section 2(15) Council for Leather Exports promoting export of leather and leather products is a charitable institution

By | October 25, 2015

Facts of the case :-

Council for Leather Exports

Main objects of assessee were to support, protect, maintain, increase and promote export leather articles and products and bye-products of leather industry .Its activities were multiple and directed towards assisting its members in extending their global reach thereby increasing their exports

Issue :-

Assessing Officer held that activities of assessee were in nature of trade, commerce or business and applying proviso to section 2(15) denied exemption under section 10(23C)(iv) –

Held:-

where an institution is not driven primarily by a desire or motive to earn profits but to do charity through advancement of object of general public utility, it can be regarded as an institution established for charitable purposes as defined under section 2(15).Assessees’ activities were covered by proviso to section 2(15) and AO was not justified  [Para 12]

Favour:-

In favour of assessee

IN THE ITAT CHENNAI BENCH ‘A’

Deputy Director of Income-tax (Exemptions-IV)

v.

Council For Leather Exports

CHANDRA POOJARI, ACCOUNTANT MEMBER
AND CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER

IT APPEAL NO. 1192 (MDS.) OF 2014
[ASSESSMENT YEAR 2010-11]

JUNE  26, 2015

P. Radhakrishnan for the Appellant. R. Vijayaraghavan for the Respondent.

ORDER

Challa Nagendra Prasad, Judicial Member – This appeal is filed by the Revenue against the order of the Commissioner of Income-tax (Appeals)-VII, Chennai dated January 22, 2014 for the assessment year 2010-11.

2. The grievance of the Revenue in its appeal is that the Commissioner of Income-tax (Appeals) erred in holding that the association is eligible for exemption under section 11 of the Income-tax Act, 1961 and the assessee-association is not hit by the amended provisions of section 2(15) of the Act under the object of general public utility. The Commissioner of Income-tax (Appeals) erred in holding that activities of the assessee qualify as charitable activity as defined under section 2(15) of the Act and collection of certification fee, membership fee are incidental activities which were natural dominant activities which conform to the objects of the assessee-society.

3. The brief facts are that the assessee is a company registered under section 25 of the Companies Act. The main objects of the assessee are to support, protect, maintain, increase and promote export leather articles and products and bye-products of leather industry. The council for leather exports is an autonomous non-profit company registered under Indian Companies Act entrusted with export promotion activities and development of Indian leather industry. CLE is apex body of 2,400 members rapidly growing Indian leather industry. CLE’s activities are multiple and directed towards assisting its members in extending their global reach thereby increasing their exports. In the course of assessment proceedings, the Assessing Officer noticed that the assessee received member subscription, certification fee, sale of publications, interest on deposits, bulletin revenue, etc. He also noticed that the assessee is incurring expenses towards salary and staff related expenses, administrative expenses, expenses on codec activities. Analysing these expenses and income, the Assessing Officer was of the view that the assessee is not doing any multiple activities of any nature, i.e., relief to poor, medical aid/relief and education. The activities of the assessee are not falling under the limb of any other objects of general public utility for the reason that activities of the assessee are only for registered members and not for general public. The activities of the assessee are purely on commercial lines. The Assessing Officer held that activities of the assessee are in the nature of trade, commerce or business and therefore applying proviso to section 2(15) of the Act, the assessee was denied exemption under section 10(23C) of the Act. On appeal, the Commissioner of Income-tax (Appeals) held that the assessee’s activities are covered by last limb of the definition under section 2(15) of the Act, i.e., any other objects of general public utility and is not involved in any activity in the nature of trade, commerce or business. The Commissioner of Income-tax (Appeals) held that denial of exemption under section 2(15) and section 10(23C)(iv) of the Act was not based on proper appreciation of facts. Against this order, the Revenue is in appeal before us.

4. The Departmental representative vehemently supports the order of the Assessing Officer.

5. Counsel for the assessee submits that an identical issue has been decided by the co-ordinate Bench of this Tribunal in the case of Southern India Chamber of Commerce & Industry v. Jt. CIT [IT Appeal Nos. 2733 and 2734 (Mad.) of 2014, dated 17-4-2015] holding that the association is not hit by amended provisions of section 2(15) of the Act and the assessee-association is entitled for exemption under section 11 of the Act. Counsel submits that facts being identical, the ratio of the said decision may be applied to the case on hand.

6. Heard both sides. Perused the orders of the lower authorities and the case law relied on. The assessee, Council for Leather Exports (CLE) is an autonomous non-profit making company registered under the Indian Companies Act. The main activities of the assessee are as under :

“Promoting, facilitating and attracting foreign direct investments into Indian Leather Industry including joint ventures, technical collaborations and strategic alliances ;

Disseminating market information, trends and policy implications and publishing information on commercial technical and technological developments in Indian leather industry ;

Participating in the major international fairs and specialised trade shows across the globe, organising buyer-seller meets in India and abroad besides B2B meets in focus countries ;

Offering technical, marketing and design assistance to Indian exporters in terms of design inputs, product development, branding and marketing ; and

Inviting key resource personnel for fairs, seminars and lectures for exchange of information, knowledge ideas and strategies.”

7. The Assessing Officer while completing the assessment proceedings noticed that the assessee has received the entrance membership subscription, certification fee, bulletin revenue, interest on deposits, etc., and has incurred various expenses towards salaries and staff related expenses, administrative expenses, net expenses of codec activities and there was surplus of Rs. 2.45 crores out of income of Rs. 6.65 crores. The Assessing Officer was of the view that the assessee is not doing any charitable activity and the activities of the assessee are in the nature of trade, commerce or business and he applied the proviso to section 2(15) of the Act and denied exemption under section 10(23C)(iv) of the Act. On appeal, the Commissioner of Income-tax (Appeals) held that denial of exemption under sections 2(15) and 10(23C)(iv) of the Act by the Assessing Officer is not based on proper appreciation of facts. While holding so, the Commissioner of Income-tax (Appeals) held as under :

“4.4 Government of India, MOF Department of Revenue, Central Board of Direct Taxes in its notification No. 23 of 2007 dated February 6, 2007 notified that any income of the Council for leather exports, Chennai shall not be included in the total income from the assessment year 2004-05 onwards in terms of section 10(23C)(iv) of the Act.

Section 10(23C)(iv) reads as under :

(23C) any income received by any person on behalf of- . . .

(iv) any other fund or institution established for charitable purposes which may be approved by the prescribed authority, having regard to the objects of the fund or institution and its importance throughout India or through out any State or States ; or

4.5 The assessee also applied for registration under section 12AA of the Act vide its letter dated May 20, 1997. While rejecting the application, the Director of Income-tax (Exemption), Chennai in his order in No. DIT(E) No. 2(64)/97-98 dated November 12, 1997 declared that the assessee will claim exemption under section 10(23C)(iv) of the Act and not under the general sections of 11 and 12A of the Act.

4.6 In view of the above facts, the appellant continues to enjoy exemption under section 10(23C)(iv) of the Act. For the assessment year 2010-11, the Assessing Officer was of the opinion that the appellant is not eligible for exemption under section 10(23C)(iv) of the Act as the appellant has not satisfied the basic condition of ‘established for charitable purpose’. According to the Assessing Officer, the appellant was neither established for charitable purpose nor doing any activity in the nature of charity.

5. Perusal of objects set out in pages 2 and 3 of the assessment order reveals that the Assessing Officer was well aware of the objects of the company while passing the impugned order. Objects (a) to (n) of S. No. 1 are the main objects of the company and other objects are supplementary to the main objects and the activities of the company in my opinion are in accordance with the objects of the company. The objects of the company are covered by the last limb of the definition under section 2(15) of the Act, i.e., ‘any other object of general public utility’. The Assessing Officer’s view that the activities are only for members and not for the general public are not acceptable as the persons engaged in the leather industry are section of general public. The view held by the Assessing Officer is not correct and narrow interpretation of the definition of charitable purpose under section 2(15) of the Act. The definition of charitable purpose under section 2(15) of the Act is an inclusive definition and covers in its ambit any activity which is in the nature of general public utility. General public utility does not mean that it should cover the whole population. It is sufficient if it covers a distinct group of population irrespective of caste, creed, religion, etc. In this case, the beneficiaries are exporters of leather goods for whose benefits, the appellant-company has been working. For this purpose only, the Central Board of Direct Taxes granted exemption under section 10(23C)(iv) of the Act and the exemption granted continues till date. Moreover, while rejecting the application of the appellant, the Director of Income-tax (Exemption), Chennai also declared that the appellant can claim exemption under specific provision of section 10(23C)(iv) of the Act. Moreover Circular No. 11 of 2008 dated December 19, 2008 ([2009] 308 ITR (St.) 5) clarifies that the newly inserted proviso to section 2(15) will apply only to entities whose purpose is advancement of any other object of general public utility. Such entities will not be eligible for exemption under section 11 or under section 10(23C) of the Act if they carry on commercial activities. Whether such an entity is carrying on an activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of the activity.

5.1 In this case, study of income and expenditure statement and balance-sheet and objects of the company reveals that the activity carried on by it is by no stretch of imagination indicates trade, commerce or business. Certification fees are collected from members for their benefit only which are useful for availing of customs duty benefit from the Government of India. Other receipts such as interest of deposits, sale of publications, bulletin revenue, etc., are only incidental in nature and are not in the nature of commercial activity. Grant-in-aid is received from the Government of India every year for expenditure relating to exhibitions abroad, publicity abroad, seminar in India, buyer-seller meet, etc. The various activities detailed by the Assessing Officer in the assessment order do not reveal any commercial activity and all the activities are aimed at assisting the exporters in their business activities. The earning of surplus by the appellant led the Assessing Officer to the conclusion that its activities are purely on commercial lines. The Assessing Officer’s findings throughout the assessment order on the contrary, strengthens the stand of the appellant that it has been carrying on activities which are in the nature of any object of general public utility. In view of the above discussion, I am of the considered view that the appellant’s activities are covered by the last limb of the definition under section 2(15) of the Act, i.e., any other object of general public utility and is not involved in any activity in the nature of trade, commerce or business. Therefore, I am of the opinion that the denial of exemption under section 2(15) and section 10(23C)(iv) of the Act by the Assessing Officer are not based on proper appreciation of facts and hence not tenable.

5.2 I hold that the appellant is entitled to exemption under section 10(23C)(iv) of the Act. Hence, I direct the Assessing Officer to delete the addition made and accept the return of income filed by the appellant.”

8. On going through the above findings, we do not find any infirmity in the order passed by the Commissioner of Income-tax (Appeals) in directing the Assessing Officer to grant exemption under section 10(23C)(iv) of the Act.

9. In the case of India Trade Promotion Organization v. DGIT (Exemptions) [2015] 371 ITR 333/229 Taxman 347/53 taxmann.com 404, the Delhi High Court held as under (page 372) :

“58. In conclusion, we may say that the expression ‘charitable purpose’ as defined in section 2(15) cannot be construed literally and in absolute terms. It has to take colour and be considered in the context of section 10(23C)(iv) of the said Act. It is also clear that if the literal interpretation is given to the proviso to section 2(15) of the said Act, then the proviso would be at risk of running fowl of the principle of equality enshrined in article 14 of the Constitution of India. In order to save the Constitutional validity of the proviso, the same would have to be read down and interpreted in the context of section 10(23C)(iv) because, in our view, the context requires such an interpretation. The correct interpretation of the proviso to section 2(15) of the said Act would be that it carves out an exception from the charitable purpose of advancement of any other object of general public utility and that exception is limited to activities in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business for a cess or fee or any other consideration. In both the activities, in the nature of trade, commerce or business or the activity of rendering any service in relation to any trade, commerce or business, the dominant and the prime objective has to be seen. If the dominant and prime objective of the institution, which claims to have been established for charitable purposes, is profit making, whether its activities are directly in the nature of trade, commerce or business or indirectly in the rendering of any service in relation to any trade, commerce or business, then it would not be entitled to claim its object to be a ‘charitable purpose’. On the flip side, where an institution is not driven primarily by a desire or motive to earn profits, but to do charity through the advancement of an object of general public utility, it cannot but be regarded as an institution established for charitable purposes.”

10. As could be seen from the above observations of the hon’ble High Court that if the dominant and prime object of the institution which claims to have been established for charitable purposes, is profit making whether its activities are directly in the nature of trade, commerce or business or indirectly in rendering of any service in relation to its any trade, commerce or business, then the assessee would not be able to claim its object to be charitable purposes. On the other hand, where the institution is not driven primarily by a desire or motive to earn profits but to do charity through advancement of object of general public utility, the institution can be regarded as an institution established for charitable purposes. In the case on hand, we do not find it is established that the dominant and prime object of the assessee is profit making. The assessee is doing charity through advancement of object of general public utility, therefore, it is an institution established for charitable purposes.

11. A similar situation arose before the co-ordinate Bench of this Tribunal in the case of Southern India Chamber of Commerce & Industry (supra), wherein the Tribunal by its order dated April 17, 2015 held as under :

“3. Counsel for the assessee submits that exemption under section 11 was denied by the lower authorities on the ground that the assessee is into business and the activities of the assessee are not charitable and falls within the limb of object of general public utility and hence not entitled to exemption under section 11 of the Act in view of the amendment to section 2(15) of the Act. Counsel submits that various charges received are incidental to carry on its objects and therefore exemption under section 11 cannot be denied. Counsel for the assessee submits that places reliance on the recent order of the Kolkata Bench of this Tribunal in the case of Indian Chamber of Commerce v. ITO (Exemption)[2014] 52 taxmann.com 52 (Kol. – Trib.) in I.T.A. Nos. 1491 and 128/Kol/2012 dated December 2, 2014 for the assessment years 2008-09 and 2009-10. Referring to the said decision of this Tribunal, counsel submits that an identical issue has come up before the Kolkata Bench wherein it was held that receipts reported by the assessee for meetings, conferences, seminars, environment management centre, fees for certificate of origin is not in the nature of business and is incidental to carry on the objects of the assessee. Therefore, in view of the above decision, counsel submits that denying exemption under section 11 to the assessee’s charitable organisation is not justified.

4. The Departmental representative vehemently supports the orders of the lower authorities. He places reliance on the decision of the hon’ble Supreme Court in the case of Indian Chamber of Commerce v. CIT [1975] 101 ITR 796 (SC)and submits that in view of the said decision the authorities below has rightly denied exemption to the assessee under section 11 of the Act.

5. Heard both sides. Perused the orders of the lower authorities and decisions relied on. On going through the order of the Kolkata Bench of this Tribunal in the case of Indian Chamber of Commerce v. ITO (Exemption) [2014] 52 taxmann.com 52, we find that the issue in appeal is squarely covered by the said decision, as the Tribunal had elaborately considered the activities of the assessee in that case which is similar to that of the assessee in the present appeal and the Tribunal held that the assessee is a charitable organisation and the receipts collected by the assessee are only incidental to carry on its charitable objects and therefore, the assessee is not hit by newly inserted proviso to section 2(15) of the Act. The decision of the hon’ble Supreme Court relied on by the Departmental representative in the case of Indian Chamber of Commerce v. CIT [2015] 37 ITR (Trib) 688 (Kol) was also considered by the Kolkata Bench of this Tribunal in I. T. A. Nos. 1491 and 1284/Kol/2012 dated December 2, 2014 in deciding the appeals, wherein the Tribunal observed as under (page 744):

’70. In view of the above, we thus now turn to examine and analyse in full details the particular facts of the present case. That the assessee association is a charitable institution, duly registered as such under section 12A of the Act, carrying on its main object of development of trade, industries and commerce. The main objects for which the association came into existence, are clearly set out in clause 3 of the memorandum of association which duly records and reads as under :

“3(a) To promote and protect the trade, commerce and industries and in particular the trade, commerce and industries in or with which Indians are engaged or concerned.”

71. The activities of conducting environment management centre, meetings, conferences and seminar and issuance of certificate of origin, being the activities stated to be “services in relation to trade, commerce or business” were all well covered by the main object being fully connected, incidental and ancillary to the main purpose and were conducted solely for the empowerment, betterment and for creating awareness amongst the industrialists in order to bring about the development of trade and industries in India. Further it is to be noticed that the memorandum has also specifically authorised the Chamber “to do all other things as may be conducive to the development of trade, commerce and industries, or incidental to attainment of the above objectives or any of them”. Thus it was only for the purpose of securing its primary aims of proper development of business in India that the assessee was taking the said ancillary steps. The said activities were not carried out independent of the main purpose of the association of the institution being the development and protection of trade. There was no independent profit motive in any of the said activities. The surplus arising out of the same was merely incidental to the main object to charity. The majority of the receipts in the said activities were out of the sponsorships and donations. The expenses incurred on the said activities as and when incurred were all separately debited to the said accounts and the balance was shown as surplus over receipts. Thus in view of the above it is clear that the alleged activities were all merely incidental to the main object of the assessee and the predominant object of the association being the promotion development and protection of trade and commerce which is an object of general public utility, it can never be the case that it is engaged in “business, trade or commerce” or in any “service in relation to business, trade or commerce”. The individual nature and purpose of the specific activities, it is stated that the activities held by the Assessing Officer and the Commissioner of Income-tax (Appeals) to be business in nature, were as follows :

(a) meetings, conferences and seminars,
(b) environment management centre, and
(c) fees for certificate of origin.

Facts relating to these activities are discussed in detail in paras 44 to 48 of this order above, which need not be repeated.

72. From facts in entirety, now the question arises is whether the principle of consistency will apply or not? From the assessment years 1985-86 to 2007-08 exemption under section 11 of the Act was allowed. Now, having extensively with the newly amended section 2(15) of the Act and its absolute inapplicability to the case of the assessee supported by various judicial decisions, we will discuss this issue. We find that the Commissioner of Income-tax (Appeals) without appreciating that the basic principle underlying the definition of ‘charitable purpose’ remained unaltered, and on amendment in section 2(15) of the Act with effect from April 1, 2009, whereby the restrictive first proviso was inserted therein, the lower authorities held that the same substantially changed the position of law and thus the principle of consistency did not apply. But we are of the view that a detailed reading of the various judicial decisions through the years, interpreting the definition of ‘charitable purpose’ as laid out in section 2(15) of the Act and also the definition of ‘business’ in relation to the said section amply reveals that the theory of dominant purpose has always, all through the years, been upheld to be the determining factor laying down whether the institution is charitable in nature or not. 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. The hon’ble apex court in the earliest case of CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC) 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. It was laid out by the court that (headnote of 55 ITR),

‘That if the primary purpose be advancement of objects of general public utility, it would remain charitable even if an incidental entry into the political domain for achieving that purpose, e.g., promotion of or opposition to legislation concerning that purpose, was contemplated.’

73. It was only for the purpose of securing its primary aims that it was mentioned in the memorandum of association that the Chamber might take steps to urge or oppose the legislative or other measures affecting trade, commerce or manufactures. Such an object ought to be regarded as purely ancillary or subsidiary and not the primary object. In connection to the above case it is laid out the said case dealt with the assessment of the assessee in the assessment year 1948-49 wherein relevant to the said assessment years 1948-49 to 1952-53, by the last paragraph of sub-section (3) of the Indian Income-tax Act, 1922, ‘charitable purposes’ was defined as-

‘. . . In this sub-section “charitable purpose” includes relief of the poor, education, medical relief and the advancement of any other object of general public utility, but nothing contained in clause (i) or clause (ii) shall operate to exempt from the provisions of this Act part of the income from property held under a trust or other legal obligation for private religious purposes which does not enure for the benefit of the public.’

74. The adding of the words ‘not involving the carrying on of any activity for profit’ was introduced by the Income-tax Act, 1961. The hon’ble apex court in the earliest decision in the case of Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 (SC) held the theory of dominant or primary object of the trust to be the determining factor so as to take the carrying on of the business activity merely ancillary or incidental to the main object.

75. It was held as follows (headnote of 121 ITR) :

‘(i) That the dominant or primary purpose of the assessee was to promote commerce and trade in art silk yarn, raw silk, cotton yarn, art silk cloth, silk cloth and cotton cloth as set out in clause (a) and the objects specified in clauses (b) to (e) were merely powers incidental to the carrying out of that dominant and primary purpose ;
(ii) That the dominant or primary purpose of the promotion of commerce and trade in art silk, etc., was an object of public utility not involving the carrying on of any activity for profit within the meaning of section 2(15) ; and that the assessee was entitled to exemption under section 11(1)(a).’

76. Again the hon’ble apex court in the case of CIT v. Federation of Indian Chambers of Commerce and Industry[1981] 130 ITR 186 (SC) held that (headnote)-

‘that the dominant object with which the federation was constituted being a charitable purpose, viz., promotion, protection and development of trade, commerce and industry, there being no motive to earn profits, the respondent was not engaged in any activity in the nature of business or trade, and, if any income arose from such activity, it was only incidental or ancillary to the dominant object for the welfare and common good of the country’s trade, commerce and industry, and its income was, therefore, exempt from tax under section 11 of the Income-tax Act, 1961.’

77.Again reiterating the dominant purpose theory, the hon’ble Supreme Court in the case of CST v. Sai Publication Fund [2002] 258 ITR 70 (SC) ; [2002] 126 STC 288 (SC) laid out as follows (page 76) :

‘. . . If the main activity is not business, then any transaction incidental or ancillary would not normally amount to “business” unless an independent intention to carry on “business” in the incidental or ancillary activity is established. In such cases, the onus of proof of an independent intention to carry on “business” connected with or incidental or ancillary sales will rest on the Department. Thus, if the main activity of a person is not trade, commerce, etc., ordinarily incidental or ancillary activity may not come within the meaning of “business”.’

78. In the recent decision which deals specifically with the newly amended section 2(15) of the Act, in the case ofInstitute of Chartered Accountants of India v. DGIT (Exemptions) [2012] 347 ITR 99 (Delhi), laying down the very same principle it was again laid (headnote) :

‘. . . that the fundamental or dominant function of the institute was to exercise overall control and regulate the activities of the members/enrolled chartered accountants. A very narrow view had been taken that the Institute was holding coaching classes and that this amounted to business.’

79. Again, the hon’ble Bombay High Court in the case of Baun Foundation Trust v. Chief CIT (Writ Petition No. 1206 of 2010 in the High Court of judicature at Bombay March 27, 2012) it was held that-

‘4. . . . It is a well-settled position in law that the dominant nature of the purpose for which the trust exists has to be considered. The Chief Commissioner has not doubted the genuineness of the trust or the fact that it is conducting a hospital.’

80. Thus from all the above it is seen that though the definition of ‘charitable’ purpose under section 2(15) has undergone changes, the principle underlying the same has remained the same. In context of the above, with regard to the ‘principle of consistency’ it would be of relevance here to quote the decision of the apex court in the case ofRadhasoami Satsang v. CIT [1992] 193 ITR 321 (SC) wherein it was held that (headnote):

‘(ii) That, in the absence of any material change justifying the Department to take a different view from that taken in earlier proceedings, the question of the exemption of the assessee-appellant should not have been reopened.

Strictly speaking, res judicata does not apply to income-tax proceedings. Though, each assessment year being a unit, what was decided in one year might not apply in the following year; where a fundamental aspect permeating through the different assessment-years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the ordered , it would not be at all appropriate to allow the position to be changed in a subsequent year.’

81. Now coming to application of section 28(iii) of the Act. We find that section 28(iii) of the Act provides that the income derived by a trade, professional or similar association from specific services performed for its members will be brought to charge under the head ‘Profits and gains of business or profession’. The underlying idea behind section 28(iii) is that there must be a business from which income is derived and that in the course of such business specific services must be rendered for its members. The concept behind section 28(iii) is to cut at the mutuality principle being relied on in support of a claim for exemption, when the assessee was actually deriving income or making profits as a result of rendering specific services for its members in a commercial way. The reason for the introduction of section 28(iii) of Act, to ignore the principle of mutuality and reach the surplus arising to the mutual association and this is clear from the fact that these provisions are confirmed to services performed by the association ‘for its members’. Such income would either be charged as business income or under the residual head, depending upon the question whether the activities of the association with the non-members amount to a business or otherwise. Section28(iii) constitutes certain income of the association to be business income without affecting the scope of the exemption under section 11. Section 2(15) which incorporates the definition of ‘charitable purposes’ simply shows that several mutual associations may also fall within the definition. The receipts derived by a Chamber of Commerce and Industry for performing specific services to its members, though treated as business income under section 28(iii) would still be entitled to the exemption under section 11 read with section 2(15) of the Act, provided there is no profit motive. Thus, the assessee being a charitable institution carrying on the object of promotion and development of trade and commerce and which is not involved in the carrying on of any activity in the nature of ‘business’, the said section 28(iii) of the Act does not apply.

82. In view of the above discussion, we are of the considered view that in the given facts and detailed reading of the various judicial decisions through the years, interpreting the definition of ‘charitable purpose’ as laid out in section 2(15) of the Act and also the definition of ‘business’ in relation to the said section amply reveals that the theory of dominant purpose has always, all through the years, been upheld to be the determining factor laying down whether the institution is charitable in nature or not. 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. The hon’ble apex court in Indian Chamber of Commerce v. ITO earliest case of Andhra Chamber of Commerce [1965] 55 ITR 722 (SC)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. In our view the basic principle underlying the definition of ‘charitable purpose’ remained unaltered even on amendment in section 2(15) of the Act with effect from April 1, 2009, though the restrictive first proviso was inserted therein. Accordingly, in the given facts of the case as discussed above in detail, the assessee association’s primary purpose was advancement of objects of general public utility and it would remain charitable even if an incidental or ancillary activity or purpose, for achieving the main purpose was profitable in nature. Hence, the assessee is not hit by newly inserted proviso to section 2(15) of the Act. This issue of the assessee’s appeal is allowed.’

6. Respectfully following the decision of this Tribunal, we allow the appeals of the assessee.”

12. Respectfully following the said decisions, we uphold the order of the Commissioner of Income-tax (Appeals) in granting deduction under section 10(23C)(iv) to the assessee and reject the grounds raised by the Revenue.

13. In the result, the appeal of the Revenue is dismissed.

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