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Before: SHRI G. D. AGRAWAL & SMT SUCHITRA KAMBLE
The grounds of appeal are as under:-
1. “On the facts and in the circumstances of the case, the CIT(A) has erred in disallowing the additions made on the ground that the assessee is providing specific services to its members and its activities are purely and essentially of commercial nature. Based on the Annual Subscription paid by the members they are given voting rights according to their contributors. Further the amount of subscription fees received is dependent on the turnover of the associate member implying thereby that there is a direct nexus between the specific services provided by the association and the achievement of gross turnover by the members of NASSCOM. Hence, the amount received from the members should be taxable.
2. “The CIT(A) has erred in disallowing the additions made on the grounds of expenditure incurred on Global Trade Development Programme which is not in confirmation with societies objectives.” 3. “The order of the CIT(A) is not acceptable in view of the fact that the assessee’s activities would be taxable u/s 28(iii) of the Act and the assessee is not eligible for exemption u/s 11 & 12 of the Act.”
3. The grounds of appeal are as under:-
“1. “That the Commissioner of Income Tax (Appeals) [CIT(A) ] erred on facts and in law in upholding the action of the Assessing Officer ,
3 & 5406/DEL/11 in treating payment of Rs.30,00,000/- made to M/s Ray and Keshwan Design Associate (P) Ltd. for availing professional services as application of income towards the objects of the appellant society.
1.1. The CIT(A) erred on facts and in law in observing that the appellant failed to establish the reasonableness and nexus of the aforesaid payment to M/s Ray and Keshwan Design Associates (P) Ltd. with the objectives of the appellant.
The Ld. AR submitted that the Ground No. 1 & 3 of the Revenue’s appeal is covered by the decision of the Hon’ble Delhi High Court in assessee’s own case i.e. DIT Exemption Vs. National Association of Software and Services Companies [2012] 345 ITR 362 Delhi in favour of assessee. The relevant paragraph of the said judgment is as under (plasitum 34 at page No. 386):-
“………Whereas the annual subscription fee is a recurring receipt, receivable by the assessee trust by mere efflux of time irrespective of whether any services are rendered or not to the members, what is contemplated in Section 28(iii) is the receipt of fees from particular members to whom specific services have been rendered by the trust. The annual subscription fee is paid merely to keep the membership alive on yearly basis. The distinction between the two being clear, and in the absence of any evidence to show that the assessee receives fees from the members as a “quid pro quo” for specific services rendered to them, we are unable to hold that the Tribunal was 4 & 5406/DEL/11 wrong in holding that the annual subscription fees was not assessable under the section. The substantial question of law is thus answered in the affirmative, in favour of the assessee and against the Revenue.”
The Ld. DR did not refute the said submissions made by the Ld. AR. In view of this Ground No. 1 & 3 of the Revenue’s appeal are dismissed.
As relates to Ground No. 2, the same is decided against the assessee and as quoted in plasitum 31 of the said judgment.
“…We, therefore, hold that the amount of Rs.38,29,535/- spent by the assessee trust in Hanover, Germany cannot be considered as application of the income of the trust in India for charitable purposes. The substantial question of law is thus answered in favour of the assessee in so far as the payment of taxes under the VDIS is concerned and in favour of the Revenue so far as the expenditure incurred outside India (Germany) is concerned.”
The Ld. DR did not controvert the said finding and submits that the same is applicable in the present case.
We have gone through the said judgment and in view of submissions made on behalf of both the parites, Ground No. 2 is allowed in favour of Revenue.
As relates to the assessee’s appeal, the payment of professional services rendered by the assessee company needs to be verified by the Assessing Officer, as there was no agreement or evidence verified by the Assessing Officer at the time of the assessment proceedings. In fact there was no mention in CIT(A)’s order about the agreement as well and whether the same was verified or not is not clear. Thus, the said issue is remanded back to the Assessing Officer. In view of this, assessee’s appeal is partly allowed for statistical purpose.
In result, both the appeals are partly allowed for statistical purpose.
The order is pronounced in the open court on 8th of April, 2016.