M/s. Deepshikha Mahila Club, Hyderabad V. DIT ( Exemptions), Hyderabad

ITA 1282/HYD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59103 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 25-05-2011
• Assessment Year: misc
• Appeal Filed On: 07-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIVEDITA BISWAS
• Assessee Lawyers: P RAMAKRISHNA
• Keywords: Charitable institution; Principle of natural justice
• Section: 80G; 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, A.M. & SMT. ASHA VIJAYARAGHAVAN, J.M. ITA NO.1282/HYD/2010 ASSESSMENT YEAR NIL M/S DEEPSHIKHA MAHILA CLUB, HYDERABAD (PAN AAATD 3071C) VS THE DIT(E), H YDERABAD APPELLANT RESPONDENT APPELLANT BY : SHRI P. RAMAKRISHNA RESPONDENT BY : SMT. NIVEDITA BISWAS DATE OF HEARING : 26.12.2011 DATE OF PRONOUNCEMENT : 6.1.2012 ORDER PER ASHA VIJAYARAGHAVAN, JM: THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE DIT(E)-HYDERABAD DATED 26.6.2010 AND IT PERTAINS TO THE ASSESSMENT YEAR NIL. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE SOCIETY IS RUNNING AN EDUCATIONAL INSTITUTIONS AND ALSO VOCATIONAL TRAINI NG SCHOOL. TO FINANCE THE SCHOOLS, THE SOCIETY IS ORGANISING ANNUAL EVENT KNOWN AS DEEP MELA. IT ADVERTISES IN THE NEWS PAPERS, INVITING THE PEOPLE FROM ALL OVER INDIA AND ABROAD TO LOCATE THE STALLS IN ITS PREMISES AT HYDE RABAD. THIS IS AN INDEPENDENT ACTIVITY THAT IS BEING CARRIED ON BY TH E ASSESSEE AT LEAST FOR THE LAST 4 YEARS: THE SURPLUS, EARNED IN THE LAST FOU R FINANCIAL YEAR IS AS UNDER: FINANCIAL YEAR DEEPMELA PROFIT (RS.) SURPLUS (RS.) 2005-2006 7,31,854 6,11,680 2006-07 11,75,187 13,89,030 ITA NO.1282/HYD/2010 M/S DEEPSHIKHA MAHILA, HYDERABAD 2 2007 - 08 16,06, 155 13,70,729 2008 - 09 18,20,241 7,73,690 3. THE ASSESSEE FILED FOR AN APPLICATION FOR RENEW AL OF APPROVAL U/S 80G DATED 29.12.2009. THE DIRECTOR OF IT (E) AFTER PER USING THE OBJECTS OF THE ASSESSEE AND THE BALANCE SHEET HELD AS FOLLOWS: THE ASSESSEE IS CONDUCTING THE BUSINESS OF EXHIBITI ON AND MAKING PROFIT. IT IS A SYSTEMATIC ACTIVITY WHICH IS NOT P ERMITTED BY THE MEMORANDUM OF ASSOCIATION. NO SEPARATE BOOKS OF AC COUNT ARE BEING MAINTAINED AND SURPLUS IS CREDITED TO P&L A/C. SEC TION 11(4A) STIPULATES THAT THE PROVISIONS OF SECTION 11 SHALL NOT APPLY IN RELATION TO ANY INCOME OF A TRUST WHICH IS DERIVING ANY PROFIT AND GAINS FORM A BUSINESS, UNLESS, THE BUSINESS IS INCIDENTAL TO THE ATTAINMENT OF THE OBJECTS OF THE TRUST. THERE IS NO CORRELATION BETW EEN THE DEEPMELA AND THE OBJECTS OF THE TRUST. THEREFORE, THE BUSIN ESS IS NOT INCIDENTAL TO THE OBJECTS OF THE TRUST. THEREFORE, IT IS COVERED BY THE PROVISIONS OF SECTION 11(4A) OF THE IT ACT. THE ENTIRE SURPLUS O F THE ORGANISATION REQUIRES TO BE TAXED. THE ASSESSEE HAS ALSO USED THE TAG OF CHARITY. T HIS SOCIETY IS HAVING MULTI OBJECTS AND IT IS COVERED BY THE PROVISO TO S ECTION 2(15) OF THE IT ACT. THE ASSESSEE SOCIETY IS CARRYING ON THE BUSIN ESS OF CONDUCTING EXHIBITION AND MAKING A PROFIT OUT OF IT. THEREFOR E, THE SOCIETY IS COVERED BY PROVISO TO SECTION 2(15) AND THEREBY IT IS NOT A CHARITABLE INSTITUTION. THUS, THE SOCIETY HAS MULTI OBJECTS. IT IS CONDUCT ING DEEPMELA AT LEAST FOR THE LAST FOUR FINANCIAL YEARS AND MAKING SUBSTA NTIAL PROFITS BY CONDUCTING THE EXHIBITION. THE SOCIETY IS CARRYING ON THE BUSINESS OF DEEPMELA SYSTEMATICALLY. THE SOCIETY IS ADVERTIS ING IN THE NEWSPAPERS, INVITING PEOPLE FROM ALL OVER INDIA AND ABROAD TO LOCATE THE ITA NO.1282/HYD/2010 M/S DEEPSHIKHA MAHILA, HYDERABAD 3 STALLS AND CARRY ON THE BUSINESS OF SELLING OF ARTS AND HANDICRAFTS. THUS, THE SOCIETY IS CARRYING ON THE BUSINESS ACTIV ITY AND THEREBY VIOLATING THE PROVISIONS OF SECTION 2(15) OF THE IT ACT. THE FACT THAT CARRYING ON THE BUSINESS IS ALSO GETS REFLECTED IN THE SUBSTANTIAL SURPLUS EARNED BY THE ASSESSEE. 4. AGGRIEVED BY THE ORDER OF THE DIRECTOR OF IT(E) , THE ASSESSEE PREFERRED AN APPEAL BEFORE US AND RAISED A SPECIFIC GROUND OF APPEALS AS GROUND NO D: THE LEARNED AUTHORITY GROSSLY VIOLATED THE PRINCIP LES OF NATURAL JUSTICE AS HE HAS ISSUED A NOTICE DATED 25.6.2010, WHEREIN HE HAS ALLOWED A TIME OF 10 DAYS FROM THE DATE OF RECEIPT FOR SUBMIS SION OF REPLY. BUT A DAY LATER I.E. ON 26.6.2010 PASSED THE IMPUGNED ORD ER REJECTING THE APPLICATION IS ILLEGAL, ARBITRARY AND UNTENABLE IN LAW AND FACTS OF THE CASE. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI. P RA MAKRISHNA SUBMITTED THAT THE DEPARTMENT HAD ISSUED NOTICE WHICH IS AS F OLLOWS: FURTHER, YOU HAVE ALSO NOT MAINTAINED SEPARATE BOOK S OF ACCOUNTS FOR THE DEEP MELA PROGRAMME. SHOW CAUSE WHY SOCIETY RE GISTERED U/S 12AA SHOULD NOT BE REVOKED W.E.F. 1.4.2009, AS YOU ARE CARRYING ON THE BUSINESS IN A SYSTEMATIC MANNER. YOUR REPLY SHOULD REACH THE UNDER SIGNED WITHIN 10 DAYS FROM THE DATE OF RECEIPT OF T HIS LETTER, OTHERWISE IT IS TO BE PRESUMED THAT YOU HAVE NOTING TO SUBMIT 7. THE LEARNED COUNSEL FURTHER SUBMITTED THAT THE SAID NOTICE (SUPRA) GRANTED A PERIOD OF 10 DAYS FROM THE DATE OF RECEIP T OF THE NOTICE AND THE SAID NOTICE WAS RECEIVED BY THE ASSESSEE ON 8.7.201 0. ACCORDINGLY ON 19.7.2010, THE ASSESSEE SUBMITTED HIS OBJECTIONS RE LYING ON THE DECISIONS OF THE HONBLE SUPREME COURT AND VARIOUS OTHER CASES. HOWEVER, TO HIS ITA NO.1282/HYD/2010 M/S DEEPSHIKHA MAHILA, HYDERABAD 4 SURPRISE, THE DIRECTOR (E) REJECTED THE APPLICATION VIDE HIS ORDER DATED 26.6.2010 WHICH WAS RECEIVED ON 11.8.2010. HENCE I T WAS SUBMITTED THAT AN OPPORTUNITY WAS NOT GIVEN FOR THE ASSESSEE TO SU PPORT HIS CASE. IN THESE CIRCUMSTANCES, IN THE INTEREST OF JUSTICE, WE SET A SIDE THE MATTER TO THE FILE OF DIRECTOR OF INCOME TAX (E) TO GIVE SOME TIME FOR TH E ASSESSEE TO SUBMIT ITS CASE SINCE THE DIRECTOR HAD ISSUED A NOTICE ON 25.6 .2010 WHEREIN HE HAD ALLOWED A TIME OF 10 DAYS FROM THE DATE OF RECEIPT OF THE NOTICE FOR SUBMISSION OF REPLY BUT HAD WRONGLY PASSED THE ORDE R ON 26.6.2010 WITHOUT GIVING TIME FOR THE ASSESSEE TO REPLY. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES.. ORDER PRONOUNCED IN THE OPEN COURT 6.1.2012 SD/- SD/- (CHANDRA POOJARI) ( (ASHA VIJAYA RAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMB ER DATED THE 6 TH JANUARY, 2012 COPY FORWARDED TO: 1. M/S DEEPSHIKHA MAHILA CLUB, 7-1-51/1, RAJAN DHARAM KARAM ROAD, AMEERPET, HYDERABAD-16. 2. THE DIRECTOR OF INCOME TAX (E), HYDERABAD 3. THE DIT, HYDERABAD 4. THE CIT, HYDERABAD 5. THE DR, ITAT, HYDERABAD NP/