Appeal details
Counselvise Citation
[2010] 136 COUNSELVISE.COM (IT) 3880 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 month(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
21-05-2010
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
F
Next Hearing Date
22-03-2010
Assessment Year
2006-2007
Appeal Filed On
21-01-2010
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F : NEW DELHI BEFORE SHRI RAJPAL YADAV, JM AND SHRI R.C.SHARMA, A M ITA NO.323/DEL/2010 ASSESSMENT YEAR : 2006-07 DY.DIRECTOR OF INCOME TAX (E), INV.CIRCLE-II, NEW DELHI. VS. NATIONAL ASSOCIATION OF SOFTWARE AND SERVICE COMPANIES (NASSCOM), 2 ND FLOOR, INTERNATIONAL YOUTH CENTRE, TEEN MURTI MARG, CHANAKYA PURI, NEW DELHI. PAN NO.AAATN2595F. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI H.K.LAL, SR.DR. RESPONDENT BY : SHRI SACHIT JOLLY, ADVOCATE. ORDER PER R.C.SHARMA, AM : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 14.10.2009 FOR THE AY 2006-07, WHEREIN FOLLOWING TH REE GROUNDS HAVE BEEN TAKEN BY THE REVENUE :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD.CIT(A) HAS ERRED IN HOLDING THE ADMISSION FEES/S UBSCRIPTION INCOME RECEIVED BY THE ASSESSEE IS NOT TAXABLE U/S 28(III) OF THE INCOME TAX ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.CIT(A) HAS ERRED IN ALLOWING EXEMPTION U/S 11 OF THE INCOME TAX ACT TO THE ASSESSEE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MADE B Y THE AO BY TREATING AS INCOME THE SUM OF RS.10,10,000/- RECEIV ED BY THE ASSESSEE AS CORPUS DONATION. ITA-323/DEL/2010 2 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT THE ASSESSEE TRUST IS REGISTERED U/S 12A OF TH E IT ACT, 1961 AND ONE OF THE CONDITIONS STIPULATED WHILE GRANTING REGISTRATION U /S 12A WAS THAT ANY INCOME OF THE SOCIETY DERIVED FROM PROVIDING SPECIFIC SERVICE S TO MEMBERS WOULD BE TAXABLE U/S 28(III) OF THE IT ACT, 1961. THE ASSESSEE SOC IETY IS ENGAGED INTER ALIA IN THE ACTIVITIES RELATING TO PROMOTION OF THE ART AND SCI ENCE OF SOFTWARE AND FOR FURTHERING THE CAUSE OF SOFTWARE INDUSTRY IN INDIA. DURING THE COURSE OF ASSESSMENT, THE AO TREATED THE ADMISSION FEE/SUBSCR IPTION INCOME AS TAXABLE U/S 28(III) AND ALSO DECLINED ASSESSEES CLAIM FOR EXEM PTION U/S 11. THE AO ALSO DECLINED DONATION OF RS.10,10,000/- RECEIVED BY THE ASSESSEE AS CORPUS DONATION. BY THE IMPUGNED ORDER, CIT(A) DECIDED ALL THE THREE ISSUES IN FAVOUR OF THE ASSESSEE AGAINST WHICH REVENUE IS IN FURTHER APPEAL BEFORE US. 3. AT THE OUTSET, LEARNED AR PLACED ON RECORD ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE AY 1998-99, 2003-04, 20 04-05 AND 2005-06, ORDER DATED 12.3.2010, WHEREIN EXACTLY ALL THE THREE ISSU ES WERE DECIDED BY THE TRIBUNAL IN ASSESSEES FAVOUR AFTER HAVING THE FOLLOWING OBS ERVATION:- 13. APROPOSE THE ISSUE RAISED IN THE REVENUES APP EALS BEING AGAINST THE ACTION OF THE LD. CIT(A) IN HOLDING THA T THE INCOME OF THE ASSESSEE IS NOT TAXABLE U/S 28(3) OF THE ACT, I T WAS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE A.O. HAD HELD THAT THE SUM RECEIVED BY THE ASSESSEE UNDER THE NON REFUNDABLE A DMISSION FEE WAS LIABLE TO TAX AS INCOME OF THE ASSESSEE, WHEREAS IT WAS CLAIMED BY THE ASSESSEE THAT THE AMOUNT WAS CONTRIBUTION TOWARDS T HE CORPUS THAT WAS NOT LIABLE TO TAX IN VIEW OF THE PROVISIONS OF SECTION 11(1)(D) OF THE ACT THE ASSESSEE HAD RECEIVED SUBSCRIPTION AMOU NT FROM ITS MEMBERS IN THE FORM OF NON REFUNDABLE ADMISSION FEE AND ANNUAL SUBSCRIPTION CHARGES; THAT IN TERMS OF THE MEMORAN DUM OF ASSOCIATION OF THE ASSESSEE, EVERY MEMBER WAS REQUI RED TO PAY A ONE TIME NON REFUNDABLE ADMISSION FEE OF RS.5,000/- AT THE TIME OF ADMISSION, THAT IN THE CASE OF THE ASSOCIATE MEMBE RS, THE FEE WAS RS.3,000/-; THAT APART FROM THIS AMOUNT, EACH MEMBE R WAS REQUIRED TO PAY AN ANNUAL SUBSCRIPTION OF AN AMOUNT BASED IN RELATION TO THE TURNOVER OF THE MEMBERS, THAT IN TERMS OF CLAUSE 1 2.4 OF THE ITA-323/DEL/2010 3 MEMORANDUM OF ASSOCIATION, THE ONE TIME NON-REFUNDA BLE FEE CAN BE UTILIZED ONLY FOR THE PURPOSE OF CAPITAL NATURE; THAT IN THESE CIRCUMSTANCES, THE ASSESSEE HAD CLAIMED THE ONE TIM E ADMISSION FEE FOR THE NEW MEMBERS AS BEING IN THE NATURE OF DONAT ION TOWARDS CORPUS AND IT IS NOT TO BE INCLUDE IN THE TOTAL INC OME OF THE ASSESSEE IN VIEW OF THE PROVISIONS OF SECTION 1(1)(D) OF THE ACT; AND THAT THE LD. CIT(A) DELETED THE ADDITION MADE BY THE A.O. BY HOLDING THAT THE ASSESSEE HAD NOT UTILIZED THE ADMISSION FEE ONL Y FOR THE CAPITAL PURPOSE AS PER CLAUSE 12.4 OF THE MEMORANDUM OF ASS OCIATION; AND THE AMOUNT FORMED PART OF THE CORPUS OF THE ASSESSE E. HE FURTHER RELIED UPON THE DECISION OF THE HONBLE GUJARAT HIG H COURT IN THE CASE OF STHANAK VASI VARDHMAN VANIK JAIN SANGH, 2 60 ITR 366 (GUJ.) AS ALSO THE DECISION OF THE HON'BLE HIGH COU RT OF KERALA IN THE CASE OF VANDANA PRINTERS 127 ITR 227 (KER.). IN REPLY, THE LD. D.R. VEHEMENTLY SUPPORTED THE ORDER OF THE A.O. HE ALSO SUBMITTED THAT THE FUNCTIONS PERFORMED BY THE ASSESSEE WERE E XCLUSIVELY FOR THE BENEFIT OF ITS MEMBERS WHICH INTER-ALIA BENEFITED T HE ASSESSEE ITSELF THROUGH ITS INCREASE IN SUBSCRIPTION FEE. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE P ERUSED THE MATERIAL ON RECORD. IN THE CASE OF SATNA VASI VARDHMAN JAN SANGH (SUPRA) IT HAS BEEN HELD THAT VOLUNTARY CONT RIBUTION WITH SPECIFIC DIRECTION SHALL FORM PART OF THE CORPUS AN D THAT CANNOT BE TREATED AS INCOME OF THE TRUST. SIMILARLY THE DECI SION IN THE CASE OF VANCHI TRUST (SUPRA) HOLDS, THAT WHERE THERE IS A STIPULATION THAT THE SUBJECT MATTER OF THE DONATION SHOULD BE HELD BY TH E DONEE TRUST AS CORPUS AND ONLY INCOME THEREFROM IS TO BE EXPENDED FOR CHARITABLE PURPOSE OF THE DONEE. IT IS NOT THE INCOME OF THE D ONEE TRUST. A PERUSAL OF THE FACTS IN THE PRESENT ASSESSEES CASE SHOWS THAT THE MEMORANDUM OF ASSOCIATION OF THE ASSESSEE ITSELF CL EARLY HOLDS THAT THE ONE TIME ADMISSION FEE IS TO BE USED ONLY FOR A CQUIRING CAPITAL ASSETS. THUS, WHEN A MEMBER MAKES A PAYMENT OF ONE TIME ADMISSION FEE, IT CLEARLY UNDERSTOOD BY THE MEMBER THAT HE IS MAKING THE PAYMENT AS A DONATION FOR THE ACQUISITION OF A CAPITAL ASSET. FURTHER, EVEN OTHERWISE, THE ASSESSEE DULY ENJOYED THE BENEFIT OF REGISTRATION U/S 12A OF THE ACT. AS LONG AS THE AS SESSEE IS HOLDING REGISTRATION U/S 12A THE ASSESSEE IS DEEMED TO BE A CHARITABLE ORGANIZATION. ONCE IT IS FOUND THAT THE ASSESSEE I S A CHARITABLE ORGANIZATION AND IT IS ALSO FOUND THAT THE MEMBERS WHO HAVE PAID ONE TIME SUBSCRIPTION FEE ARE ALSO WELL AWARE THAT THE AMOUNT CAN BE SPENT BY THE ASSESSEE ONLY FOR THE PURPOSE OF ACQUI RING CAPITAL ASSET, THE ONE TIME SUBSCRIPTION FEE RECEIVED BY THE ASSES SEE FROM THE MEMBERS WOULD HAVE TO BE HELD TO BE A DONATION TO T HE CORPUS OF THE ASSESSEE AND CORPUS DONATIONS ARE NOT LIABLE TO BE TREATED AS INCOME ITA-323/DEL/2010 4 OF THE ASSESSEE, AS PER THE PROVISIONS OF SECTION 1 1(1)(D) OF THE ACT. IN THESE CIRCUMSTANCES, THE FINDINGS OF LD. CIT(A) ON THIS ISSUE ARE FOUND TO BE WELL VERSED AND THE SAME ARE UPHELD. 4. WE HAVE GONE THROUGH THE ORDER OF THE TRIBUNAL I N ASSESSEES OWN CASE AND FOUND THAT ALL THE THREE ISSUES HAVE BEEN DECIDED I N FAVOUR OF THE ASSESSEE IN TERMS INDICATED HEREINABOVE. AS THE FACTS AND CIRCUMSTAN CES DURING THE YEAR UNDER CONSIDERATION ARE IN PARI-MATERIA, RESPECTFULLY FOL LOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE CONFIRM THE ACTION OF TH E CIT(A) ON ALL THE THREE ISSUES. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 21 ST MAY, 2010. SD/- SD/- (RAJPAL YADAV) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 21.05.2010. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR ITA-323/DEL/2010 5
