TMI Blog2019 (9) TMI 683X X X X Extracts X X X X X X X X Extracts X X X X ..... ent Year 2009-10 in assessee s own case in appeal [ 2017 (10) TMI 1410 - ITAT DELHI] in which it was held by ITAT that the assessee was not engaged in any sort of commercial activity and all the activities were in furtherance of main objects of the assessee s society, which remained charitable and further held that authorities below were not justified in deny the exemption of the assessee society. CIT(A) further noticed that the order of the AO was identical to the order of the AO for Assessment Year 2009-10. - Decided in favour of assessee. - ITA No:- 5191/Del/2016 - - - Dated:- 13-9-2019 - Shri Amit Shukla, Judicial Member And Shri Anadee Nath Misshra, Accountant Member For the Assessee : Shri Angad Gulati, Adv. For the Revenue : Shri Janardan Das, Sr. DR ORDER PER ANADEE NATH MISSHRA, AM (A) This appeal by Revenue is filed against the impugned order of Learned Commissioner of Income Tax (Appeals)- 40 (Exemption), New Delhi, [ Ld. CIT(A) , for short], dated 08.07.2016 for Assessment Year 2012-13. The grounds of appeal are as under: 1. Ld. CIT(A) has erred in allowing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e view that depreciation was to be allowed only on the value of assets acquired during the year under consideration. The assessee filed appeal before Ld. CIT(A) against the aforesaid Assessment Order. The Ld. CIT(A) followed the order of his predecessor for Assessment Year 2011-12 and held in his appellate order dated 08.07.2016 that mischief of proviso of Section 2(15) of I.T. Act was not attracted on the facts on the assessee s case. The Ld. CIT(A) also based his decision on the order of Income Tax Appellate Tribunal ( ITAT , for short) for Assessment Year 2009-10 in assessee s own case in appeal vide ITA no. 3124/Del/2014 in which it was held by ITAT that the assessee was not engaged in any sort of commercial activity and all the activities were in furtherance of main objects of the assessee s society, which remained charitable and further held that authorities below were not justified in deny the exemption of the assessee society. The Ld. CIT(A) further noticed that the order of the AO was identical to the order of the AO for Assessment Year 2009-10. The finding of the Ld. CIT(A) is contained in paragraphs 5 and 6 of aforesaid appellate order dated 08.07.2016. The relevant port ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orld; (iv) to establish and maintain libraries and information services to facilitate the study of world cultures and spreading information in regard thereto; (v) to constitute or cause to be constituted regional centers at convenient places in India to promote the objectives of the Society. (vi) to cooperate with approval institutions and interested bodies for the purposes of helping the cause of understanding amongst people of different cultures; (vii) to organize and maintain as far as possible on no-profit no-loss basis, limited residential accommodation, with cultural and educational amenities, for the members of the society coming to participate in the activities of the Society and other bodies with cognate objectives, as well as non-members specially invited to participate in the activities of the Society. (viii) to invite as and when feasible, cultural leaders, scholars, scientists and creative artists, who may or may not be members of the Society, to take advantage of the facilities offered by the Society There is no dispute on this issue as well. 3) Rules ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties, as having been covered under the various provisions of the Income-tax Act and also principles of mutuality and assessments have been framed at the declared Nil assessable income. It is a different matter that the DIT (E) for the first time in assessment year 2009-10 and subsequently in assessment year 2010-11 has set-aside these orders u/s.263 of the I.T. Act and the orders of the DIT(E) have been challenged in the ITAT. We are pleased to inform you that the Hon ble ITAT has set aside the findings given by the Deputy Commissioner of Income Tax u/s 263 and have categorically held that the predominant activities of the Centre was not to earn income but to provide facilities for disseminating or exchanging knowledge as per the object of the Society. The relevant observations and findings given by the Hon ble ITAT in Paras 6.12 and 6.13 are as under: 6.12 The predominant activities of the Centre was not to earn income but to provide facilities for disseminating or exchanging knowledge as per the object of the society. There is no gainsaying that without creating a proper platform the primary object of dissemination and exchanging of knowledge co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of trade or commerce. 6.13 As regards hostel accommodation, there were number of rooms and guidelines for hiring of the accommodation and also there were restrictions. It was also pointed out that, as could be seen from the list of programmes, the assessee conducted very large number of programmes during the year which covered discussions, music, dances, exhibitions and also certain special programmes such as festivals during the course of the year. These programmes were published through the newspapers and website. Further e-mails were sent to members as well as nonmembers. Periodical articles also appeared in the various newspapers highlighting some of the special programmes conducted by the centre. We are enclosing herewith a copy of Order of Hon ble ITAT for your honour s perusal and record from where it would be noted of the allegations as were made b y the CIT at the first place while ordering an action u/s 263 of the Income Tax Act and the similar objections made by the AO in the Assessment Order before your honour have been duly met and set aside by the Hon ble ITAT. The issues involved are thus fully covered in favour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decades. 10) The Finance Minister during the course of discussion on the introduction of first proviso to section 2(15) inserted retrospectively w.e.f. 1st April 2009 by the Finance Bill 2010 had given assurance on the floor of the House that organizations engaged genuinely in advancement of objects of general public utility will not, in any way, be effected by the proposed amendment. The Finance Minister further went on to explain that ordinarily Chamber of Commerce and similar organizations rendering services to the members will not be effected by the amendment and their activities would continue to be regarded as advancement of any other object of general public utility. In consonance with such assurance by the Finance Minister on the floor of the House, the CBDT issued a Circular No. 2008 dated December 19, 2008 to the effect that only where the assessee is engaged in any activity in the nature of trade, commerce or business or render any services in relation to trade, commerce or business would not be entitled to claim its object as charitable. It is only organizations who are admittedly engaged in regular trading in the guise of charitable activity will hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is deriving any profit from the non-members or is engaged in activities of providing accommodation or catering facilities to the non-members or the Centre is carrying any commercial activity. In any case, all these allegations have been rejected by the Hon ble ITAT in the Order for the Assessment Year 2009-10, a copy of which is being filed before your honour s ready reference and record and therefore Assessing Officer s contentions on this issue have already been rendered groundless, it is respectfully submitted. 13) The Centre has been approved as a Fund or Institution established for charitable purposes by the Govt, of India, Ministry of Finance, Central Board of Direct Taxes, vide notification dated 19th January 2007. The validity of the Government notification/approval granting exemption to the Centre cannot be challenged by the Revenue Officers, only the Govt, of India can restrict this notification that too upon certain condition, it is respectfully submitted. The Centre as having been established for charitable purposes, as regards the objectives of the Fund or the Institution and its importance throughout India or throughout any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... institute is carried on with object of making profit or not it is duty of the prescribed authority to ascertain whether the balance of income is applied wholly and exclusively to the objects for which the applicant is established. In St. Lawrence Educational Society (Regd.) v. CIT (2011) 197 Taxman 504/9 taxmann.com 233 (Delhi) Merely because educational institutions run by assessee-society were generating surplus year after year, it could not be a ground to say that said educational institutions existed for purpose of profit and not for purpose of education [Assessment year 2009-10] 16) Recently, the Hon ble Supreme Court has reiterated these principles in the case of Queen Education Society vs. CIT, TS-119-SC-2015. Therefore, the understanding of the AO on this aspect is totally erroneous and not as per provisions of law. (a) The Hon ble Supreme Court in the aforesaid judgment in para 8 while relying upon its earlier judgment in the case of CIT vs. Surat Art Silk Cloth Manufacturers Association, 121 ITR page 1, on the interpretation of the definition of charitable purpose u/s.2(15), has held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the speech made by the Finance Minister while introducing that provision. The Finance Minister explained the reason for introducing this exclusionary clause in the following words: The definition of 'charitable purpose' in that clause is at present so widely worded that it can be taken advantage of even by commercial concerns which, while ostensibly serving a public purpose, get fully paid for the benefit provided by them namely, the newspaper industry which while running its concern on commercial lines can claim that by circulating newspapers it was improving the general knowledge of the public. In order to prevent the misuse of this definition in such cases, the Select Committee felt that the words 'not involving the carrying on of any activity for profit' should be added to the definition. It is obvious that the exclusionary clause was added with a view to overcoming the decision of the Privy Council in the Tribune case [AIR 1939 PC 208 : In Re the Trustees of the Tribune, (1939) 7 ITR 415] where it was held that the object of supplying the community with an organ of educated public opinion by publication of a newspaper was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose should not involve the carrying on of any activity for profit would be satisfied if profit making is not the real object (emphasis supplied). We wholly endorse these observations. (b) The Hon ble Supreme Court while explaining the provisions of section 2(15), has in this judgment the occasion to the extent of giving an example in its judgment in order to clarify as to what would constitute charitable purpose u/s.2(15) of the I.T. Act, as under:- The application of this test may be illustrated by taking a simple example. Suppose the Gandhi Peace Foundation which has been established for propagation of Gandhian thought and philosophy, which would admittedly be an object of general public utility, undertakes publication of a monthly journal for the purpose of carrying out this charitable object and charges a small price which is more than the cost of the publication and leaves a little profit, would it deprive the Gandhi Peace Foundation of its charitable character? The pricing of the monthly journal would undoubtedly be made in such a manner that it leaves some profit for the Gandhi Peace Foundation, as, indeed, would be done by any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of activity of profit. However, if there are express restrictions on the making of profit, then the court would not be justified in drawing any such inference merely because the activity results in profits. (d) Further, the Hon ble Supreme court in its latest judgement relying upon the judgement in the case of Aidtanar Educational Institution vs. Additional Commissioner of Income-tax, 224 ITR 310, has reiterated its earlier principles as to how in a practical way the activities of a charitable association can also result into some surplus and that by itself does not mean that the organization is existing for the purpose of making profit, as observed in para 9 as under: - The High Court has made an observation that any income which has a direct relation or incidental to the running of the institution as such would qualify for exemption. We may state that the language of Section 10(22) of the Act is plain and clear and the availability of the exemption should be evaluated each year to find out whether the institution existed during the relevant year solely for educational purposes and not for the purposes of profit. After meeting the expenditure, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correct and based on conjectures and surmises. 19) It is further submitted that it is predominant purposes which really matter in the case of the Society. So long as the predominant purpose or objective of the Society is not to earn profit, the same is liable to be treated as charitable as has been held in the case of PHD Chamber of Commerce Industry v. DIT (Delhi)357 ITR 296 (Del.). 20) Recent judgment of Hon ble Delhi High Court in the case of India Trade Promotion Organization v . D.G. of Income Tax (Exemptions) and others is directly on this issue and in fact makes the order of Ld. DIT (Exemption) as of no consequence. The Hon ble Delhi High Court while upholding the constitutional validity of the first proviso to Section 2(15) introduced w.e.f. 01.04.2009 has held that even after insertion of first proviso to Section 2(15), what is required to be seen is that it is the dominant and main object that is predominant. So long as profit making is not the driving force and objective of the assessee, then merely charging some fee for some of the activities does 21) not put it in-the category of non-charitable entity in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... marily by a desire or motive to earn profits, but to do charity through the advancement of an object of general public utility, it cannot but be regarded as an institution established for charitable purposes. (b) Therefore, when the latest thinking of the courts on the first proviso u/s.2(15) of the I.T. Act is seen, it would be noted that the courts are holding that the first proviso cannot take away the charitable character of an Institution so long as the dominant object and the prime motive is to carry on charitable activity and there is no profit motive involved in charging some fee for the services rendered by it. (c) When these judgments are seen with reference to assessee trust, then it is respectfully submitted that whole of the receipts of the assessee trust are liable to be treated as exempt and not includable in the total income irrespective of the fact whether they have been claimed as exempt u/s,10(23C)(iv) or on the principles of mutuality. So long as the trust remains notified u/s.10(23C)(iv) as a charitable society, whole of its income from whatever activities has to be treated as exempt, as having been arisen out of charitable ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee from all corners of the case. There is no scope of making different interpretation of the provisions of section 11, 12 and 20(23C)(iv), 2(15) of the Income Tax Act, it is respectfully submitted. The assessee institution has been in existence for more than 5 decades now and it is continuously been assessed for many years and in all the years the facts have been examined in detail and assessee has been allowed exemption u/s 11 and 12 of the Income Tax Act. There is neither any change in law or in the facts or in the objectives of the assessee or in the activities of the trust to take a different view of the matter as has been done by the Director of Income Tax (Exemption). The rule of consistency strictly is in favour of the assessee as per the following judgments: (i) Dy. Director of Income Tax Vs. Shanti Devi Progressive Educations Society [2012] 340 ITR 320 (Delhi). (ii) Excel Industries SC-2013-TIOL-52-SC-IT The principle of mutuality is very much applicable on the facts of the assessee s case and the same has also-been accepted in the previous years in asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing given by the Assessing Officer in the Assessment Order is identical as was in the Order made by the Assessing Officer for the Assessment Year 2009H0. The Assessment Order for the Assessment Year 2009-10 was passed based on the directions issued by the DIT (Exemption) u/s 263 of the Income Tax Act. That Order of Ld. DIT (Exemption) has been quashed by the Hon ble ITAT in ITA No. 3124/Del/2014. The facts and the circumstances and the reasons of the AO to deny the exemption to the appellant during the year are identical and there is no difference in the facts or in the law on the issue involved in this appeal. Therefore, there is no reason for me to take a different view of the matter, as the issue has already been decided in favour of the assessee by the Hon ble ITAT in assessee s own case for the Assessment Year 2009-10. Respectfully following said judgment, I hold that AO was not justified in denying the exemption to the appellant. I further notice that my predecessor has also passed on Order in Appeal No. 169/2014-15 for the Assessment Year 2011-12, where also identical facts and legal issues were involved by following the jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the Ld. Counsel for the assessee that all the issues in the present appeal are squarely covered in favour of the assessee by the aforesaid order of ITAT/ Hon ble High Court in assessee s own case, in identical facts and circumstances. He also did not bring out any distinguishing facts and circumstances to our attention for this year in comparison to the years for which the aforesaid orders have been passed in favour of the assessee. (C.1) We have heard both sides. We have perused the materials on record. We have considered the judicial precedents referred to in the records, or brought to our attention at the time of hearing. Both sides are in agreement that all the disputed issues in this appeal are covered in favour of the assessee by orders of ITAT / Hon ble High Court, in assessee s own case, in identical facts and circumstances. On perusal of grounds 1 and 2 in this appeal, we further find that there is already an admission from Revenue s side that ITAT has decided these issues in favour of the assessee in earlier year (though Revenue has preferred appeal in Hon ble High Court). We are further aware that the issue raised in third ground of present appeal is ..... 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