DCIT, C-2 (E), Chandigarh V. M/s National Horticulture Board, Gurgaon

ITA 1467/CHANDI/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5228 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 13-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHISH ABROL
• Assessee Lawyers: AKHIL B GUPTA
• Keywords: Business income; Depreciation
• Section: 12AA; 6; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH B, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.1467/CHD/2017 (ASSESSMENT YEAR : 2013-14) & ITA NO.1468/CHD/2017 (ASSESSMENT YEAR : 2014-15) THE D.C.I.T, VS. M/S NATIONAL HORTICULTURE BOARD, CIRCLE-2(EXEMPTION), PLOT NO.85, INSTITUTIONAL AREA, CHANDIGARH. SECTOR 8, GURGAON. 56, INDUSTRIAL ESTATE, YAMUNA NAGAR. PAN: AAATN0804F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHISH ABROL, CIT DR RESPONDENT BY : SHRI AKHIL B. GUPTA, CA DATE OF HEARING : 12.02.2018 DATE OF PRONOUNCEMENT : 23.02.2018 ORDER PER ANNAPURNA GUPTA, A.M. : BOTH THESE APPEALS FILED BY THE REVENUE PERTAIN TO THE SAME ASSESSEE AND HAVE BEEN PREFERRED AGAINST SEPA RATE ORDERS PASSED BY THE LD. COMMISSIONER OF INCOME TAX(APPEALS)-2, GURGAON BOTH DATED 28.7.2017 RELATI NG TO ASSESSMENT YEARS 2013-14 AND 2014-15. 2. SINCE IDENTICAL ISSUE IS INVOLVED IN BOTH THE A PPEALS, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS COMMON ORDER. FOR THE SAKE OF CONVENIENCE, WE SHAL L BE DEALING WITH THE FACTS OF THE APPEAL OF THE REVENUE IN ITA NO.1467/CHD/2017 AND THE DECISION RENDERED THEREIN SHALL 2 APPLY MUTATIS MUTANDIS TO OTHER APPEAL OF THE REVEN UE IN ITA NO.1468/CHD/2017. 3. BRIEFLY STATED, THE ASSESSEE IS A SOCIETY REGIST ERED U/S 12AA OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT ) WITH THE OBJECT TO PROMOTE, ENCOURAGE AND DEVELOP HORTIC ULTURE INDUSTRY. RETURN DECLARING NIL INCOME WAS FILED B Y THE ASSESSEE FOR THE IMPUGNED YEAR AFTER CLAIMING EXEMP TION U/S 11 OF THE ACT. DURING THE IMPUGNED ASSESSMENT Y EAR THE ASSESSEE HAD EARNED RS.99,50,968/- FROM THE SA LE OF APPLICATION FORMS AND BROCHURES AND RS.54,36,310/- AS INTEREST ON THE AMOUNT OF COST OF APPLICATION FORM AND SCHEME BROCHURES . THE ASSESSING OFFICER WAS OF TH E VIEW THAT BOTH THESE INCOMES WERE REQUIRED TO BE CONSID ERED AS SEPARATE BUSINESS INCOME, AS PER PROVISIONS OF SECT ION 2(15) OF THE ACT. HE ACCORDINGLY, HELD THAT THE ASSESSEE WAS NOT ENTITLED TO CLAIM EXEMPTION ON THE SAID INCOMES AND DENIED THE SAME TO THE ASSESSEE. THE ASSESSING OFFICER, H OWEVER, ALLOWED 30% OF THE INCOME EARNED FROM SALE OF APPLI CATION FORMS, AS EXPENSES INCURRED FOR THE SAME AND TREATE D THE BALANCE OF RS.69,65,673/- AS TAXABLE INCOME ON WHIC H EXEMPTION U/S 11 WAS NOT ALLOWABLE. THE ASSESSING OFFICER FURTHER ALLOWED DEPRECIATION OF RS.30,00,050/- TO T HE ASSESSEE. THE ASSESSEES INCOME WAS THUS ASSESSED AT A TOTAL INCOME OF RS.94,01,933/-. 4. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LD.CIT(APPEALS) WHO DELETED THE ADDITION MADE BY TH E ASSESSING OFFICER FOLLOWING THE ORDER OF THE I.T.A. T. IN 3 ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2009-10, 2 010-11 AND 2011-12. 5. AGGRIEVED BY THE SAME, THE REVENUE HAS COME UP I N APPEAL BEFORE US RAISING FOLLOWING GROUNDS: I. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION O F SURPLUS INCOME OF RS.69,65,673/- GENERATED AND EARNED DURING THE YEAR UNDER CONSIDERATION BY SALE OF APPLICATION FORMS AND SCHEME BROCHURES TO THE CUSTOMERS ACTIVITIES THAT ARE CLEARLY IN THE NATURE OF BUSINESS, TRADE OR COMMERCE. II. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION O F RS.54,36,310/- MADE ON ACCOUNT OF INTEREST EARNED ON THE AMOUNT GENERATED FROM NON-CHARITABLE ACTIVITY I. E. BY SALE OF APPLICATION FORMS AND SCHEME BROCHURES. III. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN LAW IN NOT CONSIDERING THE AMENDED PROVISION OF SECTION OF 2(15) W.E.F. 01.04.2009 WHICH ARE APPLICABLE IN ASSESSEE'S CASE AND ALSO THE FACT THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHAR ITABLE PURPOSE IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR RENDERING ANY SERVICE IN RELATION TO TRADE, COMMERC E OR BUSINESS OR ANY ACTIVITY FOR A CESS OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION OR THE RETENTION OF THE INCOME FROM SUCH ACTIVITY. IV. THAT THE APPELLANT CRAVES TO LEAVE, ADD OR AME ND THE GROUNDS OF APPEAL ON OR BEFORE THE APPEAL HEARD AND DISPOSED OFF. 6. DURING THE COURSE OF HEARING BEFORE US, THE LD. DR FAIRLY CONCEDED THAT THE ISSUE WAS COVERED IN FAVOU R OF THE ASSESSEE BY THE ORDER OF THE I.T.A.T. IN ASSESSEES OWN CASE, THOUGH THE LD. DR RELIED UPON ORDER OF THE ASSESSIN G OFFICER CONTENDING THAT THE AMOUNT OF INCOME EARNED BY THE ASSESSEE ON ACCOUNT OF SALE OF APPLICATION FORMS AN D SCHEME BROCHURES WAS IN THE NATURE BUSINESS INCOME 4 EARNED BY IT AND SO ALSO THE INTEREST INCOME EARNED ON THE SAME AND THE ASSESSING OFFICER HAD, THEREFORE, RIGH TLY DENIED THE EXEMPTION ON THE SAID INCOME. 7. LD.COUNSEL FOR THE ASSESSEE ON THE OTHER HAND RE LIED UPON THE ORDER OF THE CIT(A). 8. WE HAVE HEARD THE RIVAL CONTENTIONS. WE FIND NO INFIRMITY IN THE ORDER OF THE LD.CIT(APPEALS). ADM ITTEDLY, THE ISSUE OF EXEMPTION OF INCOME EARNED FROM THE SA LE OF BROCHURES AND APPLICATION FORMS BY THE ASSESSEE SOC IETY U/S 11 OF THE ACT, HAS BEEN DECIDED BY THE ITAT IN FAVOUR OF THE ASSESSEE IN EARLIER YEARS. NO DISTINGUISHING F ACTS HAVE BEEN BROUGHT TO OUR NOTICE BY THE LD. DR. THE LD.CIT(APPEALS), WE HOLD, THEREFORE, HAS RIGHTLY FO LLOWED THE EARLIER YEARS ORDERS OF THE I.T.A.T. IN THE CASE OF THE ASSESSEE AND ALLOWED ASSESSEES CLAIM OF EXEMPTION U/S 11 ON THE INCOME EARNED FROM THE SALE OF BROCHURES AND INTEREST INCOME EARNED ON THE SAID INCOME. EVEN OT HERWISE, DURING THE COURSE OF HEARING BEFORE US, IT WAS BROU GHT TO OUR NOTICE THAT THE ASSESSEE I.E. M/S NATIONAL HORT ICULTURE BOARD, WAS SET UP BY THE GOVERNMENT OF INDIA FOR IMPLEMENTING PROGRAMMES AS PART OF THE SCHEME OF MI SSION FOR INTEGRATED DEVELOPMENT OF HORTICULTURE. IT WAS SUBMITTED THAT ASSESSEE SOCIETY CONDUCTED PROGRAMME S UNDER THE MINISTRY OF AGRICULTURE AND FARMERS WELFA RE, GOVERNMENT OF INDIA. IT WAS POINTED OUT TO US THAT AS PART OF ITS OPERATING GUIDELINES, A FEE STRUCTURE FOR CO ST OF APPLICATION FORMS AND SCHEME BROCHURES WAS DEVISED, SO AS 5 TO AVOID FRIVOLOUS APPLICATIONS BEING FILED BEFORE IT, WHICH CONSUMED A LOT OF ENERGY AND EFFORT OF THE ASSESSEE SOCIETY. A BOOKLET CONTAINING THE OPERATIONAL GUIDELINES OF THE SCHEMES OF THE ASSESSEE WAS FILED BEFORE US HIGHLIG HTING THE ABOVE FACTS. FROM THE SAID FEE STRUCTURE IT WAS POI NTED OUT THAT FEES @RS.1,000/-, RS.2,000/-, RS.5,000/- & RS.10,000/- WAS COLLECTED AS COST OF APPLICATION DE PENDING UPON THE COST OF THE PROJECT FOR WHICH APPLICATION WAS MADE. IT WAS CONTENDED THAT BY COLLECTING SUCH FEE S FOR THE APPLICATION FORMS, ONLY SUCH APPLICANTS WHO WERE SE RIOUS CONTENDERS FOR THE SCHEMES OF THE ASSESSEE, APPLIED , RESULTING IN FEWER FORMS BEING SUBMITTED, WHICH MAD E THE WORK OF THE ASSESSEE SOCIETY EASIER AND MANAGEABLE. IT WAS ALSO POINTED OUT THAT THE ENTIRE AMOUNT COLLECTED A GAINST THE COST OF APPLICATION FORMS AMOUNTING TO RS.99,50 ,968/- HAD BEEN SPENT ON THE ACTIVITIES OF ASSESSEE SOCIET Y BY WAY OF PAYMENT MADE FOR HIRING OF SERVICES OF DEOS, SE CURITY FEES OF COLD STORAGE, EXPENSES AND CONSULTANCY FEE OF EXPORTS AND EXPENSES INCURRED BY NBCC ON BEHALF OF THE ASSESSEE, THE DETAILS OF WHICH WERE FILED TO THE AS SESSING OFFICER ALSO. 9. IT IS MORE THAN EVIDENT FROM THE ABOVE FACTS THA T THE FEES COLLECTED THROUGH APPLICATION FORMS AND BROCHU RES WAS TO ASSIST THE ASSESSEE IN THE EXECUTION OF ITS STAT ED AND APPROVED CHARITABLE ACTIVITY OF IMPLEMENTING PROGRA MMES FOR DEVELOPMENT OF HORTICULTURE. THIS CAN BY NO ST RETCH OF LOGIC BE TREATED AS A SEPARATE COMMERCIAL ACTIVITY SO AS TO 6 BRING IT WITHIN THE FOLD OF THE PROVISO TO SECTION 2(15) OF THE ACT BY TREATING IT AS A SEPARATE BUSINESS ACTIVITY OF THE ASSESSEE. WE, THEREFORE, UPHOLD THE ORDER OF THE LD.CIT(APPEALS) TREATING THE RECEIPTS ON ACCOUNT OF SALE OF APPLICATION FORMS AND BROCHURES AND THE INTEREST EA RNED THEREON AS INCOME EARNED FROM CHARITABLE ACTIVITIES ,ELIGIBLE FOR EXEMPTION U/S 11 OF THE ACT. 10. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE, THEREFORE, DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 23 RD FEBRUARY, 2018 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)S 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH