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Income Tax Officer (E) , Trust Ward-III, Aayakar Bhavan, Laxmi Nagar, Delhi Versus Delhi Bureau of Text Books

2015 (5) TMI 862 - ITAT DELHI

Benefit of Section 11 - whether Registration U/S 12A does not automatically guarantee exemption from income tax U/S 11 of the Act? - whether registration has been granted u/s. 12A of the I.T. Act, AO cannot override exemption while passing the assessment order? - Held that:- The impugned order passed by the Ld. CIT(A) is contrary to the law and facts and on the file by holding that once registration has been granted u/s. 12A of the I.T. Act, AO cannot override exemption while passing the assessm .....

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obstacle in the way of AO, at the time when the assessment proceedings are to be taken and to decide as to whether the assessee is entitled for the benefit of section 11 and 12 of the I.T. Act as the case may be. After examining the Income and Expenditure Statement of the assessee for the asstt. year in dispute, we are of the view that the assessee has not incurred any expenditure for charitable purpose, as per their aims and objects. Therefore, the activities of the assessee is not charitable .....

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he documentary evidence filed by the assessee in the shape of Paper Book, we are of the considered view that assessee has not proved that activities done by the assessee for the asstt. years in dispute is charitable in nature, as per the provisions of section 2(15) of the I.T. Act. We find that the Ld. First Appellate Authority has passed the impugned order and granted the exemption u/s. 11 and 12 of the I.T., Act to the assessee, which is contrary to the law and facts on the file, therefore, th .....

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ainst the separate impugned orders passed by the Ld. CIT(A) for the assessment years 2006-07, 2007-08, 2008-09 & 2009-10. Since the issues involved in these 4 appeals are identical and we have heard 4 appeals together, therefore, we are disposing off these appeals by passing one common order for the sake of convenience, by dealing with ITA No. 2362/Del/2010 (A.Y. 2006-07). The grounds raised in ITA No. 2362/Del/2010 are reproduced as under:- 1. On the facts & in the circumstances of the .....

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of Registration U/S 12A is that the entity should prove before the Assessing Officer that it is involved in activities which are charitable in nature. The Registration granted U/S 12A casts an onus upon the Assessee to prove, during assessment proceedings, that provisions of Section 2(15) and Section 11 are satisfied by it and also that there is no contravention of provisions of Section 13 of the Act. Once it is discovered that activities being undertaken are not charitable in nature, then, the .....

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; in the circumstances of the case, the Ld.CIT (A) has erred in granting relief to the Assessee by ignoring the fact that the activities of the Assessee do not fall under the definition of 'Education' as per provisions of Section 2(15) of the Act in view of decision of Hon'ble Supreme court in the case of Sole Trustee Loka Shikshana Trust vs. CIT (1975) 101 ITR 234. 3. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at .....

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In response to the said notices, Authorised Representative of the assessee appeared from time to time and filed the details. 2.1 The assessee Society is registered under the Society's Registration Act, 1860. lt is also registered u/s 12A(a) of IT Act The Society was notified u/s 10(23C)(vi) upto assessment year 2002-03. The assessee society is engaged in publication of text of books form class 1 to VII Govt. Schools, MCD Schools, NDMC Schools and Delhi cantonment Schools. The book are claim .....

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e prima facie view that activities of the assessee are in the nature of business by way of sale and purchase of books. During the year under consideration the assessee has shown sale of books of ₹ 79537473/- against cost of ₹ 55793090/- , thus there is profit of ₹ 23744383/-. From these figures it is also apparent that the books are being sold at a huge profit margin of about 40%. The AO was of the view that the assessee is engaged in activities for earning profit. He asked the .....

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ary and secondary education and for this purpose the assessee has undertaken to produce, print, publish and distribute high quality text books and other instructional material such as teacher hand books, work books etc. Assessee further submitted that the objective of the assessee to make available at subsidized cost or even at the free of cost text books to children of economically weaker families and similarly to make teaching material available to teachers at subsidized cost or even free of c .....

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ness activities. By no stretch of imagination can this activity of publishing, printing and sale of books oat a huge profit margin be called charitable activity. As per the provisions of section 11(4A) of the Income Tax Act, 1961 the assessee is required to maintain separate books of account for the activity of selling of books, but no separate books are maintained by the assessee for its activities. The assessee has thus violated the provisions of section 11(4A) of the I.T. Act for the activiti .....

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e Fund ₹ 1,94,27,360/-, but the assessee has not explained in Form No. 10 as to what purpose the funds would be used and has accumulated the aforesaid funds without specifying any purpose in Form No. 10 filed alongwith return of income for the assessment year in dispute. The AO has also held that the assessee was engaged mainly in printing and sale of schools text books could not be treated as an educational institution within the meaning of Section 10(22) of the I.T. Act. He supported his .....

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the free distribution of books amounting to ₹ 1443605/- is also not an act of charity but in the nature of business promotion expenses by way of free sample given to various people. But there is nothing to prove as to whom these free books have been distributed. AO is also of the view that as per the provisions of section 11(2) of the I.T. Act, the accumulation in excess of 15% can be made only for the objects of the trust for which assessee had not specified any purpose, therefore, accumu .....

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by the assessment order dated 31.2.2008, the assessee filed the Appeal before the Ld. CIT(A) who vide impugned order 22.2.2010 partly allowed the appeal filed by the assessee for statistical purposes and mainly held that once exemption has been granted by way of exemption given by the DIT(E) u/s. 12A of the I.T. Act, the AO cannot override this exemption while passing the order of the assessment order ignoring the fact that the Registration u/s. 12A of the Act is accumulated by certain terms and .....

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2010 and filed the present Appeals before the Tribunal. 5. Mrs. Poonam Khaira Sidhu, CIT(DR) and Mrs. Parwinder Kaur, Sr. DR appeared for the Department and stated that the impugned order passed by the Ld. CIT(A) is contrary to the law and facts of the case, therefore, deserved to be cancelled. 5.1 Ld. CIT(DR) stated that the assessee is engaged in the sale and purchase of books as a business activity, but the Ld. CIT(DR) has wrongly reversed the finding of the AO on the basis of presumption and .....

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e provisions of section 2(15) of the Act. To support her arguments she draw our attention towards para 4 and 5 of the impugned order. She further stated that Ld. CIT(A) has also wrongly held that it is not mandatory and non maintenance of separate books of accounts and it shall not be fatal to the claim of the assessee for exemption u/s. 11 of the I.T. Act. Further, to support this contention, she also draw our attention towards para 4, 5 and 5.1 of the impugned order. Ld. CIT(DR) argued that ac .....

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assessee is engaged in the activities for earning profit. She has also draw our attention towards the profit and loss account for the asstt. years in dispute and stated that assessee is earning 40% of profit from its business. Therefore, the assessee is not entitled for exemption u/s. 11 and 12 of the I.T. Act and the AO has rightly assessed the income of the assessee as its business income. 5.2 As regards the violation of provisions of section 11(4A) of the I.T. Act, Ld. CIT(DR) has stated tha .....

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he year under consideration assessee showed an accumulation of ₹ 15670997 as per Form 10 filed along with return, which shows that accumulation is without specifying any purpose and is excess of 15% according to section 11(2) of the I.T. Act. She also stated that printing and publication of books falls under general public utility limb of definition u/s. 2(15) of the I.T. Act, not education. Because the assessee is engaged in the publication of text books from Class I to VIII of the Govt. .....

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oration; OUP vs. CIT (2001) 245 ITR 658 (SC). She stated that keeping in view of the aforesaid decisions there should be imparting education or some other educational activity . Activity not pertaining to systematic instruction, schooling or training has been held to fall under the purview of the general public utility limb of section 2(15) of the I.T. Act, 1961. If such assessee is engaged in any activity in the nature of trade commerce or business it would not be entitled to claim that its obj .....

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mu Development Authority vs. CIT in ITA No. 30(ASR) of 2011 dated June, 14, 2012. 5.4 Lastly, Ld. CIT(DR) also distinguished the case law cited by the Ld. CIT(A) in the impugned order by drawing our attention towards written statement filed by her during the course of hearing and requested that keeping in view of her arguments, the Appeal of the Revenue may be allowed by cancelling the impugned order and restoring the order of the AO. 6. On the other hand, Shri Gaurav Jain, alongwith Miss Babita .....

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rt the order of Ld. First Appellate Authority. Ld. Counsel of the assessee also draw our attention towards the written submission filed before the Ld. First Appellate Authority as well as the documents attached with the Paper Books and stated that the ITAT, Delhi E Bench has already decided the issue in dispute in favor of the assessee for the asstt. year 1975-76 and 1976-77 on 30.9.1980 in assessee s own case, therefore, the appeal filed by the Revenue may be dismissed and the order of the Ld. .....

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rnment schools, MCD schools, NDMC schools and Delhi Cantonments Schools. The books are published and sold on subsidized rates and nominal profits to the schools students and whole dealers. Therefore, the objects of the assessee-society falls under the purview of the education limb of section 2(15) of the I.T. Act. He also draw our attention towards the balance sheet of all the four assessment years and stated that the major part of the income has been spent by the assessee for the purpose of cha .....

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requested that keeping in view of his arguments alongwith documentary evidence filed by him and the Paper Books, the appeals filed by the Revneue may be dismissed. 7. We have heard both the parties and perused the records, especially the orders passed by the revenue authorities and the Paper Book filed by the assessee, especially the balance sheet of the assessee society for the asstt. year 2006-07, 2007-08, 2008-09 & 2009-10. We are of the view it is very much relevant for the adjudication .....

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or asstt. year 2006-07 has rightly held that the activities of the assessee are prima facie in nature of business activities by way of sale and purchase of books, because during the year under consideration, the assessee has shown sale of books of ₹ 7,95,37,473/- against the cost of ₹ 5,57,93,090/-, thus there is profit of ₹ 2,37,44,383/-. From these figures it is apparent that books also have sold on huge profit margin of about 40%, which shows the assessee is engaged in the a .....

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6,166 4,25,81,374 43.95 2009-10 13,03,72,304 10,51,51,795 2,28,87,322 21.76 7.2 Keeping in view of the aforesaid Income and Expenditure Statement as well as showing Profit Margin Table, we are of the considered view that the activities of the assessee society are in the nature of business, not in the nature of charitable purposes. Ld. CIT(A) wrongly reversed the finding of the AO by saying that assessee society has been given Registration u/s. 12 of the I.T. Act by Ld. DIT(E). Ld. CIT(A) has fur .....

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gned order is totally against the law and facts of these cases, which deserve to be cancelled. We hold that even if the registration is granted to the assessee trust u/s. 12AA of the I.T. Act as has been granted in the present appeals, then it will not be precluded the AO to examine in details of every objects of the society and to give his findings in the assessment orders as to whether the assessee has complied with the requirement of section 11 of the I.T. Act or not as and when the assessee .....

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Medical Sciences, Garha Road, Jalandhar City vs. DCIT in ITA No. 504(Asr)/2009 for the assessment year 2006-07 and ITA No. 515(Asr)/2009, Assessment year 2006-07; Jalandhar Development Authority vs. CIT, Amritsar 124 TTJ 598 and Jammu Development Authority vs. CIT in ITA No. 30(ASR) of 2011 dated June, 14, 2012 which has been upheld by Hon ble J&K High Court in ITA No. 164 of 2012 vide orders dated 7.11.2013 and the said Judgment of the Hon ble J&K High Court has also been upheld by the .....

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and Delhi Cantonment Schools. The books are claimed to be published and sold on subsidized rates and nominal profit to schools students and whole sale dealers. According to the assessee the object of the society fall under the purview of the education limb of section 2(15) of the I.T. Act, 1961. After going through the aims and objects of the society, alongwith the relevant provisions of section 2(15) of the I.T. Act, we are of the considered view that meaning of word education and the context i .....

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tic instruction which a person has received. The word "education" has not been used in that wide and extended sense, according to which acquisition of further knowledge constitutes education. According to this wide and extended sense travelling is education, because as a result of travelling you acquire fresh knowledge. Likewise, if you read newspapers and magazine, see pictures, visit art galleries, museums and zoos, you thereby add to your knowledge. Again, when you grow up and have .....

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et acquainted with and add to your knowledge about some of the not much revealed realities and mysteries of life. All this in a way is education in the great school of life. But that is not the sense in which the word "education" is used in clause (15) of Section 2. What education cannotes in that clause is he process of training and developing the knowledge, skill mind and character of students by normal schooling. 7.5 Similar view has also been taken by the Hon ble Supreme Court of I .....

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the assessee is engaged in the activities in the nature of trade, or commerce or business. It should not be entitled to claim that its objects is charitable purposes, in view of the aforesaid decision of the Hon ble Supreme Court of India. 7.6 We have also perused the order of the ITAT, Delhi Bench E passed in the case of assessee in ITA No. 1239/Del/1979 and 4440/Del/1979 for the asstt. years 1975-76 and 1976-77 title vs. ITO, Trust Circle, Delhi vs. Delhi Bureau of Text Books vide order dated .....

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lic utility limb and where this is systematically run for profit, section 11 exemption cannot be allowed to it. 7.8 Thirdly, it is admitted fact that the assessee has not maintained separate books of accounts for its activities of sale and purchase of books for the assessment year in dispute and thus has violated the provisions of section 11(4A) of the I.T. Act. Ld. CIT(A) has not appreciated these facts and has wrongly allowed the exemption u/s. 11 & 12 of the Act which is contrary to the p .....

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15% and contrary to the provisions of Section 11(2) of the I.T. Act. Our view is supported by the decision of Hon ble Supreme Court of India in the case Nachimuthu Industrial Association vs. CIT 235 ITR 190 (SC). 7.10 We have gone through the Paper Book filed by the assessee in which he has cited various decisions rendered by the Hon ble High Courts. At the time of hearing, Ld. Counsel of the assessee draw our attention towards few judgments. i) Council for the Indian School Certificate Examinat .....

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After going through the decisions cited by the Ld. Counsel of the assessee, we are of the view that not on the denial of the exemption u/s. 11 and 12 of the I.T. Act by the AO, the judgments cited by the Ld. Counsel for the assessee are for granting the registration u/s. 12AA or section 10(23) or section 80G of the I.T. Act, therefore, decision cited by him are not helpful to the assessee. Ld. Counsel has not cited any judgment of any Hon ble Court regarding precluding the AO for examining the .....

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any evidence that the assesee has filed Income & Expenditure Statements for the asstt. years 1975-76 and 1976-77 before the Tribunal in ITA No. 1239/Del/1979 and ITA no. 4448/Del/1979 for asstt. years 1975-76 and 1976-77 vide order dated 3.9.1980.The Tribunal in its order at Page 18 has held that ……though the assessee is not running any educational institution as such….. 7.12 Keeping in view of the facts and circumstances, as explained above, we are of the considered vi .....

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ssment order as to whether the assessee has complied with the requirement of section 11 of the Act or not as to when the assessee is seeking exemption u/s. 11 of the I.T. Act. The registration granted u/s. 12AA of the Act to the assessee should not be obstacle in the way of AO, at the time when the assessment proceedings are to be taken and to decide as to whether the assessee is entitled for the benefit of section 11 and 12 of the I.T. Act as the case may be. After examining the Income and Expe .....

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