ADIT (E), New Delhi V. Indian National Theatre Trust, New Delhi

ITA 3795/DEL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52782 (ITAT-DELHI)
• Duration Of Justice: 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 10-10-2011
• Assessment Year: 2008-2009
• Appeal Filed On: 09-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SALIL MISHRA SR
• Assessee Lawyers: SSH V P GUPTA
• Keywords: Business income; Charitable institution
• Section: 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `C: NEW DELHI BEFORE SHRI C.L.SETHI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T. A. NO.3795/DEL/2011 ASSESSMENT YEAR : 2008-09 ASSTT. DIRECTOR OF INCOME-TAX (E), INDIAN NATIONAL THEATRE TRUST, TC-II, NEW DELHI. VS. 4, SAFDAR HASHMI MARG, NEW DELHI. PAN: AAATI1040E (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SALIL MISHRA, SR. CIT. RESPONDENT BY: S/SH. V.P. GUPTA & BASANT KUMAR, AD VOCATE. O R D E R PER C.L. SETHI, JUDICIAL MEMBER: THE REVENUE IS IN APPEAL AGAINST THE ORDER DATED 14 .06.2011 PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) PE RTAINING TO THE ASSESSMENT YEAR 2008-09. 2. IN THIS APPEAL, THE ONLY GROUND TAKEN BY THE REV ENUE IS THAT THE LEARNED CIT(A) HAS ERRED IN ALLOWING EXEMPTION UNDER SEC. 1 1 OF THE INCOME-TAX ACT, PARTICULARLY WHEN THE HIRING OF THE AUDITORIUM AND PROVIDING SPACE FOR RENT ARE COMMERCIAL ACTIVITIES AND THERE IS NOTHING CHARITABLE ABOUT THE ACTIVITIES CARRIED ON BY THE ASSESSEE. 2 3. THE ASSESSEE SOCIETY IS REGISTERED UNDER SEC. 12 A OF THE ACT VIDE ORDER DATED 9.02.1977 OF THE LEARNED COMMISSIONER OF INCO ME-TAX. IT WAS FOUND BY THE ASSESSING OFFICER THAT THE ASSESSEES MAIN S OURCE OF INCOME WAS FROM HIRING CHARGES OF AUDITORIUM, RENTAL INCOME AND MAI NTENANCE CHARGES RECEIVED FROM THE TENANTS. AFTER HEARING THE ASSES SEE AND CONSIDERING THE ASSESSEES APPLICATION, THE AO FOUND HIMSELF IN AGR EEMENT WITH THE VIEWS OF HIS PREDECESSOR THAT HIRING OF AUDITORIUM AND RENT OF PROPERTY WERE THE PRINCIPAL ACTIVITY OF THE ASSESSEE, CONDUCTED WITH A CLEAR PROFIT MOTIVE AND NOT AN INCIDENTAL ACTIVITY. THE AO, THEREFORE, REJ ECTED THE ASSESSEES CLAIM OF BEING A CHARITABLE INSTITUTION AND BROUGHT THE S URPLUS TO INCOME CHARGEABLE TO TAX AND DETERMINE THE ASSESSEES TOTA L INCOME AT RS.55,89,830/-. 4. ON AN APPEAL, THE LEARNED CIT(A) DECIDED THE ISS UE IN FAVOUR OF THE ASSESSEE AFTER FOLLOWING THE ORDER OF THE TRIBUNAL FOR ASSESSMENT YEARS 1986-87 TO 1988-89. THE LEARNED CIT(A) ALSO OBSERV ED THAT HIS PREDECESSOR, WHILE DECIDING THE ISSUE IN ASSESSMENT YEAR 2007-08 , HAS ALSO FOLLOWED THE ORDER OF THE TRIBUNAL AND DECIDED THE ISSUE IN FAVO UR OF THE ASSESSEE. THE LEARNED CIT(A), THEREFORE, HELD THAT THE ASSESSEE I S ENTITLED TO EXEMPTION UNDER SEC. 11 OF THE ACT. 5. HENCE, THE DEPARTMENT IS IN APPEAL BEFORE US. 3 6. IN THE COURSE OF HEARING OF THIS APPEAL, IT HAS BEEN POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE CIT(A)S ORDER DECIDED IN ASSESSEES FAVOUR AFTER FOLLOWING THE DECISION OF T HE TRIBUNAL DATED 22.4.1999 FOR ASSESSMENT YEARS 1986-87 TO 1988-89, HAS BEEN UPHELD BY THE HONBLE TRIBUNAL VIDE ORDER DATED 5.08.2011 IN THE APPEAL FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2007-08 (ITA NO.565 9(DEL)/2010), A COPY OF WHICH HAS BEEN PLACED BEFORE US. THE LEARNED DR ON THE OTHER HAND, SUPPORTED THE ORDER OF THE ASSESSING OFFICER. THE ITAT, DELHI BENCH `C, NEW DELHI HAS DECIDED THE ISSUE IN ASSESSEES FAVOU R BY DISMISSING THE DEPARTMENTAL APPEAL (ITA NO.5659(DEL)/2010) FOR ASS ESSMENT YEAR 2007- 08 BY OBSERVING AS UNDER:- 3. THE SUBMISSIONS OF THE LD. DR BEFORE US ARE TO THE EFFECT THAT EARNING OF RENTAL INCOME BY HIRING THE P REMISES AND CHARGING MAINTENANCE CHARGES IS A COMMERCIAL ACTI VITY, THEREFORE, THE ASSESSEE SHOULD HAVE MAINTAINED SEPARATE BOOKS OF ACCOUNT FOR THIS ACTIVITY. THERE IS NOT HING ON RECORD TO SHOW ANY CHARITABLE ACTIVITY IN PURSUANCE OF THE OBJECTS OF THE SOCIETY. THEREFORE, IT IS AGITATED THAT THE PROVISION CONTAINED IN SECTION 11(4A) IS APPLICABLE. 3.1 AS AGAINST THE AFORESAID, THE SUBMISSION OF THE LD. COUNSEL IS THAT THE ASSESSEE HAS BEEN ASSESSED AS A CHARITABLE SOCIETY OVER A LONG PERIOD OF TIME. TH ERE HAS BEEN NO CHANGE IN FACTS IN THIS YEAR. THE ISSUE R AISED BY THE REVENUE STANDS COVERED BY THE DECISION OF THE TRI BUNAL DATED 22.04.1999 FOR ASSESSMENT YEARS 1986-87 TO 1988 -89, A COPY OF WHICH HAS BEEN PLACED BEFORE US. THIS DECISIO N HAS NOT BEEN CHALLENGED BY THE REVENUE BEFORE THE HIGH COURT. 4 4. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. THE OPERATIVE PORTION OF THE ORDER OF THE TRIBUNAL IS CONTAINED IN PARAGRAPH NO. 6, W HICH READS AS UNDER:- 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. CIT(A) IN THE IMPUGNED ORDER HIMSELF ADMITTED THAT FACTS IN THE CASE WERE IDENTICAL TO THE FACTS IN THE CASE OF GALI B INSTITUTE AND ADMITTEDLY, ITAT DELHI BENCH HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE. THE LD. DR WAS NOT ABLE TO POINT OUT ANY DIFFERENCE EITHE R OF FACT OR OF LAW AND RESPECTFULLY FOLLOWING THE SAID ANALOGY, THE APPEALS OF THE ASSESSEE ARE T O BE ALLOWED. 4.1 THE FACTS IN THE CASE OF GALIB INSTITUTE (S UPRA) ARE THAT THE ASSESSEE DERIVED INCOME FROM RENT INCLUDING RENT FROM HIRING OF AUDITORIUM AND FURNITURE AND FIXTURE. T HE AO TREATED THE INCOME AS BUSINESS INCOME AND INVOKED THE PROVISION CONTAINED IN SECTION 11(4A). SINCE S EPARATE BOOKS OF ACCOUNT WERE NOT MAINTAINED, HE DENIED DED UCTION U/S 11. THE OPERATIVE PORTION OF THE DECISION READS AS UNDER:- IN ALL THE ABOVE CASES, THEIR LORDSHIPS WERE CONSIDERING THE WORDS THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT. THEIR LORDSHIPS HAVE COME TO THE CONCLUSION THAT WHEN THE PREDOMINANT OBJECT WAS NOT TO EARN THE PROFIT BUT TO CARRY OUT OBJECTS OF GENERAL PUBLIC UTILITY, THE PROFIT EARNED IS RENT WOULD NOT AMOUNT TO CARRYING ON OF ANY ACTIVITY FOR PROFIT. HERE, IN THIS CASE ALSO, THE PREDOMINANT OBJECT OF THE LETTING OUT OF THE AUDITORIUM AND FURNITURE AND FIXTURE IS FOR CARRYING OUT OF THE OBJECT OF THE TRUST AND, THEREFORE, IN VIEW OF THE ABOVE DECISIONS, IT IS N OT AN ACTIVITY CARRIED ON FOR PROFIT. THEREFORE, IT CANNOT BE SAID TO BE PROFITS AND GAINS OF THE 5 BUSINESS. ACCORDINGLY, S. 11(4A) WILL HAVE NO APPLICATION. THEREFORE, WE HOLD THE ASSESSEE-TRUS T BE ALLOWED EXEMPTION UNDER S. 11 EVEN IN RESPECT OF THE INCOME FROM RENT FROM LETTING OUT OF THE AUDITORIUM AND FURNITURE AND FIXTURES. ACCORDINGLY, GROUND NO. 1 OF THE ASSESSEES APPEAL FOR ALL THE YEARS IS ALLOWED. 4.2 THE DECISION IN THE CASE OF THE ASSESSEE AN D IN THE CASE OF GALIB INSTITUTE WILL SHOW THAT THE HIRIN G OF THE AUDITORIUM TO VARIOUS PERSONS WAS IN FURTHERANCE OF ITS OBJECTS. THIS DECISION IN THE CASE OF THE ASSE SSEE HAS NOT BEEN CHALLENGED. THIS ISSUE IS FUNDAMENTAL ISSUE PERMEATING ALL THE ASSESSMENT OF THE ASSESSEE. THEREFORE, I N ABSENCE OF ANY CHALLENGE TO THE EARLIER ORDER, THE REVENUE CANNOT BE ALLOWED TO CHANGE ITS STAND IN THIS YEAR. 7. RESPECTFULLY FOLLOWING THE AFORESAID TRIBUNALS ORDER RENDERED ON IDENTICAL FACTS, WE ARE INCLINED TO UPHOLD THE ORDE R OF THE LEARNED CIT(A) IN HOLDING THAT THE ASSESSEE IS ENTITLED TO EXEMPTION UNDER SEC. 11 OF THE ACT AND DISMISS THIS APPEAL FILED BY THE REVENUE. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. 9. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 1 0.10.2011 IMMEDIATELY AFTER THE HEARING WAS OVER. SD/- SD/- (SHAMIM YAHYA) (C.L. SETHI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 10 TH OCTOBER, 2011. 6 ITA NO.3795/DEL/2011 COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT.