MARITIME TRAINING AND RESEARCH FOUNDATON, MUMBAI V. DDIT (E) 1(2), MUMBAI

ITA 1733/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1975 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 25-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PRAKASH K JOTWANI
• Keywords: Charitable institution; Question of law
• Section: 142(1); 12A; 11

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI , . . , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO.1733/MUM/2015 ASSESSMENT YEAR: 2010-11 MARITIME TRAINING AND RESEARCH FOUNDATION, MACKINNON MACKENZIE BUILDING, 1 ST FLOOR, SHOORJI VALLABHDAS MARG, BALLARD ESTATE, MUMBAI-400038 / VS. DDIT(EXEMPTION) - 1( 2 ), MUMBAI ( '# $ /ASSESSEE) ( % / REVENUE) P.A. NO. AAATM5180H '# $ / ASSESSEE BY SHRI PRAKASH K. JOTWANI % / REVENUE BY SHRI PURUSHOTTAM KUMAR- DR & %' ( $ ) / DATE OF HEARING : 15/11/2016 ( $ ) / DATE OF ORDER: 15/11/2016 MARITIME TRAINING AND RESEARCH FOUNDATION ITA NO.1733/MUM/2015 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DA TED 30/01/2015 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. THE ONLY GROUND RAISED IN THE PRESENT APPEAL PERTAINS T O DENYING EXEMPTION U/S 11 OF THE INCOME TAX ACT, 1961 (HEREI NAFTER THE ACT) TO THE ASSESSEE ARISING OUT OF PROVIDING CHARI TABLE SERVICES OF TRAINING AND EDUCATION. 2. DURING HEARING, THE LD. COUNSEL FOR THE ASSESSE E, SHRI PRAKASH K. JOTWANI, CLAIMED THAT THE IMPUGNED ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL (ITA NO.7247/MUM/2012) ORDER DATED 22/08/2016 FOR ASSESSMENT YEAR 2009-10. THIS FACTUAL MATRIX WAS N OT CONTROVERTED BY THE LD. DR, SHRI PURUSHOTTAM KUMAR. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW O F THE ABOVE ASSERTIONS, WE ARE REPRODUCING HEREUNDER THE RELEVA NT PORTION FROM THE AFORESAID ORDER OF THE TRIBUNAL DATED 22/0 8/2016 FOR READY REFERENCE AND ANALYSIS:- 2. THE SOLE ISSUE RAISED IN THE VARIOUS GROUNDS OF APPEAL TAKEN BY THE ASSESSEE IS AGAINST THE UPHOLDING THE DENIAL OF EXEMPTION U/S 11 OF THE INCOME TAX ACT, 1961 (HEREINAFTER TO REFERRED TO AS THE ACT) AS DONE BY THE AO ON THE GROUND THAT THE A SSESSEE IS ENGAGED IN THE BUSINESS OF ACTIVITIES NOT COVERED W ITHIN THE MARITIME TRAINING AND RESEARCH FOUNDATION ITA NO.1733/MUM/2015 3 MEANING CHARITABLE AS DEFINED IN SECTION 2(15) OF T HE ACT AND THAT THE ACTIVITY OF TRAINING OF CADETS WAS NOT QUALIFIE D TO BE EDUCATION AND ALSO THAT THE ASSESSEE HAS BEEN MAKING PROFIT O N CONTINUOUS BASIS AND WITHOUT ANY CHARITABLE OBJECT AS PROVIDED UNDER SECTION 2(15) OF THE ACT. 3. FACTS OF THE CASE ARE THAT THE ASSESSEE FILED IT S RETURN OF INCOME ON 25.9.2009 DECLARING TOTAL INCOME OF RS.26 ,94,806/- ALONG WITH THE INCOME AND EXPENDITURE ACCOUNT, BALA NCE SHEET AND AUDIT REPORT IN FORM NO.10B. THE ASSESSEE TRUST IS REGISTERED AS A CHARITABLE TRUST WITH DIT(E), MUMBAI U/S 12A V IDE REGISTRATION NO.TR 29320/1992 AND ALSO WITH CHARITY COMMISSIONER, MUMBAI VIDE REGISTRATION NO.E-13963/- . THE ASSESSEE TRUST IS ENGAGED IN CHARITABLE ACTIVITIES IN THE FIELD OF TRAINING OF ALL CATEGORIES OF NAUTICAL AND OTHER OF FICERS AND RATINGS CONDUCTING TRAINING FOR EMPLOYEES OF MARINE COMPANIES AND CLAIMED ITS INCOME TO BE EXEMPT UNDER SECTION 1 1 OF THE ACT. THEREAFTER, SCRUTINY PROCEEDINGS WERE INITIATED AGA INST THE ASSESSEE AND STATUTORY NOTICES UNDER SECTION 143(2) AND 142(1) WERE ISSUED AND SERVED UPON THE ASSESSEE. DURING TH E COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE AC TIVITIES OF THE ASSESSEE WERE BEYOND THE SCOPE OF DEDUCTION AS PROVIDED UNDER SECTION 2(15) OF THE ACT AND THEREFORE CAME T O THE CONCLUSION THAT THE ASSESSEE WAS NOT ENTITLED TO CL AIM DEDUCTION UNDER SECTION 11 OF THE ACT. THE AO SPECIFICALLY RE PRODUCED THE OBJECTS OF ASSESSEE-TRUST IN PARA 3.1.1 OF THE ASSE SSMENT ORDER WHICH ARE REPRODUCED BELOW FOR READY REFERENCE : MARITIME TRAINING AND RESEARCH FOUNDATION ITA NO.1733/MUM/2015 4 5. OBJECTS A) THE OBJECTS OF THE TRUST ARE AS UNDER: I) TO ESTABLISH, MAINTAIN, CONDUCT CONTROL AND FIN ANCIALLY ASSIST TRAINING ESTABLISHMENTS, IN PARTICULAR ESTABLISHMEN TS FOR THE RAINING OF ALL CATEGORIES OF NAUTICAL AND OTHER OFF ICES AND RATINGS FOR THE MERCHANT MARINE IN INDIAN AND TO PROMOTE AN D PROVIDE FOR THE TECHNICAL AND NAUTICAL EDUCATION TO ALL PER SONS OF INDIA, NATIONALITY WITH REGARD TO ALL ASPECTS OF THE SHIPP ING INDUSTRY B) AND GENERALLY TO DO AL SUCH LAWFUL ACTS AND THIN GS AS ARE INCIDENTAL OR CONDUCIVE TO THE ATTAINMENT OF THE AF ORESAID OBJECT 4. ACCORDINGLY, THE AO ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE DATED 14.10.2011 WHICH WAS REPLIED ON 21.12.2011 AN D THE DETAILED REPLY OF THE ASSESSEE IS REPRODUCED IN PAR A 3.12 OF THE ASSESSMENT YEAR. AFTER PERUSING THE REPLY OF THE AS SESSEE, THE AO HELD THAT THE ASSESSEE WAS ENGAGED IN THE ACTIVITIE S OF TRAINING AND NOT EDUCATION AS CONTEMPLATED WITHIN THE MEANIN G OF SECTION 2(15) OF THE ACT AND THUS THE TRUST WAS DOING THE A CTIVITIES OF COMMERCIAL NATURE AND CLEARLY BUSINESS ACTIVITIES A ND ACCORDINGLY, THE AO COMPLETED THE ASSESSMENT U/S 14 3(3) OF THE ACT VIDE ASSESSMENT ORDER DATED 24.12.2011 AT AN IN COME OF RS.2,62,94,895/-. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE HAS PREFERRED APPEALBEFORE THE LD. CIT(A) WHO ALSO DISMISSED THE APPEAL OF THE ASSESSEE BY UPHOLDING THE ASSESSMENT ORDER AS UNDER : MARITIME TRAINING AND RESEARCH FOUNDATION ITA NO.1733/MUM/2015 5 4. I FIND THAT THE APPELLANT IS CERTAINLY ENGAGED IN THE ACTIVITIES OF TRAINING THE CADETS, WHICH BY ITSELF CANNOT BE QUALIFIED AS THE 'EDUCATION'. THERE IS NO MERIT IN THE ARGUMENT OF THE APPELLANT THAT ISSUANCE OF CERTIFICATE AFTER SHORT TERM COURSE AND TRAINING FOR THE SAME IS 'EDUCATION'. RE SPECTFULLY FOLLOWING THE ORDER OF JURISDICTIONAL TRIBUNAL IN T HE CASE OF GURSHIP EDUCATION TRUST, MUMBAI VS. ITO ITA NO. 4788/MUM/2009 I HOLD THAT THE ACTIVITIES OF THE APP ELLANT ARE IN THE NATURE OF BUSINESS ACTIVITIES REGULARLY CARRIED ON AND THEREFORE OUTSIDE THE PURVIEW OF SECTION 2(15) OF T HE ACT. IT IS FURTHER SEEN THAT THE APPELLANT IS CARRYING OUT THE SE ACTIVITIES WITH HUGE PROFIT, ON CONTINUOUS BASIS AND WITHOUT A NY CHARITABLE OBJECT AS CONTEMPLATED U/S 2(15). I THER EFORE DO NOT FIND MERIT IN THE CONTENTION OF THE APPELLANT AND C ONFIRM THE ACTION OF THE AO IN TREATING INCOME OF THE APPELLAN T UNDER THE HEAD INCOME FROM BUSINESS. CONSEQUENTLY EVEN THE CA PITAL EXPENDITURE CLAIMED AS EXEMPT UNDER SECTION 11 BY T HE APPELLANT AMOUNTING TO RS.22,38,508/- IS ALSO RIGHT LY ADDED BY THE AO. GROUNDS 1 TO 3 OF APPEAL ARE DISMISSED. 5. THE LD.AR VEHEMENTLY SUBMITTED THAT THE CASE OF THE ASSESSEE IS FULLY COVERED BY THE DECISION OF HONBLE JURISDICTI ONAL HIGH COURT IN IT APPEAL NO.465 OF 2012 IN DIRECTOR OF IN COME TAX V/S SAMUDRA INSTITUTE OF MARITIME STUDIES TRUST, ORDER DATED 7.8.2014 WHEREIN AN IDENTICAL ISSUE HAS BEEN DECIDE D IN FAVOUR OF THE ASSESSEE AND PRAYED THAT FOLLOWING THE RATIO LA ID DOWN IN THE SAID DECISION THE ORDER OF THE LD.CIT(A) BE SET ASI DE AND AO BE DIRECTED TO ALLOW THE DEDUCTION AS CLAIMED BY THE A SSESSEE UNDER SECTION 11 OF THE ACT. 6. ON THE CONTRARY, THE LD.DR REITERATED THE FACTS OF THE CASE AS SUBMITTED BEFORE THE LD.CIT(A) AND HEAVILY RELIED O N THE ORDER OF LD.CIT(A). MARITIME TRAINING AND RESEARCH FOUNDATION ITA NO.1733/MUM/2015 6 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE PARTIES, PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE ORDERS OF AUTHORITIES BELOW AND CASE LAWS RELIED UPON BY THE PARTIES. WE FIND THAT THE ASSESSEE WAS DENIED EXEMPTION UNDER S ECTION 11 OF THE ACT ON THE GROUND THAT THE ASSESSEE WAS ENGAGED IN IMPARTING TRAINING TO CADETS AND NOT EDUCATION WITHIN THE MEA NING OF SECTION 2(15) OF THE ACT AND MOTIVE OF THE ASSESSEE WAS EARNING PROFIT FROM THE SAID ACTIVITIES. WE FIND THAT THE S IMILAR ISSUE HAS BEEN CONSIDERED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SAMUDRA INSTITUTE OF MARITIME STUDIES TRUST ,(SUPRA)/ THE OPERATIVE PART OF THE SAID JUDGMENT IS REPRODUCED B ELOW : 3. WE HAVE PERUSED THE ORDERS PASSED BY THE AUTHOR ITIES INCLUDING THE TRIBUNAL. WE HAVE ALSO PERUSED THE TW O DECISIONS, ONE OF THE HON'BLE SUPREME COURT AND REL IED UPON BY BOTH THE COUNSEL AND EQUALLY A SHORT JUDGMENT OF THE DIVISION BENCH OF THIS COURT IN THE CASE OF DIT (EX EMPTIONS) V. NATIONAL SAFETY COUNCIL [2008] 305 ITR 257 (BOM) . WE ARE OF THE OPINION THAT THE TRIBUNAL HAS APPLIED THE CO RRECT TEST IN CONCLUDING THAT THE EXEMPTION UNDER SECTION 11 CAN BE AVAILED OF BY THE RESPONDENT - ASSESSEE. IN DOING SO, THE T RIBUNAL REFERRED TO THE OBJECTS AS SET OUT IN THE TRUST DEE D OF THE RESPONDENT - ASSESSEE. THEY ARE TO SET UP, ADMINIST ER AND MAINTAIN TECHNICAL TRAINING INSTITUTION AT VARIOUS PLACES IN INDIA FOR PRE-SEA AND POST-SEA TRAINING FOR THE SHI PS AND MARITIME INDUSTRY AS A PUBLIC CHARITABLE INSTITUTE FOR EDUCATION. THAT IS TO PROVIDE ON-BOARD AND OFFSHORE TRAINING AND CONTINUING TECHNICAL EDUCATION FOR OFFICERS, BO TH ON THE DECK AND ENGINE SIDE. ONE OF THE OBJECT WAS TO REGI STER WITH THE DIRECTOR GENERAL OF SHIPPING AND OBTAIN OTHER N ECESSARY APPROVALS AT THE STATE AND CENTRAL LEVELS. WE DO NO T FIND THAT THE RATIO OF THE JUDGMENT OF THE HON'BLE SUPREME CO URT OR OF THIS COURT, WHICH MAY BE DEALING WITH SECTION 10(22 ), HAS BEEN APPLIED TO SUCH AN EXTENT AS COMPLAINED BY MR MALHOTRA. IN THE PRESENT CASE, THE TRIBUNAL IN PARA GRAPH 9.6 OF THE IMPUGNED ORDER CONCLUDES THAT THE ASSESSEE I S GIVING TRAINING IN THE ABOVE AREA TO SEAMEN. ALL THE COURS ES MAY NOT MARITIME TRAINING AND RESEARCH FOUNDATION ITA NO.1733/MUM/2015 7 BE APPROVED BY THE DIRECTOR GENERAL OF SHIPPING BUT THAT BY ITSELF IS NO GROUND TO HOLD THAT THE PURPOSE IS NOT CHARITABLE. THE EXEMPTION UNDER SECTION 11 CAN BE CLAIMED AND B EARING IN MIND THE OBJECT OF THE TRUST. WE ARE OF THE OPIN ION THAT THE TRIBUNAL AND THE CIT (APPEALS) HAVE APPROACHED THE ISSUE CORRECTLY AND IN THE LIGHT OF THE DEFINITION SO ALS O THE TESTS LAID DOWN CAME TO A FACTUAL CONCLUSION THAT THE RESPONDE NT IS ENTITLED TO EXEMPTION UNDER SECTION 11 OF THE ACT. THIS IS NOT A CASE WHERE THE PURPOSE CAN BE SAID TO RUN A COACHIN G CLASS OR A CENTRE. THIS IS AN INSTITUTION WHICH IMPARTS EDUC ATION IN THE AREA OF PRE-SEA AND POST-SEA TRAINING TO SEAMEN SO AS TO PREPARE THEM FOR ALL DUTIES. IN SUCH CIRCUMSTANCES, WE DO NOT FIND THAT THE CONCURRENT FINDINGS OF FACT ARE VITIA TED BY ERROR OF LAW APPARENT ON THE FACE OF THE RECORD OR PERVER SITY ENABLING US TO ENTERTAIN THIS APPEAL. THERE IS NO S UBSTANTIAL QUESTION OF LAW. THE APPEAL IS THEREFORE DISMISSED WITH NO ORDER AS TO COSTS. 8. ON PERUSAL OF THE ABOVE JUDGEMENT IT IS REVEALE D THAT THE ASSESSEE TRUST WAS SET UP TO ADMINISTER AND MAINTAI N TECHNICAL TRAINING INSTITUTION AT VARIOUS PLACES IN INDIA FOR PRE-SEA AND POST-SEA TRAINING FOR THE SHIPS AND MARITIME INDUST RY AND WAS ENGAGED TO PROVIDE ON-BOARD AND OFFSHORE TRAINING A ND ALSO SEEMS TO BE EDUCATION AND ACCORDINGLY, HELD THAT TH ERE IS NO SUBSTANTIAL QUESTION OF LAW AND DISMISSED THE APPEA L OF THE REVENUE. WE FIND THAT THE CASE OF ASSESSEE IS SQUAR ELY COVERED BY THE RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COUR T IN THE CASE OF SAMUDRA INSTITUTE OF MARITIME STUDIES TRUST,(SUP RA). RESPECTFULLY FOLLOWING THE ABOVE MENTIONED JUDGMENT OF HONBLE HIGH COURT WE SET ASIDE THE ORDER OF THE LD.CIT(A) AND DIRECT THE AO TO ALLOW THE BENEFIT AN ENUMERATED UNDER SECTION 11 OF THE ACT BY DELETING THE ADDITION. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. MARITIME TRAINING AND RESEARCH FOUNDATION ITA NO.1733/MUM/2015 8 2.2. WE FIND THAT WHILE COMING TO A PARTICULAR CONCLUSION, THE BENCH VIDE ORDER DATED 22/08/2016 D ULY CONSIDERED THE ISSUE/FACTS AND BY FOLLOWING THE DEC ISION FROM HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF DI T VS SAMUDRA INSTITUTE OF MARITIME STUDIES TRUST (ITA NO .465 OF 2012) ORDER DATED 07/08/2014 DECIDED THE ISSUE IN F AVOUR OF THE ASSESSEE. THE RELEVANT PORTION FROM THE ORDER O F THE HIGH COURT HAS BEEN REPRODUCED IN PARA-7 OF THE ORDER OF THE TRIBUNAL. FOLLOWING THE AFORESAID ORDER OF THE TRIB UNAL, WE ALLOW THE APPEAL OF THE ASSESSEE BEING ON IDENTICAL FACTS/ISSUE, THUS, THE APPEAL OF THE ASSESSEE IS ALLOWED. FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 15/11/2016. SD/- SD/- ( N.K. PRADHAN ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER & ' MUMBAI; * DATED : 15/11/2016 F{X~{T? P.S / +% %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. ,-./ / THE APPELLANT 2. 0./ / THE RESPONDENT. 3. 1 1 & 2$ ( ,- ) / THE CIT, MUMBAI. 4. 1 1 & 2$ / CIT(A)- , MUMBAI MARITIME TRAINING AND RESEARCH FOUNDATION ITA NO.1733/MUM/2015 9 5. 4%5 $ , 1 ,-) , 6 , & ' / DR, ITAT, MUMBAI 6. 7' 8' / GUARD FILE. / BY ORDER, 04-$ $ //TRUE COPY// / (DY./ASSTT. REGISTRAR) , & ' / ITAT, MUMBAI,