2018 (3) TMI 479 - HC - Income Tax

Court rules exhibition as business activity for profit, denies tax benefits due to lack of proper accounting.

Indian Machine Tools & Manufacturers' Association Versus The Director of Income Tax (E) Mumbai

Indian Machine Tools & Manufacturers' Association Versus The Director of Income Tax (E) Mumbai - TMI Issues Involved:1. Whether the activity of holding an exhibition IMTEX-92 by the Assessee amounts to a business activity.2. Whether the business of holding the exhibition is incidental to the attainment of the objects of the Assessee.3. Whether the Assessee maintained separate books of accounts for the business activity as required under Section 11(4A) of the Income Tax Act, 1961.Issue-Wise Detailed Analysis:1. Whether the activity of holding an exhibition IMTEX-92 by the Assessee amounts to a business activity:The Court examined the nature of the activity carried out by the Assessee while holding the exhibition IMTEX-92. The total receipts from the exhibition were Rs. 4.76 Crores, with a net surplus of Rs. 1.72 Crores. The activity involved hiring space from the Trade Fair Authority of India, setting exhibition tariffs, and charging various fees. The Tribunal found that the activity was well-organized, carried out regularly, and aimed at earning substantial profits. The Tribunal held that the activity satisfied the test of business, as it was not conducted on a no-profit-no-loss basis or for marginal gains. The Court agreed with this finding, stating that the activity of holding the exhibition was indeed a business activity.2. Whether the business of holding the exhibition is incidental to the attainment of the objects of the Assessee:This issue was decided in favor of the Assessee by the Commissioner of Income Tax (Appeals) (CIT[A]), and the Revenue did not challenge this finding. Therefore, the Court did not need to consider this issue further, as it stood concluded in favor of the Assessee.3. Whether the Assessee maintained separate books of accounts for the business activity as required under Section 11(4A) of the Income Tax Act, 1961:The Court examined whether the Assessee maintained separate books of accounts for the exhibition IMTEX-92. The Assessee argued that the manner in which the accounts were maintained allowed the Assessing Officer to determine the total receipts, expenditure, and net income from the exhibition. However, the Court held that the requirement to maintain separate books of accounts is mandatory and must be strictly construed. The Court stated that the words 'maintained separate books of accounts' are clear and unambiguous, and the Assessee's failure to maintain separate books of accounts meant that it did not fulfill the requirement of Section 11(4A) of the Act. Consequently, the Assessee was not entitled to the benefit of Section 11 of the Act.Conclusion:1. The activity of holding an exhibition IMTEX-92 by the Assessee is a business activity.2. The business of holding the exhibition IMTEX-92 is incidental to the attainment of the objects of the Assessee.3. The Assessee did not maintain separate books of accounts for the business activity as required under Section 11(4A) of the Act, and therefore, is not entitled to the benefit of Section 11.The question raised for the Court's opinion was answered in favor of the Revenue and against the Assessee. The reference was disposed of accordingly.