National Academy of Construction, Hyderabad V. Asst. Commissioner of Income Tax, (Exemptions), Hyderabad

ITA 445/Hyd/2019

• Counselvise Citation: [NaN] 107 COUNSELVISE.COM (IT) 1705 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Assessment Year: 2015-2016
• Appeal Filed On: 29-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T. SUNIL GOUTAM
• Assessee Lawyers: C.S. SUBRAMANYAM
• Keywords: Depreciation; Charitable institution; Principle of natural justice; Benefit of exemption; Capital expenditure; TDS
• Section: 11; 80G; 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “A” : HYDERABAD (THROUGH VIDEO CONFERENCE) BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI S.S.GODARA, JUDICIAL MEMBER I.T.A. No.445/HYD/2019 Assessment Year: 2015-16 National Academy of Construction, HYDERABAD [PAN: AAAAN0794M] Vs Asst.Commissioner of Income Tax, Exemptions, HYDERABAD (Appellant) (Respondent) For Assessee : Shri C.S.Subramanyam, AR For Revenue : Shri T.Sunil Goutam, DR Date of Hearing : 23-12-2021 Date of Pronouncement : 04-02-2022 O R D E R PER S.S.GODARA, J.M. : This assessee’s appeal for AY.2015-16 arises from the CIT(A)-9, Hyderabad’s order dated 17-01-2019 passed in case No.10629 / CIT(A)-9, Hyd / 2017-18, involving proceedings u/s.143(3) of the Income Tax Act, 1961 [in short, ‘the Act’]. Heard both the parties. Case file perused. 2. Coming to the assessee’s sole substantive grievance that both the lower authorities have erred in law and on facts in denying Section 11 Exemption relief, we find that the CIT(A)’s detailed discussion upholding the Assessing Officer’s action to this effect reads as under: ITA No. 445/Hyd/2019 :- 2 -: “4. Aggrieved with the above order, the appellant is in appeal by raising following grounds of appeal and statement of facts: "The order of the learned Assessing Officer is erroneous in law and on the facts of the case. The learned Assessing Officer erred in denying the benefits of Section 11 to the total income of current year, for the investment made in A.Y.2002-2003 in violation of Section 11(5), even though there is neither investment nor income from such investment earned in the current year by the assessee. The learned Assessing Officer erred ignoring the Hon'ble Supreme Court decision of Fr. Mullers Charitable Institutions relied upon by the assessee in denying benefits under section 11 to the total income for violation of Section 11(5) in earlier year. The learned Assessing Officer erred in concluding that the assessee was not pursuing the main object of education u/ s 2(15). The learned Assessing Officer ought to have considered that the assessee does not fall under last limb of Section 2(15), viz., any other object of general public utility, since all the education activities carried on by the assessee were evidenced during the assessment. The learned Assessing Officer ought to have considered that, as per the decision of Supreme Court in the case of Sole Trustee, Loka Shikshana Trust, the activities carried on by the assessee need to be treated as education only. The learned Assessing Officer erred in not granting depreciation for assets acquired in earlier years since the capital expenditure was not allowed by Revenue during assessments completed. The learned Assessing Officer erred in granting lesser credit for TDS compared to the claim in the return of income. The Appellant craves leave to, add to, amend to or modify the above grounds of appeal either before or during the hearings of the appeal, as permitted by the learned Commissioner of Income-tax (Appeal). STATEMENT OF FACTS The assessee is a charitable entity registered under Section 12A as well as Section 80G for the current year. Such registrations were in force for the A.Y.2015-2016 as well as till the date of filing of this appeal. The appellant is a charitable entity carrying on the activity of skill development training and education mainly in the construction field operating in the state of Telangana. It runs various training camps all over the state apart from the activities carried out regularly at its own campus as Madhapur, Hyderabad. The learned Assessing Officer observed that, the assessee made investment in shares in ITA No. 445/Hyd/2019 :- 3 -: violation of Section 11(5) during the earlier A.Y.2002-2003. During the current year, assessee did not make any further investment in violation of Section 11(5). Further, such investment did not yield any income during the current year, However, stating that the violation continued in the current year, the learned Assessing Officer denied the claim of exemption u/s 11 for the whole income of current year. The learned Assessing Officer failed to follow the decision of Hon'ble Supreme Court in the case of Fr. Mullers Charitable Institutions relied upon by the assessee and brought to the notice of the learned Assessing Officer. The learned Assessing Officer further observed that by earning certain other incomes such as rent, fees for professional charges, etc., the assessee was not carrying on the activity of education but falls under the last limb of Section 2(15), viz., any other object of general public utility. Since the gross receipts exceeded Rs.25 Lakhs, the learned Assessing Officer denied the exemption u/s 11 on this count also. The appellant is training and skill development organization to provide resources to construction industry as well as providing better employment to the skilled labour. The learned Assessing Officer, erroneously observing that the capital expenditure being 'acquisition' of fixed assets was claimed by the assessee as utilisation in earlier years, denied the depreciation, having changed the method of computation to normal instead of method prescribed under Section 11. The learned Assessing Officer failed to notice that, such claim was denied by Revenue in earlier years during assessments, since for all such years, the benefit of exemption u/ s 11 was continuously being denied to assessee for the reasons mentioned above. Aggrieved by the assessment denying the benefit of exemption u/ s 11 for the current year, the assessee prefers appeal." 5. The similar issue arose in the immediately preceding assessment year i.e., A.Y. 2014-15, where after considering the submissions my predecessor has confirmed the additions / disallowances made by the Assessing Officer as under: "It is also observed by Assessing Officer that the assessee society invested the funds in violation of section 11(5) r.w.s. 13(1)(d), in the equity shares of Hyderabad International Trade Exposition (HITEX). When questioned in this regard, assessee reiterated that there is no violation of provisions of section 11(5) or 13(1)(d). Even this contribution was made in A.Y.2002-03 and there has been no further contribution during the year under consideration. After considering the assessee's arguments it was held by the Assessing Officer that there is violation of provisions of section 11 (5) r. w.s. 13(1)(d) as was held in earlier years by the CIT(A) and the ITAT. Assessing Officer in this regard relied on the Hon'ble ITAT decision in the assessee's case for A.Y.2002-03 in ITA No.1067/H/2005 dated 30.06.2006. ITA No. 445/Hyd/2019 :- 4 -: Further, on perusal of Income and expenditure account it is observed that the receipts included lease receipts, professional charges, lodging and boarding receipts etc. Assessee was questioned, in view of amended provisions of section 2(15), as to how the society claims to be existing for charitable purposes. In response, it was stated that the primary objective of the society is to impart education, training in the field of construction activity. After considering the explanations of the assessee it is held by Assessing Officer that the assessee is not carrying on any activity which would fall within the ambit of charitable purpose as defined u/ s 2(15) because the activities being carried out by the assessee are in the nature of general public utility i.e., carrying on of activities in the nature of trade I commerce. Therefore, the Assessing Officer held that the assessee is not eligible for exemption uls. 11 r.w.s. 2(15). In view of the above, Assessing Officer denied claim of exemption u/s.11 in view of violations of Section 11 (5) and also because the assessee is not carrying out any charitable activities within the meaning of amended provisions of Section 2(15)." 5.1 On perusal of Income and expenditure account of A.Y. 2015-16, it is observed that the receipts included fees from professional charges to QC / QA, fees from training and courses, lease and rents, lodging and boarding receipts and rent from premises. Assessee was questioned, in view of amended provisions of section 2(15), as to how the society claims to be existing for charitable purposes. In response, it was stated that the primary objective of the society is to impart education to unskilled workers in the field of construction. After considering the explanations of the assessee it is held by Assessing Officer that the assessee is not carrying on any activity which would fall within the ambit of charitable purpose as defined u/s 2(15) because the activities being carried out by the assessee are in the nature of general public utility i.e., carrying on of activities in the nature of trade / commerce. Therefore, the Assessi.ng Officer held that the assessee is not eligible for exemption u/s. 11 r.w.s 2(15). In view of the above, Assessing Officer denied claim of exemption u/s. 11 in view of violations of Section 11(5) and also because the assessee is not carrying out any charitable activities within the meaning of amended provisions of Section 2(15). 5.2 During the appellate proceedings the Sri. C.S. Subramaniam, attended the proceedings on 17.07.2018, when he was asked to file the power of attorney. Therafter, on 17.01.2019, again he stated verbally that earlier years are pending in the ITAT, however on this date also no power of attorney was filed. It appears that assessee has no further submissions to be made in this year, as the facts are similar to the A.Y. 2014-15. Respectfully, following the order of my predecessor in appellant's own case, the appeal is dismissed on merits. However, on the ground of appeal relating to TDS credit, the ITA No. 445/Hyd/2019 :- 5 -: Assessing Officer is directed to give full credit after verification. The depreciation has been granted by the Assessing Officer on the new assets acquired during the year at Rs. 2,81,014/-. Therefore, this ground also does not survive”. 3. We sought to know from the assessee side about the final status before the tribunal in AY.2014-15. Learned counsel informed us that the tribunal’s co-ordinate bench’s order dt.06-11-2020 in ITA No.833/Hyd/2013 for AY.2008-09 and other assessment years has restored the assessee’s grievance back to the Assessing Officer as under: “3. After hearing both the sides, We are of the considered view that the appeals of the assessee as well as of the Revenue have to be remitted back to the file of the ld. AO for fresh consideration as it appears that the principles of natural justice are violated. Therefore, in the interest of justice, We hereby admit the additional grounds raised by the assessee in all its appeals and further remit all the appeals back to the file of Ld. AO for de-novo consideration and further direct the Ld. Revenue Authorities to admit any fresh evidence filed by the assessee and after considering the same and after providing property opportunity to the assessee and its Counsel of being heard, pass appropriate orders in accordance with law and merit”. 3.1. We therefore adopt judicial consistency and restore the instant issue as well back to the Assessing Officer in very terms. It is made clear that the assessee shall be at liberty to raise all factual / legal arguments in consequential proceedings as per law. 4. This assessee’s appeal is treated as allowed for statistical purposes in above terms. Order pronounced in the open court on 04-02-2022 Sd/- Sd/- ( A. MOHAN ALANKAMONY ) ( S.S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Dated: 04-02-2022 TNMM ITA No. 445/Hyd/2019 :- 6 -: Copy to : 1.National Academy of Construction, NAC Campus (Hi-tex), Cyberabad, Kothaguda Post, Madhapur, Hyderabad. 2.Asst.Commissioner of Income Tax, Exemptions, Hyderabad. 3.CIT(Appeals)-9, Hyderabad. 4.CIT(Exemption)-Hyderabad. 5.D.R. ITAT, Hyderabad. 6.Guard File.