Phd Chamber Of Commerce & Industry, New ... vs Department Of Income Tax

ITA Nos. 248 & 1572/Del/2013 Assessment Years: 2008-09 & 2009-10 DDIT, vs. PHD Chamber of Commerce & Industry, Inv. Cir.-II, Room No. 306, PHD House, Opp. Asian Games Village, Aayakar Bhawan, New Delhi. Laxmi Nagar, N. Delhi. AAACP1438L

(Appellant) (Respondent)

Appellant by : Sh. Vikram Sahay, Sr. DR Respondent by : Sh. C.S. Aggarwal, Sr. Adv. Date of Hearing: 16.02.2015 Date of Pronouncement:

ORDER

PER SHRI C.M. GARG, J.M.

These appeals have been filed against the order of Commissioner

of Income Tax (Appeals)-XXI, New Delhi dated 15.11.2012 in Appeal

No. 128/2010-11 for A.Y. 2008-09 and another order dated 31.01.2013

in Appeal No. 257/2011-12 for A.Y. 2009-10 respectively.

2. Grounds raised by the Revenue in ITA No. 248/Del/2013:

1. "On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in upholding that the activities of the assessee are Charitable in nature.

2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in upholding that the activities of the 2

assessee is eligible for exemption u/s 11 of the Income Tax Act, 1961.

3. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in direction to allow depreciation on Rs. 73,68,590/-.

4. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in direction to allow deduction of Rs. 9,05,460/- on account of provision for leave encashment.

5. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in direction to allow deduction of Rs. 65,00,000/- on account of provision of gratuity."

3. Grounds raised by the Revenue in ITA No. 1572/Del/2013 read as

under:

1. "On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in upholding that the activities of the assessee are charitable in nature;

2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in upholding that the assessee is eligible for exemption u/s 11 of the Income Tax Act, 1961;

3. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in upholding that the assessee is eligible for exemption on earned surplus of Rs. 2,41,40,492/- on the basis of principle of mutuality;

4. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in directing the AO to allow depreciation of Rs. 76,62,753/-;

5. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in directing the AO to allow deduction of Rs. 73,36,350/- on account of provision for gratuity."

4. We have heard arguments of both the sides and carefully perused

the relevant material placed on record. Briefly stated the facts giving

rise to these appeals are that the assessee was established in 1909 and

it was incorporated as a company on 26.04.1951 as Punjab Chamber of

Commerce and thereafter on 13.08.1981 afresh certificate of

incorporation was issued in the name of PHD Chamber of Commerce 3

and Industry under Companies Act, 1956. The assessee is also

registered u/s 12A of the Income Tax Act, 1961 vide certificate dated

23/05/1994 from the A.Y. 1996-97 upto A.Y. 2005-06 and it was granted

exemption u/s 11 of the Act. For the year assessment year under

consideration, the AO noted that the assessee has not restricted its

activities only to the members and the assessee is doing business

activity either specific service to its members which is taxable u/s 28(iii)

of the Act or the business or professional services to the non members

which is taxable u/s 28 of the Act. Thereafter the AO held that since the

assessee is not carrying out any charitable activity. Therefore,

exemption u/s 11 of the Act is denied and the receipts collected from the

members and non members are taxed u/s 28(iii) of the Act.

5. Being aggrieved by the above assessment order, the assessee

preferred an appeal before the CIT(A) which was allowed by passing the

impugned order granting part relief for the assessee. Now the aggrieved

revenue before this Tribunal with the grounds as reproduced

hereinabove.

6. The ld. Departmental Representative (DR) contended that while

the assessee is not working according to the aims and objectives of the

memorandum of the Association and is providing services to the non

members performing professional services to all then it should be

inferred that the assessee is doing business activity. The ld. DR also 4

contended that the assessee has not restricted its activities only to the

members. Therefore, either specific service to its members or the

business or professional services to the non members both are taxable

u/s 28 of the Act. The ld. DR vehemently contended that in view of

aforesaid facts the assessee is not carrying out any charitable activities.

Therefore, the AO was correct in denying exemption u/s 11 of the Act

and rightly taxed all the receipts collected from the members and non

members.

7. The ld. DR supporting the order of the AO for A.Y. 2009-10

submitted that after the amendment to section 2(15) of the Act w.e.f.

A.Y. 2009-10 the assessee's claim of exemption the sixth limb of the

charitable activity mentioned in section 2(15) of the Act is not tenable.

The ld. DR also drawn our attention towards paragraph no. 14 of the

assessment order for A.Y. 2009-10 and submitted that the assessee's

claim of exemption on the mutuality was rightly rejected as the assessee

was under the purview of newly inserted proviso to sec. 2(15) of the Act.

The ld. DR, justifying the action of the AO further submitted that after

proviso inserted to sec. 2(15) of the Act w.e.f. 2009-10 in a case of

General Public Utilities the entities will no longer be enjoying charitable

status if they involve carrying on any activity in the nature of trade, or

business or any activity of rendering any service in relation to any trade,

or business for a cess or fee or any other consideration irrespective of 5

the nature of use or application, or retention, of the income from such

activity. The ld. DR lastly submitted that the AO rightly denied

exemption u/s 11 & 12 of the Act to the assessee society and rightly

taxed the same.

8. Replying to the above, the ld. Sr. Counsel of the respondent

assessee at the very outset, submitted that while framing the

assessment for A.Y. 2006-07 and 2007-08, the AO for the first time held

that the assessee was carrying on business of rendering services not

only to its members but also to the non members and, therefore, the

provisions of sec. 11(4A) of the Act (w.e.f. 01.04.12) were attracted and

hence exemption u/s 11(1) of the Act could not be given to the

assessee. The ld. SR. Counsel further pointed out that in these

assessment years the AO also observed that since the exemption could

be held allowable only if the business was incidental to the carrying out

of the purchase of the trusts and separate books of accounts were

maintained for the business. The ld. Sr. Counsel further pointed out that

the AO finally held that as the assessee was also providing services to

the non members and had not maintained separate books of accounts

therefore, the exemption u/s 11 of the Act could not be granted to the

assessee because the activities of the assessee society were not

charitable in nature as by providing services to non members it was

carrying on activity for consideration and with profit motive. 6

9. The ld. Sr. Counsel further pointed out that the findings of the AO

denying the exemption was upheld by the ITAT in ITA No. 1233/D/2010

dated 31.03.2011 for A.Y. 2006-07 and ITA No. 5685/D/2010 dated

19.12.2011 for A.Y. 2007-08. The ld. Sr. Counsel strenuously pointed

out that the Hon'ble High Court allowed the appeals of the assessee

which were filed against the orders of the Tribunal (supra), by its

judgment reported in 357 ITR 296 (Del.). The ld. Sr. Counsel further

drawn our attention towards placitum 20 of the judgment of High Court

(supra) and submitted that the Hon'ble High Court held that the

aforesaid findings of the Tribunal that the assessee's activities could not

be termed as charitable cannot be sustained as the activities performed

by the assessee were similar with the activities provided to the non

members and the same were not with the profit motive and, therefore,

cannot be characterized as non charitable in nature. The ld. Sr. Counsel

of the assessee vehemently contended that the aforesaid findings of the

Hon'ble High Court that the assessee is a charitable institution and had

been set up with a charitable object and there was no need to maintain

separate books of accounts. The ld. Sr. Counsel further pointed out that

for A.Y. 2009-10 the assessee has maintained separate books of

accounts and details of receipts and allocation of expenses has been

placed at page no. 49 to 51 of the paper book of the assessee. The ld.

Sr. Counsel also drawn our attentions towards this fact that the factual 7

situation remains the same in the two subsequent assessment years

under consideration before us as there is no change of facts that the

assesee carried on the same activities as were carried by it in the earlier

assessment years and such activities are in accordance with its

memorandum and article of association right from its incorporation till

date.

10. The ld. Sr. Counsel reiterated its arguments and contended that

the AO had gone wrong in denying exemption u/s 11 of the Act to the

assessee in respect of its surplus as is reflected in the income and

expenditure account on the ground that it either did not carry out its

activities in accordance with the objects or that the activities of the

assessee were not charitable in nature.

11. The ld. Sr. Counsel further pointed out calculation of taxable

income by the AO and submitted that the gross receipts aggregates to

Rs. 11,75,01,190/- for A.Y. 2008-09 and aggregates to Rs.

12,36,91,232/- for A.Y. 2009-10 and the surplus before depreciation was

3,06,27,500/- for A.Y. 2008-09 and Rs. 3,22,63,291/- for A.Y. 2009-10

respectively and for A.Y. 2008-09 the claim of depreciation was wrongly

denied which was a statutory deduction in view of decision of Hon'ble

Jurisdictional High Court of Delhi in the case of DIT(E) vs. Indraprastha

Cancer Society (2015) 53 taxmann.com 463 (Del.).

8

12. Supporting the impugned orders of the CIT(A) in both the

assessment years the ld. Sr. Counsel pointed out that the CIT(A) rightly

directed the AO to allow depreciation, provision for leave encashment

and provision of gratuity for A.Y. 2008-09 and the CIT(A) was also

justified in directing the AO to allow exemption on earned surplus on the

basis of principles of mutuality, to allow depreciation and provision for

gratuity for A.Y. 2009-10.

13. The ld. Departmental Representative also placed a rejoinder and

submitted that the proviso to sec. 2(15) of the Act was came into

existence w.e.f. A.Y. 2009-10. Therefore, the AO was quite justified in

denying exemption u/s 11 of the Act to the assessee in view of newly

inserted provision to section 2(15) of the Act.

14. On careful consideration of above submissions, we note that the

Hon'ble Jurisdictional High Court of Delhi in assessee's own case for

A.Y. 2006-07 and A.Y. 2007-08 (supra) in para 20 at page 310 has

observed as under:

20. "Turning specifically to the facts of the case before us, we find that there is no dispute that the objects of the assessee are charitable in nature within the meaning of section 2(15) of the Act. The Tribunal has so held and that finding is not under challenge before us by the Revenue. Clause 4 of the memorandum of association prescribed the distribution of profit and is in the following terms:

"4. The income and property of the company whensoever derived shall be applied solely towards the promotion of the objects of the company as set forth in this memorandum of association, and no 9

portion by way of dividend or bonus or otherwise, shall be paid to the persons who at any time, are, or have been, members of the company, or to any of them or to any person claiming through any of them; provide that nothing herein contained shall prevent the payment in good faith of remuneration to any officer or servants of the company, to any member thereof, or to any other person in return for any services actively rendered to, for or on behalf of the company or of interest on money borrowed by or for the purposes of the company, from any person, whether a member of the company or otherwise."

15. We further respectfully note that the Hon'ble High Court in para 22

at page 311 has clearly observed that the activities as driven by

charitable motive in the sense in which a charitable purpose is defined in

section 2(15) of the Act. The provisions of section 11(4A) of the Act are

not attracted to the case of the assessee i.e. PHD Chamber of

Commerce & Industry. Respectfully following the judgment of the

Hon'ble High Court of Delhi in assessee's own case (supra), we are

inclined to hold that the assessee's activities are being driven by a

charitable motive according to its objects as per Memorandum of

Association.

16. Turning to the issue of newly inserted proviso to section 2(15) of

the Act firstly we respectfully take cognizance of decision of the Hon'ble

Jurisdictional High Court of Delhi in the case of India Trade Promotion

Organization vs. DGIT(E) (2015) 53 taxmann.com 404 (Del.), wherein

their lordships held that the correct interpretation of proviso to section

2(15) of the Act would be that it carves out an exception from charitable 10

purpose of advancement of any other object of general public utility and

that exception is limited to the 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. Speaking for Hon'ble High Court of Delhi their lordships

further elaborated that in both the activities, in the nature of trade,

commerce or business, the dominant and the prime objective has to be

seen and 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 services in

relation to any trade, commerce or business, then it would not be entitled

to claim its object to be a charitable purpose. The Hon'ble High Court

also observed that where 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.

17. The Hon'ble High Court also held that the introduction of the first

proviso to section 2(15) of the Act by virtue of Finance Act, 2008 was

directed to prevent the unholy practise of pure trade, commerce and

business entities from marking their activities and portraying them in the

garb of an activity with the object of a general public utility and the 11

proviso has not been designed and inserted to hit those Institutions,

which had the advancement of the objects of general public utility at their

hards and were charity institutions. Emphasizing on the intention of the

legislation the Hon'ble High Court also hold that the object to insert

proviso to section 2(15) of the Act was not to hurt genuine charitable

organizations and it was enforced to remove the mask from the entities,

which were purely trade, commerce and business entities and to expose

their true identities as per assurance given by the then Hon'ble Finance

Minister while introducing Finance Bill, 2008. Their lordships also made

it clear that in order to save the constitutional validity of the proviso to

sec. 2(15) of the Act the same would have to be read down and

interpreted in the context of sec. 10(23C)(iv) of the Act because context

requires such interpretation. It was also held that when the expression

"charitable purpose" as defined in sec. 2(15) of the Act is read in the

context of sec. 10(23C)(iv) of the Act, we would have to give up the strict

and literal interpretation sought to be given to the expression "charitable

purpose" by the legislature.

18. We respectfully reproduced relevant operative paragraph of the

decision of Hon'ble High Court of Delhi in the case of India Trade

Promotion Organization vs. DGIT(E) (supra) which reads as under:

"43. From this, it is clear that prior to the introduction of the proviso to Section 2(15) of the said Act, there was no dispute that the petitioner was established for charitable purposes and, 12

therefore, its income was not to be included in the total income and was, therefore, granted the benefit of exemption. We have already noted above, while discussing the facts of the case that the income received by the petitioner is from the letting out of space, sale of publications, sale of tickets and leasing out food and beverages outlets in Pragati Maidan. The dominant and main object of the petitioner is to organise trade fairs / exhibitions in order to promote trade, commerce and business not only within India, but internationally. This is done through the organisation of trade fairs, including the annual International Trade Fair and other exhibitions. It is for this purpose that the space is let out to various entities during the said fairs and exhibitions. All these activities, including the sale of tickets and sale of publications are an inherent part of the main object of the petitioner. It is clear from the facts of the case that profit making is not the driving force or objective of the petitioner. It is registered under Section 25 of the Companies Act, 1956, which specifically applies to entities which intend to apply their profits, if any, or other income in promoting their objects and prohibits, the payment of any dividend to its members. This makes it clear that any income generated by the petitioner does not find its way into the pockets of any individuals or entities. It is to be utilized fully for the purposes of the objects of the petitioner.

46. At this juncture, we may point out that we are in agreement with the argument advanced by Mr Syali that the proviso to Section 2(15) does not make any distinction between entities carrying on regular trade, commerce or business or providing services in relation to any trade, commerce or business on the one hand and genuine charitable organizations on the other. It must be remembered that we are construing the expression "charitable purpose" not in a vacuum, but in the specific context of Section 10(23C)(iv) of the said Act. As pointed out above, Section 10 deals with the incomes not included in total income. And, Section 10(23C)(iv) specifically deals with the income received by any person on behalf of, inter alia, an institution established for charitable purposes. We have to, therefore, examine the meaning of the expression "charitable purposes" in the context of Section 10(23C)(iv). Looking at the said expression from this stand point, it becomes clear that it has a reference to income. Because, it is only when such an institution has an income that the question of not including that income in its total income would arise. Therefore, merely because an institution, which otherwise is established for a charitable purpose, receives income would not 13

make it any less a charitable institution. Whether that institution, which is established for charitable purposes, will get the exemption under Section 10(23C)(iv) would have to be determined by the prescribed authority having regard to the objects of the institution and its importance throughout India or throughout any State or States. There is no denying that having regard to the objects of the petitioner and its importance throughout India in the field of advancement of promotion of trade and commerce, the petitioner would be entitled to be regarded as an institution which would qualify for that exemption. The only thing that we have to examine is - whether the petitioner had been established for charitable purposes? The fact that it derives income does not, in any way, detract from the position that it is an institution established for charitable purposes. Therefore, in our view, merely because the petitioner derives rental income, income out of sale of tickets and sale of publications or income out of leasing out food and beverages outlets in the exhibition grounds, does not, in any way, affect the nature of the petitioner as a charitable institution if it otherwise qualifies for such a character.

53. From the said decision, it is apparent that merely because a fee or some other consideration is collected or received by an institution, it would not lose its character of having been established for a charitable purpose. It is also important to note that we must examine as to what is the dominant activity of the institution in question. If the dominant activity of the institution was not business, trade or commerce, then any such incidental or ancillary activity would also not fall within the categories of trade, commerce or business. It is clear from the facts of the present case that the driving force is not the desire to earn profits but, the object of promoting trade and commerce not for itself, but for the nation - both within India and outside India. Clearly, this is a charitable purpose, which has as its motive the advancement of an object of general public utility to which the exception carved out in the first proviso to Section 2(15) of the said Act would not apply. We say so, because, if a literal interpretation were to be given to the said proviso, then it would risk being hit by Article 14 (the equality clause enshrined in Article 14 of the Constitution). It is well-settled that the courts should always endeavour to uphold the Constitutional validity of a provision and, in doing so, the provision in question may have to be read down, as pointed out above, in Arun Kumar (supra).

55. It would be appropriate to also examine the observations of another Division Bench of this court in G.S.1 (supra). While 14

considering Circular No.11 of 2008 issued by the CBDT, to which a reference has been made earlier in this judgment, the Division Bench held that it was evident from the said circular that the new proviso to Section 2(15) of the said Act was "applicable to assesses, who are engaged in commercial activities, i.e., carrying on business, trade or commerce, in the garb of 'public utilities' to avoid tax liability as it was noticed that the object 'general public utility' was sometimes used as a mask or device to hide the true purpose, which was 'trade, commerce or business'." From this, it is evident that the introduction of the proviso to Section 2(15) by virtue of the Finance Act, 2008 was directed to prevent the unholy practice of pure trade, commerce and business entities from masking their activities and portraying them in the garb of an activity with the object of a general public utility. It was not designed to hit at those institutions, which had the advancement of the objects of general public utility at their hearts and were charity institutions. The attempt was to remove the masks from the entities, which were purely trade, commerce or business entities, and to expose their true identities. The object was not to hurt genuine charitable organizations. And, this was also the assurance given by the Finance Minister while introducing the Finance Bill 2008."

19. Turning to the factual matrix of the present case the AO and the ld.

DR has not pointed out any fact that there was a change in the activities

conducted by the assessee society during F.Y. 2008-09 and 2009-10

from the activities which the assessee society carried on during the

earlier assessment years. Therefore, we may safely infer that the

activities of the assessee society were similar during the assessment

years under consideration as similar to the activities which were carried

out during the earlier assessment years. As we have already noted that

the Hon'ble High Court of Delhi in its judgment in assessee's own case

for A.Y. 2006-07 and 2007-08 has held that it is proper to view the 15

activities as driven by charitable motive in the sense in which a

charitable purpose is defined in section 2(15) of the Act. After

considering all facts and circumstances and activities conducted and

driven by the assessee society their lordships also recorded their

satisfaction that the provisions of section 11(4A) of the Act are not

attracted to the case of the assessee. Meaning thereby in assessee's

own case for immediately previous assessment years it was held that

activities conducted and driven by the assessee society are of charitable

nature and purpose as defined in section 2(15) of the Act and the

provisions of section 11(4A) of the Act are not applicable to the case of

the assessee society and, therefore, the AO was not justified in denying

the exemption u/s 11 of the Act for the assessee.

20. Turning to the case of the assessee for A.Y. 2008-09 from bare

reading of the impugned order, we observe that the CIT(A) in para 4.3

following the order of Hon'ble High Court of Delhi dated 19.10.2012 in

assessee's own case (supra) held that the assessee is eligible for

exemption u/s 11 of the Act in A.Y. 2008-09 and the CIT(A) deleted the

addition made by the AO amounting to Rs. 3,06,27,500/-. In view of the

above noted facts, respectfully following the decision of Hon'ble High

Court of Delhi for A.Y. 2006-07 and 2007-08 (supra), we are inclined to

hold that the CIT(A) was quite justified in granting exemption u/s 11 of 16

the Act to the assessee and deleting the impugned addition made by the

AO for A.Y. 2008-09.

21. Turning to the case of A.Y. 2009-10 from bare reading of the

impugned order of the CIT(A) we note that the CIT(A) granted relief for

the assessee with following observations and conclusions:

"4.1 I have gone through the findings of the AO in the assessment order and the submissions made by the ld. AR before me during appeal proceedings. The main contention of the ld. AO is that there is an amendment to sec. 2(15) of the Income Tax Act, 1961 w.e.f. A.Y. 2009-10 wherein it has been mentioned as under:

["Sec. 2(15) "charitable purpose" includes relief of the poor, education, medial 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 charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of sue 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 year.] 4.2 In this regard the issue whether the appellant chamber is carrying on any business activity arose in A.Y. 2006-07 and A.Y. 2007-08 and wherein the Hon'ble Delhi High Court vide order dated 19.10.2012 in ITA No. 368-369/2012 has allowed the appeal of the appellant and has held as under:

PARA 7 OF ORDER 17

"...................In the opinion of the Tribunal, the AO was not right in the characterization of these services, both to the members as well as non members, as non charitable activities, however, it upheld the view of the AO that in rendering these services the assessee was carrying on a business activity. PARA 8 OF ORDER The nice question as to whether by rendering specific services to members and non members for a fee, a trade, professional or similar association can be said to be carrying on a business activity needs to be examined. The further question to be addressed, with reference to sec. 11(4A), would be whether such activities (which amount to a business) were incidental to the attainment of the objectives oftrust or institution and whether separate books of accounts were maintained in respect of such activities. There can be no doubt that the activities of the nature described above, in the case of an assessee such as the present one, which is a trade association- Chamber of Commerce & Industry, established to protect the interest of trade and industry in Punjab, Haryana and Delhi - were activities which are incidental to the attainment of the objects of the chamber.

We do not think that the Tribunal is justified in taking the view that the assessee, which is a chamber of commerce and industry, is carrying on business activities which require compliance with the conditions of section 11(4A). Para 18 OF ORDER The Tribunal in the present case disapproved the view taken by the Assessing Officer that by rendering professional services to members and non-members, it was not carrying on a charitable activity. This was because the assessee's objects were charitable in nature and it was so registered u/s 12A. However, it tended to view the assessee's activities as amounting to business. It even observed that "the admitted position of fact is that the assessee has been carrying on business activities". This part of the order of the Tribunal was sought to be corrected by an application u/s 254(2) of the Act but that application was dismissed by the Tribunal though with some clarification. The Tribunal noted that on this aspect the finding of the CIT(Appeals) was that the activities were carried on pursuant to the objects and, therefore, they do not constitute business.

At the same breath it has also been observed that the receipts were earned by repetitive activities, which can rightly be termed as business. Having regard to the authorities which we have noticed above it is not proper to 18

characterize the activities of the chamber as activities amounting to a business in the generally understood sense of the word, the most important feature of business being profit motive. It has not been suggested by the income tax authorities that the activities carried out by the assessee chamber were propelled by any profit motive. In such circumstances, it is proper to view the activities as driven by a charitable motive in the sense in which a charitable purpose is defined in section 2(15) of the Act. In this view of the matter, we are satisfied that the provision of section 11(4A) are not attached to the present case and a remand to the AO for finding out whether the activities were maintained for such business was unnecessary. We accordingly answer the substantial question of law framed by us in the negative, in favour of the assessee and against the Revenue. However, there shall be no order as to costs."

On going through the aforesaid order passed by the Hon'ble Delhi High Court in the case of the appellant chamber, it is seen that the Hon'ble Delhi High Court has held that the various activities carried out by the appellant chamber were not propelled by any profit motive and, therefore, it would not be correct to conclude that the appellant was carrying out any business activity during the year. The Hon'ble Delhi High Court has further held that the activities carried out by the appellant were charitable in nature.

4.3 The aforesaid order of the Hon'ble Delhi High Court was passed in respect of A.Y. 2006-07 and A.Y. 2007-08. The Income Tax Act has been amended w.e.f. A.Y. 2009-10 by insertion of proviso to section 2(15) of the Income Tax Act.

In view of the provisions of section 2(15) it will be seen that the proviso to section 2(15) of the Income Tax Act will be applicable only if the entity is carrying out any activity or rendering any service in the nature of trade, commerce or business and most important feature of business being profit motive. In the present case activities carried out by the appellant were not propelled by any profit motive.

In view of the above as the appellant chamber has not carried out any activity in the nature of trade, commerce or business and, therefore, the proviso to section 2(15) of the Income Tax Act is not applicable in the case of the appellant. Therefore, as the appellant is carrying out charitable activities it is entitled to exempt u/s 11 of the Income Tax Act.

19

In view of the above facts and findings, I am of the opinion that the appellant is eligible for exemption u/s 11 of the Act in A.Y. 2009-10 also as held in earlier assessment years and, therefore, the addition of Rs. 27084321/- is hereby deleted.

Ground No. 1 of the appellant is allowed."

22. In view of above observations and conclusions of CIT(A), we note

that the CIT(A) has categorically held that the provisions of sec. 2(15) of

the Act will be seen that the proviso to section 2(15) of the Act will be

applicable only if the entities carrying out any activity or rendering any

services in the nature of trading, commerce or business and the most

important feature of the business is being profit motive. After analyzing

entire activities, receipts and its application, the CIT(A) further hold that

activities of the assessee society are not carried out with profit motive.

As we have respectfully noted earlier the observations of Hon'ble

Jurisdictional High Court of Delhi in the case of India Trade Promotion

Organization vs. DGIT(E) (supra) that the expression "charitable

purpose" as defined in 2(15) of the Act is read in the context of section

10(23C)(iv) of the Act and we would have to give up the strict and literal

interpretation sought to be given to the expression "charitable purpose"

by the Revenue and if an Institution established for charitable purpose

did not receive an income at all then what would be need for taking any

benefit u/s 10(23C)(iv) of the Act.

23. Therefore, in our humble understanding, if the expression

"charitable purpose" is given meaning that in case an Institution, with an 20

object of advancement of general public utility, derives an income then it

would be falling within the exception carved out by the first proviso to

sec. 2(15) of the Act then no entity would qualify for the exemption u/s

10(23C)(iv) of the Act and this meaning obviously provide the effect that

the provision of sec. 10(23C)(iv) of the Act would be rendered

redundant.

24. Finally respectfully following the ratio of the decision of Hon'ble

Jurisdictional High Court of Delhi in the case of India Trade Promotion

Organization vs. DGIT (E) (supra) we note that we are unable to see any

ambiguity or perversity in the order of the CIT(A) which granted relief for

the assessee by directing the AO to allow exemption u/s 11 of the Act for

the assessee. At this point, it is also pertinent to mention that the AO

has not brought out any fact to support this allegation that the activities

carried out by the assessee society were conducted or derived in the

nature of trade, commerce or business or the activity of rendering any

service in relation to any trade, commerce or business and the dominant

and prime objective of the assessee society was to earn profit i.e.

activities of the assessee society was derived for profit motive.

25. Before parting with the order we also find it appropriate to deal with

the objection of the ld. DR that the CIT(A) was not justified in allowing

depreciation to the assessee society. On this issue we respectfully take

note of the decision of the Jurisdictional High Court of Delhi in the case 21

of DIT(E) vs. Indraprastha Cancer Society (supra), wherein it was held

that where a charitable institution has purchased a capital asset and

treated the amount spend on the said asset as application of income

then the said charitable institution is entitled to claim depreciation on

said assets utilized for the activities of the institution. As we have

already approved the conclusion of the CIT(A) that the assessee society

is eligible for exemption u/s 11 of the Act then we are of the considered

view that the CIT(A) directed the AO to allow depreciation for the

assessee society in both the assessment years. Therefore, this ground

and objection of the ld. DR being devoid of merits is dismissed.

26. We decline to interfere with the conclusion of the CIT(A) as we are

unable to see any illegality or any other valid reason to interfere with the

same and, therefore, grounds raised by the Revenue in both the appeals

being devoid of merits are dismissed.

27. In the result, both the appeals of the Revenue are dismissed.

This decision was pronounced in the open court on 11.05.2015

Sd/- Sd/-

(B.C. MEENA) (C.M. GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: 11.05.2015 *Kavita, P.S. 22

Copy to:

1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, New Delhi. TRUE COPY

By Order

ASSISTANT REGISTRAR 23

Sl. Description Date No.

1. Date of dictation by the Author 23.04.2015

2. Draft placed before the Dictating Member 01.05.2015

3. Draft placed before the Second Member 01.05.2015

4. Draft approved by the Second Member 11.05.2015

5. Date of approved order comes to the Sr. PS 11.05.2015

6. Date of pronouncement of order 11.05.2015

7. Date of file sent to the Bench Clerk 12.05.2015

8. Date on which file goes to the Head Clerk

9. Date of dispatch of order