Commissioner Of Income Tax-(E v. National Rifile Assocation Of India

$~34 *IN THE HIGH COURT OF DELHI AT NEW DELHI +ITA 807/2016 & CM Nos. 43249/2016 & 43250/2016 COMMISSIONER OF INCOME TAX-(E)..... AppellantThrough: Ms. Vibhooti Malhotra, Adv. versus NATIONAL RIFILE ASSOCATION OF INDIA..... RespondentThrough CORAM:HON'BLE MR. JUSTICE S. RAVINDRA BHATHON'BLE MR. JUSTICE NAJMI WAZIRIO R D E R%22.11.2016 1.The question of law sought to be urged by the Revenue is:Whether in the circumstances of the case the Income Tax AppellateTribunal (ITAT) fell into error in overlooking the proviso to Section2(15) added by Finance Act, 2008. 2.The assessee is a charitable organization established with thepurpose of promoting rifle shooting by its members and advocacy forthat purpose. The amounts received by it as sponsorship fee andhandling charges were sought to be brought to tax on the ground thatthey amount to commercial activities and consequently fell within themischief of the proviso to Section 2(15).Though the AssessingOfficer (AO) accepted the Revenue’s contention, the ITAT rejected itrelying upon the several rulings, notably, Addl. Commissioner ofIncome Tax, Gujarat vs Surat Art Silk Cloth ManufacturersAssociation 121 ITR 1 etc. 3.It is contended on behalf of the Revenue that the ITAT’sdecision is unsupportable given the plain text of the proviso toSection 2(15).Ms. Malhotra, the learned counsel relied upon thefindings of the AO to say that the nature of the amounts generated andreceived by the assessee association should not be sought to becharitable having regard to the commercial nature of the servicesrendered by it.It was also highlighted that Surat Art Silk ClothManufacturers Association (supra) was decided in the absence of theproviso to Section 2(15). 4.This Court notices that the issue at hand has been decided in thejudgment reported as India Trade Promotion Organisation vsDirector General of Income Tax (2015) 371 ITR 333.The Courthad clearly ruled that the proviso was not designed to hit at thoseinstitutions which had advancement of objects of general utility atheart and were charity institutions but to remove masks from entitieswhich were purely trade, commerce or business enterprises and toexpose their true identity.Therefore, the Court deduced that thecorrect interpretation would be that the activity should be anexception from the charitable purpose of advancement of any otherobject of general public utility and that exception is limited toactivities in the nature of trade, commerce and business. Therefore, ifthe dominant and prime objective of the institution established forcharitable purpose is profit making whether its activities relatedirectly in the nature of trade, commerce or business or indirectly inrendering of any service in relation to any trade, commerce orbusiness, then it would not be entitled to claim that its object is charitable purpose. 5.Likewise, we notice that the earlier judgment dated 04.07.2013in WP(C) 3147/2012, titled: The Institute of Chartered Accountantsof India and Anr. vs Director General of Income Tax (Exemptions),Delhi & Ors. the Court had expounded on the meaning of business inthe context of general charitable activity and concluded that anyactivity incidentally meant to promote the main charitable purpose butipso-facto not constitute commerce and trade itself could not fallwithin the mischief of the proviso. 6.Having regard to these judgments, the Court is of the opinionthat no substantial question of law arises and the impugned order ofthe ITAT does not require interference. The appeal is, accordingly,dismissed. S. RAVINDRA BHAT, J NOVEMBER 22, 2016/kk NAJMI WAZIRI, J