The Income Tax Appellate Tribunal (ITAT), Chennai bench held that exemption under Section 11 of the Income Tax Act , 1961 should not be granted when activities of trust are in nature of trade , commerce or business.
The assessee, SAE India,was registered under Section 12AA of the Income Tax Act, 1961 from AY 2004-05 onwards. The assessee has filed its return of income on 30.09.2013 admitting a ‘nil’ income. The case was selected for scrutiny.
Thereafter, the AO observed that objects of the assessee falls under the last limb of the definition of ‘charitable purpose’ as defined under Section 2(15) of the Income Tax Act.
Before AO, the assessee submitted that the Society was formed with the object of imparting education in the field of Mobility Engineering.
The assessee organized technical meetings, workshops, seminars and other educational programs which are for the benefit of members of the society and in the nature of the education as defined under Section 2(15) of the Income Tax Act. Accordingly, AO rejected arguments of the assessee and denied the benefit of exemption under Section 11 of the Act.
Aggrieved by the order, the assessee filed an appeal before the CIT(A) who allowed the appeal. Thereafter, the revenue filed a second appeal before the tribunal.
S.Sridhar, the counsel for assesee submitted that objects of the Trust is to the nature of imparting education in the field of Mobility Engineering.
Further argued that the assessee carried its activities and holds technical meetings, workshops, seminars and other educational programs to encourage the profession of mobility engineering and said activity clearly falls under the definition of ‘education’ as per provisions of Section 2(15) of the Income Tax Act.
P. Sajit Kumar, Counsel for the revenue submitted that objects of assessee’s Trust and its activities falls under the last limb of ‘charitable purpose’ i.e. any other object of GPU and once the receipts from said activity exceeds the prescribed limit, assessee will lose benefit of exemption under Section 11 of the Income Tax Act.
Thus, trade promotion bodies, councils, associations or organizations are clearly GPU charities and subject to provisions of Sectoon 2(15) of the Income Tax Act. So, if the activities of the GPU charities are in nature of trade, commerce or business for a fees or cess, then, such Trust/Societies will not get exemption under section 11 of the Income Tax Act
It was observed by the tribunal that the assessee is conducting technical meetings, workshops, seminars and other educational programs and specialty conference for development of Mobility Engineering, etc
It was noted that the assessee falls under the last limb of the definition of ‘charitable purpose’ as defined under section 2(15) of the Act i.e. any other object of GPU.
The objects and activities of the Trust are in the nature of trade, commerce or business and hit by provision to Sec.2(15) of the Income Tax Act. Therefore, the assessee entitlement for exemption needs to be examined in light of gross-receipts and receipts from the activity of trade, commerce or business.
If gross receipts from the GPU activity, i.e. from trade, commerce or business exceeds 20% of gross receipts, then, the assessee is not entitled for exemption under section11 of the Income Tax Act.
The gross income of the assessee from conducting conference is more than 20% of the gross-receipts of the assessee for the impugned assessment year. Hence, the assessee did not entitled exemption.
After reviewing the facts and records, the two-member bench of Manjunatha.G (Accountant member) and Manomohan Das, (Judicial Member) exemption under Section 11 of the Income Tax Act should not be granted when activities of trust are in nature of trade , commerce or business
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