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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC-3’, NEW DELHI
(Appellant) (Respondent) Appellant by : Sh. Rajesh Kumar, Sr.D.R. Respondent by : Sh. Kapil Goel, Adv. ORDER
This is an appeal filed by the Revenue directed against the order of the Ld.CIT(A)-40, New Delhi dt. 15.9.2015 dated pertaining to the Assessment Year (A.Y.) 2011-12 on the following grounds . “1. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in holding that the assessee society is a charitable organization despite the fact that the assessee society was doing business within the meaning of amended provisions of S.2(15) of the Income Tax Act, 1961 (the Act).
2. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in allowing the appeal of the assessee by not appreciating the fact that the income received by the assessee are contractual in nature. 1
3. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in ignoring the fact that TDS has also been deducted by the parties on these contractual payment but the assessee has wrongly treated these payments as sponsorship receipts.
4. The appellant craves leave to add, alter or amend any ground of appeal raised above at the time of hearing.”
Facts in brief:-The facts are brought out at para 3 and 3.1 of Ld.CIT(A)’s order, which are extracted herein below for ready reference.
“3. The facts emanating from the order of the AO and the submissions of the assessee is that the assessee is a society registered under the Societies Registration Act, 1860 and is also registered u/s 12AA(1) of the IT Act, 1861 dt. 31.1.2003 as a charitable institution. The assessee also enjoys the benefit of S.80G vide the order dated 17/06/2009. The Society for the Promotion of Indian Classical Music and Culture amongst Youth (SPIC MACAY) is a non-profit organization which was established by Dr. Kiran Seth (Padmashree awardee) in 1977 at IIT Delhi for promotion of lndian classical music, Indian classical dance and other aspects of Indian culture. It seeks to foster the exchange of traditional Indian values and to generate awareness of the cultural traditions and heritage of India specifically amongst the youth, In, order to achieve its goals, SPIC MACAY organizes concerts, lectures, demonstrations, informal discussions and seminars specifically at-college and 2 school levels which are hosted by various local chapters of the organization. Since past 35 years of its existence, SPIC MACAY has strived hard to sensitise the youth with the Country's rich and composite heritage. SPIC MACAY has chapters in almost all the states of the Country including the Andaman and Nicobar Islands. There are about 350 chapters in the Country covering almost all the states of the country.
3.1 The main source of income of the assessee is, from donations, grant-in-aid, sponsorship fee, interest, income from sound system, foreign contribution, for conducting programmes, dividend and membership fee etc. The assessee has filed the nil return of income for the AY 2011-12 and the case was taken up for scrutiny. During the assessment proceedings the AO has invoked the mischief of the proviso of, section 2(15) and denied the exemption u/s 11(1) and mainly on the ground that the assessee is neither in the field of education, nor in the field of medical relief or relief to the poor and the activities carried out by the assessee fall within the scope of 'Advancement of any other object of general public utility' as per Sec. 2(15) of I.T. Act and all the receipts are commercial in nature and receiving the income/professional income which are of commercial in nature and accordingly the AO has invoked the proviso of Section 2(15) and denied the exemption u/s 11(1) to the assessee vide the order of the AO.”
On appeal the First Appellate Authority held as follows. “3.6 It is, also submitted that the AO had denied the exemption u/s 11(1) to the assessee during the A.V 2009-10 & 2010-11 mainly on the ground that the assessee is not doing any charitable activity and is involved in trade commerce or business but the Ld. CIT(A) has allowed the appeal to the assessee vide the appellate orders,dated 17/05/2013 & 18/03/2015 and has held that the assessee is not involved in any trade, commerce or business and involved in trade; commerce or business. It is submitted that the precedence and consistency must be followed in this year also. 3.7 I have considered the order of the AO and the submissions of the assessee and I find considerable merit in the submissions of the assessee that the mischief of Proviso of section 2(15) is not applicable as the assessee is not involved in any trade, commerce or business and the activity of the appellant are identical in nature and found to be fully covered by above mentioned decision as in the instant case also. The activities of the assessee is in the nature of music and other cultural activities which is advancement in the nature of general public utility and not involved, in trade, commerce or business. The assessee is very much a charitable institution and is very much eligible for exemption u/s 11(1) and the AO has not made out any specific case to show that the assessee is involved in any trade, commerce or business to attract the mischief of the Proviso of section ,2(15).
3.8 The Hon'ble Delhi High Court in the case of India Trade Promotion Organisation vs, DGIT(E), 53 Taxmann.com 404 (Delhi) 2015 (order dated 22/01/2015) 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 section 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 ITPO case vide Para 58 and 59 of the order. 3.9 After considering all the facts and circumstances of the Case I am of the view that the assessee is not involved in any trade, commerce or business and as such the mischief of Proviso of section 2(15) is not applicable and the cases relied on by the assessee are also applicable in the case of the assessee and the case of the assessee is also covered by the assessee's own case for the A.V 2009-10 & 2010-11 as referred above and following the precedence and consistency the AO is directed to allow the exemption u/s 11(1) with all the consequential benefits.”
Aggrieved the Revenue is in appeal before me.
After hearing rival contentions I find that the A.O. is not justified in denying exemption u/s 11(1) of the Income Tax Act, 1961 (the Act) to the assessee on the ground that it is involved in trade, commerce or business and hence it falls within the mischief of Proviso to S.2(15) of the Act. The 5 assessee promotes exchange of traditional Indian values and generates awareness of the cultural traditions and heritage of India specifically amongst the youth. For achieving these goals SPICMACAY organizes activities, at college and school levels which are hosted by various local Chapters of the Organisation. In my view the Ld.CIT(A) was right in holding that, mere receipt of fees or some other amounts, does not mean that the assessee is involved in any trade, commerce or business. He rightly relied on the decision of the Chennai Bench of the ITAT in the case of Hansadwari vs. DIT(E) (2012) 19 Taxman.com 10, which held that advancement of traditional music and culture and conducting music programmes for that purpose, could never be considered as an activity in the nature of trade, or commerce or business u/s 2(15) of the Act. In the earlier years also this argument of the assessee was accepted by the Ld.CIT(A). In my view the Ld.CIT(A) has rightly applied the decision of the Jurisdictional High Court in the case of India Trade Promotion Organisation vs. DGIT(E) (supra) and granted relief to the assessee.
On the issue of the finding that, tax has been deducted at source on certain payments and hence the assessee should be considered as doing business, I find that Kolkata ‘ A’ Bench of the ITAT in the case of M/s Asset Payments Organisation vs. ITO in vide its order dt. 19th October, 2012 has held as follows. “ As far as the allegation of Trust have deducted at source from payments to the assessee and for this reason, the receipt is to 6 be taken as taxable receipt, it is only elementary that conduct on the part of the person making payment cannot determine character of receipt in the hand of recipient. That apart, it is also a fact of life that sometimes tax payers err on the side of excessive caution and deduct taxes as a measure of abundant caution. The mere deduction of tax at source by person making the payment in our humble understanding, cannot lead to the conclusion that receipt was taxable in nature. It is too naïve to the accepted or to be even given a serious consideration. The factors relied upon by the authorities below, in rejecting assessee’s plea, are not germane to the context and devoid of legally sustainable merits. The plea of the assessee for tax exemption on the ground of mutuality, therefore, must succeed. We uphold the same.”
6.1. Respectfully following the same, we dismiss the appeal of the Revenue.
In the result the appeal of the Revenue is dismissed.
Order pronounced in the Open Court on 29th September, 2016.