The DCIT, Circle-3(2), Surat V. M/s. Indian Diamond Institute, Surat

ITA 3062/AHD/2014

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 2173 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 19-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R P RASTOGI
• Keywords: Business income; Charitable institution

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT , , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . / ITA NO.3062/AHD/2014/SRT / ASSESSMENT YEAR: 2011-12 DY. COMMISSIONER OF INCOME TAX, CIRCLE-3(2), SURAT. VS. M/S. INDIAN DIAMOND INSTITUTE, GIDC, SUMUL DAIRY ROAD, KATARGAM, SURAT 395 004. [PAN: AAATI 2642 C] ( ' / APPELLANT) ( #$' /RESPONDENT) / ASSESSEE BY : SHRI HIREN R. VEPARI, C.A /REVENUE BY : SHRI R.P. RASTOGI, SR. D.R /DATE OF HEARING : 30-07-2018 / DATE OF PRONOUNCEMENT : 18-09-2018 / ORDER PER C.M.GARG, JUDICIAL MEMBER: THIS APPEAL HAS BEEN FILED BY THE REVENUE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-V, SU RAT (CIT(A) FOR SHORT) DATED 23.09.2014 FOR THE ASSESSMENT YEAR (A. YS) 2011-12. 2. THE GROUNDS RAISED BY THE REVENUE READ AS FOLLOW S: I. THE FACT OF THE CASE CLEARLY INDICATES THAT THE MAJ OR SOURCE OF REVENUE OF THE ASSESSEE IS FROM JOB WORK AND CONSUL TANCY INCOME, WHICH CAN ONLY BE PERFORMED BY SKILLED AND TRAINED WORKERS, THEREFORE THE PERSONS WHO ARE BEING CLAIME D TO HAVE BEEN GIVEN TRAINING ARE ALREADY TRAINED TO GREAT EX TENT, AS NO COMMERCIAL JOB WORK COULD HAVE BEEN DONE BY BASICAL LY UNSKILLED 2 ITA NO.3062/AHD/2014/SRT (A.Y: 2011-12) M/S. INDIAN DIAMOND INSTITUTE TRAINEES. HENCE, ON THE FACTS AND CIRCUMSTANCE OF T HE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN LAW TO TREAT THE JO B WORK ACTIVITIES AS INCIDENTAL ACTIVITIES WHICH IS INTRINSICALLY INT ERLINKED WITH THE ACTIVITY OF IMPARTING TRAINING. II. FROM THE FACT OF THE CASE IT IS OBVIOUS THAT THE AS SESSEE IS A COACHING INSTITUTE IMPARTING ADVANCED VOCATIONAL TR AINING AND HENCE, THE INCOME EARNED BY THE ASSESSEE FROM JOB W ORK AND CONSULTANCY INCOME CANNOT BE SAID TO BE EARNED FROM IMPARTING OF EDUCATION PERTAINING TO A PROCESS OF TRAINING AND D EVELOPING KNOWLEDGE AND CHARACTER OF STUDENT BY NORMAL SCHOOL ING. RELIANCE IS PLACED ON CASE LAW (1994) 76 TAXMAN 455 (PAT.) IN THE CASE OF BIHAR INSTITUTE OF MINING & MINE SURVEY ING V/S COMMISSIONER OF INCOME-TAX. III. THE JOB WORK AND CONSULTAN CY RECEIPT OF RS. 75,51,606/- ( WHICH IS EXCEEDING RS. 25,00,000/-) CAN ONLY BE SAID TO BE E ARNED FROM ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY INVOLVING RENDERING OF SERVICE IN RELATION TO TRADE, COMMERCE OR BUSINESS. THEREFORE, THE JOB WORK AND CONSULTANCY ACTIVITY OF THE ASSESSEE TRUST IS NOT CHARITABLE PURPOSE WITHIN THE MEANING UNDER FIRST PROVISO TO SECTION 2(15) OF THE IT ACT. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND CA REFULLY PERUSED THE RELEVANT MATERIAL PLACED ON THE RECORD OF THE T RIBUNAL. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT THE FACT OF THE CASE CLEARLY INDICATES THAT THE MAJOR SOURCE OF REVENUE OF THE ASSESSEE IS FROM JOB WORK AND CONSULTANCY INCOME, WHICH CAN ONLY BE PERFORMED BY SKILLED AND TRAINED WORKERS, THEREFORE THE PERSONS WHO ARE BEING CLAIMED TO HAVE BEEN GIVEN TRAINING ARE ALREADY TRAINED TO GREAT EX TENT, AS NO COMMERCIAL JOB WORK COULD HAVE BEEN DONE BY BASICALLY UNSKILLE D TRAINEES. HENCE, ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN LAW TO TREAT THE JOB WORK ACTIVITIES AS IN CIDENTAL ACTIVITIES WHICH IS INTRINSICALLY INTERLINKED WITH THE ACTIVITY OF IMPA RTING TRAINING. THE LD. DR 3 ITA NO.3062/AHD/2014/SRT (A.Y: 2011-12) M/S. INDIAN DIAMOND INSTITUTE ALSO SUBMITTED THAT FROM THE FACTS AND CIRCUMSTANCE S OF THE CASE IT IS CLEAR THAT THE ASSESSEE IS A COACHING INSTITUTE IMPARTING ADVANCED VOCATIONAL TRAINING AND HENCE, THE INCOME EARNED BY THE ASSESS EE FROM JOB WORK AND CONSULTANCY INCOME CANNOT BE SAID TO BE EARNED FROM IMPARTING OF EDUCATION PERTAINING TO A PROCESS OF TRAINING AND D EVELOPING KNOWLEDGE AND CHARACTER OF STUDENT BY NORMAL SCHOOLING. RELIA NCE IS PLACED ON CASE LAW (1994) 76 TAXMAN 455(PAT.) IN THE CASE OF BIHAR INSTITUTE OF MINING & MINE SURVEYING V/S COMMISSIONER OF INCOME-TAX. 4. THE LD. DR FURTHER SUBMITTED THAT THE JOB WORK A ND CONSULTAN CY RECEIPT OF RS. 75,51,606/- ( WHICH IS EXCEEDING RS. 25,00,000/-) CAN ONLY BE SAID TO BE EARNED FROM ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY INVOLVING RENDERING OF SERVICE IN RE LATION TO TRADE, COMMERCE OR BUSINESS. THEREFORE, THE JOB WORK AND CONSULTANC Y ACTIVITY OF THE ASSESSEE TRUST IS NOT CHARITABLE PURPOSE WITHIN THE MEANING UNDER FIRST PROVISO TO SECTION 2(15) OF THE INCOME TAX ACT, 196 1 (IN SHORT 'THE ACT'). THE LD. DR LASTLY SUBMITTED THAT THE ASSESSING OFFI CE4R (AO) WAS RIGHT IN TREATING THE IMPUGNED RECEIPTS AS TAXABLE AND THE L D. CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE WITHOUT ANY REASONABLE BASIS AND JUSTIFIED REASON THEREFORE, IMPUGNED ORDER MAY KINDLY BE SET ASIDE B Y RESTORING THAT OF THE AO. 4 ITA NO.3062/AHD/2014/SRT (A.Y: 2011-12) M/S. INDIAN DIAMOND INSTITUTE 5. REPLYING TO THE ABOVE, THE LD. ASSESSEES REPRES ENTATIVE (AR) DREW OUR ATTENTION TOWARDS PARA 6.2.2 OF THE FIRST APPEL LATE ORDER AND SUBMITTED THAT THE JOB WORK WHICH GIVES TO THE STUDENTS THE P RACTICAL ASPECT OF THE LEARNING CANNOT BE TREATED AS COMMERCIAL ACTIVITY, BUT THE SAME IS INCIDENTAL TO THE MAIN ACTIVITY OF IMPARTING TRAINI NG THEREFORE, THE INCOME FROM JOB WORK ACTIVITIES IS NOT COVERED BY THE PROV ISO OF S. 2(15) OF THE ACT HENCE, IMPUGNED ORDER MAY KINDLY BE UPHELD BY DISMI SSING APPEAL OF THE REVENUE. 6. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISSI ONS, FROM THE FIRST APPELLATE ORDER, WE OBSERVE THAT THE LD. CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE WITH FOLLOWING OBSERVATIONS: 6.2.2 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES IT IS EVIDENT THAT THE TRAINING IN CUTTING AND POLISHING BEING A HIGHL Y SPECIALIZED WORK CANNOT BE EXPLAINED TO THE STUDENTS ONLY THEORETICA LLY. THE PRACTICAL ASPECT IS EQUALLY IMPORTANT TO KEEP THEMSELVES UPDA TED WITH THE LATEST DEVELOPMENT AND TECHNOLOGY. THE JOB WORK WITH GIVE S THE STUDENTS THE PRACTICAL ASPECT OF LEARNING CANNOT BE TREATED AS C OMMERCIAL ACTIVITY BUT ARE INCIDENTAL ACTIVITY WHICH IS INTRINSICALLY INTE RLINKED WITH THE ACTIVITY OF IMPARTING TRAINING. HENCE, THE APPELLANT TRUST JOB WORK ACTIVITIES IS NOT COVERED BY THE PROVISO TO SUB SECTION 2(15) OF THE ACT AND THE ADDITION MADE BY THE AO TREATING THE JOB WORK INCOME AND CON SULTANCY INCOME AS BUSINESS INCOME AS BUSINESS INCOME IS DELETED AN D THE GROUND OF APPEAL IS ALLOWED. 7. IN VIEW OF ABOVE, UNDISPUTEDLY THE ASSESSEE INST ITUTE IS IMPARTING TRAINING IN CUTTING AND POLISHING OF DIAMONDS WHICH IS A HIGHLY SPECIALIZED WORK AND THE SAME CANNOT BE EXPLAINED AND TEASED TO THE TRAINEES ONLY BY WAY OF THEORETICAL LEARNING WITHOUT ANY PRACTICA L TRAINING. IN OUR 5 ITA NO.3062/AHD/2014/SRT (A.Y: 2011-12) M/S. INDIAN DIAMOND INSTITUTE UNDERSTANDING OF THE LEARNING PROCESS OF INSTITUTE WE ARE INCLINED TO HOLD THAT THE PRACTICAL TRAINING IS VERY IMPORTANT TO KE EP THE STUDENTS UPDATED WITH THE PRACTICAL ASPECT AND LATEST DEVELOPMENT OF TECHNOLOGY IN THE FIELD OF CUTTING AND POLISHING OF DIAMONDS. THE IMPUGNED AMOUNT HAS BEEN RECEIVED BY THE INSTITUTE FROM THE JOB WORK WHICH P ROVIDED THE STUDENTS PRACTICAL ASPECT OF LEARNING WHICH IS INTRINSICALLY INTERLINKED WITH THE MAIN ACTIVITY OF IMPARTING TRAINING OF CUTTING AND POLIS HING OF DIAMONDS. THEREFORE, WHEN THE PRACTICAL TRAINING IS IMPORTANT AND NECESSARY WHICH CAN BE DONE BY WAY OF ALLOWING JOB WORK THEN, THE A MOUNT RECEIVED FROM JOB WORK CANNOT BE TREATED AS INCOME FROM COMMERCIA L ACTIVITY. IT IS NOT A CASE OF THE AO THAT THE ASSESSEE USED THIS AMOUNT B EYOND ITS CHARITABLE OBJECTS FOR ANY OTHER PURPOSE AND IT IS WELL ACCEPT ED PREPOSITION THAT IF THE AMOUNT EARNED FROM ANY ACTIVITY WHICH IS INCIDENTAL TO THE MAIN CHARITABLE ACTIVITY HAS BEEN USED BY THE RECIPIENT INSTITUTE F OR THE PURPOSE OF ACHIEVING THE CHARITABLE OBJECTS THEN, THE SAME CAN NOT BE TREATED AS COMMERCIAL ACTIVITY FOR COLLECTION OF TAX THEREON B Y INVOKING PROVISO TO S. 2(15) OF THE ACT. HENCE, CONCLUSION DRAWN BY THE L D. CIT(A) IS QUITE CORRECT AND JUSTIFIED AND HENCE, WE ARE UNABLE TO S EE ANY REASON TO INTERFERE WITH THE SAME AND THUS, WE UPHOLD THE SAM E. ACCORDINGLY, GROUNDS OF REVENUE BEING DEVOID OF MERITS ARE DISMI SSED. 6 ITA NO.3062/AHD/2014/SRT (A.Y: 2011-12) M/S. INDIAN DIAMOND INSTITUTE 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 8 TH SEPTEMBER, 2018. / SURAT ; DATED : 18 TH SEPTEMBER, 2018 EDN # & / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT ; 3. $ ( ) / THE CIT(A)- V, SURAT; 4. CCIT-2, SURAT; 5. , , / DR, ITAT, SURAT; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // * / ASSISTANT REGISTRAR , / ITAT, SURAT SD/- SD/- ( ) ( O.P.MEENA ) / ACCOUNTANT MEMBER ( ) (C.M.GARG) /JUDICIAL MEMBER