ACIT (Exemptions), Hyd, Hyderabad V. Andhra Pradesh Foods, Hyd, Hyderabad

ITA 290/HYD/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6064 (ITAT-HYDERABAD)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2017
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 06-12-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 11-03-2016
• Court: TRIBUNAL
• Department Lawyers: K J RAO
• Assessee Lawyers: B SATYANARAYANA MURTY
• Keywords: Gift; Charitable institution
• Section: 12AA; 11

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI D MANMOHAN, VICE PRESIDENT AND B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 290/HYD/2016 ASSESSMENT YEAR: 2011-12 ASST. COMMISSIONER OF INCOME TAX (EXEMPTIONS) HYDERABAD VS. M/S TELENGANA FOODS HYDERABAD. PAN AAATA4938R (APPELLANT) (RESPONDENT) REVENUE BY : SHRI K.J . RAO ASSESSEE BY : SHRI B. SATYANARAYANA MURTY DATE OF HEARING : 02 - 03 - 201 7 DATE OF PRONOUNCEMENT : 10 - 03 - 2017 ORDER PER B. RAMAKOTAIAH, AM THIS IS AN APPEAL BY REVENUE AGAINST THE ORDER OF THE LD. CIT(A)-9, HYDERABAD DATED 28-12-2015 ALLOWING ASSESSEE EXEMPTION CLAIMED U/S 11 OF THE IT ACT. 2. BRIEFLY STATED THAT ASSESSEE IS A SOCIETY AND IS REGISTERED U/S 12AA OF THE IT ACT. ASSESSEE WAS DI RECTED BY THE GOVERNMENT TO SUPPLY NUTRITIOUS FOOD TO UNDE R- NUTRITIOUS CHILDREN, PREGNANT WOMEN AND LACTATING M OTHERS BELOW POVERTY LINE. THE ASSESSEE WAS GRANTED REGIS TRATION U/S 12AA OF THE IT ACT W.E.F 23-03-1989 AND HAS BEE N FILING RETURNS OF INCOME CLAIMING EXEMPTION U/S 11 OF THE IT ACT. ASSESSEE WAS GRANTED EXEMPTION U/S 11 FOR ALL YEARS UP TO ASSESSMENT YEAR 2004-05. FOR THE FIRST TIME IN THE ASSESSMENT YEAR 2005-06 TO 2007-08, ASSESSING O FFICER 2 ITA NO. 290/HYD/2016 M/S. TELANGANA FOODS, HYDERABAD DENIED EXEMPTION CLAIMED AND IN THE LATER YEARS ALS O FOLLOWED THE SAME, ON THE REASON THAT THE ASSESSEE IS EARNING PROFITS THEREBY MAKING BUSINESS PROFITS VIO LATING THE CHARITABLE ACTIVITY. 3. THE LD. CIT(A) HOWEVER, IN ALL THE YEARS HELD TH AT THE ASSESSEES OBJECT IS TO SERVE POOR, MAINLY CHILDREN AND WOMEN AND THEREFORE, IT HSS NOT VIOLATED THE PROVIS IONS OF IT ACT. IN THIS YEAR ALSO, LD. CIT(A) ALLOWED THE A SSESSEE CLAIM BY STATING AS UNDER 4.3 I HAVE PERUSED THE SUBMISSIONS OF THE ASSESS EE AND THE FACTS OF THE CASE. IT IS A FACT THAT THE ASSESS EE SOCIETY'S OBJECTIVE IS TO PROVIDE NUTRITIOUS FOOD TO SCHOOL A ND PRE-SCHOOL CHILDREN, PREGNANT WOMEN AND LACTATING MOTHERS. THE SE BENEFICIARIES ARE DECIDED BY THE GOVT. OF AP FROM T IME TO TIME, WITHIN THE GENERAL FRAME WORK OF THE APPELLANT SOCI ETY'S ACTIVITIES SINCE THE ACTIVITIES ARE AIMED AT PROVID ING NUTRITIOUS FOOD TO THE UNDER NOURISHED CHILDREN AND WOMEN WHO ARE BELOW POVERTY LINE, SUCH ACTIVITIES CONSTITUTE 'RELIEF OF THE POOR' AS CONTAINED IN THE PROVISIONS OF THE INCOME TAX ACT. EVEN FROM THE DETAILS OF THE APPLICATION OF THE SURPLUS FURNISHED BY THE ASSESSEE, IT IS SEEN THAT THE APPLICATION HAS BEEN MADE IN THE FIXED AND CURRENT ASSETS OF THE APPELLANT'S FOOD PR OCESSING ACTIVITIES WHICH IS IN ACCORDANCE WITH THE OBJECTS OF THE ASSESSEE. I PLACE RELIANCE ON THE CASE OF ACIT VS. THANTHI TRUST (2001) 247 ITR 785 (SC), WHEREIN THE APEX COURT, WH ILE EXAMINING WHETHER BUSINESS WAS CARRIED ON IN THE CO URSE OF CARRYING OUT OF A PRIMARY PURPOSE OF THE TRUST OR I NSTITUTION AND WHETHER IT WAS INCIDENTAL TO THE ATTAINMENT OF THE OBJECTIVES OF THE TRUST, HELD IN FAVOUR OF THE ASSESSEE. FURTHER, HON'BLE ITAT, HYDERABAD VIDE ORDER DT. 1505.2015 IN ITA NO. 1759/ HYD/2014 IN THE ASSESSEE'S OWN CASE HELD AS UNDER: '25. WE ALSO FIND THAT THE DIT HAS PROCEEDED TO HO LD THAT IF BUSINESS IS CARRIED ON BY A CHARITABLE ORGA NIZATION, IT WILL FORFEIT ITS EXEMPTION. THE ASSESSEE IS PROD UCING NUTRITIOUS FOOD TO SUPPLY THE READY-TO-EAT FOOD TO PREGNANT WOMEN, UNDER- NOURISHED CHILDREN AND LACTATING MOTH ERS. THE ORGANIZATIONS FULFILLING ITS OBJECTS BY SUPPLYI NG FOOD SO PRODUCED TO THE BENEFICIARIES FOR THE IMPLEMENTA TION OF SCHEMES PROMOTED BY THE WOMEN & CHILD WELFARE DEPARTMENT OF THE GOVERNMENT OF ANDHRA PRADESH AND OTHER SUCH RELATED PROGRAMMES. THE NUTRITIOUS FOOD PRODUCED BY THE ASSESSEE IS NOT SOLD IN THE NUTRITI OUS FOOD PRODUCED BY THE ASSESSEE IS NOT SOLD IN THE COMMERC IAL 3 ITA NO. 290/HYD/2016 M/S. TELANGANA FOODS, HYDERABAD MARKET NOR IT IS SUPPLIED TO THE PARTIES OTHER THAN THE BENEFICIARIES UNDER THE SCHEMES REFERRED TO ABOVE. IT CANNOT BE REFERRED TO AS A CONTRACTOR TO THE GOVERN MENT OF ANDHRA PRADESH AS IT IS INVOLVED IN MANUFACTURE AND SUPPLY OF THE FOOD TO THE BENEFICIARIES. ONLY, THE SUPERVISORY ACTIVITIES ARE CARRIED ON BY THE GOVERN MENT OF ANDHRA PRADESH, IN BRINGING OUT SCHEMES FOR THE BEN EFIT OF THE BENEFICIARIES AND FIXING A SUITABLE PRICE TO ME ET THE COST OF MANUFACTURING AND OTHER OVERHEADS. 26. THUS, THERE IS NO PROHIBITION IN THE ACT THAT A CHARITABLE INSTITUTION SHOULD BE INDULGE IN ANY BUS INESS ACTIVITY. THE ONLY RESTRICTION IS THAT IT SHOULD CO NFORM TO THE PROVISIONS OF SUB-SECTION 4 & 4A OF SECTION 11 OF THE I.T. ACT AND THE ACTIVITY SHOULD COME WITHIN THE PR OVISIONS OF SECTION 2(15) DEFINING THE CHARITABLE PURPOSES 27. FOR THE REASON GIVEN ABOVE, WE SET ASIDE THE IMPUGNED ORDER OF THE LD DIT(E) AND ALLOW THE APPEA L OF THE ASSESSEE. 4. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS. 1. THE ORDER OF THE LD. CIT(A) IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN HOLDING THAT THE ASSESSEE IS ENTITL ED FOR EXEMPTION U/S. 11 OF THE IT ACT,1961. 3. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A ND WHEN IN THE STATEMENT OF COMPUTATION OF TOTAL INCOME SIGNED BY ITS MANAGING DIRECTOR FILED WITH THE RETURN OF INCOME, THE ASSESSEE HAS STATED THAT ITS INCOME CONSTITUTES INCOME FROM BUSINESS, THEREBY ADMITTING ABOUT ENGAGING IN BUSINESS ACTIVI TY DURING THE PREVIOUS YEAR 2010-11, THE LD. CIT(A) ERRED IN HOLDING THAT THE ASSESSEE IS DOING CHARITABLE ACTIVITY. 4. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A ND WHEN THE ASSESSEE IS ENGAGED IN MANUFACTURING AND SUPPLY ING OF READY-TO-EAT NUTRITIOUS FOOD, MENTIONED IN COL.NO.8 (A) PERTAINING TO NATURE OF BUSINESS OR PROFESSION IN THE TAX AUDI T REPORT IN FORM NO.3CD, FILED U/S. 44AB OF THE IT ACT, 1961, T HE ACTIVITY OF THE ASSESSEE, UNDER THAT CIRCUMSTANCES, DOES NOT CO ME UNDER THE PURVIEW OF SECTION 2(15) OF THE IT ACT, 1961, A ND HENCE, IT IS NOT ENTITLED FOR EXEMPTION U/S 11 OF THE IT ACT, 19 61. 5. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT T HE ASSESSEE WAS MAINLY WORKING AS CONTRACTOR, SUPPLYIN G FOOD PRODUCTS PRODUCED IN ITS FACTORY TO STATE GOVERNMEN T DEPARTMENTS AND THE SAME DO NOT COME UNDER THE AMBI T OF PROVISIONS OF SECTION 2(15) OF THE IT. ACT, 1961. 4 ITA NO. 290/HYD/2016 M/S. TELANGANA FOODS, HYDERABAD 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND WHEN THE ASSESSEE IS SELLING FOOD PRODUCTS TO VARIOUS STATE GOVERNMENT DEPARTMENTS, THE LD. CIT(A) ERRED IN HOLDING THAT T HE ACTIVITY OF THE ASSESSEE FALLS UNDER THE PURVIEW OF 'RELIEF OF POOR'. 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND WHEN THE ASSESSEE IS PAYING ALL OTHER APPLICABLE TAXES INCLU DING SALES TAX, SERVICE TAX, VAT ETC., ON ITS TURNOVER, WHICH SHOWS ITS NATURE AS A COMMERCIAL ORGANIZATION, THE LD CIT(A) ERRED IN HOLDING THAT THE ASSESSEE'S ACTIVITY REMAINS 'RELIE F OF POOR'. 8. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A ND WHEN IN THE RETURN OF INCOME THE ASSESSEE HAS ADMITTED ABOU T ENGAGING IN BUSINESS ACTIVITY AND FURTHER ADMITTED HIGH NET MARGIN OF 13.13% OF ITS TURNOVER, AS EVIDENT FROM COL. NO. 32 (B) OF THE AUDIT REPORT IN FORM NO. 3CD FILED AND WITH THE RET URN OF INCOME, THE LD. CIT(A) ERRED IN HOLDING THAT THE AC TIVITY OF THE ASSESSEE FALLS WITHIN THE PURVIEW OF 'RELIEF OF POO R', AND THUS, WAS NOT JUSTIFIED IN HOLDING THAT THE ASSESSEE IS E LIGIBLE FOR EXEMPTION U/S. 11 OF THE IT ACT, 1961. 9. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. 5. AT THE OUTSET BOTH PARTIES HAVE AGREED THAT THE REVENUE HAS RAISED SIMILAR GROUNDS IN ASSESSMENT YE ARS 2005-06 TO 2007-08 AND ALSO IN 2010-11 AND ITAT VID E ITS ORDER DATED 08-02-2017 IN ITA NO. 1637 TO 1640/HYD/ 2014 HAS DECIDED AGAINST THE REVENUE. THE ORDER OF THE ITAT IS AS UNDER: 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT UNDISPUTEDLY THE ASSESSEE HAS BEEN GRANTED REGISTRATION U/S 12AA OF THE ACT W.E.F. 23. 3.1989 AND HAS BEEN ALLOWED EXEMPTION U/S 11 OF THE ACT FOR AL L THE A.YS UP TO A.Y 2004-05. THE OBJECTS OF THE ASSESSEE SOCIETY ARE AS UNDER: I. TO PROVIDE, EXPAND AND FACILITATE SUPPLY OF NUTRITIOUS FOODS TO SCHOOL AND PRE-SCHOOL CHILDREN, PREGNANT WOMEN AND LACTATING MOTHERS AND SUCH OTHER CATEGORIES OF BENEFICIARIES AS THE GOVERNMENT MAY FROM TIME TO TIME DECIDE WITHIN THE GENERAL FRAME WORK OF THE GOVERNMENT'S SOCIAL WELFARE PROGRAMME WITH A VIEW TO IMPROVING THE NUTRITIONAL STATUS OF VULNERABLE SECTIONS OF THE LOWER INCOME GROUPS AND TO ESTABLISH AND 5 ITA NO. 290/HYD/2016 M/S. TELANGANA FOODS, HYDERABAD MANAGE FOOD OR OTHER FACTORIES FOR THE PURPOSE; II. TO CREATE RAW MATERIAL PRE-PROCESSING AND FOOD PROCESSING CAPACITY WITH ASSISTANCE FROM THE GOVT. OF INDIA, STATE GOVERNMENT AND INTERNATIONAL AGENCIES LIKE CARE AND UNICEF AND ALSO NATIONAL AGENCIES AND USE THE SAME FOR PRODUCTION OF RTE SNACKS AND OTHER PRODUCTS FOR THE NUTRITION PROGRAMMES OF THE STATE IN PARTICULAR AND FOR NUTRITION PROGRAMMES IN GENERAL; III. TO PROCESS RAW MATERIALS OF HIGH NUTRITIVE VALUE INDIGENOUS AS WELL AS IMPORTED FOR THE PRODUCTION OF READY-TO-EAT SNACKS, FORMULATED FLOURS AND OTHER TYPES OF PROCESSED FOODS; IV. TO PROMOTE AND ASSIST INSTITUTIONS FOR THE STUDY OF FOOD AND NUTRITION PROBLEMS AND REQUIREMENTS; V. THE PROPAGATION OF KNOWLEDGE AND EXPERIMENTAL MEASURES THE ASSISTANCE TO PROSECUTION, DEVELOPMENT AND COORDINATION OF RESEARCH GENERALLY OR SPECIFICALLY IN CONNECTION WITH STUDY OF THE CAUSES, MODE OF SPREAD AND PREVENTION OF DISEASES DUE TO MAL-NUTRITION; VI. TO EXCHANGE INFORMATION KNOWLEDGE AND PERSONNEL WITH OTHER INSTITUTIONS, ASSOCIATIONS AND SOCIETIES EITHER IN INDIA OR ELSEWHERE INTERESTED IN THE SAME SUBJECTS; VII. TO PREPARE AND PUBLISH ANY PAPERS OR PERIODICALS IN FURTHERANCE OF THE OBJECTS OF THE COUNCIL AND CONTRIBUTE TO ANY SUCH PERIODICALS; VIII. TO PUT TO USE ANY AVAILABLE EXCESS PRE- PROCESSING AND PROCESSING CAPACITY IN THE PLANTS OF THE FACTORY FOR ASSISTING OTHER GOVERNMENT UNITS-CENTRAL AND STATE AND ALSO FOR INTRODUCING THE PRODUCTS OF THE FACTORY INTO ADJACENT STATES FOR THEIR PROGRAMMES OF NUTRITION IT SHALL BE POSSIBLE ALSO THE FACTORY TO UTILIZE ANY PORTION OF ITS CAPACITY NOT ACTUALLY USED IN IMPLEMENTATION OF GOVERNMENT PROGRAMMES OF NUTRITION, FOR MARKETING OF ITS PRODUCTS; 6 ITA NO. 290/HYD/2016 M/S. TELANGANA FOODS, HYDERABAD IX. TO AFFILIATE, COORDINATE, REGULATE AND DEVELOP THE WORKING OF FOOD AND NUTRITION PROJECTS IN ANDHRA PRADESH; X. TO COORDINATE WITH THE GOVERNMENT OF ANDHRA PRADESH, GOVERNMENT OF INDIA, INTERNATIONAL AGENCIES SUCH AS UNICEF, CARE AND VOLUNTARY AGENCIES TO ENSURE REGULAR SUPPLY OF NUTRITIOUS FOODS TO SCHOOL GOING CHILDREN, PRESCHOOL CHILDREN PREGNANT WOMEN, NURSING MOTHERS AND OTHER VULNERABLE GROUPS; XI. TO ISSUE APPEALS AND APPLICATIONS FOR MONEY AND FUNDS AND FURTHERANCE OF THE SAID OBJECTS AND TO ACCEPT GIFTS, DONATIONS AND SUBSCRIPTIONS OF CASH AND SECURITIES AND OF ANY PROPERTY EITHER MOVABLE OR IMMOVABLE; XII. TO ACQUIRE AND HOLD, WHETHER TEMPORARILY OR PERMANENTLY ANY MOVABLE OR IMMOVABLE PROPERTY NECESSARY, OR CONVENIENT FOR THE FURTHERANCE OF THE OBJECTS OF THE COUNCIL WHETHER IN INDIA OR OUTSIDE THE FRONTIER OF INDIA. XIII TO SELL, LEASE, EXCHANGE AND OTHERWISE TRANSFER ALL OR ANY OF THE PROPERTIES, MOVABLE OR IMMOVABLE, OF THE COUNCIL; XIV, TO CONSTRUCT, MAINTAIN AND ALTER ANY BUILDINGS OR WORKS NECESSARY OR CONVENIENT FOR THE PURPOSE OF THE COUNCIL; XV. TO UNDERTAKE AND ACCEPT THE MANAGEMENT OF ANY ENDOWMENT OR TRUST FUND OR DONATIONS THE UNDERTAKING WHEREOF MAY SEEM DESIRABLE FROM THE POINT OF IMPLEMENTATION OF NUTRITION PROGRAMMES; XVI. TO OFFER PRIZES AND TO GRANT SCHOLARSHIPS, IN FURTHERANCE OF THE OBJECTS OF THE COUNCIL; XVII. TO UNDERTAKE, ORGANIZE AND FACILITATE STUDY COURSES, CONFERENCES, LECTURES, SEMINARS, SUMMER INSTITUTES AND THE LIKE; XVIII. TO UNDERTAKE AND PROVIDE FOR THE PUBLICATION OF BOOKS, PERIODICALS JOURNALS AND RESEARCH PAPERS IN FURTHERANCE OF THE OBJECTS OF THE COUNCIL; 7 ITA NO. 290/HYD/2016 M/S. TELANGANA FOODS, HYDERABAD XIX. TO CONSTITUTE SUCH COMMITTEE OR COMMITTEES OR SUCH STUDY GROUP OR STUDY GROUPS OR SUCH WORKING GROUP OR WORKING GROUPS AS THE COUNCIL MAY CONSIDER NECESSARY FOR THE PERFORMANCE OF ITS FUNCTIONS; XX. TO SUBSCRIBE TO OR TO COOPERATE WITH OTHER INSTITUTIONS HAVING OBJECTS SIMILAR TO THOSE OF THE COUNCIL IN SUCH MANNER AS MAY BE CONDUCIVE TO THE REALIZATION OF THEIR COMMON OBJECTS AND TO DEPUTE ITS MEMBER(S) TO SERVE ON THE COMMITTEES OF THOSE INSTITUTIONS AS ITS REPRESENTATIVE( S); XXI. TO MAKE RULES FOR THE CONDUCT OF THE AFFAIRS OF THE COUNCIL TO ADD TO, AMEND, VARY OR ANNUAL THEM FROM TIME TO TIME; XXII. TO DOING OF ALL SUCH OTHER LAWFUL THINGS AS ARE INCIDENTAL OR CONDUCIVE TO THE ATTAINMENT OF THE ABOVE OBJECTS; 7. FROM A READING OF THE ABOVE OBJECTS, IT IS CLEAR THAT THE ASSESSEES OBJECTIVE IS TO SERVE THE POOR, MAINLY C HILDREN AND WOMEN, PARTICULARLY PREGNANT AND LACTATING MOTHERS. THE AO HAS DISALLOWED THE EXEMPTION U/S 11 ON THE GROUND THAT THE ASSESSEE IS ONLY A CONTRACTOR SUPPLYING FOOD TO VAR IOUS DEPARTMENTS OF GOVT. OF A.P TO IMPLEMENT ITS FLAGSH IP PROGRAMMES AND THAT THE GOVT. IS REIMBURSING THE AS SESSEE WHICH IS RESULTING IN EXCESS OF INCOME OVER EXPENDI TURE. ANOTHER GROUND ON WHICH THE EXEMPTION IS DISALLOWED IS THAT THE ASSESSEE IS CARRYING ON ACTIVITY FOR PROFIT AND IS ALSO PAYING OTHER TAXES SUCH AS SALES TAX, VAT AND SERVICE TAX AND THEREFORE IT SHOULD ALSO PAY THE INCOME TAX. FOR COMING TO TH IS CONCLUSION, THE AO HAS ALSO RELIED UPON THE DECISION OF THE HON 'BLE SUPREME COURT IN THE CASE OF INDIAN CHAMBER OF COMMERCE VS. CIT REPORTED IN 101 ITR 796. THE CIT (A), ON THE OTHER HAND, HAS CONSIDERED THE OBJECTIVES OF THE ASSESSEE AND HAS H ELD THAT THE ASSESSEE IS NOT CARRYING ON THE ACTIVITIES FOR THE BENEFIT OF ANY GENERAL PUBLIC ENTITY BUT IS CARRYING ON RELIEF FOR THE POOR AND THEREFORE IT FALLS UNDER THE FIRST LIMB OF THE DEFI NITION OF CHARITABLE PURPOSE AND EVEN IF IT IS CARRYING ON AN Y BUSINESS ACTIVITY, IT DOES NOT LOSE ITS CHARACTER OF A CHAR ITABLE PURPOSE AND THUS CANNOT BE DENIED EXEMPTION U/S 11 OF THE A CT. 8. WE FIND THAT THE DIT (E) HAD CANCELLED THE REGIS TRATION GRANTED TO THE ASSESSEE W.E.F. 1.4.2005 BY ORDERS D ATED 25.09.2014 AND THE ASSESSEE HAD CHALLENGED THE SAME BEFORE THE INCOME TAX APPELLATE TRIBUNAL. THE COORDINATE B ENCH OF THIS TRIBUNAL IN ITA NO.759/HYD/2014 DATED 15.05.2015 HA S RESTORED THE REGISTRATION U/S 12AA OF THE ACT BY OB SERVING THAT THE ASSESSEE CANNOT BE REFERRED TO AS THE CONTRACTO R TO THE GOVT. 8 ITA NO. 290/HYD/2016 M/S. TELANGANA FOODS, HYDERABAD OF A.P AS IT IS INVOLVED IN MANUFACTURE AND SUPPLY OF FOOD TO THE BENEFICIARIES AND ONLY THE SUPERVISORY ACTIVITIES A RE CARRIED ON BY THE GOVT. OF A.P. IN BRINGING OUT SCHEMES FOR TH E BENEFIT OF THE BENEFICIARIES AND FIXING A SUITABLE PRICE TO MEET T HE COST OF MANUFACTURING AND OTHER OVERHEADS. FURTHER, THE HON 'BLE TRIBUNAL HAS ALSO HELD THAT THERE IS NO PROHIBITION IN THE ACT THAT A CHARITABLE INSTITUTION SHOULD NOT INDULGE IN ANY OF THE BUSINESS ACTIVITIES AD THAT THE ONLY RESTRICTION IS THAT IT SHOULD CONFORM TO THE PROVISIONS OF SUB SECTION 4 AND 4A OF SECTION 1 1 OF THE IT. ACT AND THAT THE ACTIVITY SHOULD COME WITHIN THE PR OVISIONS OF SECTION 2(15) OF THE ACT DEFINING THE CHARITABLE PU RPOSE. THUS, THE GROUNDS ON WHICH THE ASSESSEE HAS BEEN DENIED E XEMPTION FOR THE A.YS BEFORE US HAVE ALREADY BEEN CONSIDERED BY THE COORDINATE BENCH OF THE TRIBUNAL FOR RESTORING THE REGISTRATION TO THE ASSESSEE. 9. THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF INDIAN CHAMBER OF COMMERCE (CITED SUPRA) WAS WITH R EGARD TO THE MEANING OF THE TERM ADVANCEMENT OF ANY OBJECT O F GENERAL PUBLIC UTILITY NOT INVOLVING THE CARRYING ON THE AC TIVITY FOR PROFIT. THE ASSESSEE THEREIN WAS PRIMARILY ENGAGED IN ACTIV ITIES WHICH WAS PRIMARILY PROMOTION OF PRODUCTS AND TRADE INTER ESTS AND OTHER ALLIED SERVICE OPERATIONS AND THE BONE OF CON TENTION BEFORE THE HON'BLE SUPREME COURT WAS THAT THE 3 SOURCES (A ) ARBITRATION FEES LEVIED BY THE CHAMBER, (B ) FEES COLLECTED FOR THE CERTIFICATES OF ORIGIN, AND (C) SHARE OF PROFIT IN MESSRS. CALCU TTA LICENSED MEASURERS FOR ISSUE OF CERTIFICATES OF WEIGHMENT AN D MEASUREMENT FALL WITHIN THE EXCLUSION. THE HON'BLE SUPREME COURT CONSIDERED THAT ALL THESE 3 SERVICES WERE EXT ENDED TO THE MEMBERS AND NON MEMBERS OR RATHER TO THE TRADE GENE RALLY AND IT WAS IN THESE CIRCUMSTANCES THAT THE HON'BLE SUPR EME COURT CONSIDERED THE DEFINITION OF CHARITABLE PURPOSE A ND IN PARTICULAR CLAUSE 4 THEREOF AND HAS HELD THAT SECTI ON 2(15) EXCLUDES FROM EXEMPTION CARRYING ON ACTIVITIES FOR PROFIT EVEN IF THEY ARE LINKED WITH THE OBJECTIVES OF GENERAL PUBL IC UTILITY. IT IS FURTHER HELD THAT TO BRING HIMSELF WITHIN SECTION 2 (15), THE ONUS IS ON THE ASSESSEE TO SHOW THAT HIS OBJECTS ARE OF GENERAL PUBLIC UTILITY AND THUS THE ADVANCEMENT OF THESE OBJECTS T HERE IS NO INVOLVEMENT OF ACTIVITIES FOR PROFIT. IN THE CASE B EFORE US, THE ASSESSEE HAS CLEARLY PROVED THAT IT IS NOT INVOLVED IN THE ACTIVITY OF ADVANCEMENT OF ANY OTHER OBJECTS FOR GENERAL PUB LIC UTILITY BUT THAT IT IS INVOLVED IN ACTIVITY FOR RELIEF OF THE P OOR ALBEIT BY THE GOVT. OF A.P. THE FACT THAT THE ASSESSEE ONLY MANUF ACTURES AND SUPPLIES THE FOOD ITEMS TO THE GOVT. OF A.P. ITSELF , PROVES THAT THE ASSESSEE IS RENDERING THE SERVICES THROUGH THE GOVT . OF A.P. THE PRICE OF THE GOODS IS NOT FIXED BY THE ASSESSEE AT THE TIME OF ITS SUPPLY BUT IT IS FIXED BY THE GOVT. OF A.P. DEPENDI NG ON THE EXPENDITURE INCURRED BY THE ASSESSEE AND ALSO ITS O VERHEAD WHICH IS ALSO EVIDENT FROM THE FACT THAT THE ASSESS EE SUFFERED LOSSES IN CERTAIN YEARS WHILE IT HAS EXCESS OF INCO ME OVER EXPENDITURE IN CERTAIN OTHER YEARS. THE EXCESS OF I NCOME OVER EXPENDITURE ALONE CANNOT BE A DETERMINING FACTOR AS TO THE 9 ITA NO. 290/HYD/2016 M/S. TELANGANA FOODS, HYDERABAD NATURE OF THE ASSESSEES ACTIVITIES. THE EXEMPTION U/S 11 DEPENDS ON THE NATURE OF THE ACTIVITIES CARRIED ON BY THE ASSESSEE AND NOT AS TO WHETHER THE ASSESSEE IS MAKI NG PROFIT OUT OF SUCH ACTIVITY. THE ESTABLISHMENT OF FACTORIE S FOR MANUFACTURING OF THE FOOD ARTICLES IS ALSO ONE OF T HE ANCILLARY ACTIVITIES OF THE ASSESSEE. THEREFORE, WE AGREE WIT H THE FINDING OF THE CIT (A) THAT THE ASSESSEE IS AN INSTITUTION ENGAGED IN THE ACTIVITIES FOR RELIEF OF THE POOR AND THEREFORE, WH ETHER IT IS MAKING PROFIT OR OTHERWISE BECOMES IRRELEVANT WHILE GRANTING EXEMPTION U/S 11 OF THE ACT. FURTHER, THE CIT (A) H AD ALSO CALLED FOR A REMAND REPORT FROM THE AO ABOUT THE APPLICATI ON OF INCOME AND HAS OBSERVED THAT IT HAS COMPLIED WITH THE PROV ISIONS OF SECTION 11(4A) OF THE ACT. THEREFORE, WE SEE NO REA SON TO INTERFERE WITH THE ORDER OF THE CIT (A) FOR ALL THE A.YS. 6. SINCE THE FACTS ARE SIMILAR AND AS LD. CIT(A) FO LLOWED CO-ORDINATE BENCH DECISION GIVEN IN EARLIER YEARS H OLDING THAT THE ASSESSEE IS ENTITLED TO EXEMPTION AS CLAIM ED, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER O F THE CIT(A). REVENUE GROUNDS WERE ACCORDINGLY DISMISSED. 7. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMI SSED. PRONOUNCED IN THE OPEN COURT ON 10 TH MARCH, 2017. SD/- SD/- (D. MANMOHAN) (B. RAMAKOTA IAH) VICE PRESIDENT ACCOUNTANT MEMBE R HYDERABAD, DATED: 10 TH MARCH, 2017 KRK 1) M/S TELANGANA FOODS(PREVIOUSLY KNOWN AS ANDHRA PRADESH FOODS), IDA, NACHARAM. HYDERABAD. 2) ACIT(EXEMPTIONS), HYDERABAD. 3) CIT(A) -9, HYDERABAD 4) CIT(EXEMPTIONS), HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., H YDERABAD. 6) GUARD FILE