Auto Cluster Development & Research Institute Ltd., Pune V. Asst. Comm. of Income-tax, Pune

ITA 20/PUN/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 5253 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 08-10-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 05-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L PATHADE
• Keywords: Business income; Charitable institution; Opportunity of being heard; Additional evidence; Competent authority
• Section: 12A; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 20/PN/2012 (ASSTT.YEAR : 2007-08) AUTO CLUSTER DEVELOPMENT AND RESEARCH INSTITUTE LTD., H-BLOCK, PLOT NO.C-181, CHINCHWAD, PUNE-411019 PAN NO. AAFCA0558D .. APPELLANT VS. ACIT, CIRCLE-1(1), PUNE .. RESPONDENT ITA NO.265/PN/2012 (ASSTT.YEAR : 2007-08) DY.CIT, CIRCLE-1(1), PUNE .. CROSS OBJECTOR VS. AUTO CLUSTER DEVELOPMENT AND RESEARCH INSTITUTE LTD., H-BLOCK, PLOT NO.C-181, CHINCHWAD, PUNE-411019 PAN NO. AAFCA0558D .. APPELLANT IN THE APPEAL ASSESSEE BY : SHRI KISHOR PHADKE REVENUE BY : SHRI P.L. PATHADE DATE OF HEARING : 11-11-2013 DATE OF PRONOUNCEMENT : 27-11-2013 ORDER PER R.K. PANDA, AM : THESE ARE CROSS APPEALS. THE FIRST ONE IS FILED BY THE ASSESSEE AND THE SECOND ONE FILED BY THE REVENUE AND ARE DIRECTED AG AINST THE ORDER DATED 21-07- 2011 OF THE CIT(A)-II, PUNE RELATING TO ASSESSMENT YEAR 2007-08. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A REGISTERED COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956. THE CE RTIFICATE OF INCORPORATION 2 WAS ISSUED BY THE ROC, PUNE VIDE CERTIFICATE DATED 13-04-2004. THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME ALONG WITH THE A UDITORS REPORT DECLARING NIL INCOME ON 31-10-2007 DECLARING THE STATUS OF TH E COMPANY AS AN AOP/TRUST. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING TRADING AND TESTING FACILITIES AND RAW MATERIAL BAN K FOR AUTO INDUSTRIES AND FACILITATES RESEARCH AND DEVELOPMENT. 3. THE ASSESSING OFFICER DURING THE COURSE OF ASSES SMENT PROCEEDINGS OBSERVED FROM THE INCOME & EXPENDITURE ACCOUNT FOR THE IMPUGNED ASSESSMENT YEAR THAT THE COMPANY HAS SHOWN SURPLUS INCOME OF RS.25,88,618/- OVER THE EXPENDITURE. HOWEVER, THE ASSESSEE HAS FI LED NIL RETURN. THEREFORE, HE ASKED THE ASSESSEE COMPANY TO EXPLAIN THE SAME. IN RESPONSE TO THE QUERY RAISED BY THE ASSESSING OFFICER IT WAS SUBMITTED AS UNDER : AUTO CLUSTER IS REGISTERED UNDER THE INDIAN COMPANIES ACT, 1956 AND IS THE COMPANY WITH THE OBJECTIVE OF RESEARCH & DEVELOPMEN T ACTIVITY NOT WORKING FOR PROFIT. AUTO CLUSTER HAS BEEN FORMED AS A COMPANY ONLY TO BRI NG IN THE CORPORATE DISCIPLINE BUT WITH THE OBJECTIVE OF NOT EARNING THE PROFIT. IN THE YEAR 2005, AFTER THE FORMATION OF THE COMPAN Y, WE FILED AN APPLICATION U/S.12A OF THE I.T. ACT, 1961. COPY OF THE SAME IS EN CLOSED HEREWITH. WE HAVE NEITHER RECEIVED ANY COMMUNICATION, ANY QUE RIES NOR ANY DENIAL OF THE REGISTRATION. ENTIRE PROJECT OF THE COMPANY IS TOWARDS OBJECTIVES OF PROVIDING WORLD CLASS MACHINING, TESTING AND RELATED FACILITIES AT MINIMUM OF THE PRICE OF THE VARIOUS SUB CONTRACTORS ETC. IN THE VEHICLE MANUFACTURING ACT IVITY. THE COMPANY IS PROMOTED BY MINISTRY OF INDUSTRY, GOVER NMENT OF INDIA, MCCIA AND PCMC WITH THE OBJECTIVE AS STATED ABOVE. WE HEREBY STATE THAT OUR APPLICATION FILED UNDER SECT ION 12A IS VALID COMPLIANCE OF THE STATUTORY DUTY COAST UPON US FOR CLAIMING THE E XEMPTION UNDER THE INCOME TAX ACT. YOU ARE REQUESTED TO CONSIDER THE ABOVE ISSUES WHILE COM PLETING THE ASSESSMENT AND OBLIGE. NEEDLESS TO ADD IF YOU REQUIRE ANY INFORMATION/CLARIF ICATION, WE WILL BE PLEASED FOR FURNISH THE SAME. 3 4. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE OBSERVED THAT THE ASSESS EE COMPANY IS CLAIMING EXEMPTION U/S.11 AND 12 ALTHOUGH THE COMPANY HAS NO T BEEN REGISTERED U/S.12A OF THE I.T. ACT. AFTER GOING THROUGH THE OBJECTS O F THE COMPANY AND SUBMISSION MADE BY THE ASSESSEE FROM TIME TO TIME THE ASSESSIN G OFFICER CAME TO THE CONCLUSION THAT THIS COMPANY IS SET UP WITH THE OBJ ECTS TO DEVELOP THE AUTO INDUSTRY IN THE REGION. THE COMPANY HAS PROCURED W ORLD CLASS MACHINERY FROM THE FUNDS AVAILABLE TO PROVIDE THE SERVICES OF TEST ING THE VARIOUS AUTO COMPONENTS MANUFACTURED BY AUTO INDUSTRY. THE COMP ANY ENDEAVOURS IN SETTING UP A RAW MATERIAL BANK WHICH WOULD BRING TH E ACCESSIBILITY OF SUCH RAW MATERIAL TO THE AUTO INDUSTRIES. FOR RENDERING SUC H SERVICES THE ASSESSEE COMPANY IS CHARGING HEFTY FEES FROM ITS CUSTOMERS. NO SPECIAL PROVISIONS ARE MADE WHERE THE SERVICES ARE RENDERED AT NO COST, LO W COST OR AT CONCESSIONAL RATE. THEREFORE, HE CAME TO THE CONCLUSION THAT TH E ACTIVITY CARRIED ON BY THE ASSESSEE COMPANY IS PURELY OF A COMMERCIAL NATURE A ND THERE IS NO IOTA OF CHARITY INVOLVED IN THE ACTIVITIES. 4.1 THE ASSESSING OFFICER ANALYSED THE PROVISIONS O F SECTION 2(15) AS AMENDED BY THE FINANCE ACT, 2008 W.E.F. 01-04-2009 WHICH EXPLAINS CLEARLY REGARDING THE ELIGIBILITY OF OBJECTS OF GENERAL PUB LIC UTILITY WHICH SHALL NOT BE A CHARITABLE PURPOSE. HE WAS OF THE OPINION THAT ANY ACTIVITY IN NATURE OF TRADE, COMMERCE OR BUSINESS OR ANY ACTIVITY OR RENDERING A NY SERVICES IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS RENDERED FOR A CESS OR FEE WILL NOT BE A CHARITABLE ACTIVITY. SINCE THE ASSESSEE COMPANY IN THE INSTANT CASE RENDERED SERVICES TO VARIOUS AUTO INDUSTRIES FOR A HANDSOME FEE, THEREFORE, IT IS ITS BUSINESS INCOME. IT IS NOT PROVIDING ANY SERVICES FOR THE POOR, EDUCATIONALLY BACKWARD OR ADVANCEMENT OF MEDICAL RELIEF. HE ACCO RDINGLY HELD THAT THE 4 ACTIVITY OF THE ASSESSEE COMPANY IS PURELY COMMERCI AL IN NATURE AND IT IS NOT QUALIFIED IN THE DEFINITION OF CHARITABLE PURPOSES AS PER PROVISIONS OF SECTION 2(15) BOTH PRE AND POST AMENDMENT. 4.2 HE FURTHER NOTED THAT THE COMPANY IS NOT REGIST ERED AS CHARITABLE TRUST UNDER BOMBAY PUBLIC TRUST ACT, 1950 OR SOCIETIES RE GISTRATION ACT, 1860. FURTHER, IN THE NOTES TO FORM NO.10 FILED BY THE AS SESSEE, IT IS STATED THAT THE ASSESSEE COMPANY IS ESTABLISHED FOR CARRYING OUT FO R CHARITABLE ACTIVITIES AND ACCORDINGLY REGISTERED U/S.25 OF THE COMPANIES ACT, 1956. NO SUCH CERTIFICATE WAS PRODUCED TO SUBSTANTIATE THAT IT IS REGISTERED U/S.25 OF THE COMPANIES ACT. HE FURTHER NOTED THAT THE PAN CARD ISSUED BY NSDL S TATES THE ASSESSEE AS A COMPANY AND NOT AS AOP/TRUST. IN VIEW OF THE ABOVE , THE ASSESSING OFFICER REJECTED THE CLAIM OF EXEMPTION U/S.11 AND DETERMIN ED THE INCOME OF THE ASSESSEE AT RS.25,88,620/-. 5. IN APPEAL THE LD.CIT(A) HELD THAT THE ACT SPECIF ICALLY PROVIDES FOR THE FACILITY TO THE ASSESSEE THAT THE ORDER GRANTING OR REFUSING REGISTRATION HAS TO BE PASSED WITHIN THE PRESCRIBED TIME OF 6 MONTHS AVAIL ABLE TO THE STATUTORY AUTHORITY FROM THE DATE OF FILING OF THE APPLICATIO N. HE OBSERVED THAT THERE IS NOTHING ON RECORD WHICH COULD SHOW THAT AN ORDER HA S BEEN PASSED BY THE PRESCRIBED AUTHORITY TO REFUSE THE REGISTRATION WIT HIN THE TIME PERMITTED IN LAW. RELYING ON VARIOUS DECISIONS HE HELD THAT THE ASSES SING OFFICER WAS NOT JUSTIFIED IN HOLDING THAT THE ASSESSEE HAD NO REGIS TRATION U/S.12A AND THEREFORE THIS CANNOT CONSTITUTE THE BASIS OF DENIAL OF BENEF IT U/S.11 AND 12 OF THE I.T. ACT. HE HELD THAT THE REGISTRATION WILL BE DEEMED TO BE AVAILABLE TO THE COMPANY IN THE INSTANT CASE AS NO ORDER REFUSING REGISTRATION WAS PASSED BY THE COMPETENT AUTHORITY. SO FAR AS THE DENIAL OF EXEMPTION U/S.1 1 AND 12 FOR NOT BEING 5 INVOLVED IN ANY CHARITABLE PURPOSES THE LD.CIT(A) U PHELD THE REASONING GIVEN BY THE ASSESSING OFFICER FOR DENYING SUCH EXEMPTION . 6. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSE SSEE AS WELL AS THE REVENUE ARE IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : GROUND BY ASSESSEE : ON THE FACTS & CIRCUMSTANCES OF THE CASE & IN LAW, THE LD.CIT(A) ERRED IN SUSTAINING THE DISALLOWANCE OF EXEMPTION U/S.11 OF THE I.T. ACT, 1961 BY CONSIDERING THE ACTIVITIES MORE IN THE NATURE OF COMM ERCE & PROFITEERING, BASED ON THE AMENDMENT TO SECTION 2(15) APPLICABLE FROM A .Y. 10-11. GROUNDS BY REVENUE : 1. THE LD. CIT(A) HAS GROSSLY ERRED IN GRANTING DEEM ED REGISTRATION U/S.12A OF THE I.T. ACT, 1961 TO THE ASSESSEE IGNORING THE FACT THAT ASSESSEE IS NEITHER REGISTERED UNDER BOMBAY PUBLIC TRUSTS ACT NOR UNDER SO CIETIES REGISTRATION ACT, 1860 BESIDES THE FACT THAT ASSESSEE IS NOT IN POSSESSION OF A LICENCE/REGISTRATION U/S.25 OF THE COMPANIES ACT, 1956. 2. FOR THIS AND SUCH OTHER REASONS AS MAY BE URGED AT T HE TIME OF HEARING, THE ORDER OF THE LD.CIT(A) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER O R DELETE ANY OF THE ABOVE GROUNDS OF APPEAL DURING THE COURSE OF APPELLATE PRO CEEDINGS BEFORE THE HONBLE TRIBUNAL. 7. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO PA GE 63 TO 63D OF THE PAPER BOOK DREW THE ATTENTION OF THE BENCH TO THE CERTIFI CATE ISSUED BY THE ROC U/S.25 OF THE COMPANIES ACT. HE SUBMITTED THAT THE ABOVE CERTIFICATES WERE OBTAINED ON 28-06-2012, WHICH IS AFTER THE PASSING OF THE ORDER OF THE CIT(A). THEREFORE, THESE ARE ADDITIONAL EVIDENCES WHICH GO TO THE ROOT OF THE MATTER FOR DECIDING THE ISSUE AND THEREFORE THE SAME SHOULD BE ADMITTED. 8. AFTER HEARING BOTH THE SIDES THE ADDITIONAL EVID ENCES FILED BY THE ASSESSEE IN THE PAPER BOOK BEING THE CERTIFICATE OBTAINED FR OM ROC GRANTING CERTIFICATE U/S.25 OF THE COMPANIES ACT ARE ADMITTED FOR ADJUDI CATION. 6 9. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ONE OF THE REASON FOR DENYING THE EXEMPTION U/S.11 AND 12 BY THE ASSESSIN G OFFICER IS THAT THE ASSESSEE IS CHARGING FEES FROM INDUSTRIES FOR EXTEN DING SERVICES. HE SUBMITTED THAT CHARGING FEES FOR SERVICES IS NOT A DISQUALIFI CATION OF CHARITABLE ACTIVITY. HE SUBMITTED THAT THERE IS NO CONCEPT OF NON-CHARGI NG IN CHARITY. FOR THIS PURPOSE, HE RELIED ON THE FOLLOWING DECISIONS : I. CIT VS. A.P. STATE ROAD TRANSPORT CORPORATION REPO RTED IN 159 ITR 1 (SC) II. DIRECTOR OF INCOME TAX VS. THE CA STUDY CIRCLE REPORTED IN 250 CTR (MAD) 70 III. ICAI RESEARCH & ACCOUNTING FOUNDATION VS. DIT R EPORTED IN 321 ITR 73 (DEL). 9.1 AS REGARDS RELIANCE BY THE ASSESSING OFFICER ON THE AMENDED PROVISIONS OF SECTION 2(15) THE LD. COUNSEL FOR THE ASSESSEE R EFERRING TO CBDT CIRCULAR NO.1/2009 SUBMITTED THAT THE AMENDMENT HAS BEEN MAD E APPLICABLE W.E.F. 01- 04-2009 AND SHALL ACCORDINGLY APPLY FOR A.Y.2009-10 AND SUBSEQUENT ASSESSMENT YEARS. HE SUBMITTED THAT THE CIRCULAR I SSUED BY THE CBDT IS BINDING ON THE DEPARTMENT AND THEREFORE THE ASSESSI NG OFFICER WAS NOT JUSTIFIED IN APPLYING THE AMENDED PROVISIONS OF SEC TION 2(15) TO THE ASSESSEE COMPANY FOR THE IMPUGNED ASSESSMENT YEAR. 9.2 SO FAR AS THE GRANTING OF DEEMED REGISTRATION U S/.12A BY THE LD.CIT(A) HE RELIED ON THE ORDER OF THE CIT(A). 10. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HAND SUBMITTED THAT SINCE THE ASSESSEE COMPANY HAS NOT BEEN REGISTERED U/S.12A, THEREFORE, THE ASSESSING OFFICER HAD RIGHTLY DENIED THE CLAIM OF B ENEFIT U/S.11. FURTHER, THE ACTIVITIES OF THE ASSESSEE COMPANY ARE PURELY COMME RCIAL IN NATURE AND THERE IS NO ELEMENT OF ANY CHARITY. HE SUBMITTED THAT THE L D.CIT(A) WAS NOT JUSTIFIED IN GRANTING DEEMED REGISTRATION. HE SUBMITTED THAT THERE IS NO AUTOMATIC OR 7 DEEMED REGISTRATION IF THE APPLICATION FILED U/S.12 AA IS NOT DISPOSED OF WITHIN THE STIPULATED PERIOD OF 6 MONTHS SINCE THE TIME FR AME FIXED UNDER THE PROVISION IS ONLY DIRECTORY. HE ACCORDINGLY SUBMITTED THAT T HE ORDER OF THE ASSESSING OFFICER BE UPHELD. 11. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED TH E VARIOUS DECISIONS CITED BEFORE US. IN THE INSTANT CASE, THE ASSESSEE HAS F ILED APPLICATION FOR REGISTRATION U/S.12A ON 31-03-2005 WHICH IS STILL PENDING. NO O RDER EITHER ALLOWING OR REFUSING THE REGISTRATION U/S.12A HAS BEEN PASSED B Y THE CONCERNED CIT. WE FIND THE LD.CIT(A) HELD THAT THE REGISTRATION WILL BE DEEMED TO BE AVAILABLE TO THE ASSESSEE AS NO ORDER REFUSING REGISTRATION WAS PASSED BY THE COMPETENT AUTHORITY. HOWEVER, WE DO NOT AGREE WITH THE ABOVE REASONING OF THE CIT(A). IN OUR OPINION, THE PERIOD OF 6 MONTHS PROVIDED IN SECTION 12AA(2) FOR DISPOSAL OF APPLICATION SEEKING REGISTRATION IS ONL Y DIRECTORY. THERE IS NO AUTOMATIC OR DEEMED REGISTRATION IF THE APPLICATION FILED U/S.12AA IS NOT DISPOSED OF WITHIN THE STIPULATED PERIOD OF 6 MONTH S. 11.1 FROM THE VARIOUS SUBMISSIONS FILED BY THE ASSE SSEE INCLUDING THE ADDITIONAL EVIDENCE IN THE SHAPE OF CERTIFICATE FRO M ROC GRANTING REGISTRATION U/S.25 OF THE COMPANIES ACT WE FIND THE MATTER REQU IRES FRESH ADJUDICATION AT THE LEVEL OF THE ASSESSING OFFICER. ADMITTEDLY, TH E ABOVE CERTIFICATE HAS BEEN OBTAINED BY THE ASSESSEE COMPANY AFTER PASSING OF T HE ORDER OF THE CIT(A) AND THEREFORE IT WAS NOT AVAILABLE BEFORE THE LOWER AUT HORITIES WHICH IS ONE OF THE BASIS FOR REFUSING BENEFIT OF SECTION 11. FURTHER, THE AMENDED PROVISIONS OF SECTION 2(15) ARE APPLICABLE FROM A.Y. 2009-10 AS P ER CBDT CIRCULAR 8 NO.1/2009 DATED 27-03-2009. THIS ASPECT WAS NEVER ARGUED BEFORE THE LOWER AUTHORITIES AND THEREFORE THIS HAS NOT BEEN CONSIDE RED BY THEM. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND IN THE INTERE ST OF JUSTICE, WE DEEM IT PROPER TO RESTORE THE ISSUE BACK TO THE FILE OF THE ASSESS ING OFFICER WITH A DIRECTION TO DECIDE THE ISSUE AFRESH AND IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THE APPEAL FILED BY THE ASSESSEE AS WELL AS THE REVENUE ARE AC CORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 12. IN THE RESULT, BOTH THE CROSS APPEALS ARE ALLOW ED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 27-11-2013. SD/- SD/- (SHAILENDRA KUMAR YADAV) ( R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED : 27 TH NOVEMBER, 2013 SATISH COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A)-I, PUNE 4. THE CIT-I, PUNE 5. D.R. A BENCH, PUNE 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE