Dy. DIT(E), New Delhi V. Apparel Export Promotion Council, New Delhi

ITA 110/DEL/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9897 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 25-08-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 12-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIDUR PURI; S P PURI
• Assessee Lawyers: A K
• Keywords: Capital asset; Opportunity of being heard; Capital expenditure; Set aside

Judgement Text

ITA NO. 3497/DEL/08 & 110/DEL/09 A.Y. 2005-06 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 3497/DEL/2008 A.Y. 2005-06 APPAREL EXPORT PROMOTION COUNCIL, VS. ADDL. D IR. OF INCOME TAX (EXEMPTION) A-223, OKHLA INDUSTRIAL AREA, RANGE-1, NEW D ELHI PHASE-1, NEW DELHI 110 020 I.T.A. NO. 110/DEL/2009 A.Y. 2005-06 DY. DIR. OF INCOME TAX (EXEMPTION) VS. APPAREL EXPORT PROMOTION COUNCIL, INV. CIR-I, NEW DELHI A-223, OKHLA INDUSTRIAL ARE A, PHASE-1, NEW DELHI 110 020 [APPELLANT] (RESPONDENT) APPELLANT BY : S/SHRI VIDUR PURI AND S.P. PURI, CA RESPONDENT BY : SHRI AK PANDEY, CIT(DR) ORDER PER SHAMIM YAHYA, AM THESE CROSSED APPEALS BY THE ASSESSEE AND THE REVE NUE EMANATE OUT OF THE ORDER OF THE CIT(A) DATED 23.10.2008 FOR THE ASSESSMENT Y EAR 2005-06. ITA NO. 3497/DEL/2008 2. THE ISSUE RAISED IN THE GROUNDS OF APPEAL IS TH AT THE LD. CIT(A) ERRED IN HOLDING THAT THE CONDITIONAL GRANT RECEIVED FROM THE GOVERNM ENT OF INDIA OF RS. 15,97,64,037/- IS INCOME DERIVED FROM PROFIT HELD TRUST. ITA NO. 3497/DEL/08 & 110/DEL/09 A.Y. 2005-06 2 3. IN THIS CASE THE ASSESSEE IS A COMPANY INCORPOR ATED UNDER SECTION 25 OF THE COMPANIES ACT, 1956 AS NON-PROFIT INSTITUTION WITH T HE APPROVAL OF THE CENTRAL GOVERNMENT FOR THE PROMOTION OF EXPORT OF GARMENTS F ROM INDIA. THE ASSESSEE IS ALSO REGISTERED UNDER SECTION 12A(A) OF THE INCOME TAX A CT, 1961. DURING THE YEAR THE ASSESSEE HAS RECEIVED GRANT FROM GOVERNMENT OF INDI A TOWARDS CAPITAL EXPENDITURE OF APPAREL TRAINING AND DESIGN CENTRE AND FOR CONSTRUC TION OF APPAREL INTERNATIONAL MART. THE SAID GRANT WAS TO BE UTILIZED ONLY FOR SPECIFIE D CAPITAL EXPENDITURE FOR APPROVED PROJECTS AND THE UNSPENT BALANCE WAS TO BE REFUNDED BACK TO THE GOVERNMENT OF INDIA ALONGWITH INTEREST THEREON @ 6%. DURING THE YEAR T HERE REMAIN UNUTILIZED BLANCE AMOUNTING TO RS. 15,97,64,037/- OUT OF THE GOVERNMENT OF INDIA GRANTS AND WAS SHOWN AS LIABILITY IN THE BALANCE SHEET. THE ASSESSING OFFICER WAS OF THE OPINION THAT THESE GRANTS HAVE BEEN RECEIVED FROM THE GOVERNMENT OF IN DIA AND THE PAYMENTS ARE MADE THROUGH THE BANK ACCOUNT OF THE ASSESSEE. HENCE, H E WAS OF THE OPINION THAT THE ASSESSEE HAD ACQUIRED CAPITAL ASSET AND HENCE IT IS AN INCOME DERIVED FROM THE PROFIT HELD UNDER TRUST AND CANNOT BE TREATED AS LIABILITY . 4. ON ASSESSEES APPEAL THE LD. CIT(A) CONFIRMED TH E ACTION OF THE ASSESSING OFFICER. 5. AGAINST THIS ORDER THE ASSESSEE IS AN APPEAL BE FORE US. 6. IT HAS BEEN CONTENDED THAT THE ASSESSEE HAS NO U NCONDITIONAL RIGHT TO UTILIZE THE GRANT THAT HAS BEEN ONLY AUTHORIZED TO USE THE SAME AS PER THE GOVERNMENT OF INDIA DIRECTIONS. IT HAS FURTHER BEEN PLEADED THAT THIS CANNOT BE AN INCOME OF THE ASSESSEE AS THE GRANT IS NOT FREELY AVAILABLE FOR UTILIZATION. 7. IN THIS REGARD, THE ASSESSEE HAS PLACED RELIANCE UPON THE FOLLOWING CASE LAWS:- (A) SUKHDEO CHARITY ESTATE, LADNU VS. CIT, RAJASTHAN , JAIPUR (1994) 149 ITR 470 (RAJ). (B) NIRMAL AGRICULTURE SOCIETY VS. INCOME TAX OFFI CER (1999) 71 ITD 152 (HYD) ITA NO. 3497/DEL/08 & 110/DEL/09 A.Y. 2005-06 3 (C) THAKUR RAGHUNATH JI MAHARAJ AND ANR. VS. RAMESH CHANDRA (2001) 5 SCC 18 (D) STATE OF UTTAR PRADESH VS. BANSI DHAR AND OTHER S (1974) 1 SCC 466. 8. HENCE, IT WAS FINALLY PLEADED THAT THE UNUTILIZE D GRANT CANNOT BE TREATED AS VOLUNTARY UNCONDITIONAL DONATION AND CANNOT BE THE INCOME OF THE ASSESSEE. 9. THE LD. DR ON THE OTHER HAND SUPPORTED THE ORDER S OF THE AUTHORITIES BELOW. 10. WE HAVE HEARD BOTH THE COUNSELS AND PERUSED THE RECORDS. ADMITTEDLY, THESE GRANTS HAVE BEEN RECEIVED FROM THE GOVERNMENT OF IN DIA. THIS HAS BEEN SAID TO BE RECEIPT FOR SPECIFIC PURPOSE AND UNUTILIZED BALANCE IS TO BE RETURNED BACK. THE MATTER NEEDS TO BE EXAMINED ON THE BASIS OF THE TERMS AND CONDITIONS OF THE GRANT. ONLY ELABORATE EXAMINATION OF THE TERMS AND CONDITIONS AND THE VERIFICATION AS TO WHETHER THE SAME HAVE BEEN COMPLIED OR NOT COMPLIED BY THE ASSESSEE CAN ENABLE TO DRAW ANY CONCLUSION, AS TO WHETHER THE ASSESSEE HAS ADHERED TO THE CONDITIONS STIPULATED IN THE GRANT, WE FIND THAT THIS EXERCISE HAS NOT BEEN DO NE BY THE AUTHORITIES BELOW. THE ASSESSING OFFICER HAS LACONICALLY HELD THAT THIS I S AN INCOME FROM PROPERTY UNDER TRUST WITHOUT REFERRING TO OR EXAMINING THE TERMS AND C ONDITIONS UNDER WHICH THE GRANT HAS BEEN RECEIVED. THE LD. CIT(A) ALSO UPHELD THE DECI SION OF THE ASSESSING OFFICER WITHOUT GIVING ANY REASONING. SUCH AN APPROACH IN OUR CON SIDERED OPINION IS NOT APPROPRIATE. 11. HONBLE APEX COURT IN THE CASE OF KAPURCHAND SHR IMAL VS. CIT, 131 ITR 451 HAS HELD THAT IT IS THE DUTY OF THE APPELLATE AUTHORITY TO CORRECT THE LACUNAE IN ORDER OF AUTHORITY BELOW AND ISSUE APPROPRIATE DIRECTIONS WH EN NEEDED. IN OUR OPINION, THIS MATTER NEEDS TO BE SET ASIDE TO THE FILE OF THE ASS ESSING OFFICER TO EXAMINE IN DETAIL AS TO WHAT WERE THE TERMS AND CONDITIONS OF THESE GR ANTS AND TO WHAT EXTENT THE ASSESSEE HAD COMPLIED WITH THE SAME. THE ASSESSING OFFICER MAY ALSO EXAMINE HOW THIS AMOUNT WAS SUBSEQUENTLY DEALT WITH BY THE ASSESSEE. ACCOR DINGLY, THE ASSESSING OFFICER SHALL ITA NO. 3497/DEL/08 & 110/DEL/09 A.Y. 2005-06 4 DECIDE AS PER LAW. NEEDLESS TO ADD THAT THE ASSESSE E SHOULD BE GIVEN ADEQUATE OPPORTUNITY OF BEING HEARD. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 110/DEL/2009 13. THE GROUNDS RAISED IN THE APPEAL OF THE REVENUE READS AS UNDER:- A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 18,47,000/- AS ENTRANC E FEE AND RS. 6,78,24,829/- AS SUBSCRIPTION MONEY; B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 1,62,53,088/- REPRESEN TING FOREIGN EXHIBITION EXPENSES; C) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 4,77,199/- REPRESE NTING ENTERTAINMENT EXPENSES. 14. WE HAVE HEARD BOTH THE COUNSELS AND PERUSED T HE RECORDS. BOTH THE COUNSELS FAIRLY AGREED THAT THE ISSUE INVOLVED ARE COVERED BY THE DECISION OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR EARLIER YEARS. A) AS REGARDS THE MATTER PERTAINING TO ENTERTAINMEN T EXPENDITURE, THE MATTER HAD TRAVELLED TO THE HONBLE DELHI HIGH COURT. THE HO NBLE HIGH COURT NOTED THAT THE ASSESSEE WAS REQUIRED TO INTERACT WITH THE FOREIGN DELEGATES ETC . FOR THE PURPOSE OF GENERATING EXPORTS AND HAD TO CALL MEETINGS OVER LUNCH AND DINNERS. FURTH ER, THE HONBLE APEX COURT IN THE CASE OF SA BUILDERS V/S CIT 288 ITR 1 WAS ALSO REFERRED. HEN CE THE HONBLE HIGH COURT UPHELD THE DECISION OF THE TRIBUNAL WHICH WAS IN FAVOUR OF THE ASSESSEE. B) REGARDING THE MEMBERSHIP SUBSCRIPTION, THIS TR IBUNAL IN ITA NO. 4085 VIDE ORDER DATED 17.3.2004 HAS FOUND THAT THE ISSUE REGA RDING MEMBERSHIP SUBSCRIPTION RECEIVED BY THE ASSESSEE WAS INTERALIA COVERED BY THE DECISION OF THE APEX COURT IN CIT V/S BANKIPUR CLUB LTD. 226 ITR 97. HENCE, IT WAS HELD THAT THE MEMBE RSHIP FEES AND SUBSCRIPTION FEES ARE NOT TAXABLE ON THE PRINCIPLE OF MUTUALITY. IN THE SAME DECISION THE TRIBUNAL HAD FOUND THAT THE ITA NO. 3497/DEL/08 & 110/DEL/09 A.Y. 2005-06 5 AMOUNT RECEIVED ON ACCOUNT OF ENTRANCE FEES WAS ALS O NOT INCLUDEABLE IN THE TOTAL INCOME AS THE TRIBUNAL RIGHT FROM A.Y. 1980-81 TO 1990-91 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. C) AS REGARDS THE ISSUE OF EXPENDITURE INCURRED ON FOREIGN DELEGATION, THIS TRIBUNAL IN ITA NO. 1270 VIDE ORDER DATED 31.3.2009 HAS FOUN D THAT THE SAID ISSUE WAS COVERED IN FAVOUR OF THE ASSESSEE IN ASSESSEE OWN CASE IN EARL IER YEARS. 15. IN THE BACKGROUND OF THE AFORESAID DISCUSSION A ND PRECEDENTS, ADHERING TO THE DOCTRINE OF STARE DECISES , WE UPHOLD THE ORDER OF THE CIT(A ) AND DECIDE THE ISSUE AGAINST THE REVENUE. 16. IN THE RESULT, THE APPEAL FILED BY THE REVENU E IS DISMISSED. 17. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH AUGUST, 2009. SD/- SD/- [C.L. SETHI] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 28 TH AUGUST, 2009 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES