The Kolkata bench of Income Tax Appellate Tribunal, on 24th May held that the activity of publishing journal supported by sponsorship fees cannot be treated as business activity of the trust and hence the income from publication of such journals cannot be treated as business income, but as income from other sources.
The appellants (assessee) in the case, Pediatric Infectious Disease Academy, is an association of pediatric doctors. The association had published a journal during the assessment year 2013-14. The journal was distributed free of cost to the members and the expenditure for printing the journal was claimed to be financed from sponsorship fees. A surplus of Rs 4,58,880 was offered to tax by the assessee during the assessment year 2013-14. During the assessment proceedings, the Assessing Officer noticed that the assessee had paid printing charges of Rs 41,59,000/- to Ms. Reed Elsevier India Pvt. Ltd. without deduction of tax at source as required under section 194C. The amount was disallowed by the Assessment officer under section 40(a)(ia).
The appellants had explained that there was no business activity carried out by them and the surplus income from the activity of publication of journal was shown under ‘income from other sources’, and that the provision of section 40(a)(ia), was not applicable, even if there was failure to deduct tax at source from printing charges u/s 194C. The assessing officer disregarded the assessee’s contention and held that the act of publication of journals by the assessee was in the nature of the business and the income from the said activity was chargeable to tax under the head profits and gains of business or profession. Hence the printing charges of Rs 41,59,000 paid by the assessee without deduction of tax at source was liable to be disallowed under section 40(a)(ia). A disallowance to that extent was made in the assessment completed u/s 143(3).vide an order dated 15.03.2016.
Aggrieved by the order the appellants preferred an appeal before the Ld CIT(A), which confirmed the assessing officers’ decision of making the disallowance. Aggrieved by the decision of Ld.CIT(A), the appellants approached the Income Tax Appellate Tribunal.
The ITAT upheld the contentions of the appellants and held that the activity of publication of journal having been financed from sponsorship fees and the said journals having been distributed free of cost, the same cannot be treated as in the nature of trade, profession or business as envisaged in the proviso to section 2(15) and the income of the assessee from the said activity cannot be treated as business income. The disallowance made by the assessing officer, confirmed by Ld.CIT(A) was held unsustainable.
