ADIT(E), New Delhi V. Nutrition Foundation Of India, New Delhi

ITA 2745/DEL/2011

• Counselvise Citation: 274520114 RSA 2011
• Duration Of Justice: 2 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 18-12-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 27-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL BHALA
• Assessee Lawyers: GUNJAN PRASHAD
• Keywords: Charitable institution; Additional evidence; Benefit of exemption
• Section: 80G; 12; 11

Judgement Text

PAGE 1 OF 8 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : E NEW DELHI BEFORE SHRI A.D. J AIN, JM AND SHRI J.SUDHAKAR REDDY, AM ITA NO. 2745/DEL/2011 ASSESSMENT YEA R : 2006-07 ADIT (E) VS. NUTRITION FOUNDATION OF INDIA INV.CIR. II, ROOM NO.306 C 13, QUTAB INSTL.AREA 3 RD FLOOR, AAYAKAR BHAVAN NEW DELHI LAXMI NAGAR DIST.CENTRE NEW DELHI PAN: AAATN 4671 Q (APPELLANT) (RESPONDENT) APPELLANT BY:- SH.ANIL BHALA, ADV. RESPONDENT BY:- SH. GUNJAN PRASHAD, CIT, D.R O R D E R PER J.SUDHAKAR REDDY, AM THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AG AINST THE ORDER OF THE LD.COMMISSIONER OF INCOME TAX (APPEALS)-XXI, NEW DE LHI DATED 10.3.2011 PERTAINING TO THE A.Y. 2006-07. 2. FACTS IN BRIEF :- THE FACTS AS BROUGHT OUT IN THE ASSESSMENT ORDE R ARE EXTRACTED FOR READY REFERENCE. PAGE 2 OF 8 THE ASSESSEE IS A SOCIETY REGISTERED U/S 12A(A) OF THE ACT VIDE ORDER DT. 29.4.2004. THE ASSESSEE SOCIETY IS ALSO NOTIFIED U /S 80G OF THE ACT FOR THE PERIOD FROM 17.2.2006 TO 31.3.2008 VIDE ORDER DT. 2 9.8.2006. NUTRITION FOUNDATION OF INDIA WAS REGISTERED UNDER SOCIETY RE GISTRATION ACT VIDE CERTIFICATE OF REGISTRATION NO.S/9610 DT. 22.8.1978 . THE MAIN OBJECTS OF THE SOCIETY ARE TO UNDERTAKE RE SEARCH IN PROBLEM OF MAL NUTRITION OF THE COUNTRY, TO ANALYSE AND PROPOSE SO LUTION OF SPECIFIC NUTRITION PROBLEM. THE RECEIPTS OF THE ASSESSEE ARE GRANT FR OM MINISTRY OF HEALTH, GRANT FROM FOOD AND AGRICULTURE ORGANISATION, ROME, GRANT FROM MID DAY MEAL PROGRAMME, DONATIONS ETC. 2.1. THE ASSESSEE FILED A NIL RETURN OF INCOME ON 31.10.2006. THE AO IN HIS ORDER DT. 29.12.2008 CAME TO A CONCLUSION THAT THE ASSESSEE HAS NOT CARRIED OUT ANY RESEARCH WORK. HE FURTHER CAME TO A CONCLUSION THAT THERE WAS VIOLATION OF S.13(1)(C) OF THE ACT. HENCE HE DENIE D EXEMPTION CLAIMED BY THE ASSESSEE U/S 11 OF THE ACT. 3. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN A PPEAL BEFORE THE FIRST APPELLATE AUTHORITY RAISING THE FOLLOWING TWO ISSUE S: (A) WHETHER THE ASSESSEE IS RENDERING PROFESSIONAL SERVICES AND RECEIVED REMUNERATION IN LIEU OF IT; (B) WHETHER THE PRESIDENT OF THE SOCIETY DERIVES BE NEFITS FROM THE FUNDS OF THE SOCIETY RESULTING IN ATTRACTING PROVISIONS OF S.13( 1) (C) R.W.S. 13(3) OF THE INCOME TAX ACT. PAGE 3 OF 8 3.1. THE FIRST APPELLATE AUTHORITY ADMITTED ADDITI ONAL EVIDENCE UNDER RULE 46A. HE FORWARDED THE ADDITIONAL EVIDENCES TO THE AO AND CALLED FOR A REMAND REPORT. THE AO VIDE LETTER DT. 8.10.2010 FI LED A REMAND REPORT. AFTER CONSIDERING ALL THE PAPERS ON RECORD, THE LD.CIT(A) HELD THAT THE ASSESSEE WAS ENTITLED TO EXEMPTION U/S 11 BY HOLDING THAT DR.C.G OPALAN WHO WAS 93 YEARS OLD, WAS A SCIENTIST OF INTERNATIONAL REPUTE AND TH AT HE DID CARRY ON RESEARCH WORK FROM HIS OFFICE CUM RESIDENCE. HE VACATED THE FINDING OF THE AO THAT THE ASSESSEE DID NOT CARRY OUT ANY RESEARCH WORK AND W AS RENDERING PROFESSIONAL SERVICES AND RECEIVED REMUNERATION IN LIEU OF IT. 4. ON THE ISSUE OF VIOLATION OF S.13(1)(C ), HE HEL D THAT THERE IS NO SUCH VIOLATION AS DR.C.GOPALAN DID ALL HIS RESEARCH WOR K FROM HIS OFFICE CUM RESIDENCE AND THAT ALL THE WORK IS BEING CONDUCTED FOR THE PURPOSE OF THE TRUST AND NOT FOR THE PERSONAL BENEFIT OF DR.GOPALAN. HE ALLOWED THE APPEAL. 5. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD.COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN ALLOWING THE BENE FITS OF EXEMPTION U/S 11 AND 12 OF THE INCOME TAX ACT, AS THE ASSESSEE HAS F AILED TO PRODUCE ANY CONCRETE EVIDENCE IN SUPPORT OF ITS CLAIM THAT IT H AS NOT VIOLATED THE PROVISIONS OF SECTION 13(1)(C ) OF THE ACT. 2. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AME ND ANY GROUND OF APPEAL RAISED ABOVE, AT THE TIME OF HEARING. PAGE 4 OF 8 6. THE LD.D.R. MR.GUNJAN PRASAD SUBMITTED THAT THER E IS VIOLATION OF S.13(1)(C ) AS RENT WAS PAID FOR THE PREMISES AT B 37, GULMOHAR PARK, NEW DELHI WHICH IS THE HOUSE OF THE PRESIDENT AND THE T RUSTEE OF THE SOCIETY DR.C.GOPALAN. HE REFERRED TO PAGES 5 AND 6 OF THE ASSESSMENT ORDER AND SUBMITTED THAT THE INSPECTOR WAS DEPUTED TO THE SAI D RESIDENCE AND IT WAS FOUND THROUGH LOCAL ENQUIRIES THAT NO ACTIVITIES OF RESEARCH WAS CARRIED OUT FROM THE SAID PREMISES. HE POINTED OUT THAT THE AS SESSEE HAS NOT GIVEN ANY DOCUMENTARY EVIDENCE TO DEMONSTRATE THAT RESEARCH W ORK WAS DONE BY PRESIDENT DR.C.GOPALAN. HE PRAYED THAT THE ORDER O F THE AO BE UPHELD ON THE ISSUE OF VIOLATION ON S.13(1)(C ). HE FURTHER SU BMITTED THAT THE LD.CIT(A) HAS ACCEPTED ADDITIONAL EVIDENCES UNDER RULE 46(A)(1)(C ) AND THAT AN AFFIDAVIT WAS ACCEPTED FROM PREMA RAMACHANDRAN, DIRECTOR OF NUTRI TION FOUNDATION OF INDIA, AND THAT THE AO DID NOT HAVE AN OPPORTUNITY TO VER IFY THE CONTENTS OF THE AFFIDAVIT OR CROSS EXAMINE PREMA RAMACHANDRAN. HE RELIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. NO VA PROMOTERS AND FINLEASE (P) LTD. IN ITA 342/2011, AND SUBMITTED THAT THE IS SUE SHOULD BE RESTORED TO THE FILE OF AO FOR FRESH ADJUDICATION. 7. THE LD.COUNSEL FOR THE ASSESSEE MR.ANIL BHALLA ON THE OTHER HAND FILED A PAPER BOOK RUNNING INTO 157 PAGES AND SUBMITTED THA T DR.C.GOPAL IS A PADMA VIBHUSHAN AND IS AN INTERNATIONALLY RENOWNED SCIENT IST IN THE FIELD OF MAL NUTRITION. HE POINTED OUT THAT THE ADMISSION OF AD DITIONAL EVIDENCE BY THE PAGE 5 OF 8 LD.CIT(A) AND HIS FINDING THAT THE SOCIETY IS A CHA RITABLE ORGANISATION, HAS BEEN ACCEPTED BY THE REVENUE AND THAT THE ONLY GROU ND TAKEN BY REVENUE IS THAT THERE IS VIOLATION OF S.13(1)(C ) FOR THE REAS ON THAT CERTAIN EXPENSES WERE INCURRED BY THE ASSESSEE SOCIETY ON THE RESIDENTIAL ACCOMMODATION OF THE PRESIDENT. HE SUBMITTED THAT THE ASSESSEE SOCIETY DREW ITS INSPIRATION FROM ITS FOUNDER TRUSTEE MR.C.GOPALAN AND THAT MR.C.GOPALAN WAS 93 YEARS OLD AND HIS MOVEMENTS WERE RESTRICTED AND UNDER THOSE CIRCU MSTANCES HE WAS CONDUCTING RESEARCH WORK FROM HIS OFFICE-CUM-RESIDE NCE. HE VEHEMENTLY CONTENDED THAT THERE IS NO PERSONAL BENEFIT TO DR.C .GOPALAN AND IT WAS IN FACT THE ASSESSEE SOCIETY THAT WAS BENEFITTING FROM THE SERVICES OF DR.C.GOPALAN AND NOT VICE VERSA. HE POINTED OUT THAT THE AO HAS NOT DOUBTED THE EXPENSES INCURRED. ALTERNATIVELY HE SUBMITTED THAT THE PAYM ENT OF REASONABLE AMOUNTS FOR OBTAINING SERVICES COMMENSURATE WITH THE PAYMEN T, DOES NOT RESULT IN VIOLATION OF S.13(1)(C ). 7.1. HE RELIED ON THE FOLLOWING DECISIONS. (A) THE HONBLE ALLAHABAD HIGH COURT IN CIT VS. FOU NDATION FOR SOCIAL CARE (2013) 37 TAXMANN.COM 389 (ALL.) PB 123-126, WHEREI N IT WAS HELD AS FOLLOWS. 6.1. SECTION 13, READ WITH SECTION 11 OF THE INCO ME TAX ACT, 1961 CHARITABLE OR RELIGIOUS TRUST DENIAL OF EXEMPTION (PERSONAL BENEFITS) ASSESSMENT YEAR 2002-03 ASSESSEE WAS A CHARITABLE TRUST IT TOOK OFFICE PREMISES ON RENT IN BUILDING OWNED BY ITS PRESIDENT ASSESSING OFFICER DENIED EXEMPTION ON GROUNDS THAT EXPENSES OF OFFICE RENT AND ELECTRICIT Y BILLS PAID BY TRUST WAS FOR PERSONAL BENEFIT OF PRESIDENT/SECRETARY OF TRUST HOWEVER, IT WAS FOUND THAT PRESIDENT AND SECRETARY OF TRUST WERE PROVIDING VOL UNTARY SERVICES TO TRUST FOR WHICH THEY DID NOT CHARGE ANY FEE/REMUNERATION AND OFFICE AT SAME PREMISES OF PAGE 6 OF 8 RESIDENT SAVES EXPENDITURE ON CONVEYANCE FURTHER , ELECTRICITY CHARGE WAS MEAGER FURTHERMORE, SEPARATE ;ACCOUNT HAD BEEN MA INTAINED FOR PAYING GENUINE RENT AND ELECTRICITY CHARGES WHETHER DEDU CTION WAS TO BE ALLOWED ON SAID EXPENDITURES AND EXEMPTION WAS TO BE GRANTED T O TRUST HELD, YES (PARA 12) (IN FAVOUR OF ASSESSEE). (B) THE CUTTACK TRIBUNAL IN ITO VS. HUMAN RESOURCE DEVELOPMENT & MANAGEMENT TRUST (ASBM TRUST) 12 TAXMANN.COM 478 (C CK TRIB.) PB 127-149, WHEREIN IT WAS HELD AS FOLLOWS. SECTION 13 OF THE INCOME TAX ACT, 1961 CHARITABLE OR RELIGIOUS TRUST DENIAL OF EXEMPTION ASSESSMENT YEAR 2007-08 WHETHER PROVI SIONS CONTAINED IN S.13(1)(C) DO NOT BAR PAYMENT OF REASONABLE SALARY FOR SERVICES RENDERED BY AN INTERESTED PERSON AND, IT IS ONLY WHEN SUCH PAYMENT IS FOUND UNREASONABLE OR EXCESSIVE THAT STIPULATION OF CLAUSE (C ) OF SECTIO N 13(2) WOULD BE ATTRACTED HELD, YES (IN FAVOUR OF ASSESSEE). (C ) ITAT DELHI BENCH IN ADDL.DIV VS. MANAV BHARTI CHILD INSTITUTE & CHILD PSYCHOLOGY, PB 150-157, WHEREIN IT WAS HELD AS UND ER: WHETHER THERE IS NO PROHIBITION IN ACT TO REMUNERAT E INTERESTED PERSONS BUT SUCH REMUNERATION SHOULD BE COMMENSURATE WITH SERVICES R ENDERED BY THEM AND SO FOUND, IT CANNOT BE SAID THAT PROVISIONS OF SECTION 13(1)(C ) ARE ATTRACTED SO AS TO DENY BENEFIT OF EXEMPTION. U/S 11 AND 12 HELD, Y ES. 7.2. ON THE ISSUE OF OPPORTUNITY, THE LD.COUNSEL SU BMITTED THAT THE AFFIDAVIT WAS RECEIVED AND FORWARDED TO THE AO, WHO GAVE A RE MAND REPORT ON THE SAME AND HENCE THE QUESTION OF GIVING ONE MORE OPPORTUN ITY DOES NOT ARISE. PAGE 7 OF 8 8. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERA TION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON PERUSAL OF THE PAP ERS ON RECORD AND ORDERS OF THE AUTHORITIES BELOW, CASE LAWS CITED, WE HOLD AS FOLLOWS. 9. THE SOLE ISSUE BEFORE US IS WHETHER THERE IS A V IOLATION OF S.13(1)(C ). THE ASSESSEE PAID SECURITY CHARGES OF RS.6,167/- RENT O F RS.24,000/- (I.E. RS.2,000/- P.M.) FOR THE YEAR IN RESPECT OF THE PRE MISES B-37, GULMOHAR PARK, NEW DELHI. CERTAIN EXPENSES WERE ALSO INCURRED ON TELEPHONE, WATER, ELECTRICITY AND ALSO TOWARDS STAFF WELFARE. THE ISSUE IS WHETH ER SUCH PAYMENTS WERE FOR THE PERSONAL BENEFIT OF DR.C.GOPALAN. THE PROFILE OF DR.C.GOPALAN ARE AT PAGES 79 TO 82 OF THE PAPER BOOK. HE IS AN INTERNATIONAL LY RENOWNED NUTRITIONAL SCIENTIST WHO HELD THE POSITION OF DIRECTOR IN THE NATIONAL INSTITUTE OF NUTRITION AND WAS DIRECTOR GENERAL OF INDIAN COU NCIL OF MEDICAL RESEARCH. HE IS A FELLOW OF THE ROYAL SOCIETY AND HAS BEEN A WARDED PADMA VIBHUSHAN. DR.C.GOPALAN IS THE GUIDING FORCE BEHIND THE ASSESS EE SOCIETY. BEING 93 YEARS OF AGE, THE SOCIETY OPERATED FROM HIS OFFICE-CUM-RE SIDENCE AT B-37, GULMOHAR PARK, NEW DELHI. ON THESE FACTS AND CIRCUMSTANCES WE ARE OF THE CONSIDERED OPINION THAT THE FIRST APPELLATE AUTHORITY WAS RIGH T IN HOLDING THAT THE ASSESSEE HAS NOT VIOLATED PROVISIONS OF S.13(1)(C ) OF THE ACT. THE EXPENSES INCURRED ARE REASONABLE. THIS IS NOT A CASE WHETHE R THE FOUNDER TRUSTEE HAS BEEN REMUNERATED. IT IS A CASE WHERE REASONABLE EX PENSES WERE INCURRED FOR A PAGE 8 OF 8 FURTHERANCE OF OBJECTIVES OF THE TRUST. HENCE THE ORDER OF THE FIRST APPELLATE AUTHORITY IS UPHELD, AND THE REVENUES APPEAL IS DI SMISSED. 10. IN THE RESULT THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 07 TH FEBRUARY, 2014. SD/- SD/- (A.D. JAIN) ( J.SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 07 TH FEBRUARY, 2014 *MANGA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT (A); 5.DR; 6.GUARD FILE BY ORDER ASST. REGISTRAR