The Mumbai Bench of Income Tax Appellate Tribunal ( ITAT ) has held that conducting or participating in exhibitions by the Gem & Jewellery Export Company within India or overseas would not be treated as commercial activity.
The assessee Gem & Jewellery Export is a registered company with the main objective to support, protect, maintain, increase and promote the export of gems and jewellery etc.
In the year under consideration, the assessee had claimed that organising and participating in exhibitions and trade fairs as the core activity of the assessee for the promotion of Indian products of gems, jewellery and diamond etc. to overseas market buyers which could only showcase products.
The Assessing Officer observed receipts from membership, subscription fees, grants from the Government of India, income from publication, exhibitions, award functions etc. Regarding the activity of conducting exhibitions, the AO held that it was a commercial activity, which prima facie falls in the nature of trade or business,
The Assessing Officer referring to the amendment to the definition of charitable purpose made an addition and rejected the deficit claimed by the assessee.
P.C. Pardiwala on behalf of the assessee submitted that the activity of organising exhibitions and trade fairs was very much a part of the general public utility (GPU) activity of the assessee for which the assessee had been registered as a charitable institution.
He referred to an annual feature of the EP (G & J) division in the Department of Commerce, Ministry of commerce and industry, the government of India, which issues calendars for each year, wherein it approved the exhibitions for gems and jewellery products.
Sanjay Vishwas Rao Deshmukh, on behalf of the revenue submitted that these were activities in the nature of trade, commerce or business or activity of rendering services in relation to trade, commerce or businesses were covered by the provisions to section 2(15) of the Act.
The Division Bench of Om Prakash Kant (Accountant Member) And Shri Rahul Chaudhary (Judicial Member) set aside the impugned order and granted relief under Sections 11 and 12 of the Income Tax Act 1961.
“We are of the opinion that the assessee is not hit by the proviso to section 2(15) of the Act as far as the activity of conducting or participating in exhibitions within India or overseas and therefore the disallowance of exemption claimed by the assessee made by the Assessing Officer and the finding of the Ld. CIT(A) on the issue in dispute is set aside and matters restored back to grant the benefit of sections 11 and 12 as per provisions of law.” The bench was further observed.
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