DCIT (E), NEW DELHI vs. M/S NATIONAL INTERNATE EXCHANGE OF INDIA, NEW DELHI

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ITA 2469/DEL/2016Status: DisposedITAT Delhi26 December 2017AY 2012-134 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that NIXI's activities were not in the nature of business, following previous Tribunal orders in the assessee's own case and a Delhi High Court decision. Therefore, the exemption under Section 11 was rightly allowed by the CIT(A).

What were the facts?

The assessee, National Internet Exchange of India (NIXI), was formed by the Government of India for promoting internet services and is registered under Section 25 of the Companies Act and Section 12AA of the Income Tax Act. The Assessing Officer (AO) held that NIXI's activities were commercial, making it ineligible for exemption under Section 11.

What were the issues?

Whether the activities of the assessee, NIXI, are commercial in nature, thereby attracting the proviso to Section 2(15) and disentitling it from exemption under Section 11.

Which sections of the Income-tax Act were involved?

Section 11,Section 12AA,Section 2(15)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, DELHI BENCH: ‘C’ NEW DELHI

Before: SHRI N.K. SAINI & SHRI K.N. CHARY

Hearing: 20.12.2017Pronounced: 26.12.2017

ORDER PER K. NARSIMHA CHARY, J.M. These two appeals relating to the assessment years 2010-11 & 2012-13 by the Revenue challenging the orders of the Ld. Commissioner of Income Tax (Appeals)-36, New Delhi (for short called as the “Ld. CIT (A)) on the following grounds of appeal:

1. “On the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in law in ignoring the fact that the activities of the assessee involve rendering of services in relation to carrying on of a commerce or business and hence, proviso to section 2(15) is clearly applicable in case of the assessee.

2.

The assessee craves leave to add, to alter or amend any ground of appeal

raised above at the time of hearing.”

2. Briefly stated facts are that National Internet Exchange of India (NIXI) was formed in 2003 by the Government of India under the Ministry of communication and Information Technology 1 & 2469/Del/2016 for the purpose of promotion and growth of internet services for the public. It is registered u/s 25 of the Company’s Act; on the basis of no profit no loss. The assessee is also registered u/s 12AA(1) of the Income Tax Act, 1961 (for short called as the “Act”) vide order dated 31.03.2009. The AO stated in the Assessment Order that the assessee is doing activities on commercial lines which are in the nature of business. Hence, the assessee is hit by the proviso to section 2(15). The whole of surplus was brought to tax by withdrawing exemption under section 11.

3.

In appeal Ld. CIT (A) followed the orders of the Tribunal in assessee’s own case for the assessment years 2004-05 and 2009- 10 and also the decision of the Hon’ble Jurisdictional High Court in India Trade Promotion Organization vs. DGIT (E), 53 Taxmann.com 404 (Delhi) 2015 (order dated 22.01.2015) and held since the assessee has been created by the Govt. of India for the promotion and growth of internet services for the general public and as such the assessee cannot involve in any commercial or business activity. He, therefore, allowed exemption u/s 11 of the Act to the assessee. The Revenue is, therefore, in this appeal before us.

4.

Ld. DR submitted that the assessee was doing activities on commercial lines which are in the nature of business, as such, the assessee is hit by the proviso to section 2(15) of the Act, but by ignoring this fact Ld. CIT (A) granted relief to the assessee. Per contra, it is the argument of the Ld. AR that earlier also when the assessee was denied of exemption u/s 11 of the Act, the matter had reached the level of the Tribunal for the assessment years 2004-05 and 2009-10 and the Tribunal granted relief to the 2 & 2469/Del/2016 assessee. Further Ld. CIT (A) while following the orders of the Tribunal also followed the decision of the Hon’ble Jurisdictional High Court in the case of India Trade Promotion Organization vs. DGIT (E) (supra), therefore, such an order cannot be interfered with.

5.

We have carefully gone through the record. Absolutely there is no dispute that the assessee is formed in 2003 by the Govt. of India under the Ministry of Communication and Information Technology for the promotion and growth of internet services of public and is registered u/s 25 of the Company’s Act and also registered u/s 12AA(1) of the Act. There is also no dispute that on a similar set off facts that the Tribunal in assessee’s own case for the assessment years 2004-05 and 2009-10 held that the activities of the assessee are not in the nature of business. We further find that the facts of this case are very much similar to the facts involved in India Trade Promotion Organization. We, therefore, find that the Ld. CIT (A) rightly followed the binding precedent of the Hon’ble Jurisdictional High Court and also the decisions of the Tribunal in assessee’s own case for the earlier years to hold that the activities of the assessee are not in the nature of the business and allowed exemption u/s 11 of the Act. We, therefore, find that the impugned order does not suffer any illegality or irregularity, as such, it cannot be interfered with. Accordingly, we find the grounds of appeal as devoid of merits and are liable to be dismissed.

6.

In the result, appeals of the Revenue are dismissed.

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