Attempt to promote trade without seeking to make profits for its members is charitable purpose

Section 11: Property held for charitable purposes- Attempt to promote the trade, commerce and manufacturers of India without seeking to make profits for its members is charitable purpose -Denial of exemption is held to be not justified. [S. 2(15)]

Case Name: Bombay Chamber of Commerce vs ITO (E) (ITAT Mumbai), Mumbai, Appeal No: ITA No. 5832/Mum/2019, Date of judgement/order: 30.09.2021, Related Assessment Year – 2009-10

The Hon’ble Mumbai, ITAT has held that the amounts received from the members are not in nature of trade (since there is no exchange of goods either for goods in return or money) or commerce. Therefore the activities carried out by the assessee Chamber continue to be charitable in nature even under the amended definition under S. 2(15) of the Act and assessee is entitled for exemption under S. 11 of the Act

Bombay Chamber of Commerce is a non-profit company incorporated in 1924, inter alia for the purposes of promoting and protecting the trade, commerce and manufacturers of India and in particular the trade, commerce and manufacturers of the Bombay Presidency. It is registered as a section 25 company under the erstwhile Companies Act, 1956. The assessee was registered as a charitable trust under section 12A of the Act by order dated 22.09.1998. Upto and including the assessment year 2008-2009 the assessments were made granting exemption under section 11 of the Act. For the assessment year under consideration, the assessee filed its return of income on 30.09.2009 claiming exemption under section 11 of the Act.

The assessee’s return was selected for scrutiny assessment. The ITO called for various details, which were submitted from time to time. Meanwhile the Director of Income-tax (Exemptions) Mumbai [in short DIT(E)] passed an order dated 16.12.2011 under section 12AA(3) of the Act withdrawing the registration under section 12A of the Act on the ground that the assessee is not covered under the term “charitable purpose” as defined in section 2(15) of the Act. The assessee filed an appeal before the Income-tax Appellate Tribunal (ITAT).

The Hon’ble Mumbai ITAT held as under; –

We noted that the observations of the CIT(A) mentioned in the order of Assessment Year 2010-11 and 2011-12 is incorrect because the Kolkata Tribunal in Indian Chamber of Commerce (supra) has considered the effect of the proviso to section 2(15) of the Act in arriving at its conclusion. One of the grievances raised in the appeal filed by Indian Chamber of Commerce (supra) for AY 2009-10 before the Tribunal read as under (para 311):

“Thai on the facts and circumstances of the case of the appellant, the Ld. CIT(A) erred in confirming the allegation of the Ld. AO that the appellant was hit by the proviso to section 2(15) of the Income-tax Act inserted w. e.f. 01.04.2009, in as much as the appellant was allegedly involved in the rendering of service in relation to trade, commerce or business, for cess or fee or any other consideration “. The Tribunal in para 32 stated as under:

“We have already discussed the facts above in ITA No 1491/Kol/2012 for AY 2008-09, which are unchanged in this appeal also i.e. for AY 2009-10 but in view of amendment in Section 2(15) of the Act vide Finance Act 2008, w.e.f 01/04/2009, whereby new proviso was inserted and according to lower authorities the activities of assessee association of conducting Environment Management Centres, meetings, conferences & seminars and issuance of certificate of origin were all in the nature of “rendering of service in relation to business, for consideration” and falling under the last limb of charitable purpose, i.e. “advancement of any other object of general public utility”, thus covered by the proviso to section 2(15) of the Act. In connection to the above it would be relevant to know the amended section 2(15,) of the Act in view of legislative intent behind such amendment…………………….‖

We noted that the Tribunal after considering the proviso to section 2(15) of the Act and the CBDT Circular No. 11/2008 dated 19.12.2008 (which was issued pursuant to the proviso being inserted in the Act) held in para 38 that the definition of the term “charitable purpose” remained unaltered even on amendment in the section 2(15) of the Act w.e.f. 01.04.2009, though the restrictive first proviso was inserted therein. Hence, the assessee was not hit by newly inserted proviso to section 2(15) of the Act.

20. We noted that the issue in present appeal is also covered in favour of assessee by the Kolkata Tribunal decision in the case of Indian Chamber of commerce (supra) because of its income streams noted above. We also noted that the amounts received are not in nature of trade (since there is no exchange of goods either for goods in return or money) or commerce (since it is not engaged in purchase and sale of goods) or business (since we are a non-profit making body formed with the promotion of protecting the trade, commerce and manufacture of India and in particular the Bombay Presidency). In view thereof, we hold that the activities carried out by the assessee chamber continue to be charitable in nature even under the amended definition under section 2(15) of the Act and assessee is entitled for exemption under section 11 of the Act. We direct the AO accordingly.

22. Since, we have held that the assessee is entitled for exemption under section 11 of the Act, we need not adjudicate any other issue on this”.