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2018 (4) TMI 1423 - AT - Income TaxDenial of exemption u/s 11 - activities of the appellant are commercial in nature - Held that - As decided in assessee s own case for Assessment Year 2011-12 2018 (4) TMI 1293 - ITAT MUMBAI the holding of the seminar at Bangalore and the other activities of the assessee trust, viz. receipt of subscriptions from the members, sale of publications, Fafai Journal, holding of workshops & conferences, directory receipts were incidental to and in furtherance of the main object of securing the advancement and development of the Fragrance and Flavours industry in India No agreement with the view of the lower authorities that the assessee was involved in carrying of commercial activities. We thus being of the view that as the assessee is carrying on its charitable activities, which are in the nature of advancement of the object of general public utility and is not carrying on any commercial activity, therefore, uphold the entitlement of the assessee towards claim of exemption under Sec. 11 of the Act. - Decided in favour of assessee.
Issues Involved:
1. Legality of the reopening of assessment. 2. Denial of exemption under Section 11 of the Income Tax Act. 3. Nature of the trust's activities (commercial vs. charitable). 4. Consideration of a single seminar to draw adverse conclusions. 5. Application of the principle of mutuality. 6. Reliance on the Supreme Court decision in Bangalore Club vs. CIT. Issue-wise Detailed Analysis: 1. Legality of the Reopening of Assessment: The assessee contended that the reopening of the assessment was "bad in law." However, the judgment did not delve deeply into this issue, as the appeal was decided on other substantial grounds. 2. Denial of Exemption under Section 11: The primary contention was that the Commissioner of Income Tax (Appeals) erred in denying the exemption under Section 11 by holding that the activities of the appellant trust were commercial in nature. The Tribunal noted that the assessee was registered as a charitable organization under Section 12A and that its activities were primarily aimed at the "advancement of any other object of general public utility." The Tribunal found that the activities, such as subscriptions, sale of publications, workshops, and conferences, were for the furtherance of the general public utility object and could not be construed as commercial activities. 3. Nature of the Trust's Activities: The Tribunal examined whether the activities of the trust, including the seminar held at Bangalore, were commercial. The Tribunal concluded that these activities were aimed at providing knowledge, information, awareness, and demonstrations to the members of the Fragrance and Flavours industry. It was held that these activities were essential for the development of the industry and could not be characterized as commercial. The Tribunal emphasized that the seminar at Bangalore was in furtherance of the trust's main object and not a regular, systematic commercial activity. 4. Consideration of a Single Seminar: The Tribunal found that the lower authorities had erred in drawing adverse conclusions based on a single seminar. It was noted that the seminar was the only international seminar held by the trust and was aimed at the empowerment and development of the industry. The Tribunal held that the display of products by sponsors at the seminar did not constitute a commercial activity. 5. Application of the Principle of Mutuality: Although the assessee raised an alternative plea for the benefit of the principle of mutuality, the Tribunal's decision primarily rested on the nature of the trust's activities and their alignment with its charitable objectives. The Tribunal did not specifically address the principle of mutuality in detail. 6. Reliance on the Supreme Court Decision in Bangalore Club vs. CIT: The Tribunal noted that the Commissioner of Income Tax (Appeals) had relied on the Supreme Court decision in Bangalore Club vs. CIT. However, the Tribunal found that the facts of the present case were distinguishable. The Tribunal emphasized that the activities of the assessee trust were not commercial and were in furtherance of its charitable objectives. Conclusion: The Tribunal allowed the appeal filed by the assessee, holding that the activities of the trust were charitable and not commercial. Consequently, the assessee was entitled to the exemption under Section 11 of the Income Tax Act. The Tribunal set aside the order of the Commissioner of Income Tax (Appeals) and allowed the grounds of appeal raised by the assessee. The appeal was pronounced in favor of the assessee on 22nd March 2018.
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