A bench headed by Justice DK Jain has admitted the appeal filed by the income tax department that argued that the annual subscription fees received by Nasscom, a trust registered under Section 12A, from its members is taxable under Section 28 (III).
According to the provision, income derived by a trade, professional or similar association from specific services performed for its members shall be chargeable to income tax under the head Profits and gains of business of profession.
Challenging the Delhi High Court judgment that held contrary to the department's view, the appeal stated that the HC had erroneously deleted the additions made under Sec 28 (iii) of the Act by holding that the annual subscription fee received by the assessee does not attract the provision as no specific services were rendered by the assessee to its members.
Nasscom, which received annual subscription charges based on the turnover of its members, in its tax returns for 2003-04 had declared an income of R7,27,500. However, the assessment was completed on a total income of R4.13 crore as against the assesses' declaration. The Assessing Officer was of the view that income was taxable under the head profit and gains of business or profession, thus he added back provisions of doubtful debt, corpus donations, prior period expenses, etc.
While the Commissioner of Income Tax upheld the department's view, the Income Tax Appellate Tribunal held that the annual subscription fee received from the members was not taxable.
The HC also decided the issue of applicability of Sec 28 (iii) of the Act in favour of the assessee by holding the fees is paid merely to keep the membership alive on yearly basis.