A trade association is a non-profit voluntary organisation of business competitors operating in the same line of business for the promotion of their common economic interest.
Income derived by a trade, professional or similar association from specific service performed for its members only is considered to be business income and taxed accordingly. Section 28(iii) further says that income arising from specific services rendered by the association to its members is taxed only and income not arising from specific purpose is outside the purview of this clause, e.g., entrance fees or member’s periodical subscription etc. are not taxable.
This provision does not apply to social clubs. Under section 44A, in case of trade association if the total amount of expenditure exceeds the receipts from the members, the d it will be allowed as deduction in computing the income of the association assessable under the heat. ‘Profits and Gains of Business or Profession’ or in computing the income assessable under any other head. The deduction of this type is subject to the following two conditions
(a) The association does not distribute its income to its members except as grants to any association or institution affiliated to it.
(b) The amount of deduction to be allowed should not exceed 50% of the total income of the association before this deduction.
If there is no income under that head or the deficiency exceeds such income, then the whole or bi1ance of the deficiency can be set off against the income under any other head. However, the deficiency deductible should not exceed half of the total income of the association.