ITO (E), New Delhi V. M/s. Society For Development Alternatives, New Delhi

ITA 2297/DEL/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3786 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 17-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Retrospective amendment
• Section: 12A; 12; 2; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC, NEW DELHI BEFORE MS. DIVA SINGH, JUDICIAL MEMBER ITA NO. 2297/DEL/2017 ASSESSMENT YEAR: 2011-12 ITO (E) WARD-2(2), ROOM NO. 2410, 24 TH FLOOR, E-2 BLOCK, PRATYAKSH KAR BHAWAN, DR. SHYAMA PRASAD MUKHERJEE CIVIC CENTRE, JAWAHAR LAL NEHRU MARG, NEW DELHI VS. SOCIETY FOR DEVELOPMENT ALTERNATIVES B-32, TARA CRESCENT, QUTAB INSTITUTIONAL AREA, NEW MEHRAULI ROAD, NEW DELHI PAN : AAAAS0278B (APPELLANT) (RESPONDENT) O R D E R PER DIVA SINGH, J.M. : THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AS SAILING THE CORRECTNESS OF THE ORDER DATED 5.1.2017 OF CIT(A)-36, NEW DELHI PERTAI NING TO 2011-12 ASSESSMENT YEAR ON THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW IN IGNORING THAT ACTIVITIES OF ASSESSE E IS ADVANCEMENT OF ANY OTHER OBJECT OF PUBLIC UTILITY AND HITS THE PROVISO OF SECTION 2 (15) OF THE I.T. ACT. 2. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER OR AMEND ANY GROUND OR APPEAL RAISED ABOVE AT THE TIME OF HEARING. 2. BOTH THE PARTIES HAVE BEEN HEARD. IT WAS A COMMO N STAND OF THE PARTIES BEFORE THE BENCH THAT AT THE TIME OF PASSING OF THE ASSESSMENT ORDER DATED 31.3.2014 UNDER SECTION 143(3), THE ASSESSEES REGISTRATION UNDER SECTION 1 2A WAS CANCELLED. THE DIT(EXEMPTION) NEW DELHI VIDE ORDER DATED 21.1.2011 HELD THAT THE ASSESSEE SOCIETY WAS NOT CARRYING ON GENUINE CHARITABLE ACTIVITIES AS AS SESSEE HAD VIOLATED THE PROVISIONS OF SECTION 13 OF THE INCOME TAX ACT, CONSEQUENTLY, REG ISTRATION WAS CANCELLED FROM INCEPTION. THE ASSESSING OFFICER TOOK NOTE OF THE F ACT THAT THE ITAT RESTORED THE ISSUE BACK TO THE FILE OF THE DIT (EXEMPTION), NEW DELHI WITH A DIRECTION TO DECIDE THE SAME IN ACCORDANCE WITH LAW, THE ISSUE THUS WAS STILL PENDI NG AT THE TIME WHEN THE ASSESSMENT ORDER WAS PASSED. BY THE TIME, THE ISSUE TRAVELLED TO THE CIT(A), THE ASSESSEE WAS GRANTED APPELLANT BY SH. VINOD KUMAR BINDAL & SMT. SWEETY KOTHARI, CA RESPONDENT BY SH. T. VASANTHAN, SR. D.R. DATE OF HEARING 23-08-2017 DATE OF PRONOUNCEMENT 31. 10.2017 2 ITA NO.2297 /DEL/2017 REGISTRATION UNDER SECTION 12A. THE ASSESSEES REGI STRATION UNDER SECTION 12A HAD BEEN RESTORED WITH RETROSPECTIVE EFFECT I.E. W.E.F. 2002 -03 ASSESSMENT YEAR VIDE ORDER DATED 29.9.2016. THE CIT(A) GRANTED RELIEF TO THE ASSESSE E NOT ONLY IN THE SAID BACKGROUND BUT ALSO CONSIDERING THE PECULIAR FACTS OF THE CASE TOO K NOTE OF THE FACT THAT ASSESSING OFFICER HAS HIMSELF ALLOWED EXEMPTION UNDER SECTION 11 FOR 2014-15 ASSESSMENT YEAR VIDE ORDER DATED 7.12.2016 ON THE VERY SAME FACTS AND CIRCUMST ANCES OF THE CASE. 3. ACCORDINGLY IN VIEW OF THE ABOVE PECULIAR FACTS AND CIRCUMSTANCES, THE LD. AR HAS SUBMITTED THAT THERE IS NO MERIT IN THE APPEAL FILE D BY THE REVENUE. THE LD. SR.DR HAS RELIED ON THE ORDER OF THE AO, HOWEVER, NO CONTRARY FACT OR ARGUMENT HAS BEEN ADVANCED IN REBUTTAL. THE RELEVANT FINDING OF THE CIT(A) IN PARAS 6 TO 8 IS REPRODUCED FOR READY REFERENCE:- I HAVE GONE THROUGH THE ASSESSMENT ORDER, GR OUNDS OF APPEAL AND THE SUBMISSION OF THE ASSESSEE. IT IS EVIDENT THAT THE STARTING POINT OF THE ASSESSMENT WAS THAT THE REGISTRATION OF THE SOCIETY U/S. 12 WAS CA NCELLED BY THE CIT(E) SINCE INCEPTION VIDE ORDER DATED 21/01/2011 AND HENCE THE EXEMPTION WAS NOT AVAILABLE. THEREAFTER, THE AO HAS FURTHER EXAMINED THE CASE IN VIEW OF THE AMENDMENT TO THE PROVISO TO SECTION 2(15) OF THE I.T ACT AND HELD TH AT THE ASSESSEE IS COVERED BY THE PROVISO IN VIEW OF THE TDS CERTIFICATES WHICH SHOW THAT THE ASSESSEE HAS RECEIVED PROFESSIONAL/CONTRACTUAL RECEIPTS IN RETURN FOR SER VICES PROVIDED. IT WAS THEN HELD THAT AS THE ACTIVITIES CARRIED OUT FALL UNDER THE ' ADVANCEMENT OF ANY OTHER OBJECTS OF GENERAL PUBLIC UTILITY' AND ARE COMMERCIAL IN NATUR E, THE EXEMPTION WAS DISALLOWED. WITH REGARD TO THE FIRST ISSUE, THE CIT(E) HAS NOW, VIDE ORDER DATED 29/09/2016, RESTORED THE EXEMPTION THE ASSESSEE SINCE INCEPTION . THE NEXT MATTER IS NOW TO SEE WHETHER THE ASSESSEE IS COVERED BY THE PROVISO TO S ECTION 2(15) OF THE I.T ACT. IT HAS BEEN SUBMITTED BY THE ASSESSEE THAT ALL THE ISSUES RAISED IN THE ASSESSMENT ORDER HAVE BEEN SUBMITTED AND ANALYSED DURING THE PROCEED INGS FOR RESTORATION OF REGISTRATION WITH THE CIT(E). THE SUBMISSIONS MADE TO CIT(E) WERE ALSO SUBMITTED DURING THE APPELLATE PROCEEDINGS AND IT IS SEEN THA T THE SUBMISSIONS MADE WITH REGARD TO THE TDS DEDUCTED AND THE NATURE OF RECEIP TS WAS ALSO PUT UP TO THE CIT(E). IT WAS SUBMITTED THAT WHILE PASSING THE ORDER U/S 1 2AA(3) DATED 2.1.01.2011, THE DIT(E) CANCELLED THE REGISTRATION U/S 12A OF THE AC T OF THE ASSESSEE SOCIETY ON THE FOLLOWING GROUNDS: A) THE SOCIETY'S FAILED TO JUSTIFY THE NON-MAINTENANC E OF SEPARATE BOOKS FOR SEPARATE PROJECTS. B) THE SOCIETY PROVIDED SECURITY TO THE RELATED PERSON S COVERED U/S 13(3) TO SECURE THEIR BANK LOANS. C) THE SOCIETY PASSED PROTOTYPE DEVELOPED BY IT TO THE COMMERCIAL ENTITIES COVERED U/S 13(3)AND D) THE ASSESSEE CARRIED ON PROJECT WORKS ON THE BASIS OF SPONSORS / GRANTORS AND NOT ON ITS OWN. THE ASSESSEE SUBMITTED INTERALIA THAT IT RECEI VES GRANT FROM VARIOUS GOVERNMENT, SEMI-GOVERNMENT AND NON-GOVERNMENT AGENCIES TO CARR Y OUT SPECIFIC PROJECTS. EACH ACT OF THE SOCIETY HAS DIRECT RELATION TO THE FUNDI NG ORGANIZATION. THE ASSESSEE WOULD NOT HAVE CARRIED OUT ANY ACTIVITIES AT ITS OW N WITHOUT RECEIVING FUNDS BY THESE AGENCIES AS ALL THE PROJECTS WERE EXCLUSIVELY FINAN CED BY OTHERS. NOT A SINGLE ACTIVITY HAS BEEN DONE BY THE ASSESSEE OUT OF ITS O WN FUNDS. SOME OF THE FUNDING AGENCIES HAVE DEDUCTED TAX AT SOURCE ON THE PAYMENT S MADE TO THE ASSESSEE SOCIETY FOR CARRYING OUT THE SPECIFIC JOB ENTRUSTED TO IT W HICH CONFIRMS THE NATURE OF PAYMENT AS SPECIFIC CONTRACT WORK. THE ASSESSEE SOC IETY CARRIED ON CONTRACT WORK BY CHARGING FEES. IF THE SO CALLED ACTIVITY IS TO BE T REATED AS CHARITABLE THEN TEACHERS AND DOCTORS WORKING IN SCHOOLS AND HOSPITALS CAN AL SO CLAIM THE SAME BENEFITS AS ASSESSEE IS DOING. THE ASSESSEE HAS CHARITABLE OBJE CTS AND TO ACHIEVE THOSE OBJECTS, THE ASSESSEE IS CARRYING OUT ACTIVITIES FINANCED BY THE FUNDING AGENCIES, DONATIONS OR ITS OWN FUNDS. THERE IS NO BAR OR RESTRICTION IN THE LAW THAT THE CHARITY CAN ONLY BE DONE THOUGH OWN FUNDS. THE ACTIVITIES CARRIED OU T BY THE ASSESSEE FOR RELIEF OF THE POOR ARE CLEARLY COVERED UNDER CHARITABLE PURPOSE E VEN UNDER THE AMENDED SECTION 2(15) OF THE ACT. THE ACTIVITIES CARRIED OUT BY THE ASSESSEE FOR PRESERVATION OF 3 ITA NO.2297 /DEL/2017 ENVIRONMENT ARE ALSO CHARITABLE IN NATURE AS THE PR ESERVATION OF ENVIRONMENT HAS SPECIFICALLY BEEN INCLUDED IN SECTION 2(15) OF THE ACT. THUS NOW ALL THE ACTIVITIES CARRIED OUT BY THE ASSESSEE ARE COVERED UNDER SPECI FIC HEADS PROVIDED IN THE SAID DEFINITION AND NO ACTIVITIES OF THE ASSESSEE FALL W ITHIN THE FIRST (RELIEF OF THE POOR) AND FOURTH (PRESERVATION OF ENVIRONMENT INCLUDING W ATER SHED) LIMB OF THE DEFINITION AND NOT UNDER THE LAST LIMB I.E. ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. THE ASSESSEE SOCIETY HAS BEEN CARRYING OUT THE CHARITABLE ACTIVITIES SINCE ITS INCEPTION. THERE IS NO CHANGE IN THE NATURE OF ACTI VITIES CARRIES OUT BY THE SOCIETY. FURTHER, THE DIT(E) HAS NOT MENTIONED ANYTHING ADVE RSE ABOUT THE OBJECTS OF THE SOCIETY IN HIS ORDER. THE DIT( EE) HAS NOT GIVEN ANY FINDING THAT THE OBJECTS OF THE ASSESSEE ARE NOT COVERED U/S 2(15) OF THE ACT THOUG H THE SHOW CAUSE NOTICE WAS GIVEN SPECIFICALLY ON THIS ISSUE. THUS, IT IS SEEN THAT THE EXEMPTION NOW GRANTED BY THE CIT(E) VIDE ORDER DATED 29.09.2016 HAS BEEN DONE AFTER THOROUGHLY GOING THR OUGH THE OBJECTS AND ACTIVITIES OF THE ASSESSEE IN VIEW OF THE EARLIER HON'BLE HIGH COURT AND HON'BLE ITAT ORDERS. THAT THERE IS TDS CANNOT BE SOLE REASON FOR NOT GRA TING THE EXEMPTION U/S 11. IN CASES WHERE THE FUNDING AGENCIES DEDUCT TAX AT SOUR CE, THERE IS NO SUCH HEAD THAT CAN BE MENTIONED FOR TRUSTS/SOCIETIES IN THE COLUMN 'NATURE OF PAYMENT' EXCEPT FEES OR PROFESSIONAL OR TECHNICAL SERVICES. THIS, CAN TH EREFORE, NOT BE A CRITERIA. THE RECEIPT/GRANTS OF FUNDS FROM VARIOUS BODIES-GOVERNM ENT/NON-GOVERNMENT ARE IN THE NATURE OF TIED UP OR DEDICATED FUNDS AND NOT IN THE NATURE OF TRADE/BUSINESS/COMMERCE. THE PROVISO TO SECTION 2(1 5) WILL NOT APPLY EVEN IF THE ASSESSEE IS CONSIDERED TO BE FOR OBJECTS OF GENERAL PUBLIC UTILITY. AS SUBMITTED BY THE ASSESSEE, IT IS SEEN CHAT THERE IS NO CHANGE OF ACTIVITIES OR OBJECTS OF THE ASSESSEE SINCE THE BEGINNING. FURTHER, ON SIMILAR OBJECTS AN D ACTIVITIES, THE AO HAS ALLOWED THE EXEMPTION U/S. 11 FOR AY 2014-15 ALSO, VIDE ORD ER DATED 07.12.2016. IN VIEW OF THE ABOVE CIRCUMSTANCES SPECIALLY THE FACT THAT AIL THESE ISSUES HAVE BEEN SEEN BY THE CIT(E) DURING THE PROCEEDINGS FOR RESTORATION OF RE GISTRATION AFTER WHICH THE REGISTRATION U/S. 12A WAS GRANTED VIDE ORDER DATED 29.09.2016, IT IS FELT THAT THE DISALLOWANCE OF THE EXEMPTION FOR AY 2011-12 MAY BE DELETED. THE INCOME MAY BE COMPUTED IN ACCORDANCE WITH SECTION 11 OF THE ACT. IN THE RESULT, THE APPEAL OF THE ASSE SSEE IS ALLOWED. 3.1. IN THE ABSENCE OF ANY INFIRMITY IN THE AFORESA ID ORDER AND BEING SATISFIED BY THE REASONING AND FINDING RECORDED IN THE IMPUGNED ORDE R, THE APPEAL FILED BY THE REVENUE IS DISMISSED. THE SAID ORDER WAS PRONOUNCED IN THE OP EN COURT AT THE TIME OF HEARING ITSELF . 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED ON 31 ST OCTOBER,2017. SD/- (DIVA SINGH) JUDICIAL MEMBER SH (DEL)/POONAM(CHD) COPY FORWARDED TO: APPELLANT RESPONDENT CIT CIT(APPEALS) DR: ITAT ASSISTANT REGIS TRAR, ITAT NEW DELHI