Surplus income from holding exhibition by chamber of commerce held eligible for exemption u/s 11
ABCAUS Case Law Citation:
ABCAUS 2991 (2019) (06) ITAT
Important Case Laws Cited/relied upon by the parties:
Radiological & Imaging Association vs DDIT
The instant appeal filed by the assessee was against the order passed by the Commissioner of Income Tax (Appeals)
The appellant (Chamber of Commerce) was a society registered under Societies Registration Act, 1860 and also registered u/s 12AA of the Income Tax Act, 1961 (the Act) filed its return of income which was assessed after rejecting the claim of exemption u/s 11 of the Act.
During the year under consideration, the appellant had conducted a Trade Exhibition which generated surplus. The Assessing Officer (AO) was of the view that the hosting of the exhibition did not fall to the object of general public utility as provided by section 2(15) of the Act.
The AO denial the exemption u/s 11 of the Act by resorting to Section 13(8) of the Act through application of proviso to section 2(15) of the Act by treating the appellant’s activity of hosting exhibition as in the nature of trade/ commerce with profit motive. The same was confirmed by the CIT(A).
Before the Tribunal, the assessee submitted that objects of the appellant society included conducting and/or undertaking and/or participating in national/regional exhibitions and to organize industrial exhibitions, conferences and seminars from time to time to create awareness and to focus the issues affecting trade, commerce and industry and economical development of the country.
It was further argued that the said object was duly verified and accepted by the appropriate authority while granting registration u/s 12AA of the Act fact of which was not considered by the authorities below and ultimately the assessee was denied the claim u/s 11 of the Act on the count that the assessee had charged certain fees from the participants of the trade exhibition.
It was further pointed out that the appellant collected stall rent from the participants for the purpose of recovering the cost incurred in organizing the trade exhibition; such stall rent was less than the prevailing market rate. The entry fees charged to put a check and control over the persons attending the exhibitions. Neither profit making was the aim of the assessee nor its principle activity.
It was submitted that the invoking of proviso to section 2(15) of the Act was not proper since the same would only apply in a case where the activities of an assessee involved carrying on any activity in the nature of trade, commerce or business. Further that, in order to hold that activities are in the nature of “business”, there must be evidence to the effect that such activities have been continued on recognized business principles and pursued with reasonable continuity. The receipt was nothing but on account of trade conference, the event carried out for merely five-six days in one year is not sufficient enough to conclude that appellant’s activities were in the nature of business.
The Tribunal went through the objects of the appellant and opined that Thus to conduct / undertake and participate in national/regional exhibitions and to organize industrial exhibitions, conferences and seminars from time to time to create awareness and to focus the issues affecting trade, commerce and industry and economical development of the country was one of the main object of the registered society of the appellant which was on record and not been denied by the authorities below.
Further the Tribunal opined that the AO was of the opinion that the income generated by hosting the exhibition was not charitable in nature for this particular reasons that the assessee had charged stall and participant charges. However, the case made out by the assessee reflected such activity was not in the nature of trade and commerce. The genuineness of the activities of the appellant trust was not doubtful at all.
The Tribunal noted the judgment passed by the Co-ordinate Bench where under identical situation while dealing the claim of the assessee, the Tribunal had reversed the action of the authorities below, in treating the income from holding conferences business income.
Accordingly, the Tribunal held that surplus and/or income from holding such exhibition was to be treated as income eligible for exemption u/s 11 of the Act particularly taking into consideration the objects as laid down in the Memorandum of Rules and Regulations of the appellant society.
