Indian Chamber of Commerce v. ITO

INCOME TAX ACT, 1961

--Charitable trust--Exemption under section 11Applicability of proviso to section 2(15)--The assessee filed its return of income for the year under consideration, i.e. assessment year 2008-09 being a charitable institution eligible for exemption under section 11 on 13-10-2008 declaring nil total income. During assessment proceedings, AO noted that certain activities of the assessee were clearly in the nature of business activities. According to AO, assessee had violated the provisions of section 11(4A) since the activities were in the nature of trading and business and separate books of account were purportedly not maintained. The assessee explained that the activities were not in the nature of trade or business and same were all conducted for the empowerment, betterment and for creating awareness amongst industrialists in order to bring about development of trade and industries in India. But, AO objected to exemption claimed by assessee under section 11 and assessed total income by disallowing claim vide assessment order under section 143(3). The AO stated that the activities incidental to the main object, were all in the nature of business and formed predominant activities, since there was no separation of such business activities, inasmuch as no separate books of account were maintained in respect of such business in terms of section 11(4A). The AO held that assessee had thus violated provisions of section 11(4A). The assessee was earning income from business and was not engaged in activities for charitable pruposes under section 11 read with section 2(15). Accordingly, AO assessed excess of gross receipts over expenses as total icnome. The CIT(A) upheld order of AO. Held: The activities of conducting environment management centre, meetings, conferences and seminar and issuance of the certificate of origin, were all connected, incidental and ancillary to the main purpose of charity and were conducted solely for empowerment, betterment and for creating awareness amongst industrialists in order to bring about development of trade and industries in India. Assessee association is a charitable institution carrying on as its main, object of development of trade, industries and commerce. The other activities were all merely incidental to the main object and predominant object of the association being the promotion development and protection of trade and commerce which was an object of general public utility, it could never be the case that assessee is predominantly engaged in business though receipts were charged under section 28(iii) but exemption under section 11 read with section 2(15) was available to assessee association.