Confederation of Indian Textile Industry Vs ITO (ITAT Mumbai)
The issue under consideration is whether the exemption u/s 11 will be allowed against the interest income, exchange gain, and miscellaneous income to the Confederation of Indian Textile Industry?
In the present case, the AO applied the principles of mutuality and observed that the regular income derived by the assessee from its members is exempt from the principles of mutuality. However, with regard to the interest income, exchange gain, and miscellaneous income as tabulated in the aforesaid table, the AO observed that these incomes were derived by the assessee from its non-members and accordingly, the same would not be exempt on the principles of mutuality. AO applied the proviso to Section 2(15) of the Act and consequently rejected the claim of exemption under Section 11 of the Act.
ITAT states that, they do not find any finding at all by the Assessing Officer or even by the CIT(A) that any of the activities of the assessee are with a profit motive so as to attract proviso to Sec. 2(15) of the Act. So far as the Principle of Mutuality is concerned, the same is with reference to the services vis-a-vis the members and qua the income received by assessee from non-members, the other provisions of the Act would govern. In any case, an entity cannot be denied charitable character merely because some element of its income is exempt from the Principles of Mutuality. Thus, on this aspect also, we find no reason to uphold the stand of the Revenue. In the result, ITAT hereby set-aside the order of CIT(A) and the Assessing Officer is directed to allow the benefit of Sec. 11/12 of the Act to the assessee and thereafter recompute the income, as per law.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal in ITA No.2435/Mum/2019 for A.Y.2013-14 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-3, Mumbai in appeal No.CIT(A)-3(IT)-10478/2017-18 dated 18/01/2019 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3)of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 07/03/2016 by the ld. Income Tax Officer (E)-1(2),Mumbai (hereinafter referred to as ld. AO).
2. The only effective issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in confirming the action of the ld. AO in disallowing the claim of exemption u/s.11 of the Act to the assessee in the facts and circumstances of the case.
3. We have heard rival submissions and perused the materials available on record. We find that assessee is a non-profit organisation registered u/s. 25 of the Companies Act, 1956. It is an apex industry association representing the entire value chain of textile and clothing sector. It is constituted by member associations, members and corporate members and young entrepreneurs group. Member associations covering all the geographical area of India nominate their selected members to the executive committee of the confederation. All textile companies which are members of these associations automatically become the members of the confederation.
3.1. We find that the assessee is registered u/s.12A of the Act and was accordingly, claiming exemption u./s.11 of the Act which was granted by the ld. AO up to A.Y.2012-13. For the A.Y.2013-14 also, the assessee claimed exemption u/s.11 of the Act in the return of income filed on 28/09/2013 claiming the deficit of Rs.8,40,487/- to be carried forward to subsequent years. As per the Memorandum of Articles of Association of the assessee, the following are the primary objects for which the assessee was formed:-
