2015 (3) TMI 537 - HC - Income Tax

Exemption u/s. 11 - main activity of the assessee is to organize trade fair - Tribunal confirming the order of the CIT(A) allowing exemption - Held that - Two authorities have come to a concurrent findings of fact that the respondentassessee is not organizing trade fairs and therefore not engaged in business activity. We find that there is certainly a distinction/difference between organizing trade fairs and facilitating its members to participate in trade fairs. Consequently, once there are concurrent findings of fact that no trade fair is organized by the respondentassessee which would amount to carrying the business, there is no occasion to us to interfere with the same. The finding recorded by the authorities of respondentassessee not carrying on business is not shown to be perverse. Therefore there is no reason for us to entertain the proposed question of law as it does not give rise to any substantial question of law. - Decided against revenue.

Summary

Issues:
Challenge to Tribunal's order allowing exemption under Section 11 of the Income Tax Act, 1961 for Assessment Year 2005-06.

Analysis:
The appellant, the Revenue, challenged the Tribunal's order dated 10 August 2012, which dismissed the Revenue's appeal from the Commissioner of Income Tax (Appeals) directing the Assessing Officer to allow the respondent-assessee exemption under Section 11 of the Act. The main question of law raised was whether the Tribunal was justified in confirming the exemption under Section 11 when the assessee's main activity of organizing trade fairs could be considered a business activity rather than for charitable purposes as defined under Section 2(15) of the Act.

The respondent-assessee, a company registered under Section 25 of the Companies Act, 1956, and holding valid registration under Section 12A of the Act, was engaged in facilitating its members to participate in trade fairs. The Assessing Officer initially denied the exemption under Section 11, considering the trade fair organization as a business activity. However, the CIT (A) concluded that the activities were charitable in nature and not business activities, thus allowing the exemption under Section 11.

Upon appeal to the Tribunal, it was held that the respondent-assessee was not organizing trade fairs but facilitating participation, which did not constitute a business activity. The Tribunal also noted that a similar view was taken for the subsequent assessment year by the CIT (A), and the Revenue did not challenge it. The Revenue contended that there was no substantial difference between organizing and facilitating trade fairs, but the Tribunal upheld the concurrent findings that the respondent was not engaged in business activities.

The High Court found that there was a clear distinction between organizing and facilitating trade fairs, and since the respondent was not organizing trade fairs as a business, the exemption under Section 11 was justified. The Court held that the findings were not perverse, and there was no substantial question of law to entertain. Consequently, the appeal by the Revenue was dismissed, with no order as to costs.