DCIT (Exemption), New Delhi V. Science Olympiad Foundation, New Delhi

ITA 5407/DEL/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7578 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 31-05-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 03-09-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S R SENAPATHI
• Assessee Lawyers: ASHISH
• Keywords: Charitable institution
• Section: 143(3); 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER I.T.A. NO. 5407 /DEL/20 1 5 A.Y. : 20 11 - 1 2 DCIT(E), CIRCLE 2(1), ROOM NO. 2408, 24 TH FLOOR, E-2 BLOCK, PRATYAKSH KAR BHAWAN, DR. SP MUKHERJEE CIVIC CENTRE, NEW DELHI 2 VS M/S SCIENCE OLYMPIAD FOUNDATION D-8, TAJ APARTMENTS, NEAR SAFDARJUNG HOSPITAL, RING ROAD, NEW DELHI 29 (PAN: AABTS5082M) (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. S.R. SENAPATHI, SR. DR ASSESSEE BY : SH. VED JAIN, ADV. & SH. ASHISH DATE OF HEARING: 31.05.2016 DATE OF ORDER : 02-06-2016 ORDER PER H.S. SIDHU : JM THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE O RDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (EXEMP TION), NEW DELHI FOR THE ASSESSMENT YEAR 2011-12. 2. THE GROUNDS RAISED IN THE REVENUES APPEAL READ AS UNDER:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE AC TIVITIES ITA NO. 5407/DEL/2015 2 OF THE ASSESSEE ARE CHARITABLE IN NATURE AND THAT ASSESSEE IS ELIGIBLE FOR EXEMPTON U/S. 11 OF THE ACT BY IGNORING THE FACT THAT THE ACTIVITIES OF THE ASSESSEE OF CONDUCTING EXAMINATION BY CHARGING FEES ARE ESSENTIAL LY CARRYING THE CHARACTERISTICS OF BUSINESS. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE AC TIVITIES OF THE ASSESSEE ARE CHARITABLE IN NATURE AND THAT ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S. 11 OF THE AC T BY IGNORING THE FACT THAT THE ASSESSEE IS NOT PROVIDING FORMAL SCHOOLING WHICH THE ESSENCE OF EDUCATION. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ASS ESEE IS AN EDUCATIONAL INSTITUTION WITHIN THE MEANING OF SECTION 2(15) OF THE INCOME TAX ACT, 1961 AND IN DIRECTING THE AO TO ALLOW EXEMPTION AS CLAIMED BY THE ASSESSEE. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER O R AMEND ANY GROUND OF APPEAL, RAISED ABOVE AT THE TIME OF HEARING. ITA NO. 5407/DEL/2015 3 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FIL ED RETURN OF INCOME ON 17.8.2011 DECLARING TOTAL INCOME AT RS. NIL AFTER CLAIMING APPLICATION OF INCOME U/S. 11 & 12 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS THE ACT). THE RETURN W AS PROCESSED U/S. 143(1) OF THE ACT. THE CASE WAS SELECTED UNDER CASS FOR SCRUTINY. NOTICE U/S. 143(2) DATED 3.8.2012 WAS ISSUE D AND DULY SERVED UPON THE ASSESSEE. IN RESPONSE TO THE SAME, AS SESSEES AUTHORISED REPRESENTATIVE ATTENDED THE HEARING FROM TIM E TO TIME AND THE DISCUSSED THE CASE WITH THE AO AND ALSO PRODU CED BOOKS OF ACCOUNTS WHICH HAS BEEN SEEN ON TEST CHECK BASIS. TH EREAFTER, THE AO VIDE HIS ORDER DATED 25.03.2014 PASSED U/S. 143(3 ) OF THE I.T. ACT, 1961 HAS ASSESSED TOTAL INCOME OF THE ASSESSEE AT RS. 2,53,59,589/- BY TREATING IT AS ENTIRE SURPLUS AS PER INCOME & EXPENDITURE ACCOUNT WHICH WAS TAXED UNDER SECTION 13( 8) OF THE ACT AND NOT ALLOWED ANY BENEFIT OF SECTION 11 & 12 OF THE ACT. 4. AGGRIEVED WITH THE AFORESAID ORDER OF THE AO, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(E) WHO VIDE IMPUGNED ORDER DATED 03.06.2015 HAS ALLOWED THE APPEAL OF THE ASSESSEE AND HELD THAT APPARENTLY THE ASSESSEE IS NOT INVOLVED IN ANY TRAD E, COMMERCE OR BUSINESS AND AS SUCH THE MISCHIEF OF PROVISO OF SE CTION 2(15) IS NOT APPLICABLE AS HELD BY THE ITAT DURING THE AY 2 009-10 AND ITA NO. 5407/DEL/2015 4 ACCORDINGLY, ALLOWED THE RELIEF OR EXEMPTION U/S. 11 (1) AS A CHARITABLE INSTITUTION AND ACCORDINGLY DIRECTED THE AO TO ALLOW THE EXEMPTION U/S11(1) WITH ALL THE CONSEQUENTIAL BENEFIT S. 5. AGAINST THE ORDER OF THE LEARNED CIT(E) THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 6. LD. DR RELIED UPON THE ORDER OF THE AO AND REITER ATED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL. IT WAS S UBMITTED BY THE LEARNED DR THAT THE AO HAS RIGHTLY ASSESSED THE INCO ME VIDE HIS ORDER DATED 25.03.2014 PASSED U/S. 143(3) OF THE I.T . ACT, 1961 AT RS. 2,53,59,589/- BY TREATING IT AS ENTIRE SURPLUS AS PER INCOME & EXPENDITURE ACCOUNT WHICH WAS TAXED UNDER SECTION 13( 8) OF THE ACT AND ALSO RIGHTLY NOT ALLOWED THE BENEFIT OF SECTION 11 & 12 OF THE ACT TO THE ASSESSEE. THEREFORE, HE SUBMITTED THAT THE ORDER OF THE AO MAY BE SUSTAINED. 7. ON THE CONTRARY, THE LD. COUNSEL OF THE ASSESSEE RELIED UPON THE ORDER OF THE LD. CIT(E) AND PRAYED THAT THE SAME M AY BE UPHELD. ITA NO. 5407/DEL/2015 5 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RE LEVANT RECORDS AVAILABLE WITH US. WE FIND THAT LD. CIT(E) HAS ELABORATELY DISCUSSED THE ISSUE AND GAVE HIS FINDING VIDE PARA NO. 4.5 TO 5 AT PAGE NO. 2 TO 3 OF HIS IMPUGNED ORDER. FOR THE SAKE OF CONVENIENCE, THE SAID RELEVANT FINDING OF THE LD. CIT(E) IS REPR ODUCED BELOW:- 4.5 I HAVE CONSIDERED THE ORDER OF THE AO AND THE SUBMISSIONS OF THE ASSESSEE AND I FIND CONSIDERABLE MERIT IN THE SUBMISSIONS OF THE ASSESSEE THAT THE MISCHIEF OF PROVISO OF SECTION 2(15) IS NOT APPARENTLY APPLICABLE AS THE ASSESSEE IS NOT INVOLVED IN ANY TRADE, COMMERCE OR BUSINESS AND AS SUCH THERE IS NO PROPER JUSTIFICATION FOR DENYING THE EXEMPTION U/S. 11(1). THERE IS ALSO MERIT IN THE SUBMISSIONS OF THE ASSESSEE THAT MERE RECEIPT OF FEES AND CHARGES ETC. DOES NOT MEAN THAT THE ASSESSEE IS INVOLVED IN ANY TRADE, COMMERCE OR BUSINESS ETC. 4.6 RECENTLY THE HONBLE HIGH COURT IN THE CASE OF INDIA TRADE PROMOTION ORGANISATION VS. DGIT(E), 53 TAXMANN.COM 404 (DELHI) 2015 ITA NO. 5407/DEL/2015 6 (ORDER DATED 22.1.2015_ 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 CONSTITUTION OF INDIA BUT THE HONBLE HIGH COURT HAS READ DOWN THE STRICT AND LITERAL INTERPRETATION OF THE PROVISO OF SECTION 2(15) AND HAS HELD THAT MERE RECEIPT OF FEE OR CHARGE CANNOT BE SAID THAT THE ASSESSE IS INVOLVED IN ANY TRADE, COMMERCE OR BUSINESS AND HAS ACCORDINGLY ALLOWED THE RELIEF TO THE ITPO CASE VIDE PARA 58 AND 59 OF THE ORDER. 4.7 AFTER CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE VIEW THAT APPARENTLY THE ASSESSEE IS NOT APPARENTLY INVOLVED IN ANY TRADE, COMMERCE OR BUSINESS AND AS SUCH THE MISCHIEF OF PROVISO OF SECTION 2(15) IS NOT APPLICABLE AS HELD BY THE HONBLE TRIBUNAL DURING THE AY 2009-10 AS REFERRED ABOVE AND AS SUCH ASSESSEE MAY BE ALLOWED THE RELIEF OR EXEMPTION U/S. 11(1) AS A ITA NO. 5407/DEL/2015 7 CHARITABLE INSTITUTION AND ACCORDINGLY THE AO IS DIRECTED TO ALLOW THE EXEMPTION U/S. 11(1) WITH ALL THE CONSEQUENTIAL BENEFITS. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. 8.1 WE GONE THROUGH THE FINDING OF THE LD. CIT(E) A ND FIND THAT THE ASSESSEE HAD BEEN ENJOYING THE EXEMPTION U/S. 1 1(1) BUT THE SAME WAS DENIED BY THE AO DURING THE AY 2009-10 BY I NVOKING THE MISCHIEF OF THE PROVISO OF SECTION 2(15) MAINLY ON TH E GROUND THAT THE ASSESSEE WAS INVOLVED IN TRADE, COMMERCE OR BUS INESS AS THE ASSESSEE WAS RECEIVING FEES FROM THE STUDENTS BUT THE APPEAL OF THE ASSESSEE WAS ALLOWED BY THE LD. CIT(A)-XXI, (OLD), N EW DELHI VIDE HIS ORDER DATED 26.11.2012 AND THE DEPARTMENTAL APPEA L HAS ALSO BEEN DISMISSED BY THE ITAT VIDE THE ORDER DATED 16.5. 2014 IN ITA NO. 907/DEL/2013. THERE WAS APPARENTLY NO SCRUTINY ASSESSMENT DURING THE AY 2010-11 AND AS SUCH THE RETURN OF THE A SSESSEE CLAIMING THE EXEMPTION U/S. 11(1) WAS ALLOWED U/S. 143(1) OF THE ACT. THE AO HAS SIMILARLY DENIED THE EXEMPTION U/S. 11(1) DURING THE PRESENT AY I.E. 2011-12 AND SIMILARLY, LD. CIT(E ) HAS ALLOWED THE EXEMPTION TO THE ASSESSEE AND HELD THAT THE ASSESS EE IS ACTUALLY A CHARITABLE INSTITUTION AND IS WORKING IN THE FIELD OF EDUCATION AND ITA NO. 5407/DEL/2015 8 THE CASE OF THE ASSESSEE IS ALSO COVERED BY THE ORD ER OF THE TRIBUNAL FOR THE AY 2009-10. WE FIND CONSIDERABLE COGENCY IN THE FINDING OF THE LD. CIT(E) IN REVERSING THE ACTION OF THE AO BY RELYING ON THE JUDGMENT OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE AY 2009-10 AND ALSO RELYING UPON THE JUDGMENT OF THE HONBLE JU RISDICTIONAL HIGH COURT IN THE CASE OF INDIA TRADE PROMOTION ORG ANISATION VS. DGIT(E) (2015) 371 ITR 333 (DELHI) AND HAS RIGHTLY H ELD THAT THE PROVISO TO SECTION 2(15) IS NOT APPLICABLE TO THE ASSE SSEE AS THE ASSESSEE IS NOT INVOLVED IN ANY TRADE, COMMERCE OR B USINESS. FOR THE SAKE OF CLARITY, WE ARE REPRODUCING THE RELEVANT FINDING OF THE TRIBUNAL PASSED VIDE ORDER DATED 16.5.2014 IN ITA NO . 907/DEL/2013 IN ASSESSEES OWN CASE FOR THE AY 2009 -10, WHICH THE LD. CIT(E) HAS FOLLOWED IN THE PRESENT CASE, BE CAUSE THE ISSUE IN DISPUTE IN THE AY 2011-12 IS SQUARELY COVERED BY THIS DECISION. '5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED T HE MATERIAL AVAILABLE ON RECORD. IT IS UNDISPUTED THAT ASSESSES BOOKS OF ACCOUNTS ARE AUDITED AND UPHELD BY ID. AO. NO DISCREPANCY OR QUESTION ABOUT GENUINENESS OF T HE BOOKS AND AFFAIRS OF THE ASSESSEE HAVE BEEN CALLED I NTO QUESTION. LN EARLIER ASSESSMENTS ULS 143(3) ASSESSES ACTIVITIES HAVE BEEN HELD TO BE EDUCATIONAL AND CHARITA BLE ACTIVITIES AND BENEFITS OF SEC 11 HAVE BEEN ALLOWED TO THE ITA NO. 5407/DEL/2015 9 ASSESSEE. REGISTRATION UNDER SEC 12A HAS NOT BEEN WITHDRAWN. IT HAS BEEN DEMONSTRATED BY THE ASSESSEE'S COUNSEL THAT NATURE OF ITS EDUCATIONAL ACTIVITIES, MODALITIES OF WORKING, METHODOLOGY OF AFFILIATION W ITH CBSE AND OTHER BOARDS, FEE STRUCTURE, EXAMINATION PATTERN REMAIN SAME AS IN EARLIER YEAR. 5.1. LD. AO HAS TAKEN A DIVERGENT VIEW ON THE ASSESSEE EDUCATIONAL ACTIVITIES BY HOLDING THAT THEY ARE NO MO RE EDUCATIONAL ACTIVITIES AS REGULAR CLASSES ARE NOT HELD. AO'S OBJECTIONS HAVE BEEN LISTED ABOVE. HON'BLE DELH I HIGH COURT IN THE CASE OF COUNCIL FOR INDIAN SCHOOLS CERTIFICATE EXAMINATION HAS SQUARELY HELD THAT ASSESSEE THOUGH BEING ONLY IN CONDUCTING EXAMINATIONS IS STILL TO BE REGARDED AS EDUCATIONAL INSTITUTION. 5.2. HON'BLE SUPREME COURT IN ASSAM BOOK PRODUCTION CASE (SUPRA) HELD THAT BOARD THOUGH BEING ONLY IN TH E PUBLICATION OF BOOKS FALLS WITHIN THE MEANING OF EDUCATIONAL INSTITUTION. IT IS NOT NECESSARY TO HOLD REG ULAR CLASSES TO BE REGARDED AS AN EDUCATIONAL INSTITUTION. HON'BLE SUPREME COURT IN AMERICAN HOTELS AND LODGIN G ASSOCIATION CASE (SUPRA) HAS SQUARELY HELD THAT PUBLICATION OF CURRICULUM, REPRODUCTION OF TEXT BOOK S, ITA NO. 5407/DEL/2015 10 FACULTY DEVELOPMENT PROGRAMMES ARE TO BE HELD AS EDUCATIONAL ACTIVITIES. 5.3. IN VIEW OF THESE CLEAR JUDGMENTS WE FIND NO MER IT IN THE ORDER OF AO TO GIVE A RESTRICTED MEANING TO THE SCO PE OF MEANING OF TERM EDUCATIONAL ACTIVITIES. THEREBY AO 'S NECESSITY OF HOLDING OF REGULAR CLASSES OR WHOLESOM E EDUCATIONAL ACTIVITIES TO BE ONLY ELIGIBLE TO BE CALLED EDUCATION ACTIVITIES ELIGIBLE FOR BENEFITS ULS 11 CANN OT BE SUSTAINED. 5.4. IT IS A SETTLED LAW THAT A CHARITABLE OR EDUCATIONAL INSTITUTION CAN CHARGE FEES FOR RENDERING SERVICES, I T IS SO AS THE SURPLUS IS ACCUMULATED WHICH IS FURTHER TO BE APPLIED FOR CHARITABLE OBJECTS OF THE INSTITUTION. IN C ASE OF WINDING UP, SURPLUS HAS NOT DWELL UPON SHARE HOLDER S OR RELATIVES, THEREFORE, THE AOS ALLEGATIONS IN THIS BE HALF CANNOT BE SUSTAINED. CONSEQUENTLY ADVERSE INFERENCE DRAWN BY AO IS WITHOUT ANY BASIS. 5.5 IN VIEW OF THE ABOVE FACTS, CIRCUMSTANCES AND CATENA OF BINDING JUDGEMENTS OF HONBLE SUPREME COUR T AND JURISDICTION DELHI HIGH COURT SUPPORTING CIT(A) S ORDER WE SEE NO INFIRMITY OF THE ORDER OF THE LD. CI T(A). 6. IN THE RESULT REVENUE APPEAL IS DISMISSED. ITA NO. 5407/DEL/2015 11 9. IN THE BACKGROUND OF THE AFORESAID DETAILED DISCU SSIONS AND RESPECTFULLY FOLLOWING THE PRECEDENTS AS AFORESAID, WE ARE OF THE VIEW THAT LD. CIT(E) HAS PASSED A WELL REASONED ORDE R WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, WE UPH OLD THE SAME. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STAN D DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 02/06/2016. SD/- SD/- [O.P. KANT] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEM BER SRBHATNAGAR DATE: 02-06-2016 COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES