Organizing Drama on Commercial Basis by Charitable Trust is “Commercial Activity”, No Income Tax Exemption: ITAT [Read Order]

The Pune Bench of Income Tax Appellate Tribunal (ITAT) has denied income tax exemption holding that organising drama on commercial basis by charitable trust was a commercial activity.

The assessee, Maharaja Shivchatrapati Pratishthan, is a trust engaged in highlighting life of Chatrapati Shree Shivaji Maharaj by organising drama “Janta Raja”. The assessee was registered under Section 12A of the Act on 20-06-1974. The assessee had claimed exemption of receipts from organising drama on commercial basis and AO denied exemption under Section 11 of the Income Tax Act taking into consideration second provision of section 2(15) of the Act as the receipts on such drama on commercial basis were more than 25 lakhs. 

Sunil U. Pathak on behalf of the assessee submitted that the issue in the present appeal was covered against the assessee by the order of this Tribunal in assessee’s own case for A.Y. 2013-14.

Ramnath P. Murkunde, appeared on behalf of the revenue.

Sub-section (15) of section 2 defines charitable purpose, explains advancement of any other object of general public activity. The impact of the proviso is that the advancement of any other object of general public activity shall not be considered as a “charitable purpose”, if it involves carrying on any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to the trade, commerce or business for a cess or fee or any other consideration.

Further, this proviso provides an exception which explains that such an activity will continue to be charitable if the requisite conditions are satisfied. The first condition is that such an activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; the second, is that the aggregate receipts from such activity do not exceed 20% of the total receipts.

The Division Bench of R.S. Syal, (Vice President) and S.S. Viswanethra Ravi, (Judicial Member) dismissed the appeal as the aggregate receipts in the present case from such activity were more than 20% of the total receipts. Therefore, the Bench held that the assessee did not satisfy the condition of advancement of any other object of general public utility so as to be covered under Section 2(15) of the Income Tax Act.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates