9911796707
TMI Blog2018 (3) TMI 479X X X X Extracts X X X X X X X X Extracts X X X X ..... at holding of an exhibition is a well organized activity, making use of its past experience, so as to earn substantial amount of money. The Tribunal held that it is not an activity carried on no-profit-no-loss basis or only for marginal/nominal gain. It therefore, does satisfy the test of business. Thus, on the above facts, the Authorities under the Act have held that holding of exhibitionIMTEX92 is a business activity. Therefore, covered by the first part of Section 11 (4A) of the Act. The business of holding exhibition IMTEX92 is incidental to the objective of the Trust to share knowledge amongst its members. Benefit of Section 11 of the Act is not available to the ApplicantAssessee as it had not maintained separate books of accounts in respect of its incidental business as mandated by Section 11(4A) of the Act. - Decided against assessee. - Income Tax Reference No. 104 of 2000 - - - Dated:- 9-3-2018 - M.S. SANKLECHA RIYAZ I. CHAGLA, JJ. Ms. Aarti Sathe with Mr. Nirav Barot i/b. Maneksha Sethna, for the Applicant. Mr. A. R. Kotangle with Ms. Pratima Singh i/b. A. K. Saxena, for the Respondent. JUDGMENT (Per M. S. Sanklecha, J): This Refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income Tax Act, 1961. It is also registered u/s. 25 of the Companies Act. In the Memorandum and Articles of Association, the main objects of the assessee are set out and they are extracted in the A.O.'s order. During the year under consideration, the assessee had shown gross receipts of ₹ 5,52,56,585/ the break up of which is the following: Income from membership fees Rs. 4,61,000 Income from IMTEX 92 ₹ 4,76,80,230 Miscellaneous Income Rs. 71,15,355 Total receipts ========== ₹ 5,52,56,585 ========== The main source of receipts is by way of 'Income from IMTEX 92' which constitutes 86.29% of the total receipts. The A.O. asked the assessee to explain the details of IMTEX 92. During the course of hearing, it was explained that IMTEX -92 is the name of a Trade Fair Exhibition organized by the assessee at Pragati Maidan, New Delhi, in March, 1992. The total receipt from IMTEX 92 has been to the tune of ₹ 4,76,80,230/ . The break up of these receipts is the following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not acceptable. He held that the main activity of the assessee during the year has been to hold trade fair and by doing so, the assessee has earned handsome profits. The AO held that for this reason alone the assessee's argument that its intention is not to earn profit is self defeating. He felt unable to agree with the assessee's contention that they had no profit motive. He held that the assessee's profit motive was evidence in its circulating the above referred exhibition tariff and letter for earning huge profit. The A. O. held that what has to be considered is the result of the activity and not the motive of a person. If the result of the business activity is profit then there is no provision in the Income tax to exempt such income on the basis of the assumed motive of the person. For this, he relied on the judgment in the cases of Sole Trustee Loka Shikshana Trust v. CIT (101 ITR 243) (SC) and CIT v/s. Lahore Electric Supply Co. Ltd., (60 ITR 1) (SC). He also relied upon the decision of C Bench of ITAT, Mumbai in the case of Prabodhan Prakashan (ITA No.2661/Bom/93), which had held that even if the business is for charitable purpose, the income from such business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gave the reasoning for its decision at para 9. In para 9, the Tribunal found that it could not be denied that the purpose for which the assessee association was formed was for the general benefit of various types of trade and industry and in view of the case law cited by the learned Counsel, including several decisions of the Supreme Court on this issue, the Tribunal accepted that the purpose of the assessee association is charitable. It is further proved by the fact that it is registered as a company u/s. 25 of the Companies Act and is also registered u/s.12A of the Income Tax Act by the Income Tax Department itself. However, the questions which remained to be decided were, whether the holding of exhibitions by the assesssee amounted to business and, if so, whether separate books of account had been kept for that. From the detailed arguments advanced by the learned D.R. it is obvious that the assessee has been organizing the exhibitions and fairs almost regularly after every alternate year. The Tribunal also noticed from the balance sheet of the assessee that as against very nominal amounts received by the assessee in connection with its normal association activities, it had coll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal decided the issue in favour of the dependent in para 10 of their order, extract of which has already been made in prior paras. 8 Order of the A.O. order of the CIT(A) and the order of the Tribunal are marked as Annexures A, B and C respectively, forming part of the Statement of the case. 9 We, therefore, respectfully urge the Hon'ble High Court to render suitable answer to the question which is set out below under section 256(1) of the Income tax Act, 1961: Whether in the facts and circumstances of the case, the assessee had fulfilled all the requirements of section 11(4A) and if so, whether it is entitled to exemption u/s. 11 and whether the decision of the Tribunal that the assesssee has not fulfilled all the requirements of sec.11(4A) is correct under law or is liable to be set aside? 5. From the question as referred to us for our opinion, it would be evident that it subsumes within it three independent issues as under: (a) whether the activity of holding an exhibition IMTEX -92 by the Assessee would amount to an activity of business? (b) if the answer to question (a) is in the affirmative, whether the activity is incidental to the att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther, it is submitted that on the test of per dominant activity, the activity of holding an exhibition IMTEX 92 cannot be held to be a business activity. In support of her aforesaid submissions, particularly, with regard to predominant activity test, she has relied upon the following decisions: (a) Additional CIT v/s. Surat Art Silk Cloth Manufacturers Association (1979) 121 ITR 1; (b) CIT v/s. Federation of Commerce and Industry 130 ITR186 (SC); (c) CIT v/s. Western India Chamber of Commerce 136 ITR 67 (Bom.) (d) Addl. CIT v/s. Delhi Brick Kiln Owners Association 130 ITR 55 (Del.) (e) CIT v/s. Andhra Chamber of Commerce LV ITR 722 (SC); (f) DIT v/s. Lala Lajpatrai Memorial Trust v/s. CIT 383 ITR 345 (Bom.); (g) DIT v/s. Shri Vile Parle Kelvani Mandal 378 ITR 593 (Bom.); (h) Indian Trade Promotion Organization v/s. DGIT 371 ITR 333 (Delhi.); (i) GSI India v/s. Director General of Income Tax 360 ITR 138 (Delhi). (ii) As against the above, Mr. Kotangle, learned Counsel for the Revenue reiterated the view of the Tribunal, holding that the activity of the Assessee is a business activity. (iii) Before dealing with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for marginal/nominal gain. It therefore, does satisfy the test of business. Thus, on the above facts, the Authorities under the Act have held that holding of exhibition IMTEX 92 is a business activity. This finding of fact has not been shown to be perverse. Therefore, no fault can be found with the view in the given facts that holding of exhibition, is a business activity. (v) In the above view, it was submitted by Ms. Sathe that in any case, mere carrying on of business would not necessarily result in the Applicant Assessee ceasing to be for a charitable purpose. This, would be decided upon the test of predominant activity of the Institution. In this case, holding of the exhibition IMTEX 92, she submits was not the predominant activity of the Assessee and, therefore, it continues to be charitable in nature. In support, reliance was placed upon the above decisions at (a) to (e) above. However, the above decisions of predominant activity may not apply as they were rendered in the context of definition of charitable purpose as in force prior to 1984 and not in the context of the applicable definition read with Section 11(4A) of the Act. (vi) The decisions at Serial Nos. (a) to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of any other object of general public utility. Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service om relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention of the income from such a activity. (viii) It would be noted that 2008 Amendment of the definition of charitable purpose after the addition of proviso would be similar to the definition of charitable purpose under Section 2(15) as existing prior of 1984. Thus, it may have no application while dealing with the question referred to us in the context of Assessment Year 1992-93. In any event, it may be pointed out that the decision at (f) above of this Court in Lala Lajpatrai Memorial Trust (supra) it was found that letting out of 6 and 7th floor of the building to maintain the institution, was for an educational purpose. Thus, the proviso would not came into play. Similarly, the decision at (g) above in Shree Ville Parle Kelvan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;The quantum of fees charged, economic status of the beneficiaries who pay, commercial value of benefits in comparison to the fee, purpose and object behind the fee, etc., are several factors will decide the seminal question, is it business?'. On application of the above facts, the Court found that the activities carried out fulfilled the charitable purposes of the trust and was not business. This on the ground that the Society was promoted by the Government of India and various business bodies with the objects of creating awareness and promoting global standards. The underlying objective was of the promotion of the GS1 system of coding and was not to earn profits. This is, particularly so, as the Revenue itself acknowledges the fact that it had a monopoly and yet charged nominal fees. The objective was not to earn profit, but the token fee had been fixed so as only to meet its costs. In the aforesaid facts, the Court found that its activity met the touchstone of charity and not that of business. In the above circumstances, it was held that it could not be said that the Petitioner therein was carrying on business. Therefore, it was only fulfilling its charitable purpose. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liance upon the decision of the Punjab Haryana High Court in CIT v/s. Kartar Singh 77 ITR 338 and also upon the reasoning given by the Tribunal in ITO v/s. Trilok Tirath Vidyawati Chuttani Charitable Trust (2004) 90 ITD 569 (Chd.) and seeks to adopt it as her submissions. (iii) Mr. Kotangle, learned Counsel for the Revenue relied upon the orders of the authorities. He further submits that as held by the Madras High Court in DIT v/s. Wellington Charitable Trust 2010 (195) Taxmann 232, the maintenance of separate books of accounts is a mandatory requirement/ condition precedent for seeking the benefit of Section 11 of the Act. (iv) It is well settled that fiscal legislation has to be strictly construed. It is not open to the Court to add and / or ignore words found in the statute. Long years ago, Justice Rowlatt in Cape Brandy Syndicate v/s. IRC 1921 (1) KB 64 had expressed the principle of strict construction which has now become locus classicus in the following words : In a taxing Act, one has to look merely what is clearly said. There is no room for any interment, there is no equity about the tax, there is no presumption as to tax, nothing is to be re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expression 'books of the assessee' and not 'separate books of accounts'. In the above context, the Court observed that 'in the absence of the Act indicating any particular type of accounts to be maintained', a memorandum book containing the relevant entries of purchase and sales can be considered to be a book within the meaning of books of the assessee under Section 10(2)(vii) of the 1922 Act. The aforesaid decision would have no application to interpreting Section 11(4A) of the Act, which requires maintaining separate books of accounts in respect of the business, which is incidental to the objects of the Trust. (viii) Further, the reliance upon the reasoning given in the order of the Tribunal in Trilok Tirath Vidyawati Chuttani Charitable Trust (supra) , in support to the effect that the purpose of maintaining separate books of accounts is only to enable the Assessing Officer to find out the surplus income earned by carrying on business incidental to the objective of the Trust. This reasoning of the Tribunal entirely overlooks the fact that the legislature has specifically used the words 'maintained separate books of accounts' and it is not ope ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
