Loading judgment…
Facts
The assessee, Gujarat Council of Science City, is registered under Section 12AA of the Income Tax Act and claims exemption under Sections 11 & 12. For AY 2018-19, its return was processed at Rs. Nil. However, the AO determined a total income of Rs. 98,89,60,675/-, disallowing exemptions and corpus donations. The CIT(A) dismissed the assessee's appeal.
Held
The Tribunal restored the issues to the file of the Assessing Officer for re-determination. Specifically, the character of the activities as 'education' vs. 'general public utility' and whether they were commercial in nature, along with the treatment of research funds as capital or revenue receipts, need verification.
Key Issues
Whether the assessee's activities qualify as 'education' or 'general public utility', and if commercial in nature; and whether research funds are capital or revenue receipts.
Sections Cited
2(15), 11, 11(1)(a), 11(1)(d), 12, 12AA, 143(1), 144, 144B, 250
AI-generated summary — verify with the full judgment below
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH, AHMEDABAD
Before: Ms. SUCHITRA KAMBLE & SHRI MAKARAND VASANT MAHADEOKAR
PER SUCHITRA KAMBLE, JUDICIAL MEMBER:
This appeal is filed by the Assessee against order dated 29.08.2024 passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2018-19. The assessee has also filed a Stay Application praying for stay of recovery proceedings initiated against the assessee in respect of outstanding demand till the receipt of the order of the Tribunal disposing of the appeal of the assessee.
“1.1. The order u/s. 250 passed on 29-08-2024 for A.Y. 2018-19 by NFAC, Delhi (in short CIT(A)') upholding that the activities of the appellant were not "education" u/s.2(15) but entertainment so that the exemption u/s.11 was not admissible and voluntary donations were chargeable to tax is wholly illegal, unlawful and against the principles of natural justice.
1.2 That the Id. CIT(A) has grievously erred in law and on facts in (1) not allowing sufficient opportunity to furnish rejoinder to the remand report submitted by AO and (ii) not considering the past record relating to assessment, orders etc. while disposing off the appeal in respect of the grounds covered. (ii) not allowing further opportunity for video conferencing.
2.1 The Id. CIT(A) has grievously erred in confirming that the activities of the appellant was not education u/s.2(15) so that the exemption u/s.11 & 12 were not admissible. The ld. CIT(A) ought not to have confirmed the disallowance of application of income of Rs.12,09,85,532/- on revenue account and Rs.1,79,75,143/- as accumulation of income, thus totalling to Rs.13,89,60,675/-.
2.2 That in the facts and circumstances of the case as well as in law, the Ld. CIT(A) has grievously erred in not adjudicating the ground relating to the nature of activity was of general public utility or commercial in nature.
3.1 The Id. CIT(A) has grievously erred in law and or on facts in upholding the corpus donations of Rs.85,00,00,000/- as income u/s.11(1)(d). The ld. CIT(A) has failed to appreciate that the appellant had sought time to collect the necessary data from Govt. with regard to the impugned capital grants which could not be received by the date of hearing.
3.2 That in the facts and circumstances of the case as well as in law, the Ld. CIT(A) ought not to have confirmed the corpus donation as income u/s. 11(1)(d).
4.1 Without prejudice to above and in the alternative, the computation of total taxable income should have been re-worked out after considering the provisions of sec.11 & 12.”
The principal objective of the assessee is to promote science and technology and to undertake and encourage research and training in various science activities as mentioned in the Assessment Order. The assessee was registered under Section 12AA of the of the Income Tax Act, 1961 and enjoyed exemption and deduction under Income Tax Act, 1961. The assessee’s case was selected for complete scrutiny on S.A. No.1/Ahd/2025 (Assessment Year: 2018-19) Gujarat Council of Science City vs. DCIT Page 3 of 8 the issue of receipt of voluntary donation. The return of income for the Assessment Year (A.Y.) 2018-19 was filed by the assessee on 29.09.2018 showing total income at Rs. Nil. Subsequently the assessee filed revised return on 04.10.2018 showing total income at Rs. Nil. The return was processed on 10.11.2019 under Section 143(1) of the Act on the total income of Rs.98,89,60,675/-. The Assessing Officer observed that the difference was arrived due to the reason that there is disallowance of Corpus Donation under Section 11(1)(d) of the Act amounting to Rs.85,00,00,000/- and disallowance of income referred to Section 11 and 12 of the Act amounting to Rs.13,89,60,675/-. The statutory notices were issued but the same was not responded and, therefore, the Assessing Officer held that the assessee has shown the following income and expenses:-
S.No. Particulars Amount (Rs.) 1. Amount of income applied during the previous 12,09,85,532/- year (Revenue Account) 2. Amount of income accumulated of set apart for 1,79,75,143/- application to charitable or religious purpose (Disallowance of accumulation u/s.11(1)(a) of the Act [as discussed above in Para 2(b)] Total Aggregate of income referred to Section 11 & 12 13,89,60,675/- of the Act.
3.1 The Assessing Officer further held that the assessee is not eligible to any of the exemption claimed otherwise available under Section 11 & 12 of the Act and thus made disallowance in respect of Corpus Donation under Section 11(1)(d) of the Act and income referred to Section 11 & 12 of the Act.
Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
The Ld. AR submitted that the Tribunal vide order dated 20.03.2023 in assessee’s own case for the A.Ys. 2013-14, 2014-15 & 2015-16 (ITA Nos.2405/Ahd/2017, 260/Ahd/2018 & 306/Ahd/2019) has given directions for both the issues. The Ld. AR further submitted that the Assessing Officer has given the order S.A. No.1/Ahd/2025 (Assessment Year: 2018-19) Gujarat Council of Science City vs. DCIT Page 4 of 8 giving effect to the appeal order of the assessee vide order dated 05.09.2024. Thus, the issue is identical but the Ld. AR in respect of ground nos.3.1 & 3.2 regarding the capital receipt submitted that the assessee has sought time to collect necessary data from the Government with respect to the impugned capital grant which could not be received by the date of hearing. Therefore, to that extent the same needs to be confirmed as Corpus Donation as income under Section 11(1)(d) of the Act. The Ld. AR has filed the synopsis which is as follows :-
“SYNOPSIS
Being aggrieved and dissatisfied with the Order U/s.144 R.W.S.144B passed on 30.04.2021 by NeAC Delhi, the appellant has preferred this appeal challenging the finding that the appellant was not covered under the limb of "education” of Sec.2(15) but operates entertainment facility so that exemptions u/s.11 aggregating to Rs.98,89,60,675/- were not admissible.
2.0 The brief facts of the appeal are that the appellant is set up by Govt. of Gujarat for promotion & advancement of Science & Technology through Science City Project. (hereafter called "GCSC") It is therefore registered under the Societies Registration Act with the objects such as advancement & promotion of science & technology. Its main object include promotion, exhibition, Interaction on science, technology, energy etc. with human life and other related work. The State Govt. has set up a governing body of GCSC vide GR dated 04/09/1999. The appellant is registered under Societies Registration Act, 1860 as well as u/s.12AA of I.T. Act. It had filed its return of income for A.Y. 2018-19 on 29.09.2018 declaring therein total income of Rs. Nil after claiming exemptions u/s.11. It was processed u/s.143(1) on the total Income of Rs.98,89,60,675/- by disallowing exemptions claimed u/s.11 & 12. Thereafter, the case was selected for complete scrutiny under CASS.
2.1 During the course of assessment proceedings the AO claimed to have issued various notices from time to time which remain non-complied and finally the assessment was completed u/s.144. It is observed by AO that the appellant was charging fees for various activities carried out at Science City Campus and even operates entertainment facility on the lines of amusement/entertainment park which activities cannot be termed as providing education to the public. Hence the exemptions u/s.11 & 12 towards application and accumulation of income were disallowed to the extent of Rs.13,89,60,675/- and corpus donation of Rs.85 Crores vide impugned order.
2.2 Being aggrieved, the appellant preferred appeal before NFAC which has been dismissed in respect of all the grounds of appeal relying upon the assessment order for the reason that the appellant had failed to respond to the notices of hearing issued from time to time as stated in para-5 at page-6 of the S.A. No.1/Ahd/2025 (Assessment Year: 2018-19) Gujarat Council of Science City vs. DCIT Page 5 of 8 impugned order. The NFAC had call for remand report from AO in view of the additional evidence produced during the course of appellate proceedings.
3.0 Validity of Assessment 3.1 The case of the appellant was selected for complete scrutiny under e- Assessment Scheme, 2019 on the issue "receipt of voluntary donation." However, while completing the ex-parte assessment u/s.144 r.w.s. 144B on 30.04.2021 by AO, the issue relating to the nature of charitable activity u/s.2(15) carried on by the appellant by examined by him and it was held that the appellant trust was not involved in the activity of "education" but "advancement of any other object of general public utility" which was falling under the proviso to sec.2(15). Secondly, the AO also disallowed the exemption u/s.11 & 12 aggregating to Rs.13,89,60,675/- as a consequential disallowance.
3.2 Being aggrieved by the said order the appellant preferred appeal before CIT(A) wherein the appellant had partly responded to the notices of hearing but the later notices were not responded so that NFAC passed the impugned order upholding the disallowances on the basis of findings given by AO.
3.3 The appellant submits that the issues before the lower authorities can be bifurcated into three broad categories namely:
(a) Whether the activities carried on by the appellant trust fall under the limb of "education" or the last limb of "general public utility"
(b) In case it falls under "GPU" whether the activities could be said to be in the nature of trade commerce within the proviso to sec.2(15).
(c) The determination of profit of mark up as per the decision in case of AUDA. (449 ITR 1) (SC).
4.0 Nature of Charitable Activity u/s 2(15)
4.1 So far as this ground of appeal is concerned, though the appellant contends that its activities are in the nature of "education" but Hon'ble Tribunal has already held in appeal for earlier years i.e. A.Y. 2013-14 to 2015
16. (ITA No.2405/Ahd/2017 dated 20.03.2023) and order in for A.Y. 2016-17 dated 13.09.2023 that in view of the decision of Hon'ble Supreme Court in case of New Global Education Society vs. CCIT (448 ITR 594), the activities were not in nature of "education" but in the nature of "advancement of any other object of general public utility" (See para-12 and 18 of the order). However, the appellant continues to contend that the activities are in the nature of “education"
S.A. No.1/Ahd/2025 (Assessment Year: 2018-19) Gujarat Council of Science City vs. DCIT Page 6 of 8 4.2 The Hon'ble ITAT in the aforesaid orders has held that the activities carried on by the appellant trust were in the nature of "General Public Utility" as defined in sec. 2(15) (See para-34 of the order).
4.3 The Hon'ble ITAT in order to determine whether the activities were carried out in a commercial manner as defined in the proviso to sec. 2(15), it has restored back the matter to the file of AO as per para-35-36 of the order with a direction to determine its character in the light of guidelines laid down by Hon'ble Apex Court in case of AUDA which are listed at page-25 of the order.
4.4 In view of the aforesaid order available with the appellant, it was brought to the notice of the NFAC[CIT(A)] vide written submission No.1 dtd. 25.09.2023 in response to notice u/s. 250 dtd. 18.09.2023 that the matter should be examined in the light of the aforesaid order of Hon'ble ITAT. (See para 2.2 of said submission). However, the entire appellate proceedings have been concluded without considering the aforesaid order of ITAT.
4.5 So far as the issue relating to non-response to the notices issued by NFAC [CIT(A)] in July - August, 2024, the appellant would like to explain that the said notices were issued at the email id scityahmedabad@gmail.com which was a non-operational mail id of the appellant and the office staff did not check the same and referred to the main operational mail id ao2.gesc@gmail.com and secondary mail id accounts-gcsc@gujarat.gov.in. Under the circumstances, the aforesaid notices issued by NFAC including the response to the remand report could not be complied with by the appellant. It will be appreciated that whenever the mail have been sent at the operational mail id. ao2.gcsc@gmail.com, the appellant has responded to it as it would be found from the subsequent notices for other years. Thus, there was a sufficient cause for failure to respond to the aforesaid notices.
4.6 So far as the issue relating to the determination whether the activities were in nature of trade or commerce as per the guidelines of decision in case of AUDA is concerned, the appellant would like to point out that while passing the order giving effect to appellate order on 05.09.2024 DCIT(Exemption) Circle-1, Ahmedabad has given calculation and observed that the net profit as a percentage of total receipts came at 12.93% which cannot be said to be cost plus nominal mark up 4.7 The appellant submits that the entire computation made by AO in this order is not admitted and there are various errors in this computation such as (i) the interest income as well as grants received cannot be taken into consideration to ascertain the activities in a commercial manner because the same are return on investment and the capital grants did not belong to the appellant trust. (ii) The activities from sale of tickets and other income aggregating to Rs.3,89,22,961/- and tender fees of Rs.3,49,200/- aggregating to Rs.3,92,72,161/-should have been considered as receipts for the purpose of determination of commercial manner and the expenses by way of establishment of Rs.3,23,81,974/-, expenses in respect of properties of S.A. No.1/Ahd/2025 (Assessment Year: 2018-19) Gujarat Council of Science City vs. DCIT Page 7 of 8 Rs.45,89,501/-, legal expenses of Rs.8,42,288/- + 70,800 and expenses for objects of the society aggregating to Rs.8,31,00,969/- should have been considered to arrive at the profit or loss from the activities considered by AO as non-education. In short there is no profit or surplus therefrom and therefore, the proviso to sec. 2(15) is not attracted.”
The Ld. DR submitted that the Tribunal vide order dated 13.09.2023 and 20.03.2023 has already decided the issues and remanded back to the file of the Assessing Officer for proper verification. the Ld. DR relied upon the Assessment Order and the order of the CIT(A).
We have heard both the parties and perused all the relevant material available on record. As regards the first issue, the same is identical to the A.Y. 2013-14 to 2015- 16 in assessee’s own case. The observation made in paragraph nos.31 & 32 clearly set out that its activities has consistently been held to be in the nature of charitable activity of imparting education is not correct and the same has been restored back to the file of the Assessing Officer, whether its character is commercial or not in the light of the guidelines laid down by the Hon’ble Apex Court in the case of New Global Education Society, 448 ITR 594 (SC) and ACIT vs. Ahmedabad Urban Development Authority, 449 ITR 1 (SC). Thus, in the present A.Y. i.e. A.Y. 2018-19 this issue is restored back to the file of the Assessing Officer for determining the said character as held in the order dated 20.03.2023 by the Tribunal. As regards the second issue regarding manner of treatment of specific research fund received by the assessee from the Government, whether to be treated as capital receipt as claimed by the assessee or not to be treated as revenue receipt as claimed by the Department also needs to be verified regarding the nature of grant received by the assessee and the same is identical to the earlier years mentioned herein above. Therefore, this issue also is restored back to the file of the Assessing Officer in consonance with the directions made in paragraph nos.38 & 39 of the order of the Tribunal in assessee’s own case for the A.Y. 2013-14 to 2015-16. Thus, the appeal filed by the assessee is partly allowed for statistical purpose.
As regards the Stay Application filed by the assessee, the appeal is decided and, therefore, the Stay Application becomes infructuous and hence dismissed.
S.A. No.1/Ahd/2025 (Assessment Year: 2018-19) Gujarat Council of Science City vs. DCIT Page 8 of 8 9. In the result, appeal of the assessee is partly allowed for statistical purpose and the Stay Application filed by the assessee is dismissed.
Order pronounced in the open Court on this 19th February, 2025.