JCIT (OSD), (E), C-I, Chandigarh V. M/s Semi Conductor Laboratory SCL, Mohali

ITA 465/CHANDI/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2567 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 13-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS MONA MOHANTY
• Assessee Lawyers: A K SOOD
• Keywords: Charitable institution
• Section: 12A; 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH B, CHANDIGARH BEFORE MS.DIVA SINGH, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NOS.465 TO 467/CHD/2018 (ASSESSMENT YEARS : 2013-14 TO 2015-16) THE J.C.I.T., VS. M/S SEMI CONDUCTOR LABORATORY SCL CIRICLE-1(EXEMPTIONS), PHASE-8, INDUSTRIAL AREA, SECTOR 72, CHANDIGARH. MOHALI. PAN: AAGTS0959N (APPELLANT) (RESPONDENT) APPELLANT BY : MRS.MONA MOHANTY, CIT DR RESPONDENT BY : SHRI A.K.SOOD, CA DATE OF HEARING : 19.07.2018 DATE OF PRONOUNCEMENT : 27.08.2018 ORDER PER BENCH : ALL THE ABOVE APPEALS HAVE BEEN PREFERRED BY THE REVENUE AGAINST SEPARATE ORDERS OF LD. COMMISSIONE R OF INCOME TAX (APPEALS)-2, CHANDIGARH, ALL RELATING TO THE SAME ASSESSEE AND ALL DATED 19.1.2018, BUT PERTAIN ING TO DIFFERENT ASSESSMENT YEARS I.E. ASSESSMENT YEARS 2 013-14, 2014-15 AND 2015-16 . IT WAS COMMON GROUND THAT THE ISSUE INVOLVED IN A LL THE APPEALS WAS IDENTICAL, BEING DENIAL OF EXEMPTIO N U/S 11 OF THE INCOME TAX ACT,1961, (HEREINAFTER REFERRED T O AS ACT).THEREFORE ALL THE IMPUGNED APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLIDATED OR DER FOR THE SAKE OF CONVENIENCE. ITA N O.465 TO 467/CHD/2018 A.Y.2013-14 TO 2015-16 2 2. BRIEF FACTS OF THE CASE, AS EMANATING FROM THE O RDERS OF THE AUTHORITIES BELOW, ARE THAT THE ASSESSEE TRUST, A SOCIETY, IS A BODY WORKING UNDER DEPARTMENT OF SPACE, GOVERN MENT OF INDIA. THE MAIN OBJECTIVE OF THE ASSESSEE SOCIET Y, AS PER ITS MEMORANDUM OF ASSOCIATION AND RULES & REGULATIO NS WAS TO UNDERTAKE, AID, PROMOTE, GUIDE AND COORDINATE RE SEARCH AND DEVELOPMENT IN THE FIELD OF SEMICONDUCTOR TECHN OLOGY, MICRO-ELECTRO MECHANICAL SYSTEMS AND PROCESS TECHNO LOGIES, RELATING TO SEMICONDUCTOR PROCESSING. THE ASSESSEE HAD DEVELOPED CMOS TECHNOLOGIES AS WELL AS SPECIALISED TECHNOLOGIES THROUGH IN-HOUSE R&D EFFORTS. THE ASSE SSEE SOCIETY HAD BEEN GRANTED REGISTRATION AS A CHARITAB LE SOCIETY U/S 12A OF THE ACT . FOR THE IMPUGNED ASSESSMENT Y EARS THE ASSESSEE SOCIETY HAD FILED RETURNS DECLARING 'NIL' INCOME. DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE WAS DOING MANUFACTURING OF LSI/VLSI DEVICES FOR PRIVATE PARTIES AND THEN SELLI NG IT FOR PROFIT AND THAT IT WAS NOT DOING ANY WORK RELATED T O CHARITABLE ACTIVITIES. ACCORDINGLY, AFTER SEEKING D UE EXPLANATION FROM THE ASSESSEE ON THE ISSUE, WITH WH ICH HE WAS NOT SATISFIED, HE HELD THAT THE OBJECTIVE OF TH E ASSESSEE DID NOT FALL WITHIN THE PURVIEW OF GENERAL PUBLIC UTILITY AND THAT THE ASSESSEE WAS CARRYING OUT BUSINESS/COM MERCIAL ACTIVITIES. HE FURTHER NOTED THAT THE ASSESSEE HAD NOT MAINTAINED SEPARATE BOOKS OF ACCOUNTS FOR GRANTS/RE CEIPTS FROM PROPERTIES OF TRUST. THE ASSESSING OFFICER, TH EREFORE, HELD THAT THE ASSESSEE WAS NOT ELIGIBLE FOR EXEMPTI ON U/S 11 OF THE ACT. ITA N O.465 TO 467/CHD/2018 A.Y.2013-14 TO 2015-16 3 3. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LD.CIT(APPEALS),WHO NOTED THAT IDENTICAL ISSUE HA D BEEN DECIDED BY THE I.T.A.T. IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2010-11 AND 2011-12 VIDE THEIR ORD ER IN ITA NO.151/CHD/2014 & ITA NO.858/CHD/2014 DATED 12.5.2016, HOLDING THAT THE ASSESSEES CASE IS NOT HIT BY THE PROVISO TO SECTION 2(15) OF THE ACT AND, THEREFORE, THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S 11 OF THE AC T. FOLLOWING THE SAID ORDERS THE APPEAL WAS DECIDED I N FAVOUR OF THE ASSESSEE. 4. AGGRIEVED BY THE SAME, THE REVENUE HAS COME UP I N APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD.CIT(A) HAS ERRED IN LAW IN HOLDING THAT THE PROVI SO TO SECTION 2(15) OF THE IT. ACT, 1961 WAS NOT APPLICABLE I N THE CASE OF THE ASSESSEE WHEREAS THE ACTIVITIES OF THE ASSESSEE WERE OF COMMERCIAL/BUSINESS IN NATURE. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN LAW IN INTERPRETING THE PROVISI ONS OF SECTION 2(15) VIS-A-VIS THE FACTS OF ASSESSEE'S CASE THAT THE ASSESSEE'S ACTIVITIES WERE NOT FOR PROFIT M OTIVES EVEN AS THE PROVISO ENTAILS PRECLUSION OF ALL ACTIV ITIES, IN THE NATURE OF TRADE, BUSINESS OR COMMERCE, FROM THE AMBIT OF CHARITABLE PURPOSE IN CASES PROFESSING TO PURSUE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW BY RELYING ON THE FACT THAT THE SOCIETY IS A REGISTERED ENTITY AND IGNORING THAT TH E STATUTORY PROVISIONS ENTAIL FIRST THE EXAMINATION O F INCOME THAT QUALIFIES UNDER SECTION 11 & 12 AND THEN THE UTILIZATION OF THE SAME FOR CHARITABLE PURPOSES. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW DELETING THE ADDITIONS WHEN THE ACTIVITIES OF THE TRUST ARE NON-CHARITABLE AND T HE PROVISIONS OF SECTION 11(4A) OF THE IT. ACT ARE SQUA RELY APPLICABLE TO THE CASE. ITA N O.465 TO 467/CHD/2018 A.Y.2013-14 TO 2015-16 4 5. THAT THE APPELLANT CRAVES TO LEAVE, ADD OR AMEND THE GROUNDS OF APPEAL ON OR BEFORE THE APPEAL HEARD AND DISPOSED OFF. 5. BEFORE US, THE LD. DR FAIRLY AGREED THAT THE ISS UE WAS COVERED BY THE ORDER OF THE I.T.A.T. IN THE PRECEDI NG YEARS AS POINTED OUT BY THE LD.CIT(APPEALS) IN HIS ORDER. TH E LD. COUNSEL FOR ASSESSEE PLACED COPY OF THE ORDER OF TH E I.T.A.T. PASSED IN THE PRECEDING YEARS REFERRED TO BY THE LD.CIT(APPEALS) WHILE DECIDING THE APPEAL IN FAVOUR OF THE ASSESSEE. 6. WE HAVE GONE THROUGH THE ORDER OF THE I.T.A.T. I N THE PRECEDING YEARS AND FIND THAT IN THE SAID YEARS ALS O THE ASSESSEE SOCIETY HAD BEEN DENIED EXEMPTION U/S 11 O F THE ACT, SINCE IT WAS FOUND TO BE ENGAGED IN COMMERCIAL ACTIVITIES OF SALE AND PURCHASE. THE I.T.A.T. FOUND THAT THE SAID ACTIVITY WAS CARRIED OUT IN CONSONANCE WITH IT S OBJECT ON THE BASIS OF WHICH IT WAS GRANTED REGISTRATION U /S 12AA OF THE ACT AND WAS CARRIED OUT WITHOUT ANY PROFIT MOT IVE WHICH WAS EVIDENT FROM THE FACT ON RECORD THAT THE ASSESS EE WAS MAKING SALES AT LESS THAN THE MARKET PRICE AND ITS ULTIMATE OBJECT WAS NOT TO GIVE BENEFIT TO SOME SPECIFIC PER SON AS PER ITS MEMORANDUM OF ASSOCIATION. THE I.T.A.T. THEREFO RE HELD THAT THE SAID ACTIVITIES WERE CHARITABLE IN NATURE, NOT HIT BY THE PROVISO TO SECTION 2(15) OF THE ACT. THE CLAIM OF THE ASSESSEE TO EXEMPTION U/S 11 OF THE ACT WAS ACCORDI NGLY ALLOWED. 7. ADMITTEDLY THE FACTS IN THE PRESENT CASE ARE ID ENTICAL TO THAT IN THE PRECEDING YEAR WITH THE ASSESSEE HAV ING BEEN ITA N O.465 TO 467/CHD/2018 A.Y.2013-14 TO 2015-16 5 DENIED EXEMPTION U/S 11 OF THE ACT FOR HAVING BEEN FOUND TO HAVE INDULGED IN COMMERCIAL ACTIVITIES OF SALE AND PURCHASE. NO DISTINGUISHING FACTS HAVE BEEN BROUGHT TO OUR NO TICE BY THE LD. DR. THE ISSUE THEREFORE IS SQUARELY COVERED BY THE ORDER OF THE I.T.A.T. IN THE PRECEDING YEARS, WHIC H WE HOLD HAS BEEN RIGHTLY FOLLOWED BY THE CIT(APPEALS), ALLO WING THE ASSESSEES APPEAL. WE THEREFORE SEE NO REASON TO INT ERFERE IN THE ORDER OF THE CIT(APPEALS). 8. IN THE RESULT, ALL THE APPEALS FILED BY THE REVE NUE ARE, THEREFORE, DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (DIVA SINGH) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 27 TH , 2018 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH