THE INDIAN SILK EXPORT PROMOTION CONCIL, NEW DELHI V. ASST CIT (E) II(1), MUMBAI

ITA 3328/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1692 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 02-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAILASH GAIKWAD
• Assessee Lawyers: N H GAJRIA
• Keywords: Charitable institution; Opportunity of being heard
• Section: 143(3); 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J MUMBAI BEFORE SHRI C. N. PRASAD (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 3328/MUM/2015 ASSESSMENT YEAR: 2010-11 THE INDIAN SILK EXPORT PROMOTION VS. ACIT COUNCIL, B-1, ENTENSION A -39 MOHAN CO-OP. (EXEMPT ION) II (1), INDUSTRIAL ESTATE, MATHURA ROAD, MUMBAI- 400002 NEW DELHI-110044. PAN NO. AAATT4407C (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI N. H. GAJRIA, AR REVENUE BY: SHRI KAILASH GAIKWAD, DR. DATE OF HEARING : 06/10/2 016 DATE OF PRONOUNCEMENT: 30/11/2016 ORDER PER N.K. PRADHAN, A.M THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVA NT ASSESSMENT YEAR IS 2010-11. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER (APPEALS)-7 MUMBAI AND ARISES OUT OF T HE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME TAX ACT 1961, (T HE ACT). 2. THE SOLE GROUND RAISED BY THE ASSESSEE IN THIS A PPEAL IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.32,90,030/-, BEING THE AMOUNT SPENT OUTSIDE INDIA AS NOT AN APPL ICATION OF MONEY IN INDIA IN TERMS OF PROVISIONS OF SECTION 11 OF TH E ACT. IT IS ALSO RAISED THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE SAI D DISALLOWANCE, BEING THE AMOUNT SPENT OUTSIDE INDIA, THOUGH THE MA IN OBJECT OF THE COUNCIL IS TO PROMOTE EXPORTS IN SILK INDUSTRIES FO R THE COUNTRY FALLING UNDER THE HEAD PUBLIC UTILITY SERVICES. ITA NO. 3328/MUM/2015 2 3. THE ASSESSEE-TRUST FILED ITS RETURN OF INCOME FO R A.Y. 2010 11 DECLARING TOTAL INCOME AT RS. NIL. DURING THE COURS E OF ASSESSMENT FOR THE IMPUGNED ASSESSMENT YEAR, THE AO FOUND THAT THE ASSESSEE HAD SPENT THE FOLLOWING AMOUNT OUTSIDE INDIA. PARTICULARS AMOUNT SPENT OUTSIDE INDIA (RS.) GLOBAL TEXTILE FAIR, LOS ANGELES USA , APRIL 2009 6 ,96,155/- TEX WORLD FAIR, PARIS, SEPTEMBER,2009 4,96,599/- ATF FAIR, CAPETOWN, SOUTH AFRICA, NOVEMBER,2009 7,4 1,968/- HEIM TEXTILE FAIR, GERMANY,JANUARY,2010 8,31,086/- TEXTILE WORLD FAIR,PARIS, FEBRUARY,2010 5,24,222/- TOTAL 32,90,030/- IN RESPONSE TO A QUERY RAISED BY THE AO TO EXPLAIN WHY THIS AMOUNT SPENT OUTSIDE INDIA SHOULD NOT BE DISALLOWED , THE ASSESSEE SUBMITS THAT THE TRUST IS FORMED BY THE MINISTRY OF COMMERCE WITH THE OBJECT OF PROMOTING EXPORT OF SILK AND ITS ALLI ED PRODUCTS. IT GETS GRANTS FROM THE GOVERNMENT FOR PARTICIPATING IN SUC H PROGRAMS. IT IS ARGUED BEFORE THE AO THAT THE OBJECTS OF THE TRUST FALL UNDER THE GENERAL PUBLIC UTILITY. THE ASSESSEE ALSO SUBMITS T HAT IT REQUIRES PARTICIPATION IN FAIRS ABROAD IN ORDER TO ACHIEVE I TS OBJECTS AND THE VERY PURPOSE OF FORMATION OF THE ASSESSEE TRUST WOU LD BE DEFEATED IF SUCH AMOUNT IS NOT SPENT OUTSIDE INDIA. THE AO RELIED ON THE DECISION IN THE CASE OF DIRECTOR OF INCOME- TAX (EXEMPTION) VS. NATIONAL ASSOCIATION OF SOFTWAR E AND SERVICES COMPANIES (345 ITR 362) AND HELD THAT THE APPLICATION OF INC OME AS WELL AS CHARITABLE PURPOSES SHOULD BE IN INDIA. IN VIEW OF THE ABOVE DECISION, THE AO DISALLOWED RS. 32, 90, 030/-SPENT BY THE ASSESSEE TRUST OUTSIDE INDIA AND DENIED EXEMPTION ON THE ABO VE AMOUNT. 4. THE ASSESSEE-TRUST PREFERRED APPEAL AGAINST THE ORDER OF THE AO BEFORE THE LD. CIT (A). THE LD. CIT (A) RELIED ON T HE DECISION IN THE CASE OF INDIA BRAND EQUITY FOUNDATION , 53 SOT 506 AND NATIONAL ITA NO. 3328/MUM/2015 3 ASSOCIATION OF SOFTWARE AND SERVICES COMPANIES (SUP RA) AND CONFIRMED THE DISALLOWANCE OF RS.32,90,030/- MADE BY THE AO. 5. THE LD. COUNSEL OF THE ASSESSEE SUBMITS BEFORE U S THAT THE DECISION RELIED ON BY THE AO AND LD. CIT(A) ARE DIF FERENT FROM THE CASE OF THE ASSESSEE IN THE FOLLOWING MANNER. INDIA BRAN D EQUITY FOUNDATION (IBEF) IS NOT AN EXPORT PROMOTION COUNCI L. IT DID NOT GET ANY GRANTS FROM GOVERNMENT TO ORGANIZE AN EXHIBITIO N ABROAD. IT GOT FUNDS FROM ENGINEERING EXPORT PROMOTION COUNCIL TO HOLD THE EXHIBITION ABROAD. IBEF WAS NOT LIABLE TO REFUND TH E UNSPENT AMOUNT TO ANY AUTHORITIES AS AGAINST THE APPELLANT COMPANY IS BOUND TO REFUND THE ENTIRE AMOUNT OF GRANTS IF NOT UTILIZED AS PER THE DIRECTIONS OF THE GOVERNMENT. THE COUNCIL IS AN EXPORT PROMOTI ON COUNCIL, WHOSE MAIN OBJECTS ARE TO PROMOTE THE EXPORTS IN TH E FIELD OF SILK AND ITS ALLIED PRODUCTS, WHEREAS THE CASE OF IBEF AND N ASCOM (NATIONAL ASSOCIATION OF SOFTWARE AND SERVICES COMPANIES) THE IR MAIN OBJECTS ARE NOT TO PROMOTE EXPORTS BUT TO PROMOTE TRADE OF THEIR INDUSTRY. THE COUNCIL NEEDS TO ARRANGE SUCH EXHIBITIONS AND S EMINARS IN INDIA AND ABROAD TO PROMOTE THE EXPORTS UNDER THE GUIDELI NES OF THE GOVERNMENT POLICIES AND RULES AND REGULATIONS, WHER EAS IBEF AND NASCOM ARE AT THEIR WILL AND DESIRE TO ARRANGE OR P ARTICIPATE IN EXHIBITIONS OUTSIDE INDIA. THE COUNCIL IS BOUND TO HAVE SUCH EXHIBITIONS ABROAD IN VIEW OF THE GOVERNMENT POLICI ES AND GUIDELINES, WHEREAS IBEF AND NASCOM ARE NOT BOUND TO PARTICIPAT E IN ACTIVITIES OUTSIDE INDIA. 5.1 THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT TH E CASE OF THE ASSESSEE IS FULLY COVERED BY THE FOLLOWING DECISION S WHICH INDICATE THAT THE AMOUNT SPENT OUTSIDE INDIA TO PROMOTE THE EXPORTS ARE DEEMED TO HAVE BEEN APPLIED FOR THE CHARITABLE PURP OSES IN INDIA. ITA NO. 3328/MUM/2015 4 (I) GEM AND JEWELLERY EXPORT PROMOTION COUNCIL VS. SIXT H INCOME TAX OFFICER 68 ITD 95(MUM-ITAT BENCH) (II) HANDLOOM EXPORT PROMOTION COUNCIL VS. ADI (EXEMPTI ON)- IV, CHENNAI 62 TAXMANN. COM 288-CHENNAI ITAT (III) ADIT (EXEMPTION) VS. THE SYNTHETICS & RAYON TEXTILES E XPORT PROMOTION COUNCIL MUMBAI - ITA 6639 AND 6640/MUM/2011 MUMBAI ITAT. 5.2 THE LD. COUNSEL SPECIFICALLY REFERS TO THE ORDER OF THE ITAT H BENCHES MUMBAI IN THE CASE OF M/S THE GEM & JEWELLERY EXPORT PROMOTION COUNCIL (ITA NO. 5143/MUM/2010 FOR A.Y. 2005-06), (ITA NO. 5144/MUM/2010 FOR A.Y. 2006-07) & (ITA NO. 5145 /MUM/2010 FOR A.Y. 2007-08) STATING THAT THE TRIBUNAL HAS FOL LOWED THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN DIT VS. M/S THE GEM & JEWELLERY EXPORT PROMOTION COUNCIL [ITA (LOD) NO. 1113 OF 2010] AND ALLOWED EXEMPTION U/S 11 TO THE ASSESSEE. THE LD. COUNSEL S UBMITS THAT FACTS BEING SIMILAR, THE ASSESSEE-TRUST IN THE INSTANT CA SE IS ALSO ENTITLED TO EXEMPTION U/S 11 BY FOLLOWING THE REFERRED DECISION OF THE JURISDICTIONAL HIGH COURT. 5.3 AN ALTERNATIVE ARGUMENT IS MADE BY THE LD. COUN SEL OF THE ASSESSEE STATING THAT ALL GRANTS RECEIVED WITH SPEC IFIC DIRECTIONS DO NOT FORM OR FALL WITHIN THE DEFINITION VOLUNTARY CO NTRIBUTION AND HENCE NOT LIABLE TO TAXED . HE STATES THAT THE ISSU E HAS BEEN CLEARLY BROUGHT OUT IN THE FOLLOWING DECISIONS. (I) CIT VS. GEM AND JEWELLERY EXPORT PROMOTION COUNCIL 13 TAXMANN 13(BOM). (II) HANDLOOM EXPORT PROMOTION COUNCIL VS. ADIT (EXEMPTI ON IV) 62 TAXMANN.COM 288 (CHENNAI ITAT). (III) DIT (EXEMPTION) VS. GUJARAT STATE COUNCIL FOR BLOOD TRANSFUSION 41 TAXMANN.COM 449(GUJ.) ITA NO. 3328/MUM/2015 5 (IV) DIT (EXEMPTION) VS. SOCIETY FOR DEVELOPMENT ALTERNA TIVES 18 TAXMANN. COM 364 (DEL.) (VI) NIRMAL AGRICULTURE SOCIETY VS. ITO 71 ITD 152 (HYDERABAD ITAT). 6. THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). HE RELIES ON THE DECISION IN THE CASE OF NATIONAL ASSOCIATION OF SOFTWARE AND SERVICES COMPANIES (SUPRA) WHEREIN IT HAS BEEN HELD THAT THE AMOUNT OF RS. 38,29,535 SPENT BY THE ASSESSEE-TRUST IN HAN OVER, GERMANY CANNOT BE CONSIDERED AS APPLICATION OF THE INCOME O F THE TRUST IN INDIA FOR CHARITABLE PURPOSES. HE ALSO RELIES ON THE ORD ER IN THE CASE OF INDIA BRAND EQUITY FOUNDATION(SUPRA). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. DURING THE COURSE OF HEARING WE REQUESTED THE LD. COUNSEL OF THE ASSESSEE TO FILE A COPY OF THE J UDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN M/S THE GEM & JEWELLERY EXPORT PROMOTION COUNCIL (SUPRA) . THE LD. COUNSEL FILED A WRITTEN SUBMISSION ON 21.10.2016 STATING THAT THE SAID DECISION OF THE HONBLE BOMBAY HIGH COURT IS NOT AVAILABLE THOUGH THE ORDER OF THE TRIBUNAL MENTIONS IT. WE HAVE GONE THROUGH THE ORDER OF THE TRIBUNAL IN M/S THE GEM & JEWELLERY EXPORT PROMOTION COUNCIL(SUPRA) AND FIND THAT THE ISSUE OF HOLDING EXHIBITION IS THERE. BUT THE ISSUE OF HOLDI NG EXHIBITION OUTSIDE INDIA IS NOT APPARENT FROM THE ORDER. 7.1 WE FIND THAT THE ALTERNATIVE ARGUMENT ADVANCED BY THE LD. COUNSEL OF THE ASSESSEE HAS GOT A DIRECT BEARING ON THE INSTANT CASE . THE LD COUNSEL OF THE ASSESSEE HAS RELIED INTER-ALIA ON THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN GEM AND JEWELLERY EXPORT PROMOTION COUNCIL(SUPRA) , WHEREIN IT HAS BEEN HELD: IT WAS WELL KNOWN THAT THE GRANTS-IN-AID WERE MADE B Y THE GOVERNMENT TO PROVIDE CERTAIN INSTITUTIONS WITH SUFFICIENT FUNDS TO CARRY ON THEIR CHARITABLE ACTIVITIES. ON READING THE CONDITIONS ON WHICH THOSE GRANTS-IN-AID WERE GIVEN, ITA NO. 3328/MUM/2015 6 IT WAS OBVIOUS THAT THE INSTITUTIONS OR ASSOCIATION S TO WHICH THE GRANT WAS MADE HAD NO RIGHT TO ASK FOR THE GRANT AND IT WAS SOLE LY WITHIN THE DISCRETION OF THE GOVERNMENT TO MAKE GRANTS TO INSTITUTIONS OF A CHARITABLE NATURE. AGAIN, THE GOVERNMENT DID NOT EXPECT ANY RETURN FOR THE GRA NTS GIVEN BY IT TO SUCH INSTITUTIONS AND THERE WAS NOTHING WHICH WAS REQUIR ED TO BE DONE BY THESE INSTITUTIONS FOR THE GOVERNMENT, WHICH COULD BE CONS IDERED AS CONSIDERATION FOR THE GRANT. THEREFORE, NONE OF THE CONDITIONS ATTACHED TO THE GRA NT AFFECTED THE VOLUNTARY NATURE OF THE CONTRIBUTION. HENCE, THE IMPUGNED GRAN T WAS EXEMPT UNDER SECTION 12. 7.2 THEREFORE, WE ADMIT UNDER RULE 29 OF THE ITAT R ULES, 1963 THE ALTERNATIVE ARGUMENT FILED BY THE ASSESSEE ON 21/10 /2016 BEFORE THE TRIBUNAL. HOWEVER, THE ABOVE ALTERNATIVE ARGUMENT W AS NOT THERE BEFORE THE AO OR THE LD. CIT(A) . IN VIEW OF THE AB OVE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND REMIT THE CASE TO THE F ILE OF THE AO (I) TO CONSIDER THE MAIN AS WELL AS THE ALTERNATIVE ARGUME NT OF THE ASSESSEE (II) EXAMINE THE RELEVANCE OF THE DECISION OF HONB LE BOMBAY HIGH COURT IN M/S THE GEM & JEWELLERY EXPORT PROMOTION COUNCIL (SUPRA) AND MAKE A FRESH ASSESSMENT AS PER THE PROVISIONS O F THE ACT, AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 8. IN THE RESULT THE APPEAL IS ALLOWED FOR STATISTI CAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 30/11/201 6 SD/- SD/- (C. N. PRASAD) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBE R MUMBAI; DATED: 30/11/2016 PRAMILA ITA NO. 3328/MUM/2015 7 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI