No proviso to section 2(15) applies if surplus earned from activities incidental to main object being charitable in nature

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

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