Promotion of Industry and Trade is 'General Public Utility': ITAT Directs CIT(E) to Grant Registration U/S 10(23C)(iv), Citing SC Outcome [Read Order]

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) directed the Commissioner of Income Tax (Exemptions) [CIT(E)] to grant registration under Section 10(23C)(iv) of the Income Tax Act and held that the promotion of Industry and trade is ‘General Public Utility’

Tamil Nadu Trade Promotion Organization (assessee) a joint venture of the Government of India and the Government of Tamil Nadu, incorporated as a Non-Profit company under Section 25 of the Companies Act, 1956.

The main objectives are to promote, organize, and participate in industrial trade and other fairs to promote Indian industry and trade and enhance its global competitiveness. The assessee was initially granted registration under Section 10(23C)(iv) from Assessment Year (AY) 2007-08 onwards, but this was later withdrawn from AY 2009-10.

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The withdrawal was based on the introduction of the provision to Section 2(15) of the Income Tax Act, which limits the exemption if an institution pursuing the object of general public utility conducts business where commercial receipts exceed the Rs. 10 lakh threshold.

The assessee's subsequent application for permanent registration under the new regime was rejected by the CIT(E), on the grounds that the appellant was not established with charitable purposes and by relying on the Supreme Court's decision in the case of Ahmedabad Urban Development Authority.

The assessee submitted that the Delhi High Court, in the India Trade Promotion Organisation (ITPO) case, had held that 'charitable purpose' in the context of Section 10(23C)(iv) must be read down to avoid being hit by Article 14 of the Constitution.

The Delhi High Court had previously directed the tax authorities to grant approval to ITPO under Section 10(23C)(iv). The court established that the correct interpretation of the provision to Section 2(15) is to see the "dominant and the prime objective".

The assessee highlighted the court's conclusion that an institution not driven primarily by a desire to earn profits but to do charity through the advancement of an object of general public utility must be regarded as an institution established for charitable purposes.

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The two-member bench, comprising S.S. Viswanethra Ravi (Judicial Member) and Ratnesh Nandan Sahay (Accountant Member), noted that the core issue was identical to that of the appellant's major shareholder, ITPO.

The Tribunal observed that as of the date of the hearing, the decision in the case of the appellant's major shareholder, ITPO, was in favour of the assessee.

The tribunal observed that the assessee have the charitable purpose which had the motive advancement of an object of General Public Utility from the outcome of Delhi High court case and subsequent dismissal of SLP against the Delhi High court’s order.

The Tribunal directed the CIT(E) to grant registration to the assessee, subject to the outcome of the Supreme Court's decision in the assessee's connected case. The appeal of the assessee was allowed.

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