TAMILNADU SMALL AND TINY INDUSTRIES LIMITED,CHENNAI V. ITO, EXEMPTIONS WARD 4, CHENNAI

ITA 1415/CHNY/2024

AI Insights

The case involves the Tamilnadu Small & Tiny Industries Association, which appealed against the order of the Commissioner of Income Tax (Appeals) that upheld the Assessing Officer's decision denying exemption under sections 11 and 12 of the Income Tax Act. The Assessing Officer had determined that the Association's activities constituted trade, commerce, or business as they involved charging fees for skill development programs, which exceeded Rs. 25 Lakhs. The Tribunal, referencing decisions from the Supreme Court and other ITATs, found that the Association's activities, being cost-based and not profit-driven, did not amount to trade or business, thus reversing the CIT(A)'s decision on this point. However, the Tribunal agreed with the CIT(A) on the disallowance of depreciation claimed by the Association.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 107038 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2024
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 11-09-2024
• Assessment Year: misc
• Appeal Filed On: 13-05-2024
• Other Referred Cases: ACIT v. Ahmedabad Urban Development Authority [2022] 143 taxmann.com 278 (SC), Indian Chamber of Commerce v. DCIT [2024] 110 ITR 30 (Kol-Trib.), Aarambh Foundation v. CIT (Exemptions) in ITA No.90/Ind/2023 (Indore-Trib.)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P. KRISHNA KUMAR
• Assessee Lawyers: T. BANUSEKAR
• Keywords: Capital asset; Depreciation; Principle of natural justice
• Section: 143(3); 11; 12AA; 234B; 12

Judgement Text

"आयकर अपीलीय अिधकरण, ‘ए’ \u0011ा यपीठ, चे\u0016ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH: CHENNAI \u0019ी एबी टी. वक\u001e, \u0011ा ियक सद! एवं \u0019ी जगदीश, लेखा सद! क े सम( BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI JAGADISH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.1415/Chny/2024 िनधा9रण वष9 /Assessment Year: 2015-16 Tamilnadu Small & Tiny Industries Association, No.10, GST Road, Guindy, Chennai – 600 032. Vs. The Income Tax Officer (Exemptions), Ward-4, Chennai. [PAN: AAATT 2207J] (अपीलाथ\u0007/Appellant) (\b\tयथ\u0007/Respondent) अपीलाथ\u001e की ओर से/ Appellant by : Shri T.Banusekar, Advocate GHथ\u001e की ओर से /Respondent by : Shri P. Krishna Kumar, JCIT सुनवाई की तारीख/Date of Hearing : 11.09.2024 घोषणा की तारीख /Date of Pronouncement : 13.11.2024 आदेश / O R D E R PER JAGADISH, A.M : Aforesaid appeal filed by the assessee for Assessment Year (AY) 2015-16 arises out of the order of Learned Commissioner of Income Tax, Appeal, Addl/JCIT(A)-12, Mumbai [hereinafter “CIT(A)”] dated 22.03.2024 in the matter of assessment framed by the Assessing Officer [AO] u/s. 143(3) of the Income-tax Act,1961 (hereinafter “the Act”) on 29.12.2017. ITA No.1415/Chny/2024 :- 2 -: 2. The grounds of appeal raised by the assessee are as under: “1. For that the order of Commissioner of income Tax (Appeals) is contrary to law, facts and circumstances of the case to the extent prejudicial to the interest of the appellant and at any rate is opposed to the principles of equity, natural justice and fair play. 2. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the order of the Assessing Officer is without jurisdiction. Denial of exemption u/s.11 3. For that the Commissioner of Income Tax (Appeals) erred in upholding the denial of exemption u/s.11 of the Income Tax Act. 4. For that the Commissioner of lncome Tax (Appeals) failed to appreciate that the activities carried on by the appellant trUst are charitable in nature. 5. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the appellant trust would not fall under the ambit of the proviso to section 2(15) of the income Tax Act. 6. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the activities carried on by the appellant trust are only in furtherance of its main object and cannot be regarded as activities carried out in relation to any trade, Commerce or business. 7. For that without prejudice to the above, the Commissioner of Income Tax (Appeals) failed to appreciate that the income of the appellant trustwould not be taxable in view of the principles of mutuality. Disallowance of depreciation of Rs.4,53,727/- 8. For that the Commissioner of Income Tax (Appeals) erred in upholding the disallowance of depreciation of Rs.4,53,727/- made y the Assessing Officer for the reason that the appellant has already claimed the cost price of the capital assets (purchased in earlier accounting years) as application of income in such years. Levy of interest under sections 234A and 234B 9. For that the appellant trust objects to the levy of interest under sections 234A and 234B of the Income Tax Act, 1961.” 3. Grounds No.1 & 2 are general in nature hence, no adjudication is required. ITA No.1415/Chny/2024 :- 3 -: 4. Grounds No.2 to 7 are relating to denial of exemption u/s. 11 of the Act invoking the provisio of section 2(15) and section 13(8) of income tax. 5. The assessee is an association registered u/s. 12AA of the Act and filed return of income admitting total income as Nil. The A.O invoking provisions of Section 2(15) of the Act has held that the assessee is engaged in carrying on of activity in the nature of trade, commerce or business or an activity of rendering services in relation to trade, commerce or business for a cess, fee or any other consideration and the gross receipt exceeds Rs. 25 Lakhs therefore, not eligible for exemption u/s. 11 or 12 of the Act. The A.O has accordingly considered excess income over expenditure of Rs. 9,75,944/- for the purpose of computation of taxable income. The Ld. Addl. CIT(A) has confirmed the finding of A.O. 6. The Ld. Authorized Representative (A.R) of the assessee before us has contended that the assessee is charitable association involved in charitable activity without any profit motive therefore proviso to section 2(15) of the Act cannot be invoked. The Ld. AR has further stated that it has conducted a skill development course for which programme fee of Rs. 23,40,000/- has been charged for which ITA No.1415/Chny/2024 :- 4 -: Rs.20,15,000/- has been paid to the organization conducting the training. The Ld. AR has further stated that this activity cannot be called as a trade, commerce or business as it has been held by the Hon’ble Supreme Court in the case of ACIT v. Ahmedabad Urban Development Authority [2022] 143 taxmann.com 278 (SC) that generally charging of any amount towards consideration of such activity which is on cost basis or nominally above cost, cannot be considered trade, commerce or business and fall within the description of one advancing the general public utility. The Ld. AR has further relied on the decision of ITAT, Kolkata in the case of Indian Chamber of Commerce v. DCIT [2024] 110 ITR 30 (Kol-Trib.) in ITA Nos.933 & 934/Kol/2023 dated 22.12.2023 and order of ITAT, Indore in the case of Aarambh Foundation v. CIT (Exemptions) in ITA No.90/Ind/2023 (Indore-Trib.) dated 04.01.2024. 7. The Ld. Departmental Representative (DR), on the other hand, has relied on the orders of lower authorities and argued that the activities of assessee are clearly in the nature of trade and therefore, provisions of Section 2(15) of the Act is clearly applicable and assessee is not eligible for benefit u/s 11 or 12 of the Act. ITA No.1415/Chny/2024 :- 5 -: 8. We have heard the rival submissions, and perused the materials available on record. The assessee is an association registered u/s. 12AA of the Act and set up with the objective to promote and protect small scale industries in the State of Tamil Nadu. The main activity conducted by the assessee was attending to workshops, seminars, conferences and other events by the group of the association to benefit small and micro industries. The assessee during the year has shown gross receipts of Rs. 88,71,510 including receipt from subscription fees, admission fees, membership fees, programme fees, rental income and interest income. The total expenditure incurred is Rs. 78,95,566/- and the excess of income over expenditure is Rs. 9,75,944/-. The A.O has held that the activity of the assessee during the year are in the nature of trade, commerce or business since, the object of the assessee-society are of general public utility and the gross receipt exceeds Rs. 25,00,000/-. The A.O therefore, invoking the proviso to section 2(15) has denied exemption u/s. 11 or 12 of the Act. The A.O has noted that the gross receipt considered to be in nature of trade, commerce and business amounts of Rs. 57,72,260/- which includes fee for advertisement and publication amounting to Rs. 34,32,260/- and programme receipt amount of Rs. 23,40,000/-. The Ld. AR has contended that the only activity which can be considered ITA No.1415/Chny/2024 :- 6 -: trade, commerce or business is the programme receipt which is receipt for conducting skill development programme on cost basis. The Ld. AR has further submitted that the assessee has received Rs. 23,40,000/- from Tamil Nadu Skill Development Corporation for imparting training in engineering skill to 200 candidates. The Ld. AR has also submitted that it has paid Rs. 20,15,000/- against the above receipt to conduct the training programme. Therefore, the activity is on cost to cost basis or nominally above cost. The Ld. AR has relied on the orders of ITAT, Kolkata in the case of Indian Chamber of Commerce v. DCIT (Exemption), supra, and order of ITAT, Indore Aarambh Foundation v. CIT (Exemption), supra. Based on the finanicial submitted by the Ld AR, We agree with the arguments of Ld. AR that proviso of section 2(15) is not attracted in the current year and the case is covered by the above decisions. Accordingly, we reverse the finding of Ld. CIT(A) and held that the assessee is eligible for deduction u/s. 11 or 12 of the Act. 9. Ground No.8 is relating to disallowance of depreciation of Rs. 4,53,727/- on the ground that the assessee has already claimed the cost price of capital asset as application in earlier years. ITA No.1415/Chny/2024 :- 7 -: 10. The assessee has claimed depreciation of Rs. 4,60,972/- and the same has been disallowed by the A.O on the ground that the assessee has already claimed the cost price of the capital asset in earlier years as the application of income in the earlier assessment year. The dispute whether depreciation is to be allowed, has been settled by insertion of Section 11(6) in the Income-tax Act w.e.f AY 2015-16 that no deduction of depreciation is allowed in respect of any asset , acquisition of which has been claimed as an application . In view of the above, the assessee is not entitled for deprecation and there is no infirmity in the order of Ld. CIT(A). Thus, this ground of appeal is dismissed. 11. In the result, the appeal filed by the assessee is partly allowed. Order pronounced on 13th November, 2024. Sd/- Sd/- (एबी टी. वक\u001e) (ABY. T. Varkey) \u0011ाियक सद! / Judicial Member (जगदीश) (Jagadish) लेखा सद! /Accountant Member चे\u0010नई/Chennai, \u0013दनांक/Dated: 13th November, 2024. EDN/- ITA No.1415/Chny/2024 :- 8 -: आदेश क\u0016 \bितिल\u0019प अ\u001aे\u0019षत/Copy to: 1. अपीलाथ\b/Appellant 2. \t थ\b/Respondent 3. आयकर आयु\u0010/CIT, Chennai 4. िवभागीय \tितिनिध/DR 5. गाड\u0019 फाईल/GF "