DCIT (Exemption), New Delhi V. Servants of the People Society, New Delhi

ITA 4984/DEL/2015

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0590 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 04-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: IS DIRECTED AGAINS T PASSED
• Keywords: Charitable institution; Rule of consistency; Set aside
• Section: 143(3); 80G; 12A; 143(1); 143(2); 12; 2; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER ITA NO. 4984/DEL/2015 A.Y. 2011-12 ACIT(E), CIRCLE 2(1), NEW DELHI ROOM NO. 2408, 24 TH FLOOR, BLOCK E-2, DR. S.P. MUKHERJEE CIVIC CENTRE, NEW DELHI 110 002 VS. SERVANTS OF PEOPLE SOCIETY, LAJPAT BHAWAN, LAJPAT NAGAR-4, NEW DELHI 110 024 (PAN: AAATS1730M) (APPELLANT) (RESPONDENT) ORDER PER H.S. SIDHU, JM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A)-40(EXEMPTION), NEW DELHI IN RELATION TO ASSESSMENT YEAR 2011-12 ON THE FOLLOWING GROUNDS :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING THE EXEMPTION U/S. 11 DISREGARDING THE FACTS OF THE CASE. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW IN ALLOWING THE EXEMPTION DEPARTMENT BY SHRI ANIL KUMAR SHARMA, SR. DR. ASSESSEE BY SHRI ASEEM CHAWLA, ADV. & SH. ASHISH DHUNNA, CA 2 U/S. 11(1) OF THE ACT AND TREATING THE ASSESSEE AS CHARITABLE INSTITUTION AS ACTIVITIES OF THE ASSESSEE DO NOT FALL UNDER EDUCATION, MEDICAL RELIEF AND ENVIRONMENT BUT FALLS UNDER THE LAST LIMB OF PROVISO TO SECTION 2(15) OF THE ACT I.E. ADVANCEMENT OF ANY OTHER OBJET OF GENERAL PUBLIC UTILITY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN IGNORING THE FACT THAT THOUGH THE OBJECTS OF THE ASSESSEE MAY SEEM TO BE CHARITABLE BUT ACTIVITIES CARRIED OUT BY THE SOCIETY WHICH YIELDED INCOME TO THE SOCIETY ARE COMMERCIAL IN NATURE. 3. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER OR AMEND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 30.9.2011 DECLARING TOTAL INCOM E AT NIL AFTER CLAIMING APPLICATION OF INCOME AS PER PROVISI ONS OF SECTION 11 & 12 OF THE INCOME TAX ACT, 1961 (IN SHORT ACT ). THE RETURN OF THE ASSESSEE WAS PROCESSED U/S. 143(1) OF THE ACT. THE AO ISSUED NOTICE U/S. 143(2) OF THE INCOME TAX ACT, 1961 ON 03.08.2012 AND IN RESPONSE TO THE SAME THE AUTHO RIZED REPRESENTATIVE (AR) OF THE ASSESSEE APPEARED AND FU RNISHED THE BOOKS OF ACCOUNTS WHICH WERE EXAMINED BY THE AO . 3 2.1 THE ASSESSEE-SOCIETY DURING THE YEAR UNDER CON SIDERATION SHOWN ITS ACTIVITIES IN TWO PARTS CENTERED AT DEL HI AND ORISSA. FOR THE ORISSA, PART, ASSESSEE HAS SUBMITTED AUDIT REPORT IN FORM 3CB AND 3CD AND THE NATURE OF BUSINESS WAS SHO WN AS PRINTING AND PUBLICATION OF NEWSPAPER AND BOOKS. FO R THE DELHI PART, THE ASSESSEE HAS SHOWN VARIOUS ACTIVITIES SUCH AS RUNNING OF URBAN / RURAL / SLUM DEVELOPMENT CENTRES, BALWAR IS, PRIMARY / SENIOR SCHOOLS, HEALTH CENTRES, WORKING WOMENS HO STEL OLD AGE CENTRES. ETC. ASSESSEE IS ALSO REGISTERED U/S. 12A OF THE ACT VIDE ORDER DATED 13.09.1973 AND ALSO REGISTERE D U/S 80G OF THE ACT VIDE REGISTRATION ORDER DATED 25.11.201 1. ASSESSEE HAS ALSO SUBMITTED ITS AUDIT REPORT U/S. 12A(B) OF THE ACT. THE AO ISSUED NOTICE TO THE ASSESSEE AS TO WHY NO A CTIVITY OF THE ASSESSEE BE TREATED AS BUSINESS ACTIVITY COVERE D UNDER THE AMENDED PROVISIONS OF SECTION 2(15) OF THE ACT AND THE ASSESSMENT BE DONE ACCORDINGLY. IN RESPONSE TO THE SAME, THE AR OF THE ASSESSEE FILED ITS REPLY DATED 19.02.2 014 BY ELABORATING THAT ACTIVITY OF THE SOCIETY IS CHARITA BLE AND NOT FOR PROFIT AND NOR FOR COMMERCIAL AND FOR THE ASSESSMEN T YEAR 1973-74, 1981-82 TO 82-83, 1983-84, 1974-75 TO 1979-8 0, THE ITAT HAS ACCEPTED THE CONTENTION OF THE ASSESSEE AS WELL AS DEPARTMENT HAS ALSO ACCEPTED THE SAME ACTIVITY OF T HE ASSESSEE AS CHARITABLE NOT FOR PROFIT OR COMMERCIAL , WHICH HAS ATTAINED THE FINALITY. BUT THE AO HAS APPLIED THE LA ST LIMB OF SECTION 2(15) OF THE ACT I.E. ADVANCEMENT OF ANY OT HER OBJET OF GENERAL PUBLIC UTILITY. IN VIEW OF THE AMENDMENT IN THE PROVISIONS OF SECTION 2(15) W.E.F. 1.4.1984 THE ASSESSE E DENIED THE EXEMPTION U/S. 11 & 12 OF THE ACT BY HOLDING THA T ACTIVITY OF THE ASSESSEE OF PUBLICATION OF NEWSPAPER IS ES SENTIAL CARRY 4 ON CHARACTERISTICS AND THE ASSESSEE IS GENERATING INCOME FROM PUBLISHING ADVERTISEMENT IN ITS NEWSPAPER AND TAX T HE INCOME GENERATED FROM PUBLICATION OF NEWS PAPER U/S. 13(8) OF THE ACT AND DID NOT ALLOW THE BENEFIT OF SECTION 11 AND 12 OF THE ACT. THE AO MADE THE VARIOUS OTHER ADDITIONS WHICH THE A O HAS MENTIONED IN PARA NO. 6 TO 13 AND ESPECIALLY IN THE COMPUTATION OF INCOME AT PARA 10 OF THE ASSESSMENT AND COMPLETED THE ASSESSMENT U/S. 143(3) OF THE ACT VIDE ITS ORDER DATED 25.3.2014 FOR THE ASSESSMENT YEAR 2011-12. AGG RIEVED WITH THE ASSESSMENT ORDER, THE ASSESSEE APPEALED BE FORE THE LD. FIRST APPELLATE AUTHORITY WHO VIDE HIS IMPUGNED ORDER DATED 29.5.2015 ALLOWED THE APPEAL OF THE ASSESSEE B Y RESPECTFULLY FOLLOWING THE VARIOUS JUDGMENTS DELIVE RED BY THE HONBLE SUPREME COURT OF INDIA AND HONBLE JURISDIC TIONAL HIGH COURT AS WELL AS ON THE FACTS OF THE CASE OF THE AS SESSEE. THE ASSESSEE-SOCIETY WAS FOUNDED IN 1921 BY THE FIRE BR AND FREEDOM FIGHTER LATE SHRI LALA LAJPAT RAI (1865-19 28) DURING THE FREEDOM STRUGGLE FOR THE NATION BUILDING, ON THE BASIS OF EARLIER ASSESSMENT YEARS I.E. AY 1973-74, THE JUDGMEN T DELIVERED BY THE TRIBUNAL AND REFERENCE OF THE DEP ARTMENT U/S. 256(1) OF THE HONBLE HIGH COURT WAS WITHDRAWN VIDE THE ORDER DATED 01.01.1990 FOR 3 YEARS FOR THE AY 1990- 91 TO 1992-93 U/S. 11(1) OF THE ACT WAS WITHDRAWN BY THE DEPARTMENT AND THE ASSESSEE WAS GRANTED THE EXEMPT ION U/S. 11(1) OF THE ACT FOR ASSESSMENT YEARS 1991-92, 1992- 93. LD. CIT(A) HAS ALSO RESPECTFULLY FOLLOWING THE ORDER AL LOWED THE EXEMPTION U/S. 11(1) FOR THE AY 2009-10 AS WELL AS VARIOUS DECISIONS RENDERED BY THE HONBLE SUPREME COURT OF INDIA AS WELL AS HONBLE JURISDICTIONAL HIGH COURT DECISION IN THE RECENT 5 CASE OF HONBLE DELHI HIGH COURT IN THE CASE OF IND IA TRADE PROMOTION ORGAZNIATION VS. DGIT(E) 53 TAXMANN.COM 40 4 (DELHI) 2015 IN WHICH THE HONBLE JURISDCITIONAL HI GH COURT HAS HELD THAT MERE RECEIPT OF FEE OR CHARGE CANNOT BE SAID THAT THE ASSESSEE IS INVOLVED IN ANY TRADE, COMMERCE OR BUSI NESS AND ACCORDINGLY ALLOWED THE RELIEF TO THE ASSESSEE AND ALLOWED THE APPEAL OF THE ASSESEE. AGAINST THE IMPUGNED ORDER, T HE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 3. LD. DR RELIED UPON THE ORDER OF THE AO AND STATE D THAT AO HAS PASSED A WELL REASONED ORDER ON THE BASIS OF AMENDMENT IN SECTION 2(15) OF THE I.T. ACT, 1961 W HICH IS EFFECTIVE FROM 01.04.2009 AND IS APPLICABLE FROM AS SESSMENT YEAR 2009-10. HE FURTHER STATED THAT IN VIEW OF THI S AMENDMENT THE ACTIVITIES OF THE ASSESSEE OF RUNNING NEWSPAPER PRINTING HAS CHARACTERISTICS AND THE ASSESSEE IS GE NERATING INCOME FROM PUBLISHING ADVERTISEMENTS IN ITS NEWSPA PERS. THEREFORE, THE ACTIVITIES OF THE ASSESEE ARE COMMER CIAL IN NATURE, HENCE, AO HAS RIGHTLY HELD THAT THE ASSESSEE FALLS UNDER THE LAST LIMB OF SECTION 2(15) AND HIT BY THIS SECT ION AND THEREFORE, IS NOT ENTITLED FOR ANY BENEFIT OF EXEMPT ION U/S. 11 AND RIGHTLY MADE THE ADDITIONS IN DISPUTE. HOWEVER, THE LD. CIT(A) HAS WRONGLY ALLOWED THE APPEAL OF THE ASSESS EE WHICH NEEDS TO BE SET ASIDE AND ACCORDINGLY REVNEUES APP EAL MAY BE ALLOWED. 4. ON THE CONTRARY, LD. COUNSEL FOR THE ASSESEE REL IED UPON THE ORDER OF THE LD. CIT(A) AND STATED THAT THE ASS ESSEE IS RUNNING PRINTING NEWSPAPERS NOT FOR THE PROFIT PURP OSES AND IS ONLY FOR CHARITABLE PURPOSE. HE STATED THAT THIS SOCIETY WAS FOUNDED BY LATE LALA LAZPAT RAI, A REVERED AND LEGE NDARY 6 FREEDOM FIGHTER IN THE INDIAN INDEPENDENCE MOVEMENT . THE ASSESSEE-SOCIETY IS ONE OF INDIAS OLDEST AND HIG HLY RESPECTED SOCIETY. THE INCOME TAX DEPARTMENT HAS GRANTED RE GISTRATION U/S. 12A OF THE I.T. ACT. TO PROVE THE SAME, HE DRAW O UR ATTENTION TOWARDS PAGE NO. 66 OF THE PAPER BOOK (PB) WHICH IS A COPY OF REGISTRATION GRANTED U/S. 12A AT PB-66 AND COPY OF NOTIFICATION U/S. 80G OF THE ACT AT PAGE 68-69 OF T HE PB. HE STATED THAT THE ASSESSEE IS ENGAGED IN CHARITABLE A CTIVITIES ON AN INDIA WIDE BASIS AND RUNNING URBAN/RURAL/SLUM DE VELOPMENT CENTRES, BALWARIS, PRIMARY / SENIOR SCHOOLS, CENTRES , HEALTH CENTRES, WORKING WOMENS HOSTEL, OLD AGE CENTRES ETC . AND SELLING OF A NEWSPAPER NAMELY, THE SAMAJA IN THE STATE OF ORISSA. HE HAS ALSO STATED THAT THE PROVISION OF SE CTION 2(15) OF THE ACT INSERTED W.E.F. 01.04.2009 IS THAT THE ADVANCE MENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY WOULD NO LONGER BE CONSIDERED AS A CHARITABLE PURPOSE IF IT INVOLVED C ARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BU SINESS OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION T O ANY TRADE, COMMERCE OR BUSINESS FOR A CESS OR A FEE OR FOR ANY OTHER CONSIDERATION IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION OR RETENTION OF SUCH INCOME FROM SUCH ACTIVITY. TO CONT ROVERT THE AMENDMENT TO THE PROVISION OF SECTION 2(15) OF THE ACT, LD. COUNSEL FOR THE ASSESSEE STATED THAT ASSESSEE DERIV ES SIGNIFICANT RECEIPTS FROM THE ACTIVITY OF SELLING O F NEWSPAPERS, BUT ALL THE RECEIPTS FROM THE SAID NEWSPAPER ACTIVI TY ARE UTILIZED SOLELY TOWARDS THE CHARITABLE INITIATIVES UNDERTAK EN ON A PAN INDIA WIDE BASIS AND ITS DAY TO DAY RUNNING AND TH E BALANCE IF ANY IS TRANSFERRED TO THE GENERAL FUND/ ACCUMULATED SURPLUS OR DEFICIT WHICH IS DULY ACCOUNTED FOR IN THE AUDIT ED BALANCE 7 SHEET OF THE ASSESSEE. HE FURTHER SUBMITTED THAT IF THE DRIVING FORCE IS NOT THE DESIRE OF EARN PROFITS BUT TO DO C HARITY, THE EXCEPTION CARVED OUT IN THE FIRST PROVISO TO SECTIO N 2(15) OF THE SAID ACT WOULD NOT APPLY. HE FURTHER SUBMITTED THAT AO HAS INTER ALIA ALLEGED THAT THE RECEIPTS ON ACCOUNT OF PROFITS FROM NEWSPAPER PUBLICATION HAVE BEEN EARNED IN A SYSTEMA TIC MANNER AND ARE IN THE NATURE OF TRADE, COMMERCE AND BUSINESS. HE FURTHER SUBMITTED THAT THE ASSESSEE W AS NEVER TO DERIVE ANY PROFITS FROM THE SAID ACTIVITY. ALL THE RECEIPTS GENERATED FROM THE SAID ACTIVITY ARE UTILIZED BY TH E ASSESSEE TOWARDS ACHIEVING ITS OBJECTIVE OF SOCIAL, ECONOMIC AND POLITICAL ADVANCEMENT OF THE COUNTRY. IT WA FURTHER SUBMITTED THAT IT IS A WELL SETTLED PRINCIPLE THAT MERELY BECAUSE A FEE OR SOME OTHER CONSIDERATION IS COLLECTED OR RECEIVED BY THE ASSES SEE, IT WOULD NOT LOSE ITS CHARACTER OF HAVING BEEN ESTABLISHED F OR A CHARTIABLE PRUPOSES AND IN THIS BEHALF HE RELIED UP ON VARIOUS CASES INCLUDING THE ITPO VS. DGIT( EXEMPTIONS) 53 TAXMANN.COM 404 (DELHI) HONBLE DELHI HIGH COURT. IT WAS FURTHER SUBMITTED THAT PRIOR TO THE INSERTION OF PR OVISO TO SECTION 2(15) BY FINANCE ACT, 2008, THE ASSESSEE WAS DULY ALLOWD THE EXEMPTION CLAIMED BY IT UNDER SECTION 1 1 OF THE ACT. THE RETURN INCOME OF THE ASSESSEE WAS DULY AND CONSISTENTLY ACCEPTED FOR THE PRIOR ASSESSMENT YEAR S 2002-03 TO 2004-05 AND 2006-07 TO 2009-10. THE ACTIVITIES O F THE ASSESSEE WERE HELD AS WITHIN THE PROVISIONS OF THE SECTION 2(15) OF THE ACT. ALSO THE ACTIVITIES UNDERTAKEN B Y THE ASSESSEE IN THE STATE OF DELHI AND ODHISHA HAVE NEV ER CHANGED. THE ASSESSEE IS TILL ENGAGED IN THE ACTIVI TY OF SELLING OF NEWSPAPER IN THE STATE OF ODHISA FROM THE DAY IT WAS 8 BEQUEATHED TO IT BY UTKALMANI PANDIT GOPABANDHU DAS . IN VIEW OF ABOVE, HE REQUESTED TO DISMISS THE APPEAL O F THE REVENUE BY UPHOLDING THE ORDER OF THE LD. CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RE CORDS ESPECIALLY THE IMPUGNED ORDER, PAPER BOOK FILED BY THE ASSESSEE AND THE CASE LAWS RELIED THEREIN AS WELL A S THE RELEVANT PROVISIONS OF THE ACT ON THE ISSUE IN DIS PUTE. WE FIND CONSIDERABLE COGENCY IN THE CONTENTION OF THE LD . COUNSEL FOR THE ASSESSEE THAT THE ASSESSE IS A CHARITABLE INSTI TUTION AND MERE RECEIPT OF FEES AND INCOME ETC. CANNOT BE SAID THAT THE ASSESSEE IS INVOLVED IN ANY TRADE, COMMERCE OR BUS INESS. THE ASSESSEE IS CARRYING THE MANDATE OF THE WILL OF LAT E SHRI GOPA BANDHU DASS IN RUNNING THE PRINTING PRESS AND THE N EWSPAPER AND THE INCOME SO GENERATED IS USED FOR CHARITABLE PURPOSES AND APPARENTLY THERE IS NO PROFIT MOTIVE IN THE AC TIVITIES OF THE ASSESSEE AND AS SUCH IT CANNOT BE SAID THAT THE ASS ESSEE IS INVOLVED IN ANY TRADE, COMMERCE OR BUSINESS AND AS S UCH THE MISCHIEF OF THE PROVISO OF SECTION 2(15) IS NOT APP ARENTLY ATTRACTED. WE FURTHER NOTE THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF INDIA TRADE PROMOTION ORGANIZATION V S. DGIT9E) 53 TAXMANN.COM 404 (DELHI) 2015 ORDER DATED 22.1.201 5 HAS UPHELD THE CONSTITUTION VALIDITY OF THE PROVISO OF SECTION 2(15) WHICH WAS UNDER CHALLENGE BEING DISCRIMINATORY IN VIEW OF THE ARTICLE 14 (EQUALITY BEFORE LAW) OF THE CONSTITUTIO N OF INDIA BUT THE HONBLE HIGH COURT HAS READ DOWN THE STRICT AND LITERAL INTERPRETATION OF THE PROVISO OF SETION 2(15) AND H AS HELD THAT MERE RECEIPT OF FEE OR CHARGE CANNOT BE SAID THAT T HE ASSESSEE IS INVOLVED IN ANY TRADE, COMMERCE OR BUSINESS AND H AS ACCORDINGLY ALLOWED THE RELIEF TO THE AFORESAID CAS E. AFTER 9 CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE IS A C HARITABLE AND NON-PROFIT INSTITUTION AND ALSO FOUND THAT A SSESSEE IS NOT INVOLVED IN ANY TRADE, COMMERCE OR BUSINESS ACTIVI TY WHICH ATTRACTS THE MISCHIEF OF THE PROVISO OF SECTION 2(1 5) OF THE ACT AND THE ASSESSEE HAS BEEN ENJOYING THE EXEMPTION U/ S. 11(1) AND ALSO U/S. 10(23C)(IV) IN THE PAST AND ACCORDIN GLY FOLLOWING THE PRINCIPLE OF CONSISTENCY THE AO WAS RIGHTLY DIRECTED TO ALLOW THE EXEMPTION TO THE ASSESSEE U/S. 11(1) OF TH E ACT WITH ALL THE CONSEQUENTIAL BENEFITS BY THE LD. CIT(A). H ENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT( A), THEREFORE, WE UPHOLD THE SAME AND REJECT THE GROUNDS RAISED B Y THE REVENUE AND ACCORDINGLY, DISMISS THE APPEAL FILED BY THE REVENUE. 6. IN THE RESULT, THE REVENUE APPEAL IS DISMISSED. THE DECISION IS PRONOUNCED ON 17.09.2019. SD/- SD/- (ANADEE NATH MISSHRA) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL M EMBE R DATED: 17.09.2019 SRB COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASSTT. REGISTRAR, ITAT, NEW DELHI