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Income Tax Appellate Tribunal, DELHI BENCH: ‘A’, NEW DELHI
Before: SHRI H.S. SIDHU & SHRI ANADEE NATH MISSHRADR. S.P. MUKHERJEE CIVIC
This appeal by the Revenue is directed against the order passed by the Ld. CIT(A)-40(Exemption), New Delhi in relation to assessment year 2011-12 on the following grounds:-
On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the exemption u/s. 11 disregarding the facts of the case.
1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law in allowing the exemption u/s. 11(1) of the Act and treating the assessee as charitable institution as activities of the assessee do not fall under education, medical relief and environment but falls under the last limb of proviso to section 2(15) of the Act i.e. advancement of any other objet of general public utility.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the fact that though the objects of the assessee may seem to be charitable but activities carried out by the society which yielded income to the society are commercial in nature.
3. The appellant craves leave to add, to alter or amend any ground of appeal
raised above at the time of hearing.
2. The brief facts of the case are that the assessee filed its return of income on 30.9.2011 declaring total income at NIL after claiming application of income as per provisions of Section 11 & 12 of the Income Tax Act, 1961 (in short “Act”). The return of the assessee was processed u/s. 143(1) of the Act. The AO issued notice u/s. 143(2) of the Income Tax Act, 1961 on 03.08.2012 and in response to the same the Authorized Representative (AR) of the Assessee appeared and furnished the books of accounts which were examined by the AO.
2.1 The assessee-society during the year under consideration shown its activities in two parts centered at Delhi and Orissa. For the Orissa, part, assessee has submitted Audit Report in Form 3CB and 3CD and the nature of business was shown as printing and publication of newspaper and books. For the Delhi part, the assessee has shown various activities such as running of urban / rural / slum development centres, balwaris, primary / senior schools, health centres, working women’s hostel old age centres. Etc. Assessee is also registered u/s. 12A of the Act vide order dated 13.09.1973 and also registered u/s 80G of the Act vide Registration Order dated 25.11.2011. Assessee has also submitted its Audit Report u/s. 12A(b) of the Act. The AO issued notice to the assessee as to why no activity of the assessee be treated as business activity covered under the amended provisions of section 2(15) of the Act and the assessment be done accordingly. In response to the same, the AR of the assessee filed its reply dated 19.02.2014 by elaborating that activity of the society is charitable and not for profit and nor for commercial and for the assessment year 1973-74, 1981-82 to 82-83, 1983-84, 1974-75 to 1979-80, the ITAT has accepted the contention of the assessee as well as Department has also accepted the same activity of the assessee as charitable not for profit or commercial, which has attained the finality. But the AO has applied the last limb of section 2(15) of the Act i.e. ‘advancement of any other objet of general public utility’. In view of the amendment in the provisions of section 2(15) w.e.f. 1.4.1984 the assessee denied the exemption u/s. 11 & 12 of the Act by holding that activity of the assessee of publication of newspaper is essential carry on characteristics and the assessee is generating income from publishing advertisement in its newspaper and tax the income generated from publication of news paper u/s. 13(8) of the Act and did not allow the benefit of section 11 and 12 of the Act. The AO made the various other additions which the AO has mentioned in para no. 6 to 13 and especially in the computation of income at para 10 of the assessment and completed the assessment u/s. 143(3) of the Act vide its order dated 25.3.2014 for the assessment year 2011-12. Aggrieved with the assessment order, the assessee appealed before the Ld. First Appellate Authority who vide his impugned order dated 29.5.2015 allowed the appeal of the assessee by respectfully following the various judgments delivered by the Hon’ble Supreme Court of India and Hon’ble Jurisdictional High Court as well as on the facts of the case of the assessee. The assessee-society was founded in 1921 by the fire brand freedom fighter late Shri Lala Lajpat Rai (1865-1928) during the freedom struggle for the nation building, on the basis of earlier assessment years i.e. AY 1973-74, the judgment delivered by the Tribunal and Reference of the Department u/s. 256(1) of the Hon’ble High Court was withdrawn vide the order dated 01.01.1990 for 3 years for the AY 1990-91 to 1992-93 u/s. 11(1) of the Act was withdrawn by the Department and the assessee was granted the exemption u/s. 11(1) of the Act for assessment years 1991-92, 1992-93. Ld. CIT(A) has also respectfully following the order allowed the exemption u/s. 11(1) for the AY 2009-10 as well as various decisions rendered by the Hon’ble Supreme Court of India as well as Hon’ble Jurisdictional High Court decision in the recent case of Hon’ble Delhi High Court in the case of India Trade Promotion Orgazniation vs. DGIT(E) 53 Taxmann.com 404 (Delhi) 2015 in which the Hon’ble Jurisdcitional High Court has held that mere receipt of fee or charge cannot be said that the assessee is involved in any trade, commerce or business and accordingly allowed the relief to the assessee and allowed the appeal of the assesee. Against the impugned order, the Revenue is in appeal before the Tribunal.
Ld. DR relied upon the order of the AO and stated that AO has passed a well reasoned order on the basis of amendment in section 2(15) of the I.T. Act, 1961 which is effective from 01.04.2009 and is applicable from Assessment year 2009-10. He further stated that in view of this amendment the activities of the assessee of running newspaper printing has characteristics and the assessee is generating income from publishing advertisements in its newspapers. Therefore, the activities of the assesee are commercial in nature, hence, AO has rightly held that the assessee falls under the last limb of section 2(15) and hit by this section and therefore, is not entitled for any benefit of exemption u/s. 11 and rightly made the additions in dispute. However, the Ld. CIT(A) has wrongly allowed the appeal of the assessee which needs to be set aside and accordingly revneue’s appeal may be allowed.
On the contrary, Ld. Counsel for the assesee relied upon the order of the Ld. CIT(A) and stated that the assessee is running printing newspapers not for the profit purposes and is only for charitable purpose. He stated that this society was founded by Late Lala Lazpat Rai, a revered and legendary freedom fighter in the Indian Independence movement. The assessee-society is one of India’s oldest and highly respected society. The Income Tax Department has granted registration u/s. 12A of the I.T. Act. To prove the same, he draw our attention towards page no. 66 of the Paper Book (PB) which is a copy of registration granted u/s. 12A at PB-66 and copy of Notification u/s. 80G of the Act at page 68-69 of the PB. He stated that the assessee is engaged in charitable activities on an India wide basis and running urban/rural/slum development centres, balwaris, primary / senior schools, centres, health centres, working women’s hostel, old age centres etc. and selling of a newspaper namely, ‘the Samaja’ in the State of Orissa. He has also stated that the provision of section 2(15) of the Act inserted w.e.f. 01.04.2009 is that the “advancement of any other object of general public utility” would no longer be considered as a charitable purpose if it involved carrying on 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 a fee or for any other consideration irrespective of the nature of use or application or retention of such income from such activity. To controvert the amendment to the provision of section 2(15) of the Act, Ld. Counsel for the assessee stated that assessee derives significant receipts from the activity of selling of newspapers, but all the receipts from the said newspaper activity are utilized solely towards the charitable initiatives undertaken on a PAN India wide basis and its day to day running and the balance if any is transferred to the General Fund/ Accumulated Surplus or Deficit which is duly accounted for in the Audited Balance Sheet of the Assessee. He further submitted that if the driving force is not the desire of earn profits but to do charity, the exception carved out in the first proviso to section 2(15) of the said Act would not apply. He further submitted that AO has inter alia alleged that the receipts on account of profits from newspaper publication have been earned in a systematic manner and are in the nature of trade, commerce and business. He further submitted that the assessee was never to derive any profits from the said activity. All the receipts generated from the said activity are utilized by the assessee towards achieving its objective of social, economic and political advancement of the country. It wa further submitted that it is a well settled principle that merely because a fee or some other consideration is collected or received by the assessee, it would not lose its character of having been established for a chartiable pruposes and in this behalf he relied upon various cases including the ITPO vs. DGIT( Exemptions) 53 taxmann.com 404 (Delhi) – Hon’ble Delhi High Court. It was further submitted that prior to the insertion of proviso to section 2(15) by Finance Act, 2008, the assessee was duly allowd the exemption claimed by it under section 11 of the Act. The return income of the assessee was duly and consistently accepted for the prior assessment years 2002-03 to 2004-05 and 2006-07 to 2009-10. The activities of the assessee were held as within the provisions of the Section 2(15) of the Act. Also the activities undertaken by the assessee in the State of Delhi and Odhisha have never changed. The assessee is till engaged in the activity of selling of newspaper in the State of Odhisa from the day it was bequeathed to it by Utkalmani Pandit Gopabandhu Das. In view of above, he requested to dismiss the appeal of the revenue by upholding the order of the Ld. CIT(A).
We have heard both the parties and perused the records especially the impugned order, Paper Book filed by the Assessee and the case laws relied therein as well as the relevant provisions of the Act on the issue in dispute. We find considerable cogency in the contention of the Ld. Counsel for the assessee that the assesse is a charitable institution and mere receipt of fees and income etc. cannot be said that the assessee is involved in any trade, commerce or business. The assessee is carrying the mandate of the Will of Late Shri Gopa Bandhu Dass in running the printing press and the newspaper and the income so generated is used for charitable purposes and apparently there is no profit motive in the activities of the assessee and as such it cannot be said that the assessee is involved in any trade, commerce or business and as such the mischief of the Proviso of section 2(15) is not apparently attracted. We further note that the Hon’ble Delhi High Court in the case of India Trade Promotion Organization vs. DGIT9E) 53 Taxmann.com 404 (Delhi) 2015 order dated 22.1.2015 has upheld the constitution validity of the proviso of section 2(15) which was under challenge being discriminatory in view of the Article 14 (Equality before law) of the Constitution of India but the Hon’ble High Court has read down the strict and literal interpretation of the Proviso of setion 2(15) and has held that mere receipt of fee or charge cannot be said that the assessee is involved in any trade, commerce or business and has accordingly allowed the relief to the aforesaid case. After considering all the facts and circumstances of the case, we are of the considered view that the assessee is a charitable and non-profit institution and also found that assessee is not involved in any trade, commerce or business activity which attracts the mischief of the Proviso of section 2(15) of the Act and the assessee has been enjoying the exemption u/s. 11(1) and also u/s. 10(23C)(iv) in the past and accordingly following the principle of consistency the AO was rightly directed to allow the exemption to the assessee u/s. 11(1) of the Act with all the consequential benefits by the Ld. CIT(A). Hence, we do not find any infirmity in the order of the Ld. CIT(A), therefore, we uphold the same and reject the grounds raised
by the Revenue and accordingly, dismiss the appeal filed by the Revenue.
6. In the result, the Revenue appeal is dismissed. The decision is pronounced on 17.09.2019. Sd/- Sd/- (ANADEE NATH MISSHRA) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL M EMBER Dated: 17.09.2019 “SRB” Copy forwarded to:
1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR