ADIT(E), New Delhi V. The Institute of Chartered Accountants of India, New Delhi

ITA 1930/DEL/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3759 (ITAT-DELHI)
• Duration Of Justice: 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2007-2008
• Appeal Filed On: 19-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SRUJANI MOHANTY
• Keywords: Business income; Charitable institution
• Section: 12A; 11

Judgement Text

ITA NO. 1930/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H NEW DELHI BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 1930/DEL/2011 A.Y. : 2007-08 ASSTT. DIRECTOR OF INCOME TAX (E), TRUST CIRCLE-IV, NEW DELHI ROOM NO. 204, 2 ND FLOOR, AAYAKAR BHAVAN, LAXMI NAGAR, DISTRICT CENTRE, DELHI -110092 (PAN : AAAAT7798M) VS. THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA, PB-7100, ICAI BHAWAN, IP ESTATE, NEW DELHI 110 002 (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : SH. RAJESH JAIN, CA DEPARTMENT BY : MS. SRUJANI MOHANTY, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 24.1.2 011 PERTAINING TO ASSESSMENT YEAR 2007-08. 2. THE ISSUE RAISED IS THAT LD. COMMISSIONER OF INCOM E TAX (APPEALS) ERRED IN HOLDING THAT THE ACTIVITIES CARR IED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA (ICAI) IN CONDUCTING VARIOUS COURSES AND GIVING INSTRUCTIONS THROUGH COACHING CLASSES FO R WHICH SEPARATE FEE HAS BEEN CHARGED AND HOLDING SEMINARS/ CONFERENC ES AND FURTHER LAYING DOWN ACCOUNTING STANDARDS FOR COMMERCIAL TRA NSACTIONS COME WITH THE PURVIEW OF EDUCATION WITHIN SECTION 2(15 ) OF THE IT ACT. ITA NO. 1930/DEL/2011 2 3. IN THIS CASE ASSESSING OFFICER HAS HELD THAT IN COME FROM COACHING CLASSES WAS TAXABLE IN THE HANDS OF THE AS SESSEE. IT WAS HELD THAT THAT ASSESSEE IS NOT REGISTERED UNDER SECTION 12A AS IT HAS NOT PRODUCED ANY DOCUMENTARY EVIDENCE THAT IT IS REGIST ERED UNDER SECTION 12A. HENCE, BENEFIT OF SECTION 11 OF THE IT ACT I S DENIED TO THE ASSESSEE. THUS, THE ASSESSING OFFICER ASSESSED THE INCOME OF THE ASSESSEE AT ` 35,334,12,000/- AFTER DISALLOWING EXE MPTION U/S. 11 OF THE ACT ON TWO GROUNDS THAT COACHING INCOME SHOWN B Y THE ASSESSEE IS AN ACTIVITY OF BUSINESS AND THE ASSESSEE HAS NOT MAINTAINED BOOKS OF ACCOUNTS FOR THE SAID BUSINESS INCOME IN TERMS OF SEC TION 11(4A) OF THE ACT AND FURTHER THAT THE ASSESSEE IS NOT REGIST ERED U/S 12A OF THE ACT. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS), REFERRED TO HIS OWN APPELLATE ORDER FOR A.Y. 2006-07 AS UNDER:- I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE LD. A UTHORISED REPRESENTATIVE OF THE APPELLANT INSTITUTION VIS-A -VIS FINDING OF THE ASSESSING OFFICER MADE OUT IN THE ASSESSMENT OR DER IN RESPECT OF HOLDING THE INCOME OF COACHING CLASSES AS AN ACTIVITY OF BUSINESS. THE MAIN EMPHASIS OF THE ASSESSING OFFI CER IN ARRIVING TO CONCLUSION THAT INCOME OF THE APPELLANT INSTITUTE FROM COACHING CLASSES IS AN ACTIVITY OF BUSINESS, IS THE FIGURE OF EARNING FROM COACHING CLASSES AS REFLECTED BY HIM IN THE TABL E PREPARED IN THE ASSESSMENT ORDER GIVING DETAILED OF GROSS IN COME OF COACHING, EXPENDITURE INCURRED IN COACHING AND NET EARNING FROM COACHING CLASSES FROM ASSESSMENT YEAR 2002-03 TO A SSESSMENT ITA NO. 1930/DEL/2011 3 YEAR 2008-09 AND HIS REMARK THAT THE APPELLANT INST ITUTE IS EARNING HUGE INCOME OVER THE YEARS LIKE ANY BUSINES SMAN EARN FROM THE ACTIVITIES OF BUSINESS. HOWEVER, ON THE O THER SIDE THE LD. AUTHORISED REPRESENTATIVE OF THE APPELLANT EMPH ASIZED THAT THE CONDUCTING OF COACHING CLASSES THROUGH REGIONA L COUNCILS, THE APPELLANT INSTITUTE, FOLLOWING ITS MAIN PURPOSE AND OBJECTIVE OF GIVING TRAINING TO THE FUTURE CHARTERED ACCOUNTA NTS, FOR WHICH IT HAS BEEN ENACTED BY THE PARLIAMENT AND FURTHER E MPHASIZING THAT CBDT WHILE GRANTING NOTIFICATION U/S 10(23C)( IV) OF THE ACT TO THE APPELLANT INSTITUTE WAS WELL AWARE ABOUT THE COMPONENT OF ITS INCOME REFLECTED IN ANNUAL ACCOUNTS FILED WITH THE APPLICATION FOR APPLYING FOR EXEMPTION OF INCOME U/S. 10(23C)(IV ) OF THE ACT CONSISTENTLY TO THE ASSESSMENT YEAR 2005-06, AND THE REFORE THE OBJECTION OF THE ASSESSING OFFICER IN THIS RESPECT IS MISCONCEIVED, EVEN ON THE PRINCIPLE OF DOCTRINE OF CONSISTENCY ENUN CIATED BY HONBLE SUPREME COURT IN THE CASE OF RADHASWAMY SATSA NG (CITED SUPRA). PURSING THE CHARTERED ACCOUNTANTS R EGULATIONS, ANNUAL ACCOUNTS OF THE APPELLANT INSTITUTE AND WRIT TEN ARGUMENTS OF THE LD. AUTHORISED REPRESENTATIVE AND JUDICIAL PRECEDENTS BROUGHT TO MY NOTICE ON THE ISSUE INVOLVED, I AM IN CLINED TO ACCEPT THE ARGUMENT OF THE LD. COUNSEL THAT INCOME OF COACHING CLASSES OF THE APPELLANT INSTITUTE IS NOT AN ACTIVI TY OF BUSINESS AS ALLEGED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, BUT THE SAID INCOME HAS ARISEN FROM THE ANCILLARY ACTIVITY A RISEN FROM THE MAIN OBJECTS FOR WHICH IT HAS BEEN ENACTED BY THE PAR LIAMENT AND FURTHER ACCEPTED AS SUCH BY CENTRAL BOARD OF DIRECT TAXES YEAR TO YEAR, WHILE NOTIFYING IT FOR THE PURPOSE OF SECTION 10(23C)(IV) OF THE ACT. THE OBSERVATION OF THE ASSESSING OFFICE R THAT THE ITA NO. 1930/DEL/2011 4 APPELLANT INSTITUTE IS EARNING HUGE INCOME OVER THE YEARS AND THIS SURPLUS INCOME IS EARNED IN A SYSTEMATIC AND O RGANIZED WAY, THE WAY IN WHICH BUSINESS ACTIVITIES ARE CARRIED OU T IS ALSO MISCONCEIVED AS MERELY BECAUSE PROFIT HAS RESULTED FR OM THE ACTIVITY OF IMPARTING EDUCATION WOULD NOT CHANGE TH E CHARACTER OF THE INSTITUTION. THE HONBLE SUPREME COURT IN THE CASE OF SURAT ART SILK CLOTH MANUFACTURES ASSOCIATION AND H ONBLE DELHI HIGH COURT IN THE VERY RECENT JUDGEMENT IN THE CASE OF SISTER CONCERN OF THE APPELLANT INSTITUTE ICAI ACCOUNTING RESEARCH FOUNDATION REPORTED AT 321 ITR 73 HELD THAT THE MERE FACT OF GENERATING INCOME, WHILE CARRYING OUT THE ANCILLARY OBJECTS FOR ACHIEVING THE MAIN OBJECTS, WOULD NOT PER SE CHANGE THE CHARACTER OF THE ASSESSEE TILL THE SURPLUS RECEIVED QUA THESE ACTIVITIES ARE UTILIZED FOR ADVANCEMENT OF THE OBJE CTIVES FOR WHICH THE ASSESSEE HAS BEEN ESTABLISHED. HENCE, GROUND NO. 6 IS ALLOWED IN FAVOUR OF THE APPELLANT. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) FURTHER TOOK NOTE THAT HONBLE ITAT, DELHI BENCH IN ITA NO. 1853/ DEL/2010 ALSO HELD THAT: THE INSTITUTE AS SUCH MERELY IT IS RECEIVING COA CHING FEE FROM STUDENTS FOR IMPARTING EDUCATION, CANNOT BE SA ID TO HAVE BEEN CARRYING ON THE BUSINESS AND ACCORDINGLY IT IS NOT REQUIRED TO MAINTAIN SEPARATE BOOKS OF ACCOUNTS AS ALLEGED BY DIT(E). THE INCOME OF THE COACHING CLASSES EARNED BY THE AS SESSEE INSTITUTE IS WITHIN ITS OBJECTS AND ITS REGULATIONS AND FURTHER THESE ACTIVITIES ARE EDUCATIONAL ACTIVITY WITHIN THE DEF INITION OF SECTION ITA NO. 1930/DEL/2011 5 2(15) OF THE INCOME TAX ACT, 1961, AND CONSEQUENTLY THEREFORE CANNOT BE ACTIVITY OF BUSINESS FOR WHICH SEPARATE B OOKS OF ACCOUNTS ARE REQUIRED TO BE MAINTAINED. THE ORDE R OF THE DIT(E) IS THEREFORE NOT SUSTAINABLE AS THE INCOME OF THE I NSTITUTE IS EXEMPT NOT ONLY U/S 10(23C)(IV) BUT ALSO UNDER SECTI ON 11. THE INSTITUTE IS AN EDUCATIONAL INSTITUTE AND HENCE ITS INCOME WILL ALSO BE EXEMPT U/S. 11 AS EDUCATION FALLS WITHIN THE MEANI NG OF CHARITABLE PURPOSE UNDER SECTION 2(15) OF THE ACT. 5. AGAINST THE ABOVE ORDER, THE REVENUE IS IN APPE AL BEFORE US. 6. LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE IS SUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THIS TRI BUNAL IN ASSESSEES OWN CASE IN ITA NO. 1853/DEL/2010 FOR A.Y. 2005-06. IN THIS REGARD, LD. COUNSEL OF THE ASSESSEE REFERRED PARA 15 OF THE ABO VE SAID ORDER WHICH READS AS UNDER:- 15. THE INSTITUTE AS SUCH MERELY IT IS RECEIVING CO ACHING FEE FROM STUDENTS FOR IMPARTING EDUCATION, CANNOT BE SAI D TO HAVE BEEN CARRYING ON BUSINESS AND ACCORDINGLY IT IS NO T REQUIRED TO MAINTAIN SEPARATE BOOKS OF ACCOUNTS AS ALLEGED BY DI T(E). THE INCOME OF THE COACHING CLASSES EARNED BY THE ASSES SEE INSTITUTE IS WITHIN ITS OBJECTS AND ITS REGULATIONS AND FURTH ER THESE ACTIVITIES ARE EDUCATIONAL ACTIVITY WITHIN THE DEFI NITION OF SECTION 2(15) OF THE INCOME TAX ACT, 1961, AND CONSEQUENTLY THEREFORE CANNOT BE ACTIVITY OF BUSINESS FOR WHICH SEPARATE B OOKS OF ACCOUNTS ARE REQUIRED TO BE MAINTAINED. THE ORDER OF THE LD. DIT(E) IS THEREFORE, NOT SUSTAINABLE AS THE INCOME OF THE INSTITUTE IS EXEMPT NOT ONLY U/S 10(23C)(IV) BUT ALSO UNDER S ECTION 11. THE INSTITUTE IS AN EDUCATIONAL INSTITUTE AND HENCE ITS INCOME WILL ITA NO. 1930/DEL/2011 6 ALSO BE EXEMPT UNDER SECTION 11 AS EDUCATION FALLS W ITHIN THE MEANING OF CHARITABLE PURPOSE UNDER SECTION 2(15) O F THE ACT. 7. IN LIGHT OF THE ABOVE, LD. COUNSEL OF THE ASSESS EE CONTENDED THAT THIS ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THIS TRIBUNAL AS ABOVE. 7.1 LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CONTR OVERT THIS PROPOSITION. HE FAIRLY AGREED THAT THIS ISSUE STAN DS COVERED BY THE SAID TRIBUNAL ORDER. 8. ACCORDINGLY, IN THE BACKGROUND OF THE AFORESAID DISCUSSION AND PRECEDENT, WE DO NOT FIND ANY INFIRMITY OR ILLEGALI TY IN THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS), HENCE, WE U PHOLD THE SAME. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16/6/2011 UPO N CONCLUSION OF HEARING. SD/ SD/ SD/ SD/- -- - SD SDSD SD/ // /- -- - [A.D. JAIN] [A.D. JAIN] [A.D. JAIN] [A.D. JAIN] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 16/6/2011 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES