ACIT(E), CIRCLE-2(1), NEW DELHI vs. QUALITY COUNCIL OF INDIA, NEW DELHI

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ITA 1659/DEL/2018Status: DisposedITAT Delhi15 July 2021AY 2014-155 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 the assessee's activities were charitable in nature and that the proviso to Section 2(15) was not applicable. The Tribunal followed previous decisions in the assessee's own case and similar cases, which had granted exemption. Therefore, the CIT(A)'s order granting exemption was upheld.

What were the facts?

The assessee, Quality Council of India, an autonomous body, filed a return declaring nil income. The Assessing Officer (AO) made an addition of Rs. 6,20,24,427/- on the grounds that its receipts from trade, commerce, or business exceeded the monetary limit prescribed in the proviso to Section 2(15). The CIT(A) granted relief to the assessee.

What were the issues?

Whether the assessee's activities fall within the definition of 'charitable purpose' under Section 2(15) of the Income Tax Act, considering the receipts from trade, commerce, or business.

Which sections of the Income-tax Act were involved?

Section 2(15),Section 11,Section 12

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, DELHI BENCH “F” NEW DELHI

Before: SHRI N.K. BILLAIYA & SHRI MAHAVIR PRASAD

For Respondent: DR Assessee by None
Hearing: 13.07.2021

आदेश /O R D E R PER MAHAVIR PRASAD, J.M.

1.

This appeal has been filed on behalf of the Revenue against the order of Ld. CIT(A) No. 325/2016-17/1567 order dated 04.12.2017. The Revenue has taken the following grounds of appeal: -

1. “On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the exemption u/s 11 & 12 of the Income Tax Act, 1961 to the assessee ignoring the fact that the assessee is doing activities which are in nature of trade, commerce or business and since the receipts from trade, commerce or business exceed the monitory limit prescribed in the proviso to section 2(15), hence exemption u/s 11 & 12 shall not be available to the assessee.

2. On the basis of facts and circumstances of the case and in law,

I.T.A.No.1659/Del/2018 the Ld. CIT(A) has erred in deleting the total addition of Rs. 6,20,24,427/- made by the AO in the assessment order. 3. The appellant craves leave to add, to alter or amend any ground of appeal raised above at the time of hearing.”

2.

Facts of the case are that the Quality Council of India, an Autonomous Body was set up by Ministry of Commerce & Industry, Government of India and registered as non-profits with its own Memorandum of Association and is governed by a council with equal representation of Government, Industry and Commerce. The Council plays power role at the national level in adoption and adherence to quality standards in all years of activities including education, healthcare, preservation of environment production, governance, social sector, infrastructure sector and such other areas of organized activities that have significant wherein equipment, quality of life and well being of citizen of India arising out of penalty order dated 03.10.2016. In this Income tax return declaring nil income was filed by the assessee. After serving information and other details were called from the assessee society and from income and expenditure account of the assessee it is seen that assessee has shown following receipts:

i) Interest on Bank deposits Rs. 1,08,11,857/- ii) Quality Application Assessment & Rs. 22,56,36,486/- Accreditation fees iii) Quality Conclave Seminar Receipts Rs. 33,54,069/- iv) Honorarium, Sale of Quality Literature Rs. 2,45,211/- & Misc. receipts v) Improvement in Health Services Rs. 2,57,14,551/- Initiatives vi) Membership Fees Rs. 12,52,847/-

I.T.A.No.1659/Del/2018

The assessee has shown following major expenditures against the above receipts : i) Salary Allowance & Benefit Rs. 6,19,49,992/- ii) Administration & other Expenses Rs. 12,42,77,807/- iii) National Quality Campaign Rs. 1,68,20,065/- iv) Depreciation Rs. 33,49,552/-

3.

Thereafter, a show-cause notice was issued by the Assessing Officer to explain why its receipt may not be hit by proviso of section 2(15) of Income Tax Act. Section 2(15) contemplates as under:

“(15) charitable purpose includes relief of the poor, education, medical relief, [preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest], and the advancement of any other object of general public utility: [Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the 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 fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity, unless – (i) Such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility, and (ii) The aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year;]”

4.

In its reply assessee submitted that assessee is not having any profit motive and its activities are not business activities. Assessee further submitted that proviso of section 2(15) is not applicable to the assessee but Ld. AO did not agree with the contention of the assessee and made addition of Rs. 62024427/-. Against the assessment order assessee preferred first statutory appeal before the Ld. CIT(A) who 3

I.T.A.No.1659/Del/2018 granted relief to the assessee holding that the QCI activities are of charitable purpose u/s 2(15) of the Income Tax Act and allowed exemption in AY 2009-10, 2010-11, 2011-12, 2012-13 and 2013-14 and further held that in ITAT in in appellant’s own case it was ruled out that on the basis of Court’s judgment in India Trade Promotion Organization vs. DGIT (2015) 374 ITR 333 and in the case of Institution of the Chartered Accountants Vs. DGIT(Exemption) 2013 (358 ITR 91) (Del.) that mere circumstances of collection of such amounts did not results in the assessee losing their essential character of being established for charitable purpose and held that since the case if similar to those for the earlier assessment year, respectfully following the decision of Hon’ble Delhi High Court and Hon’ble ITAT (Delhi) in Appellant’s own case for AY 2009-10 Assessing Officer was directed to allow exemption with all consequential benefits.

5.

In the case of the assessee similar activities were treated as charitable for AY 2009-10, 2010-11, 2011-12, 2012-13 and 2013-14 and relief had been granted by the Delhi High Court and the ITAT in assessee’s own case so in our considered opinion the Ld. CIT(A) has passed the detailed and reasoned order and same does not require any kind of interference at our end.

I.T.A.No.1659/Del/2018

6.

In the result, the appeal filed by the Revenue is dismissed.

Order pronounced in the open court on 15/07/2021

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