M/s. Indian Institute of Foreign Trade, New Delhi V. ADIT(E), New Delhi

ITA 1639/DEL/2014

• Counselvise Citation: 163920114 RSA 2014
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 06-07-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 20-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHIM SINGH
• Keywords: Charitable institution
• Section: 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC - 1 , NEW DELHI BEFORE SH. N. K. SAINI, AM ITA NO. 1639 /DEL/201 4 : ASSTT. YEAR : 2010 - 11 IN DIAN INSTITUTE OF FOREIGN TRADE B - 21, QUTUB INSTITUTIONAL AREA, MEHRAULI, NEW DELHI - 110016 VS ASSISTANT DIRECTOR OF INCOME TAX(E), INVESTIGATION CIRCLE(1), NEW DEL HI (APPELLANT) (RESPONDENT) PAN NO. A AATI0438E ASSESSEE BY : SH . M. P. RASTOGI, ADV. & SMT. LALITA KRISHNAMURTHY, CA REVENUE BY : SH. BHIM SINGH , SR. DR DATE OF HEARING : 06 .0 7 .2015 DATE OF PRONOUNCEMENT : 16 .09 .2015 ORDER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 10.02.2014 OF LD. CIT (A) - XXI , NEW DELHI . 2 . FOLLOWING GROUND HAVE BEEN RAISED IN THIS APPEAL: 1. THAT THE P ROVISIONS OF SECTION 11 OF THE INCOME TAX ACT AS CONSIDERED BY THE ASSESSING OFFICER/CIT(APPEALS) IS NOT APPLICABLE AND ACCORDINGLY THE INFERENCE DRAWN BY THE AUTHORITIES BELOW BASED ON SECTION 11 IS ARBITRARY, UNJUST, BAD IN LAW AND DESERVES TO BE EXPUNGE D. 2. THAT THE OBSERVATION OF THE CIT(APPEALS) THAT THE EXPENDITURE IN TANZANIA FOR THE BOARDING AND LODGING ETC. WHICH MAY BE FOR PERSONAL TRIP OF THE FACULTY MEMBERS IN THE GARB OF OFFICIAL TOUR WHICH CANNOT BE SAID TO BE APPLICATION OF THE FUND FOR CHARITABLE PURPOSES IN INDIA IS BASED ON SURMISE, CONJECTURE, ITA NO.1639 /DEL /2014 INDIAN INSTITUTE OF FOREIGN TRADE 2 PRESUMPTION AND CONTRARY TO THE FACTS AND HISTORY OF THE CASE AND ACCORDINGLY THE ASSESSMENT SO FRAMED BY THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(APPEALS) ON SUCH ILLOGICAL AND SUSPICIOUS INFERENCE IS BAD IN LAW. 3. THAT WITHOUT PREJUDICE TO GROUND NOS. 1 AND 2 ABOVE, THE ASSESSING OFFICER/CIT(APPEALS) FAILED TO APPRECIATE THAT THE EXPENSES AT TANZANIA ARE INCURRED IN RELATION TO THE IMPARTING OF EDUCATION TO THE STUDENTS BASED IN TANZANI A AND ENROLLED FOR THE MBA (INTERNATIONAL BUSINESS) PROGRAM OF IIFT WHERE FROM THE FEES HAS ALSO BEEN RECEIVED AND ACCORDINGLY ONLY THE NET INCOME AFTER DEDUCTING THE EXPENSES SO INCURRED IN RELATION THERETO HAS TO BE SEEN, AS ACCEPTED IN EARLIER YEARS AND CONSEQUENTLY THE ASSESSMENT SO FRAMED BY THE ASSESSING OFFICER AND SUSTAINED BY CIT(APPEALS) DISALLOWING THE EXPENSES AT TANZANIA IS ARBITRARY, UNJUST AND AGAINST RULES OF CONSISTENCY. 4. THAT WITHOUT PREJUDICE TO GROUND NOS. 1 AND 2 ABOVE, THE ASSESSING OFFICER/CIT(APPEALS) BOTH HAVE ERRED IN FAILING TO CONSIDER THAT ALL THE INCOME ARISES TO THE ASSESSEE AFTER THE EXPENDITURE HAS BEEN INCURRED AND APPLIED ONLY FOR OBJECTS OF TRUST AND ACCORDINGLY THE ASSESSMENT SO FRAMED BY THE ASSESSING OFFICER AND SUST AINED BY CIT(APPEALS) IS ARBITRARY, UNJUST AND BAD IN LAW. 5. THE ABOVE GROUNDS ARE INDEPENDENT AND WITHOUT PREJUDICE TO ONE ANOTHER. 6. YOUR APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR WITHDRAW ANY OF THE GROUNDS O F APPEAL AT THE TIME OF HEARING. ITA NO.1639 /DEL /2014 INDIAN INSTITUTE OF FOREIGN TRADE 3 3 . THE ONLY GRIEVANCE OF THE ASSESSEE IN THIS APPEAL RELATES TO THE DISALLOWANCE OF THE EXPENSES INCURRED IN TANZANIA BY INVOKING THE PROVISIONS OF SECTION 11 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 4 . FACTS OF THE CASE IN BRIEF A RE THAT THE ASSESSEE IS REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 1860 ON 02.05.1963 AND ALSO REGISTERED U/S 12AA OF THE ACT ON 16.02.1974. THE ASSESSEE IS ALSO NOTIFIED U/S 10(23C)(IV) OF THE ACT AND IS PROMOTED BY THE MINISTRY OF COMMERCE AND THE GOVERNMENT OF INDIA FOR THE PURPOSE OF EDUCATION. THE ASSESSEE IS OFFERING THE MBA COURSE ON INTERNATIONAL BUSINESS AND HAD SOME FOREIGN STUDENTS FROM TANZANIA TO WHOM THE EDUCATIONAL DEGREES ARE OFFERED. THE ASSESSEE CLAIMED THE FOREIGN TOUR EXPENSES WHIC H HAD BEEN INCURRED IN TANZANIA BUT THE AO DISALLOWED THE EXPENSES OF RS. 9,07,784/ - BY OBSERVING THAT THE SAME HAD NOT BEEN INCURRED FOR THE CHARITABLE PURPOSES IN INDIA. 5 . BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTE D THAT THE FACULTY MEMBERS WENT TO TANZANIA FOR IMPARTING EDUCATION TO THE FOREIGN STUDENTS IN TANZANIA AND AS SUCH THE EXPENSES WERE FOR THE PURPOSE OF EDUCATION AND THE SAME SHOULD HAVE BEEN ALLOWED. IT WAS FURTHER SUBMITTED THAT THE SIMILAR DISALLOWANCE HAD BEEN ALLOWED BY THE LD. CIT(A) IN THE ASSESSMENT YEARS 2006 - 07 TO 2009 - 10 ITA NO.1639 /DEL /2014 INDIAN INSTITUTE OF FOREIGN TRADE 4 AND THE ITAT HAD ALSO DISMISSED THE DEPARTMENTAL APPEAL FOR THE ASSESSMENT YEAR 2009 - 10. 6. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE AO IN THE EARLIER YEARS LIKE ASSESSMENT YEARS 2006 - 07 TO 2009 - 10 ACTUALLY SOUGHT TO TAX THE INCOME WHICH WAS RECEIVED FROM THE FOREIGN STUDENTS OF TANZANIA. BUT IN THE PRESENT CASE, THE AO HAD ACTUALLY DISALLOWED THE EXPENSES WHICH HAD BEEN INCURRED OUTSI DE INDIA AND AS SUCH THE SAME CANNOT BE SAID AS APPLICATION FOR CHARITABLE PURPOSES IN INDIA AS PROVIDED U/S 11 AND 10(23C)(IV) OF THE ACT. ACCORDING TO THE LD. CIT(A), THE FACTS OF THE PRESENT CASE ARE DISTINGUISHABLE FROM THE EARLIER YEARS AND AS SUCH TH E EARLIER DECISION CANNOT BE APPLIED IN THIS YEAR. THE LD. CIT(A) AFTER DISCUSSING THE PROVISION CONTAINED IN SECTION 11(1)(A) AND 10(23C)(IV) OF THE ACT OBSERVED THAT THE ASSESSEE HAD INCURRED THE EXPENDITURE IN TANZANIA FOR THE BOARDING AND LODGING WHICH MAY BE PERSONAL TRIP OF THE FACULTY IN THE GARB OF OFFICIAL TOUR WHICH CANNOT BE SAID TO BE APPLICATION OF THE FUND FOR CHARITABLE PURPOSES IN INDIA. THE LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE AO. 7 . NOW THE ASSESSEE IS IN APPEAL. THE LD. COU NSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT FACTS FOR THE YEAR UNDER CONSIDERATION ARE IDENTICAL TO THE FACTS INVOLVED IN THE EARLIER YEAR S I.E. ASSESSMENT YEARS 2006 - 07 TO 2009 - ITA NO.1639 /DEL /2014 INDIAN INSTITUTE OF FOREIGN TRADE 5 10. A REFERE NCE WAS MADE TO PAGE NOS. 36 TO 44 OF THE ASSESSEE S COMPILATION WHICH IS THE COPY OF THE ORDER DATED 31.12.2010 PASSED BY THE CIT(A) - XXI, NEW DELHI FOR THE ASSESSMENT YEAR 2006 - 07 IN ASSESSEE S OWN CASE. THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO PARA 3 .5 OF THE SAID ORDER WHEREIN THE DISALLOWANCE MADE BY THE AO WAS DELETED BY OBSERVING AS UNDER: 3.5 I AM INCLINED TO ACCEPT THE VIEW OF LEARNED AR THAT IF ONE IS TAXING RECEIPT, THEN EXPENDITURE INCURRED IN RELATION THERETO WILL ALSO TO BE ALLOWED. IN TH E INSTANT CASE, IFM TANZANIA HAS REIMBURSED SUCH EXPENDITURE. THE RELIANCE PLACED ON VARIOUS JUDGMENTS OF HON BLE COURTS IS APPRECIATED. GROUNDS NO. 1 TO 3 ARE ALLOWED. 8 . LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT IN THE ASSESSMENT YEAR 2009 - 10 , THE SIMILAR DISALLOWANCE WAS DELETED BY THE LD. CIT(A) AND THE DEPARTMENT PREFERRED AN APPEAL IN ITA NO. 6189/DEL/2014 TO THE ITAT WHEREIN VIDE ORDER DATED 15.02.2013, THE ORDER PASSED BY THE LD. CIT(A) WAS CONFIRMED. A REFERENCE WAS MADE TO PARA 5 OF TH E SAID ORDER. 9 . IN HIS RIVAL SUBMISSIONS THE LD. DR SUPPORTED THE ORDER OF THE LD. CIT(A). 10 . I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE A SSESSEE IS OFFERING THE MBA COURSE ON INTERNATIONAL BUSINESS AND HAS SOME FOREIGN STUDENTS FROM TANZANIA , THE FACULTY ITA NO.1639 /DEL /2014 INDIAN INSTITUTE OF FOREIGN TRADE 6 MEMBERS WENT TO TANZANIA FOR IMPARTING EDUCATION TO THE FOREIGN STUDENTS AS SUCH THE IMPUGNED EXPENSES WERE FOR THE PURPOSE OF EDUCATION. A SIMILAR ISSUE WAS INVOLVED IN THE ASSESSMENT YEAR 2009 - 10 WHEREIN ON THE IDENTICAL FACTS , T HE AO NOTED THAT THE EXPENSES WERE INCURRED BY THE FACULTY ON IMPARTING OF EDUCATION IN TANZANIA. IN THE SAID YEAR, THE AO HIMSELF ALLOWED THE EXPENSES INCURRED BY THE ASSESSEE ON IMPARTING OF EDUCATION IN TANZANIA. HOWEVER, HE MADE THE DISALLOWANCE OF THE SURPLUS AMOUNT BY TREATING THE ACTIVITY OF THE ASSESSEE AS A BUSINESS ACTIVITY. THE AFORESAID SAID FACT HAS BEEN MENTIONED BY THE ITAT IN PARA 5 OF THE ORDER DATE D 15.02.2013 IN ITA NO. 6189/DEL/2011 WHICH READ AS UNDER: 5. ON DUE CONSIDERATION OF THE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT GROUND OF APPEAL TAKEN BY THE REVENUE DOES NOT ARISE FROM THE FINDINGS OF THE LEARNED CIT(APPEALS). THE EXPENDITURE INCURRED BY THE ASSESSEE ON IMPARTING OF EDUCATION IN TANZANIA AMOUNTING TO RS. 25,49,719/ - HAS ALREADY BEEN ALLOWED BY THE LEARNED ASSESSING OFFICER. HE HAS ONLY TAXED THE SURPLUS BY TREATING THE ACTIVITY OF THE ASSESSEE AS A BUSINESS ACTIVITY. FROM THE SUBMISSIONS EXTRACTED SUPRA, IT REVEALS THAT THE ASSESSEE HAS NOT CARRIED OUT ANY BUSINESS ACTIVITY, RATHER IT HAS IMPARTED EDUCATION ONLY. IN THAT PROCESS, IT HAS A SURPLUS AMOUNT OVER THE EXPENDITURE. THE ASSESSEE IS ENJOYING REGISTRATION UNDER SEC. 12A( A) AS WELL AS BENEFIT UNDER SEC. 10(23C)(IV) OF THE ACT. LEARNED ASSESSING OFFICER HAS TO VISUALIZE, WHETHER THE GROSS RECEIPTS EARNED BY IT HAVE BEEN APPLIED FOR THE OBJECTS OF THE ASSESSEE AS PER SEC. 11 OF THE ACT OR NO T ? IN THAT EXERCISE, LEARNED ASSES SING OFFICER WAS SATISFIED THAT THE APPLICATION OF INCOME ON THE OBJECTS OF THE ASSESSEE WITHIN THE INDIA IS MORE THAN 85% AS DISCERNIBLE IN THE FINDINGS OF THE ASSESSING OFFICER EXTRACTED SUPRA. WE FAIL TO UNDERSTAND UNDER WHAT PROVISIONS HE HAS CARVED OU T THE TAXABILITY OF RS. 18,84,420. THE ITA NO.1639 /DEL /2014 INDIAN INSTITUTE OF FOREIGN TRADE 7 SURPLUS AMOUNT COLLECTED BY THE ASSESSEE FROM TANZANIA IS IN FURTHERANCE OF ITS OBJECTS, IT HAS NOT APPLIED ITS RESOURCES ON THE STUDENTS OF A FOREIGN COUNTRY. IT HAS JUST EARNED SOME AMOUNT FROM THAT ACTIVITY. IN THE LAST THREE YEARS, THIS ACT OF THE ASSESSEE WAS TREATED AS A CHARITABLE ONE. 11 . FROM THE ABOVE NARRATED FACTS AND DISCUSSION MADE IN THE FORMER PART OF THIS ORDER, IT IS CLEAR THAT A SIMILAR DISALLOWANCE WAS DELETED BY THE LD. CIT(A) FOR THE ASSESSMENT YEARS 2006 - 07 TO 2008 - 09, NOTHING IS BROUGHT ON RECORD THAT THE SAID ORDER S W ERE CHALLENGED BY THE DEPARTMENT. MOREOVER, IN THE ASSESSMENT YEAR 2009 - 10, THE AO HIMSELF HAD ACCEPTED THE CLAIM OF THE ASSESSEE WHICH IS CLEAR FROM THE AFORESAID REFERRED TO PA RA 5 OF THE ORDER DATED 15.02.2013 PASSED BY THE ITAT IN ASSESSEE S OWN CASE. THEREFORE BY CONSIDERING THE TOTALITY OF THE FACT, I AM OF THE VIEW THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE DISALLOWANCE MADE BY THE AO. ACCORDINGLY, THE SAME IS DELETED. 1 2 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . ( ORDER PRON OUNCED IN THE COURT ON 16 /09 /2015 ) SD/ - (N. K. SAINI) ACCOUNTANT MEMBER DATED: 16 /09 /2015 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR