ITO (E), Delhi V. M/s. Association of Corporation & Apex Societies of Handlooms, New Delhi

ITA 2087/DEL/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3432 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-03-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 07-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Rule of consistency
• Section: 143(3); 12A; 201; 13; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER I.T.A. NO. 2087/DEL/2017 AY: 2012-13 ITO(E), TRUST WARD 1(1), DELHI VS. M/S ASSOCIATION OF CORPORATION & APEX SOCIETIES OF HANDLOOMS, HANDLOOM PAVILIAN, MARKETING COMPLEX, NEAR INDIAN OIL BUILDING, JANPATH, NEW DELHI 110 001 (PAN:AAATA0822C) (APPELLANT) (RESPONDENT) REVENUE BY : MS. RAKHI VIMAL, SR. DR. ASSESSEE BY : SH. K.V.S.R. KRISHNAN, CA ORDER PER H.S. SIDHU, JM REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE IMPUGNED ORDER DATED 30.01.2017 PASSED BY THE LD. CIT(A)-40, NEW DELHI RELATING TO ASSESSMENT YEAR 2012-13 ON THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, LD. CIT(A) HAS ERRED IN LAW IN IGNORING THAT THOUGH THE OBJECTS OF THE ASSESSEE SEEMS TO BE CHARITABLE IN NATURE, B UT THE ACTIVITIES CARRIED OUT BY THE ASSESSEE WHICH RESULT ED IN THE PROFITS/ SURPLUS ARE COMMERCIAL IN NATURE. 2. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER OR AMEN D ANY GROUND OF APPEAL RAISED BEFORE AT THE TIME OF HEARI NG. 2 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FI LED ITS RETURN OF INCOME DECLARING NIL INCOME ON 29.09.2012 FOR ASSESSMENT Y EAR 2012-13. THE ASSESSSEE IS REGISTERED UNDER THE SOCIETIES REGISTR ATION ACT, 1860. THE ASSESSEE IS ALSO REGISTERED UNDER SECTION 12A OF THE INCOME TAX ACT, 1961 (IN SHORT ACT) SINCE 28.06.1984. THE ASSESSEE-SOCIETY HAS B EEN CONSTITUTED BY THE DEVELOPMENT COMMISSIONER (HANDLOOM), MINISTRY OF TE XTILES, GOVERNMENT OF INDIA. THE MAIN OBJECTIVE OF THE ASSESSEE SOCIETY I S TO PROMOTE THE HANDLOOM SECTOR. IT WORKS AS THE IMPLEMENTING AGENCY FOR THE DEVELOPMENT COMMISSIONER (HANDLOOM), GOVERNMENT OF INDIA FOR OR GANIZING EXHIBITIONS IN DIFFERENT PARTS OF THE COUNTRY FOR DISPLAY AND SALE OF HANDLOOM FABRICS/ CLOTH MANUFACTURED BY HANDLOOM WEAVERS AND HANDLOOM SOCIE TY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED TO SHOW CAUSE HOW ITS ACTIVITIES ARE CHARITABLE AND WHY THE SAME SHOULD N OT BE TREATED AS BUSINESS OF PROVIDING FACILITIES TO MEMBER SOCIETIES FOR A FEE AND WHY THE SAME SHOULD NOT BE COVERED BY THE PROVISO TO SECTION 2(15) OF THE A CT. THE ASSESSEE, IN RESPONSE, STATED THAT IT IS A NON-PROFIT ORGANIZATI ON MANAGED AND CONTROLLED BY THE GOVERNMENT OF INDIA AND THAT ITS OBJECTIVES ARE TO COORDINATE AND DIFFUSE USEFUL KNOWLEDGE TO THE MEMBER UNITS TOWARDS MARKET ING OF HANDLOOM PRODUCTS. IT WAS ALSO STATED THAT THE MAIN OBJECTIV E IS TO PROMOTE THE HANDLOOM SECTOR BY PROVIDING MARKETING PLATFORM TO THE HANDLOOM PRIMARY SOCIETIES, APEX SOCIETIES AS WELL AS HANDLOOM CORPO RATION AND THAT IT PROCURES ORDERS FROM VARIOUS DEPARTMENT OF GOVERNMENT OF IND IA FOR SUPPLY OF HANDLOOM ITEMS AND DISTRIBUTES THE ORDERS TO VARIOU S MEMBERS OF THE SOCIETY FOR SUPPLY. IT WAS ALSO STATED THAT THE SOCIETY IS REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 1860 AND IS ALSO REGISTERED UNDER SECTION 12A OF THE ACT AND QUALIFIES FOR EXEMPTION UNDER SECTION 11 AND 12 OF THE ACT. THE ASSESSING OFFICER HELD THAT THE ACTIVITIES OF THE ASSESSEE DO NOT FALL IN THE CATEGORY OF 3 RELIEF OF POOR, EDUCATION, MEDICAL RELIEF, PRESERVA TION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILDLIFE) AND PR ESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTORIC INTEREST. THE ASSESSING OFFICER ALSO HELD THAT THE ASSESSEE'S CASE CANNOT BE CONSIDERED THE U NDER THE CONCEPT OF MUTUALITY SINCE THE ESSENCE OF MUTUALITY LIES IN TH E RETURN OF WHAT ONE HAS CONTRIBUTED TO A COMMON FUND AND UNLESS THERE IS A COMPLETE IDENTITY BETWEEN THE CONTRIBUTORS AND PARTICIPATORS IN A COM MON FUND, THE PRINCIPLE OF MUTUALITY WOULD NOT BE ATTRACTED. THE ASSESSING OFF ICER DISCUSSED THE AMENDMENT TO THE PROVISO TO SECTION 2(15) OF THE AC T AND CBDT CIRCULAR DATED 19.12.2008 AND COMPLETED THE ASSESSMENT BY INVOKING THE PROVISO TO SECTION 2(15) BY ASSESSING TOTAL INCOME OF RS. 2,23,63,070/ - U/S. 143(3) OF THE ACT VIDE ORDER DATED 11.3.2015. AGAINST THE ASSESSMENT ORDE R DATED 11.3.2015, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE H IS IMPUGNED ORDER DATED 30.1.2017 HAS PARTLY ALLOWED THE APPEAL OF THE ASSE SSEE BY HOLDING THAT AO IS DIRECTED TO ALLOW THE BENEFIT OF SECTION 11 WITH CO NSEQUENTIAL BENEFITS. AGGRIEVED WITH THE IMPUGNED ORDER DATED 30.1.2017, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 3. AT THE TIME OF HEARING, LD. DR RELIED UPON ORDER PASSED BY THE AO AND THE REITERATED THE CONTENTION RAISED IN THE GROUNDS OF APPEAL OF THE REVENUE AND REQUESTED THAT APPEAL OF THE REVENUE MAY BE ALL OWED. 4. ON THE CONTRARY, LD. COUNSEL FOR THE ASSESSEE RE LIED UPON THE ORDER OF THE LD. CIT(A) AND STATED THAT LD. CIT(A) HAS PASSE D A WELL REASONED ORDER ON THE BASIS OF THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN ACCORDANCE WITH PROVISIONS OF LAW. THEREFORE, HE REQUESTED THAT THE APPEAL FILED BY THE REVENUE MAY BE DISMISSED. HE FURTHER SUBMITTED THAT ON IDENTICAL FACTS, THE ITAT, COORDINATE BENCH, DELHI IN REVENUES ITA NO. 4788/DEL/2016 (AY 2010- 4 11) VIDE ORDER DATED 27.3.2019 IN ASSESSEES OWN CA SE HAS UPHELD THE ORDER OF THE LD. CIT(A) FOR THE ASSESSMENT YEAR 2010-11 AND DISMISSED THE APPEAL FILED BY THE REVENUE, BEFORE THE TRIBUNAL. 5. WE HAVE HEARD BOTH THE PARTIES ESPECIALLY THE OR DERS OF THE AUTHORITIES ESPECIALLY THE IMPUGNED ORDER OF THE LD. CIT(A) AS WELL AS THE ITAT, COORDINATE BENCH, DELHI DECISION PASSED IN REVENUES ITA NO. 4 788/DEL/2016 (AY 2010-11) VIDE ORDER DATED 27.3.2019 IN ASSESSEES OWN CASE . WE FIND THAT LD. CIT(A) HAS OBSERVED AS UNDER:- 4.1 THE APPELLANT HAS RAISED, AS MANY AS 8 GROUNDS OF APPEAL FOR ASSESSMENT YEAR 2011-12 AND 9 GROUNDS OF APPEAL FOR ASSESSMENT YEAR 2012-13. GROUND NOS. 1 TO 5 IN ASSESSMENT YEAR 2011-12 AND GROUND NOS. 1 TO 6 IN ASSESSMENT YEAR 2012-13 CHALL ENGE THE DENIAL OF EXEMPTION UNDER SECTION 11. SINCE THESE G ROUNDS ARE INTERLINKED, THESE ARE BEING ADJUDICATED TOGETHER. 4.1.1 I HAVE CONSIDERED THE ASSESSMENT ORDER, THE SUBMISSIONS OF THE APPELLANT AS WELL AS THE ORDER OF LD. CIT(A) FO R ASSESSMENT YEAR 2010-11 IN THE APPELLANT'S OWN CASE. A COPY OF THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2010-11, WHICH WAS ALSO F ILED BY THE APPELLANT, HAS ALSO BEEN PERUSED. THE LD. CIT(A)-36 IN HER ORDER DATED 10.06.2016 HAS HELD AS UNDER: 8. I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE ASSESSEE. THE ONLY GROUND OF APP EAL IS WHETHER THE ASSESSEE IS ENGAGED IN THE ACTIVITIES O F TRADE, COMMERCE OR BUSINESS OR SO AS TO BE HIT BY THE PROV ISO TO SECTION 2(15) OF THE ACT. THE FIRST CONTENTION OF T HE ASSESEE 5 IS THAT IN ALL EARLIER YEARS THE OBJECTS OF THE ASS ESSEE REMAINING SAME AND HELD TO BE CHARITABLE, THE BENEF IT OF SECTION 11 SHOULD BE ALLOWED BASED ON PRINCIPLE OF CONSISTENCY. IN THIS CASE, THIS CONTENTION IS NOT A CCEPTABLE AS THE AMENDMENT TO THE SEC 2(15) OF THE I.T ACT WAS APPLICABLE ONLY FROM A.Y. 2009-10 AND THEREFORE WHA T HAPPENS PREVIOUSLY CANNOT BE SEEN WITH THE SAME EYE S. WITH THIS ARGUMENT, NO AMENDMENT CAN EVER BE APPLIC ABLE. GROUND NO.4 IS THEREFORE DISMISSED. 9. WHETHER THE BENEFIT OF SECTION 11 IS TO BE GIVEN IS TO BE DECIDED BY THE OBJECTS AND THE ACTIVITIES FROM YEAR TO YEAR. IN THIS CASE THE ASSESSEE IS AN ORGANIZATION CONSTI TUTED BY THE MINISTRY OF TEXTILES AND CLEARLY IS NOT FOR PRO FIT AS IT CAN BE SEEN THAT THE EXECUTIVE COMMITTEE IS WHOLLY CONS TITUTED BY THE GOVERNMENT OFFICERS MAINLY CONSISTING OF THE MOS OF TEXTILES RELATED DEPARTMENT IN DIFFERENT STATES AND HEADED BY THE DC HANDLOOM, MINISTRY OF TEXTILES. IT IS PRO MOTING THE HANDLOOM SECTOR BY PROCURING THE ORDERS FROM ALL GOVERNMENT DEPARTMENTS WHICH HAVE THE DEMAND AND GIVING IT TO THE MEMBER SOCIETY. THUS IT IS A NODAL AND IMPLEMENTING AGENCY OF THE GOVERNMENT AND NOT A SOC IETY FOR THE PURPOSE OF MAKING ANY PROFIT OR DOING BUSIN ESS. FURTHER, IT ORGANIZES EXHIBITIONS TO PROVIDE A PLAT FORM TO 'WEAVERS ACROSS THE COUNTRY. THE AD HAS APPARENTLY NOT CONSIDERED THE NATURE OF THE ACTIVITIES AND THE OBJ ECTIVES OF THE SOCIETY AND MERELY DISALLOWED THE BENEFIT OF SE CTION 11 BY STATING THAT THE ACTIVITIES DO NOT FALL UNDER TH E FIRST FIVE 6 LIMBS OF SEC 2(15) & THAT PRINCIPLE OF MUTUALITY DO ES NOT APPLY. THE CASE OF ITPO (2015) 371 ITR 333 OF DELHI HIGH C OURT APPLIES TO THIS CASE ALSO, WHERE IT WAS ADJUDICATED THAT WHERE INSTITUTION IS NOT DRIVEN BY MOTIVE TO EARN P ROFIT BUT TO DO CHARITY THROUGH THE ADVANCEMENT OF OBJECTIVES OF GENERAL PUBLIC UTILITY, IT WILL BE REGARDED AS ESTA BLISHED FOR CHARITABLE PURPOSES. FURTHER IN THE CASE OF ICAL (2 013) 358 ITR 91, IT WAS OBSERVED BY THE HIGH COURT THAT EVEN THOUGH FEES ARE CHARGED FOR SUCH ACTIVITIES (COACHING IN T HAT CASE) ACTIVITIES CANNOT BE STATED TO BE RENDERING OF SERV ICES IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, AS SUC H ACTIVITIES ARE UNDERTAKEN IN FURTHERANCE OF ITS MAI N OBJECTS WHICH IS NOT TRADE, COMMERCE OR BUSINESS. THUS, THE PURPOSE AND THE DOMINANT OBJECTIVE FOR WHICH AN INSTITUTION CARRIES ON ITS ACTIVITIES IS MATERIAL TO DECIDE IF THE SAME IS BUSINESS OR NOT FOR WHICH EXISTENCE OF PROFIT MOTIVE IS A VI TAL INDICATOR. IN THE PRESENT CASE THE MOTIVE IS TO PRO VIDE A PLATFORM FOR HANDLOOM WEAVERS OF THE COUNTRY FOR MARKETING AND DISPLAYING THEIR PRODUCTS THROUGH EXH IBITIONS. THE ACTIVITIES ARE NOT FOR THE ANY PRIVATE GAIN AT PROFIT AS CAN BE SEEN BY THE EXECUTIVE COMMITTEE WHICH CONSISTS O F ALL GOVT. OFFICES HAVING NO PROFIT SHARING OR PERSONAL INTEREST. THE RECEIPTS ARE USED FOR ACTIVITIES OF THE SOCIETY AND THE ACTIVITIES ARE MONITORED BY THE MINISTRY OF TEXTILE S, GOVERNMENT OF INDIA. IN MY OPINION THEREFORE, THE A SSESSEE CANNOT BE SAID TO BE INVOLVED IN CARRYING ON ANY BU SINESS, 7 TRADE OR COMMERCE EVEN THROUGH IT HAS OBJECTS OF GE NERAL PUBLIC UTILITY. THE BENEFIT OF SECTION 11 MAY THERE FORE BE PROVIDED TO THE ASSESSEE ALONGWITH CONSEQUENTIAL BE NEFITS.' 4.1.2 THE FACTS OF THE CASE FOR ASSESSMENT YEAR 201 1-12 AND 2012-13 ARE SAME AS THOSE FOR ASSESSMENT YEAR 2010 -11. A COMPARISON OF THE ASSESSMENT ORDER FOR THE ASSESSME NT YEAR 2010-11 WITH THOSE FOR ASSESSMENT YEARS 2011-12 AND 2012- 13 SHOWS THAT NO NEW FACTS HAVE BEEN BROUGHT ON REC ORD BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEARS UNDE R CONSIDERATION IN THESE APPEALS. SINCE THE FACTS OF THE CASE ARE SAME AS IN ASSESSMENT YEAR 2010-11, RESPECTFULL Y FOLLOWING THE ORDER OF THE LD. CIT(A)-36 FOR ASSESS MENT YEAR 2010-11, IT IS HELD THAT THE ASSESSEE CANNOT BE SAI D TO BE INVOLVED IN CARRYING ON ANY BUSINESS, TRADE OR COMM ERCE AND THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE BENE FIT OF SECTION 11 WITH CONSEQUENTIAL BENEFITS. GROUND NOS. 1 TO 5 FOR ASSESSMENT YEAR 2011-12 AND GROUND NO. 1 TO 6 R ASSESSMENT YEAR 2012-13 ARE ALLOWED. 5.1 WE FURTHER FIND THAT COORDINATE BENCH OF ITAT, DELHI IN REVENUES ITA NO. 4788/DEL/2016 (AY 2010-11) VIDE ORDER DATED 27. 3.2019 IN ASSESSEES OWN CASE HAS OBSERVED AS UNDER:- 5.3 EVIDENTLY, THE ACTIVITY OF THE ASSESSEE ARE OF ADVANCEMENT OF ANY OTHER OBJECT OF THE GENERAL PUBLIC UTILITY, WHI CH FALLS UNDER THE DEFINITION OF THE CHARITABLE PURPOSES DEF INED UNDER SECTION 2(15) OF THE ACT. BUT THE CONTENTION OF THE ASSESSING OFFICER IS THAT SAID OBJET OF GENERAL PUB LIC UTILITY 8 SHALL NOT BE CHARITABLE BECAUSE THE ASSESSEE IS ENG AGED IN THE ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR B USINESS OR RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COM MERCE AND BUSINESS FOR CESS OR FEE. WE FIND THAT ACTIVI TY OF THE ASSESSEE ARE PRIMARILY MOTIVATED WITH THE OBJECTIV E OF PROMOTING HANDLOOM SECTOR IN INDIA AND SAID ACTIVIT Y ARE NOT FOR GAIN OR PROFIT OF AN INDIVIDUAL. THE EXECUTIVE COMMITTEE OF THE SOCIETY ALSO CONSIST OF ALL GOVERNMENT OFFIC IALS WITH NO MOTIVE OF PROFIT SHARING OR PERSONAL INTEREST. THE MEMBER SUBSCRIPTION IS RECEIVED BY THE ASSESSEE IN PROPO RTION OF THE SUPPLY BY THE AGENCY AND THE RATE DECIDED. THE SAID SUBSCRIPTION FEE RECEIVED CANNOT BE EQUATED WITH TH E CESS OR FEE AGAINST SERVICES RENDERED. WE ARE OF THE VIEW T HAT THE ASSESSING OFFICER HAS NOT APPRECIATED THE ACTIVITIE S AND OBJECTIVE OF THE SOCIETY PROPERLY AND THEREFORE HE IS NOT JUSTIFIED IN HOLDING THAT PROVISION TO SECTION 2(1 5) WILL BE ATTRACTED IN THE CASE OF THE ASSESSEE. IN OUR OPIN ION, THE FINDING OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE I S WELL REASONED, AND WE DO NOT FIND ANY ERROR IN THE SAME . ACCORDINGLY, WE UPHOLD THE SAME. THE GROUND OF THE APPEAL OF THE REVENUE IS ACCORDINGLY DISMISSED. 5.2 AFTER HEARING BOTH THE PARTIES AND PERUSING THE ORDERS PASSED BY THE REVENUE AUTHORITIES, ESPECIALLY THE IMPUGNED ORDER DATED 30.1.2017 OF THE LD. CIT(A) AND THE FINDING OF THE TRIBUNAL, AS REPRODUC ED ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE FACTS OF THE CASE OF AY 2 012-13 ARE SAME AS THOSE FOR ASSESSMENT YEAR 2010-11. A COMPARISON OF THE ASSES SMENT ORDER FOR THE ASSESSMENT YEAR 2010-11 WITH THOSE FOR ASSESSMENT Y EAR 2012-13 SHOWS THAT 9 NO NEW FACTS HAVE BEEN BROUGHT ON RECORD BY THE ASS ESSING OFFICER FOR THE ASSESSMENT YEARS UNDER CONSIDERATION IN THIS APPEAL . SINCE THE FACTS OF THE CASE ARE SAME AS IN ASSESSMENT YEAR 2010-11, RESPECTFULL Y FOLLOWING THE ORDER OF THE LD. CIT(A)-36 FOR ASSESSMENT YEAR 2010-11, IT IS HE LD THAT THE ASSESSEE CANNOT BE SAID TO BE INVOLVED IN CARRYING ON ANY BUSINESS, TRADE OR COMMERCE AND THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE BENEFIT OF SECTION 11 WITH CONSEQUENTIAL BENEFITS AND THE TRIBUNAL VIDE ITS OR DER DATED 27.3.2019, AS REPRODUCED ABOVE, HAS ALSO UPHELD THE ORDER OF THE LD. CIT(A) BY HOLDING THAT AO HAS NOT APPRECIATED THE ACTIVITIES AND OBJECTIVE OF THE SOCIETY PROPERLY AND THEREFORE HE IS NOT JUSTIFIED IN HOLDING THAT PROVI SION OF SECTION 2(15) WILL BE ATTRACTED IN THE CASE OF THE ASSESSEE. IN VIEW OF ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A), HENCE, UP HOLD THE SAME BY RESPECTFULLY FOLLOWING THE TRIBUNALS ORDER DATED 27.3.2019 AND REJECT THE GROUNDS RAISED BY THE REVENUE. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED ON 06.03.2020. SD/- SD/- [N.K. BILLAIYA] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER SRB DATE: 06.03.2020 COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES 10