Sood Sewa Bhawan Trust, Chandigarh V. ITO( Exemption Ward), Chandigarh

ITA 161/CHANDI/2020

AI Insights

The appeals by Sood Sewa Bhawan Trust challenge the orders of the CIT(A)-II, Chandigarh, which confirmed the additions made by the Assessing Officer for the assessment years 2013-14 and 2014-15. The main issues revolved around the classification of the Trust's activities as charitable or business in nature, the application of income for charitable purposes, and the non-deduction of TDS on certain payments. The Tribunal noted the inconsistency in the application of tax laws over the years and the lack of a change in the Trust's activities since its registration under Section 12A. The Tribunal referenced a similar case, Sood Sabha Vs. ITO, where it was decided that the matter should be re-examined by the Assessing Officer, emphasizing the need for a consistent approach in tax assessments.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 127770 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 15-05-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 11-02-2020
• Other Referred Cases: Sood Sabha Vs. ITO
• Laws Referred To: Section 2(15), Section 13(8), Section 11, Section 12A
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Capital expenditure; TDS; Set aside
• Section: 11; 143(3)

Judgement Text

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ “बी” , च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH ी आकाश द प जैन, उपा य एवं ी $व%म 'संह यादव, लेखा सद,य BEFORE: SHRI. AAKASH DEEP JAIN, VP & SHRI. VIKRAM SINGH YADAV, AM ITA Nos. 160 & 161/Chd/ 2020 Assessment Years : 2013-14 & 2014-15 Sood Sewa Bhawan Trust, Sood Bhawan, Sector 44-A, Chandigarh The ITO (Exemptions Ward), CR Building, Sector 17-E Chandigarh PAN NO: AAATS6008E Appellant Respondent ! " Assessee by : Shri A.K. Sood, CA # ! " Revenue by : Shri Akashdeep, JCIT, Sr. Dr $ % ! & Date of Hearing : 16/05/2023 '()* ! & Date of Pronouncement : 22/05/2023 आदेश/Order PER VIKRAM SINGH YADAV, A.M. : These are two appeals filed by the assessee against the respective orders of Ld. CIT(A)-2, Chandigarh each dt. 04/11/2019 pertaining to Assessment Year 2013-14 and 2014-15 respectively. 2. Since the issues involved are common, both these appeals were heard together and are being disposed off by this consolidated order. 3. In ITA No. 160/Chd/2020 pertaining to A.Y. 2013-14, the assessee has taken the following grounds of appeal: 1. That the Ld CIT (Appeals)-II has erred in law and facts by confirming the orders of AO in commenting that the assessee is not carrying on activity for charitable purposes instead its purpose involves carrying on activity in the nature of business and is thus covered by proviso to section 2(15) read with section 13(8)and the entire surplus of Rs 62,73,276/- is being added to the returned income. 2. That the Ld CIT (Appeals)-II has erred in law and facts by confirming the orders of AO for adding a sum of Rs 5,10,000/- being amount paid to Sood Sabha as income of the trust for non application of income for the purposes other than stated objects. 2 3. That the Ld CIT (Appeals)-II has erred in law and facts by confirming the orders of AO for adding a sum of Rs 9,63,243/- paid to Chandigarh lab services under the head 'Outsource Testing expenses' as income of the trust for not deducting TDS. 4. That the Ld CIT (Appeals)-II has erred in law and facts by confirming the orders of AO for adding a sum of Rs 3,86,100/- paid to Awadraj contractor without deduction of tax at source as income of the trust. 5. The assessing officer has erred in making multiple overlapping additions and taking a restrictive meaning of "Charitable activity" under section 2(15) where as the definition of "Charitable activity" under section 2(15) is inclusive and the assessee trust has been spending more than 85% of its income for charitable purposes. 6. That the Ld CIT (Appeals)-II has erred in law and facts by confirming the orders of Assessing Officer in not considering capital expenditure of Rs.49,78,844 for the purpose of calculation of 85% of expenditure on the objects of society. 7. The orders of The Ld CIT (Appeals)-II confirming the orders of the Assessing Officer are against the law and facts of the case on account of Judicial inconsistency as the cases of the assessee for the last so many years are being regularly assessed u/s 143(3) by different assessing officers without any adverse inference on the above issues and there is no change in the facts of the case regarding constitution, objects and activities since grant of registration u/s 12A. 8. For these and other reasons that may be urged at the time of hearing the appellant prays for relief. 4. In ITA No. 161/Chd/2020 pertaining to A.Y. 2014-15, the assessee has taken the following grounds of appeal: 1. That the Ld CIT (Appeals)-II has erred in law and facts by confirming the orders of AO in commenting that the assessee is not carrying on activity for charitable purposes instead its purpose involves carrying on activity in the nature of business and is thus covered by proviso to section 2(15) read with section 13(8) and the entire surplus of Rs 59,02,501/- is being added to the returned income. 2. That the Ld CIT (Appeals)-II has erred in law and facts by confirming the orders of AO for adding a sum of Rs 24,50,000/- being amount paid to Sood Sabha as income of the trust for non application of income for the purposes other than stated objects. 3. That the Ld CIT (Appeals)-II has erred in law and facts by confirming the orders of AO for adding a sum of Rs 10,28,793/- paid to Chandigarh lab services under the head 'Outsource Testing expenses' as income of the trust for not deducting TDS. 4. That the Ld CIT (Appeals)-II has erred in law and facts by confirming the orders of AO for making multiple overlapping additions and taking a restrictive meaning of "Charitable activity" under section 2(15) where as the definition of "Charitable activity" under section 2(15) is inclusive and the assessee trust has been spending more than 85% of its income for charitable purposes. 3 5. That the Ld CIT (Appeals)-II has erred in law and facts by confirming the orders of AO for not considering capital expenditure of Rs. 14,06,007/- for the purpose of calculation of 85% of expenditure on the objects of society. 6. The orders of The Ld CIT (Appeals)-II confirming the orders of the learned Deputy Commissioner of Income Tax (Exemptions) are against the law and facts of the case on account of Judicial inconsistency as the cases of the assessee for the last so many years are being regularly assessed u/s 143(3) by different assessing officers without any adverse inference on the above issues and there is no change in the facts of the case regarding constitution, objects and activities since grant of registration u/s 12A.. 7. For these and other reasons that may be urged at the time of hearing the appellant prays for relief. 5. During the course of hearing, the Ld. AR submitted that the assessee society is Registered under section 12A(a) of the Act and has filed its return of income declaring NIL income which was selected for scrutiny and during the course of assessment proceedings, the AO, without appreciating the nature of charitable activities being carried out by the assessee society has brought to tax the entire surplus of Rs. 62,73,276/- by denying the exemption under section 11 to the assessee society by virtue of proviso of Section 2(15) r.w.s 13(8) of the Act. Further there are certain other consequential disallowance which have been made by the AO and the income has been assessed at Rs. 81,32,619/- as against the returned income of NIL. It was submitted that identical facts and circumstances of the case exist for the subsequent assessment year 2014-15. It was submitted that the matter was carried in appeal before the Ld. CIT(A) and various contentions were advanced. However, the same were again not appreciated and the findings of the AO were sustained by the Ld. CIT(A). 6. It was submitted that under identical set of facts and circumstances of the case in case of Sood Sabha Vs. ITO (in ITA No. 138/Chd/2021 dt. 21/07/2022), the Coordinate Chandigarh Benches have set aside the matter to the file of the AO to examine the matter afresh and it was submitted that given the facts and circumstances are exactly identical and similar contentions are being raised in 4 the present case, in the interest of justice, the matter may be set aside to the file of the AO by following the decision in the case of Sood Sabha Vs. ITO(supra). 7. Per contra the Ld. DR has relied on the orders of the lower authorities and has taken us through the findings of the ld CIT(A). 8. We have heard the rival contention and perused the material available on the record. In case of Sood Sabha Vs. ITO (supra), the Coordinate Chandigarh Benches have set aside the matter to the file of the AO and the relevant findings and the directions are reproduced as under: “13. We have heard the rival contentions and carefully purused the material available on record. Firstly, we find that it is a consistent stand of the assessee society before the lower authorities that there is no change in the objects of the assessee society and it has been carrying on same set of activities in pursuance of the said objects over past number of years and which has been accepted by the Assessing officer while framing the assessment in the earlier years and therefore, questioning the different stand taken by the AO during the year under consideration and which has also been confirmed by the ld CIT(A). On perusal of the records, we find that the AO has not addressed this contention of the assessee and the ld CIT(A) has merely stated that each year is an independent assessment year and the AO has to examine and decide the matter based on facts of that particular year. No doubt, each year is an independent assessment year and the AO is bound by law to examine the activities each year and whether the same are in pursuance of its stated objectives. At the same time, it is a settled legal proposition as has been reiterated by the Courts and this Tribunal from time to time that where there are no material changes in the facts and circumstances of the case and same nature of activities have been carried on in the past years and in the year under consideration and there is no change in law, a view once taken by the Revenue authorities in the past years should not ordinarily be disturbed or varied in the year under consideration. In other words, the principle of consistency has been well enshrined in tax jurisprudence which should be respected and adhered to by the authorities. Therefore, the contention of the assessee regarding consistency in approach by the Revenue authorities need to be appropriately addressed and for that reasons, we believe that the matter deserve to be said set-aside to the file of the Assessing office for examination a fresh and to record a specific finding in this regard as to why he believes that a position accepted by the Revenue in the earlier years should not be followed and the reasons for arriving at such a finding. 14. The second contention which has been raised by the assessee is that its objects fall under the category of medical relief, relief of the poor and yoga and doesn’t fall under the category of “advancement of any other object of general public utility” and as per settled legal position, the proviso to section 2(15) which applies to last limb under the category of “advancement of any other object of general public utility” doesn’t apply in the instant case. In this regard, we find that the AO in para 2.3 of his order has summarily held that as list of objects sought to be achieved by the assessee society encompasses nearly all objects mentioned in the definition of charitable purpose in section 2(15) of the Act, all the objects fall under the category of “general public utility”. In this regard, if we look at the definition of the charitable purpose as defined in section 2(15) of the Act, it defines “charitable purpose" to include relief of the poor, education, yoga, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility. In our understanding, prima facie reading of the 5 aforesaid provisions require to identify objects which are falling under individual category of “relief to the poor”, “education”, “yoga”, “medical relief”, etc and in cases, where it is falling under more than one category, then apply the dominant purpose test to identify a suitable category rather than clubbing all the objects as falling under the category of “general public utility” as the language used is “any other object of general public utility” and therefore, the significance and import of “any other object” need to be appreciated and which means that an object which doesn’t fall specifically under any of the earlier categories. In this regard, we find that firstly, the Assessing officer has summarily decided this issue and thereafter, the ld CIT(A) has merely confirmed the findings of the Assessing officer without addressing the matter and the contentions so raised by the assessee and for this reason as well, the matter deserve to be set-aside. In this regard, it is also noted that a fresh registration has been granted by the ld PCIT vide order dated 15.10.2021 u/s.12AA of the Act, for A.Y 2022-23 to A.Y 2026-2027 with the objects of relief of the poor, education, medical relief and yoga to the assessee society. The AO is therefore directed to take the same into consideration and decide the matter afresh and record his specific finding and the basis of arriving at such finding. 15. The third contention which has been raised by the assessee is that applying the dominant purpose test, it is carrying on charitable activities in the medical field and relief to poor, and the activities of running of guest house/renting of halls for social and other functions are activities through which it generate funds besides receiving charity/donations and membership fees and such funds are used for undertaking aforesaid charitable activities. In support, the assessee has submitted documentary evidence in support of undertaking the charitable activities. On the other hand, the contention of the Revenue is that looking at the assessee society’s income and expenditure account, the assessee has shown receipts of Rs 1.41 cr from booking of halls and rooms which amounts to 93% of total receipts and it has generate net profit of 41.13% and further, it is generating huge profits from year-on-year and the same is not ploughed back to feed any charity. On careful perusal of records, we find that the AO has not recorded any findings regarding various charitable activities being carried out by the assessee society, as listed in its written submissions filed before the AO, which also find mention in para 2.8 of the AO’s order, however, there is no finding by the AO disputing such activities being undertaken by the assessee society. On a prima facie read of these activities, we find that a lot of these activities are undertaken without any charges and therefore, the question of reflection of any receipts from such activities in the profit/loss account doesn’t arise. In order to undertake these activities free of any charge which of course require manpower and infrastructure, the assessee society need to generate funds which as claimed are generated through rentals of rooms/halls, etc. Therefore, we believe that where there are activities which are undertaken by the assessee society free of any charges, one needs to examine what the nature of these activities and how the same have been carried on by the assessee society and what are the cost implications thereof. The reflection of such activities in the income and expenditure will be more on the expense side rather than on the revenue side which apparently has escaped the attention of the Assessing officer. For this reason as well, we believe that it would be in fitment of things that the matter is set-aside to the file of the Assessing officer who shall examine the same afresh as per law taking into consideration aforesaid discussions after providing reasonable opportunity to the assessee. Needless to say, the Assessing officer is free to call for any information/documentation and the assessee is also at liberty to raise its contentions and file any information/documentation before the Assessing officer.” 9. Admittedly, similar contentions are being raised before us in the case of the assessee society and given that there are certain linkages between the two societies as apparent from the impugned order, we deem it appropriate that this matter is also set aside to the file of the AO to examine the same afresh as 6 per law taking into consideration the aforesaid discussion and directions in the case of Sood Sabha Vs. ITO(supra). Therefore all the contentions raised by the Ld. AR are left open and the assessee is at liberty to raise the same before the AO who shall consider the same and decide the matter as per law after providing reasonable opportunity to the assessee. 10. In the result, both the above appeals are allowed for statistical purposes. Order pronounced in the open Court on 22/05/2023. Sd/- Sd/- आकाश द प जैन $व%म 'संह यादव (AAKASH DEEP JAIN) ( VIKRAM SINGH YADAV) उपा य / VICE PRESIDENT लेखा सद,य/ ACCOUNTANT MEMBER AG Date: 22/05/2023 ( + ! , - . - Copy of the order forwarded to : 1. The Appellant 2. The Respondent 3. $ / CIT 4. $ / 0 1 The CIT(A) 5. - 2 ग 4 5 & 4 5 678 ग9 DR, ITAT, CHANDIGARH 6. ग 8 : % Guard File ( + $ By order, ; # Assistant Registrar