Quality Circle Forum of India, Hyd, Secunderabad V. DDIT (Exemptions)-III, Hyd, Hyderabad

ITA 1193/HYD/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6257 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 09-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A SITARAMA RAO
• Assessee Lawyers: M V ANIL KUMAR
• Keywords: Depreciation; Charitable institution
• Section: 12A; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1193/HYD/2016 ASSESSMENT YEAR: 2011-12 QUALITY CIRCLE FORUM OF INDIA, HYDERABAD. PAN AAAAQ0008 P VS. DY. DIRECTOR OF INCOME-TAX, EXEMPTIONS III, HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI M.V. ANIL KUMAR REVENUE BY : SHRI A. SITARAMA RAO DATE OF HEARING : 20-12-2016 DATE OF PRONOUNCEMENT : 04-01-2017 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX(A) - 9, HYDE RABAD, DATED 31/03/2016 FOR AY 2011-12. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSE SSEE FILED ITS RETURN OF INCOME FOR AY 2011-12 ON 29/09/2011 CLAIM ING EXEMPTION U/S 11 OF THE INCOME-TAX ACT, 1961 (IN SHORT THE A CT) DECLARING A TOTAL INCOME OF RS. NIL THE ASSESSING OFFICER REJECTED TH E CLAIM OF EXEMPTION U/S 11 ON THE BASIS OF PROVISO TO SECTION 2(15). THEREAFTER, THE ASSESSING OFFICER ASSESSED THE TOTAL INCOME AT RS. 2,56,61,942/- BY ADDING EXCESS OF INCOME OVER EXPENDITURE AND DIS ALLOWING THE DEPRECIATION. 2 ITA NO. 1193/H/16 QUALITY CIRCLE FORUM OF INDIA, HYD. 3. ON APPEAL, THE CIT(A) CONFIRMED THE ACTION OF TH E AO. 4. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX, HYDERABAD, IS AGAINST THE LAW, WEIGHT OF EVIDENCE A ND PROBABILITIES OF CASE. 2. YOUR ASSESSEE SUBMITS THAT THE CIT(A) OUGHT TO H AVE APPRECIATED THE FACT THAT YOUR ASSESSEE IS CARRYING ON EDUCATION AND TRAINING ACTIVITIES, BASED ON THE VARIOUS CASE LAWS CITED BEFORE CIT(A), WITHIN THE MEANING OF EDUCATION UNDE R SECTION 2(15) OF THE INCOME TAX ACT, 1961. 3. CIT (A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE ASSESSEE WAS ALLOWED EXEMPTION DURING PAST 30 YEARS AND THER E IS NO CHANGE IN OBJECTIVES AND ACTIVITIES OF THE ASSESSEE . 4. CIT (A) ERRED IN CONCLUDING THAT THERE IS NO ELE MENT OF CHARITY IN THE ACTIVITIES OF YOUR ASSESSEE, WHEREAS YOUR AS SESSEE SINCE INCEPTION IN 1982, WAS GRANTED EXEMPTION UNDER SECT ION 11 ON THE BASIS THAT ITS OBJECTIVES AS WELL AS ITS ACTIVI TIES ARE CHARITABLE WITHIN THE MEANING OF SECTION 2(15) OF THE INCOME T AX ACT, 1961. 5. THE CIT(A) AS WELL AS THE ASSESSING OFFICER ERRE D IN LAW AND FACTS OF THE CASE THAT YOUR ASSESSEE WAS IN FACT CA RRYING ON EDUCATION AND TRAINING TO WHICH PROVISO TO SECTION 2(15) ARE NOT APPLICABLE AND NOT HAVE DENIED EXEMPTION U/S 11 OF THE INCOME TAX ACT, 1961. 6. CIT (A) ERRED IN LAW AND ON FACTS OF THE CASE IN DISALLOWING DEPRECIATION CLAIMED BY YOUR ASSESSEE. 7. THE ASSESSEE CRAVES LEAVE TO ADD TO, AMEND OR MO DIFY THE ABOVE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIM E OF HEARING OF THE APPEAL, IF IT IS CONSIDERED NECESSARY. 5. BEFORE US, THE LD. AR SUBMITTED THAT THE ISSUES UNDER CONSIDERATION IS SQUARELY COVERED BY THE DECISION O F THE COORDINATE BENCH IN ASSESSEES OWN CASE FOR AY 2010-11 IN ITA NO. 1340/HYD/2014, ORDER DATED 28/09/2016, A COPY OF WH ICH IS PLACED ON RECORD. 6. ON THE OTHER HAND, THE LD. DR NEITHER CONTROVERT ED THE SUBMISSIONS OF THE ASSESSEE NOR BROUGHT ANY CONTRAR Y DECISION ON THIS ISSUE. 3 ITA NO. 1193/H/16 QUALITY CIRCLE FORUM OF INDIA, HYD. 7. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL FACTS ON RECORD. AS SUBMITTED BY THE LD. AR OF THE ASSESS EE, SIMILAR ISSUE CAME UP FOR CONSIDERATION BEFORE THE ITAT IN ASSESS EES OWN CASE FOR AY 2010-11, WHEREIN THE BENCH HAS HELD AS UNDER: 9. CONSIDERED THE SUBMISSIONS OF BOTH THE COUNSELS AND MATERIAL FACTS ON RECORD AS WELL AS THE ORDERS OF R EVENUE AUTHORITIES. THERE IS NO DISPUTE ON THE FACT THAT T HE TRUST IS FUNCTIONING SINCE 1982 AND 12A REGISTRATION IS GRAN TED AS WELL AS ENJOYING EXEMPTION U/S 11. THERE IS NO CHANGE IN TR UST NOR METHOD OF ACCOUNTING SINCE INCEPTION. AFTER AMENDME NT TO SECTION 2(15) OF THE ACT, THE DEPARTMENT IS RELOOKI NG AT THE OBJECTS AND FUNCTIONING OF THE TRUST. AFTER ANALYZI NG THE SUBMISSIONS, THE QUESTION RAISED BEFORE US IS THAT WHETHER THE TRUST, NO DOUBT CHARITABLE, FALLS IN THE SECOND LIM B OF DEFINITION OF CHARITABLE PURPOSE CONTAINED IN SECTION 2(15) OF TH E ACT, I.E. EDUCATION OR FOURTH LIMB I.E. ADVANCEMENT OF ANY OT HER OBJECT OF GENERAL PUBLIC UTILITY. 9.1 TO ADJUDICATE THE ISSUE IN DISPUTE, WE ANALYSE THE JUDICIAL PRONOUNCEMENTS, WHICH ARE AS BELOW: 9.2 IT WAS HELD IN BUREAU OF INDIAN STANDARDS VS. D GIT (EXEMPTION) [2013] 212 TAXMANN 210 (DEL.), ACTIVITI ES OF BUREAU OF INDIAN STANDARDS IN PRESCRIBING OF STANDARDS OF GOODS/ARTICLES AND ENFORCING THOSE STANDARDS THROUGH ACCREDITATION AND CONTINUING SUPERVISION THROUGH INSPECTION ETC., CAN NOT BE CONSIDERED AS TRADE BUSINESS OR COMMERCIAL ACTIVITY MERELY BECAUSE TESTING PROCEDURES INVOLVES CHARGING OF FEE S. IN THE PRESENT CASE ALSO MERELY CHARGING FEES DOES NOT TAK E AWAY THE CHARITABLE NATURE OF THE TRUST. 9.3 ON THE ISSUE OF EDUCATION ACTIVITIES, AS HELD I N DIT(*E) VS. AMHEDABAD MANAGEMENT ASSOCIATION [2014] 47 TAXMANN.COM 162 (GUJ.), FROM CIRCULAR NO. 11/2008, DTD. 19/12/2008, IT APPEARS THAT THE NEWLY INSERTED PROV ISO TO SECTION 2(15) OF THE ACT WILL APPLY TO ENTITIES WHOSE PURPO SE IS ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY AND HENCE SUCH ENTITIES WILL NOT BE ELIGIBLE FOR EXEMPT ION U/S 11 OR 10(23)(C) OF THE ACT IF THEY CARRY ON COMMERCIAL AC TIVITIES AND IF THE AGGREGATE VALUE OF THE RECEIPTS FROM THE ACTIVI TIES IS TEN LAKH RUPEES OR MORE IN THE RELEVANT PY. THE PROVISO WI LL NOT APPLY IN RESPECT OF THE FIRST THREE LIMBS OF SECTION 2(15) I .E. RELIEF TO THE POOR, EDUCATION OR MEDICAL RELIEF. THUS, WHERE THE PURPOSE OF A TRUST OR INSTITUTION IS RELIEF TO THE POOR, EDUCATI ON OR MEDICAL RELIEF, IT WILL CONSTITUTE CHARITABLE PURPOSE EVE N IF IT INCIDENTALLY INVOLVES THE CARRYING ON OF THE COMMERCIAL ACTIVITI ES. IN THE PRESENT CASE, THE AO AND CIT(A) HAVE HELD THAT THER E EXISTS 4 ITA NO. 1193/H/16 QUALITY CIRCLE FORUM OF INDIA, HYD. INCOME OVER EXPENDITURE AND THE ASSESSEE IS CHARGIN G CERTAIN FEES FOR ACTIVITIES CARRIED ON BY IT, WHICH AMOUNTS TO CARRYING ON OF COMMERCIAL ACTIVITIES, HENCE, DENIED THE EXEMPTI ON U/S 11. WE ARE OF THE VIEW THAT MERE CHARGING OF FEES FOR CARR YING ACTIVITIES WILL NOT LOOSE THE CHARACTER OF CHARITY AND IN THIS CASE, THE DEPARTMENT HAS ALREADY GRANTED REGISTRATION TREATIN G THE ACTIVITIES AS CHARITABLE BUT HAS NOT DECLARED UNDER WHICH ACTIVITY WHETHER UNDER EDUCATION OR GENERAL PUBLIC UTILITY. FROM THE ASSESSMENT ORDER, THE ASSESSEE HAS CHARGED FEE TO VARIOUS ACTIVITIES LIKE SEMINARS, PARTICIPATION FEES OF PAR TICIPANTS SHOWS THAT ASSESSEE HAD ENGAGED IN SOME SORT OF LECTURES/ TRAINING RELATING TO THE OBJECTS OF THE TRUST I.E. EDUCATION AND TRAINING TO THE BOTTOM LINE EMPLOYEES IN QUALITY AND IMPROVEMEN T METHODS. IT WAS NOT CONTROVERTED BY THE DEPARTMENT. IT WAS O NLY OBJECTED TO CHARGING OF FEES. IN OUR CONSIDERED VIEW, THE AS SESSEE HAS CARRIED ON THE ACTIVITIES OF IMPARTING TRAINING TO THE BOTTOM LINE EMPLOYEES AND THERE IS NO ELEMENT OF PROFIT IN THE SAID ACTIVITY AS THE SURPLUS GENERATED OUT OF THE ACTIVITIES IS AGAI N APPLIED FOR THE CHARITABLE ACTIVITY ONLY. MOREOVER, THE ASSESSEE QU OTED VARIOUS CASE LAWS IN SUPPORT OF ITS CLAIM THAT THEY ARE IN THE FIELD OF EDUCATION. WHEN ANALYSED CLOSELY, ALL THE INSTITUTI ONS I.E. AHMADABAD MANAGEMENT ASSOCIATION, ICAI, PETERS EDU CATION SOCIETY, ARE EDUCATING PEOPLE MORE ON STRUCTURED MA NNER AND ACKNOWLEDGING BY ISSUING PROPER CERTIFICATES. IN TH E PRESENT CASE, WE ARE NOT SURE IF SUCH ACTIVITIES ARE BEING CARRIED ON BY THE ASSESSEE. WE ARE NOT INCLINED TO ADJUDICATE WHE THER THEY FALL INTO EDUCATION ACTIVITIES IN THE ABSENCE OF RELEVAN T MATERIAL BEFORE US. HOWEVER, ASSESSEE IS IMPARTING TRAINING TO THE BOTTOM LIKE EMPLOYEES, WHICH MAY BE SIMILAR TO EDUCATION. HENCE, IN OUR VIEW, THE ASSESSEE IS INVOLVED IN CARRYING ON OF CH ARITABLE ACTIVITIES AND NOT IN ANY COMMERCIAL ACTIVITIES AS HELD BY THE AO. THUS, AO CANNOT DENY THE BENEFIT U/S 11 OF THE ACT. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE IN THIS REGARD A RE ALLOWED. AS THE FACTS AND GROUNDS ARE MATERIALLY IDENTICAL I N THE YEAR UNDER CONSIDERATION TO THAT OF AY 2010-11, RESPECTFULLY FOLLOWING THE CONCLUSIONS DRAWN THEREIN, WE DIRECT THE AO TO ALLO W THE ASSESSEES CLAIM OF EXEMPTION U/S 11 OF THE ACT. ACCORDINGLY, GROUND NOS. 1 TO 5 ARE ALLOWED. 8. AS REGARDS GROUND NO.6 REGARDING DISALLOWANCE OF DEPRECIATION, SINCE WE HAVE ALLOWED THE ASSESSEES CLAIM OF EXEMP TION U/S 11 OF THE ACT, WE DIRECT THE AO TO COMPUTE THE ASSESSEES DEPRECIATION CLAIM ACCORDINGLY. 5 ITA NO. 1193/H/16 QUALITY CIRCLE FORUM OF INDIA, HYD. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . PRONOUNCED IN THE OPEN COURT ON 4 TH JANUARY, 2017. SD/- SD/- (D. MANMOHAN) (S. RIFAUR RAHMAN) VICE PRESIDENT ACCOUNTANT MEMBER HYDERABAD, DATED: 4 TH JANUARY, 2017 KV COPY TO:- 1) QUALITY CIRCLE FORUM OF INDIA, C/O M. ANANDAM & CO, CAS., 7A, SURYA TOWERS, SP ROAD, SECUNDERABAD 500 0 03. 2) DDIT(EXEMPTION) - III, HYDERABAD. 3) CIT(A) 9, HYD 4) PR. CIT(E), HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./ P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER