AIEMA Technology Centre, CHENNAI V. DIT, CHENNAI

ITA 403/CHNY/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9213 (ITAT-CHENNAI)
• Duration Of Justice: 4 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 16-03-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 24-02-2012
• Court: TRIBUNAL
• Department Lawyers: SUNDAR RAO
• Assessee Lawyers: V S JAYAKUMAR
• Keywords: Charitable institution; Cancellation of registration
• Section: 12A; 12AA

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO. 40 3/MDS/2012 / ASSESSMENT YEAR :200 9 - 1 0 M/S. AIEMA TECHNOLOGY CENTRE, FIRST CROSS ROAD, AMBATTUR INDUSTRIAL ESTATE, CHENNAI 600 058. [PAN: A AB TA5825C ] VS. THE DIRECTOR OF INCOME TAX [EXEMPTIONS] , 121, MAHATMA GANDHI ROAD, CHENNAI 600 034. ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI V.S. JAYAKUMAR, ADVOCATE / RESPONDENT BY : SHRI SUNDAR RAO , CIT / DATE OF HEARING : 1 6 . 0 3 .201 6 / DATE OF P RONOUNCEMENT : 15 . 0 6 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : TH I S APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. DIRECTOR OF INCOME TAX [EXEMPTIONS] , CHENNAI , DATED 09.12.2011 RELEVANT TO THE ASSESSMENT YEAR 200 9 - 1 0 PASSED UNDER SECTION 12AA(3) OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] . 2. BRIEF FACTS OF THE CASE ARE THAT M/S. AIEMA TECHNOLOGY CENTRE IS A COMPANY REGISTERED UNDER SECTION 25 OF THE COMPANIES ACT AND ALSO I.T.A. NO . 40 3 /M / 12 2 REGISTERED UNDER SECTION 12AA OF THE INCOME TAX ACT VIDE ORDER OF THE DIT(EXEMPTIONS), CHENNAI DATED 27.07.2005. THE MAIN OBJECTS OF THE APPLICANT COMPANY ARE AS UNDER: 1. TO ORGANIZE TECHNOLOGICAL SEMINARS AN EXHIBITIONS IN ALL PAR TS OF INDIA TO PROPAGATE EQUIPMENTS SUCH AS AGRICULTURAL IMPLEMENTS, ELECTRICAL HOUSE HOLD APPLIANCES, AUTOMOBILE EQUIPMENTS, MACHINE TOOLS & ACCESSORIES, JIGS & FIXTURES AND PVC CABLES AND OTHER ITEMS MANUFACTURED BY THE MEMBERS OF THE COMPANY. 2. TO P ROVIDE FACILITIES TO MEMBERS FOR CONDUCTING MEETING AND CONFERENCES TO PROMOTE THE MARKET FOR THE GOODS MANUFACTURED BY THE MEMBERS. 3. TO PEN AND RUN TECHNICAL LIBRARIES. 4. TO PROVIDE FOR SPORTS & COMPETITION AND CATERING FACILITY TO MEMBERS. 3 . THE APPLICANT INSTITUTION WAS SELECTED FOR SCRUTINY FOR THE ASSESSMENT YEAR 2009 - 10 BY THE ASSESSING OFFICER. VARIOUS DETAILS WERE CALLED FOR BY THE ASSESSING OFFICER. THE ASSESSING OFFICER VIDE LETTER DATED 05.09.2011 HAS SUBMITTED A PROPOSAL FOR INITIAT ING THE PROCEEDINGS UNDER SECTION 12AA(3) OF THE ACT FOR CANCELLATION OF REGISTRATION. 4 . AS PER THE ANNUAL REPORT SUBMITTED ALONG WITH THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009 - 10 RELEVANT TO THE FINANCIAL YEAR 2008 - 09, THE APPLICANT COMPANY HAS RECEIVED THE FOLLOWING RECEIPTS APART FROM OTHERS. CATERING RECEIPTS RS. 1,58,411 HALL CHARGES RECEIVED RS. 3,36,803 MEMBERSHIP FEES RS. 1,51,236 RENT RESTAURANT RS. 1,55,000 HIRE CHARGES INCOME RS. 2,34,000 HRD & EDP INCOME RS. 6,86,712 I.T.A. NO . 40 3 /M / 12 3 5 . THE LD. DIT(E) HAS OBSERVED THAT T HE RECEIPTS WERE PRIMA FACIE FOUND AS COMMERCIAL RECEIPTS OR FEES IN THE NATURE OF FIRST PROVISO TO CLAUSE (15) OF SECTION 2 OF THE ACT. ACCORDINGLY, THE LD. DIT(E) HAS ISSUED A SHOW CAUSE NOTICE UNDER SECTION 12AA(3) OF THE ACT DATED 17.10.2011 TO EXPLAIN THE NATURE OF RECEIPTS AS COMMERCIAL RECEIPTS AND THE FEES ARE COVERED UNDER THE PROVISO TO SEC.2(15) OF THE ACT. BY THIS SHOW CAUSE NOTICE, THE ASSESSEE WAS GIVEN AN OPPORTUNITY AS TO WHY ACTION UNDER SECTION 12AA(3) OF TH E ACT SHOULD NOT BE TAKEN. THERE UPON, THE AR. OF THE APPLICANT APPEARED AND FILED WRITTEN SUBMISSIONS DATED 2.11.2011 BEFORE THE LD. DIT(E), WHICH READS AS UNDER: 1. ALL THE ACTIVITIES OF THE COMPANY ARE PRIMARILY AIMED AT SERVING THE CAUSE OF MEMBERS A ND THEREFORE COVERED UNDER THE CONCEPT OF MUTUALITY. A SPECIAL TRAINING PROGRAMME IS CONDUCTED FOR ENHANCING THE KNOWLEDGE OF THE MEMBERS AND THE EMPLOYEES BY INVITING EXPERTS IN VARIOUS FIELDS LIKE PRODUCTION, QUALITY, MEASUREMENT, METHODS, ETC. 2. CAT ERING CHARGES AND ALL CHARGES ARE RECEIPTS FROM THE MEMBERS WHO HAD UTILIZED THE SPACE IN THE CENTRE FOR CONDUCTING THE MEETINGS, ETC. FOR THEIR STAFF OR CUSTOMERS. CATERING FACILITIES ARE ALSO USED BY MEMBERS FOR PROVIDING FOOD FOR THEIR STAFF WHILE THEY ARE DOING OVERTIME AND ON SPECIAL OCCASIONS. 3. THE LEARNED A R. HAS RAISED THE ISSUE THAT FINANCE MINISTER WHILE PRESENTING THE BUDGET ON THE ISSUE OF AMENDMENT TO SEC.2(15) HAS MADE THE FOLLOWING ASSURANCE. 'I ONCE AGAIN ASSURE THE HOUSE THAT GENUIN E CHARITABLE ORGANIZATIONS WILL NOT IN ANY WAY BE AFFECTED. THE CBDT WILL, FOLLOWING THE USUAL PRACTICE, ISSUE AN EXPLANATORY CIRCULAR CONTAINING GUIDELINES FOR DETERMINING WHETHER AN ENTITY IS CARRYING ON ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR B USINESS OR ANY ACTIVITY OR RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS. WHETHER THE PURPOSE IS A CHARITABLE PURPOSE WILL DEPEND ON THE TOTALITY OF THE FACTS OF I.T.A. NO . 40 3 /M / 12 4 THE CASE. ORDINARILY, CHAMBERS OF COMMERCE AND SIMILAR ORGANIZATIONS RE NDERING SERVICES TO THEIR MEMBERS WOULD NOT BE AFFECTED BY THE AMENDMENT AND THEIR ACTIVITIES WOULD CONTINUE TO BE REGARDED AS 'ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY'. 6 . AFTER CONSIDERING THE SUBMISSIONS OF THE AR OF THE APPLICANT, THE LD. DIT(E) HAS OBSERVED AS UNDER: A. PRINCIPLE OF MUTUALITY : THE LEARNED A.R. HAS ACCEPTED IN THE WRITTEN SUBMISSION THAT THE ACTIVITIES OF THE APPLICANT WAS PRIMARILY AIMED AT .BENEFITTING THE MEMBERS AND THEIR SPONSORED PERSONS. IN FACT DURING THE APPEARANCE ON 3.11.2011, HE HAS ACCEPTED THAT THE ACTIVITIES CANNOT BE TERMED AS CHARITABLE AS THE BENEFIT IS GIVEN ONLY TO MEMBERS. HE HAS ALSO ACCEPTED THAT IN SUCH CIRCUMSTANCES THERE IS NO QUESTION OF CONTINUANCE OF REGISTRATION U/S 12AA. ISSUE HAS BEE N EXAMINED. AS ACCEPTED BY THE LEARNED A.R., THE BENEFICIARIES ARE ONLY THE MEMBERS AND BENEFIT IS NOT PASSED TO PUBLIC AT LARGE IN ANYWAY. THEREFORE THE OBJECT AND ACTIVITIES OF THE ASSESSEE CANNOT BE CALLED CHARITABLE WITHIN THE DEFINITION OF MAIN PROVIS ION OF SEC.2(15) OF THE ACT. B. WITHOUT PREJUDICE TO THE ABOVE FINDING, EVEN IF SUPPOSE THE ACTIVITIES ARE HELD TO BE CHARITABLE, THE ASSESSEE HAS NOT RAISED OBJECTIONS TO THE NATURE OF RECEIPTS AS MENTIONED IN THE SHOW CAUSE NOTICE DISCUSSED EARLIER. IN FACT, IN THE WRITTEN SUBMISSION THE ASSESSEE HAS VERY CLEARLY ACCEPTED THAT CATERING CHARGES, HALL CHARGES, ETC. ARE GIVEN TO MEMBERS FOR THEIR STAFF ON COMMERCIAL BASIS. THEREFORE, THESE ACTIVITIES ARE COMMERCIAL IN NATURE. THE TOTAL SUM OF SUCH RECEIPTS IS EXCEEDING RS.10 LAKHS AS REQUIRED FOR F.Y. 2008 - 09 RELEVANT TO A.Y. 2009 - 10 AND ATTRACTS FIRST AND SECOND PROVISO TO SEC.2(15) OF THE ACT. THEREFORE, THE ASSESSEE'S CASE IS COVERED UNDER SAID PROVISO AND LOSES THE CHARACTER CHARITABLE PURPOSES. C. O NCE THE INSTITUTION LOSES ITS CHARACTER, THE QUESTION OF CONTINUANCE OF REGISTRATION IS NO WAY AFFECTED BY THE SPEECH OF HON'BLE FINANCE MINISTER WHO HAS SAID THAT GENUINE CHARITABLE INSTITUTION IS NOT HIT BY THE PROVISO TO SEC.2(15). THE HON'BLE FINANCE M INISTER HAS MENTIONED IN HIS SPEECH THAT ATTRACTION OF THE AMENDMENT WILL DEPEND ON ENTIRE FACTS AND CIRCUMSTANCES OF PARTICULAR CASE. D. THE LEARNED A.R. HAS ONLY MADE REFERENCE THAT SPECIAL TRAINING PROGRAMME TO THE MEMBERS FOR ENHANCING THE KNOWLEDGE CAN BE TERMED AS EDUCATION. IT MAY BE STATED THAT THE WORD 'EDUCATION' HAS I.T.A. NO . 40 3 /M / 12 5 NOT BEEN DEFINED UNDER THE I.T. ACT. HOWEVER, VARIOUS COURTS HAVE GIVEN THE SCOPE OF EDUCATION FOR SEC.2(15) OF THE ACT. 7 . THE LD. DIT(E), BY RELYING ON VARIOUS JUDGEMENTS, CON CLUDED THAT CONDUCTING SPECIAL TRAINING PROGRAMMES FOR UPDATION OF KNOWLEDGE FOR THE MEMBERS WILL NOT AMOUNT TO EDUCATION AS IT IS NOT A FORMAL EDUCATION. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, THE LD. DIT(E) HAS WITHDRAWN THE REGISTRATION OF THE CO MPANY WITH EFFECT FROM 01.04.2009 I.E., THE APPLICABLE DATE OF AMENDMENT UNDER SECTION 2(15) OF THE ACT. 8 . ON BEING AGGRIEVED, THE APPLICANT IS IN APPEAL BEFORE THE TRIBUNAL AND CONTENDED THAT ONCE REGISTRATION IS GRANTED, THE SAME CANNOT BE WITHDRAWN WITHOUT PROPER REASONING AS TO HOW THE ACTIVITY NOW CARRIED ON IS AGAINST THE OBJECTS FOR WHICH THE ORIGINAL REGISTRATION IS GRANTED. HE ALSO RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S. TAMIL FILM PRODUCERS COUNCIL IN I.T.A. NO. 2087/MDS/201 3 DATED 03.07.2015. 9 . ON THE OTHER HAND, THE LD. DR STRONGLY SUPPORTED THE ORDER PASSED BY THE LD. DIT(E). 1 0 . WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN THIS CASE, THE APPLICANT WA S GRANTED REGISTRATION UNDER SECTION 12AA OF THE ACT VIDE ORDER DATED 27.07.2005. THE OBJECTS OF THE APPLICANT ARE REPRODUCED HEREINABOVE. FROM THE ABOVE, IT IS CLEAR THAT THE OBJECTS OF THE APPLICANT ARE TO PROPAGATE I.T.A. NO . 40 3 /M / 12 6 EQUIPMENTS BY WAY OF ORGANIZING SEMINA RS, EXHIBITIONS, ETC. BY THE MEMBERS OF THE COMPANY AND ALSO PROVIDE FACILITIES TO MEMBERS FOR CONDUCTING MEETINGS AND CONFERENCE TO PROMOTE THE MARKET FOR THE GOODS MANUFACTURED BY THE MEMBERS. BY AND LARGE, THE OBJECTS REVOLVE ONLY FOR THE BENEFIT OF MEM BERS OF THE COMPANY AND NOT GENERAL PUBLIC UTILITY. 11. WITH EFFECT FROM 1.4.2009 PROVISO TO SEC. 2(15) HAS BEEN INTRODUCED AND THE SAME IS REPRODUCED AS UNDER: CHARITABLE PURPOSE INCLUDES RELIEF OF THE POOR, EDUCATION. MEDICAL RELIEF, PRESERVATION O F 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 OBJECT 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 OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY. PROVIDED FURTHER THAT THE FIRST PROVISO SHALL NOT APPLY IF THE AGGREGATE VALUE OF THE RECEIPTS FROM THE ACTIVITIES R EFERRED TO THEREIN IS TEN LAKH RUPEES OR LESS IN THE PREVIOUS YEAR . 11 . 1 BY INTRODUCTION OF PROVISO TO SECTION 2(15) OF THE ACT WITH EFFECT FROM 01.04.2009, THE CHARITABLE PURPOSE HAS BEEN WELL DEFINED AND INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICA L RELIEF, PRESERVATION OF ENVIRONMENT INCLUDING WATER SHEDS, FORESTS AND WILDLIFE AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTORIC INTEREST AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. WHILE CAREFULLY GOING T HROUGH THE OBJECT OF THE APPLICANT , THE OBJECTS OF THE APPLICANT ARE NEITHER CHARITABLE IN NATURE I.T.A. NO . 40 3 /M / 12 7 NOR ADVANCEMENT OF ANY GENERAL PUBLIC UTILITY BUT FOR THE ONLY BENEFIT OF THE MEMBERS OF THE COMPANY. 11.2 WITH REGARD TO PRINCIPLES OF MUTUALITY, THE AR OF THE APPLICANT HAS VERY WELL ACCEPTED IN PERSON BEFORE THE LD. DIT(E) AND ALSO IN THE WRITTEN SUBMISSIONS THAT THE ACTIVITIES OF THE APPLICANT WAS PRIMARILY AIMED AT BENEFITTING THE MEMBERS AND THEIR SPONSORED PERSONS. BEFORE THE LD. DIT(E), THE LD. AR OF THE APPLICANT HAS ALSO ACCEPTED THAT THERE IS NO QUESTION OF CONTINUANCE OF REGISTRATION UNDER SECTION 12AA OF THE ACT SINCE THE BENEFICIARIES ARE ONLY THE MEMBERS AND BENEFIT IS NOT PASSED ON TO THE PUBLIC AT LARGE IN ANY WAY. THEREFORE, THE OBJECTS AND A CTIVITIES OF THE APPLICANT CANNOT BE CALLED AS CHARITABLE WITHIN THE DEFINITION OF MAIN PROVISION OF SECTION 2(15) OF THE ACT. 11.3 FURTHER, IN THE WRITTEN SUBMISSIONS BEFORE THE LD. DIT(E), THE APPLICANT HAS VERY CLEARLY ACCEPTED THAT CATERING CHARGES , HALL CHARGES, ETC. ARE GIVEN TO MEMBERS FOR THEIR STAFF ON COMMERCIAL BASIS AND, IN FACT, THESE ACTIVITIES ARE COMMERCIAL IN NATURE AND ON VERIFICATION OF RECORDS, SUCH RECEIPTS EXCEEDED .10 LAKHS IN THE FINANCIAL YEAR 2008 - 09 RELEVANT TO THE ASSESSMENT YEAR 2009 - 10, WHICH ATTRACTS FIRST AND SECOND PROVISO TO SECTION 2(15) OF THE ACT. IN VIEW OF THE ABOVE, THE APPLICANT S CASE IS COVERED UNDER THE ABOVE SAID PROVISO AND LOSES THE CHARACTE R OF CHARITABLE PURPOSES. NATURALLY, ONCE THE INSTITUTION LOSES ITS CHARACTER, THE QUESTION OF CONTINUANCE I.T.A. NO . 40 3 /M / 12 8 OF REGISTRATION DOES NOT AFFECT BY ANY MEANS. THE VERY PURPOSE OF GRANTING REGISTRATION UNDER SECTION 12A OF THE ACT STANDS DEFEATED ONCE THE INSTITU TION IS NOT IMPARTING ANY CHARITABLE ACTIVITIES OF GENERAL PUBLIC UTILITY. WITH REGARD TO THE RELIANCE PLACED BY THE LD. COUNSEL FOR THE ASSESSEE IN THE CASE OF TAMIL FILM PRODUCERS COUNCIL (SUPRA), IT WAS NOT IN DISPUTE THAT THE ACTIVITY OF THE ASSESSEE W AS CONSIDERED TO BE A GENERAL PUBLIC UTILITY, WHEREAS, IN THE PRESENT CASE, THE BENEFICIARIES ARE ONLY THE MEMBERS AND BENEFIT IS NOT PASSED ON TO PUBLIC AT LARGE IN ANYWAY . UNDER THE ABOVE FACTS AND CIRCUMSTANCES, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. DIT(E) AND WE UPHOLD THE SAME. 12 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED . ORDER PRONOUNCED ON THE 15 TH JUNE , 201 6 AT CHENNAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED , THE 15 . 0 6 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.