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

ITA 1666/DEL/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7915 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 30-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT KR JAIN
• Section: 12A; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI D BENCH, NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER, AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER, ITA NO.1666/DEL/2016 [ASSESSMENT YEAR: 2010-11] ITO(E), WARD-1(2), ROOM NO.2417, 24 TH FLOOR, E-2 BLOCK, PRATYAKSH KAR BHAWAN, DR. SHYAMA PRASAD MUKHERJEE CIVIC CENTRE, JAWAHARLAL NEHRU MARG, NEW DELHI-110002 M/S INDIAN PORTS ASSOCIATION, 19, INSTITUTIONAL AREA, LODHI ROAD, NEW DELHI-110003 PAN- AAATI0349A APPELLANT RESPONDENT APPELLANT BY SHRI AMIT KR. JAIN SR. DR RESPONDENT BY SHRI SATYAJEET GOYAL DATE OF HEARING 21/01/2020 DATE OF PRONOUNCEMENT 23/01/2020 ORDER PER M. BALAGANESH, AM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A)-40, NEW DELHI, DATED 05/01/2016, FOR ASSESSMENT YEAR 2010-11. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL:- I. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE BY IGNORING THAT ASSESSEE WAS RECEIVING CONTRIBUTION F ROM THE 2 ITA NO. 1666/DEL/2016 CONTRIBUTOR PORT ON COMMERCIAL LINES AND WAS PROVID ING CONSULTANCY SERVICES TO THE PORTS AND CONTRIBUTORS PORTS HAD DEDUCTED TAX AT SOURCE ON CONTRIBUTIONS GIVEN TO TH E ASSESSEE AND ACCORDINGLY, THE AO RIGHTLY INVOKED FIRST PROVI SO TO SECTION 2(15) OF THE ACT AND CONSEQUENTLY, ADDED BACK UNSPE NT EXPENSES OF RS. 2,34,58,706/- TO THE TOTAL INCOME BY CONSIDE RING THEM SURPLUS OF THE ASSESSEE. II. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW IN IGNORING THAT PLEA O F MUTUALITY TAKEN BY THE ASSESSEE IS MISPLACED AS THE ASSESSEE WAS PROVIDING SERVICES OF ITS GUEST HOUSE AND STAFF CAR TO THE PERSONS WHO WERE NOT THE EMPLOYEES OF THE ASSESSEE SOCIETY. THE PRINCIPLE OF MUTUALITY IS NOT APPLICABLE ON THE ASS ESSEE IN VIEW OF RATIO LAID DOWN BY HON'BLE APEX COURT IN THE CASE O F BANGLORE CLUB VS. CIT & ANR. WHEREIN IT HAS BEEN HELD THAT T HERE IS A LACK OF IDENTITY OF THE CONTRIBUTORS AND THE PARTICIPATO RS IT WENT BEYOND THE PRINCIPLE OF MUTUALITY. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE IS AN APEX BODY OF ALL MAJOR PORTS, WHICH ARE CENTRALLY A DMINISTERED UNDER, MINISTRY OF SHIPPING, GOVERNMENT OF INDIA. ALL MAJO R PORTS OF INDIA ARE MEMBERS OF THE ASSESSEE SOCIETY. THE MAIN MAJOR PORTS ARE JAWAHARLAL NEHRU PORT TRUST, MUMBAI PORT TRUST, KOL KATA PORT TRUST, CHENNAI PORT TRUST, VISHAKHAPATNAM PORT TRUST, KAND LA PORT TRUST, COCHIN PORT TRUST, MORMUGAO PORT TRUST, PARADIP POR T TRUST, NEW MANGALORE PORT TRUST, TUTIKORIN PORT TRUST AND ENNO RE PORT TRUST. THE MAIN OBJECT OF THE ASSESSEE IS TO UNDERTAKE AND PROMOTE ENGINEERING, TECHNICAL, ECONOMIC, FINANCIAL, MANAGE RIAL AND STATISTICAL STUDIES AND RESEARCH INTO MATTERS RELATING TO THE P LANNING, ORGANIZATION, MANAGEMENT OPERATION MAINTENANCE AND CONSTRUCTION OF PORTS AND HARBOURS AND TO PROVIDE A TECHNICAL CO NSULTANCY SERVICE 3 ITA NO. 1666/DEL/2016 THEREOF. THE ASSESSEE ASSOCIATION IS REGISTERED UND ER SECTION 12A OF THE INCOME TAX ACT VIDE ORDER DATED 13/01/1997. WE FIND THAT THE ASSESSEE HAD FILED NIL RETURN FOR AY 2010-11 BY CLA IMING EXEMPTION U/S 11 OF THE ACT. VARIOUS RECEIPTS AS PER INCOME & EXPENDITURE ACCOUNT OF THE ASSESSEE ARE AS UNDER:- HEADS INCOME MISCE LLANEOUS INCOME RS.57,50,364/ - CONTRIBUTION RECEIVED FROM MAJOR PORTS RS.4,62,25,128/ - 5. A BREAK UP OF MISCELLANEOUS INCOME REPORTED A BOVE ARE AS UNDER:- SUBHEADS INCOME SALE AND ADVERTISEMENT ON INDIAN PORTS RS.1,77,955/ - ROOM RENT RECEIVED RS. 5,02,545/ - INCOME FROM FIXED DEPOSITS RS.41,13,516/ - SUNDRY INCOME RS.9,56,618/ - 6. WE FIND THAT THE ASSESSEE HAD INCURRED FOLLOWING EXPENDITURE IN ITS INCOME AND EXPENDITURE ACCOUNT:- HEADS INCOME STAFF EXPENSES RS.3,14,65,143/ - REST HOUSE EXPENSES RS.30,11,044/ - OFFICE EXPENSES RS.56,24,103/ - GENERAL EXPENSES RS.56,24,103/ - GRANT TO ASSOCIATED ORGANIZATIONS RS.60,00,000/ - 4 ITA NO. 1666/DEL/2016 7. IT IS NOT IN DISPUTE THAT THE ACTIVITIES OF THE ASSESSEE FALLS UNDER THE LAST LIMB OF DEFINITION CHARITABLE OF PURPOSE U /S 2(15) OF THE ACT I.E. ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PU BLIC UTILITY. THE LD. AO SOUGHT TO INVOKE THE FIRST PROVISO ON THE AS SESSEE BY STATING THAT IT HAD DERIVED COMMERCIAL RECEIPTS WHICH WOULD MAKE THE ASSESSEE ASSOCIATION INELIGIBLE FOR CLAIM OF EXEMPT ION 11 OF THE ACT. WE FIND THAT THE LD. ASSESSING OFFICER HAD ALSO OBS ERVED THAT THE ASSESSEE HAS SHOWN UNPAID EXPENSES OF RS.2,34,58,70 6/- WHICH INCLUDES (A) MAJOR PORTS SPORTS CONTROL BOARD EXPEN SES OF RS.64,00,000/- (B) INDIAN MARITIME UNIVERSITY EXPEN SES OF RS.54,62,334/- (C) PAYMENTS FOR PAY AND ALLOWANCES OF RS.99,21,958/- AND THE BALANCE OF RS.16,74,414/- UN DER VARIOUS HEADS, VIZ. TRANSPORT HIRE CHARGES, AUDIT FEE, SUND RY EXPENSES ETC. THE ASSESSEE HAS SHOWN EXPENDITURE AS GRANT OF RS.6 0,00,000/- TO ASSOCIATED ORGANIZATIONS ON SCHEDULE XIII WHICH IS MERE A BOOK ENTRY. THE LD. ASSESSING OFFICER PROCEEDED TO DISALLOW THE SE UNPAID 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 T HE ACT HAS BEEN DENIED TO THE ASSESSEE, THIS SURPLUS WAS BROUGHT TO TAX BY THE LD. ASSESSING OFFICER IN THE ASSESSMENT. 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, 5 ITA NO. 1666/DEL/2016 COMMERCE OR BUSINESS. IT WAS SPECIFICALLY PLEADED T HAT THE HOLDING OF CONFERENCE, PROVIDING CONSULTANCY SERVICES AND MANA GEMENT SERVICES ARE PART OF MAIN OBJECTS OF THE ASSOCIATION AND THE SE SERVICES ARE ONLY PROVIDED TO ITS MEMBERS WITH THE AIM OF NO PROFIT/L OSS BASIS AND THESE MEMBERS ARE CONTRIBUTING TO THE ASSOCIATION F OR THE SAME ON THE PREFIXED BASIS. ACCORDINGLY, IT WAS SPECIFICALL Y PLEADED THAT THESE SERVICES ARE NOT PROVIDED FOR (A) ANY ACTIVITY IN T HE NATURE OF TRADE COMMERCE OR BUSINESS; (B) ANY ACTIVITY OR RENDERING ANY SERVICES IN RELATION TO ANY TRADE COMMERCE OR BUSINESS; (C) FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY. THE AS SESSEE ALSO PLEADED THAT THE INCOME OF THE ASSESSEE WOULD ALSO BE EXEMP TED 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 NEVE R CLAIMED IN THE INCOME AND EXPENDITURE ACCOUNT BY THE ASSESSEE. IT WAS PLEADED THAT ONCE EXPENDITURE HAS NOT BEEN CLAIMED AT ALL, THERE IS NO QUESTION OF DISALLOWANCE OF THE SAME IN THE ASSESSMENT. WE FIND THAT THE LD. CIT(A) HAD GIVEN A CATEGORICAL FINDING THAT THE ASS ESSEE ASSOCIATION IS NOT INVOLVED IN ANY TRADE, COMMERCE OR BUSINESS SO AS TO FALL WITHIN THE MISCHIEF OF THE FIRST PROVISO OF SECTION 2(15) OF THE ACT. 6 ITA NO. 1666/DEL/2016 10. PER CONTRA, THE LD. DR VEHEMENTLY RELIED UPON T HE ORDER OF THE LD. AO. 11. WE FIND THAT THE ISSUE IN DISPUTE HAD BEEN ADDR ESSED BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF PHD CHAMBER OF COMMERCE AND INDUSTRY VS DIT(EXEMPTION) REPORTED IN 357 ITR 296 (DEL.), WHEREIN, 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, PROF ESSIONAL OR SIMILAR ASSOCIATION CAN BE SAID TO BE CARRYING ON A BUSINESS ACTIVITY NEEDS TO BE EXAMINED. THE FURTHER QUESTION TO BE ADDRESSED, WITH REFERENCE TO SECTION 11(4A), WOULD BE WHETHER SUCH ACTIVITIES (WHICH AMOUNT TO A BUSINESS) WERE I NCIDENTAL TO THE ATTAINMENT OF THE OBJECTIVES OF TRUST OR INSTIT UTION AND WHETHER SEPARATE BOOKS OF ACCOUNTS WERE MAINTAINED IN RESPECT OF SUCH ACTIVITIES. THERE CAN BE NO DOUBT THAT THE ACTIVITIES OF THE NATURE DESCRIBED ABOVE, IN THE CASE OF AN ASSES SEE SUCH AS THE PRESENT ONE, WHICH IS A TRADE ASSOCIATION-CHAMB ER OF COMMERCE AND INDUSTRY, ESTABLISHED TO PROTECT THE I NTERESTS OF TRADE AND INDU TRY IN PUNJAB, HARYANA AND DELHI- WE RE ACTIVITIES WHICH ARE INCIDENTAL TO THE ATTAINMENT O F THE OBJECTS OF THE CHAMBER. WE DO NOT THINK THAT THE TRIBUNAL IS J USTIFIED IN TAKING THE VIEW THAT THE ASSESSEE, WHICH IS A CHAMB ER 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 PROSPERITY 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 PURP OSE WAS NOT RENDERED ANY THE LESS AN OBJECT OF GENERAL PUBL IC UTILITY. ECHOING THESE SENTIMENTS ANOTHER BENCH OF EQUAL STR ENGTH OF THE SUPREME COURT IN COMMISSIONER OF INCOME TAX, NE W DELHI VS. FEDERATION OF INDIAN CHAMBERS OF COMMERCE AND I NDUSTRIES, NEW DELHI 1981) 130 ITR 186 HELD THAT WHERE THE MAI N OBJECT OF THE ASSESSEE WAS THE PROMOTION, PROTECTION AND D EVELOPMENT OF TRADE, COMMERCE AND INDUSTRY IN INDIA, ITS INCOM E FROM CONDUCTING A TRADE FAIR, RENT FOR SPACE ALLOTTED AN D SALE OF ENTRY AND GATE TICKETS, FEES FOR ARBITRATION ETC. WOULD B E EXEMPTED 7 ITA NO. 1666/DEL/2016 FROM TAX UNDER SECTION 11 READ WITH SECTION 2(15) O F THE ACT. THE 'DOMINANT PURPOSE' TEST WAS APPLIED TO HOLD THA T THE ACTIVITIES TO EARN INCOME WERE NOT DRIVEN WITH THE MOTIVE OF PROFITMAKING. IN THIS JUDGMENT, SEPARATE OPINIONS W ERE EXPRESSED BY EACH OF THE THREE LEARNED JUDGES AND W HILE JUSTICE PATHAK (AS HIS LORDSHIP THEN WAS) CONSIDERE D THE MATTER TO BE COVERED BY THE MAJORITY OPINION OF THE SUPREME COURT IN ADDITIONAL COMMISSIONER OF INCOME-TAX, GUJ ARAT VS. SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION (198 0) 121ITR PAGE 1,SEN, J. AND VENKATARAMIAH, J, HELD DIFFERENT OPINIONS BUT CONSIDERED THEMSELVES BOUND BY THE MAJORITY OPI NION IN ADDITIONAL COMMISSIONER OF INCOME-TAX, GUJARAT VS. SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION (SUPRA). IT WO ULD, THEREFORE, APPEAR THAT JUDICIAL THINKING WAS NEVER IN FAVOUR OF THE VIEW THAT THE SERVICES PERFORMED BY A TRADE, PR OFESSIONAL OR SIMILAR ASSOCIATION, SUCH AS A CHAMBER OF COMMERCE AND INDUSTRY, WERE IN PURSUIT OF A BUSINESS OR TRADE WI TH A PROFIT MOTIVE. 12. WE ALSO FIND THAT THE ASSESSEE IS ALSO COVERED BY THE DECISION OF THE HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS COCHIN PORT TRUST REPORTED IN 411 ITR 467 (KERALA) AND THE DECISION O F THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS KANDLA POR T TRUST REPORTED IN 364 ITR 164 (GUJ.). THE RELEVANT OPERATIVE PORTI ONS OF THE SAID JUDGMENTS ARE NOT REITERATED HEREIN FOR THE SAKE OF BREVITY. WE FIND THAT CATEGORICAL FINDING GIVEN BY THE LD. CIT(A) TH AT THE ASSESSEE IN THE INSTANT CASE IS NOT ENGAGED IN ANY ACTIVITY OF TRADE, COMMERCE OR BUSINESS SO AS TO FALL WITHIN THE MISCHIEF OF FIRST PROVISO OF SECTION 2(15) OF THE ACT, IS NOT CONTROVERTED BY THE REVENU E BEFORE US. HENCE, IN OUR CONSIDERED OPINION, EXEMPTION U/S 11 OF THE ACT COULD 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.2,34,58,70 6/- IN ITS INCOME AND EXPENDITURE ACCOUNT WHICH FACTUAL FINDING GIVEN BY THE LD. CIT(A) 8 ITA NO. 1666/DEL/2016 HAD ALSO NOT BEEN CONTROVERTED BY THE REVENUE BEFOR E US. HENCE, THERE CANNOT BE ANY DISALLOWANCE 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 RESPE CTFULLY FOLLOWING THE AFORESAID JUDICIAL PRECEDENTS, WE DO NOT FIND A NY MERIT IN THE GROUNDS RAISED BY THE REVENUE AND ACCORDINGLY THE S AME ARE HEREBY DISMISSED. 14. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 23/0 1/2020. SD/- SD/- [AMIT SHUKLA] [M. BALA GANESH] JUDICIAL MEMBER ACCOUNTANT MEMBE R DELHI; DATED: 23/01/2020. F{X~{T? F{X~{T? F{X~{T? F{X~{T? FA FA FA FA P.S P.SP.S P.S / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) 4. , , / DR, ITAT, DELHI 5. / GUARD FILE. / BY ORDER , /ASSISTANT REGISTRAR, , / ITAT, DELHI