Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2023 (10) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (10) TMI 840 - AT - Income TaxExemption u/s 11 - income from holding of exhibitions and organising of seminars arising from participation by non-members - applicability of the principle of mutuality in respect of income from members - differential treatment of income from non-members and members by the assessee - HELD THAT:- As there is no dispute as regards the income from non-members, letting out of exhibitions centre, and the income derived from investments, which have already been offered to tax by the assessee. AO only disagreed with the contention of the assessee that income from members in respect of holding exhibitions and organising seminars is not taxable on the principle of mutuality. As per the AO, complete identity between the contributor and participators ceases to exist when the same type of services are provided to members and non-members. As per the assessee, since it is an association to protect the machine tool industry engaged in the manufacture and trade in machine tools, small tools, cutting tools, etc., therefore number of persons combine together and contribute to a common fund for a common venture or the object. The surplus from activities by those persons cannot be regarded in any sense as profit. As per the assessee, the income from members is non-taxable not u/s 11 of the Act but the same is not taxable as per the principle of mutuality. An activity between persons associated together does not give rise to profit which is chargeable to tax, as the members cannot trade with themselves. No person or body of persons can earn profit out of himself or themselves jointly. We find from the Memorandum of Association that it was also resolved that upon winding up or dissolution of the assessee if any property whatsoever remains then the same shall not be distributed amongst the members of the assessee but shall be given or transferred to such other association having similar objects. On the basis of the principle of mutuality, the income earned from members in respect of holding seminars, exhibitions, and other activities is not taxable. Accordingly, the plea of the assessee regarding the non-taxability of receipts from members is upheld on the basis of the principle of maturity. Since the AO on the erroneous assumption that the assessee has claimed exemption under section 11 of the Act treated the income from members to be of the same category as income from non-members and taxed the same and the details as provided on page 26 of the paper book regarding bifurcations of income and expenditure amongst members and non-members were not examined during the assessment proceedings, therefore we direct the AO to examine the allocation of income and expenditure amongst members and non-members as submitted by the assessee and grant the relief to the assessee to the extent the income is earned from the members in light of the principle of mutuality. As a result, the grounds raised by the Revenue are partly allowed for statistical purposes. As we have accepted the plea of the assessee regarding the applicability of the principle of mutuality with respect to income earned from members, we deem it appropriate to restore the issues raised in assessee’s appeal to the file of AO for de novo adjudication, since the assessee has been found to not have claimed exemption under section 11 of the Act
|