Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH “E”, NEW DELHI
Before: SMT. DIVA SINGH & SHRI R. K. PANDA
Department by : Ms. Shefal Swroop, CIT (DR) Assessee by : Shri Vishal Kalra, Adv. : 23-08-2018 Date of hearing : 10-09-2018 Date of pronouncement O R D E R PER BECNH : This appeal filed by the Revenue is directed against the order dated 08.07.2016 of the CIT(A)- 40 (Exemption), New Delhi relating to assessment year 2012-13. The assessee has filed the Cross Objection against the appeal filed by the Revenue. For the sake of convenience these were heard together and are being disposed of by this common order.
Facts of the case, in brief, are that the assessee is a company incorporated under the provisions of the Companies Act, 1956 on 12.10.2009. The assessee company obtained license u/s 25 of the Companies Act, 1956. The assessee company is registered u/s 12A of the I.T. Act, 1961 vide order No.DIT(E)/2011- 12/DEL-NR22004-13042012/24 dated 13.04.2012. The assessee filed its return of income on 29.09.2012 declaring Nil income. The return was accompanied with audit report dated 28.09.2012. During the course of assessment proceedings, the Assessing Officer observed that the objectives as per Memorandum of Association (MoA) are as under :-
“1. To promote commerce by undertaking operations with respect to livestock production, productivity enhancement and extension as under :- a. All insemination activities including production, purchase, sale delivery of semen, liquid nitrogen and other associated products; b. All nutrition activities including production and supply of cattle feed, mixture, nutraceuticals fodder, fodder seeds and other associated products; Ration Balancing on non commercial basis; 2. To undertake operations relating to promote cooperative strategy by carrying out all activities including setting up facilities relating to milk procurement processing transportation, marketing and quality assurance by itself and through dairy and other cooperatives, producer companies and other entities by providing technical managerial and financial support.
3. To collect, compile, analyze and disseminate relevant data/statistics, necessary for efficient management of all the livestock related activities.
4. To set up all kinds dairy and animal husbandry related infrastructure for producer companies and other cooperatives on build, operate and transfer basis (BOT).
5. Enhancing water and biomass availability through watershed management programmes and controlling green house gas emissions.
He, therefore, asked the assessee to explain under which limb of section 2(15) of the I.T. Act, 1961 the case falls and explain as to why it should not be hit by proviso to section 2(15) of the I.T. Act, 1961. Rejecting the explanation given by the assessee and observing that the assessee is carrying on commercial activities and governed by proviso to section 2(15) and, therefore, not entitled to the benefit of section 11 of the I.T. Act, the Assessing Officer rejected the claim of exemption u/s 11 and 12 and determined the total income of the assessee at Rs.19,05,14,430/-. While doing so, he observed that even if the assessee’s case is considered to be engaged in advancement of general public utility still the same is clearly covered by new proviso to section 2(15) of the I.T. Act.
Before the ld. CIT(A), it was submitted that the allegations made by the Assessing Officer are devoid of any merit and he has not brought out any facts/findings on record as to how the case of the assessee falls under the proviso to section 2(15) of the I.T. Act. It was submitted that since the assessee has Nil commercial receipts, therefore, the prerequisite requirement for application of first proviso to section 2(15) for having commercial receipt from carrying on trade, commerce and business activities is not satisfied in the present case. The assessee has successfully submitted point by point rebuttal to the allegations made by the Assessing Officer in the assessment order and has very strongly distinguished the facts of the case vis-à-vis case laws relied by the Assessing Officer in the assessment order. Further, it has been examined from audited financials and submissions made by the assessee that the only factual finding on which the Assessing Officer has concluded that the assessee is carrying on commercial activities is incurring of auditorium user charges and advertisement fees is completely incorrect as no such expenditure has been incurred by assessee during the assessment year concerned.
The assessee also submitted that the Assessing Officer has failed to appreciate the facts of the case while framing the assessment order. The Assessing Officer has brought the entire receipts of Rs.19,05,14,430/- to tax without allowing any expenses of Rs.18,90,60,296/- incurred on activities/ objectives defined in its MOA. Also even when the Assessing Officer was not in agreement of assessee’s submission in respect of claim u/s 11 of the I.T. Act, it should have allowed deduction of Rs.18,90,60,296/- incurred during the relevant assessment year.
It was submitted that while framing the assessment order, the Assessing Officer did not consider that for the immediately preceding year, the ld. CIT(A) has granted favourable order in the case of the assessee on same facts holding the activities of the assessee to be entirely of charitable nature. It was submitted that during the course of assessment proceedings, vide letter dated 27.02.2015, the Assessing Officer was duly provided with detailed note on principles emerging from the order of the ld. CIT(A). However, the same was completely ignored by the Assessing Officer while passing the assessment order of assessment year 2012-13 u/s 143(3) on 13.03.2015. Further, the assessee had the same source of receipts and utilization of funds during the immediately succeeding year i.e. assessment year 2013-14 where the assessee’s claim of section 11 was accepted by the Assessing Officer while assessing assessee’s income u/s 143(3) of the I.T. Act.
Based on the argument advanced by the assessee, the ld. CIT(A) allowed the claim of exemption u/s 11 on the ground that the Assessing Officer has not brought in any facts/findings on record to substantiate as to how the assessee’s case falls under the proviso to section 2(15) and on what basis its activities are in nature of trade, commerce and business and not charitable. He observed that observation given by the Assessing Officer that the assessee is incurring of auditorium user charges and advertisement fees which amounts to carrying on commercial activities is incorrect which is evident from the audited financial statements. He further noted that his predecessor in assessment year 2011-12 has held that the activities of the assessee are charitable in nature and the Assessing Officer himself in assessment year 2013-14 accepted the activities of the assessee as charitable in nature. Therefore, the assessment order passed by the Assessing Officer is erroneous and devoid of any merits. He accordingly allowed the claim of exemption u/s 11 of the I.T. Act.
Aggrieved with such order of the ld. CIT(A), the Revenue is in appeal before the Tribunal.
The ld. DR strongly supported the order of the Assessing Officer.
The ld. counsel for the assessee on the other hand heavily relied on the order of the ld. CIT(A). He submitted that the ld. CIT(A) in the immediately preceding assessment year has decided the issue in favour of the assessee and the Revenue has not challenged the order of the ld. CIT(A). Further, in assessment year 2013-14 the Assessing Officer himself has treated the activities of the assessee as charitable in nature. Therefore, in absence of any contrary material brought on record the order of the ld. CIT(A) should be upheld and the grounds raised by the Revenue should be dismissed.
We have considered the rival arguments made by both the sides and perused the material available on record. We find the Assessing Officer in the instant case denied the claim of exemption u/s 11 and 12 of the I.T. Act on the ground that the activities of NDDB (i.e. the assessee) involved the rendering of services in relation to carrying on commercial or business activities and is clearly covered by the new proviso to section 2(15) of the I.T. Act and, therefore, the assessee cannot be treated to be engaged in charitable activities.
We find the ld. CIT(A) allowed the claim of exemption u/s 11 and 12 on the ground that in the immediately preceding assessment year, the ld. CIT(A) has allowed the claim of exemption u/s 11 and the Revenue has not challenged the same. Further, in the immediately succeeding assessment year the Assessing Officer himself has allowed the claim of exemption u/s 11 by treating the activities of the assessee as charitable in nature. Under these circumstances, we do not find any infirmity in the order of the ld. CIT(A) since in the immediately preceding assessment year the ld. CIT(A) has allowed the claim of exemption u/s 11 which has attained finality and the Assessing Officer himself in the subsequent assessment year has treated the activities of the assessee as charitable in nature and has allowed the claim of exemption u/s 11 of the I.T.
Act, therefore, the order of the ld. CIT(A) is upheld and the grounds raised by the Revenue are dismissed.
C.O. No.50/Del/2018 (By Assessee) :
The only effective ground raised by the assessee reads as under :-
“That on facts and circumstances of the case and in law, the assessing officer (“A.O.”) against the order of Commissioner of Income-tax (Appeals)- 40 (Exemption), New Delhi [“CIT(A)”], dated July 8, 2016, passed under section 250(6) of the Act, for the assessment year (“A.Y.”) 2012-13.”
After hearing both the sides, we find the only grievance of the assessee is regarding short computation of interest u/s 244A by computing interest for the period till issuance of refund instead of the period till receipt of refund. We, therefore, restore this issue to the file of the Assessing Officer with a direction to compute correct interest u/s 244A as per law. Needless to say, the Assessing Officer shall give due opportunity of being heard to the assessee while calculating such interest. The ground raised by the assessee in the Cross Objection is accordingly allowed for statistical purposes.
In the result, the appeal filed by the Revenue is dismissed and the Cross Objection filed by the assessee is allowed for statistical purposes. Order pronounced in the open Court on this 10th September, 2018.