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Assessment of aop

Basavaraj (B.Com FCA) (193 Points)

01 August 2015

Hi,

My Client is registered under Cooperative Societies Act. There are members in the cooperative societies. They main purpose is conduct of poojas during Dasara mainly. and if any amount left out, undertake other charitable activities like donating books to Orphans, Conducting Programs for specially handicapped child....etc

Their inflows are mainly
1. Annual Membershio fees
2. Donations from other than members
3. The charges recieved for putting up the stall in the premises when the main activities areconducted...lime advertisement.

How do i assess them under Income Tax act and Service Tax.
the persons who pay for Advertisement deduct TDS at 2%.

Please help me out in this urgently

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1 Replies

Rajagopalakrishnan R (PARTNER) (1422 Points)
Replied 02 August 2015

Unless otherwise you are registered under Secton 12A of the act, you cannot claim any tax concessions. Then the option would be to treat the entire activity of the society in a general manner. Now there are a lot of issues here.

1. The issue of commerical purpose. The Ad revenue you get during programs may not have any matching expenses. The expenses you incur from this revenue ( Pooja, Welfare etc ) any not expenses for the purpose of business and therefore do not qualify for deduction. In short you will find it difficult to return your income under Profits and gains from Business.

2. the issue of Voluntary Contributions : These can only be taxed under other sources. Since none of the above expenditure are incurred to earn this income, the same cannot be deducted there also.

If you examine closely, the activity you are doing is actually spending ( applying) the income earned by youfor some specific objects.

My advise would be that if you are confident that your activities are charitable, get yourselves registered as an institution u/s 12A of the IT act. Which will entitle you to exemption fof your income u/s 11