INSTITUTE OF CHEMICAL TECHNOLOGY,MUMBAI vs. NFAC-DELHI-DS COMMISSIONER OF INCOME TAX (A) INCOME TAX DEPT 1, DELHI

These appeals in 1086/Mum/2022 for A.Yrs.2013-14 to 2017-18 arise out of the order by the ld. Commissioner of Income Tax (Appeals) National Faceless Appeal Centre (NFAC) in appeal Nos.CIT(A)-1, Mumbai/10496/2016-17, CIT(A)-1, Mumbai/10731/2016-17, CIT(A)-1, Mumbai/10350/2017-18, CIT(A)-1, Mumbai/10522/2018-19 & CIT(A)-1, Mumbai/10651/2019-20 dated 16/03/2022 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 23/02/2016, 28/11/2016,15/12/2017 & 9/12/2018 respectively by 1086/Mum/2022 M/s. Institute of Chemical Technology, Mumbai the ld. Asst. Commissioner of Income Tax (Exem)-1 (1), Mumbai (hereinafter referred to as ld. AO).

The assessee has raised the following grounds of appeal for 2013- 14:-

The DS Commissioner of Income Tax (Appeals), Income Tax Department 1 (NFAC), Delhi has erred in concluding that the consultancy fees earned for research purpose is not charitable in nature.

We have heard rival submissions and perused the materials available on record. Though the assessee has raised several grounds, we find that the effective issue to be decided is with regard to disallowance of claim of exemption u/s.11 of the Act in respect of consultancy fee received by the assessee. The assessee has also raised the alternative ground claiming exemption u/s.10(23C) of the Act. The assessee was established as a Department of Chemical Technology on 01/10/1933 by University of Mumbai. The assessee Institute is basically undertaking research in the field of chemical engineering and providing training. With paucity of time, assessee was granted autonomy under University Grants Commission (UGC) Regulations and converted into an independent Institution on 26/01/2002. Subsequently, on the recommendation of 1086/Mum/2022 M/s. Institute of Chemical Technology, Mumbai Government of Maharashtra and University of Mumbai, the assessee was granted deemed university status by the University of Human Resource Development, Government of India on 12/09/2008, with all the provisions of UGC for funding and support as the state owned deemed university. When the assessee was part of Mumbai University, the income earned by it formed part of income of the Mumbai University and was exempt u/s.10(23C) of the Act. For the A.Y.2013-14, the assessee filed its return of income u/s.139 of the Act on 10/01/2014 declaring ‘nil’ income after claiming exemption u/s.11 of the Act. The assessee is registered u/s.12A of the Act vide order of Director of the Income Tax (Exemptions) Mumbai granting Registration vide Registration No.39711 dated 28/06/2005 and also has approved for exemption u/s.80G of the Act. The ld. AO, in the course of assessment proceedings, noticed that during the year under consideration, the assessee received consultancy fee. The ld. AO called upon the assessee to explain why the consultancy fee received should not be treated as business income and brought to tax u/s.11(4A) of the Act. The assessee in response submitted that certain projects were undertaken with a view to carry out research and helped the students/fellows of the Institution to gain actual working experience in live projects in the subject during the course of their studies. The training session helps in imparting the results of the research to the industry, hence, serves as a practical experience and at the same time it helps the Institute in giving research in new projects. It was submitted, out of the total fee received from such projects, only 1/3rd is taken by the assessee and the balance amount is paid to the faculty who undertakes the research project. It was also submitted, the Institution’s share is mainly to cover the cost of infrastructure, laboratory facilities provided by the institution for undertaking the research and administrative expenditure. Thus, it was submitted, the activities undertaken by the assessee is not in 1086/Mum/2022 M/s. Institute of Chemical Technology, Mumbai the nature of business but only for research and training purpose and therefore is part of its main activity of imparting education on the latest technical development in the field of chemical technology being a leading training Institution. The ld. AO however, did not heed to the aforesaid submissions of the assessee. He observed, nowhere in the objects of the Institution the assessee is required to provide consultancy service. Further, he observed, while making payment of consultancy fee, major companies have deducted tax under section 194C and 194J of the Act. Out of the receipt of consultancy fee, the assessee has shown payment to two professors which indicates that professionals were engaged in the activity of consultancy under the roof of the Institution and there is no major role of students for education purpose. The ld. AO concluded that the intention of the assessee is to make profit which is further strengthened from the fact that the assessee is not maintaining any separate accounts as envisaged under section 11(4) and (4A) of the Act and accordingly, the revenue earned from consultancy activity cannot be regarded as charitable in view of the provisions of section 2(15) r.w.s 11 and 12 of the Act. Accordingly, the ld. AO disallowed assessee's claim of exemption only with regard to its share in consultancy fee received, though, he allowed assessee's claim of exemption under section 11 of the Act in respect of balance income. The ld. AO while making this observation also placed reliance on the decision of this Tribunal in assessee’s own case for A.Y.2010-11 in dated 28/10/2015 wherein the said receipt was held to be taxable u/s.11(4A) of the Act. This action of the ld. AO was upheld by the ld. CIT(A).

In the result, assessee's appeals are allowed for statistical purposes.

In the result, appeals of the assessee are allowed for statistical purposes. Order pronounced on 28/11/2022 by way of proper mentioning in the notice board.