M/s. Nabadigant Educational Trust, Bhubaneswar V. ITO, Ward-2(1), Bhubaneswar, Bhubaneswar

ITA 1/CTK/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7211 (ITAT-CUTTACK)
• Duration Of Justice: 2 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 24-01-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 01-01-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Assessee Lawyers: B D OJHA
• Keywords: Charitable institution
• Section: 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK SMC BENCH, CUTTACK BEFORE SHRI N.S SAINI, ACCOUNTANT MEMBER ITA NO.01/CTK/2015 ASSESSMENT YEAR : 2007 - 08 M/S. NABADIGANT EDUCATIONAL TRUST, PLOT NO.NO 2/17, IRC VILLAGE, BHUBANESWAR. VS. ITO, WARD 2(1), BHUBANESWAR. PAN/GIR NO. AAATN 3196 L (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI B.D.OJHA, AR REVENUE BY : SHRI D.K.PRADHAN, DR DATE OF HEARING : 24 /01/ 2017 DATE OF PRONOUNCEMENT : 24 /01/ 2017 O R D E R THIS IS AN APPEAL FILED BY THE ASSESSEE AGA INST THE ORDER OF CIT(A) - BERHAMPUR, CAMP - BHUBANESWAR , DATED 27.10.14 , FOR THE ASSESSMENT YEAR 2007 - 08 . 2. THE SOLE ISSUE INVOLVED IN THIS APPEAL IS THAT THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER FOR TREATING THE INCOME F ROM SALE OF LAPTOPS AS BUSINESS NOT INCIDENTAL TO THE CARRYING OUT THE OBJECTIVES OF THE 2 ITA NO.01/CTK/2015 ASSESSMENT YEAR :2007 - 08 ASSESSEE TRUST ALTHOUGH THE SALE OF LAPTOPS HAS BEEN MADE TO THE STUDENTS OF THE COLLEGE RUN BY THE ASSESSEE AND NOT TO OUTSIDE PARTIES. 3. I HAVE HEARD THE RIVAL SUBM ISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A TRUST REGISTERED UNDER SECTION 12A OF THE ACT. IT RUNS VARIOUS EDUCATIONAL INSTITUTIONS INCLUDING TWO ENGINEERING COLLEGES AT BHUBANESWAR. IN THE RETURN OF INCOME FILED FOR THE IMPUGNED ASSESSMENT YEAR ON 31.10.2007, THE ASSESSEE DISCLOSED NIL INCO ME. DURING THE ASSESSMENT PROCEEDINGS, ON VERIFICATION OF FINANCIAL STATEMENT, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS SOLD LAPTOPS WORTH RS.33,27,500/ - , WHICH WAS PURCHASED BY IT FOR RS.27,87,000/ - . THE ASSESSING OFFICER HELD THAT PURCHASE AND SALE OF LAPTOPS IS A BUSINESS ACTIVITY NOT INCIDENTAL TO THE MAIN OBJECTIVES OF THE ASSESSEE AND, ACCORDINGLY, HELD IT AS BUSINESS TRANSACTION AND BROUGHT THE SAME TO TAX. 4. ON APPEAL, THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER OBSERVING AS UNDER: 5.3 I HAVE CAREFULLY CONSIDERED THE MATTER. AS MENTIONED BY THE AO IN HIS REPORT, THE AVERAGE PURCHASE PRICE OF A LAPTOP WAS RS.3 5,540/ - WHEREAS THE AVERAGE SALE PRICE WAS RS.46,215/ - . IN OTHER WORDS, THE PROFIT ON EACH LAPTOP IS MORE THAN 30% . THIS CAN HARDLY BE CALLED A CHARITABLE ACTIVITY, INCIDENTAL TO THE OBJECTIVE OF THE APPELLANT TO RUN AN EDUCATIONAL INSTITUTION. BY TAKING ADVANTAGE OF ITS CAPTIVE STUDENT COMMUNITY, THE APPELLANT, IN A PURE AND SIMPLE BUSINESS TRANSACTION, HAS PROCURED LAPTOPS IN BULK AND SOLD THE SAME TO THE STUDENTS AT A HANDSOME 3 ITA NO.01/CTK/2015 ASSESSMENT YEAR :2007 - 08 PROFIT. I, THEREFORE, FIND NO REASON TO DIFFER FROM THE FINDING OF THE AO THAT THE ABOVE TRANSACTION IS A PURE AND SIMPLE BUSINESS TRANSACTION AND, ACCORDINGLY, CONFIRM THE ACTION OF THE AO IN BRINGING TO TAX THE SURPLUS FROM THIS TRANSACTION U/S. 11(4A). THE GROUNDS ARE, ACCORDINGLY, DISMISSED. 5. BEFORE ME, LD A.R. REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND SUBMITTED THAT THE PROFIT FROM SALE OF LAPTOPS TO THE STUDENT S OF THE COLLEGE WAS INCIDENTAL TO THE CHARITABLE ACTIVITIES CARRIED ON BY THE ASSESSEE TRUST AND, THEREFORE, WAS EXEMPT U/S.11 OF THE ACT. 6. ON THE OTHER HAND, LD D.R. SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 7. ON A QUERY BY THE BENCH TO THE LD A.R. OF THE ASSESSEE THAT WHY THE LAPTOPS WERE SOLD TO THE STUDENTS AT A HIGHER PRICE THAN THE COST PRICE THEREBY MAKING PROFIT OF RS.5,48,500/ - , LD A.R. OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE PURCHASED LAPTOPS IN BULK AND, THEREFORE, GOT A HIGHER DI SCOUNT FROM THE DEALER OF THE LAPTOPS. THE LAPTOPS WERE SOLD TO THE STUDENTS AT THE RETAIL PRICE OF THE LAPTOPS IN THE MARKET. WHEN QUESTIONED BY THE BENCH THAT WHY CHARITY WAS NOT DONE TO THE STUDENTS BY SELLING THE LAPTOPS AT THE COST PRICE BY THE ASSE SSEE, AS THE ASSESSEE IS A CHARITABLE TRUST, LD A.R. HAD NO ANSWER FOR THE SAME. AS NO MATERIAL HAS BEEN BROUGHT ON RECORD BY LD A.R. OF THE ASSESSEE TO SHOW THAT THE PROFIT OF RS.5,48,500/ - EARNED BY THE ASSESSEE WAS INCIDENTAL TO THE CARRYING ON THE CHA RITABLE ACTIVITY OF THE ASSESSEE TRUST, I FIND 4 ITA NO.01/CTK/2015 ASSESSMENT YEAR :2007 - 08 NO GOOD REASON TO INTERFERE WITH THE ORDER OF LD CIT(A), WHICH IS HEREBY CONFIRMED. HENCE, GROUNDS OF APPEAL OF THE ASSESSEE ARE DISMISSED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED . OR DER PRONOUNCE D IN THE OPEN COURT ON 24 / 01/2017 IN THE PRESENCE OF PARTIES. ( N.S SAINI) A CCOUNTANT MEMBER CUTTACK; DATED 24 /01 /2017 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, ASST.REGISTRAR, ITAT, CUTTACK DATE INITIAL 1. DRAFT DICTATED ON 24 /01/17 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 24 /01/11 (DICTATION PAD HAS BEEN ENCLOSED ALONG WITH ORIGINAL FILE) SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/P S 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE H.C. 9. DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER. 1. THE APPELLANT : M/S. NABADIGANT EDUCATIONAL TRUST, PLOT NO.NO 2/17, IRC VILLAGE, BHUBANESWAR. 2. THE RESPONDENT. ITO, WARD 2(1), BHUBANESWAR 3. THE CIT(A) ,BHUBANESWAR 4. PR. CIT , BHUBANESWAR. 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY// 5 ITA NO.01/CTK/2015 ASSESSMENT YEAR :2007 - 08