2019 (5) TMI 334 - AT - Income Tax

Exemption u/s 11 denied - charitable activity u/s 2(15) or not? - Addition of interest received on account of fixed deposits and savings account - Addition received on account of Goa Fest 2010 - HELD THAT - We find that in the case of assessee not a single transaction is in nature of trade, commerce or business and the Goa Fest from the detailed facts enumerated above is abundantly and clearly wholly towards the advancement of Its objects which have been duly considered as being towards advancement of object general public utility, while granting registration u/s 12A. As relying on THE COMMISSIONER OF INCOME TAX-EXEMPTION VERSUS THE FERTILIZERS ASSOCIATION OF INDIA 2017 (11) TMI 805 - DELHI HIGH COURT wherein held mere charging of fee from members or non-members for rendering services like training, conducting seminars would not ipso facto lead to denial of exemption. The dominant object of the assesses remains charitable and the aforesaid activities are only incidental to the main activity of the assesses. Also, the activities of the assessee are benefiting the public at large at submitted by the assessee. Furthermore, it is not the case of the department that any change in object had taken place in the relevant year so as to take that assessee outside the ambit of section 2 (15). The receipts regarding Goa Fest 2010 and interest received on money deposited is exempt u/s 11. The orders of the lower authorities are set aside and appeal of the assessee is accordingly allowed.

Summary

Issues Involved:
1. Denial of exemption under Sections 11 to 13 read with Section 2(15) of the Income Tax Act.
2. Taxability of interest income received from fixed deposits.
3. Taxability of income from the "Goa Fest 2010" event.

Detailed Analysis:

1. Denial of Exemption under Sections 11 to 13 read with Section 2(15):
The primary issue in this appeal was whether the assessee, a trade association trust, was entitled to exemption under Sections 11 to 13 read with Section 2(15) of the Income Tax Act. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] denied the exemption, arguing that the activities of the assessee were in the nature of trade, commerce, or business. The Tribunal examined the object clauses of the assessee and concluded that none of the objects were in the nature of carrying on any trade, commerce, or business or rendering any service thereto. The Tribunal emphasized that the assessee's activities, including the Goa Fest, were wholly in furtherance of its objects and not for profit. The Tribunal relied on the speech of the Finance Minister and CBDT Circular No. 11/2008 to assert that the proviso to Section 2(15) was meant to curb activities disguised as charitable purposes but actually engaged in trade or business, which was not the case here.

2. Taxability of Interest Income from Fixed Deposits:
The AO had taxed the interest income of ?30,62,564 received from fixed deposits, asserting that it was hit by the first proviso to Section 2(15). The CIT(A) upheld this view, relying on judgments from the Hon'ble Supreme Court and the Bombay High Court. The Tribunal, however, found that the interest income was part of the funds accumulated for charitable purposes and invested as per Section 11(5) of the Act. The Tribunal concluded that since the interest income was used for charitable purposes, it should be exempt under Section 11.

3. Taxability of Income from "Goa Fest 2010":
The AO and CIT(A) considered the income of ?1,03,08,215 from the "Goa Fest 2010" as taxable, arguing that the event was a commercial activity. They noted that significant fees were collected from non-members, including entities unrelated to the advertisement business. The Tribunal, however, found that the Goa Fest was an annual event organized to further the objects of the association, involving knowledge sharing by global leaders in advertising. The Tribunal noted that the surplus generated was incidental and not the primary motive. It also highlighted that the income was accumulated for future charitable purposes and invested as per Section 11(5). The Tribunal relied on the decision of the Hon'ble Delhi High Court in the case of CIT (Exemption) vs. Fertilizers Association of India, which held that mere charging of fees for services incidental to the main charitable activity does not disqualify an entity from exemption under Section 11.

Conclusion:
The Tribunal concluded that the activities of the assessee, including the Goa Fest and the interest income from fixed deposits, were in furtherance of its charitable objects and not in the nature of trade, commerce, or business. Therefore, the assessee was entitled to exemption under Sections 11 to 13 read with Section 2(15) of the Income Tax Act. The Tribunal set aside the orders of the lower authorities and allowed the appeal of the assessee.