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Income Tax Appellate Tribunal, DELHI BENCHES ‘G’, NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI O.P.MEENA
PER O.P.MEENA, AM: 1. This appeal by the Revenue is directed against the order of Ld.Commissioner of Income Tax(Appeals)-40, New Delhi dated 21.09.2016 for the assessment year 2012-13.
Grounds raised by the Revenue read as under:
“1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law in ignoring the fact that the activities of assessee is advancement of any other object of public utility and hits by the proviso of section 2(15) of the I.T.Act. 2. The appellant craves leave to add, to alter or amend any ground or appeal raised above at the time of hearing.”
ITO (E), Ward-2(2), New Delhi V. Society for Participatory Research in Asia/ A.Y. 2012-13 Page 2 of 9
Brief facts of the case are that the assessee, a society, was established in 1982 under Societies Registration Act, 1860 and was granted registration under section 12A of the Income-tax Act, 1961 (‘the Act’) vide order dated 03.09.1983. The society was also granted exemption under section 80G of the Act. From the beginning itself, the society is, inter-alia engaged in providing education and promoting research, training and education for peoples participation in developmental processes nationally and internationally. In the assessment year 1984-85, claim of the society under section 10(22) of the erstwhile Act was denied by the Assessing Officer(AO) which was overturned by the appellate authority. On appeal by department, the Tribunal vide order dated 30.07.1987 passed in allowed the claim of exemption and inter-alia held that activities of the society are purely for educational purpose and its income deserves to be exempt under section 10(22) of the erstwhile Act.
The assessee carried the matter before the ld.CIT(A) who vide para 4 has given the following findings:
“4. I have considered the order of the Assessing Officer, the submissions made by the appellant and also the decision order of Hon’ble ITAT, Delhi ‘G’ Bench “G” dated 27.05.2016 in in the appellant’s own case. For the assessment year 2009-10 also, exemption under section 11 and 12 had been denied. The Assessing Officer has himself observed in Para 9 of the assessment order that the facts and issues in the period under consideration are also similar to the issues involved in assessment year 2009-10.”
ITO (E), Ward-2(2), New Delhi V. Society for Participatory Research in Asia/ A.Y. 2012-13 Page 3 of 9
Being aggrieved, the Revenue filed appeal before this Tribunal.
The learned CIT-Departmental Representative relied on the order of the Assessing Officer.
Per contra, the learned Counsel for the assessee submitted that 6.
the issue stands covered in favour of the assessee in its own case for A.Y. 2009-10 in dated 27.05.2016, further the aforesaid decision of Tribunal was affirmed by the Hon’ble Delhi High Court in ITA No.845/2016 and C.M.No.43732/2016 vide order dated 25.11.2016 wherein the appeal of the Revenue was dismissed.
Following the above decision of Hon’ble Delhi High Court in the assessee’s own case for the A.Y. 2010-11 in and A.Y. 2011-12 in ITA No.4213/Del/2016 have been decided in favour of the assessee by the Tribunal vide order dated 17.02.2017 and 30.06.2017 respectively. It was further submitted that the AO in the A.Y.2013-14, 2014-15 and 2015-16 respectively have been accepted the charitable character of the assessee and therefore allowed the exemption u/s.11 and 12 of the Act.
We have heard the rival submissions and perused the material available on record. We find that the issue in the case of assessee is covered in favour of the assessee by the decision of Tribunal for A.Y. 2009-10 dated 27.05.2016 and also by the Hon’ble Delhi High Court in ITO (E), Ward-2(2), New Delhi V. Society for Participatory Research in Asia/ A.Y. 2012-13 Page 4 of 9 and CM.No.43732/2016 dated 25.11.2016. We find that the Hon’ble Tribunal for A.Y. 2009-10 vide para 6.5 to 8 has held as under:
“6.5 From the aforesaid, it is apparent that the activities of the appellant have been accepted to be within the scope of education under section 2(15) of the Act and also under section 10(22) of the Act. In such circumstances, the conclusion of the Assessing Officer to hold that the activities of the assessee are not in the nature of education only on the pretext that income from education is confined to Distance Learning course fee of Rs.20.65 lacs out of total receipts of Rs. 21.45 crores is incorrect. On the contrary, we notice that the activities of the appellant are in the nature of participatory research. In the order of assessment of the appellant for assessment year 1983-84, it has been observed that the participatory research is a new development of the last decade and was arisen out of the experience of grassroots educational efforts in the Third World Countries. It has been noted that the Participatory Research can be utilized depend upon the needs of the poor and deprived. It has been noted that it has worked on the problems of forest, land, rural development, drinking water, primary health care, women’s income generating efforts, occupational and environmental health etc. The appellant has also emphasized that it work with the community organizers, adult educator, health care workers, social workers etc. in training them to use participatory research methodology in their work. The appellant produces own educational materials for use in educational programmes and for wider dissemination.
6.6 Similar view has also been expressed in the case of Praxis Institute of Participatory Practices v. DIT(E) 154 ITD 10 (Del) wherein it has been held as under: “Having gone through the activities of the assessee made available at page Nos. 101, 113, 130, 141, 151, 156 etc. of the paper book filed on behalf of the assessee about the activities of the assessee, we find that for Care India, the task involves on the part of the assessee is planning and conducting capacity building program for state lead and implementing partners, field visits and facilitation of reflection process of the organization development etc. mainly in respect of HIV and Sex Workers. At page Nos. 8 & 9 of the annual report relevant activities and photograph study for community mobilization have been provided. For the Leprosy Mission Trust India (TLM) the role of the assessee is to focus its approach to work with people and communities effected leprosy and disability and to address poverty and industries through enhanced quality people centered intervention. One of the points to be ensured by the assessee is the key area, where capacity is lacking at the field level and also to make field visits to projects where needed. The assessee was to visit selected project locations in Delhi to explore alternative to the existing structure and system. Field work will be organized to sensitized the usages of the participatory approaches, requirement of paradiagram shift from technical to community centric approaches. Semi- structured interviews will be held with the Leprosy Effected, Disability, Socially Excluded People to know ITO (E), Ward-2(2), New Delhi V. Society for Participatory Research in Asia/ A.Y. 2012-13 Page 5 of 9 about their aspirational and attitudinal behavior which they are looking for. The assessee will also hold discussion with officials of leprosy mission. Page No. 10/A of the annual reports contains the relevant activities and page 19C contains photograph depicting the plans. For the Plan International ( a child rights organization working to elevate child poverty) the objective is to understand the CC based microplanning through classrooms and field based training evolves a process and identity mythology for a participatory needs assessment to develop line centered community level microplan and field work etc., page Nos. 18/19A of the annual report contains the relevant activities and photographs depicting therein online high and micro level planning for UNICEF, the task of the assessee involve fixing understanding the living condition of the tribal people and dynamics of their social exclusion (page No. 16 of the annual report contains the relevant activities and photographs depicting the immersional lending program). For international labour office (ILO), the task of the assessee is to carry out rapid assessment on the vulnerability of workers to bondages/labour exploitation in Tamilnadu by organizing separate works job/consultation meetings with employer, NGOs and government etc. Also to find out specific issues of women workers such as Child Care including sexual harassment/violence etc. Page No. 12 of the annual report contains the relevant activities and photographs depicting the living and working condition of workers.
For Pellastakaa Laspset-Radda Banen(save the children, contract Finland), the assessee was entrusted to undertake the study on qualitative base line in eight village of southern Rajasthan for formulating an educational model for promoting and protecting the rights of children of indigenous community through a right based approach in the area of root causes of violation of rights of children, nature and impact of such violation etc.
We find that during the year, the assessee undertook 25 such projects, the details of which were submitted before the authorities below but the Learned CIT(Appeals) or the Assessing Officer did not determine the nature of the activities for the very purpose of the objects. The Assessing Officer was of the view that the assessee involves in carrying on the activities in the nature of rendering services in relation to trade, commerce or business as assessee is providing consultancy, workshop, training program, conducting research on behalf of other agencies. Thus, we find that the above view of the Assessing Officer was based upon the fact that assessee is providing consultancy, workshop and training program etc. We are of the view that the activities of the assessee can in no way be covered in trade, commerce etc. as it is not charging any fee from the beneficiaries who are poor communities. It is also worth noting that the NGOs who have engaged the assessee are itself charitable institutions like WHO, UNICEF etc. and they ensure that the grant etc. given to the assessee are fully utilized only for the purpose of charitable activities and not for any business. The assessee did not have any receipt in excess of expenditure during the year. The books of account clearly show that no amount of current receipt or out of unutilized receipt of the past has been treated as profit in the sense it would be treated, had it been a business and that no amount has ever been given to any member of the board of the society or any member of the assessee society except the reimbursement of expenses incurred in connection with the board's meeting. It is also not the case of the department that any part of profit or gain shown as receipt over expenditure has been transferred to any member of the society. Thus, the ITO (E), Ward-2(2), New Delhi V. Society for Participatory Research in Asia/ A.Y. 2012-13 Page 6 of 9
activity of the assessee society is certainly not for making profit and it is certainly not in the nature of any trade, business or commerce, so as to be headed by the first proviso to sec. 2(15) of the Act even if it is treated as advancement of any general public utility. Similar are the facts in the case of Society for Essential Health Action & Training (supra). In that case also, the assessee had received an amount of Rs. 42 lacs from SAS for research conducting on implementation of various medicine related to children invocation. This research was part of the research activities which were to be carried out by SAS, but SAS could not carry out. This research was carried out by the assessee society in pursuance of a written arrangement with SAS. As per the arrangement/agreement, the assessee provided techno-medical research support and compilation of DATA in a project called "ROTA VIROS" . In consideration thereafter, SAS agreed to pay the assessee a lump sum amount of Rs. 50 lacs. It was termed as service fee. The Assessing Officer construed the above said agreement to be a commercial agreement. The services provided by the assessee to SAS were taken as being of commercial nature. The Assessing Officer held that the proviso to sec. 2(15) of the Act is applicable to "any other object of general public utility and not to charitable organization engaged in providing either relief to the poor or medical relief or education and that since the activities of the assessee did not fall under either relief to the poor or medical relief or education, it could be safely presumed that they fall under the category of general public utility", that for such activities, the assessee was receiving contractual income, irrespective of whether it resulted in profit or loss and that as such, the assessee had violation of the provisions of section 2(15) of the Act, that since the assessee did not fall within the scope "charitable purpose", as defined in sec. 2(15) of the Act, the benefit of sec. 11/12 of the Act was being disallowed to the assessee for the year under consideration. The Assessing Officer also sent a proposal for withdrawal of registration to the assessee under sec. 12AA of the Act to the DIT(E), separately. The grievance of the revenue before the ITAT was that the Learned CIT(Appeals) has erroneously held the activities of the assessee society to be falling under "advancement of any other object of general public utility" as defined therein. The ITAT held that the aims and objects of the assessee society, as per its Memorandum of Association includes medical research and informal education and communication activities of health and nutritional issue for urban slum and rural communities. The ITAT thus held that the activities in question is undisputedly the activity of research i.e. Techno Medical Research Support for research and compilation of DATA on account of "ROTA VIRUS" to SAS. Therefore, the activity carried on by the assessee cannot be said to be beyond its main aims and objects. It also remains irrefutable that the assessee society continues to enjoy registration under sec. 12A of the Act, as a charitable trust, confirming that the charitable purposes for which the assessee society was established remains unchanged. The activities of assessee during the year was in pursuance of such purposes thereafter following the ratio laid down by the Co- ordinate Bench of the ITAT in the case of Harnam Singh Harbans Kaur v. DIT (Exemption) [2012] 49 SOT 387/17 taxmann.com 103, Delhi, the ITAT upheld the action of the Learned CIT(Appeals). As per the cited decisions, charitable institution registered under sec. 12A of the Act and carrying the activities in the nature of charity, cannot be held to be engaged in the activity of advancement of any other object of general public utility.
ITO (E), Ward-2(2), New Delhi V. Society for Participatory Research in Asia/ A.Y. 2012-13 Page 7 of 9
Similar view has been expressed by the Hyderabad Bench of the ITAT in the case of GVK EMRI (UP)(supra). Similar are facts in the case of assessee as most of the NGOs related to WHO/UNO etc. do not have any experience of connecting/collecting the poor and needy people like destitute orphans, sex workers, drug addicts in which assessee society has gained experience over a period of time and has capacity to collect these particulars classes of people and motivate them to get out of it. Besides, there is no change in the activity of the assessee which all along has been covered under the first three limbs of charitable activities laid down under sec. 2(15) of the Act as in the assessment years for 2006-07, 207-08 and 2008-09 in the assessment framed under sec. 143(3), the activities of the assessee trust have been treated as charitable in nature and within the meaning of sec. 2(15) of the Act. As discussed above, the activities of the assessee firstly cannot be treated as advancement of any other object of general public utility nor it can be said that the activity of the assessee involves the carrying of any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business for a cess or fee or any other consideration. Respectfully following the above referred decisions on identical issues on almost similar facts as of the present assessee before us, we hold that the activities as discussed hereinabove of the present assessee cannot be held to be engaged in the activity of advancement of any other object of general public utility. The activities carried on by the assessee cannot be said to be beyond its main aims and objects and it is also an undisputed fact that the assessee society continued to enjoy registration under sec. 12A of the Act as a charitable trust and that the charitable purpose for which the assessee society was established remained unchanged. Under the circumstances, we while setting aside the first appellate order as well as order of the learned DIT(E) direct the Assessing Officer to allow the assessee the claimed exemption under sec. 11(12) of the Act and the ld. DIT(E) is directed to allow the application of the assessee for continuance of the approval granted under sec. 80G(5)(vi) of the Income-tax Act, 1961. The grounds of the appeals are thus allowed in favour of the assessee.”
6.7 Also Hon’ble Delhi High Court in the case of CIT v. Praxis Institute of Participatory Practices dated 23.9.2015 approving the above judgment has held as under:
“3 The question that arose is whether the activities of the Assessee would fall within the scope of ‘general public utility’ under Section 2(15) of the Act and whether the Assessee is therefore entitled to exemption under Sections 11 and 12 of the Act? 4 The ITAT has returned a factual finding, after analyzing the documents on record, that the activities of the Assessee can in no way be termed as trade and commerce etc. as it is not charging any fee from the beneficiaries who belong to the poor communities. The ITAT also noted that the NGOs like the WHO, UNICEF etc. which have engaged the Assessee are themselves charitable instructions. They ensure that the grants given to the Assessee are utilized for the purpose of charitable activities and not for any business. The consultants’ fees were also paid out of such grants. Further, the Revenue was not able to show that any part of the profit or gains has been transferred to ITO (E), Ward-2(2), New Delhi V. Society for Participatory Research in Asia/ A.Y. 2012-13 Page 8 of 9 any member of the Assessee society.”
7 As regards the basis of surplus, the Hon’ble Apex Court in the case of Queen’s Educational Society v. CIT 372 ITR 699 has referred to the judgment in the case of American Hotel & Lodging Association, Educational Institute v. CBDT 301 ITR 86 (SC) and noted as under:
“11. Thus, the law common to Section 10(23C)(iiiad) and (vi) may be summed up as foll0ws: (1) Where an educational institution carries on the activity of education primarily for educating persons, the fact that it meaks a surplus does not lead to the conclusion that it ceases to exist solely for educational purposes and becomes an institution for the purpose of making profit. (2) The predominant object test must be applied – the purpose of education should not be submerged by a profit making motive. (3) A distinction must be drawn between the making of a surplus and an institution being carried on “for profit”. No inference arises that merely because imparting education results in making a profit, it becomes an activity for profit. (4) If after meeting expenditure, a surplus arises incidentally from the activity carried on by the educational institution, it will ont be cease to be one existing solely for educational purposes. (5) The ultimate test is whether on an overall view of the matter in the concerned assessment year the object is to make profit as opposed to educating persons.”
7.1 The Hon’ble Court in the aforesaid judgment affirmed the judgment of the Punjab & Haryana High Court n the case of Pinegrove International Charitable Trust v. UOI 327 ITR 73 wherein it was held that merely because profits have resulted from the activities of imparting education, it would not result in change of character of the education that it was solely for educational purpose.
8. Thus, respectfully following the aforesaid judgments, we hold that the invocation of proviso to section 2(15) of the Act to deny claim of exemption under section 11 and 12 of the Act is not justified. Accordingly, grounds of appeal are allowed.”
9. In view of the above facts, respectfully following the assessees judgments we hold that invocation of proviso to section 2(15) of the Act to deny the claim of exemption u/s.11 and 12 was not justified and same has been rightly allowed by the ld.CIT(A). Further, the AO himself accepted the charitable character in subsequent assessment proceedings. In view of these facts, we do not find any infirmity in the ITO (E), Ward-2(2), New Delhi V. Society for Participatory Research in Asia/ A.Y. 2012-13 Page 9 of 9 order of the ld.CIT(A), therefore same is upheld, consequently the appeal of the Revenue is dismissed.
In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on 05-11-2019.