2019 (5) TMI 620 - AT - Income Tax

Exemption u/s 11 - charitable purpose as per u/s 2(15) - assessee had charged certain fees from the participants of the trade exhibition, thus the revenue has came to a conclusion that the appellant was engaged in the activities in the nature of trade and commerce - stand taken by the assessee that it did not render any services in relation to trade, commerce or business - HELD THAT - 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 is 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 that, none of the object reflects is non-charitable in nature. Surplus and/or income from holding such exhibition is 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. We, thus direct the Learned AO to grant exemption as directed above. - Assessee s appeal is thus allowed.

Summary

Issues Involved:

1. Denial of exemption under Section 11 of the Income Tax Act, 1961.
2. Application of proviso to Section 2(15) of the Income Tax Act, 1961.
3. Determination of whether the activities of the appellant are in the nature of trade, commerce, or business.

Issue-wise Detailed Analysis:

1. Denial of exemption under Section 11 of the Income Tax Act, 1961:

The appellant, a society registered under the Societies Registration Act, 1860 and Section 12AA of the Income Tax Act, filed its return of income declaring a total loss of ?3,22,023/-. However, the assessment determined a total income of ?61,45,979/- on account of net surplus from hosting a trade exhibition, rejecting the claim of exemption under Section 11. The AO denied the exemption by applying Section 13(8) through the proviso to Section 2(15), treating the exhibition as a commercial activity with a profit motive. The appellant argued that the purpose of the exhibition was to provide a platform for members to display their skills and not to generate profit. The fees charged were to cover the costs of organizing the exhibition, not for profit-making. The Tribunal found that the objects of the society, including conducting exhibitions, were charitable and directed the AO to grant the exemption under Section 11.

2. Application of proviso to Section 2(15) of the Income Tax Act, 1961:

The AO applied the proviso to Section 2(15) to deny the exemption, arguing that the appellant's activities were commercial. The appellant contended that their activities were not in the nature of trade, commerce, or business, as the fees charged were below market rates and aimed at cost recovery. The Tribunal referred to the judgment in Radiological & Imaging Association vs. DDIT, where similar activities were deemed eligible for exemption under Section 11. The Tribunal concluded that the appellant's activities were not commercial and directed the AO to grant the exemption.

3. Determination of whether the activities of the appellant are in the nature of trade, commerce, or business:

The AO concluded that the appellant's activities of organizing the exhibition were commercial, citing the systematic and organized nature of the event and the fees charged. The appellant argued that the exhibition was for the benefit of its members and not for profit. The Tribunal found that the appellant's objects, including organizing exhibitions, were charitable and not commercial. The Tribunal referred to the judgment in Radiological & Imaging Association vs. DDIT, where similar activities were deemed charitable. The Tribunal concluded that the appellant's activities were not in the nature of trade, commerce, or business and directed the AO to grant the exemption under Section 11.

Conclusion:

The Tribunal allowed the appeal, directing the AO to grant the exemption under Section 11, concluding that the appellant's activities were charitable and not in the nature of trade, commerce, or business. The Tribunal relied on the judgment in Radiological & Imaging Association vs. DDIT, where similar activities were deemed charitable and eligible for exemption under Section 11.