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Income Tax Appellate Tribunal, DELHI BENCH “D”, NEW DELHI
Before: SHRI H.S. SIDHU & SHRI O.P. KANT
Date of Hearing: 31.05.2016 Date of Order : 02-06-2016
ORDER PER H.S. SIDHU : JM This Appeal filed by the Revenue is directed against the order passed by the Ld. Commissioner of Income Tax (Exemption), New Delhi for the assessment year 2011-12.
The grounds raised in the Revenue’s Appeal read as under:-
“ 1. That on the facts and circumstances of the case and in law, the ld. CIT(A) has erred in holding that the activities of the assessee are charitable in nature and that assessee is eligible for exempton u/s. 11 of the Act by ignoring the fact that the activities of the assessee of conducting examination by charging fees are essentially carrying the characteristics of business.
2. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the activities
of the assessee are charitable in nature and that assessee is eligible for exemption u/s. 11 of the Act by ignoring the fact that the assessee is not providing formal schooling which the essence of education.
That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the assesee
is an educational institution within the meaning of Section 2(15) of the Income Tax Act, 1961 and in directing the AO to allow exemption as claimed by the Assessee.
4. That the appellant craves leave to add, to alter or amend
any ground of appeal, raised above at the time of hearing.
3. The brief facts of the case are that Assessee filed Return of income on 17.8.2011 declaring total income at Rs. NIL after claiming application of income u/s. 11 & 12 of the Income Tax Act, 1961 (hereinafter referred as the Act). The return was processed u/s. 143(1) of the Act. The case was selected under CASS for scrutiny. Notice u/s. 143(2) dated 3.8.2012 was issued and duly served upon the assessee. In response to the same, Assessee’s Authorised Representative attended the hearing from time to time and the discussed the case with the AO and also produced books of accounts which has been seen on test check basis. Thereafter, the AO vide his order dated 25.03.2014 passed u/s. 143(3) of the I.T.
Act, 1961 has assessed total income of the assessee at Rs. 2,53,59,589/- by treating it as entire surplus as per Income & Expenditure Account which was taxed under section 13(8) of the Act and not allowed any benefit of Section 11 & 12 of the Act.
Aggrieved with the aforesaid order of the AO, the assessee filed appeal before the Ld. CIT(E) who vide impugned order dated 03.06.2015 has allowed the appeal of the assessee and held that apparently 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 as held by the ITAT during the AY 2009-10 and accordingly, allowed the relief or exemption u/s. 11(1) as a charitable institution and accordingly directed the AO to allow the exemption u/s11(1) with all the consequential benefits.
5. Against the order of the learned CIT(E) the Revenue is in appeal before the Tribunal.
6. Ld. DR relied upon the order of the AO and reiterated the contentions raised in the grounds of appeal. It was submitted by the learned DR that the AO has rightly assessed the income vide his order dated 25.03.2014 passed u/s. 143(3) of the I.T. Act, 1961 at Rs. 2,53,59,589/- by treating it as entire surplus as per Income & Expenditure Account which was taxed under section 13(8) of the Act and also rightly not allowed the benefit of Section 11 & 12 of the Act to the assessee. Therefore, he submitted that the order of the AO may be sustained.
7. On the contrary, the Ld. Counsel of the Assessee relied upon the order of the Ld. CIT(E) and prayed that the same may be upheld.
We have heard both the parties and perused the relevant records available with us. We find that Ld. CIT(E) has elaborately discussed the issue and gave his finding vide para no. 4.5 to 5 at page no. 2 to 3 of his impugned order. For the sake of convenience, the said relevant finding of the Ld. CIT(E) is reproduced below:-
“4.5 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 apparently applicable as the assessee is not involved in any trade, commerce or business and as such there is no proper justification for denying the exemption u/s. 11(1). There is also merit in the submissions of the assessee that mere receipt of fees and charges etc. does not mean that the assessee is involved in any trade, commerce or business etc.
4.6 Recently the Hon’ble High Court in the case of India Trade Promotion Organisation vs.
DGIT(E), 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 Section 2(15) and has held that mere receipt of fee or charge cannot be said that the assesse 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.
4.7 After considering all the facts and circumstances of the case, I am of the view that apparently the assessee is not apparently involved in any trade, commerce or business and as such the mischief of Proviso of Section 2(15) is not applicable as held by the Hon’ble
Tribunal during the AY 2009-10 as referred above and as such assessee may be allowed the relief or exemption u/s. 11(1) as a charitable institution and accordingly the AO is directed to allow the exemption u/s. 11(1) with all the consequential benefits.
In the result, the appeal of the assessee is allowed.”
8.1 We gone through the finding of the Ld. CIT(E) and find that the assessee had been enjoying the exemption u/s. 11(1) but the same was denied by the AO during the AY 2009-10 by invoking the mischief of the proviso of section 2(15) mainly on the ground that the assessee was involved in trade, commerce or business as the assessee was receiving fees from the students but the appeal of the assessee was allowed by the ld. CIT(A)-XXI, (old), New Delhi vide his order dated 26.11.2012 and the Departmental Appeal has also been dismissed by the ITAT vide the order dated 16.5.2014 in ITA No. 907/Del/2013. There was apparently no scrutiny assessment during the AY 2010-11 and as such the return of the assessee claiming the exemption u/s. 11(1) was allowed u/s. 143(1) of the Act. The AO has similarly denied the exemption u/s. 11(1) during the present AY i.e. 2011-12 and similarly, Ld. CIT(E) has allowed the exemption to the assessee and held that the assessee is actually a charitable institution and is working in the field of education and the case of the assessee is also covered by the order of the Tribunal for the AY 2009-10. We find considerable cogency in the finding of the Ld. CIT(E) in reversing the action of the AO by relying on the judgment of the Tribunal in assessee’s own case for the AY 2009-10 and also relying upon the judgment of the Hon’ble Jurisdictional High Court in the case of India Trade Promotion Organisation vs. DGIT(E) (2015) 371 ITR 333 (Delhi) and has rightly held that the proviso to section 2(15) is not applicable to the assessee as the assessee is not involved in any trade, commerce or business. For the sake of clarity, we are reproducing the relevant finding of the Tribunal passed vide order dated 16.5.2014 in in assessee’s own case for the AY 2009-10, which the Ld. CIT(E) has followed in the present case, because the issue in dispute in the AY 2011-12 is squarely covered by this decision.
"5. We have heard the rival contentions and perused the material available on record. It is undisputed that assesses books of accounts are audited and upheld by Id.
AO. No discrepancy or question about genuineness of the books and affairs of the assessee have been called into question. ln earlier assessments uls 143(3) assesses activities have been held to be educational and charitable activities and benefits of sec 11 have been allowed to the assessee. Registration under sec 12A has not been withdrawn. It has been demonstrated by the assessee's counsel that nature of its educational activities, modalities of working, methodology of affiliation with CBSE and other Boards, fee structure, examination pattern remain same as in earlier year.
5.1. Ld. AO has taken a divergent view on the assessee educational activities by holding that they are no more educational activities as regular classes are not held.
AO's objections have been listed above. Hon'ble Delhi
High court in the case of Council for Indian schools certificate examination has squarely held that assessee though being only in conducting examinations is still to be regarded as educational institution.
5.2. Hon'ble Supreme court in Assam Book Production case (supra) held that board though being only in the publication of books falls within the meaning of educational institution. It is not necessary to hold regular classes to be regarded as an educational institution.
Hon'ble Supreme Court in American Hotels and lodging association case (supra) has squarely held that publication of curriculum, reproduction of text books, faculty development programmes are to be held as educational activities.
5.3. In view of these clear judgments we find no merit in the order of AO to give a restricted meaning to the scope of meaning of term educational activities. Thereby AO's necessity of holding of regular classes or wholesome educational activities to be only eligible to be called education activities eligible for benefits uls 11 cannot be sustained.
5.4. It is a settled law that a charitable or educational institution can charge fees for rendering services, it is so as the surplus is accumulated which is further to be applied for charitable objects of the institution. In case of winding up, surplus has not dwell upon share holders or relatives, therefore, the AO’s allegations in this behalf cannot be sustained. Consequently adverse inference drawn by AO is without any basis.
5.5 In view of the above facts, circumstances and catena of binding judgements of Hon’ble Supreme Court and Jurisdiction Delhi High Court supporting CIT(A)’s order we see no infirmity of the order of the Ld. CIT(A).
In the result revenue appeal is dismissed.”
In the background of the aforesaid detailed discussions and respectfully following the precedents as aforesaid, we are of the view that Ld. CIT(E) has passed a well reasoned order which does not need any interference on our part, hence, we uphold the same.
Accordingly, the grounds raised by the Revenue are dismissed.
In the result, the appeal filed by the Revenue stand dismissed.
Order pronounced in the Open Court on 02/06/2016.