Promoters & Builders Association of Pune, Pune V. CIT, Pune

ITA 39/PUN/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3104 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 09-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A S SINGH
• Assessee Lawyers: V L JAIN
• Keywords: Business income; Charitable institution; Opportunity of being heard; Principle of natural justice
• Section: 80G; 12A; 12; 10; 2; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI I.C. SUDHIR AND SHRI D. KARUNAKARA RAO ITA NO. 39/PN/09 (ASSTT. YEAR 2008-09) PROMOTERS & BUILDERS ASSOCIATION OF PUNE 501/502, MANTRI TERRACE , THUBE PARK, NEAR SANCHETI HOSPITAL, PUNE-411005 PAN NO. AAATP6190J .... APPELLANT VS. CIT, TECH-II,. PUNE . RESPONDENT APPELLANT BY : SHRI V.L.JAIN RESPONDENT BY : SHRI A.S. SINGH ORDER PER D. KARUNAKARA RAO AM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE CIT-II, PUNE DATED 27-11-2008. THE GROUNDS READS AS UNDER:- 1. THE LEARNED CIT(A) HAS ERRED IN NOT CONTINUING THE RECOGNITION U/SEC. 80G OF THE INCOME TAX ACT, 1961 GRANTED TO THE ASSO CIATION EARLIER. 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S IN REJECTING APPLICATION OF THE ASSOCIATION FOR CONTINUATION OF RECOGNITION U/SEC. 80G ON THE GROUND THAT THE EXHIBITION ACTIVITY CARR IED OUT BY THE ASSOCIATION IS A PROFIT MAKING ACTIVITY. 3. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S IN HOLDING THAT SINCE THE ACTIVITY OF EXHIBITION RESULTED INTO SURPLUS FO R THE ASSOCIATION IT IS A ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINES S AND THEREFORE THERE IS A VIOLATION OF PROVISIONS OF SEC. 80G(5)(I ) OF THE INCOME TAX ACT, 1961. 2. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE FILED AN APPLICATION FOR REGISTRATION U/S. 80G ON 27-05-2008 AL ONGWITH THE NECESSARY PAPERS INCLUDING THE COPY OF THE REGISTRATION U/S. 12A OF TH E ACT. AFTER ANALYZING THE OBJECTS OF THE TRUST AND THE EXPENDITURE ACCOUNT OF THE ASSES SEE, CIT NOTED THAT THE ASSESSEE CONDUCTED BUSINESS ACTIVITIES OF CONDUCTIN G EXHIBITION, SALE OF PAINTINGS, ADVERTISING ETC. AND EARNED BUSINESS INCOME WITH IN T HE MEANING OF 1 ST PROVISO TO ITA NOS. 39/PN/08 A.Y. 2008-09 PAGE 2 OF 4 SECTION 2(15) OF THE ACT. AS PER THE ASSESSEE THE AB OVE ACTIVITIES ARE NOT DOMINANT ONES AND THE MAIN PURPOSE OF ASSESSEE IS TO CARRY ON THE CHARITABLE PURPOSE. IN THIS REGARD, THEY RELIED ON THE CALCUTTA HIGH COURT JUDGEMEN T IN THE CASE OF SHILPAM 230 ITR 126 FOR THE PROPOSITION THAT THE CHARITABLE PU RPOSE WOULD NOT LOOSE ITS CHARACTER IF THE PREDOMINANT OBJECT OF THE ASSESSEE WA S TO CARRY OUT A CHARITABLE PURPOSE. ON CONSIDERING THE VARIOUS OBJECTS RAISED BY T HE ASSESSEE WHICH ARE MENTIONED IN PARA 3 OF THE IMPUGNED ORDER, THE CIT DIS CUSSED THE PROVISIONS OF SEC. 2(15) AND HELD THAT THE ASSESSEE IS INVOLVED IN PROFIT MAKING ACTIVITY AND THEREFORE, REQUESTED REGISTRATION U/S 80G WAS DENIED. AG GRIEVED WITH THE SAME ASSESSEE FILED THE INSTANT APPEAL BEFORE US. 3. AT THE VERY OUTSET, LD. COUNSEL ARGUED THAT THE AS SOCIATION IS FOR PROMOTING THE CHARITABLE ACTIVITIES FOR THE BENEFITS OF THE BUI LDERS AND PROMOTERS. THE INCOME EARNED BY THE ASSESSEE IS INCIDENTAL TO THE OBJECTS OF THE TRUST AND ALSO FOR THE ADVANCEMENT OF THE SAID OBJECTS. RELYING ON THE CHA NDIGARH BENCH DECISION IN THE CASE OF HIMACHAL PRADESH ENVIRONMENT PROTECTION AND PO LLUTION CONTROL BOARD VS. CIT (2009) 125 TTJ (CHD) 98, TO SUPPORT HIS ARGUMENTS REGARDING DOMINANT PURPOSE VS. ANCILLARY ACTIVITIES AND HELD THE MAIN OBJECT OF THE ASSESSEE IS GENERAL PUBLIC UTILITY. FURTHER, IN RESPONSE TO THE REF ERENCE FROM THE BENCH TO THE DECISION OF ITAT DELHI, LD. COUNSEL FILED A COPY OF THE ORDER OF THE TRIBUNAL OF THE DELHI BENCH IN THE CASE OF GIAN EDUCATIONAL SOCIETY VS. CIT (2010) 6 ITR (TRIB) 350 (DELHI) AND STATED THAT, REGISTRATION U/S 80G CANNOT BE REJECTED WHILE REGISTRATION U/S. 12A IS UNDISTURBED BY THE REVENUE AS THE IMPUGNE D VIOLATION IF ANY IS EQUALLY RELEVANT FOR BOTH THE PROCEEDINGS U/S 12A AS WELL AS U /S 80G OF THE ACT. LD. DR FOR THE REVENUE RELIED ON THE ORDER OF THE COMMISSIONER. 3. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE CIT AS WELL AS THE DECISION REFERRED ABOVE. WE HAVE ALSO GONE THROUGH THE RELEVANT PROVISIONS IN THIS REGARD WHICH ARE AS FOLLOWS:- SEC 2(15) CHARITABLE PURPOSE INCLUDES RELIEF OF THE POOR, EDUCA TION, MEDICAL RELIEF, [PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTORIC INTEREST,] AND THE ADVANCEMENT OF ANY OTHER O BJECT OF GENERAL PUBLIC UTILITY: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CARRYING ON ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF T HE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACT IVITY: . .. ITA NOS. 39/PN/08 A.Y. 2008-09 PAGE 3 OF 4 FURTHER, THE PROVISION OF SECTIN 80G(5)(I) IS AS UNDER. 80G(5)(I). THIS SECTION APPLIES TO DONATIONS TO ANY INSTITUTI ON OR FUND REFERRED TO IN SUB-CLAUSE (IV) OF CLAUSE (A) OF SUB-SE CTION (2), ONLY IF IT IS ESTABLISHED IN INDIA FOR A CHARITABLE PURPOSE AND IF I T FULFILS THE FOLLOWING CONDITIONS, NAMELY:- [(I) WHERE THE INSTITUTION OR FUND DERIVES ANY INCOME, SUCH INCOME WOULD NOT BE LIABLE TO INCLUSION IN ITS TOTAL INCOME UNDER TH E PROVISIONS OF SECTIONS 11 AND 12 [OR CLAUSE (23AA)] [OR CLAUSE (23C)] OF SECT ION 10 : [ PROVIDED THAT WHERE AN INSTITUTION OR FUND DERIVES ANY INCOME, BEING PROFITS AND GAINS OF BUSINESS, THE CONDITION THAT SUCH INCO ME WOULD NOT BE LIABLE TO INCLUSION IN ITS TOTAL INCOME UNDER THE PROVISIONS OF SECTION 11 SHALL NOT APPLY IN RELATION TO SUCH INCOME, IF- 4. FURTHER, WE HAVE ALSO PERUSED THE DELHI BENCH DECI SION IN THE CASE OF GAIN EDUCATIONAL SOCIETY(SUPRA) THE HELD PORTION READS AS UNDER:- HELD, ALLOWING THE APPEAL, THAT THE ASSESSEE PROVI DED FREE PROFESSIONAL TRAINING OF SEWING, WEAVING AND MUSIC TO THE POOR, WIDOWS AND HELPLESS UNEDUCATED FEMALES TO MAKE THEM SELF-DEPENDENT AGAI NST NOMINAL PAYMENTS. THE ACTIVITIES WERE CARRIED ON WITH THE HELP OF DON ATIONS RECEIVED FROM MEMBERS AND FROM PERSONS CONTRIBUTING FOR CHARITY. MOREOVER, THE RECOGNITION GRANTED TO THE ASSESSEE UNDER SECTION 1 2A WAS IN FORCE AND HAD NOT BEEN WITHDRAWN . THE GRANT OF RENEWAL OF 80G CERTIFICATE HAD WRONGLY BEEN REFUSED TO THE ASSESSEE AS ACCORDING TO THE FATS OF THE CASE THE ACTIVITY OF THE ASSESSEE WAS VERY MUCH CHARITABLE I N NATURE AS IT WAS CONSTITUTED TO PROVIDE EDUCATION TO THE NEEDY PERSO NS AND FEMALES TO ENABLE THEM TO BECOME SELF-DEPENDENT. NO SPECIFIC INSTANCE HAD BEEN BROUGHT ON RECORD BY THE COMMISSIONER TO SHOW THAT WHAT WAS ST ATED BY THE ASSESSEE WAS NOT CORRECT. THERE WAS NO JUSTIFICATION FOR NON-GRANT OF RENEWAL OF CERTIFICATE UNDER SECTION 80G AND THE COMMISSIONER WAS DIRECTED TO GRANT RENEWAL OF CERTIFICATE UNDER SECTION 80G OF THE ACT TO THE ASSESSEE. 5. FROM THE PROVISIONS IT IS EVIDENT THAT THE PROVISI ONS TO SEC. 80G(5) ARE NOT INDEPENDENT AND THEY HAVE TO BE INTERPRETED IN CONJUN CTION WITH THE OTHER PROVISIONS OF THE ACT SUCH AS SEC. 11 AND 12 OF THE INCOME TAX ACT. THE INCOME WHICH IS OTHER WISE INELIGIBLE FOR INCLUSION IN THE TOTAL INCOME FOR THE PURPOSE OF SEC. 11 AND 12 OF THE INCOME TAX ACT CANNOT BE ELIG IBLE FOR INCLUSION IN THE TOTAL INCOME UNDER THE SAID PROVISIONS. THEREFORE THE APPLICA BILITY OF THE DECISION IN THE CASE OF GIAN EDUCATIONAL SOCIETY (SUPRA) CANNOT BE RU LED OUT. IN OTHER WORDS, THE INCOME, CHARGEABLE TO TAX IN VIEW OF THE VIOLATION O F THE PROVISIONS OF SECTION 80G, CANNOT BE ALLOWED AS EXEMPTION ONE UNDER THE PROVISI ONS OF SECTIONS 11 AND 12 OF THE ACT. NONE OF THE PARTIES PRESENT BEFORE US TO ESTA BLISH WHETHER THERE IS DISTURBANCE TO REGISTRATION GRANTED U/S 12A OF THE IN COME TAX ACT. IN THESE CIRCUMSTANCES BOTH THE PARTIES HAVE AGREED TO GO BACK TO THE FILES OF THE CIT, PUNE FOR DECIDING THE ISSUE AFRESH AFTER EXAMINATION OF THE ISSUE AFRESH. WE FIND MERIT IN ITA NOS. 39/PN/08 A.Y. 2008-09 PAGE 4 OF 4 THE REQUEST OF THE PARTIES, ACCORDINGLY THE GROUNDS RAI SED IN THE APPEAL ARE SET ASIDE TO THE FILES OF THE CIT WITH THE DIRECTION TO DECIDE THE ISSUE DE NOVO AFTER CONSIDERING THE DECISION MENTIONED ABOVE AND ALSO AN Y OTHER LAW IN FORCE. IT GOES WITHOUT SAYING THAT CIT SHOULD HONOUR THE PRINCIPLE O F NATURAL JUSTICE AND ACCORD ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, GROUNDS ARE SET ASIDE. 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE . ORDERS PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER, 2010. SD/- SD/- (I.C. SUDHIR) (D.KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBE R PUNE DATED THE 30 TH NOVEMBER, 2010 R COPY OF THE ORDER IS FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT-II, PUNE 4. D.R. ITAT B BENCH BY ORDER ASSISTANT REGISTRAR I.T.A.T PUNE