Apparel Export Promotion Council, New Delhi V. DCIT (E), New Delhi

ITA 4911/DEL/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2921 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 30-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Assessee Lawyers: VIDHUR PURI
• Keywords: Charitable institution; Capital receipt
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DLEHI BEFORE SHRI G.D. AGRAWAL, PRESIDENT AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER I.T.A. NO. 4911/DEL/2015 ASSESSMENT YEAR: 2011-12 APPAREL EXPORT PROMOTION COUNCIL, VS DY. COMMISSION ER OF INCOME-TAX A-223, OKHLA INDUSTRIAL AREA, (EXEMPTION) INVESTI GATION CIRCLE, PHASE-1, NEW DELHI. NEW DELHI. (PAN: AAACA5150G) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI VIDHUR PURI, CA DEPARTMENT BY: SHRI S.S. RANA, CI T DR ORDER DATE OF HEARING: 27.02.2018 DATE OF PRONOUNCEMENT: 12.03.2018 PER K. NARASIMHA CHARY, JM THIS APPEAL OF THE ASSESSEE IS FILED AGAINST THE OR DER DATED 28 TH MAY, 2015 OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-40(EXEMPTI ON), NEW DELHI {HEREINAFTER REFERRED TO AS CIT(A)} IN APPEAL NO.225/2014-15. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY REGISTERED UNDER SECTION 25 OF THE COMPANIES ACT, 1956 AS NON-PROFIT INSTITUTION AND ALSO REGISTERED U/S 12A(A) OF THE INCOME-TAX ACT, 1961 (THE ACT) WITH THE COMMISSIONER OF INCOME-TAX AS NON-PROFIT CHARITABLE INSTITUTION W.E .F. 18.5.1979. SINCE THEN THE ASSESSEE HAS BEEN FILING RETURNS OF INCOME CLAIMING APPLICABILITY OF THIS SECTION 11 OF THE ACT. FOR THE PERIOD BETWEEN 1979-80 TO 1990-91 , LEARNED AO ACCEPTED THE 2 ASSESSEE AS A CHARITABLE INSTITUTION BUT THEREAFTER STARTED DENYING THE SAME ON THE PREMISE THAT THE ASSESSEE WAS CARRYING ON BUSINESS. FOR THE YEARS BETWEEN 1991-92 AND 1993-94, AS AGAINST THE ORDER OF THE LEARNED A O AND THE LEARNED CIT(A), A COORDINATE BENCH OF THIS TRIBUNAL ALLOWED THE CLAIM OF THE ASSESSEE TO BE A CHARITABLE INSTITUTION, WHEREAS FOR THE YEARS 1994-9 5, 1995-96, 2009-10 AND 2010- 11, LEARNED CIT(A) GRANTED RELIEF TO THE ASSESSEE. HOWEVER, FOR THE YEARS BETWEEN 1996-97 AND 2008-09, THE EXEMPTION U/S 11(1) WAS AL LOWED BY THE LEARNED AO HIMSELF, BUT AGAIN IN RESPECT OF THE ASSTT. YEAR 20 11-12 THE LEARNED AO INVOKED THE MISCHIEF OF THE PROVISO OF SECTION 2(15) OF THE ACT STATING THAT THE ASSESSEE HAS INVOLVED IN THE TRADE, COMMERCE OR BUSINESS AND CON SEQUENTLY, NOT ENTITLED TO THE EXEMPTION U/S 11(1) OF THE ACT. 3. ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED CIT (A). IN THE IMPUGNED ORDER LEARNED CIT(A) RECORDED THAT THOUGH THE ASSESSEE HA D TAKEN AS MANY AS ELEVEN GROUNDS IN THE APPEAL, THE ASSESSEE HAD NOT PRESSED GROUND NOS. 7,10 AND 11. WHILE DEALING WITH GROUND NOS. 1 TO 6 AND 8, LEARNE D CIT(A) RECORDED THE FACTS BORNE OUT OF RECORD AND HELD THAT THE ASSESSEES IS A CHARITABLE AND NONPROFIT ORGANIZATION AND HAS NOT INVOLVED IN ANY TRADE, COM MERCE OR BUSINESS, AND THEREFORE, IS ENTITLED TO THE EXEMPTION U/S 11(1) O F THE ACT WITH ALL THE CONSEQUENTIAL BENEFITS. ON GROUND NO. 9 RELATING TO THE DENIAL OF TDS CREDIT, LEARNED CIT(A) DIRECTED THE LEARNED AO TO ALLOW SUC H CLAIM AFTER DUE VERIFICATION. IT, THEREFORE, APPEARS THAT BARRING GROUNDS NOS. 7, 10 AND 11,WHICH ARE NOT PRESSED BY THE ASSESSEE, LEARNED CIT(A) DEALT WITH ALL THE GRO UNDS AND ANSWERED THEM IN FAVOUR OF THE ASSESSEE. 4. BEFORE US THOUGH THE ASSESSEE PREFERRED THIS APP EAL ON THREE GROUNDS, LD. AR REPORTED THAT GROUND NOS. 1 & 3 ARE NOT PRESSED BUT PROCEEDED TO ARGUE GROUND NO.2 ONLY. HOWEVER, THE GRIEVANCE OF THE ASSESSEE IN THIS APPEAL IS THAT THE LEARNED CIT(A) DID NOT DISPOSE OF GROUND NO.3 OF THE APPEAL WHICH IS TO THE EFFECT THAT ,- 3 THE LEARNED ASSESSING OFFICER ERRED IN LAW AND ON FACTS BY HOLDING THAT THE PRINCIPLES OF MUTUALITY ARE NOT APPLICABLE TO TH E APPLICANT IN SPITE OF TRIBUNALS ORDER ON THE SAME SETTLED ISSUES IN EARL IER YEARS AND DEPARTMENT APPEAL HAS BEEN REJECTED BY THE DELHI HIG H COURT AND THE APEX COURT AND MOREOVER, HAVE BEEN ACCEPTED AND FOL LOWED BY REVENUE IN THE PAST. 4. ASSESSMENT ORDER REVEALS THAT VIDE ORDER SHEET E NTRY DATED 7.11.2013 LEARNED AO SOUGHT THE EXPLANATION OF THE ASSESSEE IN RESPEC T OF THE PROPOSED ADDITIONS ON THE SAME LINES OF DISALLOWANCE IN THE PRECEDING YEAR AND AFTER EXTRACTING THE SUBMISSIONS OF THE ASSESSEE, PROCEEDED TO RECORD TH AT THE SUBMISSIONS OF THE ASSESSEE ARE NOT ACCEPTABLE TO HIM IN VIEW OF THE A MENDMENT IN DEFINITION OF CHARITY U/S 2(15) OF THE ACT AND VARIOUS OTHER C HANGES IN THE STATUTE AND SETTLED CASE LAWS. 5. IT HAS BEEN THE CONTENTION OF THE ASSESSEE ALL T HROUGH THE PROCEEDINGS THAT AS PER THE ARTICLES OF ASSOCIATION, EVERY MEMBER HAS TO PAY ONE TIME ENTRANCE FEES AT THE TIME OF ADMISSION AND RECURRING FEE BY WAY OF ANN UAL SUBSCRIPTION WHICH ACCORDING TO THE ASSESSEE IS NOT AN INCOME ON THE P RINCIPLE OF MUTUALITY/CAPITAL RECEIPTS. 6. LEARNED AR SUBMITTED THAT IN ASSESSEES OWN CASE FOR THE ASSTT. YEARS BETWEEN 1979-80 AND 1990-91, A COORDINATE BENCH OF THIS TRIBUNAL HAS HELD THIS FEE AS A CAPITAL RECEIPT, WHEREAS IT WAS SO ACCEPTED BY THE LEARNED CIT(A) FOR THE ASSTT. YEARS 1994-95 TO 1997-98 AND WAS UPHELD BY THIS TRIB UNAL, THE HONBLE JURISDICTIONAL HIGH COURT AND THE HONBLE APEX COURT IN THE APPEAL S PREFERRED BY THE DEPARTMENT. FURTHER, FOR THE ASSTT. YEARS 1998-99 TO 2007-08 TH E EXCLUSION OF THE SUBSCRIPTION FROM MEMBERS IN THE COMPUTATION OF INCOME ON THE PR INCIPLE OF MUTUALITY WAS ACCEPTED BY THE LEARNED CIT(A) AND WAS UPHELD BY THIS TRIBUNAL. HE FURTHER SUBMITTED THAT FOR THE ASSTT. YEAR2008-09, LEARNED AO ACCEPTED THE CLAIM THAT THE ENTRANCE FEE AND SUBSCRIPTION RECEIVED FROM THE MEM BERS IS NOT INCOME ON THE PRINCIPLE OF MUTUALITY. LEARNED DR PLACED RELIANCE ON THE ORDERS OF THE LEARNED AO. 4 7. WE HAVE CAREFULLY GONE THROUGH THE RECORD, AND TH E ORDERS OF THIS TRIBUNAL FOR THE ASSTT. YEARS 1991-92 AND 1993-94 TO 1997-98, 20 09-10, 2010-11 AND 2011-12, ORDER OF THE HONBLE JURISDICTIONAL HIGH COURT IN I TA NO.683, 688, 689 OF 2004, 85, 172,174, 207 OF 2005 AND THE ORDERS OF THE HONBLE APEX COURT IN SLP (CIVIL) CC 10383 OF 2008,CC 1999, CC6900,CC 6687, CC 8552, AND CC 6274 OF 2008. 8. VIDE PARAGRAPH NO.4.1 IN THE ORDER DATED 17.3.20 04 IN ITA NO.481 AND 482/DEL/2003 AND BATCH, A COORDINATE BENCH OF THIS TRIBUNAL DEALT WITH SUBSCRIPTION AND ENTRANCE FEE AND WHILE PLACING RELIANCE ON THE ORDERS IN ASSESSEES OWN CASE FOR THE ASSTT. YEARS 1991-92 AND 1993-94, THE TRIBUNAL ALLOWED THE CLAIM OF THE ASSESSEE. 9. FURTHER, THERE IS NO DENIAL OF THE FACT THAT THI S ISSUE OF THE APPLICABILITY ON THE PRINCIPLE OF MUTUALITY TO THE CASE OF THE ASSESSEE H AD ATTAINED FINALITY IN VIEW OF THE ORDERS OF THE TRIBUNAL FOR THE PERIOD BETWEEN ASST T. YEAR 1991-92 TO 1997-98 AS UPHELD BY THE HONBLE JURISDICTIONAL HIGH COURT AND THE HONBLE SUPREME COURT FOR THE ASSTT. YEARS 1992-93 TO 1997-98. IT IS ALSO NO T IN DISPUTE THAT CONSISTENTLY IT IS HELD THAT UNDER THE PRINCIPLE OF MUTUALITY, THE ENTR ANCE FEE AND THE SUBSCRIPTION FROM THE MEMBERS IS NOT INCLUDIBLE IN THE COMPUTATI ON OF INCOME AND THIS FINDING WAS CONSISTENTLY UPHELD BY THE HONBLE JURISDICTIONAL HIGH COURT AND THE HONBLE APEX COURT. 10. THERE IS NO CHANGE IN THE OBJECTS AND THE ACTIV ITIES OF THE ASSESSEE RIGHT FROM THE INCEPTION AND ALSO THERE IS NO CHANGE IN THE CO NSISTENT FINDINGS OF THE TRIBUNAL, HONBLE HIGH COURT AND THE HONBLE APEX COURT. TH ERE IS NO DENIAL OF THIS FACT. HENCE, WE ARE OF THE CONSIDERED OPINION THAT IT IS NOT OPEN FOR THE REVENUE TO TAKE A DIFFERENT VIEW FROM THAT OF THE PRINCIPLE WHICH ATT AINED FINALITY. 5 11. IN VIEW OF THIS FACTUAL AND LEGAL POSITION, WE HOLD THAT THE LD. AO ERRED IN HOLDING THAT THE PRINCIPLE OF MUTUALITY IS NOT APPLI CABLE TO THE ASSESSEE. WE ANSWER THE GROUND NO.2 ACCORDINGLY. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS THE 12 TH DAY OF MARCH, 2018. SD/- SD/- (G.D. AGRAWAL) (K. NARASIMHA CHARY) PRESIDENT JUDICIAL MEMBER DATED: 12 TH MARCH, 2018 VJ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT BY ORDER ASSTT. REGISTRA R, ITAT