National Association of Software & Service Companies, New Delhi V. ADIT(E), New Delhi

ITA 4724/DEL/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8257 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 24-11-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 31-10-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJNA
• Keywords: Charitable institution; Question of law
• Section: 12; 11

Judgement Text

1 ITA NOS. 4724 & 5406/DEL/11 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SHRI G. D. AGRAWAL, VICE P RESIDENT AND SMT SUCHITRA KAMBLE , JUDICIAL MEMBER I.T.A . NO.-4724/DEL/2011 (ASSESSMEN T YEAR-2008-09) NATIONAL ASSOCIATION OF SOFTWARE & SERVICES COMPANIES 2 ND FLOOR, INTERNATIONAL YOUTH CENTRE TEEN MURTI MARG, CHANAKYAPURI NEW DELHI AAATN2595F (APPELLANT) VS ADIT(E) INVESTIGATION CIRCLE-1 NEW DELHI (RESPONDENT) I.T.A .NO.-5406/DEL/2011 (ASSESSM ENT YEAR-2008-09) ADIT(E) INVESTIGATION CIRCLE-1 NEW DELHI (APPELLANT) VS NATIONAL ASSOCIATION OF SOFTWARE & SERVICES COMPANIES 2 ND FLOOR, INTERNATIONAL YOUTH CENTRE TEEN MURTI MARG, CHANAKYAPURI, NEW DELHI AAATN2595F RESPONDENT) APPELLANT BY SH. GAURAV JAIN, ADV RESPONDENT BY SH.P. DAM KANUNJNA, SR. DR ORDER PER SUCHITRA KAMBLE, JM DATE OF HEARING 06.04.2016 DATE OF PRONOUNCEMENT 08.04.2016 2 ITA NOS. 4724 & 5406/DEL/11 THESE CROSS APPEALS HAVE BEEN FILED AGAINST THE ORD ER DATED 30/09/2011 PASSED BY CIT(A) XXI, NEW DELHI. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- ITA NO. 5406/DEL/2011 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE CIT(A) HAS ERRED IN DISALLOWING THE ADDITIONS MADE ON THE GROUND THAT THE ASSESSEE IS PROVIDING SPECIFIC SERV ICES TO ITS MEMBERS AND ITS ACTIVITIES ARE PURELY AND ESSEN TIALLY OF COMMERCIAL NATURE. BASED ON THE ANNUAL SUBSCRIPTIO N PAID BY THE MEMBERS THEY ARE GIVEN VOTING RIGHTS ACCORDING TO THEIR CONTRIBUTORS. FURTHER THE AMOUN T OF SUBSCRIPTION FEES RECEIVED IS DEPENDENT ON THE TURN OVER OF THE ASSOCIATE MEMBER IMPLYING THEREBY THAT THERE IS A DIRECT NEXUS BETWEEN THE SPECIFIC SERVICES PROVIDED BY THE ASSOCIATION AND THE ACHIEVEMENT OF GROSS TURNOVER B Y THE MEMBERS OF NASSCOM. HENCE, THE AMOUNT RECEIVED FRO M THE MEMBERS SHOULD BE TAXABLE. 2. THE CIT(A) HAS ERRED IN DISALLOWING THE ADDITIO NS MADE ON THE GROUNDS OF EXPENDITURE INCURRED ON GLOBAL TR ADE DEVELOPMENT PROGRAMME WHICH IS NOT IN CONFIRMATION WITH SOCIETIES OBJECTIVES. 3. THE ORDER OF THE CIT(A) IS NOT ACCEPTABLE IN VI EW OF THE FACT THAT THE ASSESSEES ACTIVITIES WOULD BE TAXABL E U/S 28(III) OF THE ACT AND THE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION U/S 11 & 12 OF THE ACT. 3. THE GROUNDS OF APPEAL ARE AS UNDER:- ITA NO. 4724/DEL/2011 1. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A) ] ERRED ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER , 3 ITA NOS. 4724 & 5406/DEL/11 IN TREATING PAYMENT OF RS.30,00,000/- MADE TO M/S R AY AND KESHWAN DESIGN ASSOCIATE (P) LTD. FOR AVAILING PROF ESSIONAL SERVICES AS APPLICATION OF INCOME TOWARDS THE OBJECTS OF THE APPELLANT SOCIETY. 1.1. THE CIT(A) ERRED ON FACTS AND IN LAW IN OBSERVING T HAT THE APPELLANT FAILED TO ESTABLISH THE REASONABLENESS AN D NEXUS OF THE AFORESAID PAYMENT TO M/S RAY AND KESHWAN DESIGN ASSOCIATES (P) LTD. WITH THE OBJECTIVES OF THE APPE LLANT. 3. THE LD. AR SUBMITTED THAT THE GROUND NO. 1 & 3 O F THE REVENUES APPEAL IS COVERED BY THE DECISION OF THE HONBLE DELHI HIGH COURT IN ASSESSEES OWN CASE I.E. DIT EXEMPTIO N VS. NATIONAL ASSOCIATION OF SOFTWARE AND SERVICES COMPANIES [201 2] 345 ITR 362 DELHI IN FAVOUR OF ASSESSEE. THE RELEVANT PARAGRAP H OF THE SAID JUDGMENT IS AS UNDER (PLASITUM 34 AT PAGE NO. 386): - WHEREAS THE ANNUAL SUBSCRIPTION FEE IS A RECURR ING RECEIPT, RECEIVABLE BY THE ASSESSEE TRUST BY MERE E FFLUX OF TIME IRRESPECTIVE OF WHETHER ANY SERVICES ARE RENDERED O R NOT TO THE MEMBERS, WHAT IS CONTEMPLATED IN SECTION 28(III) IS THE RECEIPT OF FEES FROM PARTICULAR MEMBERS TO WHOM SPECIFIC SE RVICES HAVE BEEN RENDERED BY THE TRUST. THE ANNUAL SUBSCR IPTION FEE IS PAID MERELY TO KEEP THE MEMBERSHIP ALIVE ON YEAR LY BASIS. THE DISTINCTION BETWEEN THE TWO BEING CLEAR, AND IN THE ABSENCE OF ANY EVIDENCE TO SHOW THAT THE ASSESSEE R ECEIVES FEES FROM THE MEMBERS AS A QUID PRO QUO FOR SPECI FIC SERVICES RENDERED TO THEM, WE ARE UNABLE TO HOLD THAT THE TR IBUNAL WAS 4 ITA NOS. 4724 & 5406/DEL/11 WRONG IN HOLDING THAT THE ANNUAL SUBSCRIPTION FEES WAS NOT ASSESSABLE UNDER THE SECTION. THE SUBSTANTIAL QUES TION OF LAW IS THUS ANSWERED IN THE AFFIRMATIVE, IN FAVOUR OF T HE ASSESSEE AND AGAINST THE REVENUE. 4. THE LD. DR DID NOT REFUTE THE SAID SUBMISSIONS M ADE BY THE LD. AR. IN VIEW OF THIS GROUND NO. 1 & 3 OF THE RE VENUES APPEAL ARE DISMISSED. 5. AS RELATES TO GROUND NO. 2, THE SAME IS DECIDED AGAINST THE ASSESSEE AND AS QUOTED IN PLASITUM 31 OF THE SAID J UDGMENT. WE, THEREFORE, HOLD THAT THE AMOUNT OF RS.38,29,5 35/- SPENT BY THE ASSESSEE TRUST IN HANOVER, GERMANY CAN NOT BE CONSIDERED AS APPLICATION OF THE INCOME OF THE TRUS T IN INDIA FOR CHARITABLE PURPOSES. THE SUBSTANTIAL QUESTION OF LAW IS THUS ANSWERED IN FAVOUR OF THE ASSESSEE IN SO FAR A S THE PAYMENT OF TAXES UNDER THE VDIS IS CONCERNED AND IN FAVOUR OF THE REVENUE SO FAR AS THE EXPENDITURE INCURRED OUTS IDE INDIA (GERMANY) IS CONCERNED. THE LD. DR DID NOT CONTROVERT THE SAID FINDING AND SUBMITS THAT THE SAME IS APPLICABLE IN THE PRESENT CASE. 6. WE HAVE GONE THROUGH THE SAID JUDGMENT AND IN VIEW OF SUBMISSIONS MADE ON BEHALF OF BOTH THE PARITES, GRO UND NO. 2 IS ALLOWED IN FAVOUR OF REVENUE. 5 ITA NOS. 4724 & 5406/DEL/11 7. AS RELATES TO THE ASSESSEES APPEAL, THE PAYMENT OF PROFESSIONAL SERVICES RENDERED BY THE ASSESSEE COMP ANY NEEDS TO BE VERIFIED BY THE ASSESSING OFFICER, AS THERE WAS NO AGREEMENT OR EVIDENCE VERIFIED BY THE ASSESSING OFFICER AT THE TIME OF THE ASSESSMENT PROCEEDINGS. IN FACT THERE WAS NO MENTI ON IN CIT(A)S ORDER ABOUT THE AGREEMENT AS WELL AND WHETHER THE S AME WAS VERIFIED OR NOT IS NOT CLEAR. THUS, THE SAID ISSUE IS REMANDED BACK TO THE ASSESSING OFFICER. IN VIEW OF THIS, ASSESSEE S APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 8. IN RESULT, BOTH THE APPEALS ARE PARTLY ALLOWED F OR STATISTICAL PURPOSE. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 8TH OF APRIL, 2016. SD/- SD/- (G. D. AGRAWAL) (SUC HITRA KAMBLE) VICE PRESIDENT JUDICIAL MEMBER DATED: 08/04/2016 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT R EGISTRAR ITAT NEW DELHI 6 ITA NOS. 4724 & 5406/DEL/11 DATE 1. DRAFT DICTATED ON 06/04/2016 PS 2. DRAFT PLACED BEFORE AUTHOR 06/04/2016 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2016 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 8.04.2016 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 8 .04.2016 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.