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Income Tax Appellate Tribunal, DELHI BENCHES : “A” NEW DELHI
Before: SHRI H.S.SIDHU, J.M. & SHRI J.SUDHAKAR REDDY, AM
O R D E R PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER
These two appeals are filed by the Revenue directed against the order of the Ld.Commissioner of Income Tax (Appeals)-XXI, New Delhi dated 30th November, 2012 for the Assessment Year (A.Y.) 2009-10 and 2010-11. The A.Y. 2009-10 C.O. 55/Del/13 (In ITA 645/Del/13) ITA 549/Del/15 A.Y. 2010-11 Apparel Export Promotion Council, New Delhi Cross Objection has been filed by the assessee in ITA 645/Del/13 for the A.Y. 2009-10.
Facts in brief: The assessee is a company registered under section 25 of the Companies Act 1956, as a non-profit institution with the approval of the Central government for the promotion of export of garments from India. It is registered under section 12 A (a) of the Income Tax Act, 1961 (the Act) w.e.f. 18.05.1979. The assessee has been claiming exemption under section 11 of the Act from the A.Y. 1979-80 to 199-91 and exemption was granted u/s 11 of the Act. It was only during the A.Y. 1991-92 that the A.O. held the that the assessee is not entitled to exemption under section11 of the Act, as it was carrying on business. On appeal the Income Tax Appellate Tribunals held that the assessee is entitled to exemption under section11 of the Act. Subsequently an amendment was brought to Section 11 (4A) of the Act and the assessee was required to maintain separate books of account. The A.O. again denied exemption under section11 of the Act. On appeal the issue was decided in favour of the assessee. The Hon’ble Delhi High Court upheld the order of the ITAT in a judgement which is reported at 244 ITR 736. The same was the case for the assessment year 1993–94. Further the assessee received entrance fee and membership fee. It has claimed that these receipts are exempt on the principle of mutuality. This issue was also resolved in favour of the assessee from the Assessment Years 1992-93 to the Assessment Year 1997-98 by the Jurisdictional High Court. For the Assessment Years 1998-99 to the Assessment Years 2008-09 the Assessing Officer accepted the claim of the assessee that the income in question is exempt under section11 of the Act. During the impugned Assessment Year 2009–10, the Assessing Officer held that the assessee is a charitable organisation which falls under the category “advancement of any other object of general public utility” as defined u/s 2(15) read with Section 11 of the Act and that the newly inserted proviso to Section 2(15) of the Act is attracted in this case and the assessee will not be eligible for exemption under section11 of the Act as it is carrying on business. He held A.Y. 2009-10 C.O. 55/Del/13 (In ITA 645/Del/13) ITA 549/Del/15 A.Y. 2010-11 Apparel Export Promotion Council, New Delhi that the assessee has been rendering services in relation to trade, commerce business for the consideration, the receipts of which exceeds Rs. 10 Lacs. He concluded that the assessee’s activities neither qualify as “charitable activity” nor covered under the “concept of mutuality”. He concluded that this income is therefore, assessed as per the normal provisions of the Act. Aggrieved the assessee carried the matter in appeal. 2.1. The First Appellate Authority called for the remand report from the Assessing Officer after receiving written submissions along with affidavits from the assessee. Thereafter he concluded that the issue as to whether the assessee is entitled to exemption u/s 11 of the Act is no more res integra, as the Hon’ble Delhi High Court has resolved the issue in favour of the assessee. As there is no change in facts and circumstance of the case he allowed ground No.
On principle of mutuality the Ld. First Appellate Authority followed the binding decision of the Tribunal in the assessee’s own case for the Assessment Years 2002-2003, and 2003 –04, as well as A.Y. e 2004 –05, 2005– 6, wherein it is held that entrance fee and subscription should not be included in the assessee’s income. On ground No. 5 which is against the treatment of miscellaneous income by the AO he held that the main object of the assessee has already been resolved as charitable in nature and hence exemption under section11 has to be granted. On the issue of depreciation he applied the judgement of the Jurisdictional High Court in the case of Vishwa Jagriti Mission, reported at 20112-TIOL-271-HC-Del-IT and granted relief. On the issue of contribution of Rs. 1.50 course to Apparel HR Development Society the Ld.CIT directed the A.O. to allow the claim after proper verification.
Aggrieved the Revenue is in appeal before us 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 allowing depreciation of Rs.3,30,97,036/- which tantamount to double deduction and not appreciating the assessment framed by the A.O. A.Y. 2009-10 C.O. 55/Del/13 (In ITA 645/Del/13) ITA 549/Del/15 A.Y. 2010-11 Apparel Export Promotion Council, New Delhi
2. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in allowing Rs.25,92,927/- under misc. income treated by the AO as receipts from members as rendering services for consideration which was on sound footing and appreciating the action of the A.O.
3. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in directing the AO to allow Rs.1.50 crores as payment to the APEC HR Development Society, disallowed by the AO after proper verification.
4. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in allowing the assessee benefit of S.11 of the Income Tax Act, 1961.
5. The appellant craves leave to add, to alter or amend any ground of appeal raised above at the time of hearing.”
4. We have heard Shri KK Jaiswal, Ld.DR on behalf of the Revenue and Shri Kidus Puri, Ld.Counsel for the assessee. On a careful consideration of the facts and circumstances of the case and a perusal of material on record and orders of authorities below, case laws cited, we hold as follows.
5. Ground No. 1 is admittedly covered in favour of the assessee by the Jurisdictional High Court in the case of Vishwa Jagriti Mission (supra). The First Appellate Authority has rightly applied this binding decision. We find no infirmity in the same. In the result we dismiss ground No. 1 of the Revenue.
6. Ground No. 2 is whether miscellaneous income earned by the assessee can be considered as receipts from rendering services, in relation to trade, commerce or business, as specified in the proviso to section 2(15) of the Act. The receipts in question are listed out at page 3 of the assessment order. A perusal of the same does not lead us to the conclusion that the assessee is rendering services which are in the nature of trade, commerce or business, as specified in the proviso to section 2 (15) of the Act. The jurisdictional High Court in the assessee’s own case has held that the dominant objects of the assessee is charitable in nature and that the assessee is not carrying on any trade, commerce or business. The decision of the ITAT for the Assessment Year 1991–92 was upheld by the Hon’ble High Court. The ITAT held as follows : A.Y. 2009-10 C.O. 55/Del/13 (In ITA 645/Del/13) ITA 549/Del/15 A.Y. 2010-11 Apparel Export Promotion Council, New Delhi “It is clear that in treating council as a trading entity, the Ld.Revenue authorities did not keep in mind the distinction that exists between dominant object of Institution and its activities to achieve that object. They also did not appreciate that fashion shows, seminars etc. are required to be carried on educated people on export and economically it has to be carried on business purpose lines by charging fee from the participants to meet administrative and other expenses of the council. It does not mean that any activity in which loss is not suffered is being carried on for profit. Activity carried on business principles does not mean that the assessee was carrying on business. It is clear from material on record that all activities of the assessee are directed towards achieving its main object of promoting export on ready made garments from India. It did not carry any activity for earning profit and, therefore, it has to be held that the assessee did not carry on ‘business’ as the term is understood in common parlance. The assessee, therefore, is a public charitable institute. For the purpose of granting exemption, the dominant or min object is to be seen even if it is found that at some point of time the persons at the helm of affairs did not observe rules and acted in a manner not authorized by rules that would not make any difference to the claim of the assessee. A breach of a duty by public or private holder of an office cannot change the character of office or institution. Thus even if it is proved that certain favours were done by the Executive Committee in allotment of quota that would not make the assessee a non-charitable institution. For all the above reasons, we hold that assessee is a charitable institution to which provisions of section11 are applicable. The provisions of section 28(iii) or of s.11(4A) are not applicable to this case as the assessee did not carry on any business. The case law cited on behalf of the revenue is not applicable as factual foundations to apply these decisions do not exist in this case.” 6.1. There is no change in facts and circumstances of the case. The objects of the assessee are charitable in nature and that the assessee did not carry on any activity with an object to carry profit. As there is no profit motive, the question of attracting the proviso to section 2(15) does not arise. Hon’ble A.Y. 2009-10 C.O. 55/Del/13 (In ITA 645/Del/13) ITA 549/Del/15 A.Y. 2010-11 Apparel Export Promotion Council, New Delhi Delhi High Court has in the following cases laid down the positions of law that governs the proviso to section to 2(15) of the Act. i. GIS vs. DCIT (Del) 360 ITR 138 (Del.) ii. ICAI vs. DIT (Del.) 35 Taxmann.com 140 iii. India Trade Promotion vs. DGIT (E) 2015 (53 taxmann.com 404 (Del.) Applying the propositions laid down in all these cases to the facts of this case we uphold the order of the Ld.CIT(A) on this issue. Thus we uphold the findings of the First Appellate Authority and dismiss this ground.
7. On the grievance of the revenue on ground No. 3 is devoid of merit, for the reason that the First Appellate Authority has asked the A.O. to verify this claim of the assessee and dispose off the same in accordance with law. Hence this ground is dismissed
8. Ground No. 4 is against the allowing of benefit under section11 of the Act to the assessee. As this issue was already considered and resolved in favour of the assessee, in its own case, for the earlier Assessment Years by the Jurisdictional High Court, this ground is dismissed.
In the result the both appeals of the Revenue are dismissed.
As we have dismissed the quantum appeal by the Revenue for the A.Y. 2009-10, the assessee’s Cross Objection which is filed in support of the order of the Ld.CIT(A) need not be separately disposed of. Hence assessee’s Cross Objection 55/Del/13 (In ITA 645/Del/13) is dismissed as such. A.Y. 2009-10 C.O. 55/Del/13 (In ITA 645/Del/13) ITA 549/Del/15 A.Y. 2010-11 Apparel Export Promotion Council, New Delhi
In the result both the appeals by the Revenue as well as the assessee’s C.O. are dismissed. Order pronounced in the Open Court on 30th March, 2016.