Southern Gujarat Chamber Trade & Industry Development Centre, Surat V. Income Tax Officer, Surat

ITA 910/AHD/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 2089 (ITAT-SURAT)
• Duration Of Justice: 1 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 18-07-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 11-04-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SRINIVAS T BIDARI
• Keywords: Charitable institution; Revenue expenditure; Capital expenditure
• Section: 11; 15; 12A

Judgement Text

M/S.SOUTHERN GUJARAT CHAMBER TRADE & INDUSTRY DEVELOPMENT CENTRE IN ITA NO.910/AHD/2016/SRT PAGE 1 OF 12 , , INCOM TAX APPELLATE TRIBUNALSURAT-BENCH-SURAT . . , . . , BEFORE SHRI C .M. GARG,JUDICIAL MEMBER AND SHRI O. P. MEENA, ACCOUNTANT MEMBER ITA NO.910/AHD/2016/SRT ASSESSMENT YEAR:2011-12 M/S.SOUTHERN GUJARAT CHAMBER TRADE & INDUSTRY DEVELOPMENT CENTRE SAMRUDDHI NEAR MAKKAI BRIDGE, NANPURA, SURAT 395001. PAN: AACTS 7513C V S. THE INCOME TAX OFFICER, EXEMPTION-WARD, SURAT. APPELLANT /RESPONDENT /ASSESSEE BY SHRI HIRENVEPARI , CA /RESPONDENT BY SHRI SRINIVAS T. BIDARI, CIT - DR / DATE OF HEARING: 0 7 .0 3 .2018 /PRONOUNCEMENT DATE 25 .04 .2018 ORDER PER O. P. MEENA, AM 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-3, SURAT [IN SHORT THE CIT(A)] DATED 26.02.2016 PERTAINING TO ASSESSMENT YEAR 2011-12, WHICH IN TURN HAS ARISEN FROM THE ORDER DATED 28.03.2014 PASSED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 5, SURAT (IN SHORT THE AO ) UNDER SECTION 143 (3) OF INCOME TAX ACT,1961 ( IN SHORT THE ACT). 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS UNDER: I. DENIAL OF EXEMPTION UNDER SECTION 11 OF THE ACT (1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND AS PER LAW ,THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN REJECTING THE CLAIM OF EXEMPTION UNDER SECTION 11 OF THE ACT. M/S.SOUTHERN GUJARAT CHAMBER TRADE & INDUSTRY DEVELOPMENT CENTRE IN ITA NO.910/AHD/2016/SRT PAGE 2 OF 12 (2) THE APPELLANT SUBMITS THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) WRONGLY APPLIED THE PROVISO TO SUB-SECTION (15) OF SECTION 2 OF THE ACT WHEN THE APPELLANT HAD NOT VIOLATED VALUATION VIOLATION ANY CONDITION THEREOF. (3) THE APPELLANT SUBMITS THE APPELLANT ONLY EARNED RENT AND DID NOT CARRY OUT ANY ACTIVITY ALONG WITH SAR INFRACON LTD. II. TAXING RS. 68,96,676: THE LD. CIT (A) ERRED IN CONFIRMING TAXABILITY OF RS. 68,96,676 WHICH WAS IN THE NAME OF RENT. III. THE LD. CIT (A) OUGHT TO HAVE DELETED INTEREST UNDER SECTION 234A U/S. 234B. 3. BRIEFLY, STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CHARITABLE TRUST REGISTERED UNDER SECTION 12A VIDE LETTER NO. SRT/COT-II/TECHNICAL/110-27-S/01- 2000 DATED 27.11.2001. THE MAIN OBJECT OF THE TRUST IS PROMOTION AND DEVELOPMENT OF TRADE AND INDUSTRIES IN SOUTH GUJARAT. ON VERIFICATION OF COMPUTATION OF INCOME, THE AO NOTICED THAT THE ASSESSEE TRUST HAD SHOWN INTEREST INCOME DERIVED FROM BANK AND FURTHER NOTICED THAT THE CONTRIBUTION RECEIVED FROM SAR INFRACON REFLECTED IN INCOME AND EXPENDITURE ACCOUNT. THE AO OBSERVED THAT THE LETTER DTD. 24.04.2013 OF THE ASSESSEE MAKES OUT A CASE THAT THE TRUST IS HAVING CONVENTION CENTER FOR ORGANIZING EXHIBITION BY INDUSTRIES FOR PROMOTION OF TRADE AND INDUSTRY. THIS CONVENTION CENTER IS GIVEN ON RENT AND INCOME IS EARNED OUT OF IT. AS PER THE MOU EXECUTED, INCOME PORTION IS SHARED WITH SAR INFRACON PVT. LTD. EVEN FROM OBJECT, THE TRUST IS CREATED FOR THE PURPOSE OF THE ADVANCEMENT OF ANY OTHER OBJECT OF PUBLIC UTILITY AS DEFINED UNDER SECTION 2(15) OF THE ACT. THE AO REPRODUCED THE OBJECT OF THE TRUST IN HIS ASSESSMENT ORDER. THE AO OBSERVED THAT AS PER LETTER DTD. 24.04.2013 OF THE ASSESSEE, TWO CONDITION TO BE SATISFIED WHILE INVOKING PROVISION OF SECTION 2(15) I.E. (1) TRUST CARRYING OUT ACTIVITY OF TRADE, COMMERCE OR BUSINESS & (2) ACTIVITY RENDERING ANY SERVICES IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS FOR CESS OR FEES OR ANY OTHER CONSIDERATION. THE AO OBSERVED THAT IT IS CLEAR FROM THE LETTER OF THE ASSESSEE THAT TRUST IS PROVIDING FACILITY/SERVICES TO THE TRADE /INDUSTRIES FOR ORGANIZING EXHIBITION OR RECOVERING HEFTY CESS OR FEES CONSIDERATION WHICH IS EVIDENT FROM THE FACTS AVAILABLE ON RECORD. ACCORDINGLY, THE PROVISIONS OF SECTION 2(15) ARE ATTRACTED IN THE CASE UNDER CONSIDERATION. THE AO FURTHER NOTICED THAT THERE IS INCOME FROM SAR INFRACON PVT. LTD. AT RS.68,96,678/- EVEN AFTER PAYMENTS OF RS.1,89,51,000/- TO SAR INFRACON PVT. LTD. WHICH IS CAPITAL IN NATURE. THE AO AFTER ISSUING SHOW CAUSE TO THE ASSESSEE AND AFTER CONSIDERING REPLY AND ALLOWING THE DEDUCTION TO TOTAL REVENUE EXPENDITURE HELD THAT PAYMENT OF RS.1,89,51,000/- PAID TO SAR INFRACON PVT. LTD. IS NOT REVENUE EXPENDITURE M/S.SOUTHERN GUJARAT CHAMBER TRADE & INDUSTRY DEVELOPMENT CENTRE IN ITA NO.910/AHD/2016/SRT PAGE 3 OF 12 BUT IN THE NATURE OF CAPITAL EXPENDITURE AS PER MOU. THE AO ACCORDINGLY MADE ADDITION OF RS. 68,96,676 BEING INCOME CHARGEABLE TO TAX FROM TRUST. 4. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT (A). THE LD. CIT (A) REFERRED AND QUOTED THE PROVISO TO SECTION 2(15) OF THE ACT AS IT WAS AMENDED BY THE FINANCE ACT, 2008 WITH EFFECT FROM 01/04/2009. THE SAID PROVISO READS AS UNDER:- '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.' 5. THE CIT (A) THERE AFTER NOTED THAT AS EVIDENT FROM RECORDS AND DETAILS OF MOU NOTED AS FOLLOWS : 7.1 AS EVIDENT FROM THE RECORDS, DETAILS AND MOU FILED BY THE AR, A SPECIAL PURPOSE VEHICLE (SPV) WAS FORMED FOR DEVELOPMENT OF PROJECT WITH OBJECTIVE OF ENHANCING COMPETITIVENESS OF DOMESTIC NATURE BY PROVIDING QUALITY INFRASTRUCTURE. THIS SPECIAL PURPOSE VEHICLE IS M/S SAR INFRCON PVT LTD (A LICENSED COMPANY UNDER SECTION 25 OF THE COMPANIES ACT). THE SAID SAR INFROCON PVT LTD HAS ENTERED INTO AN AGREEMENT (MEMORANDUM OF UNDERSTANDING) WITH THE APPELLANT, WHEREIN IT WAS AGREED THAT THE SAID SAR INFORCON PVT LTD WOULD CREATE A CONVENTION CENTRE IN THE LAND BELONGING TO THE APPELLANT (ALLOTTED TO IT BY THE GOVERNMENT OF GUJARAT). THE RELEVANT PORTION OF THE MEMORANDUM OF UNDERTAKING IS ALREADY PRODUCED IN ARS SUBMISSION SUPRA. 7.2 FROM MOU, IT IS CLEAR THAT THE APPELLANT IS TO PROVIDE A LAND FOR CREATION OF CONVENTION CENTRE TO M/S SAR INFROCON PVT LTD, FOR WHICH, IT IS TO RECEIVE CONSIDERATION. THE RELEVANT PARAS OF MOU ARE AS UNDER :- A. IN RESPECT OF LAND USED FOR CONVENTION CENTRE AS ALSO FOR PARKING AND FOR OTHER CONTRIBUTION MADE BY THE TRUST, THE TRUST WILL HAVE OVERRIDING CHARGE OF 50% ON GROSS REVENUE GENERATED IN THIS ACTIVITY. (NET OF SERVICE TAX). IT WOULD BEAR COST OF LAND REVENUE AND OTHER EXPENSES APPLICABLE TO LAND. B. AS REGARDS THE COMPANY, IT WILL BE ENTITLED TO BALANCE 50% AND WOULD BEAR ALL THE REMAINING COSTS. 7.3 SO, THE CONSIDERATION IS FOR USE OF LAND, PARKING AND OTHER CONTRIBUTION MADE BY APPELLANT. THE AR OF THE APPELLANT. THE AR OF THE APPELLANT ARGUED THAT THE APPELLANT IS NOT INVOLVING IN THE SAID CONVENTION CENTRE, WHICH CAN BE SAID TO BE COVERED WITHIN THE SCOPE OF PROVISO TO SECTION 2(15) OF THE INCOME TAX ACT. HE FURTHER ARGUED THAT THE AMOUNT RECEIVED BY THE APPELLANT IS MORE OF THE NATURE OF THE RENT FOR THE USE OF LAND OF THE APPELLANT. 7.4 IT IS NOT IN DISPUTE, THAT OBJECTIVES OF APPELLANT FALLS UNDER, THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. IT IS ALSO CLEAR THAT THE ACTIVITIES CONDUCTED IN THE CONVENTION CENTRE BUILT UP BY SPV AS PER MOU ARE FOR RENDERING SERVICE / ASSISTANCE TO TRADE, COMMERCE, AND BUSINESS OF SOUTH GUJARAT. 7.5 ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES AND THE TEST OF MOU BETWEEN THE APPELLANT TRUST AND M/S SAR INFRACON PVT LTD, IT IS EVIDENT THAT BOTH OF THEM HAVE COME TOGETHER TO CREATE A QUALITY INFRASTRUCTURE AND CONSIDERATION RECEIVED BY THE APPELLANT IS FOR USE OF ITS LAND M/S.SOUTHERN GUJARAT CHAMBER TRADE & INDUSTRY DEVELOPMENT CENTRE IN ITA NO.910/AHD/2016/SRT PAGE 4 OF 12 PARKING AND OTHER CONTRIBUTION. THIS IS NOT A SIMPLE RENT AGREEMENT AS PORTRAYED BY THE AR. HAD IT BEEN RENT SIMPLILCITOR THE RENT WOULD HAVE BEEN A CERTAIN FIXED AMOUNT PER MONTH OR PER YEAR. THE RENT WOULD BE PAYABLE IRRESPECTIVE OF REVENUE OF THE CONVENTION CENTRE. THAT IS NOT THE CASE HERE. HERE, THE APPELLANT IS GETTING 50% OF REVENUE OF THE SAID CONVENTION CENTRE. THE APPELLANT TO INCUR EXPENSES CONNECTED TO LAND AND ALSO LAND REVENUE. THE OTHER PARTY TO MOU TO RECEIVE OTHER 50% OF REVENUE AND IT WILL INCUR ALL OTHER EXPENSES. SO THE INCOME OF APPELLANT IS CONTINGENT TO THE REVENUE GENERATION IN CONVENTION CENTRE FROM ITS ACTIVITIES. ON CAREFUL CONSIDERATION OF THE ARRANGEMENT, IT APPEARS THAT THE APPELLANT IS NOT MERE A LAND LORD, BUT IT IS ACTUALLY A 50% PARTNER IN THE CONVENTION CENTRE, ENTITLED TO 50% OF REVENUE. THE LAND IS THE CAPITAL CONTRIBUTION OF APPELLANT IN THE CONVENTION CENTRE. 7.6 THE CREATION AND MAINTENANCE OF THIS CONVENTION CENTRE DEFINITELY FALLS WITHIN THE SCOPE OF OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO TRADE, COMMERCE, AND BUSINESS FOR A CESS OR ANY OTHER CONSIDERATION; IRRESPECTIVE OF THE NATURE OF THE USE OR APPLICATION OR RETENTION OF THE INCOME FROM SUCH ACTIVITY. 7.7 IN VIEW OF THIS, I FIND THAT THE FIRST PROVISO TO SECTION 2(15) IS APPLICABLE TO APPELLANT. HENCE, I FIND NOTHING INCORRECT IN THE ACTION OF THE AO IN MAKING AN ADDITION OF RS.68,96,680/-. HENCE THE ADDITION IS CONFIRMED AND THE GROUND NO.I AND II OF THE APPEAL ARE DECIDED AGAINST THE APPELLANT. 6. BEING AGGRIEVED THE ASSESSEE FILED THIS APPEAL. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT CHARITABLE PURPOSE INCLUDES RELIEF TO THE POOR, EDUCATION, MEDICAL RELIEF AND ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. IT WAS FURTHER SUBMITTED THAT W.E.F 01.04.2009 AS PER PROVISO THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY WAS NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CARRYING ON ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR ANY ACTIVITY OF RENDERING ANY SERVICES IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE FOR APPLICATIONS OR RETENTION OF THE INCOME FROM SUCH ACTIVITY. AS PER SECOND PROVISO TO THE SECTION IT PROVIDES THAT FIRST PROVISO SHALL NOT APPLY IF THE VALUE OF RECEIPT FROM THE ACTIVITY REFERRED TO THEREIN IS RS.25 LAKHS OR LESS IN THE PREVIOUS YEAR. SINCE THE ASSESSMENT YEAR INVOLVED UNDER CONSIDERATION IS ASSESSMENT YEAR 2011-12. THEREFORE, AMENDMENT IN THE PROVISO W.E.F. 01.04.2016 WOULD NOT APPLY TO THE PRESENT YEAR WHEREIN IT WAS INSERTED THAT UNLESS SUCH ACTIVITIES IS UNDERTAKEN IN THE COURSE OF ACTUALLY CARRYING OF SUCH ADVANCEMENT IF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AND THE RECEIPTS FROM SUCH ACTIVITY OR ACTIVITIES DURING THE PREVIOUS YEAR, DO NOT EXCEED 20% OF THE TOTAL RECEIPTS OF THE TRUST OR INSTITUTIONS UNDERTAKEN SUCH ACTIVITIES OR ACTIVITIES OF THAT PREVIOUS YEAR. THE LD.COUNSEL ALSO REFERRED CBDT CIRCULAR NO.11/2008 M/S.SOUTHERN GUJARAT CHAMBER TRADE & INDUSTRY DEVELOPMENT CENTRE IN ITA NO.910/AHD/2016/SRT PAGE 5 OF 12 DATED 19.12.2008, ACCORDING TO PARA 2 OF THAT CIRCULAR THE NEWLY INSERTED PROVISO TO SECTION 2(15) WILL APPLY ONLY TO THE ENTITIES WHOSE PURPOSE IS ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY I.E. THE 4 TH LIMB OF THE DEFINITION OF CHARITABLE PURPOSE CONTAINED IN SECTION 2(15) , HENCE, SUCH ENTITY WILL NOT BE ELIGIBLE FOR EXEMPTION U/S.11 OR U/S.10(23C) OF THE ACT IF THEY CARRY ON A COMMERCIAL ACTIVITIES WHETHER SUCH AN ENTITY IS CARRYING A 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. 7. AS PER PARA 3.1 OF THE SUCH CIRCULAR, 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 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 AS BELONGINGS OR RELATIONS WITH ANY OUTSIDE BODY, THEN ANY SURPLUS RETURNED TO THE PERSONS FORMING SUCH ASSOCIATIONS IS NOT CHARGEABLE TO TAX. THEREFORE, THE LD.COUNSEL ARGUED THAT WHETHER THE ASSESSEE HAS FOR ITS OBJECT THE ADVANCEMENT OF ANY OTHER OBJECT OF PUBLIC GENERAL 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 PAYMENT 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 DEVICE TO HIDE THE TRUE PURPOSE WHICH IS TRADE, COMMERCE OR BUSINESS OR RENDERING OF ANY SERVICES IN RELATION TO TRADE, COMMERCE OR BUSINESS. THEREFORE, EACH CASE WOULD BE DECIDED ON ITS OWN FACTS AND NO GENERALIZATION IS POSSIBLE. IT WAS ALSO ARGUED THAT THE ASSESSEE IS A TRUST FOR PUBLIC CHARITABLE PURPOSES AND IS REGISTERED U/S.12A OF THE ACT AND ITS MAIN OBJECT IS TO PROMOTE AND DEVELOP TRADE AND INDUSTRIES IN THE SOUTH GUJARAT AND PROMOTE ALL INTERESTS AND SEGMENTS RELATED TO TRADE AND INDUSTRIES AND TO ATTAIN THESE OBJECTS THE TRUSTEES COULD BE ENTITLED TO CARRY ON ALL THE ACTIVITIES REQUIRED M/S.SOUTHERN GUJARAT CHAMBER TRADE & INDUSTRY DEVELOPMENT CENTRE IN ITA NO.910/AHD/2016/SRT PAGE 6 OF 12 IN THE PURPOSE AND MORE PARTICULARLY FOR ESTABLISHING A PERMANENT TRADE CENTRE, EXHIBITIONS, SEMINARS AND RENDERING SERVICES IN ALL FIELD CONNECTED WITH PROMOTION OF TRADE AND INDUSTRY AND CREATING INFRASTRUCTURE FACILITIES RELATED AMENITIES. AS PER THE SCHEME OF THE CENTRAL GOVERNMENT AS INDUSTRIAL INFRASTRUCTURE UP GRADATION SEGMENT, THE CENTRAL GOVERNMENT PROVIDES ASSISTANCE TO THE EXPENDITURE OF 75% OF COST, 25 % SHOULD BE CONTRIBUTED BY THE INDUSTRY CLUSTER IN THIS 25% THE STATE GOVERNMENT GIVES SUPPORT UP TO 10% TO SUPPORT THE ABOVE THE STATE GOVERNMENT HAS GIVEN TO THE TRUST LAND ADMEASURING ABOUT 12 HECTARES AT A CONCESSIONAL PRICE SAR INFRACON PVT. LTD., A SPECIAL PURPOSE VEHICLE (SPV) WAS FORMED AT THE BEHEST OF THE CENTRAL GOVERNMENT ALL SUCH SPVS OR COMPANIES LICENSE U/S.25 OF THE COMPANIES ACT 1956, IT MEANS THAT THEY ARE ALSO HAVING CHARITABLE OBJECTS. ON THIS LAND, SAR INFRACON PVT. LTD. CONSTRUCTED CONVENTION CENTRE PRIMARILY FOR ORGANIZING EXHIBITIONS ETC. PURSUANT TO THE OBJECT FOR PROMOTION OF TRADE AND INDUSTRY. 8. THE ASSESSEE TRUST DOES NOT DO ANY ACTIVITY AND JUST BECAUSE RENT IS BEING RECEIVED, IN A DIFFERENT MANNER, IT CANNOT BE SAID THAT IT IS CARRYING ON ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO TRADE, COMMERCE AND BUSINESS FOR A CESS OR ANY OTHER CONSIDERATION SO AS TO ATTRACT PROVISO TO SUB-SECTION 15 OF SECTION 2 OF THE ACT. THE TRUST HAS NEITHER BUILD CONVENTION CENTRE NOR DOES IT MAINTAIN IT. THE ASSESSEE ENJOYS EXEMPTION U/S.11 OF THE ACT AND HAS COMPLIED ALL OTHER CONDITIONS AND THEREFORE IT SHOULD NOT BE HIT BY THE PROVISO TO SECTION 2(15) OF THE ACT AS IT IS GOAL AS PASIVE. 9. THE LD.COUNSEL FURTHER SUPPORTED HIS VIEW BY PLACING RELIANCE ON THE CASE OF HOSHIARPUR IMPROVEMENT TRUST VS. ITO (2015) 61 TAXMANN.COM 162 (AMRITSAR TRIBUNAL) WHEREIN IT WAS HELD THAT PROVISO TO SECTION 2(15) AS SUBSTITUTED BY FINANCE ACT 2015 IS APPLICABLE WITH PROSPECTIVE EFFECT, EVEN PAST INSERTION OF PROVISO TO SECTION 2(15) BUT BEFORE 01.04.2016 WHEN BUSINESS ACTIVITIES ARE CARRIED BY THE ASSESSEE TRUST IN COURSE OF ACTUALLY CARRYING OUT OF SUCH M/S.SOUTHERN GUJARAT CHAMBER TRADE & INDUSTRY DEVELOPMENT CENTRE IN ITA NO.910/AHD/2016/SRT PAGE 7 OF 12 ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY BENEFIT OF SECTION 11 R.W.S 2(15) CANNOT BE DENIED. THE LD.COUNSEL FURTHER CITED THE DECISION IN THE CASE OF INDIAN CHAMBER OF COMMERCE VS. ITO IN ITA NO.1491/KOL/2012 AND ITA NO.1284/KOL/2012 FOR THE ASSESSMENT YEARS 2008-09 & 2009-10 OF KOLKATA TRIBUNAL, INDIA TRADE PROMOTION ORGANIZATION VS. DGIT-EXEMPTIONS 2015 371 ITR 333 (DEL) WHEREIN IT WAS HELD THAT INCOME GENERATED BY COMMERCIAL ACTIVITIES ARE INCIDENTAL TO CHARITABLE INSTITUTIONS ARE EXEMPTED U/S.2(15) / 10(23C). 10. THE LD.AR ALSO PLACED RELIANCE IN THE CASE OF SOCIETY OF INDIAN AUTOMOBILES MANUFACTURERS VS. ITO-EXEMPTION 2016 159 ITD 659 (DEL). 11. PER CONTRA, THE LD.CIT-DR SUPPORTED THE ORDER OF THE LOWER AUTHORITIES. THE LD.CIT-DR ARGUED THAT ACCORDING TO THIS LD.COUNSEL FOR INVOKING PROVISIONS U/S.2(15) BY TWO CONDITIONS MUST BE SATISFIED I.E. I) TRUST CARRYING ACTIVITY OF NATURE OF TRADE, COMMERCE OR BUSINESS AND II) ACTIVITY OF RENDERING ANY SERVICES IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS FOR CESS OR FEES FOR ANY OTHER CONSIDERATION. FROM THIS EXPLANATION OF THE LD.COUNSEL, IT IS CLEAR THAT A SECOND CONDITION IS FULFILLED AS CLAIMED BY THE ASSESSEE ITSELF. THE LD.CIT-DR REFERRED THE INCOME AND EXPENDITURE ACCOUNT OF THE ASSESSEE TRUST WHICH SHOWS THAT THERE IS INCOME OF BANK INTEREST AND CONTRIBUTION OF PORTION OF INCOME RECEIVED FROM SAR INFRACON PVT. LTD. ON CREDIT SIDE AND THERE ARE DIFFERENT ADMINISTRATIVE EXPENSES OF TRUST INCLUDING PAYMENT OF RS.1,89,51,000/- TO SAR INFRACON PVT. LTD. MADE AS PER MOU. FROM THESE FACTS, IT IS CLEAR THAT THERE IS INCOME OF RS.68,96,678/- AS REFLECTED IN THE INCOME AND EXPENDITURE ACCOUNT. FROM THE FACTS IT IS REVEALED THAT TRUST IS RECOVERING HUGE FEES/RENT FROM THE PERSONS WHO TAKE THE CONVENTION CENTRE FOR EXHIBITION. SAR INFRACON PVT. LTD.IS RECOGNIZED A SPECIAL UTILITY VEHICLE APPROVED BY THE CENTRAL GOVERNMENT. THE FACILITY OF PROVIDING THE CONVENTION CENTRE IS JOINTLY CREATED OR BUILD BY THE TRUST SAR INFRACON PVT. LTD.AS PER THE MOU BOTH THE ENTITIES TO SHARE THE FINANCE BURDEN AS WELL AS TO SHARE INCOME OUT OF CONVENTION CENTRE FOR GIVING ON RENT FOR EXHIBITION TRADE AND INDUSTRIES. THE M/S.SOUTHERN GUJARAT CHAMBER TRADE & INDUSTRY DEVELOPMENT CENTRE IN ITA NO.910/AHD/2016/SRT PAGE 8 OF 12 EXCESS AND HUGE AMOUNT CHARGES RECOVERED AT RS.68.96 LAKHS ARE TOO HUGE TO ESTABLISH THAT CHARGES RECOVERED ARE COMMERCIAL NATURE ONLY. IF THE CHARGES ARE RECOVERED TO THE EXTENT THAT WOULD MADE THE EXPENDITURE OF ORGANIZING FACILITY THEN RESULT WOULD BE 0 INCOME AND THERE WOULD BE NO EXCESS IN INCOME AND EXPENDITURE ACCOUNT. THEREFORE, THE CONTRIBUTION OF RS.68.96 LAKHS IS THE INCOME IN THE HANDS OF THE TRUST WHICH IS COMMERCIAL IN NATURE BECAUSE CHARGES ARE RECOVERED TOO MUCH COMPARED WITH THE INCIDENTAL EXPENDITURE INCURRED FOR PROVIDING THESE SERVICES. FROM THE MOU OF THE TRUST IT CLEAR THAT CONSIDERATION RECEIVED IS FOR USE OF LAND, PARKING AND OTHER CONTRIBUTION MADE BY THE APPELLANT. THUS, THE OBJECTS OF THE ASSESSEE FALLS UNDER THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. IT IS NOT A RENT SIMPLILCITOR AS CLAIMED BY THE AR, HAD IT BEEN RENT SIMPLILCITOR THE RENT WOULD HAVE BEEN A CERTAIN FIXED AMOUNT PER MONTH OR PER YEAR. THE RENT WOULD BE PAYABLE IRRESPECTIVE OF THE REVENUE OF THE CONVENTION CENTRE THAT IS NOT THE CASE HERE. THE ASSESSEE IS GETTING 50% OF THE REVENUE OF THE SAID CONVENTION CENTRE. THE ASSESSEE HAD TO INCUR EXPENSES CONNECTED WITH LAND AND ALSO LAND REVENUE, BUT THE OTHER PARTY TO RECEIVE OTHER 50% OF THE REVENUE AND TO INCUR ALL OTHER EXPENSES. SO THE INCOME OF THE ASSESSEE IS CONTINGENT TO THE REVENUE GENERATION IN CONVENTION CENTRE FROM ITS ACTIVITIES. ACCORDINGLY, FIRST PROVISO TO SECTION 2(15) IS APPLICABLE, THEREFORE, THE AO AND CIT(A) ARE JUSTIFIED IN TAXING THE SAME. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE HAVE GONE THROUGH THE MOU DATED 27.04.2009 PLACED AT PAPER BOOK, PAGE NO.74 TO 78. ACCORDING TO WHICH THE ASSESSEE TRUST WAS THE OWNER AND HOLDER OF THE LAND ADMEASURING 1183 SQ.MTRS AND OUT OF SUCH LAND AND APPROXIMATELY 68,000 SQ.MTRS HAS BEEN GIVEN TO SAR INFRACON PVT. LTD. FOR CONSTRUCTION OF CONVENTION CENTRE WHICH IS KNOWN AS SURAT INTERNATIONAL EXHIBITION AND CONVENTION CENTRE (SIECC). THE LAND BELONG TO THE ASSESSEE AND THE CONVENTION CENTRE HAS BEEN CONSTRUCTED BY THE COMPANY SAR INFRACON PVT. LTD. M/S.SOUTHERN GUJARAT CHAMBER TRADE & INDUSTRY DEVELOPMENT CENTRE IN ITA NO.910/AHD/2016/SRT PAGE 9 OF 12 BELONG TO THE COMPANY. THE PARTIES HAVE AGREED AND ARRIVED AT UNDERSTANDING AS UNDER: 1. THE PARTIES HERETO STATE THAT THE MEMORANDUM OF UNDERSTANDING EXECUTED BETWEEN THE PARTIES ON 5 TH MAY, 2007 AND THE SUPPLEMENTARY MEMORANDUM OF UNDERSTANDING EXECUTED ON 18 TH JANUARY, 2008 ARE NOW SUBSTITUTED BY THIS MEMORANDUM OF UNDERSTANDING AND THE TERMS DETERMINED HEREIN WOULD APPLY IN PLACE OF THE TERMS AGREED UPON IN THE EARLIER MEMORANDUM OF UNDERSTANDING AND THE SUPPLEMENTARY MEMORANDUM OF UNDERSTANDING. 2. PARTIES HEREBY TAKE ON RECORD THAT THE CONVENTION CENTRE IS FULLY FUNCTIONAL AND BOTH THE PARTIES HAVE DECIDED TO WORK ON THE ADMINISTRATION AS ALSO THE FINANCIAL ASPECTS RELATING THERETO. 3. THE PARTIES HERETO DECLARE THAT THEY HAVE SEPARATE AND INDIVIDUAL AREAS OF ACTIVITIES AND FUNCTIONS IN THIS REGARD AND SO FAR AS THE TRUST IS CONCERNED, IT HAS PROVIDED THAT LAND ON WHICH IT SHOULD GET FAIR RETURN AND SO FAR AS THE COMPANY IS CONCERNED, IT SHOULD GET SIMILAR FAIR RETURN FOR CONVENTION CENTRE AND OTHER FACILITIES AND AMENITIES PROVIDED BY IT. 4. WITH A VIEW TO PROPERLY CONSIDER THE CONTRIBUTION BY BOTH THE PARTIES, IT HEREBY AGREED THAT THE REVENUE GENERATED FROM THE CONVENTION CENTRE WOULD BE SHARED AS UNDER; A. IN RESPECT OF LAND USED FOR THE CONVENTION CENTRE AS ALSO FOR PARKING AND FOR OTHER CONTRIBUTION MADE BY THE TRUST, THE TRUST WILL HAVE OVERRIDING CHARGE OF 50% ON GROSS REVENUE GENERATED IN THIS ACTIVITY (NET OFF SERVICE TAX). IT WOULD BEAR COST OF LAND REVENUE AND OTHER EXPENSES APPLICABLE TO LAND. B. AS REGARDS THE COMPANY, IT WILL BE ENTITLED TO BALANCE 50% AND WOULD BEAR ALL THE REMAINING COSTS. 5. IT IS ALSO FURTHER CLARIFIED THAT BOTH THE TRUST AND THE COMPANY ARE ENTITLED TO GET THE REVENUE AFORESAID AND IT SHOULD NOT BE HELD THAT ONE ENTITY IS PAYING TO ANOTHER ENTITY BECAUSE OF THE MANAGEMENT AND COLLECTION DONE BY THE OTHER ENTITY. 13. THE NEWLY INSERTED PROVISO TO SECTION 2(15) WILL APPLY TO ENTITY WHOSE PURPOSE ITS ADVANCEMENT OR ANY OTHER OBJECT OR ANY OTHER GENERAL PUBLIC UTILITY I.E. THE 4 TH LIMB OF THE DEFINITION OF CHARITABLE PURPOSE CONTAINED IN SECTION 2(15) WHETHER THE TRUST IS CARRYING ON ACTIVITY IN THE NATURE OF TRADE, COMMERCE, BUSINESS IS QUESTION OF FACT WHICH WILL BE DECIDED BASED ON THE NATURE, SCOPE AND EXTENT AND FREQUENCY OF THE ACTIVITY AS ENSHRINED IN CBDT CIRCULAR NO.11/08 DATED 19.12.2008 AS PER THE MOU, AS MENTIONED ABOVE, BOTH THE ENTITIES TO SHARE THE FINANCIAL BURDEN AS WELL AS TO SHARE INCOME OUT OF CONVENTION CENTRE FOR GIVING ON RENT FOR EXHIBITION OF TRADE AND INDUSTRIES. THEREFORE, IT IS CLEAR THAT OBJECTS OF THE TRUST FALLS UNDER THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY, THE CONSIDERATION RECEIVED BY THE ASSESSEE IS FOR USE OF ITS LAND PARKING AND OTHER CONTRIBUTIONS. ALSO THEREFORE, THIS IS NOT A SIMPLE RENT AGREEMENT AS M/S.SOUTHERN GUJARAT CHAMBER TRADE & INDUSTRY DEVELOPMENT CENTRE IN ITA NO.910/AHD/2016/SRT PAGE 10 OF 12 CLEARLY POINTED OUT BY THE LD.CIT(A). HAD IT BEEN RENT SIMPLILCITOR THE RENT WOULD HAVE A CERTAIN FIXED AMOUNT PER MANUFACTURE OR PER YEAR. BUT, THIS IS NOT THE CASE WHERE THE ASSESSEE IS GETTING 50% OF REVENUE OF SAID CONVENTION CENTRE AND ON THE OTHER HAND THE SAR INFRACON PVT. LTD.IS GETTING 50% OF THE REVENUE AND IT WILL INCUR ALL OTHER EXPENSES. THEREFORE, IT IS APPARENT AND CLEAR THAT THE ASSESSEE IS ACTUALLY A 50% PARTNER IN THE CONVENTION CENTRE AND ENTITLED TO 50% OF THE REVENUE. THE LAND IS A CAPITAL CONTRIBUTION OF THE PROFIT IN THE CONVENTION CENTRE GIVEN TO SAR INFRACON PVT. LTD., THEREFORE, THE CREATION AND MAINTENANCE OF THE CONVENTION CENTRE DEFINITELY FALLS WITHIN THE SCOPE OR ANY OTHER ACTIVITY FOR RENDERING INCOME OTHER SERVICES IN RELATION TO TRADE, COMMERCE OR BUSINESS FOR CESS OR OTHER CONSIDERATION IRRESPECTIVE OF THE NATURE OF THE USE OR APPLICATION OR RETENTION OF THE INCOME FROM SUCH ACTIVITY. FURTHER, THE FIRST PROVISO IS FULLY APPLICABLE AS THE ASSESSEE IS CARRYING OUT ACTIVITY WHICH INVOLVES THE CARRYING ON OF ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS FOR ANY ACTIVITY FOR RENDERING ANY SERVICES IN RELATION TO TRADE, COMMERCE OR BUSINESS FOR A CESS OR FEES OR FOR ANY OTHER CONSIDERATION. AS PER THE CBDT CIRCULAR WHICH APPLIES WHERE THE ASSESSEE HAS ITS OBJECT ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY WHICH IS ESSENTIALLY A QUESTION OF FACT TO BE DECIDED IN HIS CASE AND WHERE OBJECT OF THE GENERAL PUBLIC UTILITY IS ONLY A MASK OR DEVICE TO HIDE THE PRINCIPLE PURPOSE OF TRADE, BUSINESS OR COMMERCE OR RENDERING ANY SERVICES IN RELATION THERETO, THE ASSESSEE CANNOT BE SAID TO BE ENGAGED IN A CHARITABLE ACTIVITY WITHIN THE MEANINGS OF SECTION 2(15) OF THE ACT. SINCE AS PER THE OBJECT OF THE TRUST AND ON GOING THROUGH THE INCOME AND EXPENDITURE ACCOUNT OF THE TRUST, IT IS SEEN THAT THE TOTAL REVENUE EXPENDITURE UNDER CONSIDERATION WERE AT RS.8,21,955/- WHICH ARE ALLOWABLE AGAINST THE INCOME OF RS.9,50,646/- FROM BANK INTEREST AND IN THIS WAY RS.1,28,691/- IS INCOME OF THE TRUST WHICH IS WORKED OUT IN EXCESS OF INCOME OVER EXPENDITURE IN RESPECT OF THE YEAR UNDER CONSIDERATION. FURTHER, AN AMOUNT OF RS.1,89,51,000/- IS PAID TO SAR INFRACON PVT. LTD. IS NOT OF REVENUE NATURE, BUT A CAPITAL NATURE AS MOU AND HAS CONSIDERED AS SUCH ACCORDINGLY. THEREFORE, THE HUGE AND HEFTY CHARGES BEING M/S.SOUTHERN GUJARAT CHAMBER TRADE & INDUSTRY DEVELOPMENT CENTRE IN ITA NO.910/AHD/2016/SRT PAGE 11 OF 12 RECEIVED BY SAR INFRACON PVT. LTD. AND AS AGREED AS PER MOU / PORTION OR SHARE OF INCOME IS BEING RECEIVED BY ASSESSEE TRUST IN HAND AT RS.68,96,767/- IS THE INCOME OF THE ASSESSEE TRUST RECEIVED THROUGH SHARING FROM SAR INFRACON PVT. LTD. ON ACCOUNT OF DIFFERENT EXHIBITION EVENTS ON ACCOUNT CHARGES RECOVERED FROM DIFFERENT EXHIBITION EVENTS WHICH ARE OF COMMERCIAL NATURE ONLY. THEREFORE, SAME ARE CHARGEABLE INCOME WITHIN THE MEANING OF SECTION 2(15) OF THE ACT. ACCORDINGLY, LOWER AUTHORITIES ARE JUSTIFIED IN CHARGING THE SAME. 14. COMING TO THE CASE LAW RELIED BY THE LD.COUNSEL, WE FIND THAT IN THE CASE OF INDIAN CHAMBER OF COMMERCE (SUPRA) WHEREIN THE MAIN OBJECTIVE OF THE INSTITUTION WAS IN THE NATURE OF CHARITABLE THEN THE INCIDENTAL ACTIVITIES TO THE MAIN OBJECT RESULT IN PROFIT WERE HELD TO BE CHARGEABLE IN NATURE. HOWEVER, IN THE INSTANT CASE, THE ASSESSEE TRUST IS CARRYING OUT THE ACTIVITIES IN THE SHARING RATIO WITH OTHER COMPANY WHICH IS NOT THE MAIN OBJECT OF THE ASSESSEE TRUST. THEREFORE, SUCH CASE IS INAPPLICABLE IN THE CASE OF ASSESSEE. SIMILARLY, IN THE CASE OF INDIA TRADE PROMOTION ORGANISATION (SUPRA) THE TRUST WAS RECEIVING INCOME FROM LETTING OUT OF PLACE, PUBLICATIONS/BOOKS AND FOOD AND BEVERAGE OUTLETS IN PRAGATHI MAIDAN IN ORDER TO PROMOTE TRADE, COMMERCE AND BUSINESS WHEREIN IN THE INSTANT CASE AS PER THE MOU, THE ASSESSEE WITH SAR INFRACON PVT. LTD, HAS RECOVERED CHARGES WHICH ARE FAR EXCEED TO THE EXPENDITURE FOR ORGANIZING FACILITY WHICH IS NOT IN THE NATURE OF RENT BUT IN THE NATURE OF PROFIT SHARING RATIO BEING 50% OF GROSS REVENUE GENERATED, HENCE, THE FACTS OF THE CASE ARE DISTINGUISHABLE. SIMILARLY, OTHER DECISIONS AS RELIED ON BY THE LD.COUNSEL ARE DISTINGUISHABLE ON FACTS, HENCE, SAME ARE NOT BEING DISCUSSED HERE. AS PER THE PROVISO READ WITH CBDT CIRCULAR NO.08/11. WHETHER A PARTICULAR TRUST IS CARRYING ON A ACTIVITY IN THE NATURE OF TRADE, COMMERCE, BUSINESS IS PROVIDED QUESTION OF FACT WHICH WILL BE DECIDED NATURE, SCOPE, EXTENT AND FREQUENCY OF THE ACTIVITY. THEREFORE, THE ACTIVITIES BEING CARRIED OUT BY THE ASSESSEE WHICH ARE NOT A FIXED SUM TO DEPENDS ON THE EVENTS ORGANIZED, HENCE SAME CANNOT BE TURNED AS INCIDENTAL TO M/S.SOUTHERN GUJARAT CHAMBER TRADE & INDUSTRY DEVELOPMENT CENTRE IN ITA NO.910/AHD/2016/SRT PAGE 12 OF 12 MAIN OBJECT OF THE TRUST, ACCORDINGLY WE ARE OF THE CONSIDERED OPINION THAT THE LOWER AUTHORITIES HAVE JUSTIFIED IN TAXING THE SAME. 15. IN THE LIGHT OF THESE FACTS, THE FINDINGS OF THE LOWER AUTHORITIES ARE UPHELD. ACCORDINGLY, THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IS DISMISSED. 16. GROUND NO.1 & 2 ARE DISMISSED AND GROUND NO.3 RELATES TO CHARGING OF INTEREST OF WHICH IS MANDATORILY IN THE LIGHT OF DECISION OF HON'BLE SUPREME COURT IN THE CASE OF ARJUM H GHASWALA 251 ITR 1 (SC), HENCE, SAME IS UPHELD. 17. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25-04-2018 SD/- SD/- ( . . /C.M. GARG) ( . . / O.P.MEENA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER / SURAT, DATED: 25 TH APRIL , 2018 S.GANGADHARARAO COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER // TRUE COPY // ASSISTANT REGISTRAR, SURAT