The Tax Publishers2020 TaxPub(DT) 2590 (Del-Trib)

INCOME TAX ACT, 1961

Section 11 Section 2(15), Proviso

Merely because a small percentage of income of assessee was from incidental or ancillary activity like hiring out of art gallery or selling paintings proviso to section 2(15) did not get attracted to assessee's case as dominant activity of assessee society was not business, trade or commerce rather it was charitable in nature i.e. to foster and develop fine and applied arts in India and to promote appreciation by means of publications, lectures, conferences, demonstration, exhibition; to organize and establish a national art gallery and to organize art exhibitions, etc.

Charitable trust - Exemption under section 11 - Applicability of proviso to section 2(15) - Hiring out of gallery and sale of paintings by assessee having object to foster and develop fine and applied arts and to organized national art gallery and art exhibitions

Assessee-society registered under section 12AA was having objects to foster and develop fine and applied arts in India and to promote appreciation by means of publications, lectures, conferences, demonstration, exhibition; to organize and establish a national art gallery and to organize art exhibitions, etc. It claimed exemption under section 11. AO denied assessee's claim on the ground that on account of hiring out of gallery and sale of paintings, proviso to section 2(15) got attracted to assessee's case and, therefore, no exemption could be allowed. Held: Merely because a small percentage of income of assessee was from letting out of its premises and sale of paintings, essential activity of assessee would not cease to be chritable for purposes of sections 11 and 12. When it was undisputed that assessee society had carried out activities in the form of annual art exhibitions, camps for senior and junior artists, providing maintenance to aged artists, etc and it was also not the case of AO that any part of surplus was diverted from society and applied for any personal benefit of any member or office bearer. Therefore, it could be safely concluded that dominant activity of assessee society was not business, trade or commerce and, accordingly, any incidental or ancillary activity like hiring out of art gallery or selling paintings would not also fall within the categories of trade, commerce or business. Accordingly, proviso to section 2(15) did not get attracted and exemption could be disallowed.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2012-13



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