ACIT (Exemption), New Delhi V. Care India Solutions for Sustainable Development, New Delhi

ITA 1248/DEL/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2620 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 07-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Keywords: Charitable institution; Rule of consistency
• Section: 12; 11; 143(3); 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES F : DELHI BEFORE SHRI BHAVNESH SAINI, J.M. & O.P. KANT, A.M. ITA.NO.1248/DEL./2016 ASSESSMENT YEAR 2011-2012 THE ACIT (E), CIRCLE-1(1), E-2 BLOCK, PRATYAKSH KAR BHAWAN, DR. SHYAM PRAKASH MUKHERJEE CIVIC CENTRE, NEW DELHI-110002 VS. CARE INDIA SOLUTIONS FOR SUSTAINABLE DEVELOPMENT, E-46/12, OKHLA INDUSTRIAL AREA, PHASE-II, NEW DELHI. PAN AADCC3639H (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI SURENDER PAL, SR.D.R. FOR ASSESSEE : SHRI VED JAIN, ADVOCATE AND SHRI HIMANSHU AGGARWAL, CA SHRI RISHABH JAIN, C.A. DATE OF HEARING : 05.03.2019 DATE OF PRONOUNCEMENT : 08.03.2019 ORDER THIS APPEAL BY REVENUE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(A)-40, NEW DELHI, DATED 14 TH DECEMBER, 2015, FOR THE ASSESSMENT YEAR 2011-2012, 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 THE APPEAL OF THE ASSESSEE BY IGNORING THE FACT THAT SHORT- TERM LOAN/ADVANCE FROM FCRA ACCOUNT IS A VIOLATION 2 ITA.NO.1248/DEL./2016 CARE INDIA SOLUTIONS FOR SUSTAINABLE DEVELOPMENT, NEW DELHI. OF PROVISION OF FCRA GUIDELINES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE BY IGNORING THE FACT THAT AMOUNTS WERE RECEIVED BY THE ASSESSEE AS COMMERCIAL FEE IN ITS ACCOUNTS. IF THE AMOUNT WAS TO BE RECEIVED AS DONATION OR GRANT, THE SAME SHOULD HAVE BEEN RECEIVED THROUGH FOREIGN CONTRIBUTION REGULATION ACCOUNT AFTER OBTAINING PERMISSION FROM THE MINISTRY OF HOME AFFAIRS, GOVERNMENT OF INDIA. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE BY IGNORING THE FACT THAT ASSESSEE ITSELF HAS ACCEPTED THAT IN RESPECT OF PROJECTS, AS CLAIMED CHARITABLE BY ASSESSEE, THESE PROJECTS ARE NOT FOR UNDERTAKING ANY CHARITABLE ACTIVITY BUT FOR PROVIDING ANCILLARY PROFESSIONAL SERVICES TO THE AGENCIES/GOVERNMENT DEPARTMENTS IN UNDERTAKING THE CHARITABLE ACTIVITIES. 3 ITA.NO.1248/DEL./2016 CARE INDIA SOLUTIONS FOR SUSTAINABLE DEVELOPMENT, NEW DELHI. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT ASSESSEE IS A COMPANY REGISTERED UNDER SECTION 12AA OF THE INCOME TAX ACT. THE MAIN OBJECTS OF THE ASSESSEE COMPANY ARE AS UNDER: (I) TO PROMOTE SUSTAINABLE SOCIO-ECONOMIC DEVELOPMENT, POVERTY ALLEVIATION, LIVELIHOOD CREATIONS & DEVELOPMENT, FOOD SECURITY, ENVIRONMENT PROTECTION, NATURAL RESOURCES MANAGEMENT & CONSERVATION, NOT WITH THE MOTIVE OF PROFIT. (II) NONE OF THE OBJECTS OF THE COMPANY WILL BE CARRIED OUT ON COMMERCIAL BASIS. 3. THE A.O. HAD DISALLOWED EXEMPTION UNDER SECTIONS 11 AND 12 OF THE INCOME TAX ACT, AS ACCORDING TO HIM, THE ASSESSEE IS COVERED BY THE PROVISO TO AMENDED DEFINITION IN SECTION 2(15) OF THE I.T. ACT. IN ARRIVING AT ITS CONCLUSION, HE HAS MADE THE FOLLOWING OBSERVATIONS : (A) THAT THE SUM OF RS.21 LAKHS, RECEIVED FROM THE STATE GOVT. OF ANDHRA PRADESH UNDER AN AGREEMENT 4 ITA.NO.1248/DEL./2016 CARE INDIA SOLUTIONS FOR SUSTAINABLE DEVELOPMENT, NEW DELHI. TOWARDS SBI MICRO-FINANCE PROJECT IN PRAKASHAM DISTT. (TAKEN UP TO HELP THE URBAN POOR WOMEN BY FORMING SELF HELP GROUPS (SHG) TO ENABLE THEIR ACCESS TO NATIONALIZED BANKS TO ACTUALIZE THEIR ENTITLEMENTS FOR LOANS UNDER THE GOVT. SCHEME) WAS TOWARDS THE PROFESSIONAL SERVICES RENDERED BY THE ASSESSEE AND NOT RECEIVED AS GRANT FROM GOVT. AND THUS, ASSESSABLE AS 'INCOME FROM BUSINESS & PROFESSION (B) THAT THERE WAS VIOLATION OF FCRA AS SOME OF THE AGENCIES WERE PROVIDED SOFT LOANS OUT OF LOCAL AND FOREIGN CONTRIBUTIONS AND THERE HAD BEEN INWARD AND OUTWARD REMITTANCES OUT OF SUCH CONTRIBUTIONS. (C) THAT, IN THE ABSENCE OF DOCUMENTARY EVIDENCES AND PERMISSION TO SEND MONEY ABROAD, THE SUM OF RS.69,13,554 PAID FOR INFORMATION & SUPPORT SERVICES IS DISALLOWABLE. (D) THAT THERE WAS NO JUSTIFICATION IN PAYING 50% OF THE DONATION COLLECTIONS TO M/S. FUNDREAMZ ENGAGED IN THE ACTIVITY OF DONATION RAISING FOR THE ASSESSEE COMPANY (THE SUM OF RS.41,95,089 DISALLOWED BY THE 5 ITA.NO.1248/DEL./2016 CARE INDIA SOLUTIONS FOR SUSTAINABLE DEVELOPMENT, NEW DELHI. AO BEING EXORBITANT AMOUNT PAID TO M/S. FUNDREAMZ.) (E) THAT THE ENTIRE SUM OF RS.9,70,53,866 PAID TO INFRASTRUCTURE PROFESSIONAL ENTERPRISES (IPE) PVT. LTD. AS CONSULTATION FEE WAS NOT JUSTIFIED IN CONNECTION WITH THE SERVICES RENDERED FOR THE PROJECT SECTOR WIDE APPROACH TO STRENGTHENING HEALTH IN BIHAR (SWASTH) (20% THEREOF, RS. 1,94,10,772 DISALLOWED BY THE AO). (F) THAT THE SUM OF 4,18,85,309 IN POUND STERLING RECEIVED IN CONNECTION WITH THE ABOVE PROJECT WAS BY WAY OF FEES TO PROVIDE ADVICE TO THE DEPARTMENT OF HEALTH & FAMILY WELFARE IN ORISSA & BIHAR AND THEREFORE, SHOULD BE ASSESSED AS PROFESSIONAL FEE NOT CONNECTED WITH ANY CHARITABLE WORK. (G) THAT THE RECEIPTS (RS.2,43,00,764) IN CONNECTION WITH THE PROJECT COMMUNITY 7 HEALTH CARE MANAGEMENT INITIATIVE (CHCMI) SHOULD BE TREATED AS FEES FOR PROFESSIONAL & TECHNICAL SERVICES RENDERED TO THE STATE GOVT. NOT CONNECTED WITH SOME CHARITABLE WORK. 6 ITA.NO.1248/DEL./2016 CARE INDIA SOLUTIONS FOR SUSTAINABLE DEVELOPMENT, NEW DELHI. (H) THAT THE SUM OF RS.78,20,060 RECEIVED AS CONSULTANCY SERVICES AS A SUBCONTRACTOR OF OPTIONS CONSULTANCY SERVICES LTD., UK IN CONNECTION WITH CERTAIN SERVICES TO SUPPORT THE ORISSA HEALTH SECTOR PLAN FOR THE MINISTRY OF HEALTH, STATE GOVT. OF ORISSA IS NOT CONNECTED WITH ANY CHARITABLE WORK AS THE CHARITY BELONGED TO THE STATE GOVT. AND THAT THE ROLE OF THE ASSESSEE WAS ONLY AS SERVICE PROVIDER. 4. THE ASSESSEE CHALLENGED FINDINGS OF THE ASSESSING OFFICER BEFORE LD. CIT(A). IT WAS EXPLAINED THAT ASSESSING OFFICER HAS NOT APPRECIATED THE CONCEPT OF CHARITY PREVALENT UNDER THE INCOME TAX ACT AS EVEN IF FOR THE SERVICES RENDERED FOR CHARITABLE PURPOSE, SOME FEES WERE CHARGED, EXEMPTION UNDER SECTION 11 COULD NOT BE DENIED SO LONG AS THERE WERE NO PRIVATE GAIN. IT WAS SUBMITTED THAT DISALLOWANCE MADE BY ASSESSING OFFICER WERE BASED ON SURMISES AND CONJECTURES AND THEREFORE, LIABLE TO BE REJECTED. THE ASSESSEE IN ITS STATEMENT HAS GIVEN BRIEF DETAILS OF SEVERAL PROJECTS, NUMBERING 15 IN WHICH CHARITABLE WORK WAS CARRIED OUT. THESE PROJECTS ARE RELATING TO RELIEF OF 7 ITA.NO.1248/DEL./2016 CARE INDIA SOLUTIONS FOR SUSTAINABLE DEVELOPMENT, NEW DELHI. THE POOR, MEDICAL RELIEF, EDUCATION AND ENVIRONMENT. 5. THE LD. CIT(A) CONSIDERED THE ISSUE IN DETAIL AND REFERRED TO SEVERAL DECISIONS IN HIS ORDER AND NOTICED THAT IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT ANY PRIVATE GAIN WAS INVOLVED IN THE PRESENT CASE WHILE CARRYING OUT ACTIVITIES FALLING WITHIN THE CHARITABLE OBJECTS OF THE ASSESSEE AS APPROVED UNDER SECTION 12AA OF THE INCOME TAX ACT, 1961. IT IS NOT A CASE WHICH IS HIT BY THE FIRST PROVISO TO SECTION 2(15) OF THE INCOME TAX ACT, WHICH APPLIES ONLY TO THE HEAD ADVANCING OF ANY OTHER OBJECT OF GENERAL UTILITY AS EXPLAINED IN BOARD CIRCULAR DATED 19TH DECEMBER 2008. EVEN IF THE ASSESSEE RENDERED ASSISTANCE TO OTHER ORGANIZATIONS IN THE FIELD OF CHARITABLE WORK, ITS ACTIVITIES CANNOT BE TERMED AS NON-CHARITABLE AS IT MAKES NO DIFFERENCE WHETHER THE CHARITABLE WORK IS CARRIED OUT ON ITS OWN PROJECT OR BY WAY OF ASSISTANCE TO THE PROJECTS OF OTHER PARTIES. THEREFORE, OBSERVATIONS OF THE ASSESSING OFFICER NOT APPROVED THE LD. CIT(A). THE LD. CIT(A) FURTHER OBSERVED THAT THE VIOLATION OF FCRA PROVISION IS IRRELEVANT FOR THE PURPOSE OF INCOME TAX ACT. 8 ITA.NO.1248/DEL./2016 CARE INDIA SOLUTIONS FOR SUSTAINABLE DEVELOPMENT, NEW DELHI. 5.1. THE LD. CIT(A) AS REGARDS DISALLOWANCE OF RS.69,13,554/- GONE THROUGH THE EXPLANATION OF ASSESSEE AND NOTED THAT THERE WAS AN AGREEMENT BETWEEN THE ASSESSEE AND CARE INC. USA. THE LATTER RENDERED SERVICES UNDER VARIOUS CHARITABLE PROJECTS. THE ASSESSING OFFICER WITHOUT EXAMINING THE ISSUE DISALLOWED THE SAME. THEREFORE, THIS ADDITION WAS DELETED BY THE LD. CIT(A). 5.2. THE LD. CIT(A) ALSO EXAMINED THE PAYMENT OF RS.1,05,55,918/- AND NOTED THAT PAYMENT WAS FOR THE ASSISTANCE IN RAISING DONATIONS AND M/S. FUNDREAMZ WAS ONE OF THE PARTIES WHO HELPED THE ASSESSEE IN CREATING AWARENESS ABOUT THE CHARITABLE WORK BEING CARRIED ON BY THE ASSESSEE. THE AWARENESS CAMPAIGN AT THE NATIONAL LEVEL REQUIRED A BIG ORGANISATION. M/S. FUNDREAMZ CONTRACTED ABOUT 220 PERSONNEL TO MANAGE 13 OFFICES EXCLUSIVELY FOR THE ASSESSEES AWARENESS CAMPAIGN. THE ASSESSING OFFICER DISALLOWED 50% PAYMENT ON ADHOC BASIS. THEREFORE, IT WAS DELETED. 9 ITA.NO.1248/DEL./2016 CARE INDIA SOLUTIONS FOR SUSTAINABLE DEVELOPMENT, NEW DELHI. 5.3. THE LD. CIT(A) AS REGARDS DISALLOWANCE OF RS.1,94,10,772/- NOTED THAT ASSESSEE WAS INVOLVED IN A PROJECT CALLED SWASTH. CARE INTERNATIONAL, UK, WAS ENGAGED BY DFID (DEPARTMENT OF INTERNATIONAL DEVELOPMENT) FOR DESIGNING AND IMPLEMENTATION OF BIHAR HEALTH SECTOR REFORM STRATEGY MANAGEMENT AND TECHNICAL SUPPORT. CARE INTERNATIONAL, UK, APPOINTED THE ASSESSEE COMPANY FOR IMPLEMENTATION OF ITS AGREEMENT FOR INDIA. UNDER THE AGREEMENT, VARIOUS AMOUNTS WERE TO BE SHARED AMONG ASSESSEE COMPANY, INFRASTRUCTURE PROFESSIONAL ENTERPRISES (IPE) PRIVATE LIMITED., OPTIONS U.K. AND CUIK. THE SUM OF RS.9,70,53,866/- WAS PAID TO IPE AS CONSULTANCY FEES UNDER THE AGREEMENT AND 20% OUT OF THE SAME WERE DISALLOWED BY ASSESSING OFFICER WITHOUT ANY BASIS. THE SAME ADDITION WAS, THEREFORE, DELETED. THE LD. CIT(A) AFTER GOING THROUGH THE DETAILS FILED BY THE ASSESSEE FOUND THAT ASSESSEE WAS ENGAGED IN CHARITABLE ACTIVITIES ON THE VARIOUS PROJECTS. FURTHER, THERE IS NO FINDING THAT ASSESSEE THOUGH CHARGED FEES, WAS INVOLVED IN PRIVATE GAIN. THE LD. CIT(A), THEREFORE, SET ASIDE THE ORDER OF ASSESSING 10 ITA.NO.1248/DEL./2016 CARE INDIA SOLUTIONS FOR SUSTAINABLE DEVELOPMENT, NEW DELHI. OFFICER AND HELD THAT ASSESSEE IS ENTITLED FOR EXEMPTION UNDER SECTION 11 OF THE INCOME TAX ACT, 1961. THE APPEAL OF ASSESSEE HAS BEEN ALLOWED. 6. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED THE FINDINGS OF THE AUTHORITIES BELOW. 7. THE LD. D.R. RELIED UPON ORDER OF THE ASSESSING OFFICER. 8. ON THE OTHER HAND, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSING OFFICER IN SUBSEQUENT ASSESSMENT YEARS 2013-2014 AND 2014-2015 PASSED SCRUTINY ASSESSMENT UNDER SECTION 143(3) ON DATED 17TH NOVEMBER 2015 AND 10TH MAY 2016, WHEREBY ON THE IDENTICAL FACTS THE CLAIM OF ASSESSEE FOR EXEMPTION UNDER SECTION 11 HAVE BEEN ALLOWED. 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT DEPARTMENTAL APPEAL HAS NO MERIT. THE ASSESSING OFFICER IN SUBSEQUENT ASSESSMENT YEARS 2013- 2014 AND 2014-2015 CONSIDERED SIMILAR OBJECTS OF ASSESSEE 11 ITA.NO.1248/DEL./2016 CARE INDIA SOLUTIONS FOR SUSTAINABLE DEVELOPMENT, NEW DELHI. AND AFTER EXAMINING THE DETAILS FOUND THAT ASSESSEE IS REGISTERED UNDER SECTION 12AA OF THE INCOME-TAX ACT, 1961 AND THAT OBJECTS OF THE ASSESSEE COMPANY ARE CHARITABLE, WITHIN THE MEANING OF SECTION 2(15) OF THE INCOME TAX ACT, 1961. THE RETURNED NIL INCOME WAS THUS ACCEPTED. IT IS WELL SETTLED LAW THAT THOUGH THE PRINCIPLES OF RES JUDICATA DO NOT APPLY TO THE INCOME TAX PROCEEDINGS, BUT, RULE OF CONSISTENCY SHALL HAVE TO BE APPLIED BY THE INCOME TAX AUTHORITIES. WE RELY UPON DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF RADHA SOAMI SATSANG 193 ITR 321 (SC). SINCE, SIMILAR CLAIM OF ASSESSEE FOR EXEMPTION UNDER SECTION 11 OF THE I.T. ACT HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER ON SAME FACTS IN SUBSEQUENT ASSESSMENT YEARS, THEREFORE, THERE WAS NO JUSTIFICATION TO TAKE A CONTRARY VIEW IN THE PRESENT APPEAL. FURTHER, THE LD. CIT(A) EXAMINED THE ENTIRE ISSUE IN DETAIL AND HAVE GIVEN A SPECIFIC FINDING OF FACT IN FAVOUR OF THE ASSESSEE THAT THE ASSESSEE IS ENGAGED IN THE CHARITABLE ACTIVITIES AND THAT THE AMOUNT IN QUESTION HAVE BEEN SPENT FOR CHARITABLE ACTIVITIES. EVEN IF SOME AMOUNT HAVE BEEN RECEIVED BY ASSESSEE, THAT WAS RECEIVED 12 ITA.NO.1248/DEL./2016 CARE INDIA SOLUTIONS FOR SUSTAINABLE DEVELOPMENT, NEW DELHI. FOR CHARITABLE PURPOSES ONLY AND NO PERSONAL GAIN HAVE BEEN OBTAINED BY THE ASSESSEE COMPANY. THE FINDING OF FACT RECORDED BY THE LD. CIT(A) HAVE NOT BEEN REBUTTED THROUGH ANY EVIDENCE ON RECORD. WE, THEREFORE, DO NOT FIND ANY ERROR IN THE ORDER OF THE LD. CIT(A) IN ALLOWING EXEMPTION UNDER SECTION 11 OF THE INCOME TAX ACT, 1961. WE CONFIRM THE ORDER OF THE LD. CIT(A) AND DISMISS THE APPEAL OF THE DEPARTMENT. 10. IN THE RESULT, APPEAL OF THE DEPARTMENT DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (O.P. KANT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DELHI, DATED 08 TH MARCH, 2019 VBP/- COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT(A) CONCERNED 4. CIT CONCERNED 5. D.R. ITAT SMC BENCH, DELHI 6. GUARD FILE. // BY ORDER // ASSISTANT REGISTRAR : ITAT DELHI BENCHES : DELHI.