INDIAN INSTITUTE OF PACKAGING, MUMBAI V. ACIT (E) I(1), MUMBAI

ITA 191/MUM/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7505 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 09-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Keywords: Charitable institution

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI RAM LAL NEGI , JM ITA NO. 191 / MUM/20 17 ( ASSESSMENT YEAR : 2013 - 14 ) & ITA NO. 1598/ MUM/20 16 ( ASSESSMENT YEAR : 2012 - 13 ) M/S. INDIAN INSTITUTE OF PACKAGING E - 2, MIDC AREA ROAD NO.8, POST BOX NO.9432, ANDHERI (E), MUMBAI - 400093 VS. ACIT (E) I (1), MUMBAI PAN/GIR NO. AAAT I 1545E APPELLANT ) .. RESPONDENT ) ASSESSEE BY DR. K.SHIVARAM / SHRI RAHUL HAKANI REVENUE BY SHRI M.C.OMI NINGSH EN DATE OF HEARING 06/04/2018 DATE OF PRONOUNCEME NT 11 / 04 /201 8 / O R D E R PER R.C.SHARMA (A.M) : THESE ARE THE APPEALS FILED BY ASSESSEE AGAINST THE ORDER OF CIT(A) - 1, MUMBAI DATED 17/10/2016 FOR A.Y.2013 - 14 IN THE MATTER OF ORDER PAS SED U/S.143(3) OF THE IT ACT. 2. THE FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEEIN THE A.Y.2013 - 14: - THE LEARNED CIT(A) ERRED IN CONFIRMING ORDER OF LD ASSESSING OFFICER DENYING EXEMPTION U/S.11 (L)(A) AND S. 11(2) BY APPLYING PROVISO TO SECTION 2(15 ) WITHOUT APPRECIATING THAT PROVISO TO S. 2(15) IS NOT APPLICABLE TO ASSESSEE AND ITS ACTIVITIES AND HENCE THE ORDER OF LEARNED ASSESSING OFFICER DESERVES TO BE QUASHED. ITA NO. 191/MUM/2017 & 1598/MUM/2016 INDIAN INSTITUTE OF PACKAGING 2 THE LEARNED CIT(A) ERRED IN CONFIRMING ORDER OF LD ASSESSING OFFICER INCLUDING RS 4, 50,000/ - BEING LIFE MEMBERSHIP SUBSCRIPTION AS INCOME OF THE ASSESSEE WITHOUT APPRECIATING THAT THE SAID RECEIPT IS CAPITAL IN NATURE NOT LIABLE TO TAX. THE LEARNED CIT(A) ERRED IN CONFIRMING ORDER OF LEARNED ASSESSING OFFICER INCLUDING RS 11,78,996/ - BEI NG SUBSCRIPTION RECEIVED UNDER POST GRADUATE SCHOLARSHIP PROGRAMME AS INCOME OF THE ASSESSEE WITHOUT APPRECIATING THAT THAT THE SAID RECEIPT IS CAPITAL IN NATURE NOT LIABLE TO TAX. THE LEARNED CIT(A) ERRED IN CONFIRMING ORDER OF ASSESSING OFFICER INCLUDIN G RS 1,50,00,000+7 - BEING GOVT GRANTS - PLAN FUND AS INCOME OF THE ASSESSEE WITHOUT APPRECIATING THAT THAT THE SAID RECEIPT IS CAPITAL IN NATURE NOT LIABLE TO TAX AS THE SAME IS RECEIVED FOR ACQUISITION OF SPECIFIC ASSETS UNDER PLAN FUND SCHEME. THE APPELLA NT CRAVES LEAVE TO ADD, AMEND, DELETE, ALTER, SUBSTITUTE, ANY OR ALL THE ABOVE GROUNDS OF APPEAL. 3. THE FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE IN THE A.Y.2012 - 13: - 1) THE LEARNED C1T(A) ERRED IN HOLDING THAT SHRI SUBHASH DALVV ASSISTANT D IRECTOR OF THE ASSESSEE HAD ACCEPTED THE PROPOSED TAXABLE INCOME AND THE SAID CONCLUSION REACHED BY LEARNED CIT(A) IS CONTRARY TO THE RECORDS AND HENCE, THE ORDER OF LEARNED C1T(A) OUGHT TO BE QUASHED AND EXEMPTION CLAIMED BY THE ASSESSEE OUGHT TO BE ALLOW ED. 2) THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 4. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 5. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A NON - PROFIT MAKING BODY OPERATING UNDER THE MINIST RY OF COMMERCE & INDUSTRY, GOVERNMENT OF INDIA, ESTABLISHED UNDER THE SOCIETIES REGISTRATION ACT, 1860. THE INSTITUTION IS REGISTERED AS A CHARITABLE ORGANIZATION WITH CIT (EXEMPTION), MUMBAI U/S.12A UNDER VIDE REGISTRATION NO.INS/31680 DATED 01/04/1995. T HE ASSESSEE HAS ACCORDINGLY CLAIMED EXEMPTION U/S.11 OF THE IT ACT. ITA NO. 191/MUM/2017 & 1598/MUM/2016 INDIAN INSTITUTE OF PACKAGING 3 6. THE ASSESSING OFFICER IN BOTH THE ASSESSMENT YEARS DENIED EXEMPTION U/S.11 BY INVOKING PROVISIONS OF SECTION 2(15) ON THE GROUND THAT ACTIVITIES OF ASSESSEE ARE IN THE NATURE OF TRADE A ND COMMERCE. 7. BY THE IMPUGNED ORDER, CIT(A) CONFIRMED THE ACTION OF THE AO. 8. IT WAS CONTENDED BY LEARNED AR THAT ASSESSEE CARRIES ON ITS ACTIVITIES WITHOUT ANY PROFIT MOTIVE AND FOR CHARITABLE PURPOSES RELIANCE WAS PLACED ON THE FOLLOWING CASES WHEREIN IT HAS BEEN HELD THAT WHERE ACTIVITIES ARE WITHOUT PROFIT MOTIVE, PROVISO TO S.2(15) CANNOT APPLY : (I) INDIA TRADE PROMOTION ORGANISATION V DGIT(E) [2015] 371 ITR 333 (DELHI) IF DOMINANT AND PRIME OBJECTIVE OF INSTITUTION, WAS NOT DESIRE TO EARN PROFITS BUT, OBJECT OF PROMOTING TRADE AND COMMERCE NOT FOR ITSELF, BUT FOR NATION, IT WAS CLEARLY A CHARITABLE PURPOSE, [INCOME RECEIVED WAS FROM THE LETTING OUT OF SPACE, SALE OF PUBLICATIONS, SALE OF TICKETS AND LEASING OUT FOOD AND BEVERAGES OUTLETS IN PRAGAT I MAIDAN.] (II) MUDRA FOUNDATION FOR COMMUNICATIONS RESEARCH & EDUCATION V.CCIT [2016] 237 TAXMAN 139 (GUJARAT)(HC). ASSESSEE WAS A SOCIETY REGISTERED UNDER SOCIETIES REGISTRATION ACT, 1950. ITS INSTITUTION WAS ENGAGED IN IMPARTING HIGHER AND SPECIAL IZED EDUCATION IN FIELD OF COMMUNICATION INCLUDING ADVERTISING AND ITS RELATED SUBJECTS. ASSESSEE - INSTITUTION WAS PROVIDING TRAINING TO INDIVIDUAL AS WELL AS TO PERSONS SENT BY COMPANIES TO MEET NEEDS OF INDIAN INDUSTRY AND COMMERCE. WHETHER BY PROVIDING L ATEST INFORMATION AND TRAINING TO THOSE PERSONS WHO WERE ALREADY IN FIELD OF ADVERTISING COMMUNICATION, ETC. AND IN SUCH PROCESS IF CERTAIN PERSONS BECAME SUPER - SPECIALISTS IN PARTICULAR FIELD AND INSTITUTION WAS CHARGING FEE, CASE WOULD NOT FALL UNDER PRO VISO TO SECTION 2(15). (III) SOCIETY OF INDIAN AUTOMOBILE MANUFACTURERS V. INCOME - TAX OFFICER, (EXEMPTION), TRUST WARD - II, DELHI* [2016] 159 ITD 659 (DELHI - TRIB.) WHERE ACTIVITIES OF ASSESSEE - SOCIETY IN ORGANISING SEMINARS/CONFERENCES AND AUTO EXPO WERE PERFORMED WITH PRIOR OBJECT OF PROMOTION OF GROWTH OF AUTOMOBILE INDUSTRY IN INDIA WHICH IS AN OBJECT OF GENERAL ITA NO. 191/MUM/2017 & 1598/MUM/2016 INDIAN INSTITUTE OF PACKAGING 4 PUBLIC UTILITY, SUCH ACTIVITIES WOULD NOT COME WITHIN AMBIT OF PROVISO TO SECTION 2(15) EVEN IF SOME INCOME WAS GENERATED FROM SUCH ACTIV ITIES. (IV) DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE - 6 (1), MOHALI V.SEMI CONDUCTOR LABORATORY, DEPTT. OF SPACE, GOVT. OF INDIA [2016] 70 TAXMANN.COM 223 (CHANDIGARH - TRIB.) SINCE ASSESSEE WAS NOT DRIVEN BY PROFIT MOTIVE, CASE OF ASSESSEE WAS NOT H IT BY PROVISO TO SECTION 2(15) AND, THEREFORE, ASSESSEE WOULD BE ELIGIBLE FOR EXEMPTION UNDER SECTION 11. (V) DEPUTY DIRECTOR OF INCOME - TAX (EXEMPTIONS - IV) V. COUNCIL FOR - LEATHER EXPORTS [2015] 41 ITR(T) 697 (CHENNAI - TRIB.) ASSESSEE RECEIVED MEMBER SUBSCRIPTION, CERTIFICATION FEE, SALE OF . PUBLICATIONS, INTEREST ON DEPOSITS, BULLETIN REVENUE, ETC. IT WAS HELD THAT WHERE AN INSTITUTION IS NOT DRIVEN PRIMARILY BY A DESIRE OR MOTIVE TO EARN PROFITS BUT TO DO CHARITY THROUGH ADVANCEMENT OF OBJECT OF GENERAL PUBLIC UTILITY, IT CAN BE REGARDED AS AN INSTITUTION ESTABLISHED FOR CHARITABLE PURPOSES AS DEFINED UNDER SECTION 2(15) .MAIN OBJECTS OF ASSESSEE WERE TO SUPPORT, PROTECT, MAINTAIN, INCREASE AND PROMOTE EXPORT LEATHER ARTICLES AND PRODUCTS AND BYE - PRODUCTS OF LEATHER INDUSTRY . ITS ACTIVITIES WERE MULTIPLE AND DIRECTED TOWARDS ASSISTIN G ITS MEMBERS IN EXTENDING THEIR GLOBAL REACH THEREBY INCREASING THEIR EXPORTS. ASSESSEE S ACTIVITIES WERE NOT COVERED BY PROVISO TO SECTION 2(15). (VI) INDI AN CHAMBER OF COMMERCE V. INCOME - TAX OFFICER, EXEMPTION - I [2O14] 52 TAXMANN.COM 52 (KOLKATA - TRIB.) ASSESSEE CARRIED OUT THE ACTIVITIES OF CONDUCTING ENVIRONMENT MANAGEMENT CENTRE, MEETINGS, CONFERENCES AND SEMINAR AND ISSUANCE OF THE CERTIFICATE OF ORIGIN. IT WAS HELD THAT ASSESSEE - ASSOCIATION, FORMED WITH OBJECT OF ADVANCEMENT AND DEVELOPMENT OF TRADE, COMMERCE AND INDUSTRY IN INDIA, ITS PRIMARY OBJECT BEING CHARITABLE IN NATURE UNDER SECTION 2(15) , IN ABSENCE OF PROFIT MOTIVE INCOM E EARNED BY IT FROM ANY INCIDENTAL ACTIVITIES WOULD ALSO BE ELIGIBLE FOR EXEMPTION UNDER SECTION 11 . 9. ON THE OTHER HAND, LEARNED DR RELIED ON THE ORDER OF LOWER AUTHORITIES. 10. WE HAVE CONSIDERED RIVAL CONTENTIONS AND GONE THROUGH THE ORDERS OF THE AUT HORITIES BELOW AND FOUND FROM RECORD THAT ASSESSEE INSTITUTION CARRIES ON ITS ACTIVITIES FOR ACHIEVING ITS CHARITABLE OBJECTS WITHOUT ANY PROFIT MOTIVE. ASSESSEE IS AN INSTITUTION ESTABLISHED IN 1966 FOR CHARITABLE PURPOSE AND REGISTERED UNDER THE SECU RITI ES REGISTRATION ACT, 1860. ITA NO. 191/MUM/2017 & 1598/MUM/2016 INDIAN INSTITUTE OF PACKAGING 5 A SSESSEE INSTITUTE WAS ESTABLISHED BY THE MINISTRY OF COMMERCE AND INDUSTRY, GOVERNMENT OF INDIA AND ACCORDINGLY DIRECTORATE GENERAL, INDIAN INSTITUTE OF FOREIGN TRADE, NEW DELHI AND JOINT SECRETARY MINISTRY OF C OMMERCE A RE THE SIGNATORIES TO THE MEMORANDUM OF ASSOCIATION OF A SSESSEE. FURTHER AS PER THE RULES AND REGULATION OF THE A SSESSEE, THE GOVERNING BODY INCLUDES TEN PERSONS NOMINATED BY THE CENTRAL GOVERNMENT. HENCE ASSESSEE IS AN ARM / WING / BODY OF THE CENTRAL GOVERNMENT FUNCTIONING UNDER THE OVERALL AND ADMINISTRATIVE CONTROL OF THE CENTRAL GOVERNMENT. FURTHER, ANNUAL ACCOUNTS ARE LAID BEFORE THE PARLIAMENT AND THEIR INSPECTION IS DONE BY THE COMPTROLLER AND AUDITOR GENERAL. THE SERVICE CONDITIONS ETC OF STAFF ARE PRIMAR ILY GOVERNED BY THE RULES APPLICABLE TO THE EMPL OYEES OF THE CENTRAL GOVERNMENT, T HEIR PAY SCALE IS ALSO GOVERNED BY THE PAY COMMISSION RECOMMENDATION AS DETERMINED FROM TIME TO TIME. THE DIRECTOR AND THE SECRETARY ARE REQUIRED TO BE APPOINTED WITH THE PRI OR APPROVAL OF MOC AND I, GOVT OF INDIA. ASSESSEE INSTITUTE RECEIVE GRANTS FROM THE GOVT. UNDER PLAN FUND. CLAUSES 38 AND 39 OF MOA WHICH DEMONSTRATE THAT INCOME AND PROPERTY OF INSTITUTE HAS TO BE APPLIED ONLY TOWARDS PROMOTION OF OBJECTS OF THE A SSESSEE AND THAT A SSESSEE CANNOT DECLARE DIVIDENDS. FURTHER, IN EVENT OF WINDING UP OF THE INSTITUTION NOTHING WILL BE PAID OR DISTRIBUTED TO THE MEMBERS OF THE A SSESSEE INSTITUTE. 11 . FROM THE RECORD, WE ALSO OBSERVE THAT ASSESSEE INSTITUTION CARRIES ON ACTIVITIE S OF EDUCATION, RESEARCH AND DEVELOPMENT, CONSULTANCY, LABORATORY RESEARCH INCLUDING TESTING AND CERTIFICATION IN RELATION TO ITA NO. 191/MUM/2017 & 1598/MUM/2016 INDIAN INSTITUTE OF PACKAGING 6 PACKAGING AT CONCESSIONAL RATES TO COVER ITS RECURRING COSTS AND FUTURE COSTS. THE CAPITAL COSTS ARE USUALLY MET FROM GRANTS OF TH E GOVERNMENT. HENCE, THERE APPEARS TO BE NO PROFIT MOTIVE , AND SURPLUS IF ANY IS NOTHING BUT RECOVERY OF FUTURE COSTS TO BE INCURRED BY THE A SSESSEE INSTITUTION FOR ACHIEVING ITS OBJECTS. 12 . KEEPING IN VIEW THE ACTIVITIES ALREADY UNDERTAKEN BY THE ASSESSE E VIS - - VIS JUDICIAL PRONOUNCEMENTS REFERRED BY THE ASSESSEE AS QUOTED ABOVE, IT APPEARS THAT BOTH THE LOWER AUTHORITIES HAVE NOT PROPERLY APPRECIATED ACTUAL ACTIVITY BEING UNDERTAKEN BY THE ASSESSEE AND INVOKED PROVIS IONS U/S.2(15) FOR DECLINING THE CLAIM OF EXEMPTION U/S.11. IN THE INTEREST OF JUSTICE, WE RESTORE THE MATTER BACK TO THE FILE OF THE AO FOR DECIDING AFRESH AFTER CONSIDERING ABOVE OBSERVATION S . WE DIRECT ACCORDINGLY. 13 . IN THE RESULT BOTH THE APPEALS OF ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 11 / 04 /2018 SD/ - ( RAM LAL NEGI ) SD/ - ( R.C.SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 11 / 04 /201 8 KARUNA SR. PS ITA NO. 191/MUM/2017 & 1598/MUM/2016 INDIAN INSTITUTE OF PACKAGING 7 COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//