ITAT allows Tax Relief to Confederation of Indian Textile Industry [Read Order]

The Income Tax Appellate Tribunal (ITAT), Mumbai allowed exemption under Section 11 of the Income Tax Act, 1961 in respect of interest income, exchange gain, and miscellaneous income to the Confederation of Indian Textile Industry.

The assessee, M/s Confederation of Indian Textile Industry is a non-profit organization registered under section 25 of the Companies Act, 1956. It is an apex industry association representing the entire value chain of the textile and clothing sector.

It is constituted by member associations, members and corporate members, and young entrepreneurs group. Member associations covering all the geographical areas of India nominate their selected members to the executive committee of the confederation.

All textile companies which are members of these associations automatically become members of the confederation.

The assessee is registered under section 12A of the Act and claimed exemption under section 11 of the Act which was granted by the AO up to Assessment Year 2012-13. For the Assessment Year .2013-14 also, the assessee claimed exemption under section 11 of the Act in the return of income, claiming the deficit of Rs.8,40,487/- to be carried forward to subsequent years.

The AO applied the principles of mutuality and observed that the regular income derived by the assessee from its members is exempt from the principles of mutuality.

However, with regard to the interest income, exchange gain, and miscellaneous income as tabulated in the aforesaid table, the AO observed that these incomes were derived by the assessee from its non-members and accordingly, the same would not be exempt on the principles of mutuality. AO applied the proviso to Section 2(15) of the Act and consequently rejected the claim of exemption under Section 11 of the Act.

The tribunal consisting of the Judicial Member, Amarjeet Singh, and an Accountant Member, M.Balaganesh in the light of the various precedents held that that the assessee is entitled to claim of exemption under Section 11 of the Act in respect of the interest income, exchange gain and miscellaneous income totaling into Rs.1,48,65,975/-, accordingly, the grounds raised by the assessee are allowed.