While granting tax relief to the Indian Medical association (IMA), a division bench of the Delhi ITAT held that exemption under section 11(1) of the Income Tax Act cannot be denied to the assesse-society for receiving endorsement fee income for promoting consumer goods like Pepsi and Dabur.
The assesse, IMA, is an association of medical doctors and the main object of the society is to promote the interest of its members. The main objects of the society are to promote and advance medical science and to promote improvement of public health and medical education in India. All the activities carried out by IMA/Assessee can be regarded as falling within the scope of general public utility.
For the relevant assessment year, the AO observed that the assessee has received income out of commercial transaction with outsiders who are non-members of IMA/Assessee. The Officer noted that the assesee is involved in commercial activity as the assessee has been endorsing the products of consumer goods like Pepsi and Dabur etc and has been receiving endorsement fee income. Accordingly, he denied the exemption u/s. 11(1) of the Act to the assesse.
The department had approached the Tribunal against the order of the first appellate authority contending that assessee society has made commercial agreements with corporate entities and receiving contribution for specific endorsement which would result in the sale of their products. According to them, these activities are commercial in nature.
The bench noticed the assessees’ own case wherein similar issue was concluded in favour of the assessee. In that case, it was held that the assessee is not involved in any trade, commerce or business and is totally involved in charitable activity and falling within the definition of charitable purpose under section 2(15) under the head “medical relief’.
Further, relying on the decision in India Trade Promotion Organisation vs. DGIT(E), the bench upheld the view of the first appellate authority who granted exemption under section 11(1) to the assessee.
Read the full text of the Order below.
