Delhi High Court
Commissioner Of Income Tax vs India Trade Promotion ... on 11 January, 2022
$~S-33to35
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ITA 3/2022 & CM APPL.1577/2022
COMMISSIONER OF INCOME TAX ..... Appellant
Through: Mr.Mayank Nagi, Advocate.
versus
INDIA TRADE PROMOTION ORGANISATION ..... Respondent
Through: Mr.Abhishek Maratha, Advocate.
+ ITA 4/2022 & CM APPL.1694/2022
COMMISSIONER OF INCOME TAX ..... Appellant
Through: Mr.Mayank Nagi, Advocate.
versus
INDIA TRADE PROMOTION ORGANISATION ..... Respondent
Through: Mr.Abhishek Maratha, Advocate.
+ ITA 5/2022 & CM APPL.1695/2022
COMMISSIONER OF INCOME TAX ..... Appellant
Through: Mr.Mayank Nagi, Advocate.
versus
INDIA TRADE PROMOTION ORGANISATION ..... Respondent
Through: Mr.Abhishek Maratha, Advocate.
% Date of Decision: 11th January, 2022
CORAM:
HON'BLE MR. JUSTICE MANMOHAN
HON'BLE MR. JUSTICE NAVIN CHAWLA
JUDGMENT
MANMOHAN, J. (Oral)
1. The appeals have been heard by way of video conferencing.
Signature Not Verified
Digitally Signed By:JASWANT
SINGH RAWAT
Signing Date:13.01.2022
2. Present appeals have been filed challenging the order dated 13th
September, 2019 passed by Delhi Bench 'D' of Income Tax Appellate
Tribunal (hereinafter referred to as 'ITAT') in ITA Nos. 1919/Del/2016 for
the assessment year 2009-10, 2508/Del/2016 for the assessment year 2010-
11 and 3135/Del/2016 for the Assessment Year 2011-12.
3. Learned Counsel for the Appellant states that the Tribunal erred in
ignoring the fact that the activities of the respondent/assessee do not qualify
for charitable purpose in view of the Proviso to Sec 2(15) of the Income Tax
Act, 1961 (hereinafter referred to as the 'Act') and hence the assessee does
not qualify for the exemption under Section 10(23C)(iv)/11/12 of the Act.
4. It is pertinent to mention that in a writ petition being India Trade
Promotion Organization vs. Director General of Income Tax
(Exemptions) & Others in WP(C) 1872/2013, the learned predecessor
Division Bench issued a Mandamus to the appellant herein to grant approval
to the respondent herein under Section 10(23C)(iv) of the Act. The relevant
portion of the said judgment passed by the learned predecessor Division
Bench is reproduced hereinbelow:
"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
Signature Not Verified
Digitally Signed By:JASWANT
SINGH RAWAT
Signing Date:13.01.2022
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).
xxx xxx xxx
xxx
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 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
Signature Not Verified
Digitally Signed By:JASWANT
SINGH RAWAT
Signing Date:13.01.2022
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.
59. Thus, while we uphold the Constitutional validity of the
proviso to Section 2(15) of the said Act, it has to be read down in
the manner indicated by us. As a consequence, the impugned
order dated 23.01.2013 is set aside and a mandamus is issued to
the respondent to grant approval to the petitioner under Section
10(23C)(iv) of the said Act within six weeks from the date of this
judgment. The writ petition stands allowed as above. The parties
are left to bear their own costs."
5. Learned Counsel for the Appellant/revenue states that the revenue has
preferred a Special Leave Petition being SLP(C) No.8434/2017 against the
judgment passed in WP(C) 1872/2013 which is pending consideration in the
Supreme Court. In the said Special Leave Petitions, Leave has been granted.
6. Admittedly, there is no stay of the judgment passed by the learned
predecessor Division Bench. Consequently, in view of the judgment of the
Supreme Court in Kunhayammed and Others Vs. State of Kerala And
Another, (2000) 6 SCC 359 and Shree Chamundi Mopeds Ltd. Vs. Church
of South India Trust Association CSI Cinod Secretariat, Madras, (1992) 3
SCC 1, the present appeals and pending applications are dismissing being
covered by the judgment passed by the learned predecessor Division Bench
in WP(C) 1872/2013.
MANMOHAN, J
NAVIN CHAWLA, J
JANUARY 11, 2022/TS
Signature Not Verified
Digitally Signed By:JASWANT
SINGH RAWAT
Signing Date:13.01.2022
