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Income Tax Appellate Tribunal, RANCHI BENCH, RANCHI
Before: S/SHRI N.S SAINI & PAVAN KUMAR GADALE
IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI BENCH, RANCHI
BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER
ITA No.230/Ran/2017: Assessment Year : 2011-12
Income Tax Officer Vs. All India Women’s (Exemption), Ward, Conference (Golmuri Jamshedpur Constituent Branch), Mahila Sharan, Telco Colony, Jamshedpur PAN/GIR No.AAATA 3977 G (Appellant) .. ( Respondent)
ITA Nos.314/Ran/2016: Assessment Year : 2012-13 ITA Nos.238/Ran/2017: Assessment Year : 2013-14
All India Women’s Vs. Income Tax Officer Conference (Golmuri (Exemption), Ward, Constituent Branch), Mahila Jamshedpur Sharan, Telco Colony, Jamshedpur PAN/GIR No.AAATA 3977 G (Appellant) .. ( Respondent)
Assessee by : Shri Devesh Poddar, Adv Revenue by : Shri A.K.Mohanty, JCIT
Date of Hearing : 27/11/ 2018 Date of Pronouncement : 29/11/ 2018
O R D E R Per N.S.Saini, AM
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ITA No.230/Ran/17 is filed by the revenue against the order
of the CIT(A), Jamshedpur, dated 23.6.2017 for the assessment
year 2011-12.
ITA No.314/Ran/16 for the assessment year 2012-13 and
ITA No.238/Ran/17 for assessment year 13-14 are filed by the
assesse against order dated 26.9.16 and order dated 23.6.2017 of
the CIT(A), Jamshedpur.
3 The sole issue involved in the appeal filed by the revenue is
that the CIT(A) was not was not justified in deleting the penalty of
Rs.38,23,164/- levied under section 271(1)(c) of the Act.
At the outset, ld Authorised Representative of the assesse
filed an order dated 12.10.2017 in the quantum appeal in ITA
No.304 & 305/Ran/2014 for the assessment year 2010-11 and
2011-12 and submitted that as the very basis of addition regarding
levy of penalty has been deleted by the Tribunal, the penalty
deleted by the CIT(A) has to be confirmed.
Learned Departmental Representative could not controvert
the aforesaid submission of Learned counsel for the assessee.
After considering the rival submissions and perusing the
materials on record as well as the order of the Tribunal dated
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12.10.2017 in quantum appeal in ITA No.304 & 305/Ran/2014 for
the assessment year 2010-11 and 2011-12, we find that the
addition in quantum appeal, which was the very basis of levying the
penalty, has been deleted by the Tribunal and, therefore, the
penalty order of Assessing Officer has no legs to stand. In view of
this, we confirm the order of Learned CIT(A) in deleting the penalty.
In the result, appeal filed by the revenue is dismissed.
In assessment year 2012-13 and 2013-14, the common
grievance raised by the assesse is as under:
‘1. For that Ld. CIT(A) was not justified in confirming the order passed by Ld. A.O. to suggest that appellant was not entitled to exemption u/s 11 even though appellant was registered u/s 12AA and income of the appellant or surplus was exempt u/s 11 upto A.Y. 2009-10.
For that Ld. C1T(A) was not justified in suggesting that the appellant was not qualified to get the exemption in view of the amended provision for the purpose of definition of charitable purposes as provided in Section 2(15) of Finance Act, 2012. The appellant has been working to provide relief to poor, running three schools giving education to less fortunate and mentally handicapped children in remote areas. Educational institutes were sponsored health immunization centre for the benefit of children and their well being was being conducted from time to time. Ld. 'CIT(A) was not justified in suggesting that appellant was not covered under limb 1 of provision of Section 215, as such, exemption u/s 11 to 13 was denied.
For that the appellant was doing trading to support the unfortunate widows and other handicapped persons to earn their livelihood and to support themselves. Surplus generated was used for the purposes of charity. As such, Ld. CIT(A) was
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not justified in not providing exemption u/s 11 of the Income Tax Act.
For that Board of Trustees was managing affairs of the Trust without any personal benefit. They have not even receiving any reimbursement of expenses for looking after the affairs of the Institutes and getting the work done and providing for various medical and educational facilities as per objectives of the trust. Appellant trust is not having any profit making motive and all the objectives are for utilizing the trust funds for charitable purposes. 5. For that in view of the case, the CIT(A) was not justified in not giving exemption to the income of the appellant. In the process the CIT(A) was not justified in confirming the order of the AO.’ 9. Ld Authorised Representative of the assesse submitted that
the issues under consideration are covered by the decision of this
Bench of the Tribunal in assessee’s own case for the assessment
year 2010-11 & 2011-12 in ITA Nos.304 & 305 /Ran/2014 order
dated 12.10.2017. Since the facts are identical in the present years
under consideration, he prayed for allowing the appeals of the
assesse.
Ld D.R. agreed to the submission of ld authorised
representative of the assesse.
After considering the rival submissions and perusing the
materials on record, we find that similar issue had come up for
consideration in assessee’s own case for the assessment years
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2010-11 and 2011-12 (supra), wherein, the Tribunal has
adjudicated the issue as under:
‘3. The brief facts of the case are that the assessee is registered u/s.12A of the Act vide order dated 31.12.1979 by CIT, Bihar –II, Ranchi. During the assessment proceedings, the Assessing Officer found that apart from running schools was also doing business. The assessee was asked by the Assessing Officer as to why business income should not be taxed u/s.2(15) of the I.T. Act, 1961. The Assessing Officer after examining the reply of the assessee did not accept the same as according to him as per section 2(15) of the Act, the business income of the assessee is taxed irrespective of the application of business income. 4. On appeal before the CIT(A), the assessee submitted as under: “The Central Board of Direct Taxes has issued the circular No 11/2008, dated 19.12.2008 stating the following implications arise from the amendment in sec. 2(15) w. e. f. Assessment year 2009-10. The circular states as follows:
2.1 The newly inserted provisions to sec. 2(15) will not apply in respect of the first three limbs of sec. 2(15) i.e. relief of the poor, education or medical relief. consequently where the purposes of trust or institutions is relief of the poor, education or medical relief, it will constitute charitable purpose even it is incidentally involves the carrying on commercial activities. Circular further stated:
2.2 ''Relief of the poor" encompasses a wide range of objects for the welfare of the economically and socially disadvantaged or needy. It will therefore, include within its ambit purposes such as relict to destitute, orphan or the handicapped, disadvantaged women or children, small and marginal farmers indigent artisans or senior citizen in need of aid. Entities who have these objects- will continue to be eligible
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for exemption even if they incidentally carry on a commercial activity, subject, however to the conditions stipulated under Sec. 11(4 A) or the seventh proviso to Sec. 10(23c) which are that. (i) The business should be incidental to the attainment of the objections of the entity and (ii) Separate books of account should be maintained in respect of such business. Similarly entities whose object is education or medical relief would also continue to be eligible for exemption as charitable institutions even if they incidentally carry on a commercial activity subject to the conditions mentioned above. Objects of the appellant society falls in first three limbs of Sec. 2(15) i.e. relief to the poor; education or medical relief and these objects constitute charitable purpose even if it is incidentally carry on a commercial activities. Proviso to Sec. 2(15) is not applicable to the appellant, society. Appellant also rely upon judgment of honourable Gujarat High Court and of Mumbai Bench of Income Tax Appellant Tribunal — Director of Income Tax (Exemption) vs Sabarmati Ashram Goushala Trust (2014) 44 Taxmann.com 141 (Gujarat) Shree Nashik Panchvati Panjarpole vs Director of Income Tax (Exemption) (2014) 45 Taxmann.com 220 Mumbai Tribunal Asst. Director of Exemption Vs Madras Craft Foundation(2014) 46 Taxman corn 2b2 Chennai Tribunal It is therefore must humbly and respectfully prayed that addition made by learned A.O. may kindly be deleted and returned income be accepted." 5. The matter was remanded to the Assessing Officer by the CIT(A). The Assessing Officer submitted her remand report vide her letter dated 19.08 2014 as under: "Kindly refer to the above. 2, As directed, I am here by submitting the report On the captioned case:-
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In this case the A.O. has passed assessment order applying the proviso to Section 2(15) of the IT. Act, 1961, and accordingly the exemption as claimed by the assessee u/ s 11 of the act was disallowed, However, in the appellate proceeding the assessee has relied upon the CBDT circular No, 11/2008 dated 19.12.2008 wherein it was clarified that in the newly inserted proviso to section 2(15) the first three of the following objects were excluded :-
(i) Relief of the Poor (ii) Education (iii) Medical relief, and (iv) The advancement of any other object of general public utility 4. The objects of the society as submitted by the assessee during the assessment proceeding is enclosed for your kind reference. 5. It is apparent from the above that the objects as mentioned in the CBDT Circular No. 11/2008 are not explicitly stated in the aims & objects of the assessee trust. Hence, it is difficult to conclude that the assessee trust falls within the ambit of the CBDT Circular No. 11/2008.
Hence, I am of the opinion that the A.O. has rightly disallowed the exemption as claimed u/s 11 by the assessee. “
The assessee submitted the counter comments vide letter dated 11.09.2014 as under:
"In response to your letter dated 2nd September 2014, we submit as follows:- (1) Aims and object of the trust are as follows:- (a) To help handicapped. mentally retarded and needy women and children to earn their livelihood by opening avenues of employment and maintain orphanage to bring up children born of leper parents till they are settled in life. It will be purely philanthropic and charitable institution without any profit motive.
(b) To work actively for the general progress and welfare of women and children and to help women to utilize to the fullest
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the fundamental rights conferred on them by the constitution of the Indian union and in particular to set up working women's hostel and maintain it.
(c) To work for the creation of a society based on the principles of social justice, personal integrity and equal rights and opportunities for all.
(d) To secure recognition of the inherent right of every human being to work and to the essentials of life such as food, clothing, education, social amenities and security in the belief that these should not be determined by accident of birth or sex but by planned social distribution. e) To support the claim of every citizen to the right to enjoy basic civil liberties. (f) To stand against all separatist tendencies and to promote greater national integration and unity.
(g) To co-operate with peoples and organizations of the world for the implementation of these principles which alone can assure permanent international amity and world peace.
(2) CBDT Circular No.11/2008 dated 19 12.2008 stated: Para 2.2 `Relief of the poor' encompasses a wide range of objects for the welfare of the economically and socially disadvantaged or needy. It will, therefore, include within its ambit purposes such as relief to destitute, orphans or the handicapped, disadvantaged women or children, small and marginal farmers, indigent artisans or senior citizens in need of aid. Entities who have these objects will continue to be eligible for exemption even if they incidentally carry on a commercial activity, subject, however, to the conditions stipulated under section 11(4A) or the seventh proviso to section 10(23C) which are that
(a) The business should be incidental to the attainment of the objectives of the entity, and (b) Separate books of account should be maintained in respect of such business. (3) The object as mentioned in the CBDT Circular No. 11/2008 are explicitly stated in the aims and object of the assessee Trust falls within the ambit of CBDT Circular No. 11/2008.
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(4) It is therefore, submitted that proviso to Sec. 2(15) is not applicable to the appellant Trust and addition made by learned Assessing officer may kindly be deleted."
The CIT (A) after considering the submission of the assessee dismissed the appeal of the assessee by observing as under: “ I have considered the arguments of the AR and the facts of the case. I have also considered the remand report of the AO and the counter comments of the AR. The AO considered the income from the schools as exempt u/s 2(15) of the I. T. Act,1961 but held that the sale of products and labour supplied comes under the nature of trade, commerce or business and providing employment to the widow and less fortunate women comes within the purview of advancement of any other object of general public utility. The appellant has not disputed that sale of products and labour supplied comes under the nature of trade, commerce or business but the appellant disputes the finding of the AO that providing employment in the course of doing business comes within the purview of advancement of any other object of general public utility. According to the appellant relying upon circular No. 11/2008 dated 19.12.2008 states that providing employment to less fortunate women and widow so that they can serve their poor children of family comes under the "relief of poor" and it will continue to be admissible for exemption even if they incidentally carry on a commercial activities.”
Ld A.R. reiterated the submissions made before the CIT(A) and relied on the decision of the Amritsar Bench of the Tribunal in the case of Hoshiarpur Improvement Trust & Ors vs ITO, (2015) 155 ITD 570 (Asr) . 10. On the other hand, ld D.R. relied on the order of the Hon’ble Kerala High Court in the case of GCDA Employees’ Pension Fund Trust vs CIT, 369 ITR 532 (Ker). He submitted that the CIT(A) has observed in his order that the assessee carries out the work in the nature of business in making Laddu, Chaptai, running a canteen ‘Saheli’ providing quality snacks to the staff and patients attendants of Tata Motor Hospital since 1984, MTC Pantry providing for quality snacks
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from 1989 to all its participants attending training programmes and the staff of the management training centre of Tata Motors and doing the business of Cable Harness. He submitted that Cable Harness is one of the major project and source of income for which MOU was signed between the assessee and Tata Yazaki of Pune in the year 2006, for cutting and assembly of wiring, for Tata Yazaki by the employees of Mahila Shyaran of the assessee. It has supporting staff of 117 employees including four supervisors. 11. Ld D.R. submitted that in this background, the issue for adjudication was whether the carrying out of the Cable Harness business and other business employing the women in the above categories resulting in a substantial surplus of Rs.89.70 lakhs during the year is relief to poor or carrying out of advancement of any other object of general public utility and not entitled for exemption u/s.11 of the Act. 12. Ld D.R. referred to the order of the CIT(A) and argued that the CIT (A) has observed that it is true that when the women who are employed at the time of employment were poor and destitute and were engaged as per the object of the trust but over the years the employment has converted into pure commercial employment with these women becoming skilled and supplying quality products to a well reputed company M/s. Tata Motors Ltd. The Cable Harness business was from the beginning of the year and the agreement with M/s. Tata Yazaki Autocom Pvt Ltd., for doing the cable harness business was also on pure commercial basis and the entire activities has continued on sound and recognized business principles and pursued with reasonable continuity to earn profit as observed by Hon’ble Delhi High Court in the case of Institute of Chartered Accountants of India vs Director General of Income Tax (Exemptions) (2012) 347 ITR 99 (Del). The payments made by the assessee to its women employees under the various heads salary and wages, bonus, PF/EPF contributions, medical expenses, LIC and uniforms to staff is Rs.85.54 lakhs, Rs.90.66 lakhs, 122.31 lakhs and Rs.149.43 lakhs for the financial years 2007-08, 2008-09, 2009-10 & 2010-2011. The CIT(A) held that considering the number of women employees around 120, the average per month salary during the year would be in excess of Rs.10,000/- per month. The relief of poor would mean a class which is in financial hardship, but considering the salaries of the beneficiary women employees, the same will not P a g e 10 | 14
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constitute poor persons within the meaning of section 2(15) of the Act. Further, there is no general welfare of any such poor ladies on a continuous basis but the beneficiary targets is fixed and are being paid for work done by them. Hence, he submitted that the order of the CIT(A) should be confirmed. 13. We have heard the rival submissions, perused the orders of lower authorities and materials available on record. In the instant case, exemption u/s.11 of the Act was denied to the assessee society by the Assessing Officer on the ground that apart from running school, the assessee was also doing business and that as per section 2(15) of the Act, the business income of the assessee is to be taxed irrespective of the application of business income. 14. On appeal, the CIT(A) confirmed the action of the Assessing Officer. 15. The contention of ld A.R. is that since the assessee was providing employment to destitute women and poor women, hence, it was carrying out charitable activity being relief to the poor and hence, exemption u/s.11 of the Act is to be allowed. He relied on the decision of Amritsar Bench of the Tribunal in the case of Hoshiarpur Improvement Trust & Ors (supra), wherein, the Tribunal held that the registration granted to the assessee trust prove that objects of the assessee trust were advancement of objects of general public utility, and there was nothing to demonstrate any paradigm shift from that fundamental position. Allegation was only of profit making but that did not obliterate overall objects, therefore, benefit u/s.11 r.w.s 2(15) could not have been declined at all. Further, the Tribunal observed that the object of general public utility does not necessarily require that activities or beneficiaries must be funded or subsidised by the State authorities. 16. On the other hand, the ld D.R. relied on decision of Hon'ble Kerala High Court in the GCDA Employees Pension Fund Trust (supra), wherein, it was held that the objects of the trust was to pay pension to the employees of GCDA or their dependents from out of the corpus collected from the beneficiaries themselves. In other words, the employees of the GCDA are contributing and from out of that contribution, they or their dependants are getting pension. Such an object implemented by the assessee trust cannot be said to be an
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object of general public utility attracting section 2(15) of the Act. 17. In the above background of the case, we find that it is not dispute that that assessee trust is giving employment to widow, destitute and helpless \women. Instead of giving them donation, the assessee is providing employment to these needy women and paying them wages for the work done. This enhances the prestige and image of the needy women in the society. The objects and reason behind carrying out the work is to provide employment to the needy women so that they can be helped by earning a descent salary and have respectable living in the society. Further, it is also not in dispute that the assessee is registered u/s.12A of the Act since 31.12.1979 and all along the activities of the trust has been treated as object of general public utility and exemption u/s.11 has all along been allowed. Further, there is no finding of the Assessing Officer as well as CIT(A) that the incidental profit earned by the activity of the society is not utilised by the assessee society for charitable purposes and is being utilised for the personal benefit of the trustee or management of the society. In our considered view the activities carried on by the trust are in the nature of general public utility and not the activity of business. Merely from the fact that the assessee during the financial years 2007-08, 2008-09, 2009- 10 & 2010-2011, has paid to its women employees under the various heads i.e. salary and wages, bonus, PF/EPF contributions, medical expenses, LIC and uniforms to staff of Rs.85.54 lakhs, Rs.90.66 lakhs, 122.31 lakhs and Rs.149.43 lakhs , it cannot be held that the activities of the assessee society is business and not activity of general public utility. Hence, we set aside the orders of the lower authorities and direct the Assessing Officer to allow exemption u/s.11 of the Act to the assessee and allow the ground of appeal of the assessee. 18. In the result, the appeals filed by the assessee are allowed.’ 12. Facts being similar, respectfully following the same, we set
aside the orders of lower authorities and direct the Assessing Officer
to allow exemption u/s.11 of the Act to the assesse and allow the
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grounds of appeal of the assesse for both the assessment years
under appeal.
The only other ground taken by the assesse in assessment
year 2013-14 that interest u/s.234 should be charged on returned
income and not on the assessed income.
After hearing the rival submissions and perusing the orders
of lower authorities below, we find that the Hon'ble Jharkhand High
Court in the case of Ajay Prakash Verma (supra) held as under:-
“23. Learned counsel for the appellant submitted that it has been ordered by the A.O. that interest be charged as per rule. Interest can be levied under sections 234A & 234B of the Act. It is submitted that in view of the judgment of Full Bench of Ranchi Bench of Patna High Court delivered in the case of Smt. Tej Kumari Vs. CIT reported in (2001) 114 Taxman 404 (PAT) (FB), the interest cannot be levied over the assessed income and it can be levied only on the income declared in the return. The revenue preferred S.L.P. before the Hon'ble Supreme Court against the said judgment of the Full Bench of Patna High Court which was dismissed by the Hon'ble Supreme Court on merits vide order dated 01/08/2000 by saying that there is no merit in the appeal.
Learned counsel for the revenue could not dispute this legal position. Therefore, so far as question of law involved in this appeal that whether the interest could have been levied against the assessed income of the assessee under section 234A & 234B is concerned, in view of the Full Bench judgment of Ranchi Bench of Patna High Court delivered in the case of Smt. Tej Kumari, the revenue can levy the interest only on the total income declared in the returns and not on the income assessed and determined by the A.O. to that extent. The orders passed by the authorities below are accordingly modified and interest shall be chargeable in the light of the Full Bench judgment referred above.”
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Therefore, respectfully following the decision of Hon’ble
Jurisdictional High Court in the case of Ajay Prakash Verma (supra),
we direct the Assessing Officer to charge the interest on the income
declared in the return and not on assessed income and allow this
ground of appeal of the assesse.
In the result, both the appeals of the assesse are allowed.
Order pronounced on 29/11/2018. Sd/- sd/- (Pavan Kumar Gadale) (N.S Saini) JUDICIALMEMBER ACCOUNTANT MEMBER Ranchi; Dated 29 /11/2018 B.K.Parida, SPS Copy of the Order forwarded to : 1. The appellant: Income Tax Officer (Exemption), Ward, Jamshedpur
The Respondent. All India Women’s Conference (Golmuri Constituent Branch), Mahila Sharan, Telco Colony, Jamshedpur 3. The CIT(A)- Jamshedpur 4. Pr.CIT- Jamshedpur 5. DR, ITAT, Ranchi 6. Guard file. //True Copy//
By order
Srpvt.Secretary, ITAT, Ranchi on tour
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