DDIT(E), New Delhi V. M/s. Association of Unified Telecom Providers of India, New Delhi

ITA 2686/DEL/2014

• Counselvise Citation: 268620114 RSA 2014
• Duration Of Justice: 1 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC 2
• Next Hearing Date: 01-07-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 02-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P D TAN EJA
• Keywords: Charitable institution; Benefit of exemption
• Section: 12A; 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC-2: NEW DELHI BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER I.T.A .NO. 2686/DEL/2014 (ASSESSMENT YEAR- 2010-11) DDIT(E), NEW DELHI. VS ASSOCIATION OF UNIFIED TELECOM PROVIDERS OF INDIA, B-601, GAURI SADAN, 5, HAILEY ROAD, NEW DELHI. AAAAA1951B APPELLANT BY SH. P.D. TANEJA, SR. DR RESPONDENT BY SH. K.V.S.R. KRISHNA, CA DATE OF HEARING 01/07/2015 DATE OF PRONOUNCEMENT 30/07/2015 O R D E R THE REVENUE HAS QUESTIONED THE FIRST APPELLATE ORD ER ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN TREATING THE ASSESSEE AS CHARIT ABLE INSTITUTION EXEMPT U/S 11 OF THE INCOME TAX ACT, 1961, ESPECIALLY WHEN THE ASSESSEE ITSELF HAS ACCEPTED THAT IT IS A MUTUAL ORGANIZATION. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT A MUTUAL ORG ANIZATION CANNOT BE TREATED AS CHARITABLE WITHIN THE MEANING OF SECTI ON 2(15) OF THE INCOME TAX ACT, 1961. 2. AT THE OUTSET OF THE HEARING THE LD. AR POINTED OUT THAT THE ISSUE RAISED IN THE GROUND IS FULLY COVERED BY THE DECISION OF THE TRIB UNAL IN THE CASE OF THE ASSESSEE ITSELF FOR THE A.Y. 2002-03 IN ITA NO. 593/DEL/2006, VIDE ORDER DATED 25/01/2008. HE SUBMITTED FURTHER THAT RELEVANT FACTS OF THE CASE D URING THE YEAR ARE SIMILAR TO THOSE FACTS OF THE ASSESSMENT YEARS 2002-03, 2003-04, 2005-06 & 2009-10. HE SUBMITTED FURTHER THAT IN THE ASSESSMENT YEARS 2003-04, 2005-06 & 200 9-10 THE FIRST APPELLATE AUTHORITY HAS ALSO ACCEPTED THAT THE ASSESSEE IS ELIGIBLE FOR CLAIMING EXEMPTION U/S 11 BEING A CHARITABLE ASSOCIATION. ITA NO. 2686/D/2014 M/S ASSOCIATION OF UNIFIED TELEC OM PROVIDERS OF INDIA 2 3. THE LD. SR. DR SHRI P.D. TANEJA ON THE OTHER HAN D TRIED TO JUSTIFY THE ASSESSMENT ORDER WITH THIS CONTENTION THAT WHILE TREATING ASSE SSEE AS CHARITABLE INSTITUTION ELIGIBLE FOR EXEMPTION U/S 11 OF THE ACT. THE LD. CIT(A) HAS FA ILED TO APPRECIATE THAT THE ASSESSEE ITSELF HAD ACCEPTED THAT IT IS A MUTUAL ORGANIZATIO N. HE SUBMITTED THAT IMMUTUAL ORGANIZATION CANNOT BE TREATED AS CHARITABLE WITHIN THE MEANING OF SECTION 2(15) OF THE INCOME TAX ACT. 4. CONSIDERED THE ARGUMENTS ADVANCED BY THE PARTY I N VIEW OF ORDERS OF THE AUTHORITIES BELOW AND THE DECISIONS RELIED UPON. 5. THE ASSESSEE IS AN ASSOCIATION OF TELECOM OPERAT ORS IN INDIA. IT WAS GRANTED REGISTRATION U/S 12AA OF THE I.T. ACT AND INCOME WA S EXEMPT U/S 11 THEREOF. THE AO DENIED THE BENEFIT OF EXEMPTION U/S 11 ON THE BASIS THAT THE ASSESSEE IS NOT A CHARITABLE ASSOCIATION. HE HOWEVER, ALLOWED THE EXEMPTION TO THE ASSESSEE ON THE PRINCIPLE OF MUTUALITY. THE CONTENTION OF THE ASSESSEE BEFORE T HE LD. CIT(A) REMAINED THAT THE ASSESSEE EXISTS FOR THE WELFARE OF GENERAL PUBLIC, HENCE, IT IS A CHARITABLE ORGANIZATION. 6. ON PERUSAL OF THE ORDERS OF THE AUTHORITIES BELO W, I FIND THAT THE LD. CIT(A) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE FOLLOWI NG THE DECISION OF TRIBUNAL IN THE CASE OF ASSESSEE ITSELF FOR THE A.Y. 2002-03 IN ITA NO. 593/DEL/2006, VIDE ORDER DATED 25/01/2008. AN IDENTICAL ISSUE WAS ALSO RAISED BEF ORE THE TRIBUNAL IN THE CASE OF ASSESSEE ITSELF FOR THE A.Y. 2008-09 IN ITA NO. 477 0/DEL/2011 AND THE TRIBUNAL, VIDE ORDER DATED 31/01/2012 HAS DECIDED THE ISSUE IN FAV OUR OF THE ASSESSEE FOLLOWING ITS EARLIER ORDER FOR THE A.Y. 2002-03. FOR A READY RE FERENCE PARA NO. 5 OF THE ORDER OF THE TRIBUNAL FOR THE A.Y. 2002-03 IS BEING REPRODUCED H EREUNDER: 5. WE HAVE CONSIDERED THE FACTS OF THE CASE AND RIVAL SUBMISSIONS. ON REVIEW OF THE RATIO OF VARIOUS CASES CITED BY RIVAL PARTIES, NAMELY, ANDHRA CHAMBER OF COMMERCE, SURAT ART SILK CLOTH MANUFACTU RERS ASSOCIATION, BAR COUNCIL OF MAHARASHTRA AND FEDERATION OF INDIAN CHAMBER OF COMMERCE & INDUSTRIES, WE FIND THAT PROMOTION OF TR ADE, COMMERCE OR INDUSTRY IS AN OBJECT OF GENERAL PUBLIC UTILITY AND , THEREFORE, IT CONSTITUTES A CHARITABLE PURPOSE. THE ONLY CONDITION IS THAT THE ACTIVITY SHOULD NOT BE CARRIED ON WITH A PROFIT MOTIVE. IN OTHER WORDS, I F SUCH ACTIVITIES ARE UNDERTAKEN AND THEY RESULT IN A SURPLUS, THE SURPLU S SHOULD NOT BE PASSED ON DIRECTLY OR INDIRECTLY TO THE SETTLER, THE TRUST EES, THE MEMBERS OR ANY ONE CLAIMING THROUGH THEM. SUCH SURPLUS SHOULD REMAIN FOR APPLICATION ITA NO. 2686/D/2014 M/S ASSOCIATION OF UNIFIED TELEC OM PROVIDERS OF INDIA 3 TOWARDS THE OBJECTS OF GENERAL PUBLIC UTILITY. IN THE CASE OF INDIAN SUGAR MILLS ASSOCIATION, THE RULES CONTAINED PROVISION TO THE EFFECT THAT PROFITS COULD BE DISTRIBUTED TO THE MEMBERS ON PASSING OF A RESOLUTION. THE HONBLE SUPREME COURT POINTED OUT THAT THIS AMOUNTE D TO PRIVATE GAIN AND, THEREFORE, THE PURPOSE COULD NOT BE HELD TO BE CHARITABLE PURPOSE. IT IS ALSO CLEAR THAT THE ACTIVITIES, UNDERTAKEN FOR T HE BENEFIT OF PUBLIC AT LARGE, WILL NOT CEASE TO BE CHARITABLE PURPOSE IF A NY BENEFIT INCIDENTALLY ARISES TO THE MEMBERS, SETTLER OR THE TRUSTEE, AS T HE CASE MAY BE. THEREFORE, THE ARGUMENT THAT THE LITIGATION WAS PUR SUED FOR THE GAIN OF THE MEMBERS DOES NOT HOLD GOOD IN THE LIGHT OF THE FACT THAT THE OBJECTS WERE FOR PROMOTION OF BASIC TELEPHONE SERVICES, WHOSE BE NEFITS ENSURED TO PUBLIC AT LARGE BEING THE INDUSTRIES AND THE USERS. THE B ENEFITS TO THE MEMBERS, IF ANY, WAS INCIDENTAL AND IT WAS NOT THE DOMINANT OBJ ECT OF THE ASSOCIATION. THEREFORE, WE AGREE WITH THE LD. CIT(A) THAT THE OB JECTS OF THE ASSESSEE ARE CHARITABLE IN NATURE. THIS CONCLUSION ALSO GETS SO ME SUSTENANCE FROM THE FACT THAT EVEN AFTER PASSING OF THE ASSESSMENT ORDE R, THE DIRECTOR OF INCOME TAX (E) DID NOT CANCEL THE REGISTRATION U/S 12A OF THE ACT. IT MAY BE POINTED OUT THAT REGISTRATION BY THE DIRECTOR OF IN COME TAX (E) IS NOT AN EMPTY FORMALITY AND UNLESS REASONS EXIST ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE ASSOCIATION, THE EXEMPTION CANNOT BE DENIED U/S 11(1)(A) IF A CHARITABLE INSTITUTION PURSUES ITS OBJECTS, WHICH WERE CONSIDERED TO BE CHARITABLE IN NATURE BY THE DIRECTOR. THUS, WE ARE OF THE VIEW THAT THE ASSESSEE SOCIETY IS ENTITLED TO EXEMPTION U/S 11(1) (A). 7. SINCE THE FIRST APPELLATE ORDER IS BASED ON THE ORDER OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE ITSELF ON IDENTICAL ISSUE FOR THE A.Y. 2002-03 WHICH HAS ALSO BEEN FOLLOWED BY THE TRIBUNAL IN THE A.Y. 2009-10, I DO NOT FIND ANY INFIRMITY IN THE FIRST APPELLATE ORDER IN THIS REGARD. THE SAME IS UPHELD. THE GRO UNDS ARE ACCORDINGLY REJECTED. 8. IN THE RESULT, THE APPEAL IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 30/07/ 2015 SD/- (I.C. SUDHIR) JUDICIAL MEMBER DATED: 30/07/2015 *KAVITA, P.S. ITA NO. 2686/D/2014 M/S ASSOCIATION OF UNIFIED TELEC OM PROVIDERS OF INDIA 4 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI ITA NO. 2686/D/2014 M/S ASSOCIATION OF UNIFIED TELEC OM PROVIDERS OF INDIA 5 SL. NO. DESCRIPTION DATE 1. DATE OF DICTATION BY THE AUTHOR 22.07.2015 2. DRAFT PLACED BEFORE THE DICTATING MEMBER 23.07. 2015, 30.7.2015 3. DRAFT PLACED BEFORE THE SECOND MEMBER 30.07.2015 4. DRAFT APPROVED BY THE SECOND MEMBER 30.07.2015 5. DATE OF APPROVED ORDER COMES TO THE SR. PS 30.07 .2015 6. DATE OF PRONOUNCEMENT OF ORDER 30.07.2015 7. DATE OF FILE SENT TO THE BENCH CLERK 31.07.2015 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER