Tamil Nadu Industrial Guidance & Export Promotion Bureau, CHENNAI V. ADIT, CHENNAI

ITA 201/CHNY/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1193 (ITAT-CHENNAI)
• Duration Of Justice: 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 05-02-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: B SURESH
• Keywords: Search and seizure; Charitable institution
• Section: 12A; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE DR. O.K. NARAYANAN,VICE-PRESID ENT AND SHRI VIKAS AWASTHY, JUDICIAL MEM BER ITA NO.201/MDS/2013 (ASSESSMENT YEAR: 2009-10) TAMIL NADU INDUSTRIAL GUIDANCE & EXPORT PROMOTION BUREAU, 19A, RUKMANI LAKSHMIPATHY ROAD, EGMORE, CHENNAI-600 008. PAN:AACCT7538B VS. ASSISTANT DIRECTOR OF INCOME TAX, (EXEMPTIONS)-IV, CHENNAI. (APPELLANT) (RESPONDENT) APPELLANT BY : MR.B.SURESH, CA RESPONDENT BY : MR. SHAJI P.JACOB, ADDL. CIT DATE OF HEARING : 21 ST MARCH, 2013 DATE OF PRONOUNCEMENT : 21 ST MARCH, 2013 O R D E R PER VIKAS AWASTHY, JM: THE ASSESSEE HAS FILED APPEAL AGAINST THE ORDER OF THE CIT(A) XII, CHENNAI DATED 30.10.2012 RELEVANT TO THE ASSESSMENT YEAR 2009-10. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A SOCIETY REGISTERED UNDER THE TAMIL NADU SOCIETIES REGISTRATION ACT. THE ASSESSEE SOCIETY IS FORMED BY GOVERNMENT OF TAMIL NADU WITH THE OBJECTS OF ADVIS ING, ITA NO.201/MDS/2013 2 SCOUTING AND IMPRESSING ON CORPORATES ESPECIALLY FO REIGN CORPORATES TO SET UP INDUSTRIAL UNITS IN THE STATE OF TAMIL NADU. THE ASSESSEE IS ALSO REGISTERED UNDER SECTIO N 12A OF THE INCOME TAX ACT, 1961 AS A CHARITABLE ORGANIZATI ON. 3. FOR THE ASSESSMENT YEAR 2009-10, THE ASSESSEE FI LED ITS RETURN OF INCOME ON 18.10.2010 ADMITTING NIL INCOME . THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) WAS ISSUED TO THE ASSESSEE ON 15.9.2011. THE CASE OF THE ASSESSEE IS, THAT THE ASSESSEE IS A GOVERNMENT BODY AND CHARITABLE INSTITUTION, IT HA S BEEN SET UP WITH AN OBJECT OF PROVIDING INFORMATION AND ASSI STANCE TO ENTREPRENEURS FOR ESTABLISHING INDUSTRIAL UNITS IN THE STATE OF TAMIL NADU. THE ASSESSEE ADMITTED RECEIPTS OF ` 2.00 CRORES ON ACCOUNT OF SINGLE WINDOW ASSISTANCE FOR SETTING UP OF INDUSTRIES IN THE STATE. THE ASSESSEE IS PROVIDING SERVICES TO ENTREPRENEURS IN LIEU OF FEES DEPENDING UPON THE SI ZE OF INVESTMENT IN THE PROJECTS. THE ASSESSEE HAS BEEN ACCEPTING FEES AS PER THE ORDER OF THE GOVERNMENT OF TAMILNAD U IN G.O. MS.NO.588 DATED 10.09.1998 ON THE BASIS OF VARIOUS SLABS WHICH ARE SPECIFIED HEREIN BELOW:- ITA NO.201/MDS/2013 3 PROJECTS SINGLE WINDOW FEE PROJECTS WITH INVESTMENT BETWEEN ` 10 50 CRORES ` 3,00,000 PROJECTS WITH INVESTMENT BETWEEN ` 50 100 CRORES ` 5,00,000 PROJECTS WITH INVESTMENT BETWEEN ` 100 300 CRORES `10 ,00,000 PROJECTS WITH INVESTMENT BETWEEN ` 300 1000 CRORES ` 15,00,000 PROJECTS WITH INVESTMENT ABOVE ` 1000 CRORES ` 20,00,000 THE ASSESSING OFFICER VIDE ASSESSMENT ORDER DATED 29.12.2011 HELD THAT IN VIEW OF THE AMENDED PROVISI ON OF SECTION 2(15) OF THE INCOME TAX ACT, THE ACTIVITIES CARRIED ON BY THE ASSESSEE ARE IN THE NATURE OF TRADE, COMMERC E OR BUSINESS AND ARE NOT FOR CHARITABLE PURPOSES. THE A SSESSING OFFICER HELD THAT THE ASSESSEE LOST ITS CHARACTER O F CHARITABLE ORGANIZATION AND THUS NOT ELIGIBLE FOR EXEMPTION UN DER SECTION 11 OF THE I.T. ACT. THE ASSESSING OFFICER TREATED THE ASSESSEE AS AN AOP. 4. AGGRIEVED AGAINST THE ASSESSMENT ORDER, THE ASSE SSEE PREFERRED AN APPEAL BEFORE THE CIT(A). THE CIT(A) VIDE IMPUGNED ORDER UPHELD THE FINDINGS OF THE ASSESSING OFFICER AND DISMISSED THE APPEAL OF THE ASSESSEE WITH THE F OLLOWING OBSERVATIONS:- ITA NO.201/MDS/2013 4 THE ABOVE COLLECTION OF FEES WAS FOR PROCESSING THE APPLICATION, FOR GUIDANCE, PROVIDING INFORMATION ETC. IN ESTABLISHING THE PROJECTS, TO ASSIST THEM IN AVAILING THE FINANCIAL FACILITIES, T O OBTAIN CUSTOMS CLEARANCE AND OTHER FACILITIES ETC. THUS THE ASSESSEE IS RENDERING SERVICES TO ITS CLIENTS (INVESTORS/ENTREPRENEURS) WHO IN TURN ENGAGE IN MANUFACTURING AND OTHER BUSINESS ACTIVITIES. THEREFORE, THE FEES COLLECTED BY THE ASSESSEE IS DIRECTLY AMOUNTS TO THE SERVICES RENDERED BY IT IN RELATION TO THE TRADE, BUSINESS AND COMMERCE. THEREFORE, THE ASSESSEE IS CONSIDERED TO BE ENGAGED IN THE ACTIVITIES WHICH ARE IN THE NATURE OF RENDERING SERVICES IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, THE SECOND LIMB OF PROVISO TO SECTION 2(15) OF THE ACT. HENCE, THE ASSESSEE IS DIRECTLY COVERED BY THE PROVISO TO SECTION 2(15) AND HENCE, NOT ELIGIBLE TO BE CLASSIFIED AS GENERAL PUBLIC UTILITY FOR THE PURPOSE OF BENEFITS U/S.2(15) OF THE ACT. IN VIEW OF THE ABOVE OBSERVATIONS THE ASSESSEES ACTIVITIES DO NOT CONSTITUTE ADVANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTILITY AS IT INVOLVES CARRYING OF ANY ACTIVITIE S WHICH ARE IN THE NATURE OF RENDERING SERVICES IN RELATION TO TRADE, BUSINESS, COMMERCE. AGGRIEVED AGAINST THE ORDER OF THE CIT(A), THE ASS ESSEE HAS COME IN SECOND APPEAL BEFORE THE TRIBUNAL. ITA NO.201/MDS/2013 5 5. SHRI B.SURESH APPEARING ON BEHALF OF THE ASSESSE E SUBMITTED THAT THE ASSESSEE IS A SOCIETY AND IS AN EXTENDED ARM OF THE STATE GOVERNMENT. IT IS PROVIDING SINGLE WINDOW FACILITY FOR ENTREPRENEURS TO SET UP INDUSTRY IN TH E STATE OF TAMILNADU. THE OBJECTIVES OF THE SOCIETY ARE NOT I N THE NATURE OF CARRYING ON ANY TRADE OR COMMERCE OR BUSINESS OR ANY SERVICES IN RELATION THERETO AND HENCE, IT IS NOT E ARNING ANY PROFIT OUT OF THE ACTIVITIES BEING CARRIED OUT. THE AR FURTHER SUBMITTED THAT AS PER THE AIMS AND OBJECTS OF THE A SSESSEE, ITS ACTIVITIES RESULT IN ECONOMIC DEVELOPMENT OF TH E STATE WHICH IN TURN BENEFITS PEOPLE BY GRANTING EMPLOYMEN T OPPORTUNITY FOR THE UNEMPLOYED THEREBY IT SERVES A S A RELIEF TO THE POOR. THE ACTIVITIES OF THE SOCIETY RESULTS IN ADDITIONAL COLLECTION OF BOTH DIRECT AND INDIRECT TAXES AND TH E FEES CHARGED BY THE ASSESSEE SOCIETY EARNS FOREIGN EXCHA NGE AS MAJORITY OF RECEIPTS ARE FROM FOREIGN BUSINESS HOUS ES. THE AR FURTHER SUBMITTED THAT MERE CHARGING OF FEES FOR RE NDERING OF SERVICES WILL NOT CHANGE THE CHARACTER AND THE NATU RE OF SERVICES RENDERED BY THE SOCIETY. IN ORDER TO SUPP ORT HIS CONTENTIONS, HE RELIED ON THE JUDGEMENT OF THE HON BLE DELHI ITA NO.201/MDS/2013 6 HIGH COURT IN THE CASE OF BUREAU OF INDIAN STANDARD S VS. DGIT(EXEMPTIONS) REPORTED AS 27 TAXMANN.COM127 (DEL ) : 212 TAXMAN 210(DEL). 6. ON THE OTHER HAND, THE DR APPEARING ON BEHALF OF THE REVENUE STRONGLY SUPPORTING THE ORDER OF THE CIT(A) SUBMITTED THAT THE CASE OF THE ASSESSEE IS SQUAREL Y COVERED BY THE AMENDED PROVISIONS OF SECTION 2(15) OF THE I NCOME TAX ACT. THEREFORE, THE ASSESSEE HAS LOST THE CHARACTE R OF CHARITABLE ACTIVITY. THUS THE APPEAL OF THE ASSESSE E IS LIABLE TO BE DISMISSED. IN ORDER TO SUPPORT HIS CONTENTIONS, THE DR RELIED ON THE JUDGEMENT OF THE HONBLE ANDHRA PRADE SH HIGH COURT IN THE CASE OF ANDHRA PRADESH STATE SEED CERT IFICATION AGENCY VS. CCIT & ORS. REPORTED AS 83 DTR (AP) 23. . 7. WE HAVE HEARD THE SUBMISSIONS MADE BY BOTH THE PARTIES AND HAVE PERUSED THE ORDERS OF THE AUTHORIT IES BELOW AS WELL AS THE JUDGEMENTS REFERRED TO BY BOTH THE S IDES. THE A.R. HAS PLACED ON RECORD A COPY OF MEMORANDUM OF ASSOCIATION AND BYE-LAWS OF THE ASSESSEE SOCIETY T O SHOW THE AIMS AND OBJECTS OF THE ASSESSEE SOCIETY. AT TH IS JUNCTURE, IT WOULD BE IMPORTANT TO FIND OUT WHETHER THE ASSES SEE WOULD ITA NO.201/MDS/2013 7 BE COVERED BY THE PROVISO TO SECTION 2(15) OF THE A CT. THE ASSESSEE IS ALLEGEDLY UNDERTAKING CHARITABLE ACTIVI TIES WHICH ARE OF GENERAL PUBLIC UTILITY. BEFORE DECIDING THE ISSUE IT WOULD BE RELEVANT TO REFER TO PROVISIONS OF SECTION 2(15) OF THE ACT, WHICH IS REPRODUCED HEREIN BELOW:- 2(15) 'CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF, [PRESERVATION OF ENVIRON MENT (INCLUDING WATERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTORIC INTEREST,] AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PU RPOSE, IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN T HE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHE R CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY:] [ PROVIDED FURTHER THAT THE FIRST PROVISO SHALL NOT APPLY IF THE AGGREGATE VALUE OF THE RECEIPTS FROM THE ACT IVITIES REFERRED TO THEREIN IS TEN LAKH RUPEES] OR LESS IN THE PREVIOUS YEAR;] 8. THE ASSESSEE IN THE INSTANT CASE IS PROVIDING SI NGLE WINDOW FACILITY FOR SETTING UP OF INDUSTRY IN THE S TATE OF TAMIL NADU. IT WOULD NOT BE OUT OF PLACE TO MENTION HERE THAT THE ASSESSEE IS PROVIDING SUCH FACILITY ONLY TO THOSE W HO ITA NO.201/MDS/2013 8 APPROACH THE ASSESSEE FOR SETTING UP OF INDUSTRY I N THE STATE. FOR RENDERING SUCH SERVICE, THE ASSESSEE IS CHARGIN G HUGE FEE. THE ASSESSEE IS NOT PROVIDING SINGLE WINDOW CL EARANCE FACILITY TO PUBLIC AT LARGE RATHER IT IS PROVIDING FACILITY TO THE ENTREPRENEURS ESPECIALLY FOREIGN BUSINESS HOUSE (AS HAS BEEN ADMITTED BY THE ASSESSEE) BY CHARGING CONVENIE NCE FEES KNOWN AS SINGLE WINDOW FEE. 9. THE ASSESSEE IS SAID TO BE AN EXTENDED ARM OF T HE STATE GOVERNMENT FOR SETTING UP OF INDUSTRY. IT IS THE DUTY OF THE STATE TO PROVIDE CERTAIN BASIC AMENITIES FOR SE TTING UP INDUSTRY OR TRADE OR BUSINESS. IF THE ARGUMENT OF T HE A.R. IS TO BE ACCEPTED THAT ACTIVITIES OF THE ASSESSEE CONTRIB UTE IN COLLECTION OF DIRECT AND DIRECT TAXES FOR THE NATI ON AND IS PROVIDING EMPLOYMENT OPPORTUNITIES TO THE PEOPLE IN THE STATE THEREBY SERVING AS RELIEF FOR THE POOR, THEN IT WOULD NOT BE WRONG TO SAY THAT ALL INDUSTRIAL HOUSES SET UP IN THE STATE ARE DOING CHARITABLE ACTIVITIES BY PROVIDING EMPLO YMENT AND GENERATING REVENUE FOR THE NATION IN THE FORM OF EX CISE, INCOME-TAX, CUSTOMS DUTY ETC. AS HAS BEEN RIGHTLY POINTED OUT BY THE CIT(A) THAT THE ASSESSEE IS RENDERING SERVIC ES TO ITS ITA NO.201/MDS/2013 9 CLIENTS (INVESTORS/ENTREPRENEURS) WHICH IN TURN EN GAGE IN MANUFACTURING OR OTHER BUSINESS ACTIVITIES AGAINST THE FEE TERMED AS SINGLE WINDOW FEE. 10. THE FEE COLLECTED BY THE ASSESSEE IS IN LIEU OF SERVICES RENDERED TO THE BIG BUSINESS HOUSES WHICH BY NO STR ETCH OF IMAGINATION CAN BE TERMED AS CHARITABLE ACTIVITY ES PECIALLY AFTER THE INSERTION OF PROVISO TO SECTION 2(15) OF THE ACT WITH EFFECT FROM 1.4.2009. THE A.R. HAS RELIED ON THE J UDGEMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF BUREAU OF I NDIAN STANDARDS (SUPRA). WE FIND THAT THE RATIO LAID DOW N BY THE HONBLE DELHI HIGH COURT IN THE AFORESAID CASE IS NOT APPLICABLE IN THE FACTS AND CIRCUMSTANCES OF THE PR ESENT CASE. BUREAU OF INDIAN STANDARDS IS A SOVEREIGN ENTITY CR EATED UNDER THE STATUTE I.E. BUREAU OF INDIAN STANDARDS ACT, 1986. IT IS A STATUTORY BODY EMPOWERED TO FRAME RULES OR REGULATIONS, EXERCISE COERCIVE POWERS, INCLUDING INSPECTION, RAI DS ETC. THEY POSSESS SEARCH AND SEIZURE POWERS AND ARE INVA RIABLY SUBJECTED TO PARLIAMENTARY OR LEGISLATIVE OVERSIGHT . THE OBJECT FOR SETTING UP SUCH REGULATORY BODIES IS TO ENSURE GENERAL PUBLIC UTILITY BY PRESCRIBING OF STANDARDS AND ENFO RCING SUCH ITA NO.201/MDS/2013 10 STANDARDS THROUGH ACCREDITATION AND CONTINUING SUPE RVISION THROUGH INSPECTION ETC. SUCH ACTIVITIES CANNOT BE C ONSIDERED AS TRADE, BUSINESS OR COMMERCIAL ACTIVITY MERELY BE CAUSE THE TESTING PROCEDURES OR ACCREDITATION INVOLVES CHARGI NG OF SUCH FEES. THE HONBLE DELHI HIGH COURT HAS HELD THAT IT CANNOT BE SAID THAT PUBLIC UTILITY OF EVOLVING, PRESCRIBING A ND ENFORCING STANDARDS INVOLVES THE CARRYING ON OF TRADE OR CO MMERCIAL ACTIVITY. 11. IN THE INSTANT CASE, THE ASSESSEE ALTHOUGH AN EXTENDED ARM OF STATE GOVERNMENT FORMED AS A SOCIET Y TO CARRY OUT CHARITABLE ACTIVITIES IN THE NATURE OF G ENERAL PUBLIC UTILITY IS IN FACT PROVIDING ASSISTANCE TO INDUST RIAL HOUSES AND ENTREPRENEURS FOR SETTING UP OF INDUSTRY IN THE ST ATE OF TAMIL NADU. THE ASSESSEE FACILITATES IN PROVIDING LICENCE , APPROVAL AND PERMISSION FROM VARIOUS GOVERNMENT AGENCIES FOR SETTING UP OF INDUSTRY IN THE STATE, FOR WHICH IT IS CHARGI NG FEE. THE FEE CHARGED BY THE ASSESSEE IS NOT REMITTED TO THE GOVE RNMENT TREASURY OR EXCHEQUER. AFTER INSERTION OF PROVISO TO SECTION 2(15) OF THE ACT, THE ASSESSEE HAS LOST ITS CHARA CTER OF CHARITABLE ORGANIZATION. THE ASSESSEE IS A SERVIC E PROVIDER. ITA NO.201/MDS/2013 11 THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDE R OF THE CIT(A). THE ORDER OF THE CIT(A) IS UPHELD AND THE A PPEAL OF THE ASSESSEE IS DISMISSED AS IT IS DEVOID OF MERIT. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THURSDAY, TH E 21 ST DAY OF MARCH , 2013 AT CHENNAI. SD/- SD/- ( DR. O.K.NARAYANAN ) (VIKAS AWASTHY) VICE-PRESIDENT JUDICIAL MEMBER CHENNAI, DATED THE 21 ST MARCH , 2013. SOMU COPY TO: (1) APPELLANT (4) CIT(A) (2) RESPONDENT (5) D.R. (3) CIT (6) G.F