Case Law Details
After considering the submissions of the assessee and analyzing the Section 2(15) of the Act as it stood prior to its substitution with effect amendment from 01.04.2009 and after such amendment, ITAT held that first proviso was attracted only where an assessee was carrying in activities in the nature of trade, commerce or business rendering any services in relation to trade, commerce or business. As per ld. Commissioner of Income Tax (Appeals), assessee could not be considered as carrying on any trade, commerce or trade or providing services in relation to a trade, business or commerce. Further, as per ld. Commissioner of Income Tax (Appeals), there was a huge difference between the words B’to promote” and to B’carry on”. Ld. CIT(A) reached a conclusion that assessee itself was not carrying on any trade, business or commerce or rendering any services in relation to a trade, business or commerce. According to him, assessee’s prime objective was to promote trade and commerce. He also relied on the judgment of Hon’ble Apex Court in the case of CIT vs. Andhra Chamber of Commerce 130 ITR 184 for arriving at a conclusion that predominant object of the assessee was promotion of trade and commerce, which was one general public utility, without any intention for making profits. According to him, when profit making was not the predominant activity carried on by an assessee it could not be denied exemption u/s.11 of the Act, despite the proviso to Section 2(15) of the Act.
Where the main object of the institution was “charitable” in nature, then the activities carried out towards the achievement of the said, being incidental or ancillary to the main object, even if resulting in profit and even if carried out with non-members, were all held to be “charitable” in nature. Hon ‘ble apex Court in the earliest case of Andhra Chamber of Commerce (supra) had clearly laid out the principle that if the primary purpose of an institution was advancement of objects of general public utility, it would remain charitable even if an incidental or ancillary activity or purpose, for achieving the main purpose, was profitable in nature.
No doubt assessee for its receipts from non members could not claim benefit of mutuality. However, receipts from non members on account of its activities, as per the assessee, was less than Rs.10,00,000/-. Even if we consider the claim of mutuality as not as applicable for its dealing with non members, still gross receipts therefrom was less than Rs.10,00,000/- and thus assessee was saved by second proviso to Section 2(15) of the Act. For the above reasons, we are of the opinion that ld. Commissioner of Income Tax (Appeals) was justified in granting the deduction claimed by the assessee u/s.11 of the Act.
FULL TEXT OF ITAT ORDER
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