Exhibition By Gem And Jewellery Export Promotion Council, Not Trade And Commerce: Mumbai ITAT

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that the exhibitions conducted by the assessee, the Gem and Jewellery Export Promotion Council, are not in the nature of trade and commerce.

The bench of Anikesh Banerjee (Judicial Member) and B.R. Baskaran (Accountant Member) has observed that the assessee's transaction in the impugned assessment year exhibition in India and outside, after deleting the membership fees and the interest from investment, incurred a loss in exhibitions for promotion of trade and business of the members, as well as that the benefit should be carried over to other business entities that run as members of the assessee's organization. In a larger sense, the assessee's general public utility (GPU) is duly covered under Section 2(15) of the Income Tax Act.

Section 2(15) of the Income Tax Act provides a definition of 'charitable purpose'.

The respondent or assessee is a company incorporated under Section 25 of the Companies' Act, 1956, sponsored by the Ministry of Commerce, Government of India. It is a charitable organization registered under Section 12A of the Income-tax Act, 1961, since 1976, and is carrying out its activity strictly in conformity with its objectives.

The assessee filed a return of income for both assessment years, declaring total income at nil and claiming the exemption under Section 11 of the Act. The notice under Section 143(2) was issued, and the assessment was completed by ascertaining the total income at Rs. 173,38,88,333.

The AO has rejected the claim under Section 11, and the entire profit was taken as business income, amounting to Rs. 16,18,59,964. The additions were made.

The assessee filed an appeal before the CIT (A). The CIT(A) has considered the proviso to Section 2(15) as argued in the case of charitable activity in the nature of “general public utility” (GPU) adjudicated by determining the scope of GPU in the definition of charitable purpose. The CIT (A) allowed the appeal of the assessee.

The department contended that the assessee is converting the GPU into charitable work. In any case, the assessee is doing the business and the trading, which is the full nature of business activity, and the commercial activity is more than 20% of the total receipt. So, in any case, the assessee has contravened the provisions of Section 2(15). The AO has correctly withdrawn the exemption under Section 11 of the Income Tax Act.

The assessee contended that the assessee is a promotion council and that membership fees are received from the members. The assessee used to arrange exhibitions all over the world to promote jewelry and the business of gems and jewelry. The assessee arranged the exhibitions in India and outside India. No sale occurred during the exhibition arranged by the assessee.

The tribunal, while dismissing the appeal of the department, held that the business of trading, sale, and purchase was duly restricted during the time of exhibition. The department was unable to establish that the assessee was conducting any business transactions during its activities.

Counsel For Appellant: Nitesh Joshi

Counsel For Respondent: Kishor Dhule

Case Title: Dy. Commissioner of Income-Tax Versus The Gem And Jewellery Export Promotion Council

Case No.: ITA 3175/Mum/202

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