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Income Tax Appellate Tribunal, ‘A’ BENCH : CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI ABRAHAM P. GEORGE]
आदेश / O R D E R
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER
Grounds raised by the Revenue in these appeals which are directed against an order dated 01.09.2016 of ld. Commissioner of Income Tax (Appeals)-2, Madurai are reproduced hereunder:- 1. The order of the learned CIT(A) is contrary to the law and facts of the case.
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2.1 The Id. CIT (A) erred in holding that the case of the assessee is not covered by the 1st proviso to Sec. 2 (15) of the I.T. Act and that provisions of Sec. 13(8) of the I.T. Act., are not attracted in the assessee's case. 2.2 The Id CIT(A) failed to appreciate the fact that the assessee's prime object is to protect the interests of its members who are industrialists, Micro and Small Enterprises and the said object is an object of general public utility. 2.3 The Id CIT(A) failed to appreciate that the receipts from conducting exhibitions to the benefit of the trading community and the public is an activity of 'general public utility'. 2.4 The Id. CIT (A) failed to appreciate that the assessee has received a total receipt of RS.93.01 lakhs during the period from conducting exhibitions like (i) MADITSSIA HALL RENT (Rs.14.07 lakhs); (ii) M. INDEXPO (Rs.0.48 lakhs); (iii) M IHE (Rs. 75.95 lakhs); (iv) M. PRINT-n-PACK (Rs.0.69 lakhs); (v) MEDITSSIA AYUSH (Rs.0.17 lakhs); (vi) M.BIC (Rs.1.68 lakhs). 2.5 The Id. CIT (A) ought to have appreciated that the assessee has also generated a net surplus of Rs.22,81,971/- from out of the above activity, which shows that the activity is commercial in nature. 2.6 The Id CIT(A) failed to appreciate that w.e.f. 01.04.2009, the object of general public utility "shall not be a charitable purpose", if it involves the carrying on of any activity in the nature of trade, commerce or business or rendering any service in relation to any trade, commerce or business. The activities of the assessee trust clearly falls under the limb of 'object of general public utility' and also attracted by provisos to sec.2(15) of the Income-tax Act. 3.1 On the facts and in the circumstances of the case, the Id CIT(A) erred in holding that the assessee has conducted 'ancillary activities' such as holding exhibitions, conferences seminars, etc., and these have been conducted with a purpose of promoting Micro and Small scale. 3.2 The Id CIT(A) erred in law and in facts in making this artificial distinction of "ancillary activities" when the Income-tax Act does not recognise such distinction except u/s 11 (4A), While it is not the case of the assessee that it is covered u/s 11(4A). 4.1 The Id. CIT (A) erred in holding that the registration has not yet been cancelled by the CIT and in view of the fact the assessee is eligible to claim exemption u/s 11 & 12 of the I.T.
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Act. 4.2 The Id. CIT (A) failed to observe that the assessee is not eligible to claim exemption u/s 11 of the I.T. Act when the activities are attracted by the amended provisos to Section 2 (15) of the I.T. Act, even if the registration is not cancelled . 5. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned Commissioner of Income Tax (Appeals) may be set aside and that of the Assessing Officer may be restored.
Facts apropos are that assessee a society registered with the Registrar of Societies, Tamil Nadu and also having registration u/s.12A(a) of the Income Tax Act, 1961 (in short ‘’the Act’’) had filed its return for the impugned assessment years declaring Nil income after claiming exemption u/s.11 & 12 of the Act. Assessee was conducting trade fairs, exhibitions etc. As per the assessee, it was carrying on activities in the nature of general public utility and hence a charitable organization. For claiming exemption under Sections 11 & 12 of the Act, assessee had placed reliance on the definition of Charitable purpose u/s.2(15) of the Act.
Ld. Assessing Officer during the course of assessment 3. proceedings noted that assessee had receipts in excess of �10,00,000/- and could be hit by the proviso to Section 2(15) of the Act. Assessee was put on notice why exemption claimed u/s.11 & 12 of the Act should not be denied. Though the assessee replied that conducting fairs, exhibitions etc, were a part of its main object and ITA No.3470 & 3471/16 :- 4 -: was not an activity in the nature of trade or business, this was not accepted by the ld. Assessing Officer. According to him, assessee had receipts of the nature given hereunder for the impugned assessment years.
Assessment year 2010-2011:-
Sl.No Name of the activity Receipt
1 Maditssia Hall Rent �14,07,215 2 M. Indexpo �48,148 3 M. IHE �75,95,891 4 M. Print –n-pack �69,331 5 Meditssia Ayush �17,866 6 M. Bic �1,68,596
Total 93,01,047 Assessment year 2011-2012:-
Sl.No Name of the activity Receipt 1 Maditssia Hall Rent �8,32,321 2 M. Indexpo �48,77,706 3 M. IHE �87,90,219 4 M. Print –n-pack �39,54,581 5 AIMO �31,810 6 M. Bic �1,81,380
Total �1,86,68,017 Relying on the judgment of Hon’ble Apex Court in the case of Lok Shikshana Trust vs. CIT, 101 ITR 234 and Indian Chamber of Commerce vs. CIT 101 ITR 797, ld. Assessing Officer held that assessee, though it was pursuing an activity which was general public
ITA No.3470 & 3471/16 :- 5 -: utility, was also undertaking activities for making profits. According to ld. Assessing Officer, assessee could not be considered as an organization doing any charitable activity in view of the proviso to Section 2(15) of the Act. Relying on Section 13(8) of the Act, ld. Assessing Officer denied exemption claimed by the assessee u/s.11 & 12 of the Act.
Aggrieved, assessee moved in appeal before the ld. Commissioner of Income Tax (Appeals). Argument of the assessee before ld. Commissioner of Income Tax (Appeals) was that its activities, which were in the nature of conducting exhibitions under the names Ideal Home Exhibition, Print ’n’ Pack, Indexpo and Ayush could not be considered as any commercial activity. As per the assessee, these were all part of its Business Information Centre (BIC) catering to the needs of budding entrepreneurs. Contention of the assessee was that exhibitions were conducted with a specific intention of promoting trade and commerce, industrialization, promotion of printing technology, promotion of traditional medicines etc., As per the assessee, its intention was promoting micro and small scale industries in and around Madurai. Reliance was placed on the judgments of Hon’ble Delhi High Court in the case of India Trade Promotion Organization vs. Director General IT (Exemptions) 374 ITR 0333 and the decision of Hyderabad Bench of the Tribunal in the case
ITA No.3470 & 3471/16 :- 6 -: of Institute for Development and Research in Banking Technology vs. ACIT, (ITA No.1712/Hyd/2014, dated 30.06.2015).
Ld. Commissioner of Income Tax (Appeals) after considering 5. the above submissions of the assessee held that assessee was having as its main object promotion of micro and small industries. According to him, activities like conducting exhibitions, conferences, seminars etc, were part of such main object which was promoting micro and small scale industries. As per the ld. Commissioner of Income Tax (Appeals) the dominant purpose of the assessee was one of general public utility and the activities like conducting exhibitions, conference etc to pursue the dominant object would not disable it from claiming exemption under Sections 11 & 12 of the Act. According to him, assessee, through its activities like conducting seminars, exhibitions and conferences was educating members as well as non members, with the ultimate aim of promoting micro and small scale industry. He held it to be a charitable activity and directed the ld. Assessing Officer to allow the claim of exemption u/s.11 and 12.
Now before us, the ld. Departmental Representative strongly assailing the order of the ld. Commissioner of Income Tax (Appeals) submitted that assessee had no property of its own which it could have rented out for exhibitions and trade fares. As per the ld.
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Departmental Representative, fixed assets of the assessee as on 31.03.2010 came to �9,37,804.60, and as on 31.03.201 came to �7,59,215.85 only. Contention of the ld. Departmental Representative, was that assessee was only pursuing a business of conducting exhibitions, trade fairs and earning substantial income therefrom. As
per the ld. Authorised Representative holding of exhibitions, conferences and seminars wherein the assessee charged both its members and nonmembers were business activities which were ancillary to the main object of the assessee. Thus, according to him, income therefrom was hit by proviso to Section 2(15) of the Act and ld. Commissioner of Income Tax (Appeals) erred in holding that assessee was eligible for exemption u/s.11 and 12 of the Act.
Per contra, ld. Authorised Representative strongly supported the order of the ld. Commissioner of Income Tax (Appeals).
We have considered the rival contentions and perused the 8. orders of the authorities below. Objects of the assessee as per its trust deed are as under:- i) To promote and protect the Micro and Small Enterprises in Madurai District. ii) To take all steps to protect and promote the general interests of the persons engaged in Micro and Small Enterprises in Madurai District.
ITA No.3470 & 3471/16 :- 8 -: iii) To consider and formulate opinions upon all matters connected with the Micro and Small Enterprises in Madurai District. iv) To collect, classify and circulate statistics and other information relating to commercial interests in general Micro and Small Enterprises in particular. v) To promote beneficial and other measures relating to the Micro and Small Enterprises and thus obtain by all acknowledged means the redressal of grievances of the industrialist in Micro and Small Enterprises. vi) To maintain a library of books and publications and literature on Micro and Small Enterprises, so as to diffuse commercial information and knowledge amongst the members of the Association’’.
Its income and expenditure accounts for the years as on 31.03.2010 and 31.03.2011 read as under:-
31.03.2010 Expenditure 31.03.2011 31.03.2010 Income 31.03.2011 2,372,558.73 To Establishment, 2,376,217.01 1,171,566.00 By Subscriptio 3,508,500.00 n/ lletin Bulletin Sponsorshi and Office exp p 2,688,909.20 ‘’ Infrastructure 6,871,374.70 14,900.00 ‘’ Adm. Fee/ 954.890.00 Entrance fee 1,447,188.00 ‘’ Publicity and 3,449,880.95 5,816,576.50 ‘’ Stall 11,812,275.50 Marketing Ex charges/ Seminar 428,157.50 ‘’ Hospitality 1,692,557.95 1,759,163.99 ‘’ Other 613,070.68 /Meeting / Receipts/ Seminar Exp Directory 82,261.00 ‘’ Awards 172,345.50 538,841.84 ‘’ Bank 524,609.49 Interest/ Dividend ‘’ Bad debts 39,250.00 -- ‘’ Advertisem 1,244,674.00 ent / Entertainm ent 2,281,973.90 ‘’ Excess of 4,066,393.56 income over expenditure 9,301,048.33 Total 18,668,019.67 9,301,048.33 Total 18,668,019.67
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When the above income and expenditure account is read alongwith the objects of the assessee society, what we find is that substantial portion of the income of the assessee came from stall charges, seminars, subscriptions and sponsorship. Asset base of the assessee was very small. However, it was holding substantial receivable of �24.83 lakhs and cash at bank of �18.79 lakhs as on 31.03.2010.
Receivables as on 31.03.2011 came to �33.86 lakhs and cash at bank was �19.95 lakhs. In our opinion the question that ought have been addressed by the ld. Assessing Officer was whether the activities of the assessee as reflected in its income and expenditure accounts and its statement of affairs as reflected in the Balance Sheets, would show what was the dominant activity of the assessee. Ld. Assessing Officer ought have identified the dominant activity of the assessee and verified whether such activity was in line with its objects and whether income earned through stalls, seminars, conferences, entrance fees etc were part of such dominant activity or ancillary to it. Unless a close examination of this nature is done, in our opinion, a conclusion as to whether assessee was hit by the proviso to Section 2(15) of the Act cannot be reached. None of the lower authorities had done this analysis. In the circumstances, we are of the opinion that the matter requires a fresh look by the ld. Assessing Officer. We set aside the orders of the authorities below and remit the question whether
ITA No.3470 & 3471/16 :- 10 -: assessee was eligible for claiming exemption u/s.11 and 12 of the Act back to the file of ld. Assessing Officer for consideration afresh in accordance with law.
In the result, the appeals of the Revenue are allowed for statistical purpose.
Order pronounced on Thursday, the 5th day of April, 2018, at Chennai.