Media Research Users Council Vs ADIT (ITAT Mumbai)
ITAT Mumbai held that the activity of the trust for publishing advertising in the newspaper is intrinsically linked for newspaper activity falls within the ambit of sub-clause (i) of Subsection 2(15) and conditions imposed in sub-clause (ii) of the proviso has to be fulfilled.
Facts- Present appeal is filed contesting that CIT(A) has erred in law and in facts in confirming the denial of exemption u/s.11 of the Act by the AO by invoking proviso to Section 2(15) and denying the exemption u/s11, despite assessee being registered u/s.12A.
AO held that the second proviso to Section 2(15) clearly provides that if the aggregate value of the receipts from the activities exceeds Rs.10 lakhs, then where the object is any other object of general public utility, shall not be a charitable purpose. Here, the gross receipts of the assessee is more than Rs.10 lakhs and therefore, assessee has to be considered as non-charitable organization and accordingly, he denied the benefit of exemption u/s.11.
Conclusion- Held that concept of pure charity i.e. the performance of an activity without consideration is not envisioned under the Act, however, as long as GPUs object involves activities which also generates profits, it can be granted exemption provided the quantitative limit under second proviso to Section 2(15) for receipts from such profits, was adhered to.
The activity of the trust for publishing advertising in the newspaper is intrinsically linked for newspaper activity falls within the ambit of sub-clause (i) of Subsection 2(15) and conditions imposed in sub-clause (ii) of the proviso has to be fulfilled.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
All the aforesaid appeals have been filed by the assessee against separate impugned orders dated 16/01/2015, 17/08/2015, 09/03/2018 & 17/07/2015 passed by CIT(A) Mumbai-I, and CIT(A)-, Mumbai-3, respectively for the quantum of assessment years 2009-10; 2010-11; 2011-12; 2012-13 & 2013-14.
2. In all the years one common issue which has been raised is that ld. CIT(A) has erred in law and in facts in confirming the denial of exemption u/s.11 of the Act by the AO by invoking proviso to Section 2(15) and denying the exemption u/s11, despite assessee being registered u/s.12A.
3. We will first take up the appeal for A.Y.2009-10. Our finding therein will apply mutatis mutandis in all the years. The brief facts are that assessee is a company registered u/s.25 of the Companies Act, 1956. The main objects of the assessee as per its Memorandum of Association were as under:-
a. To determine the needs and frequencies of research and/or surveys required for the assessment of various media for advertising.
b. To conduct surveys and/or research into the readership, viewership and/or listenership of various media for advertising such as newspapers and periodicals, television, radio, outdoor hoardings and all other media which carry advertisements.
c. To maintain and propagate the highest possible standards of integrity, fairness and reliability in media research and to ensure that its output are not misused to convey a misleading impression by or to any party.
d. To disseminate the findings of such survey and/or research through any medium with or without charge.
4. Memorandum of Association clearly provide that income and property of the assessee shall be applied only for promotion of the objects of the assessee and no portion of income or property shall be paid or transferred directly or indirectly. Looking to its activities of general public utility, it was registered u/s.12A on 07/06/1994 and it continues to enjoy such registration during the years under consideration. It has also been informed that assessee’s application for registration under the amended provisions of Section 12AB of the Act for the A. Yrs. 2022-23 to 2026-27 has also been accepted by the department and there is no dispute that the objects of the assessee fall within the category of “advancement of any other object of general public utility”.
5. It has also been stated that benefit of Section 11 of the Act has been allowed in the past by the department and for the A. Yrs. 1998-99 to 2002-03, the Tribunal has held that its objects are charitable in nature and benefits of Section 11 cannot be denied. It has filed its return of income on 30/09/2009 alongwith income expenditure account and audit report declaring total income at Nil. It has also got its accounts audited u/s.44AB of the Act. The ld. AO noted that definition of charitable purpose has been amended from A.Y.2009-10 whereby proviso has been added which reads as under:-
“Charitable purpose” Includes relief of the poor, education, medical relief (preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic Interest, and the advancement of any other object of general public utility:
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 trade, commerce or business for a cess of fee or any other consideration, irrespective of the nature of use or application or retention of the income from such activity]
[Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is [ten lakh rupees] or less in the previous;]”
6. Thus, AO held that the second proviso to Section 2(15) clearly provides that if the aggregate value of the receipts from the activities exceeds Rs.10 lakhs, then where the object is any other object of general public utility, shall not be a charitable purpose. Here, the gross receipts of the assessee is more than Rs.10 lakhs and therefore, assessee has to be considered as non-charitable organization and accordingly, he denied the benefit of exemption u/s.11. Thereafter, he computed the income under the normal provisions of the Act after adding amount of Rs.45,936/- towards provision for gratuity and Rs.1,32,587/-towards leave encashment. The income assessed for Rs.1,22,24,260/- was computed in the following manner:-
