Income Tax Appellate Tribunal - Ahmedabad
Vadodara Chamber Of Commerce & ... vs The Acit, Circle-2(2),, Baroda on 6 May, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
"B" BENCH, AHMEDABAD
BEFORE SHRI PRAMOD KUMAR, VICE PRESIDENT &
Ms. MADHUMITA ROY, JUDICIAL MEMBER
I.T.A. No.1566/Ahd/2015
(Assessment Year : 2011-12)
Vadodara Chamber of Commerce Vs. The ACIT,
and Industry, VCCI Commercial Circle - 2(2),
Complex, 73, GIDC Industrial Baroda.
Estate, Makarpura,
Baroda - 390 010.
[PAN No. AAAAV 0490 L]
(Appellant) .. (Respondent)
Appellant by : Shri Tushar Hemani, A.R.
Respondent by : Shri Mudit Nagpal, Sr.D.R.
Date of Hearing 14.03.2019
Date of Pronouncement 06.05.2019
ORDER
PER Ms. MADHUMITA ROY - JM:
The instant appeal filed by the assessee is against the order dated 06.02.2015 passed by the Commissioner of Income Tax (Appeals)-5, Vadodara under section 143(3) of the Income Tax Act, 1961 (hereinafter referred as to "The Act") arising out of the order dated 04.02.2014 passed by the ACIT, Circle - 2(2), Baroda for the Assessment Year 2011-12.
2. The brief facts leading to this case is this that the appellant, a society registered under Societies Registration Act, 1860 and also registered u/s 12AA of the Act filed its return of income on 29.09.2011 declaring total loss of Rs.3,22,023/- which was finalized on 04.02.2014 upon determining total income at Rs.61,45,979/- on account of net surplus as per income and expenditure for the year ended on 31st March, 2011 after rejecting the -2- ITA Nos.1566/Ahd/2015 Vadodara Chamber of Commerce & Industry vs. ACIT Asst.Year - 2011-12 claim of exemption u/s 11 of the Act. Such denial of exemption u/s 11 of the Act was done by the Learned AO by resorting to Section 13(8) of the Act through application of proviso to section 2(15) of the Act by treating the appellant's activity of hosting exhibition as in the nature of trade/ commerce with profit motive; applying proviso to section 2(15) of the Act denied the exemption u/s 11 of the Act.
The purpose of the trust is to project an appropriate and progressive image of trade and industries, to promote development and co-ordinate multi-faceted growth of trade and industries, help and promote R & D activities, standardization, quality control and testing facilities. During the year under consideration, the appellant conducted a Trade Exhibition which generated receipts of Rs.2,72,77,989/-. The assessee incurred huge expenditure to the tune of Rs.2,03,62,443/- resulted into surplus of Rs.69,15,546/-. The assessee has not charged any fees or Cess for carrying out the trade exhibition. Further that, the stall rent and entry fees have been charged just in order to meet the cost incurred in organizing such exhibition as the case made out by the appellant before the authorities below.
The assessee further submitted that the main purpose for conducting such exhibition is to provide common platform to the members and display their credentials / skill to the general public. The exhibition conducted by the assessee cannot in any way considered as rendering services since the assessee chamber of commerce is firmed by members themselves and the exhibition is also organized for and by the members. However, the Learned AO came to a conclusion that such activities of organizing the exhibition reflects the commercial motive of the appellant and the intention to earn surpluses by conducting such event. He further observed as follows:
"A simple definition of services would be the act of helping or doing work for someone. Therefore, the act of providing all facilities for the smooth conduct of the exhibition, getting all the clearances from government authorities and charging fees is an act of rendering service in return for a consideration. The activity of the assessee of organizing the exhibition is nothing but a commercial -3- ITA Nos.1566/Ahd/2015 Vadodara Chamber of Commerce & Industry vs. ACIT Asst.Year - 2011-12 activity as the assessee has taken space on rent, incurred huge ground development expenditure of Rs.21,84,664/-, spent Rs.22,04,005 on advertisement, stall construction expenses of Rs.71,04,222/- and in return, it collected space rentals amounting to Rs.2,72,77,989/-. These stalls were given to anyone who wanted to participate in the exhibition. This activity of the assessee is systematic and organized and is, thus, a commercial activity.
The stand taken by the assessee that it did not render any services in relation to trade, commerce or business is thus rejected. The assessee's activities do not fall to the object of general public utility as provided by section 2(15) of the Act as opined by the Learned AO. However, charitable purpose, as per u/s 2(15), i.e. relief of the poor, education, medical relief and preservation of environment or preservation of monuments surfaces is not the activities performed by the appellant and thus the claim of exemption u/s 11 has been denied since not covered by the definition of charitable purposes u/s 2(15) of the Act as concluded by the Learned AO. In appeal, the same was confirmed by the Learned CIT(A), hence the appellant before us.
3. At the time of hearing of the instant appeal, the Learned Counsel appearing for the assessee submitted before us that the objects of the appellant society registered under the Societies Registration Act, 1961 as also registered u/s 12AA of the Act includes conducting and/or undertaking and/or participating 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. The object of the society was duly made known to the authorities below by way of written submission by the appellant. It was further argued that the said object was duly verified and accepted by the appropriate authority while granting registration u/s 12AA of the Act fact of which was not considered by the authorities below and ultimately the assessee was denied the claim u/s 11 of the Act on the count that the 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. It was further pointed out by the -4- ITA Nos.1566/Ahd/2015 Vadodara Chamber of Commerce & Industry vs. ACIT Asst.Year - 2011-12 Learned Counsel that the appellant collected stall rent from the participants for the purpose of recovering the cost incurred in organizing the trade exhibition; such stall rent is less than the prevailing market rate. The entry fees charged to put a check and control over the persons attending the exhibitions. Neither profit making was the aim of the assessee nor its principle activity. The application of proviso to section 2(15) of the Act is not proper since the same would only apply in a case where the activities of an assessee involved carrying on any activity in the nature of trade, commerce or business. Further that, in order to hold that activities are in the nature of "business", there must be evidence to the effect that such activities have been continued on recognized business principles and pursued with reasonable continuity. The receipt is nothing but on account of trade conference, the event carried out for merely five-six days in one year is not sufficient enough to conclude that appellant's activities are in the nature of business. In respect of his submission, the Learned representative of the assessee relied upon the judgment passed by the Co-ordinate Bench in the matter of Radiological & Imaging Association- vs-DDIT in ITA No.2891/Ahd/2014 wherein under identical circumstances, surplus from exhibition has been held to be eligible for exemption u/s 11 r.w.s. 2(15) of the Act. He, therefore, prayed for the same relief before us. The Learned Departmental representative, on the contrary relied upon the order passed by the authorities below.
4. We have heard the rival contentions made by the parties, we have also perused the relevant materials available on record.
The objects of the registered societies of the appellant has been vividly reproduced by the Learned CIT(A) at Page 3 of its order which is as follows:
"The Objects of the Society as appearing in Constitution are reproduced as under.
1. To achieve and sustain unity and harmony for the issues of common interest of large, medium and small-scale industries, businessmen, firms and their associations.-5- ITA Nos.1566/Ahd/2015
Vadodara Chamber of Commerce & Industry vs. ACIT Asst.Year - 2011-12
2. To protect the interest of large, medium and small scale industries, businessmen, firms and their associations and to plan and implement certain activities from time to time for the growth of industries and business.
3. To increase co-operation and harmony amongst factory owners, workers and businessmen.
4. To increase the knowledge of its members on the subjects of business and economic affairs by collecting relevant information and provide such information to its members on the subjects of business and economic affairs by collecting relevant information and provide such information to its members and if necessary to the Government and other institutions.
5. To arrange for training and education of workmen, businessmen and industrialist.
6. To establish and manage educational, medical, cultural and welfare institutions for the benefit and growth of the society.
7. To take all steps to suggest changes or provide support or oppose according to necessity of any legislative, administrative or such other measures of government, Semi-Government, Local or any other public authority in the interest of the business and industry.
8. 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.
9. To organize public talks on the subjects of common interest, of members.
10. To affiliate or co-operate with or become member of any other association, society, institution or organsation which has similar aims and objectives and to exchange information useful to each other.
11. To provide for its members assistance in the form of legal and technical consultancy.
12. To settle disputes, if any, between members of the association, through the grievance committee, which shall be constituted by the managing committee with terms of reference of the disputes.
13. To purchase, take on lease or hire or otherwise acquire movable or immovable property or any rights or privileges necessary or convenient for the use of the association.
14. To construct, alter or repair a building for the use of the association or alter or repair any rented building required for any use by or for the association.
15. To acquire, sell, improve, manage, develop, lease, rent, mortgage, dispose of or otherwise deal with all or any part of the property and rights of the association.
16. To collect subscriptions and other funds from members to raise or borrow funds with suitable conditions and guarantees and the same funds to be invested or used in the interest of the association.
17. To accept funds or any kind of property as gift or donation and utilise or invest the proceeds of such funds or property in the interest of the association.
18. To invest and otherwise deal with the funds of the association in such manner as may from time to time be determined by the managing committee and to open and operate current, fixed deposit, savings and other accounts with any bank or banks.-6- ITA Nos.1566/Ahd/2015
Vadodara Chamber of Commerce & Industry vs. ACIT Asst.Year - 2011-12
19. To frame service rules and regulations for the employees of the association. To create funds for provident fund, gratuity and other specific funds or to assist in creating such funds.
20. To establish or help in establishing Industrial Research & Development Centers or other Research Centers in the interest of the members of the association. To assist such institutions to generate funds for such activities. To collect funds or donate some funds for such activities in the interest of common public.
21. To publish house magazine, industrial directory and such other publications required for the benefit of industries and members of association and distribute them at suitable rates.
22. To contribute to the cause of rehabilitation of victims of natural calamities.
23. To represent the association to the committees constituted by the Government / Semi Government and such other authorities and bring solutions to the problems of business / industries.
24. To enter into an agreement with the Central or State Government, local authorities, etc. that may seem conductive to the objectives of the Association and to obtain from any such government or authorities all rights, concessions & privileges.
25. To do such acts to fulfill the aims & objectives and related issues thereon subject to provisions of the Bombay Public Trust Act, 1950 and the Registration of Societies Act, 1960 and such acts and rules prevailing at that time."
Thus 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. The AO was of the opinion that the income generated by hosting the exhibition was not charitable in nature for this particular reasons that the assessee has charged stall and participant charges. However, the case made out by the assessee reflects such activity is not in the nature of trade and commerce. The genuineness of the activities of the appellant trust is not doubtful at all.
We have also carefully considered the judgment passed by the Co-ordinate Bench passed in the matter of Radiological & Imaging Association (supra). In an identical -7- ITA Nos.1566/Ahd/2015 Vadodara Chamber of Commerce & Industry vs. ACIT Asst.Year - 2011-12 situation while dealing the claim of the assessee, the Learned Tribunal observed as follows:
"3. The assessee is a trust registered under section 12AA of the Act and is engaged, inter alia, in the activity of promoting the study and practice of radio diagnosis, ultrasound, radio therapy, oncology, radiation medicine and interventional radiology etc. During the relevant previous year, the assessee hosted 63rd National Conference of Indian Radiological and Imaging Association. The Assessing Officer was of the view that income generated by hosting of this conference was not of charitable nature for the reason that the assessee has charged participants on a commercial basis, the assessee has received huge amounts for stalls and participation charges, that the commercial entities making payments have deducted tax at source by treating the payment as for rent etc, and that the receipts are, as such, commercial receipts. The Assessing officer was also of the view that "activity of the trust is nothing but devise by eminent radiologists to promote their own brand/profile etc. by arranging the comfortable stay, food and other facilities to participants" which will lead to "increase the income of the participants which cannot be considered as charitable activity". Accordingly, the income from the activity of holding seminar was held to be commercial activity. Aggrieved, assessee carried the matter in appeal before the learned CIT(A) but without any success. The assessee is not satisfied and is in further appeal before us.
4. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of applicable legal position.
5. Learned Representatives fairly agree, even as learned Departmental Representative vehemently relies on and justifies the stand of the authorities below, that the issue is covered, in favour of the assessee by a co-ordinate bench's decision in the ITA No.2891/Ahd/2014 Assessment Year: 2010-11 case of Heart Care Management vs. DIT (Exemptions) [(2012) 52 SOT 277 (Delhi)] wherein the co-ordinate bench has, inter alia, observed as follows :-
"We have heard rival contentions and gone through the relevant material available on record. As the facts emerge, the assessee is a registered society with specified objects, as mentioned herein above. The objects are mainly towards medical research, experiments workshops etc. in the field of medical sciences in general and heart ailments in particular and take in their fold the ways and means for affordable medical relief. The objects include holding of scientific meetings, workshops, research and training programs and create public awareness, lecture programs among doctors and the general public. 5.1. A plain reading of the objects does not reflect that any object is non- charitable in nature. The main issue raised by the DIT(E) is in respect of holding of conference of doctors at a five star hotel and the fact that the donors are pharmaceutical companies and some of them have deducted TDS. Adverse inference has also been drawn from extravagance of expenses the fact that the conference was of doctors and there is no benefit to the common public. Except holding of this conference and corresponding donation, the charitable objects, as per the trust deed, have -8- ITA Nos.1566/Ahd/2015 Vadodara Chamber of Commerce & Industry vs. ACIT Asst.Year - 2011-12 not been challenged by the DIT(E). If the objects of the trust are duly incorporated and charitable in nature and conform to the various rules and regulations; the assessee trust maintains its books of account and the genuineness of the account is established by the society, in normal circumstances the registration should be granted to the Trust u/s 12AA and 80-G of the I.T. Act. The scheme of the Income-tax Act provides - (i) procedure at the time of registration and thereafter (ii) rules for assessment of trusts. Since at the time of registration assessee trust is newly formed, therefore, only the objects of the trust and the accounts of the trust and activities of the trust till registration are to be inquired into. In the given facts and circumstances the conference organized by the assessee is authorized by the objects of the Trust; there is no ban or embargo whether conference can be held in five star hotel or not. Therefore, the adverse inference drawn by the DIT(E) is not proper inasmuch as the trustees will have a discretion to organize the conference at a place and in the manner which is befitting into the participants and objects. Consequently, we are unable to draw any adverse inference only because the conference was organized in a five star hotel. 5.2. Coming to the issue about some of the donors being pharmaceutical companies and having deducted TDS. In our view while accepting donation, a donee has limitations and if the donor offers the donation in cash kind or in a manner which it thinks legal, generally the donee would not refuse the donation. This is so because TDS can be claimed by trust towards the tax paid. It has not been disputed that for these amounts only donation receipts were issued. There was no loss to trust as on application of income i.e. utilization of donation, the TDS becomes refundable to it. Only because donors are pharmaceutical companies and they deducted TDS, will not convert a donation into a commercial receipt on the basis of presumptive inferences. As long as the assessee has credited the amount as donations and issued donation receipts, in our view, the same cannot be held to be commercial receipt. 5.3. Assessee has demonstrated that no cess or fee was charged from the participants of conference, therefore, there is no contravention of sec. 2(15).ITA No.2891/Ahd/2014 Assessment Year: 2010-11 Besides, even if the delegates
are charged with some fee it goes to the defraying of the expenses on conference, thus, on this issue also nothing turns against the assessee."
6. We see no reasons to take any other view of the matter than the view so taken by the co-ordinate bench. Respectfully following the same, we reverse the action of the authorities below, in treating the income from holding conferences business income. In our considered view, the income from holding the conference, on the facts of this case, which are admittedly in pari materia with the facts of Heart Care Management (supra), ought to have been treated as income eligible for exemption under section 11. The Assessing Officer, accordingly, is directed to do so. 7. In the result, the appeal is allowed in the terms indicated above. Pronounced in the open Court on this 28th day of March, 2018."
-9- ITA Nos.1566/Ahd/2015Vadodara Chamber of Commerce & Industry vs. ACIT Asst.Year - 2011-12 We find no deviation and/or change in the facts and circumstances of the case with that of the fact of the case as cited above. We, therefore, respectfully following the same conclude by holding that 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.
5. In the result, assessee's appeal is allowed.
This Order pronounced in Open Court on 06/05/2019
Sd/- Sd/-
( PRAMOD KUMAR ) ( Ms. MADHUMITA ROY )
VICE PRESIDENT JUDICIAL MEMBER
Ahmedabad; Dated 06/05/2019
Priti Yadav, Sr.PS
आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. संबं धत आयकर आयु त / Concerned CIT
4. आयकर आय
ु त(अपील) / The CIT(A)-5, Vadodara.
5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड' फाईल / Guard file.
आदे शानुसार/ BY ORDER,
स या पत त //True Copy//
उप/सहायक पंजीकार (Dy./Asstt. Registrar)
आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad
1. Date of dictation 25.04.2019 (Dictation Pages 8)
2. Date on which the typed draft is placed before the Dictating Member 25.04.2019
3. Other Member...
4. Date on which the approved draft comes to the Sr.P.S./P.S ...30.04.2019
5. Date on which the fair order is placed before the Dictating Member for pronouncement.........
6. Date on which the fair order comes back to the Sr.P.S./P.S .................
7. Date on which the file goes to the Bench Clerk ....................
8. Date on which the file goes to the Head Clerk...
9. The date on which the file goes to the Assistant Registrar for signature on the order..........................
10. Date of Despatch of the Order..................