2022 (9) TMI 502 - AT - Income Tax

Exemption u/s 11 - assessment of trust - Nature of receipts - voluntary donations receive d - treating the voluntary donation received as business income of assessee society - AO has given a finding that the donations were given to the assessee by the publishers for promoting the books and have claimed as business promotion expenses - HELD THAT - Since receipt of commission from publishers has been held to be a commercial activity which is not incidental to the attainment of the objectives of the appellant society, it is held that there is no infirmity in the order of the Assessing Officer in treating the income from commission from publishers as income from business by invoking the provisions of section 11(4A).The assessee has not brought any material to rebut the finding of the learned CIT(Appeals). Therefore, no reason to interfere in the finding of learned CIT(Appeals). The same is affirmed. Grounds raised in appeal are rejected.

Summary

Issues:
1. Appeal against order of CIT(A) dated 08.03.2019 for assessment year 2014-15.
2. Jurisdiction and framing of assessment order u/s 143(3) of the Act.
3. Addition of Rs. 36,35,531/- treating voluntary donation as business income.
4. Absence of the assessee during the hearing.

Analysis:

1. The appeal was filed against the order of the CIT(A) for the assessment year 2014-15. The assessee raised grounds challenging the legality and factual correctness of the CIT(A)'s decision. The absence of the assessee during the hearing led to the appeal being decided based on the available record.

2. The main issue in the appeal was the addition of Rs. 36,35,531/- as business income, treating voluntary donations received as business receipts. The Assessing Officer invoked section 11(4A) of the Act to tax this amount. The CIT(A) upheld this addition, concluding that the donations were essentially commission for promoting books, not charitable activities.

3. The CIT(A) analyzed the transactions and found that the donations were akin to commission from publishers for promoting their books. The Assessing Officer's decision was based on various factors like economic status of publishers, commercial benefits, and consistency in donations received. The CIT(A) held that the activity was commercial and not incidental to the trust's objectives, denying exemption under section 11(4A).

4. The CIT(A) emphasized that for an activity to be incidental, it should support the main objectives of the trust. The CIT(A) differentiated between property held in trust and business carried out by the trust. The CIT(A) dismissed the appeal as the assessee failed to provide evidence to counter the findings. The decision to treat the income from commission as business income under section 11(4A) was upheld.

5. The appeal was dismissed, affirming the CIT(A)'s decision. The judgment highlighted the importance of maintaining separate books of account for business activities and ensuring they are truly incidental to the trust's objectives. The assessee's appeal was rejected, and the order was pronounced on 9th September 2022.