In a major relief to M/s South Indian Film Chamber of Commerce, the division bench of the Chennai Income Tax Appellate Tribunal (ITAT) held that the activities of the society are not in the nature of trade, business or commerce.
While dismissing the departmental appeal, the bench said that exemption under section 11 of the Income Tax Act cannot be denied to the assessee-society.
Assessee, a Trust registered under section 12AA of the Income Tax Act, received income from subscription, entrance fees, sales, advertisement, share income from preview theatres etc. The Assessing Officer invoked section 2(15) of the Income Tax Act and held that the above receipts were in the nature of income from trade, business, commerce or by providing services in relation to any trade/business/commerce and denied exemption under section 11 of the Income Tax Act to the assessee.
On appeal, the assessee maintained that it was a registered society committed for the cause and betterment of the South Indian film industry. It was contended that its sole objective was to promote trade and commerce in South Indian film industry. According to them, it did not itself carry on any trade or commerce. The first appellate authority allowed all these contentions and concluded the matter in favour of assessee.
Perusing the Memorandum of Understanding produced by the assessee, the Tribunal noted that the assessee was not formed with an intention to do any business or trade directly and the object of the assessee-society was to encourage film industry production in South India. “When viewed from this angle, the type of income listed by us at para 2 were in direct furtherance of its objects and were not arising from independent activities in the nature of trade, business or commerce. Even if we consider these receipts to be from rendering of service in relation to trade or commerce still such rendering of service was not an independent activity.”
“No doubt assessee for its receipts from non-members could not claim benefit of mutuality. However, receipts from non-members on account of its activities, as per the assessee, was less than Rs.10,00,000/-. Even if we consider the claim of mutuality as not as applicable for itsdealing with non-members, still gross receipts therefrom was less than Rs.10,00,000/- and thus assessee was saved by second proviso to Sec.2(15) of the Income Tax Act. For the above reasons, we are of the opinion that ld. Commissioner of Income Tax (Appeals) was justified in granting the deduction claimed by the assessee u/s.11 of the Act. We do not find any reason to interfere with the order of the ld. Commissioner of Income Tax (Appeals).”
Read the full text of the order below.
