevant experiments. Nehru Centre invites some of the best teachers from the Homi Bhabha Centre for Science Education, an improvised laboratory is established for the workshop and the entire expenditure is borne by Nehru Centre. A foundation Course in Astronomy of eight months duration is organized every year in collaboration with the Department of Extramural Studies of Mumbai University. Students of astronomy are taken to places away from Mumbai, where the sky is clear and free from urban lights and pollution, to study the night sky and various astronomical phenomenon like the movement of planets and the eclipses. Every summer Nehru Centre organizes workshops in performing arts viz. dance, drama and classical music. Great Masters like late Guru Kelucharan Mahapatra, Birju Maharaj, Dr. Kanak Rele and so many others teach thousands of young students. In the field of history and culture, the type of education that Nehru Centre imparts is perhaps not given in any school or college. For example, the Centre has a regular audio visual show titled “Who Are We”. This eight minute visual explains most vividly that India is the greatest amalgam of races and religions, languages and culture of diversity and contrast unmatched on the globe. In which class room of any school such an education is imparted? (Lakhs of people including students visit this show every year). The library of the Nehru Centre is a public reference library where no entrance fee is charged. It is a popular resource centre for school and college students who use the services for their projects where they can work in a comfortable air-conditioned environment. The staff at the library work painstakingly to give the students all the help they need for their projects by scanning through books, magazine and newspaper articles and the internet. The library also organizes workshops and meet-the-author sessions for students to promote reading. (Thousands make use of the library every year). “Discovery of India Exposition” is a unique exhibition, the like of which is nowhere else in India. It is not a mere exhibition. It is a 12 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre vibrant class room where India’s history of five thousand years is taught in the most lucid and intelligible manner. Students from Standards VIII to X doing projects on Indian history visit the Discovery of India Exposition and spend hours studying a particular period with which they may be dealing. One can get transported to the Harappan and Aryan civilizations and can witness the empires of the Mauryas, the Mughals and the British. One can walk along the rugged and invincible forts of the Marathas and one can relive the freedom movement and the dawn of independence. If this is not education what else is? (Over 2 lakh people visited the exposition during the year). Details of the educational activities carried out by Nehru Centre are attached as (Enclosure A) to this submission. it has been clarified above how Nehru Centre’s activities do not fall under the category of advancement of any other object of general public utility. It is now clarified that no activity of Nehru Centre falls under the category of trade, commerce or business nor is it related to trade, commerce or business. After Nehru Centre was set up it was obvious that its running would involve certain expenditure by way of salaries of the staff and conducting activities to meet its objectives in education particularly science education. It is for this reason that the Centre has been approved by the Council of Scientific and industrial Research for the purpose of Clause (ii) of Sub-section (1) of Section 35 of the Income Tax Act 1961 (Enclosure B). The aims and objectives of Nehru Centre have been spelt out in its Memorandum of Association. Nehru Centre was not funded by any agency or the government. Therefore, the Government of Maharashtra vide its circular dated 14/6/1988 (copy enclosed) granted permission to Nehru Centre to utilise 15% of its area for the purpose of earning revenue with which it could sustain itself and fulfill its objectives. Even though various exhibitions are held at Nehru Centre no counter sale is allowed. It is, therefore, erroneous to conclude that income that Nehru Centre derives by letting out its premises (limited to 15% of its total area) is derived out of trade, commerce or business. In support of the above stated facts, we wish to rely upon the latest judgment of Hon. Delhi High Court in the case of Institute of Chartered Accountants of India v/s DIT(E) (2013)35 Taxmann.com 140 (Delhi) (copy enclosed). In brief, the court has held as follows: S. 2(15) — Charitable purpose is not affected on levy of fees 13 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre The ICAI does not carry on any business, trade or commerce. The activity of imparting education in the field of accountancy and conducting courses both at pre-qualification as well as post- qualification level are activities in furtherance of the objects for which the petitioner has been constituted. Activities of providing coaching classes or undertaking campus placement interviews for a fee are in relation to the main object of the petitioner which as stated earlier cannot be held to be trade, business or commerce. Accordingly, even though fees are charged by the petitioner institute for providing coaching classes and for holding interviews with respect to campus placement, the said activities cannot be stated to be rendering service in relation to any trade, commerce or business as such activities are undertaken by the petitioner institute in furtherance of its main object which as held earlier are not trade, commerce or business. It further held that ICAI providing funds to ICAI Accounting Research Foundation would not violate Section 13 of the Act — Institute of Chartered Accountants of India vs. DIT(E) (2013) 35 140 (Delhi). 2) Ground of Appeal No. 2 : The Assessing Officer erred in taking the view that the receipts from hiring of property of the centre are not an income derived from property held under trust. There is no denying of the fact that the properties held by the Appellant Trust are all properties held under Trust. Hence any income arising from such properties are income derived from property held under trust for charitable purposes and hence exempt u/s 11(1) of the Act. The Appellant Trust does not hold any business undertaking and hence the provisions of Section 11(4) of the Act are not applicable. Here also the decision of the Hon. Delhi High Court sighted above is relevant and we rely upon the same. Hence, the income derived from hiring of the property held under trust continues to be exempt from tax. 3) Ground of Appeal No. 3 : The Assessing Officer erred in taking the view that the receipts (compensation charges), from temporary usage of certain portion of its property, are in the nature of receipt from commercial activities and the same are taxable under the Income Tax Act, 1961. Now it is clear that the AO has only changed the interpretation of the activities of the Appellant Trust to fit into the category of general 14 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre public utility only to fit it into the amended proviso without any justification. Further he has allowed as deduction only part of the expenses incurred towards the objects of the Trust instead of allowing the same in full as application of Income. 4) Ground of Appeal No. 4: The Assessing Officer erred in taking the view that the hiring charges received by the Centre, by renting of its property, are not in the nature of income derived from property held under trust and is taxable after allowing the expenditure only in relation to the property. Now it is clear that the AO has only changed the interpretation of the activities of the Appellant Trust to fit into the category of general public utility only to fit it into the amended proviso without any justification. Further he has allowed as deduction only part of the expenses incurred towards the objects of the Trust instead of allowing the same in full as application of income. 5) Ground of Appeal No. 5 The Assessing Officer erred in taking the view that the compensation and hiring charges received from property are in the nature of business or commerce and thus section 11(4A) would be applicable. AO has completely misinterpreted Section 11(4A) of the Act by stating that the same is applicable only to deny the exemption. The income of the Appellant Trust is not out of profits and gains of any business and hence Section 11(4A) has no application. 6) Ground of Appeal No.6 : The Assessing Officer erred in law stating that though he accepts that the Centre spends on some of the activities undertaken but how it spends the income is irrelevant, as the amounts spend are entirely towards the attainment of the objects of the trust. The entire income of the Appellant Trust is spent only towards the objects of the Trust which are in the nature of education. All the income generated was fully utilized for the objects of the trust and this fact has not been even denied by the AO. This proves that there cannot be any business motive in the operation of the Trust. Hence, the AO erred in holding otherwise. 7) Ground of Appeal No.7 : 15 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre Without prejudice to the foregoing, fhe Assessing Officer erred in law in taking the view that the activities carried out by the trust are in the nature of commercial activity as it charges service tax on the compensation and the hiring charges. Charging of service tax is stipulated as per the provisions of Section 64 of the Finance Act, 1994 which are entirely different and not-related to the provisions of the section of Income Tax Act 1961 applicable to the charitable trust. The Service Tax is applicable to a Charitable Trust in case of services which are availed of. That by itself cannot make the activities of the trust as commercial activity. A charitable trust has also to deduct tax at source from several payments including salary to staff as required by the Provisions of Income Tax Act. That by itself cannot make the income of the Trust taxable. 8) General The AO has grossly erred in not allowing all the expenses of the Appellant trust including capital expenditure amounting to ₹.1,22,28,971/ as application of income contrary to the provisions of the Act. 9) Other submissions RULE OF CONSISTENCY AO Failed to follow Principle of Consistency. The provisions of Sec 11(4A), were introduced in the I.T Act w.e.f Assessment year 1976 onwards. in the Assesses Case for Assessment yr. 2009-10 and earlier Assessment years, the AO had not invoked this provision. The Nature of Charitable Activities for Assessment year 1976, when the Sec 11(4A) was introduced, till date are also same. The exemption U/S 12 A granted by CIT (E) till date continues and was never withdrawn. Without bringing on record any new Facts, the AO has violated the Principle of Consistency. (i) We rely on the judgment of the Bombay High court in the case of Shri Ram Memorial Foundation 158 ITR 1. In which The Hon'ble High Court has held that when a particular party has been recognized as such for several years and is carrying on the same object without any protest it is not for the Court to reopen the same point from time to time. (ii) In the case of Excel Industries Ltd 358 ITR 295 the Apex court held that “Further, as in several assessment years, 16 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre the Revenue accepted the order of the Tribunal in favour of the assessee and did not pursue the matter any further, it cannot be allowed to flip-flop on the issue and it ought to let the matter rest rather than spend the tax payers’ money in pursuing litigation for the sake of it’. (iii) We further rely on the Judgment of Bombay High Court in the case of CIT vs. Gopal Purohit 228 CTR 582 (Bom) wherein it was held that “there should be uniformity in treatment and consistency when facts and circumstances are identical particularly in the case of the assesse”. (iv) The Jurisdictional Mumbai Tribunal in the identical case of Shamukhanand Fine Arts and Sangeeta Sabha 1975/M/2016 & 6858/M/2016 (SH Trust) on top of para no. 6.2 held as under. Para 6.2 It is also a fact that the departmental authorities have, in the past, admitted that activities carried out by it were of charitable nature. No new fact has been brought on record to prove that during the year some different incidents had taken place as compared to the earlier year to change the nature of the activities. The letting out of SH, during the period when it was not required by the trust, was not considered a commercial activity in the earlier years. It is true that principles of res judicata are not applicable to the income tax proceedings. But, at the same time it is also true that principles of consistency have to be followed while deciding the tax matters. In the case of International tractors Ltd., the Hon'ble Delhi High Court (397 ITR 696) has held that deductions allowed in the earlier assessment years should not be withdrawn unless the circumstances have changed. The Hon'ble Allahabad High Court in the matter of Zazsons export Ltd. (397 ITR 400) has held as under: In order to maintain consistency, a view, which had been accepted in an earlier order ought not to be disturbed unless there was any material to justify the Department to take a different view of the matter." While deciding the appeal, the Hon'ble Court had taken note of the proceedings of the earlier AY.s. As the rule of consistency has not followed without bringing distinguishing features of the year under appeal, as compared to the facts 17 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre of the earlier years, so, in our opinion the order of the FAA cannot be endorsed on this count. A.Y. 2009-10 Assessment Order u/s 143(3) received, total income assessed as NIL. (Enclosure -C) LETTING OUT OF HALL WAS NOT COMMERCIAL OR BUSINESS ACTIVITY The GOM by its sanction had allowed the Assessee to let out the premises, when not utilised for its Charitable Activities. The receipts received from letting out activities, subsidized the Assessee cost of Charitable Activities. These rental —receipts were not received or shared by any of the Members who were in principle involved with the Activities of the Trust as is the normal practice in Business / Commercial. All the Trustees of the Trust are Eminent Persons (Enclosure - D) and cannot by any stretch imagination be considered as involved with the Trust in any “Commercial or Business Activity” as mentioned Sec 11(4A) of the I.T Act. Further, earning of such receipts was incidental & not the Predominant activity of the Trust. (i) Further the issue of letting out of the hall has been deliberated in following decision: The Jurisdictional Bombay High Court in the case of Fellowship of Physically Handicapped I.T. Appeal No. 673 of 2013 held as under: We find that the CIT(A) as well as the Tribunal on examination of the record have determined that income derived from its property by respondent assesse should be treated as income form house property and not the business Income. This finding of the CIT(A) is upheld by the impugned order. We find that as two authorities under the act have concurrently come to a finding on the fact that the amount received by the respondent assessee on account of letting out of its property is income taxable under the head income from house property. Thus no occasion to apply section 11(4A) of the Act as canvassed by the revenue would arise. (ii) We further rely on the following judgment of the Bombay High Court wherein it was held that letting of hall cannot be treated as business or commercial activity ‘ 18 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre (a) The Lajpatrai Memorial Trust 383 ITR 45 (Bom) which held as under: As regards the auditorium the same was also part of the building housing these colleges conducted by Lala Lajpatrai Institute which was used by the college for 209 days and it was vacant for 76 days and was let out only when it was not needed by colleges. In the course of letting out the assessee has incurred expenses for electricity and Air-Conditioners. Letting out of the auditorium was not dominant object of the trust and admittedly the auditorium was incidentally let out to outsiders for commercial purpose. It thus cannot be said that such letting our would fall within the first proviso to section 2(15) of the Ac. [Emphasis supplied] (b) Shri Vile Parle Kelvani Mandal 378 ITR 593 (Bom) which held as under:- “The educational institutions require funds. The Income is generated form giving various halls and properties of the educational institution on rental only on Saturdays and Sundays and on public holidays when they are not required for educational activities then, this cannot be said to be a business which is not incidental to attain the objects of the trust. This being merely an incidental activity and the income derived form it is used for the educational institute and not for any particular person, separate books of account are also maintained, then, this income cannot be brought to tax. This conclusion is also not perverse and given the facts and circumstances which are undisputed”. [Emphasis supplied] We again rely upon the recent Bombay ITAT judgment in the Case of SH - Trust, wherein at para 6 it is stated - “We find that the main objection of the departmental authorities was that the SH was rented out most of the time and that it was a commercial activity. In our opinion, act of letting out of hall cannot be and should not be considered in isolation. Eligibility or otherwise of benefit u/s. 11 of the Act cannot depend solely on one factor. What has to be seen is as to whether the trust is incurring the expenditure for the objects and purposes for which it was established. We find that the issue of letting out of a hall by a charitable institute was deliberated upon by the Hon'ble Madras High Court in the case of Madras Stock Exchange Ltd (supra) and 19 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre Women’s India Trust (supra). We would like to reproduce the relevant portion of the judgment of the Hon’ble Bombay High Court in the case of Women’s India Trust and it reads as under: “The assessee-trust formed to carry out the object of education and development. of natural talents of people having special skills, more particularly women. It trained them to earn while learning. It educated them in the field of catering, stitching, toy making, etc. While giving them training, it used material bought from the open market. This was essential for carrying out the assessee’s object. In the process, some finished product such as pickles, jam, etc., were produced and which the assessee sold through shops, exhibitions and personal contacts. The motive of the assessee was not the generation of profit but to provide training to needy women in order to equip or train them in these fields and make them selfconfident and self-reliant. There was nursing training, which was also being managed and administered by the assessee. The details of income and expenditure showed that the assessee had received donations of Rs. 36, 88,634 and nursing school fees of Rs. 4,46,088. The assessee pointed out that this nursing training provided at the center of the assessee at Panvel was free of cost. The charge was levied for the mess but accommodation and other facilities were free of cost and apart from community development programmes, which were undertaken to educate rural women, they were taught various skills and made aware of how to live honorably. The Tribunal found that this was not an activity which would fall within the proviso to section 2(15). The Tribunal referred to two letters addressed by the trustees of the assessee-trust clarifying that in the past, such activities had been found to be incidental to the objects of the trust. Secondly, the donation received during the year had been utilised in the assessment year 2009-10 for achieving the object of the trust. However, the bank interest received was continued and, then, there was a deficit. It was in these circumstances that the argument was canvassed that the fees collected for training women were only to meet the cost of expenses for providing them food items. Their accommodation and other facilities were free of cost, The Tribunal found that the trust may be set up for advancement of any other object of general public utility but that would not cease fo be charitable purposes because the activities in which the trust was involved could not be termed as carrying on of trade, commerce or business, that the activity undertaken did not partake of the 20 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre character of trade, commerce or business nor of rendering of any service in relation thereto but was only to teach or impart skills and to instill confidence that the produced goods or articles were sold. To that extent also deficit had occurred. The Tribunal took a view that occasional sales or the trust’s own fund generation were for furthering the objects but not indicative of trade, commerce or business. The proviso did not apply. ...... considering the fact that the trust had been set up and was functional for the past several decades and it had not deviated or departed from any of its stated objects and purpose, utilisation of the income, if at all generated, did not indicate the carrying on of any trade, commerce or business. The Tribunal’s view was to be upheld. It was a possible view and could not be termed perverse. The view was taken on an overall consideration and bearing in mind the functions and activities of the trust. In such circumstances, it was not vitiated by any error of law apparent on the face of the record.” 6.1. We also find that the assessee had suffered loss in the various activities, carried out by it, to the tune of Rs.32 lakhs (app.) except for eye care department and interest on investment (Pg.50,52, 56- 57 of the PB). A perusal of Pgs. 82-84 reveal that expenditure incurred by it during the year under appeal. pertained to overall administration and activities. In other words the said expenditure would have to be incurred even if the SH was not let out.SH was rented out when it was not required by the assessee for its own purpose. Here, one important factor to be remembered is that it could continue to carry out various charitable activities and could achieve the objects at concessional rates due to income received by it from letting out of SH. Conclusion of Mumbai [TAT Decision in the case (SH —Trust) is applicable in our assessee case: As the relevant facts in our case are similar to that in the Case of SH — Trust, therefore, the Bombay ITAT’s concluding following decision is applicable in our case also. In the appellant trusts case also the appellant is having losses on carrying out education activity and other object of the Trust and that loss has been financed by the interest income and income form letting out of the trust assets. The expenses incurred by the appellant trusts pertain to maintenance of the trust property and capital 21 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre expenses on trust property and overall administration of the Trust. These expenses would have to be incurred whether the trust assets have been let out or not. Thus the most important factor which the AO should have appreciated is that the appellant could spend money on the object of the Trust, could maintain and made addition in to the Trust property only on account of income received from the letting out of the trust assets. JUDGMENT OF JURISDICTIONAL TRIBUNAL IS BINDING We submit that the Jurisdictional Bombay High court in the case of Bank of Baroda Vs H.C. Srivastava 256 ITR 385 held that “decision of jurisdictional Tribunal is binding on the lower authorities including the AO. Accordingly, we submit the recent judgment of Mumbai ITAT in the case of Shri Sanmukhanand Fine Arts and Sangeetha Sabha supra is binding in the case of the appellant and should be followed accordingly DEDUCTION U/S 11 CANNOT BE DENIED IF REGISTRATION U/S 12A HAS NOT BE REVOKED We submit that the assesse has been granted registration u/s 12A of the Act and it was not revoked, so the AO is not entitled to declare the activities of the trust as non-charitable, even otherwise also it is not a case of the AO that the activities of the trust are non-charitable. (i) The Gujarat High Court in the case of Ahmedabad Urban Development Authority 335 ITR 575 held as under: "Thus granting the registration u/s 12AA, therefore, cannot be ignored or wished away by Assessing Officer by adopting a stand that the trust or institution is not fulfilling the conditions for applicability of section 11 and 12. (ii) The Jurisdictional Mumbai Tribunal in the case of Shamukhanand Fine Arts and Sangeeta Sabha 1975/M/2016 & 6858/M/2016 held as under. “In our opinion, during the continuation of registration, it is not possible to the department to challenge the charitable nature of the object of the trusts”. 22 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre (iii) In view of the above we submit that the Ld AO should not have denied the benefit u/s 11 when the Registration u/s 12A exist in the case of the Appellant Trust. CIRCULAR No. 11/2008 DATED 19-12-2008. ENCLOSURE-E (i) We would like to submit that the CBDT has issued a detailed circular clarifying the intent and object behind enacting this proviso vide circular no. 10 134/34/2008-TPL dated 19.12.2008 which reads as under: EXEMPTION UNDER SECTION 11 IN CASE OF ASSESSEE CLAIMING BOTH TO BE CHARITABLE INSTITUTIONS AS WELL AS MUTUAL ORGANISATIONS CIRCULAR NO. 11/2008, DATED 19-12-2008 Definition of ‘Charitable purpose’ under section 2(15) of the Incometax Act, 1961 Section 2(15) of the Income Tax Act, 1961 (‘Act’) defines “charitable purpose" to include the following: (i) Relief of the poor (ii) Education (iii) Medical relief, and (iv) the advancement of any other object of general pubilc utility. An entity with a charitable object of the above nature was eligible for exemption from tax under section 11 or alternatively under section 10(23C) of the Act. However, it was seen that a number of entities who were engaged in commercial activities were also claiming exemption on the ground that such activities were for the advancement of objects of general public utility in terms of the fourth limb of the definition of ‘charitable purpose’. Therefore, section 2(15) was amended vide Finance Act, 2008 by adding a proviso which states that the ‘advancement of any other object of general public utility’ shall not be a charitable purpose if it involves the Carrying on of — (a) any activity in the nature of trade, commerce or business; or 23 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre (b) any activity of rendering any service in relation to any trade, commerce or business; for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention of the income from such activity. 2. The following implications arise from this amendment - 2.1 The newly inserted proviso to section 2(15) will not apply in respect of the first three limbs of section 2(15), i.e., relief of the poor, education or medical relief. Consequently, where the purpose of a trust or institution is relief of the poor, education or medical relief, it will constitute ‘charitable purpose’ even if it incidentally involves the carrying on of commercial activities. [Emphasis supplied] 2.2. ‘Relief of the poor’ encompasses a wide range of objects for the welfare of the economically and socially disadvantaged or needy. It will, therefore, include within its ambit purposes such as relief to destitute, orphans or the handicapped, disadvantaged women or children, small and marginal farmers, indigent artisans or senior citizens in need of aid. Entities who have these objects will continue to be eligible for exemption even if they incidentally carry on a commercial activity, subject, however, to the conditions stipulated under section 11(4A) or the seventh proviso to section 10(23C) which are that (i) the business should be incidental to the attainment of the objectives of the entity, and (ii) separate books of account should be maintained in respect of such business. Similarly, entities whose object is ‘education’ or ‘medical relief’ would also continue to be eligible for exemption as chantable institutions even if they incidentally carry on a commercial activity subject to the conditions mentioned above. 3. The newly inserted proviso to section 2(15) will apply only to entities whose purpose is ‘advancement of any other object of general public utility’ i.e. the fourth limb of the definition of ‘charitable purpose’ contained in section 2(15). Hence, such entities will not be eligible for exemption under section 11 or under section 10(23C) of the Act if they carry on commercial activities. Whether such an entity is carrying on an activity in the nature of trade, 24 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of the activity. 3.1. There are industry and trade associations who claim exemption from tax u/s 117 on the ground that their objects are for charitable purpose as these are covered under ‘any other object of general public utility’. Under the principle of mutuality, if trading takes place between persons who are associated together and contribute to a common fund for the financing of some venture or object and in this respect have no dealings or relations with any outside body, then any surplus returned to the persons forming such association is not chargeable to tax. in such cases, there must be complete identity between the contributors and the participants. Therefore, where industry or trade associations claim both to be charitable institutions as well as mutual organizations and their activities are restricted to contributions from and participation of only their members, these would not fail under the purview of the proviso to section 2(15) owing to the principle of mutuality. However, if such organizations have dealings with non-members, their claim to be charitable organizations would now be governed by the additional conditions stipulated in the proviso to section 2 (15). 3.2. In the final analysis, however, whether the assessee has for its object ‘the advancement of any other object of general public utility’ is a question of fact. if such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled to claim that its object is charitable purpose. In such a case, the object of ‘general public utility’ will be only a mask or a device to hide the true purpose which is trade, commerce or business or the rendering of any service in relation to trade, commerce or business. Each case would, therefore, be decided on its own facts and no generalization is possible. Assessees, who claim that their object is ‘charitable purpose’ within the meaning of Section 2(15), would be well advised to eschew any activity which is in the nature of trade, commerce or business or the rendering of any service in relation to any trade, commerce or business. (ii) Kindly note the para no, 2.1 of that circular specifically states that when the case is covered under first three limbs i.e. Relief to the poor, Education & Medical the proviso of section 2(15) will have no effect. We submit that the case of the appellant is covered under the first limb as the main object of the appellant Trust is imparting 25 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre of the education, so the proviso of section 2(15) will have no effect the case of the appellant trust. (iii) Further the main intent and purpose of enacting the proviso to section 2(15) was to take action in those cases where Assessee under the garb of the carrying out Charitable Activates carried out business & commercial activities. By no stretch of any imagination, in the appellant trust this proviso can apply. (iv) We further submit that in the case of the appellant trust all the managing trustee of the concerned trust are person of great repute of National level and also having great standing. Nobody shares any portion of surplus of receipt over the expenditure. This also proves that activities of the Trust are not business activities. (v) We would like to again rely on the Judgment of the Mumbai Tribunal in the case of Shri Sanmukhanand Fine Arts & Sangeet Sabha supra in this case the Mumbai ITAT held as under: 6.4. Finally, we would like to address the argument of the FAA about applicability of proviso to section 2(15) of the Act. We find that the AO as well as the FAA has emphasized the fact that the provisions of the proviso to the section 2(15) the assessee was not entitled to claim the benefit of section 11 of the Act. We would like to reproduce the proviso and it reads asunder — (15) “charitable purpose” includes relief of the poor, education, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility : Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity 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, irrespective of the nature of use or application, or retention, of the income from such activity.” If we consider the various activities carried out by the assessee, as evident from the various pages of the PB, it is clear that it was incurring expenditure in the fields of education and medical relief. Therefore, in our opinion, the assessee cannot be denied the benefit of section 11. 26 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre Here, we would like to refer to the case of Ahmedabad Urban Development Authority (396 [TR 323) of the Hon'ble Gujarat High Court wherein the court has held as under: “The introduction of the proviso to section 2(15) of the Income-tax Act, 1961, by virtue of the Finance Act, 2008 was directed to prevent the unholy practice of pure trade, commerce and business entities from masking their activities and portraying them in the garb of an activity with the object of a general public utility. It is not designed to hit at those institutions, which had the advancement of the objects of general public utility at their hearts and were charity institutions. The expressions trade, commerce and business as occurring in the first proviso to section 2(15) must be read in the context of the intent and purport of section 2(15) of the Act and cannot be interpreted to mean any activity which is carried on in an organized manner. The purport of the first proviso to section 2(15) of the Act is not to exclude entities which are essentially for charitable purposes but are conducting some activities for a consideration or a fee. 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 sub serve the Charitable purpose or to earn profit. Where profit making is the predominant object of the activity, the 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 its character of a charitable purpose merely because some profit arises from the activity.” Considering the above, we hold that the assessee is running music school and providing medical services and it is utilising SH for augmenting its funds In these circumstances in our opinion, it cannot be held that the it is carrying out business activities and the charitable activities are by product, as alleged by the departmental authorities. What has to seen in such cases is a holistic view of the things and not a narrower view. We would like to refer to the matter of Institute of Chartered Accountants of India (358 ITR 91), wherein the Hon'ble Delhi High Court has held as under: “A plain reading of section 2(15) of the Income-tax Act, 1961, indicates that the expression “charitable purpose” has been divided into six categories, namely, (i) relief to poor, (ii) education, (iii) medical relief, (iv) preservation of environment including watersheds (forest and wildlife), (v) preservation of monuments and places or objects of artistic or 27 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre historical importance, and (vi) advancement of any other object of general public utility. The first proviso to section 2(15) of the Act carves out an exception which excludes advancement of any other object of general public utility from the scope of charitable purpose to the extent that it involves carrying on any activity in the nature of trade, commerce, or business or any activity of rendering certain services in relation to any trade, commerce, or business, for a cess or fee or any other consideration is irrespective of the nature of the use or obligation, or retention of the income from such activity. The expressions ‘trade’, “commerce” and “business”, as occurring in the first proviso to section 2(15) of the Act, must be read in the context of the intent and purport of section 2(15) of the Act and cannot be interpreted to mean any activity which is carried on in an organised manner. The purpose and the dominant object for which an institution carried on its activities is maternal to determine whether the same is business or not. 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 activities for a consideration or a fee. The object of introducing the first proviso is to exclude organisations which are carrying on regular business from the scope of ‘charitable purpose”. The expression “business”, “trade” or “commerce” as used in the first proviso must, thus, be interpreted restrictively and where the dominant object of an organisation is charitable any incidental activity for furtherance of the object would not fall within the expression “business”, “trade” or “commerce”. In light of the above discussion, we decide the first ground of appeal in favour of the assessee. AS we have allowed first ground of appeal, so, we hold that Gs.AO 2.4 and 5 have become infructuous. Hence we are not adjudicating them. We submit the aforesaid judgment squarely covers the case of the appellant as the appellant is also do not involve in any trade or commerce or business for the purpose of earning the profit but the appellant trust is essentially for charitable purpose. 1. We would like to submit that the Supreme Court in the case of ACIT vs Thanti trust 247 ITR 785 (SC) held that “The scope of Sub section (4A) of section 11, as amended since 1992, is more beneficial to trust or institution than the scope of the sub-section before the amendment. As it stands amended in 1992, all that is required for the business income of a trust or institution to be extent from tax is that the business should be incidental to the attainment of the objectives of the trust or institutions. A business, whose income is 28 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre utilized by the trust or the institution for the purpose of achieving objective of the trust, is a business which is incidental to attainment of the object of the trust or institutions. 2. We submit without prejudice that even if the hall rent income is being treated as business income then also such income is fully utilized for the object of the trust and accordingly following the judgment of the Thanti Trust Supra must be treated as the business incidental attainment of the objective of the trust. As submitted the appellant is duly maintaining the record of income and expenditure of the hall the case of the appellant comes under exceptional category of the provision of section 11(4A). FINANCE MINISTER’S BUDGET SPEECH Reference to the proposal in the budget Speech of Finance Minister is most cursory. Paragraph 180, wherein the Finance Minister has referred to the amendment, is in the following words: “180. ‘Charitable Purpose’ includes relief of the poor, education or medical relief. and any other object of general public utility. These activities are exempt, as they — should be. However, some entities are 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 purposes’. Obviously this is not this was not the intention of the parliament and hence | propose to amend the law to exclude the aforesaid cases. Genuine Charitable organisation will not in any way be affected”. (Enclosure - F) According to GOI, MOF , it is gathered that they wanted to bring to tax certain cases which enjoyed exemption but were in reality the same were carrying out commercial / business activities, and not paying any Taxes. The GOI and FM's intention to Amend provisions of Sec 2 (15) by Financial Act 2008, was to bring to tax certain “Nature of General Public Utility Service”, (GPUS), which under the GARB of “Charitable Purpose” and having obtained exemption U/S 12 A, were in reality carrying out mainly or predominantly Business or Commercial Activities and not Charitable Activates. To book such Assessees, Amendment was introduced in the Act. Prior to Ass yr 2009 -10, no dispute was there between the |T Department and the Assessee regarding taxability of its Receipts. The AO always respected the exemption granted by CIT & enjoyed by the Assessee. 29 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre THE ASSESSEE IS APPROVED BY THE COUNCIL OF SCIENTIFIC AND INDUSTRIAL RESEARCH THE PRESCRIBED AUTHORITY FOR PURPOSES OF CLAUSE II OF SUBSECTION 1 OF SECTION 35 OF THE INCOME TAX ACT 1961 VIDE NOTIFICATION NO. S.0.1323 DATED MAY 07 1974. ENCLOSURE-B This shows that the Revenue Authorities have acknowledged that Nehru Centre imparts Scientific and Industrial Research related education STAY OF DEMAND GRANTED BY CIT (E), Kindly appreciate that the Learned CIT(Expenditure) vide letter CIT (Expenditure/ Stay/2016-17 dated 06.10.2016 granted the Stay on demand raised by the AO. While granting the stay the learned CIT(E) mentioned as under: “In this regards, the assesse trust mainly relied on the decision in the following three cases of the Jurisdictional Bombay High Court: DIT(E) vs. MS Lala Lajpatrai Memorial Trust, haji Ali, Mumbai (13.04.2016) DIT vs. Vile Parle Kelvani Mandal DIT(E) vs. Fellowship of Physically Handicapped in Mumbai (10.03.2015) It is noted that the addition made by the AO is covered in favour of the assessee by the above three judgments of Jurisdictional Bombay High Court and accordingly as per Board Instruction no. 1914 dated 21.3.1996 and partially modified vide F.No. 404/72/93-ITCC dated 29.2.2016 the demand in the case of the assesse trust is stayed till the disposal of appeal by the first Appellate Authority’. The CIT(E) also accepted that the appellant case is covered by the judgment of Jurisdictional Bombay High Court. (Enclosure - G) 3. In view of the above submission and binding decision including the recent decision of ITAT Mumbai in the case of Sanmukhanand Fine Arts & Sangeet Sabha, and Judgment of Bombay High Court in the case mentioned in para 18 , we pray to appreciate the grounds and oblige.” 30 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre 8. After considering the detailed submissions and the additional grounds of appeal filed by the assessee Ld.CIT(A) allowed the appeal filed by the assessee and adjudicated that the assessee is not hit by the proviso to section 2(15) of the Act with the following observations: “Crux of the matter is whether the assessee is engaged in the activity for charitable purposes.as defined in section 2(15) of the I.T. Act, 1961 or not and if so what is the nature of that activity that is classifiable and qualifies as a charitable activity. There are four limbs of charitable purposes in section 2(15) of the I.T. Act, 1961 out of which ‘relief of the poor, education’ and medical relief and preservation of monuments .................and the fourth one is ‘objects of general public utility”. The proviso comes into the picture only in respect of the fourth activity that is ‘advancement of general public utility. It appears from the objects and the activities carried on by the assessee that ‘the predominant activity of the assessee has been to run Nehru Planetarium’, ‘Discovery of India Hall’ and organise the Painting and Photographic Exhibitions’ and organize seminars on the history of India and Nehruvian thoughts from time to time. It appears from the records that the AO has tried to define the word ‘education’ in narrow terms whereas ‘education’ is a very wide term which covers not only the skills and information imparted in schools and colleges but also covers the entire field of any institution which disseminates ‘information and skills’ not only offline but online as well and that is also not confined to basic education like languages, sciences and history and geography, but also encompasses the entire gamut of universe. For example, running of the planetarium and exhibition about astronomy is a living example of teaching different facets of astronomy by a live demonstration of the universe through a film on a semicircular dome in darkness and then exhibiting various historical facts in the field of astronomy by displaying photographic exhibits and cardboards with information is an exercise similar to imparting knowledge to the public at large for a nominal fee is itself an activity in the field of education. Similar is the case of holding painting exhibitions in the art gallery and holding exhibitions of historic and general importance in the ‘discovery of India hall’ from time to time and most of these exhibitions are free of charge and any member of public can visit these places during visiting hours. The assessee charges nominal fees from artists and/or exhibitors/organisers of these exhibitions but these are free for public. Dissemination of information about painting and photographs and also about history 31 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre of India and other facets of INDIA free of charge for the general mass of people is similar to educating general public about ‘painting’, ‘photography’, history’ and other aspects of life in general. Take for example the services rendered by Famous Art Galleries (any Govt. run Art Galleries) in the field of exhibition of fine arts like paintings, photographs, sculptures and artistic installations for the last several decades, these Galleries charge nominal fees from artists but the visits to them are or at a nominal fee. But look at the service rendered by these institutions in the field of spread of knowledge and information in the field of paintings photography, sculpture and artistic installations over decades and the role of these institutes in ‘spreading and educating general mass of people with knowledge in these fields’ is phenomenal. Most of such institutions survive on ‘voluntary donations and contributions’ and/or government aid and/or income derived from investments by way of interest and dividends’ and ‘property held in trust by way of rent ‘. And that is exactly the case with the assessee. Assessee has investments from which it derives interest and also has ‘property held in trust’ from which it derives income by way of rent which are ultimately applied to meet the ‘objects of the trust, that is, education and sometimes meeting objects of general public utility. It can be observed from the income and expenditure account that ‘most of these charitable activities do not generate any surplus and there is always a deficit which is generally met with by surplus arising from the net rental and interest income after defraying general expenses. It can also be observed from the balance sheet that a large chunk of land was given to the assessee for a nominal fee and government has also given it a grant in aid running into crores of rupees for running the institution and this institution and its activities are also recognized by the Govt Of India and Govt Of Maharashtra. In nutshell, it is established beyond doubt that the assessee was established for the dissemination of knowledge which is equivalent to imparting knowledge in the field of Astronomy and Science and History and this activity has been carried on by it during the assessment year under reference as evident from the page 5 to 16 of the 39" Annual Report for the year ended 31% March 2010. Further, on this subject, the analysis of the proviso to section 2(15), the Finance Minister's speech in the Parliament and CBDTs clarification as discussed by the Hon'ble High Court of Gujarat in the case of Sabarmati Ashram Gaushala Trust 362 ITR 539 is mentioned herein below: a “4. Term "Charitable Trust" is defined in Section 2(15) of the Act which includes the relief to the poor, education, medical relief, preservation of environment; including watersheds, forests and wildlife and preservation of monuments or places or objections of 32 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre artistic or historic interest and advancement of any other object of general public utility. Proviso to Section 2(15) and further proviso whereof inserted by Finance Act 2010 w.e.f. 1st April 2009 read, thus- Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity 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, irrespective of the nature of use or application, or retention of the income from such activity. Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is twenty five lakh rupees or less in the previous year. 5. The legal controversy in the present Tax Appeal centers around the first proviso. In the plain terms, the proviso provides for exclusion from the main object of the definition of the term "Charitable purposes" and applies only to cases of advancement of any other object of general public utility. If the conditions provided under the proviso are satisfied, any entity, even if involved in advancement of any other object of general public utility by virtue to proviso, would be excluded from the definition of "charitable trust". However, for the application of the proviso, what is necessary is that the entity should be involved in carrying on activities in the nature of trade, commerce or business, or any activity of rendering services in relation to any trade, commerce or business, for a cess or fee or any other consideration. In such a situation, the nature, use or application, or retention of income from such activities would not be relevant. Under the circumstances, the important elements of application of proviso are that the entity should be involved in carrying on the activities of any trade, commerce or business or any activities of rendering service in relation to any trade, commerce or business, for a cess or fee or any other consideration. Such statutory amendment was explained by the Finance Ministers speech in the Parliament. Relevant portion of which reads as under:- I once again assure the House that genuine charitable organizations will not in any way be affected. The CBDT will, following the usual practice, issue an explanatory circular containing guidelines for determining whether any entity is carrying on any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business. Whether the purpose is a charitable purpose will depend on the totality of the facts of the case. Ordinarily, Chambers of Commerce and similar organizations rendering services to their members would not be 33 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre affected by the amendment and their activities would continue to be regarded as "advancement of any other object of general public utility". 6. In consonance with such assurance given by the Finance Minister on the floor of the House, CBDT issued a Circular No. 11 of 2008 dated 19th December 2008 explaining the amendment as under:- 3. The newly inserted proviso to section 2(15) will apply only to entities whose purpose is advancement of any other object of general public utility i.e., the fourth limb of the definition of charitable purpose contained in section 2(15). Hence, such entities will not be eligible for exemption u/s 11 or u/s 10(23C) of the Act if they carry on commercial activities. Whether such an entity is carrying on any activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of the activity. 3.1 There are industry and trade associations who claim exemption from tax u/s 11 on the ground that their objects are for charitable purpose as these are covered under any other object of general public utility. Under the principle of mutuality, if trading takes place between persons who are associated together and contribute to a common fund for the financing of some venture or object and in this respect have no dealings or relations with any outside body, then any surplus returned to the persons forming such association is not chargeable to tax. In such cases, there must be complete identity between the contributors and the participants. Therefore, where industry or trade associations claim both to be charitable institutions as well as mutual organizations and their activities are restricted to contributions from and participation of only their members, these would not fall under the purview of the proviso to section 2(15) owing to the principle of mutuality. However, if such organizations have dealings with non-members, their claim to be chargeable organizations would now be governed by the additional conditions stipulated in the proviso to section 2(15). 3.2 In the final analysis, however, whether the assessee has for its object the advancement of any other object of general public utility is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled to claim that its object is charitable purpose. In such a case, the object of general public utility will be only a mask or a device to hide the true purpose which is trade, commerce or business or the rendering of any service in relation to trade, commerce or business. Each case would, therefore, be decided on its own facts and no generalization is possible. Assessees, who claim that their object is charitable 34 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre purpose within the meaning of section 2(15), would be well advised to eschew any activity which is in the nature of trade, commerce or business or the rendering of any service in relation to any trade, commerce or business. 7. What thus emerges from the statutory provisions, as explained in the speech of Finance Minister and the CBDT Circular, is that the activity of a trust would be excluded from the term charitable purpose if it is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business for a cess, fee and/or any other consideration. It is not aimed at excluding the genuine charitable trusts of general public utility but is aimed at excluding activities in the nature of trade, commerce or business which are masked as charitable purpose. 8. Many activities of genuine charitable purposes which are not in the nature of trade, commerce or business may still generate marketable products. After setting off of the cost, for production of such marketable products from the sale consideration, the activity may leave a surplus. The law does not expect the Trust to dispose of its produce at any consideration less than the market value. If there is any surplus generated at the end of the year, that by itself would not be the sole consideration for judging whether any activity is trade, commerce or business - particularly if generating surplus is wholly incidental to the principal activities of the trust; which is otherwise for general public utility, and therefore, of charitable nature.” The analysis made by the Hon'ble Gujarat High court as reproduced above explains the distinction between the trust engaged in charitable purpose and the trust engaged in the nature of trade, commerce or business. In my opinion the assessee is not hit by the proviso to Sec 2(15) of Income-tax Act, 1961 In the light of the above facts and circumstances of the case and based on several decisions of the Hon'ble High Courts and Hon'ble ITAT, it is concluded that the assessee was engaged in charitable activity and for the purposes of advancing its objects, it earned income which was incidental to its activities. In nutshell, it is held that it is an institution which imparts education and hence fulfills the basic condition laid down in section 2(15) of the I.T. Act, 196 and hence AO's contention in this regard is rejected. In view of this the question of applicability of the proviso to section 2(15) of the I.T. Act, 1961 does not arise.” 35 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre 9. Aggrieved with the above order, revenue preferred an appeal before us raising following grounds in its appeal: - “1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) Is right in view of the fact that the definition of charitable activities has been amended by insertion of proviso to section 2(15) of the IT. Act and even if, the assessee’s objects are considered charitable, they will fall in the category of the “advancement of any other object of general public utility” attracting proviso to sec. 2(15) of I.T. Act on income from the activities such as exhibitions of commercial entities, professional artists, space for corporate meetings and functions etc. which clearly are activities in the nature of commerce or business specially looking into the proportion of receipts from such activities in overall activities clearly showing that it is the main activity of assessee and therefore such income is not exempt in view of section 13(8) of I.T. Act, 1961”. 2. “Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is right in holding that income from letting out the properties is not a business income but income from house property and thus the provisions of section 11(4A) and proviso to section 2(15) will not apply in the assessee’s case despite the fact that the objects of the trust are only in the nature of “advancement of any other object of general public utility”. 3. The appellant prays that the order of the Commissioner of Income Tax (Appeals)-1, Mumbai be set aside and that of the Assessing Officer be restored. 4. The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary.” 10. In the above grounds of appeal revenue is aggrieved with the finding given by the Ld.CIT(A) on proviso to section 2(15) of the Act and the contention of the revenue is that the object of the trust is only in the nature of advancement of any other object of the general public utility. 36 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre 11. Before us, Ld. DR vehemently argued and relied on the finding of the Assessing Officer and submitted that the object of the assessee will fall in the category of advancement of any other object of the general public utility. The operations carried on by the assessee are in the nature of commerce or business specially looking into the proportion of receipts from such activities. Therefore, the activities carried on by the assessee are not exempted in view of the section 13(8) of the Act. 12. On the other hand, Ld. AR submitted that till the A.Y.2009-10 for which scrutiny Assessment u/s. 143(3) of the Act were made, the activities of the assessee’s are Public Charitable Trust and was never considered as ‘any other object of general public utility’ even though the assessee’s trust existed as per the definition of Charitable Purpose u/s. 2(15) of the Act. He submitted that it is only after the amendment to the proviso to Section 2(15) of the Act the Assessing Officer has treated the activities of the assessee Trust as object of general public utility which was earlier treated as educational activities, he also submitted that there is no change in the activities during the year under Appeal. He submitted that the activities of the assessee are same over the years and no change. He submitted that the activities of the assessee continues to be educational and in order to stress the above point he brought to our notice submissions made by 37 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre the assessee before the Ld.CIT(A). He also refers to the Circular No. 11 of 2008 issued by CBDT on the issue of applicability of proviso to section 2(15) of the Act which are in line with the Finance Minister’s speech in the parliament. Finally, he relied on the finding of the Ld.CIT(A) and prayed that it may be upheld. 13. Considered the rival submissions and material placed on record, we observe from the record that assessee was granted 12A registration and continues to enjoy as the trust is established with the object to promote education. It is also fact on record that assessee was treated as an institution to promote the education and cause for promoting the education over the years until the present impugned Assessment year in which Assessing Officer after considering the object and activities of the assessee and came to the conclusion that assessee is hit by the proviso to section 2(15) of the Act and he categorized the assessee under the category of advancement of any other general public utility. We observe from the record that assessee is engaged in the formal form of Certification course of Astronomy and Astrophysics with collaboration with Mumbai University. The Annual Report submitted by the assessee gives detailed discussion of the Education activities carried on by the assessee, it is also found that the assessee is imparting the education in the form of 38 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre organizing various workshop/lectures/Conferences apart from providing the certificate course. It is also fact on record that assessee is also carrying out activities such as Annual Exhibitions for poor artists and exhibitions held in the hall of Arts, the Nehru Center also organizes programs on Music and Culture etc., it is also submitted that Council of Scientific and Industrial Research has approved the assessee’s trust for the purpose of section 35(1) of Clause (ii) of the Act. 14. We also observe from the record that Assessing Officer has accepted that some of the activities assessee undertakes in the field of education and it spent some income on these activities. Therefore, Assessing Officer has not disputed the fact that assessee is engaged in the activities of Education and relief to poor. We are in agreement with the findings of the Ld.CIT(A) that the term education should be understood in common parlance and should not be mixed up with the mode of giving education. With the advancement in technology the education can be provided on electronic gadgets also. Therefore, we do not find any reason why assessee should not be treated as engaged for imparting education. Through several conventional and modern methods which are in the nature of imparting education. Therefore, we do not see any reason to interfere with the finding of the Ld.CIT(A). 39 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre 15. Coming to another issue whether hiring charges and planetarium receipts are in the nature of business or not, we observe that Assessing Officer treated the hiring and planetarium receipts are in the category of business and not for charitable activities. We observe that Ld.CIT(A) by relying in the case of Institute of Chartered Accountant of India v. DIT(E) [(2013) 35 140 (Delhi)] held that ICAI does not carry on any business, trade or commerce. The activity of imparting education in the field of accountancy and conducting courses are activities in furtherance of the objects for which the ICAI has been constituted. By relying on the above decision Ld.CIT(A) held that activity of running the planetarium for general public at normal rate and earning revenue from shows does not make the activity as non-charitable. Therefore, we do not find any reason to interfere with such finding of the Ld.CIT(A). 16. Further we observe that the objects and activities carried on by the assessee are predominant activities have been to run Nehru Planetarium, ‘Discovery of India Hall’ and organize the Painting and Photographic Exhibitions and organize seminars on the history of India and Nehruvian thoughts from time to time. It is observed that Ld.CIT(A) answered to the re-defining of the above activities by the Assessing Officer that these are not for the purpose of education. The Ld.CIT(A) observed that ‘education’ 40 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre is a very wide term which covers not only the skills and information imparted in schools and colleges but also covers the entire field of any institution which disseminates ‘information and skills’ not only offline but online as well and that is also not confined to basic education like languages, sciences etc., but also encompasses the entire gamut of universe. We are in agreement with the decision of the Ld.CIT(A) that most of the institutions depends on voluntary donations and contributions and aid from government and income from property held by the trust by way of rent and assessee also depends wholly on the investments from which it derives interest and also income from the property held in trust by way of rent which are ultimately applied to meet the ‘objects of the trust, that is, education and in certain ways to meet the objects of general public utility. Ld.CIT(A) allowed the appeal of the assessee based on the facts available on record and by relying on the CBDT clarification to the Finance Minister’s speech in the Parliament and also relying on the Hon'ble Gujarat High Court in the case of Sabarmati Ashram Gaushala Trust [362 ITR 539]. After considering the facts on record, we do not see any reason to interfere in the conclusions reached by the Ld.CIT(A) that assessee was engaged in charitable activity and for the purpose of advancing its objects; it earned income which was incidental to its activities. He also came to 41 ITA NO. 7461/MUM/2018 (A.Y: 2010-11) Nehru Centre the conclusion that it is an institution which imparts education and fulfills the basic condition laid down in section 2(15) of the Act. Therefore, the proviso to section 2(15) of the Act does not arise in the case of the assessee. With the above observations and facts on record we deem it fit and proper to dismiss the grounds raised by the revenue. Accordingly, grounds raised by the revenue are dismissed. 17. In the result, appeal filed by the revenue is dismissed. Order pronounced on 04.02.2022 as per Rule 34(4) of ITAT Rules by placing the pronouncement list in the notice board. Sd/- Sd/- (PAVAN KUMAR GADALE) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 04.02.2022 Giridhar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum