A.D.I.T.(E)II(1), MUMBAI V. INDIAN ELECTRICAL AND ELECTRONICS MFG. ASSOCIATION, MUMBAI

ITA 5780/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8846 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 13-09-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 12-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J D MISTRY
• Assessee Lawyers: K G KUTTY
• Keywords: Charitable institution
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D , MUMBAI BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL M EMBER ITA NO. 5780/MUM/2011 ASSESSMENT YEAR : 2008-09 ADIT(E)-II(1) ROOM NO.507, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI-400 012. VS. M/S. INDIAN ELECTRICAL AND ELECTRONICS MFG. ASSOCIATION 501, KAKAD CHAMBER DR. A.B. ROAD, WORLI MUMBAI. PAN NO. AAATI 1078 A (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K.G. KUTTY DEPARTMENT BY : SHRI J.D. MISTRY DATE OF HEARING : 13.9.2012 DATE OF PRONOUNCEMENT : 26.09.2012 O R D E R PER RAJENDRA SINGH, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDE R DATED 8.5.2011 OF CIT(A) FOR THE ASSESSMENT YEAR 2008-09. THE ONLY DISPUTE RAISED IN THIS APPEAL IS REGARDING ALLOWABILITY OF EXE MPTION UNDER SECTION 11(4A) OF THE INCOME TAX ACT. 2. THE FACTS IN BRIEF ARE THAT THE AO DURING THE ASSESSM ENT PROCEEDINGS NOTED THAT THE MAIN OBJECT OF THE ASSESSEE TRU ST WAS TO PROMOTE AND PROTECT TRADE, COMMERCE AND INDUSTRIES OF I NDIA AND IN PARTICULAR TRADE, COMMERCE AND INDUSTRIES CONNECTED WITH ELECTRICAL ITA NO.5780/M/11 A.Y. 08-09 2 AND ELECTRONICS INDUSTRIES. THE AO NOTED THAT THE ASSESSEE EARNED INCOME OF RS.5,31,51,351/- FROM MEMBERSHIP SUBSCRIPTION, SEMINARS, WORKSHOPS, IEEMA PUBLICATIONS ETC.. THE AO FURTHER NOTED THAT THE ASSESSEE DURING THE YEAR HAD CONDUCTED AN EXHIBITION NAME D ELECRAMA 2008 HAVING GROSS RECEIPTS OF RS.25,07,95,866/- AND AFTE R DEDUCTING EXPENSES INCURRED ON ACCOUNT OF EXHIBITION, NET SURPLUS WAS SHOWN AT RS.5,57,67,313/- WHICH WAS CLAIMED AS EXEMPT. THE AO OBSE RVED THAT IN THE EARLIER YEARS THE ACTIVITY OF ORGANIZING TRADE FAIR HAD BEEN CONSIDERED AS BUSINESS ACTIVITY AND INCOME ON ACCOUNT OF SUCH ACTIVITY HAD BEEN HELD AS TAXABLE. CIT(A) IN THE EARLIER YEAR HAD ALSO CONFIRMED ADDITION CONSIDERING THE ACTIVITY AS DOMINATING BUSINESS ACTIVITY AND FOLLOWING SOME JUDGMENTS. HOWEVER, IN THIS YEAR, CIT(A) FOLLOWING THE TRIBUNAL DECISION IN ASSESSEES OWN CASE HAS DELETED THE ADD ITION HOLDING THAT ORGANIZING EXHIBITION WAS INCIDENTAL TO OBJECTS OF THE ASSESSEE. THE AO OBSERVED THAT FINDING OF CIT(A) WAS NOT CORRECT AS HOLDING FAIRS, EXHIBITIONS AND SYMPOSIA WAS AN INDEPENDE NT OBJECT WHICH WAS NON-CHARITABLE IN NATURE AND A DOMINANT ACTI VITY. THE AO ALSO NOTED THAT UNDER THE PROVISIONS OF SECTION 11(4A), ASSESSEE WAS REQUIRED TO MAINTAIN SEPARATE BOOKS OF ACCOUNT EVEN IF THE ACTIVITY WAS CONSIDERED AN INCIDENTAL ACTIVITY. IN THIS CASE THE ASSESSEE HAD MAINTAINED ONLY SEPARATE CASH BOOK, LEDGER, BANK BOOK AND JOURNAL WHICH WERE NOT SUFFICIENT TO COMPUTE INCOME FROM THIS ACT IVITY. ITA NO.5780/M/11 A.Y. 08-09 3 ASSESSEE HAD, THEREFORE, FAILED TO MAINTAIN PROPER AND SEPARATE BOOKS OF ACCOUNT. THE AO THEREFORE, HELD THAT THE ACTIVITY W AS NON-CHARITABLE AND ACCORDINGLY DENIED THE CLAIM OF EXEMPTION UNDER SECT ION 11 OF THE ACT. 3. THE ASSESSEE DISPUTED THE DECISION OF AO AND SUBMITTED B EFORE CIT(A) THAT THE MAIN OBJECT WAS TO PROMOTE TRADE, COM MERCE AND INDUSTRIES AND, IN PARTICULAR TRADE, COMMERCE AND INDUST RIES CONNECTED WITH ELECTRICAL AND ELECTRONIC INDUSTRIES . THE OTHER OB JECTS WERE ONLY SUPPLEMENTARY OR ANCILLARY OBJECTS. ASSESSEE WAS HOLDING EXH IBITION EVERY TWO YEARS THE PURPOSE OF WHICH WAS TO MAKE KNOWN TO THE PUBLIC PRODUCTS/ELECTRONIC GOODS WHICH IN TURN PROMOTE ELECTRONI C INDUSTRIES. THUS HOLDING OF EXHIBITION WAS MERELY ANCILLARY AND IN CIDENTAL TO THE DOMINANT OBJECT AND ONCE DOMINANT OBJECT WAS HELD AS CHAR GEABLE, THE ASSESSEE COULD NOT BE DENIED BENEFIT IN RESPECT OF INC IDENTAL ACTIVITIES. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSE E, CIT(A) OBSERVED THAT THE MUMBAI BENCH OF THE TRIBUNAL IN ASSESSE ES OWN CASE IN 1974-75, 1996-97, 2004-05 IN ITA NO.658/BOM/7 9 DATED 14.1.1980 AND IN ITA NO.5470/MUM/99 DATED 21.7.2005 AND IN ITA NO.4736/MUM/2007 DATED 18.5.2009 RESPECTIVELY HAVE HE LD THAT HOLDING OF EXHIBITIONS WAS AN INCIDENTAL OBJECT AND EXP LANATION UNDER SECTION 11 WAS ALLOWABLE. CIT(A) THEREFORE, FOLLOWING THE DECISION OF ITA NO.5780/M/11 A.Y. 08-09 4 THE TRIBUNAL (SUPRA), DIRECTED THE AO TO ALLOW THE CL AIM OF THE ASSESSEE AGGRIEVED BY WHICH REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 4. BEFORE US, THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE ISSUE WAS COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OW N CASE IN ASSESSMENT YEARS 2004-05 IN ITA NO.4736/M/07 AND IN ITA NO.5470/M/99 FOR ASSESSMENT YEAR 1996-97. IT WAS ALSO POI NTED OUT THAT THE DECISION OF THE TRIBUNAL HAS BEEN UPHELD BY THE HON'BLE HIGH COURT OF BOMBAY ON 6.7.2011 IN INCOME TAX APPEAL NO. 2415/10 FOR ASSESSMENT YEAR 2004-05 AND IN ASSESSMENT YEAR 1996-97 IN I NCOME TAX APPEAL NO.3177 OF 2010 VIDE JUDGMENT DATED 6.7. 2011. THE LD. AR FOR THE ASSESSEE ALSO SUBMITTED THAT ASSESSMENT IN THIS CASE WAS ALSO LIABLE TO BE QUASHED AS NOTICE UNDER SECTION 143(2) HAD NOT BEEN SERVED WITHIN THE STATUTORY TIME LMITS, IN VIEW OF THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF HOTEL BLUE MOON (3 21 ITR 362). THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HA ND SUPPORTED THE ORDER OF AO AND PLACED RELIANCE ON THE FINDINGS GIVEN IN THE SAID ORDER. 5. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING ALLOWA BILITY OF EXEMPTION UNDER SECTION 11(4A) IN RESPECT OF INCOME FRO M EXHIBITION ORGANIZED BY THE ASSESSEE. THE ASSESSEE TRUST HAD BEEN SET U P TO PROMOTE AND PROTECT THE TRADE, COMMERCE AND INDUSTRIES OF INDIA AND ITA NO.5780/M/11 A.Y. 08-09 5 IN PARTICULAR TRADE, COMMERCE AND INDUSTRIES CONNECTED WIT H ELECTRICAL AND ELECTRONIC INDUSTRIES. THE ASSESSEE TRUST HAD OTHER ANCI LLARY OBJECTS ONE OF WHICH WAS TO ARRANGE TRADE FAIRS, EXHIBI TIONS, SYMPOSIA ETC. THE DISPUTE IS AS TO WHETHER INCOME FROM SUCH ACTIVITI ES OF ORGANIZING EXHIBITION ETC. IS EXEMPT FROM TAX. UNDER THE PROVISIONS OF SECTION 11(4A), EXEMPTION UNDER THE SAID SECTION IS NO T AVAILABLE IN RESPECT OF ANY PROFIT AND GAIN ARISING FROM BUSINESS UNL ESS BUSINESS IS INCIDENTAL TO ATTAINMENT OF THE OBJECTIVES OF THE TRUST AND SEPARATE BOOKS OF ACCOUNT ARE MAINTAINED. IN THIS CASE THE AO HELD THAT HOLDING EXHIBITION WAS ONE OF THE MAIN OBJECTIVES. IT WAS HELD BY HIM THAT THE ASSESSEE WAS NOT MAINTAINING PROPER AND SEPARATE BOOKS AS O NLY CASH BOOK, LEDGER, BANK BOOK AND JOURNAL WERE MAINTAINED . THEREFORE HE DENIED THE CLAIM OF EXEMPTION. HOWEVER, WE FIND THAT SAME ISSUE HAS ALREADY BEEN CONSIDERED BY THE MUMBAI BENCH OF THE TRI BUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 1996-97 IN ITA NO.5470/MUM/99 VIDE ORDER DATED 21.7.2005. THE SAID ORDER WAS FOLLOWED BY THE TRIBUNAL IN ASSESSMENT YEAR 2004-05 IN ITA NO.4736/M/2007 IN WHICH A MORE DETAILED ORDER WAS PASSE D. THE TRIBUNAL HELD THAT THE ACTIVITY OF HOLDING EXHIBITIO N WAS INCIDENTAL TO THE MAIN OBJECT AND ALSO HELD THAT THE TWO CONDITIONS P RESCRIBED IN SECTION 11(4A) WERE SATISFIED FOR EXEMPTION FROM SUCH INCI DENTAL BUSINESS ACTIVITY. IN ASSESSMENT YEAR 2004-05, THE TRIBUNA L ALSO ITA NO.5780/M/11 A.Y. 08-09 6 CONSIDERED AMENDMENT TO SECTION 2(15) BY THE FINANCE BIL L 2008 AS PER WHICH ADVANCEMENT OF ANY OBJECT OF GENERAL PUBLIC U TILITY SHALL NOT BE FOR A CHARITABLE PURPOSE IF CARRIED ON FOR TRADE, CO MMERCE, BUSINESS OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION T O ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSID ERATION IRRESPECTIVE OF THE NATURE OF USE OF APPLICATION OR RET ENTION OF THE INCOME FROM SUCH ACTIVITY. THE TRIBUNAL AFTER DETAILED EXAMINATION HELD THAT THE AMENDED PROVISIONS WERE SUBSTANTIVE IN N ATURE AND WOULD APPLY ONLY FROM ASSESSMENT YEAR 2009-10. THE TRIB UNAL ACCORDINGLY ALLOWED THE CLAIM OF THE ASSESSEE. THE ORDERS O F THE TRIBUNAL IN ASSESSMENT YEAR 2004-05 AND 1996-97 HAVE BE EN UPHELD BY THE HON'BLE HIGH COURT OF BOMBAY IN JUDGMENTS DATED 6.7.2011 IN INCOME TAX APPEAL NO.2415 OF 10 AND 3177 OF 10. THE HONBLE HIGH COURT UPHELD THE ORDERS OF THE TRIBUNAL ON BOTH POIN TS I.E. EXHIBITION ACTIVITY BEING INCIDENTAL TO THE MAIN OBJECT AND PROP ER AND SEPARATE ACCOUNT BOOK BEING MAINTAINED BY THE ASSESSEE. THUS THE I SSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF HON' BLE HIGH COURT OF BOMBAY (SUPRA). WE, THEREFORE, SEE NO INFIRM ITY IN THE ORDER OF CIT(A) ALLOWING RELIEF TO THE ASSESSEE AND THE SAME I S UPHELD. AS WE HAVE ALLOWED THE CLAIM ON MERIT, WE DO NOT CONSIDER IT NECESSARY TO GO INTO THE ALTERNATE ARGUMENT OF THE ASSESSMENT BEING ILL EGAL ON THE GROUND OF NON-SERVICE OF NOTICE UNDER SECTION 143(2) IN TIME. ITA NO.5780/M/11 A.Y. 08-09 7 6. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26.09.2012 SD/- SD/- (VIJAY PAL RAO) JUDICIAL MEMBER (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 26.09.2012. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.