ITO (E), New Delhi V. Indian Ports Association, New Delhi

ITA 1295/DEL/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5105 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 03-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR KEDIA
• Section: 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI DR. B.R.R. KUMAR, ACCOUNTANT MEMBER I.T.A. NO.1295/DEL/2017 ASSESSMENT YEAR 2012-13 INCOME TAX OFFICER (E), WARD-1(2), NEW DELHI. V. INDIAN PORTS ASSOCIATION, 19, INSTITUTIONAL AREA, LODHI ROAD, NEW DELHI. TAN/PAN: AAATI0349A (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI RAJESH KUMAR KEDIA, CIT-DR RESPONDENT BY: SHRI R.S. SINGHVI, CA. DATE OF HEARING: 10 02 2020 DATE OF PRONOUNCEMENT: 17 02 2020 O R D E R PER AMIT SHUKLA, J.M.: THE AFORESAID APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE IMPUGNED ORDER DATED 08.12.2016, PASSED BY LD. COMMISSIONER OF INCOME TAX (APPEALS)-XL, DELHI FOR THE QUANTUM OF ASSESSMENT PASSED U/S.143(3) FOR THE ASSESSMENT YEAR 2012-13. IN THE GROUNDS OF APPEAL, THE REVENUE HAS RAISED FOLLOWING GROUNDS:- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT (A) HAS ERRED IN HOLDING THAT TH E ACTIVITIES CARRIED OUT BY THE ASSESSEE ARE NOT IN THE NATURE O F TRADE, BUSINESS OR COMMERCE OR RENDERING SERVICES IN RELAT ION TO THE SAME. I.T.A. NO.1295/DEL/2017 2 2. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THIS ISSUE STANDS COVERED IN THE CASE OF THE ASSESS EE BY THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2010- 11 VIDE ORDER DATED 23.01.2020. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E CLAIMS TO BE AN APEX BODY OF ALL THE MAJOR PORTS WHICH ARE CEN TRALLY ADMINISTERED UNDER MINISTRY OF SHIPPING, GOVERNMENT OF INDIA AND WAS GRANTED REGISTRATION U/S.12A. THE MAI N OBJECTS OF THE ASSESSEE SOCIETY WAS TO UNDERTAKE AND PROMOT E ENGINEERING, TECHNICAL, ECONOMIC, FINANCIAL, MANAGE RIAL AND STATISTICAL STUDIES AND RESEARCH INTO MATTERS RELAT ING TO THE PLANNING, ORGANIZATION, MANAGEMENT, OPERATION MAINT ENANCE AND CONSTRUCTION OF PORTS AND HARBOURS AND TO PROVI DE A TECHNICAL CONSULTANCY SERVICE. 4. THE ASSESSING OFFICER HAS DENIED THE EXEMPTION U /S.11 ON THE GROUND THAT THE ASSESSEE IS INVOLVED IN THE COMMERCIAL ACTIVITY AND HELD THAT ASSESSEES CASE FALLS UNDER THE LAST LIMB LAST OF THE SECTION 2(15) AND ACCORDINGLY HE HAS MA DE ADDITION OF RS.1,68,64,157/-. 5. LD. CIT (A) FOLLOWING THE PRECEDENT APPELLATE OR DER FOR THE ASSESSMENT YEARS 2010-11 AND 2011-12 PASSED BY THE THEN LD. CIT (A) HAS ALLOWED THE ASSESSEES APPEAL. 6. WE FIND THAT THE TRIBUNAL IN ASSESSMENT YEAR 201 0-11 HAS OBSERVED AND HELD AS UNDER: 7. IT IS NOT IN DISPUTE THAT THE ACTIVITIES OF TH E ASSESSEE FALLS I.T.A. NO.1295/DEL/2017 3 UNDER LAST LIMB OF DEFINITION CHARITABLE OF PURPOSE U/S 2(15) OF THE ACT I.E. ADVANCEMENT OF ANY OTHER OBJECT OF GE NERAL PUBLIC UTILITY. THE LD. AO SOUGHT TO INVOKE THE FIRST PRO VISO ON THE ASSESSEE BY STATING THAT IT HAD DERIVED COMMERCIAL RECEIPTS WHICH WOULD MAKE THE ASSESSEE ASSOCIATION INELIGIBL E FOR CLAIM OF EXEMPTION 11 OF THE ACT. WE FIND THAT THE LD. AS SESSING OFFICER HAD ALSO OBSERVED THAT THE ASSESSEE HAS SHOWN UNPAI D EXPENSES OF RS.2,34,58,706/- WHICH INCLUDES (A) MAJ OR PORTS SPORTS CONTROL BOARD EXPENSES OF RS.64,00,000/- (B) INDIAN MARITIME UNIVERSITY EXPENSES OF RS.54,62,334/- (C) PAYMENTS FOR PAY AND ALLOWANCES OF RS.99,21,958/- AND THE BALANC E OF RS. 16,74,414/- UNDER VARIOUS HEADS, VIZ. TRANSPORT HIR E CHARGES, AUDIT FEE, SUNDRY EXPENSES ETC. THE ASSESSEE HAS SH OWN EXPENDITURE AS GRANT OF RS.60,00,000/- TO ASSOCIATE D ORGANIZATIONS ON SCHEDULE XIII WHICH IS MERE A BOOK ENTRY. THE LD. ASSESSING OFFICER PROCEEDED TO DISALLOW THESE U NPAID EXPENSES OF RS.2,34,58,706/- BY TREATING THE SAME A S SURPLUS DERIVED BY THE ASSESSEE AND SINCE THE EXEMPTION U/S 11 OF THE ACT HAS BEEN DENIED TO THE ASSESSEE, THIS SURPLUS W AS BROUGHT TO TAX BY THE LD. ASSESSING OFFICER IN THE ASSESSME NT. 8. WE FIND THAT THE ASSESSEE HAD PLEADED BEFORE THE CIT(A) THAT IT IS NOT ENGAGED IN ANY TYPE OF ACTIVITY WHICH IN THE NATURE OF TRADE, COMMERCE OR BUSINESS. IT WAS SPECIFICALLY PL EADED THAT THE HOLDING OF CONFERENCE, PROVIDING CONSULTANCY SERVIC ES AND MANAGEMENT SERVICES ARE PART OF MAIN OBJECTS OF THE ASSOCIATION AND THESE SERVICES ARE ONLY PROVIDED TO ITS MEMBERS WITH THE AIM OF NO PROFIT/LOSS BASIS AND THESE MEMBERS ARE C ONTRIBUTING TO THE ASSOCIATION FOR THE SAME ON THE PREFIXED BAS IS. ACCORDINGLY, IT WAS SPECIFICALLY PLEADED THAT THESE SERVICES ARE I.T.A. NO.1295/DEL/2017 4 NOT PROVIDED FOR (A) ANY ACTIVITY IN THE NATURE OF TRADE COMMERCE OR BUSINESS; (B) ANY ACTIVITY OR RENDERING ANY SERV ICES IN RELATION TO ANY TRADE COMMERCE OR BUSINESS; (C) FOR A CESS O R FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY. THE ASSESSEE ALSO PLEADED THAT THE INCOME OF THE ASSESS EE WOULD ALSO BE EXEMPTED ON PRINCIPLE OF MUTUALITY. 9. WE FIND THAT THE ASSESSEE SPECIFICALLY MENTIONED THE LIST OF UNPAID EXPENSES AMOUNTING TO RS.2,34,58,706/- MENTI ONED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER WERE NEVER CLAIMED IN THE INCOME AND EXPENDITURE ACCOUNT BY TH E ASSESSEE. IT WAS PLEADED THAT ONCE EXPENDITURE HAS NOT BEEN C LAIMED AT ALL, THERE IS NO QUESTION OF DISALLOWANCE OF THE SA ME IN THE ASSESSMENT. WE FIND THAT THE LD. CIT(A) HAD GIVEN A CATEGORICAL FINDING THAT THE ASSESSEE ASSOCIATION IS NOT INVOLV ED IN ANY TRADE, COMMERCE OR BUSINESS SO AS TO FALL WITHIN TH E MISCHIEF OF THE FIRST PROVISO OF SECTION 2(15) OF THE ACT. 10. PER CONTRA, THE LD. DR VEHEMENTLY RELIED UPON THE ORDER OF THE LD. AO. 11. WE FIND THAT THE ISSUE IN DISPUTE HAD BEEN ADD RESSED BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PHD CHAMBER OF COMMERCE AND INDUSTRY VS DIT(EXEMPTION) REPORTED IN 357 ITR 296 (DEL.), WHER EIN, THE RELEVANT OPERATIVE PORTION IS REPRODUCED HEREIN:- THE NICE QUESTION AS TO WHETHER BY RENDERING SPECI FIC SERVICES TO MEMBERS AND NON-MEMBERS FOR A FEE, A TRADE, PROFESS IONAL OR SIMILAR ASSOCIATION CAN BE SAID TO BE CARRYING ON A BUSINESS ACTIVITY NEEDS TO BE EXAMINED. THE FURTHER QUESTION TO BE AD DRESSED, WITH REFERENCE TO SECTION 11 (4A), WOULD BE WHETHER SUCH ACTIVITIES (WHICH AMOUNT TO A BUSINESS) WERE INCIDENTAL TO THE ATTAINMENT OF I.T.A. NO.1295/DEL/2017 5 THE OBJECTIVES OF TRUST OR INSTITUTION AND WHETHER SEPARATE BOOKS OF ACCOUNTS WERE MAINTAINED IN RESPECT OF SUCH ACTIVIT IES. THERE CAN BE NO DOUBT THAT THE ACTIVITIES OF THE NATURE DESCR IBED ABOVE, IN THE CASE OF AN ASSESSEE SUCH AS THE PRESENT ONE, WHICH IS A TRADE ASSOCIATION-CHAMBER OF COMMERCE AND INDUSTRY, ESTAB LISHED TO PROTECT THE INTERESTS OF TRADE AND INDUSTRY IN PUNJ AB, HARYANA AND DELHI- WERE ACTIVITIES WHICH ARE INCIDENTAL TO THE ATTAINMENT OF THE OBJECTS OF THE CHAMBER. WE DO NOT THINK THAT THE TR IBUNAL IS JUSTIFIED IN TAKING THE VIEW THAT THE ASSESSEE, WHICH IS A CH AMBER OF COMMERCE AND INDUSTRY, IS CARRYING ON BUSINESS ACTI VITIES WHICH REQUIRE COMPLIANCE WITH THE CONDITIONS OF SECTION 1 1 (4A). IN CIT, MADRAS VS. ANDHRA CHAMBER OF COMMERCE (1965) 55 ITR 722, IT WAS HELD BY THE SUPREME COURT THAT ADVANCEMENT OR P ROMOTION OF TRADE, COMMERCE AND INDUSTRY LEADING TO ECONOMIC PR OSPERITY ENURED FOR THE BENEFIT OF THE ENTIRE COMMUNITY; THA T PROSPERITY WOULD BE SHARED ALSO BY THOSE WHO ENGAGED IN TRADE, COMMERCE AND INDUSTRY, BUT ON THAT ACCOUNT THE PURPOSE WAS N OT RENDERED ANY THE LESS AN OBJECT OF GENERAL PUBLIC UTILITY. E CHOING THESE SENTIMENTS ANOTHER BENCH OF EQUAL STRENGTH OF THE S UPREME COURT IN COMMISSIONER OF INCOME TAX, NEW DELHI VS. FEDERATIO N OF INDIAN CHAMBERS OF COMMERCE AND INDUSTRIES, NEW DELHI 1981 ) 130 ITR 186 HELD THAT WHERE THE MAIN OBJECT OF THE ASSESSEE WAS THE PROMOTION, PROTECTION AND DEVELOPMENT OF TRADE, COM MERCE AND INDUSTRY IN INDIA, ITS INCOME FROM CONDUCTING A TRA DE FAIR, RENT FOR SPACE ALLOTTED AND SALE OF ENTRY AND GATE TICKETS, FEES FOR ARBITRATION ETC. WOULD BE EXEMPTED FROM TAX UNDER SECTION 11 READ WITH SECTION 2(15) OF THE ACT. THE 'DOMINANT PURPOSE TEST WAS APPLIED TO HOLD THA T THE ACTIVITIES TO EARN INCOME WERE NOT DRIVEN WITH THE MOTIVE OF P ROFITMAKING. IN THIS JUDGMENT, SEPARATE OPINIONS WERE EXPRESSED BY EACH OF THE THREE LEARNED JUDGES AND WHILE JUSTICE PATHAK (AS H IS LORDSHIP THEN WAS) CONSIDERED THE MATTER TO BE COVERED BY TH E MAJORITY I.T.A. NO.1295/DEL/2017 6 OPINION OF THE SUPREME COURT IN ADDITIONAL COMMISSI ONER OF INCOME- TAX, GUJARAT VS. SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION (1980) 121ITR PAGE 1 ,SEN, J. AND VENKATARAMIAH, J, HELD DIFFERENT OPINIONS BUT CONSIDERED THEMSELVES BOUND BY THE MAJ ORITY OPINION IN ADDITIONAL COMMISSIONER OF INCOME-TAX, GUJARAT V S. SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION (SUPRA). IT WOULD, THEREFORE, APPEAR THAT JUDICIAL THINKING WAS NEVER IN FAVOUR OF THE V IEW THAT THE SERVICES PERFORMED BY A TRADE, PROFESSIONAL OR SIMI LAR ASSOCIATION, SUCH AS A CHAMBER OF COMMERCE AND INDUSTRY, WERE IN PURSUIT OF A BUSINESS OR TRADE WITH A PROFIT MOTIVE. 12. WE ALSO FIND THAT THE ASSESSEE IS ALSO COVERED BY THE DECISION OF THE HONBLE KERALA HIGH COURT IN THE CA SE OF CIT VS COCHIN PORT TRUST REPORTED IN 411 ITR 467 (KERALA) AND THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF CIT VS KANDLA PORT TRUST REPORTED IN 364 ITR 164 (GUJ.). T HE RELEVANT OPERATIVE PORTIONS OF THE SAID JUDGMENTS ARE NOT RE ITERATED HEREIN FOR THE SAKE OF BREVITY. WE FIND THAT CATEGORICAL F INDING GIVEN BY THE LD. CIT(A) THAT THE ASSESSEE IN THE INSTANT CAS E IS NOT ENGAGED IN ANY ACTIVITY OF TRADE, COMMERCE OR BUSIN ESS SO AS TO FALL WITHIN THE MISCHIEF OF FIRST PROVISO OF SECTIO N 2(15) OF THE ACT, IS NOT CONTROVERTED BY THE REVENUE BEFORE US. HENCE , IN OUR CONSIDERED OPINION, EXEMPTION U/S 11 OF THE ACT COU LD NOT BE DENIED TO THE ASSESSEE. IN ANY CASE, WE FIND THAT T HE ASSESSEE HAD NOT CLAIMED ANY EXPENDITURE IN THE SUM OF RS.2, 34,58,706/- IN ITS INCOME AND EXPENDITURE ACCOUNT WHICH FACTUAL FINDING GIVEN BY THE LD. CIT(A) HAD ALSO NOT BEEN CONTROVERTED BY THE REVENUE BEFORE US. HENCE, THERE CANNOT BE ANY DISAL LOWANCE OF THE SAID SUM OF RS.2,34,58,706/- TREATING THE SAME AS SURPLUS IN THE ASSESSMENT. 13. IN VIEW OF OUR AFORESAID OBSERVATIONS AND RESP ECTFULLY I.T.A. NO.1295/DEL/2017 7 FOLLOWING THE AFORESAID JUDICIAL PRECEDENTS, WE DO NOT FIND ANY MERIT IN THE GROUNDS RAISED BY THE REVENUE AND ACCO RDINGLY THE SAME ARE HEREBY DISMISSED. 7. THUS, RESPECTFULLY FOLLOWING THE EARLIER YEAR PR ECEDENT, WE HOLD THAT EXEMPTION U/S.11 COULD NOT BE DENIED T O THE ASSESSEE AS IT IS NOT INVOLVED IN ANY COMMERCIAL AC TIVITY SO AS TO FALL WITHIN THE PURVIEW OF 1 ST PROVISO TO SECTION 2(15). ACCORDINGLY, DISALLOWANCES MADE BY THE ASSESSING OF FICER ARE DELETED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH FEBRUARY, 2020. SD/- SD/- [DR. B.R.R. KUMAR] [AMIT SHUKLA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 17 TH FEBRUARY, 2020 PKK: