ITO (Exemptions), New Delhi V. Data Security Council of India, New Delhi

ITA 3306/DEL/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6624 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 02-02-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 06-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K JAIN
• Assessee Lawyers: PRERNA; SWATI THAPA; GAJENDRA MAHESHWARI
• Keywords: Depreciation; Charitable institution; Benefit of exemption
• Section: 143(3); 80G; 12A; 194C; 12AA; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC, NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER ITA NO.3306/DEL/2016 ASSESSMENT YEAR : 2011-12 ITO (EXEMPTIONS), WARD- 1(3), NEW DELHI. VS. DATA SECURITY COUNCIL OF INDIA, 3 RD FLOOR, NIRYAT BHAWAN, RAO TULA RAM MARG, NEW DELHI. PAN : AACCD 9781 G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S. K. JAIN, SR.DR RESPONDENT BY : SHRI GAJENDRA MAHESHWARI & MS. SWATI THAPA & MS. PRERNA CHOPRA, ADV. DATE OF HEARING : 02-02-2017 DATE OF PRONOUNCEMENT : 28-02-2017 O R D E R PER S.V. MEHROTRA, A.M : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 15.03.2016 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-40 (EXEMPTION), NEW DELHI, U/S 143(3) OF THE INCOME TA X ACT, 1961 (IN SHORT THE ACT) RELATING TO ASSESSMENT YEAR 2011-12. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY LIMITED BY GUARANTEE NOT HAVING SHARE CAPITAL REGISTERED U/S 2 5 OF THE COMPANIES ACT, 1956. THE COMPANY WAS INCORPORATED ON 22 ND AUGUST, 2008. THE ASSESSEE HAD FILED RETURN OF INCOME DECLARING NIL INCOME ALO NG WITH AUDIT REPORT U/S 2 ITA NO.3306/DEL/2016 12A(B) IN FORM NO.10B AND ALSO BALANCE SHEET, INCOM E & EXPENDITURE ACCOUNT WITH RELEVANT SCHEDULES. THE ASSESSING OFF ICER HAS OBSERVED AS UNDER :- ORIGINALLY, THE ASSESSEE WAS ACCORDED REGISTRATION U/S 12A(A) OF THE I.T. ACT, 1961 VIDE LETTER F.NO. DIT(E)/12A/2008-09/D-1392/16 30 DATED 30.03.2009 ISSUED BY THE DEPARTMENT FROM THE AY. 2009-10 ONWARDS. THE REGISTRATION U/S 12A SO GRANTED WAS WITHDRAWN BY THE DIT (E), DELHI' S ORDER PASSED U/S 12AA(3) R.W.S. 12A OF THE I.T. ACT, 1961. SUBSEQUENTLY THE LD. DIT (E), DELHI VIDE HIS ORDER F. NO. DIT (E)/12A/2011-12/854 DATED 11.10.20 12 HAS RESTORED THE REGISTRATION GRANTED U/S 12A VIDE F. NO. DIT (E)/ 1 2A/2008-09/D-1392/1630 DATED 30.03.2009, SINCE INCEPTION. THE ASSESSEE HAS ALSO BEEN GRANTED CERTIFICATE U/S 80G(5)(VI) OF THE ACT BY THE DIT(E), DELHI VIDE ORDER NO. DIT(E)/2012-13/D- 1392/1376 DATED 11.10.2012 FOR THE PERIOD FROM A.Y. 2010-11 ONWARDS TILL IT IS RESCINDED. A) THE MAIN OBJECTS OF THE ASSESSEE INCLUDES :- 1) TO PROMOTE, ENCOURAGE, SUPPORT DATA PROTECTION A ND INFORMATION SECURITY, MAINTENANCE OF DATA PRIVACY OF ANY KIND IN INDIA CA RRYING OUT RESEARCH, DISSEMINATION OF INFORMATION, SETTING OF STANDARDS, FOR MEMBERS PROVIDING EDUCATION, TRAINING, CONDUCTING MEETINGS, SEMINARS, WORKSHOPS, CONFERENCES INTERACTING WITH GOVERNMENT OR NON-GOVE RNMENT BODIES, AGENCIES, COMPANIES OR ANY OTHER PERSON, TAKING APP ROPRIATE LEGAL OR ANY OTHER ACTION BY ITSELF OR ON BEHALF OF ITS MEMBERS. 2) NO OBJECTS OF THE COMPANY WILL BE CARRIED BY THE COMPANY WITHOUT OBTAINING PRIOR APPROVAL/ NO OBJECTION CERTIFICATE FROM CONCERN AUTHORITY (IF ANY). 3. THE ASSESSING OFFICER EXAMINED THE DOCUMENTS FIL ED BY ASSESSEE AND OBSERVED THAT THE ASSESSEE WAS NEITHER IN THE FIELD OF EDUCATION, NOR IN THE FIELD OF MEDICAL RELIEF OR RELIEF OF POOR. HE POIN TED OUT THAT THE BENEFIT OF EXEMPTION U/S 11/12 COULD BE EXTENDED TO ASSESSEE O NLY AFTER VERIFYING THE APPLICABILITY OF THE PROVISO TO SECTION 2(15) SINCE ITS ACTIVITIES WERE FALLING WITHIN THE SCOPE OF GENERAL PUBLIC UTILITY. HE N OTED THAT DURING THE YEAR 3 ITA NO.3306/DEL/2016 UNDER CONSIDERATION, THE ASSESSEE HAD RECEIVED INCO ME UNDER THE FOLLOWING HEADS :- SL.NO. HEADS AMOUNT (IN RS.) 1 DONATION 2,00,00,000 2 GRANTS APPORTIONED 1,21,87,672 3 PARTICIPATION FEES 3,86,799 4 MEMBERSHIP FEES 6,81,250 5 SPONSORSHIP FEES 1,03,90,522 6 INTEREST FROM BANK AND ON REFUND 1,60,223 4. HE OBSERVED THAT THE GRANTS APPORTIONED & SPONSO RSHIP FEES WERE RECEIVED FROM DIFFERENT PARTIES AND COPY OF THE TDS CERTIFICATES WERE FILED IN SUPPORT OF THESE RECEIPTS. HE CONCLUDED THAT TH ESE WERE IN THE NATURE OF FEE FROM PROFESSIONAL/ TECHNICAL SERVICES/ CONTRACT UAL RECEIPTS AND, THEREFORE, COMMERCIAL IN NATURE. ACCORDINGLY, HE S HOW-CAUSED THE ASSESSEE AS TO WHY THESE TWO RECEIPTS BE NOT TREATED AS BEIN G COVERED BY PROVISIONS TO SECTION 2(15). AFTER CONSIDERING THE ASSESSEES SU BMISSIONS, HE CONCLUDED THAT THESE ACTIVITIES WERE CLEARLY IN THE NATURE OF TRADE AND COMMERCE AND RENDERING SERVICES IN RELATION TO TRADE/ COMMERCE/ BUSINESS MORE PARTICULARLY BECAUSE ASSESSEE HAD CHARGED SERVICE TAX ON THE AMO UNT SO RECEIVED BY IT. FURTHER TDS HAD BEEN DEDUCTED BY THE PARTIES U/S 19 4C AND 194J OF THE ACT AS A CONTRACTOR AND AS PROFESSIONAL/ TECHNICAL SERV ICES. 4.1 AS REGARDS DONATION OF RS.2 CRORE RECEIVED FROM NASSCOM DURING THE YEAR, HE REFERRED TO THE CONTENTS OF THE RESOLU TION PASSED BY THE 4 ITA NO.3306/DEL/2016 NASSCOM IN ITS EXECUTIVE MEETING HELD ON 07.01.2014 . THE SAME IS REPRODUCED HEREUNDER :- RESOLVED THAT A GRANT OF RS.2 CRORE BE MADE BY NAS SCOM TO THE 'DATA SECURITY COUNCIL OF INDIA' DURING THE PERIOD OF THE FY 2011- 12 FOR THE FURTHERANCE OF THE FOLLOWING NASSCOM'S OBJECTIVES I.E. 1. PROMOTE THE ART AND SCIENCE OF IT SOFTWARE AND SERV ICES FOR USE IN ALL TYPES OF COMPUTING EQUIPMENT. 2. ENCOURAGE AND ASSIST BALANCED DEVELOPMENT OF THE IT SOFTWARE AND SERVICES INDUSTRY. 3. TO 11 12. EDIT, PRINT AND PUBLISH JOURNALS, BOOKS PAMPHLE TS AND OTHER MATERIAL RELEVANT TO THE SOFTWARE PROFESSION. 13. COLLECT, TABULATE AND CIRCULATE INFORMATION AND STATISTICS OF VALUE TO INDUSTRY. 5. FROM THE ABOVE, HE CONCLUDED THAT THE DONATION H AD BEEN GIVEN TO THE ASSESSEE TO PROMOTE THE OBJECTS OF THE NASSCOM AND NOT FOR ANY CHARITY. HE ALSO REFERRED TO THE CONFIRMATION RECEIVED FROM M/S VERIZON COMMUNICATION INDIA PVT. LTD. (VCIPL). THE SAME IS REPRODUCED HEREUNDER :- THE CONFIRMATION HAS ALSO BEEN RECEIVED FROM M/S V ERIZON COMMUNICATION INDIA PVT. LTD. (VCIPL). THIS COMPANY HAS STATED TH AT DURING THE AY 2011-12, VCIPL WAS ENGAGED IN THE BUSINESS OF PROVIDING TELE COMMUNICATION SERVICES IN THE NATURE OF INTERNET AND DATA TRANSMISSION SERVIC ES IN INDIA TO ITS VARIOUS CORPORATE CUSTOMERS. VCIPL HAS SUBMITTED THAT THE F OLLOWING SERVICES WERE RENDERED BY THE DATA SECURITY COUNCIL OF INDIA: 1. SPONSORSHIP OF AN EVENT ORGANIZED BY DATA SECURITY COUNCIL OF INDIA & INDIAN BANKING ASSOCIATION. 2. SPONSORSHIP OF JOINT EVENT IN THE NATURE OF A ROAD SHOW CONDUCTED BY VCIPL AND DATA SECURITY COUNCIL OF INDIA TO PROMOTE VCIPL'S SERVICES. 3. SPONSORSHIP OF ANNUAL IT SECURITY SUMMIT CONDUCTED BY DATA SECURITY 5 ITA NO.3306/DEL/2016 COUNCIL OF INDIA. 6. FROM THE ABOVE, HE CONCLUDED THAT THE ASSESSEE W AS PROVIDING PROFESSIONAL SERVICES TO THE VARIOUS ORGANIZATIONS, AS PER THEIR REQUIREMENT, IN A SYSTEMATIC MANNER. HE FURTHER OBSERVED THAT T HE ASSESSEE HAD BEEN PROVIDING SERVICES TO A PARTICULAR INDUSTRY TO SAFE GUARD THEIR BUSINESS INTEREST AND NOT TO THE GENERAL PUBLIC AT LARGE, WH ICH IS THE MAIN ELEMENT FOR CHARITABLE PURPOSE. HE, ACCORDINGLY, CONCLUDED THA T AMENDED PROVISO TO SECTION 2(15) IS APPLICABLE IN THE CASE OF ASSESSEE AND DETERMINED THE TOTAL INCOME AT RS.49,32,480/- AS UNDER :- TOTAL INCOME DECLARED NIL ADD:- I. SURPLUS AS PER INCOME & EXPENDITURE A/C RS. 6,24,705/ - II. DEPRECIATION DISALLOWED RS. 2,71,266/ - III. RESTRICTIVE GRANTS AS DISCUSSED ABOVE RS.42,32,815/- RS.51,28,786/- LESS:- DEPRECIATION ALLOWED ON ADDITION TO FIXED ASSETS IN THE CURRENT YEAR. RS. 1,96,308/- ASSESSA BLE INCOME RS.49,32,478/ - ROUNDED OFF TO U/S 288A RS.49,32,480/- 7. BEFORE LD. CIT(A), THE ASSESSEE HAD FURNISHED ME MORANDUM OF ASSOCIATION (MOA) OF ASSESSEE COMPANY, THE MAIN OBJ ECTS FROM WHICH HAVE BEEN REPRODUCED EARLIER WHILE CONSIDERING THE ASSES SING OFFICERS OBJECTIONS. APART FROM THE TWO MAIN OBJECTS MENTIO NED BY ASSESSING OFFICER, THERE WAS ONE MORE OBJECT, WHICH WAS, THAT NONE OF THE OBJECTS OF THE COMPANY WILL BE CARRIED OUT ON COMMERCIAL BASIS . THESE OBJECTS HAVE 6 ITA NO.3306/DEL/2016 BEEN REPRODUCED BY LD. CIT(A) IN HIS ORDER. THE OT HER OBJECTS, INCIDENTAL TO OR ANCILLARY TO THE ATTAINMENT OF THE MAIN OBJECTS, WERE AS UNDER :- OBJECTS INCIDENTAL OR ANCILLARY TO THE ATTAINMENT O F THE MAIN OBJECTS: 1. HELP MEMBERS, INTERESTED ORGANIZATION, GOVERNME NT AUTHORITIES AND STATUTORY BODIES PREVENT AND COMBAT ANY MISUSE OF INTELLECTUA L PROPERTY RIGHTS, ILLICIT OR UNAUTHORIZED USE, COPYING DEALING, DISTRIBUTION, RE PRODUCTION, DUPLICATION, SELLING OF ANY KIND OF DATA, INFORMATION OR INTELLECTUAL PROPE RTY, IN ANY PLACE BY ANY PERSON OR PERSONS IN ANY MANNER WHATSOEVER, THROUGH ALL MEDIU MS OF COMMUNICATIONS, WHETHER ONLINE OR OFFLINE, INCLUDING BUT NOT LIMITED TO, PR INT MEDIA, ELECTRONIC MEDIA AND THE INTERNET. 2. TAKE EFFECTIVE STEPS TO RAISE AWARENESS AMONG ST AKEHOLDERS IN IT/ ITES AND USER INDUSTRY OF INFORMATION SECURITY AND PRIVACY PROTEC TION THROUGH APPROPRIATE AWARENESS, EDUCATION, TRAINING, RESEARCH AND CAPACI TY BUILDING PROGRAMMES. 3. STRIVE TO POSITION ITSELF AS AN INSTITUTION DEDI CATED TO ENSURE, PROMOTE, ENCOURAGE, AND SUPPORT DATA PROTECTION AND INFORMATION SECURIT Y, MAINTENANCE OF DATA PRIVACY, INTELLECTUAL PROPERTY RIGHTS IN DATA AND SOFTWARE, FRAUD PREVENTION, OF ANY KIND IN INDIA OR ABROAD BY COMBINING, DEVELOPING, MONITORING AND ENFORCING THE APPROPRIATE DATA PRIVACY AND SECURITY STANDARDS TO BE EVOLVED AND AD OPTED BY THE COMPANY. 4. TO PROMOTE AWARENESS OR ASSIST IN THE OPERATION OR IMPLEMENTATION OF THE INFORMATION TECHNOLOGY ACT, 2000, AND ANY OTHER REL EVANT ACT(S) AND ANY LEGISLATION, RULES, REGULATIONS AND GUIDELINES AS AMENDED FROM T IME TO TIME AND PREVAILING FOR THE TIME BEING IN FORCE, WHICH MAY SEEM CONDUCIVE TO TH E COMPANY'S OBJECTS.' 8. THE ASSESSEE POINTED OUT THAT IN VIEW OF THE OBJ ECTS TO BE CARRIED OUT BY THE ASSESSEE, IT WAS EVIDENT THAT ASSESSEE WAS S ETUP WITH THE PRE- DOMINANT OBJECTIVE TO IMPROVE NATIONAL CAPABILITIES BY PROMOTING DATA PROTECTION, DEVELOP SECURITY AND PRIVACY CODES AND STANDARDS AND ENCOURAGE IMPLEMENTATION OF THE SAME. IT WAS FURTHER POINTED OUT THAT WHILE THE IMMEDIATE GOAL OF THE ASSESSEE WAS TO RAISE THE LEV EL OF SECURITY AND PRIVACY OF IT AND BPO SERVICE PROVIDERS TO ENSURE THAT INDI A IS SECURE DESTINATION 7 ITA NO.3306/DEL/2016 FOR GLOBAL SOURCING, THE ASSESSEE ALSO PROMOTED BES T PRACTICES FOR DOMESTIC INDUSTRY SEGMENTS LIKE BANKING, TELECOM AND E-GOVER NANCE. IT WAS FURTHER POINTED OUT THAT UNLESS INDIA IS ABLE TO PROJECT IT SELF AS A DESTINATION HAVING CAPABILITY TO PROTECT THE CONFIDENTIAL DATA, THE EN TIRE IT AND BPO INDUSTRY WOULD NOT BE ABLE TO SURVIVE. FURTHER, IT WAS POIN TED OUT THAT IN THE PRESENT SCENARIO WHEN THE ENTIRE CRITICAL/ CONFIDENTIAL INF ORMATION IS STORED IN SOFT FORM, DATA PROTECTION IS EMERGING AS ONE OF THE MOS T IMPORTANT CRITICAL ASPECT OF TECHNOLOGICAL ADVANCE, TO COMBAT ANY MISU SE OF INTELLECTUAL PROPERTY RIGHTS, ILLICIT OR UNAUTHORIZED USE, COPYI NG, DEALING, DISTRIBUTION, REPRODUCTION, DUPLICATION, SELLING OF ANY KIND OF D ATA, INFORMATION OR INTELLECTUAL PROPERTY. AFTER NARRATING THE PRE-DOM INANT OBJECT, AS NOTED ABOVE, THE ASSESSEE FURTHER POINTED OUT THAT IT WAS WORKING WITH VARIOUS GOVERNMENT/ SEMI-GOVERNMENT AGENCIES ON VARIOUS PRO JECTS, WITH OR WITHOUT THE AID OF DIT AND NASSCOM. FURTHER, IT WA S POINTED OUT THAT BESIDES DEVELOPING AND PROMOTING SUCH PRACTICES, TH E ASSESSEE WAS LAUNCHING VARIOUS PROGRAMS TO REACH OUT TO EDUCATIO NAL INSTITUTIONS AND SECURITY VENDORS TO ENCOURAGE COLLABORATIVE WORKING WITH THE IT/ BPO COMPANIES, AND OTHER VERTICALS SUCH AS BANKING AND TELECOM. THE ASSESSEE FURTHER POINTED OUT THAT IT WAS ALSO BUILDING UP SI MILAR PLATFORMS FOR HELPING LAW ENFORCEMENT AGENCIES IN HANDLING CYBER-CRIMES. THE ASSESSEE HAD ALSO 8 ITA NO.3306/DEL/2016 GIVEN GIST OF EVENTS ORGANIZED BY IT, WHICH HAVE BE EN REPRODUCED FROM PAGES 4 TO 6 OF LD. CIT(A)S ORDER. THE ASSESSEE F URTHER POINTED OUT THAT IT WAS DULY REGISTERED U/S 12A WHICH WAS SUBSEQUENT TO THE CHANGE OF DEFINITION OF SECTION 2(!5) UNDER THE INCOME TAX AC T. THE ASSESSEE FURTHER POINTED OUT THAT IT IS A COMPANY REGISTERED U/S 25 OF THE COMPANIES ACT, WHICH STATUS IS GRANTED ONLY TO A COMPANY INCORPORA TED/ PROMOTED FOR A CHARITABLE PURPOSE. IT COULD NOT CARRY ON ANY ACTI VITIES FOR PROFIT AND HAD TO WORK AS NON-PROFIT ORGANIZATION AND TO APPLY THE EN TIRE INCOME FOR CHARITABLE PURPOSES. FURTHER, THE ASSESSEE POINTED OUT THAT A S PER CLAUSE X OF THE MOA NO PART OF THE INCOME/ FUNDS OF THE ASSESSEE COULD BE DISTRIBUTED AMONGST ITS MEMBERS AS PROFIT AND IN THE EVENT OF DISSOLUTION O F THE COMPANY, ANY SURPLUS SHALL VEST IN ANY OTHER COMPANY INCORPORATE D U/S 25 OF THE COMPANIES ACT HAVING SIMILAR OBJECTS AS THAT OF THE ASSESSEE. FURTHER, CLAUSE VI OF THE MOA PROVIDES FURTHER SAFEGUARD THA T ANY ALTERNATION IN MOA WOULD REQUIRE PRIOR AUTHORIZATION FROM THE REGU LATORY AUTHORITIES. AS REGARDS THE ACTIVITIES OF THE ASSESSEE BEING NON-CO MMERCIAL, THE ASSESSEE POINTED OUT AS UNDER :- NO COMMERCIAL ACTIVITY ON PERUSAL OF THE AFORESAID, IT WILL KINDLY BE APPR ECIATED THAT NOT ONLY THERE IS AN OVERRIDING MANDATE ON THE APPELLANT TO PURSUE ITS O BJECTS AND CARRY ON THE ACTIVITIES ON NO-PROFIT BASIS, BUT THE APPELLANT, A S A MATTER OF FACT, TOO, CARRIES OUT ITS ACTIVITIES ON NO-PROFIT BASIS. NONE OF THE RECEIPTS OF THE APPELLANT WERE FROM ANY OF THE COMMERCIAL ACTIVITIES. 9 ITA NO.3306/DEL/2016 DSCI IS ALSO FOCUSED ON CAPACITY BUILDING OF LAW EN FORCEMENT AGENCIES FOR COMBATING CYBERCRIMES IN THE COUNTRY AND TOWARDS TH IS; IT OPERATES SEVERAL CYBER LABS ACROSS INDIA TO TRAIN POLICE OFFICERS, P ROSECUTORS AND JUDICIAL OFFICERS IN CYBER FORENSICS. DSCI SO FAR HAS TRAINED MORE THAN 49,000 PERSONNEL FROM POLICE, PROSECUTION, JUDICIARY, BANKING INDUSTRY AND OTHER GOVERNMENT DE PARTMENTS IN VARIOUS CYBER FORENSIC TRAININGS WHICH RANGE FROM 5-DAY FULL TIME HANDS ON TRAININGS TO SHORT COURSES AND FEW GUEST LECTURES. THE OVERALL MODEL H AS BEEN CONCEPTUALIZED BASED ON THE PUBLIC-PRIVATE-PARTNERSHIP MODEL THROU GH DSCI'S CYBER LAB PROGRAM. DSCI IN INVOLVED IN THE FOLLOWING ACTIVITIES FOR CA PACITY BUILDING OF INDIAN LAW ENFORCEMENT AND OTHER DEPARTMENTS: A) CONDUCTS 5-DAY TRAINING PROGRAMS AS WELL SHORT C OURSES OF 3 DAYS AND AWARENESS PROGRAM OF 1 DAY FOR POLICE OFFICERS, PRO SECUTORS AND JUDICIARY. B) CONDUCTS SPECIAL TRAINING PROGRAMS FOR OTHER GO VERNMENT DEPARTMENTS LIKE NORTH EASTERN POLICE ACADEMIES, VIGILANCE DEPA RTMENT-INDIAN RAILWAYS, PSU BANKS. C) PROVIDES SUPPORT TO LAW ENFORCEMENT OFFICERS IN TECHNICAL INVESTIGATION. D) PUBLISHED STANDARD OPERATING PROCEDURES (SOP) FO R CYBER- CRIME INVESTIGATIONS AND STANDARDIZED TRAINING MATERIAL F OR LAW ENFORCEMENT IN THE FORM OF CYBER CRIME INVESTIGATION MANUAL THAT IS US ED AS A REFERENCE BY POLICE OFFICIALS IN INVESTIGATING CYBERCRIMES. E) CONDUCTS SEVERAL CYBER SAFE PROGRAMS IN VARIOUS CITIES- WEEK-LONG SOCIAL AWARENESS CAMPAIGNS ON CYBER SECURITY TARGET ING CITIZENS FROM STUDENTS, HOME USERS AND WORKING PROFESSIONALS THROUGH OPEN G ROUP DISCUSSIONS, ROAD SHOWS, QUIZZES, CONFERENCES, ETC. IN THE LIGHT OF THE AFORESAID, THERE IS, IT IS SUBM ITTED, NO WARRANT AT ALL TO DRAW ANY ADVERSE INFERENCE FROM THE NATURE OF RECEIPTS O F THE APPELLANT. IN VIEW OF THE ABOVE SUBMISSIONS, IT IS RESPECTFULLY SUBMITTED THA T THE ACTIVITIES OF THE APPELLANT ARE NOT AT ALL COVERED BY THE MISCHIEF OF PROVISO T O SECTION 2(15) OF THE ACT. BASED ON THE ABOVE WE WISH TO HIGHLIGHT THAT THE BA SIS ON WHICH THE APPELLANT COMPANY HAS BEEN INCORPORATED HAS NOT BEEN NOTICED BY THE AO WHILE PASSING HIS ORDER. THE APPELLANT COMPANY IS BOUND BY LAW TO CAR RY OUT ACTIVITIES WITHOUT ANY PROFIT MOTIVE AND THIS GETS STRENGTHEN BY THE FACT THAT THE COMPANY HAS BEEN ISSUED AN EXEMPTION CERTIFICATE UNDER SECTION 12AA OF THE INCOME TAX ACT, 1961. THE APPELLANT RECEIVED 80% OF ITS RECEIPTS FROM NAS SCOM DURING THE YEAR. 9. LD. CIT(A), AFTER CONSIDERING THE AFOREMENTIONED SUBMISSIONS OF ASSESSEE ALLOWED THE ASSESSEES APPEAL OBSERVING IN PARA 5.3 AS UNDER :- 10 ITA NO.3306/DEL/2016 5.3 THE REASON GIVEN BY AO AND THE SUBMISSION OF T HE APPELLANT ARE CONSIDERED. THE AO HAS LINKED THE ACTIVITIES OF TH E APPELLANT WITH NASSCOM AND HAS CONSIDERED THE APPELLANT AS A SERVICE PROVI DER TO NASSCOM, THUS DENYING THE BENEFIT OF SECTION 11 ON THE PREMISE OF COMMERCIAL ACTIVITIES DURING THE YEAR. THUS, THE ASSUMPTION OF THE LD. AO ON CO NSIDERING THE AMOUNT RECEIVED AS A PROFESSIONAL SERVICE IS INCORRECT AND BAD IN L AW. HOWEVER, NOMENCLATURE OF A PARTICULAR RECEIPT DOES NOT CHANGE THE REAL CHARA CTER AND OBJECTIVE OF A TRANSACTION. THE NATURE OF ACTIVITIES IS A MATTER OF FACTS AND NEEDS TO BE ANALYZED ON THE BASIS OF ITS PRIME OBJECTIVES. SINCE, THE G ENUINENESS AND REASONABLENESS OF THE ACTIVITIES OF THE APPELLANT IS NOT IN QUESTION AND IT IS ONLY THE NOMENCLATURE WHICH HAS RESULTED IN THE DENIAL OF THE EXEMPTIONS, THE SAME IS INCORRECT. IN VIEW OF THIS, GROUND 2 AND 3 OF APPEAL ARE ALLOWED. 10. BEING AGGRIEVED, THE DEPARTMENT IS IN APPEAL BE FORE THE TRIBUNAL AND HAS TAKEN FOLLOWING GROUNDS OF APPEAL :- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ACTIVITIES CAR RIED OUT BY THE ASSESSEE ARE NOT IN THE NATURE OF TRADE, BUSINESS OR COMMERCE OR REN DERING SERVICES IN RELATION TO THE SAME. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.42,32,815/- MA DE BY THE AO ON ACCOUNT OF RESTRICTED GRANTS. 3. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER OR A MEND ANY GROUNDS OF APPEAL RAISED ABOVE AT THE TIME OF HEARING. 11. LD. DR REFERRED TO PAGE 4 OF THE ASSESSING OFFI CERS ORDER AND POINTED OUT THAT ASSESSING OFFICER AFTER EXAMINING THE NATURE OF ACTIVITIES CARRIED ON BY THE ASSESSEE POINTED OUT THAT THE SAM E SATISFIES THE FEATURES OF BUSINESS. HE FURTHER POINTED OUT THAT THE ASSESSIN G OFFICER HAS ALSO OBSERVED THAT ASSESSEE HAD CHARGED SERVICE TAX ON T HE AMOUNT OF FEES RECEIVED BY IT AND TDS WAS ALSO DEDUCTED BY PARTY U /SS 194C AND 194J AS 11 ITA NO.3306/DEL/2016 APPLICABLE. LD. DR FURTHER POINTED OUT THAT AFTER CONSIDERING THE ASSESSEES SUBMISSIONS THAT IT HAD NO PROFIT MOTIVE IN CARRYIN G ON ITS ACTIVITY, THE ASSESSING OFFICER POINTED OUT THAT ASSESSEE HAD NOT GIVEN ANY SPECIFIC EXPLANATION AS TO HOW IT WAS NOT COVERED BY THE AME NDED DEFINITION OF SECTION 2(15) OF THE ACT. HE POINTED OUT THAT EVEN AFTER BEING REGISTERED U/S 25 OF THE COMPANIES ACT, THE ASSESSEE HAD BEEN INVO LVED IN PROVIDING PROFESSIONAL SERVICES. HE, THEREFORE, SUBMITTED TH AT THE PROVISIONS OF PROVISO TO SECTION 2(15) WERE CLEARLY ATTRACTED IN ASSESSEES CASE. 12. LD. COUNSEL FOR THE ASSESSEE, AFTER ELABORATELY NARRATING THE FACTS, REFERRED TO PAGE 76 OF THE PAPER BOOK, WHEREIN, SCH EDULE OF RESTRICTED GRANTS RECEIVED BY ASSESSEE IS CONTAINED TO DEMONSTRATE TH AT GRANTS WERE RECEIVED FROM VARIOUS GOVERNMENT AGENCIES. HE FURTHER POINT ED OUT THAT NO GRANT WAS RECEIVED DURING THE YEAR FROM NASSCOM. LD. COU NSEL FURTHER REFERRED TO PAGE 33 TO 36 OF PAPER BOOK, WHEREIN, ORDER U/S 80G(5)(VI) OF THE INCOME TAX ACT, 1961 READ WITH RULE 11AA OF THE INCOME TAX RULES, 1962 DATED 06.04.2010 OF THE DIT (EXEMPTIONS), DELHI, IS CONTA INED REJECTING THE ASSESSEES APPLICATION FOR EXEMPTION U/S 80G. LD. COUNSEL REFERRED TO PARA 3 OF THE ORDER AND POINTED OUT THAT LD. DIT (EXEMPTIO NS) HAD SPECIFICALLY OBSERVED THAT ACTIVITIES UNDERTAKEN BY THE ASSESSEE WERE COVERED BY THE LAST LIMB OF SECTION 2(15) I.E. ANY OTHER OBJECTS OF GEN ERAL PUBLIC UTILITY. HE 12 ITA NO.3306/DEL/2016 FURTHER REFERRED TO PARA 6 AND 7 OF THE ORDER AND P OINTED OUT THAT IT WAS ALSO OBSERVED THAT ASSESSEE DOES NOT QUALIFY FOR CONTINU ATION OF REGISTRATION U/S 12A/12AA. HE REFERRED TO PAGE 37 TO 41 OF PAPER BO OK, WHEREIN, THE ORDER OF DIT (EXEMPTIONS), DELHI DATED 24.03.2011 CANCELL ING THE REGISTRATION GRANTED U/S 12A IS CONTAINED. LD. COUNSEL REFERRED TO PAGE 44 TO 55 OF PAPER BOOK, WHEREIN, THE TRIBUNALS ORDER AGAINST THE AFO REMENTIONED ORDER IS CONTAINED, IN WHICH, THE ORDERS CANCELLING THE GRAN T OF EXEMPTION U/S 80G AND 12A WERE SET-ASIDE AND THE MATTER WAS RESTORED TO THE AUTHORITIES BELOW. LD. COUNSEL REFERRED TO PAGE 56 OF PAPER BOOK, WHER EIN, ORDER OF DIT (EXEMPTIONS) DATED 11.10.2012 IS CONTAINED, RESTORI NG BACK THE REGISTRATION U/S 12AA(3) SINCE INSPECTION. LD. COUNSEL FURTHER REFERRED TO PAGE 57, WHEREIN, ORDER U/S 80G(5)(VI) IS CONTAINED ENTITLIN G THE ASSESSEE EXEMPTIONS UNDER THE SAID SECTION, WHEREIN, THE FOLLOWING COND ITIONS HAVE BEEN MENTIONED, WHICH ARE REPRODUCED HEREUNDER :- 2. THIS EXEMPTION IS VALID FOR THE PERIOD A.Y. 201 0-11 ONWARDS TILL IT IS CONDITIONS :- II) EVERY RECEIPT ISSUED TO DONOR SHALL BEAR THE NU MBER AND DATE; OF THIS ORDER AND SHALL STATE THE DATE UP TO WHICH THIS CER TIFICATE IS VALID FROM A.Y. 2010- 11 ONWARDS TILL IT IS RESCINDED. 13. LD. COUNSEL POINTED OUT THAT THE ASSESSING OFFI CER HAS PASSED THE ORDER ON 31 ST MARCH, 2014 AFTER THE GRANT OF REGISTRATION U/S 12 A AND 13 ITA NO.3306/DEL/2016 EXEMPTION U/S 80G THOUGH HE HAD SPECIFICALLY EXAMIN ED THE NATURE OF RECEIPT AS PER DIRECTION OF THE TRIBUNAL. LD. COUN SEL RELIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF INSTITUT E OF CHARTERED ACCOUNTANT OF INDIA & ANOTHER VS. DIT (E), (2013) 3 58 ITR 91 (DELHI). 14. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE RECORD OF THE CASE. THE FACTS ARE NOT DISPUTED. T HE ACTIVITIES UNDERTAKEN BY ASSESSEE ARE IN THE FIELD OF CYBER SECURITY FOR INC REASING LEVEL OF SECURITY AND PRIVACY OF IT AND BPO SERVICE PROVIDERS IN PUBLIC L IFE TO ENSURE THAT INDIA IS SECURE DESTINATION. IN THE PRESENT DAY OF TECHNOLO GICAL ADVANCEMENT WHEN THE USE OF INTERNET AND OTHER TECHNOLOGICAL SUPPORT SERVICES HAS IMMENSELY ENTERED INTO DAY TO DAY WORKING OF AN INDIVIDUAL WH ERE PAYMENTS ARE MADE AND AMOUNTS ARE RECEIVED THROUGH INTERNET, IT IS IN THE INTEREST OF ALL THAT THE CONFIDENTIAL DATA OF EVERY INDIVIDUAL IS FULLY SECU RED. IT CANNOT BE DENIED THAT THE POTENTIAL OF CYBER THREATS IS INCREASINGLY RECOGNIZED IN EVERY WALK OF LIFE BECAUSE OF INCREASED USE OF INTERNET IN VARIOU S UTILITY SERVICES LIKE TRANSPORT, TELEPHONE, ELECTRICITY, WATER, ETC.. TH EREFORE, THE POTENTIAL OF CYBER THREATS IS INCREASINGLY RECOGNIZED FOR THEIR IMPACT ON THE LIVES OF INDIVIDUALS, AS ATTACKS ARE INCREASINGLY TARGETING CRITICAL INFRASTRUCTURE LIKE, UTILITIES, TRANSPORT, OIL AND ENERGY AND HENCE THE ABILITY TO DISTURB SOCIAL HARMONY AND INTERACTIONS, URGE TO CAUSE UNRECOVERAB LE DAMAGES TO 14 ITA NO.3306/DEL/2016 BUSINESSES AND ABILITY TO HARM NATIONAL SECURITY PO STURE. ADMITTEDLY, THE ASSESSEE IS IMPARTING VERY VALUABLE SERVICES IN THI S REGARD AND TRAINING OFFICIALS OF POLICE, BANKING, AND OTHER PERSONNEL I N TECHNICAL FIELD. THE GRANTS RECEIVED BY ASSESSEE ARE MAINLY FROM GOVERNM ENT. ONE OF THE MAJOR OBJECTIONS OF ASSESSING OFFICER WAS THAT ASSESSEE W AS IMPARTING SERVICES TO NOSSCOM. THIS OBJECTION IS DEVOID OF ANY MERIT BEC AUSE IT IS THE PRE- DOMINANT OBJECT OF ASSESSEE WHICH IS TO BE EXAMINED FOR DECIDING WHETHER THE ASSESSEE WAS CARRYING ON CHARITABLE ACTIVITIES OR NOT. THE ASSESSEE WAS REGISTERED U/S 25 OF THE COMPANIES ACT WHICH CLEARL Y SHOWS THAT IT COULD NOT CARRY ON ANY ACTIVITIES FOR PROFIT PURPOSES. IT IS WELL SETTLED LAW THAT WHILE CARRYING ON PRE-DOMINANT OBJECTS, IF THE ASSESSEE I S EARNING SOME INCIDENTAL SURPLUS THAT WILL NOT PREJUDICE THE ASSESSEES CLAI M OF BEING CHARITABLE IN NATURE. I, THEREFORE, FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A). 15. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF FEBRUARY, 2017. SD/- (S.V. MEHROTRA) ACCOUNTANT MEMBER DATED : 28-02-2017. SUJEET 15 ITA NO.3306/DEL/2016 COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT 4) THE CIT(A) 5) THE DR, I.T.A.T., NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI