ITO v. Association of Corporation & Apex Societies of Hand looms – [2020] 119 taxmann.com 376 (Delhi – Trib.)

 

Assessee was registered under section 12A of the Income-tax Act. Its main objective was to promote the hand loom sector. During assessment proceedings, assessee was asked to show cause how its activities were charitable and why the same should not be covered by the proviso to section 2(15).

 

Assessee submitted that it was a non-profit organisation managed and controlled by the Government of India. Its objectives were to coordinate and diffuse useful knowledge to the member units towards the marketing of hand loom products. Its main objective was to promote the hand loom sector by providing a marketing platform to the hand loom primary societies, apex societies as well as Hand loom Corporation. It further submitted that it procured orders from various department of Government of India for the supply of hand loom items and distributes the orders to various members of the society for supply.

 

Assessing Officer (AO) held that the activities of the assessee did not fall in the category of relief of poor, education, medical relief, preservation of the environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest. AO discussed the amendment to the proviso to section 2(15) and CBDT Circular dated 19-12-2008 and completed the assessment by invoking the proviso to section 2(15).

 

On appeal, ITAT held that in case of ITPO [2015] 53 taxmann.com 404 (Delhi), the Delhi High Court held that where the institution is not driven by the motive to earn profit but to do charity through the advancement of objectives of general public utility, it will be regarded as established for charitable purposes. Further, in the case of ICAl [2013] 35 taxmann.com 140 (Delhi), it was held that even though fees were charged for such activities (coaching in that case), activities cannot be stated to be rendering of services in relation to any trade, commerce or business, as such activities are undertaken in furtherance of its main objects which is not trade, commerce or business. Thus, the purpose and the dominant objective for which an institution carries on its activities is material to decide if the same is business or not for which existence of profit motive is a vital indicator.

 

In the instant case, the motive of the assessee was to provide a platform for hand loom weavers of the country for marketing and displaying their products through exhibitions. The activities were not for any private gain. The receipts were used for activities of the society and the activities were monitored by the Ministry of Textiles, Government of India. Therefore, the assessee couldn’t be said to be involved in carrying on any business, trade or commerce even though it has objects of general public utility.