Confederation of Real Estate Developers Association of India Vs ACIT (ITAT Mumbai)
Conclusion: AO was not justified in denying the benefit of exemption under section 11 as income on account of membership fees, subscription fees, grant in aid from Government of India, income from publications, exhibitions, award functions etc. were incidental to assessee’s main object to address national issues relating to real estate sector and better standard for its all member associations. Also, assesse was not having any profit motive and, therefore, activities of assessee were not in the nature of trade, commerce or business and surplus arising to assessee was utilized only for the purpose of dominant object which were charitable in nature and, therefore, proviso to section 2(15) did not get attracted to assessee’s case.
Held: Assessee-company (registered under Sec. 8 of the Companies Act, 2013) was registered as a trust with the DIT (Exemption), Mumbai under Sec. 12A. On a perusal of the income and expenditure account, it was observed by AO, that assessee had during the year in question earned income on account of membership fees, subscription fees, grant in aid from Government of India, income from publications, exhibitions, award functions etc. AO denied the benefit of exemption under Section 11 to assessee by applying the proviso to Section 2(15) and holding that assessee was carrying on activity in the nature of commerce and therefore objects of assessee was not to be treated as for charitable purpose. It was held that the narrowing of the definition of “charitable purpose” as contemplated in Sec. 2(15) insofar the same was related to “advancement of any other object of general public utility”, was carried out by the legislature by way of an insertion of a „proviso‟, vide the Finance Act, 2009 w.e.f 01.04.2009. Assessments in the case of the assessee trust for A.Ys 2010-11 to A.Y 2013-14 were framed u/s 143(3), and its claim for deduction u/s 11 after being tested in the backdrop of the amended definition of “charitable purpose”, and also, the „proviso‟ that supplemented the said definition, were in both the years found by the revenue to be in order. In sum and substance, the revenue while framing the assessment for the aforementioned preceding years had not held the activities of the assessee trust as being in the nature of trade, commerce or business, or those of rendering of any services in relation to any trade, commerce or business. Nothing was either discernible from the records which would reveal that the activities of the assessee trust had witnessed any change during the year in question as in comparison to those for the aforementioned preceding years, nor any contention to the said effect had been advanced by Revenue. Receipt of subscriptions from members, sale of publications, holding of exhibition and award functions, etc. were incidental to assessee’s main object to address national issues relating to real estate sector and better standard for its all member associations. Also, assesse was not having any profit motive and, therefore, activities of assessee were not in the nature of trade, commerce or business and surplus arising to assessee was utilized only for the purpose of dominant object which were charitable in nature and, therefore, proviso to section 2(15) did not get attracted to assessee’s case. Thus, assessee was entitled to exemption under section 11.
FULL TEXT OF THE ITAT JUDGEMENT
The captioned appeals filed by the assessee are directed against the respective orders passed by the CIT(A)-3, Mumbai, dated 19.03.2018 and 21.08.2019 for A.Y. 2014-15 and A.Y. 2016-17, respectively, which in turn arises from the respective assessment orders passed under Sec. 143(3) of the Income Tax Act, 1961 (for short „Act‟), dated 30.11.2016 and 15.12.2018 for the aforesaid years. As common issues are involved in these appeals, the same therefore are being taken up and disposed off by way of a consolidated order. We shall first take up the appeal of the assessee for A.Y. 2016-17. The assessee has assailed the impugned order by raising before us the following grounds of appeal:
“1. The learned Commissioner of Income-tax (Appeals)-3 [CIT(A)’] erred in confirming the action of the Assessing Officer in denying the benefit of exemption under Section 11 of the Income-tax Act, 1961 (the Act’) to the Appellant by applying the proviso to Section 2(15) of the Act and holding that the Appellant is carrying on activity in the nature of commerce and therefore objects of the Appellant is not to be treated as for charitable purpose.
2. In the alternative and without prejudice to the above, the CIT(A) erred in confirming the action of the Assessing Officer in not providing relief to the extent of receipts from members, applying the principle of mutuality, despite the fact that the Assessing Officer has himself treated the Assessee-trust as a mutual association.”
2. Briefly stated, the assessee which is a company registered under Sec. 25 of the Companies Act, 1956 (now Sec. 8 of the Companies Act, 2013) is registered as a trust with the DIT (Exemption), Mumbai under Sec. 12A of the Act. The assessee trust had e-filed its return of income for A.Y 2016-17 on 14.10.2016, declaring its total income at Rs. nil. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2) of the Act. In the course of the assessment proceedings it was observed by the A.O that the main objects of the assessee trust were as under:
“a) To act as a group of associations/ federations functioning at national and state level and with the object to address the national issues relating to real estate sector and better standard for its all member associations.
b) To encourage fraternity, feelings of co-operation and mutual help among the members of the confederation in respect of the subjects connected with the common good of trade, industry and profession of building, construction and development of funds.
c) To encourage adoption and promotion of fair business practices according to an ethical code of fair business practices and to maintain efficiency, dignity and integrity of the confederation.”
On a perusal of the income and expenditure account, it was observed by the A.O, that the assessee had during the year in question earned income on account of membership fees, subscription fees, grant in aid from Government of India, income from publications, exhibitions, award functions etc. As per the audited financial statements the assessee had during the year generated a revenue of Rs.17,73,02,166/-, as under:
