ADIT (E), New Delhi V. M/s Indian National Theater Trust, New Delhi

ITA 5659/DEL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52515 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 03-08-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 14-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SALIL MISHRA
• Keywords: Business income; Depreciation
• Section: 80G; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C DELHI BEFORE SHRI I.P. BANSAL AND SHRI K.G. BANSAL ITA NO. 5659(DEL)/2010 ASSESSMENT YEAR: 2007-08 ASSISTANT DIRECTOR OF INCOME IN DIAN NATIONAL THEATRE TRUST, TAX(E), TC-II, NEW DELHI. VS. 4, S AFDAR HASHMI MARG, NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SALIL MISHRA, SR . DR RESPONDENT BY : SHRI V.P. GUPTA & SHRI BASANT KUMAR, ADVOCATES ORDER PER K.G. BANSAL : AM THE ONLY GROUND TAKEN BY THE REVENUE IN THIS C ASE IS THAT THE LD. CIT(APPEALS) ERRED IN ALLOWING EXEMPTION U/S 11 OF THE INCOME-TAX ACT, 1961, PARTICULARLY WHEN THE HIRING OF AUDITORIU M AND PROVIDING SPACE FOR RENT ARE COMMERCIAL ACTIVITIES AND THERE IS NOTH ING CHARITABLE ABOUT THE ACTIVITIES CARRIED ON BY THE ASSESSEE. 2. THE FACTS MENTIONED IN THE ASSESSMENT ORDER A RE THAT THE RETURN WAS FILED ON 31.10.2007 DISCLOSING NIL INCOME. IT W AS PICKED UP FOR SCRUTINY BY ISSUING NOTICE U/S 143(2) ON 30.7.2008 WHICH W AS SERVED ON THE ASSESSEE. IT WAS FOUND THAT THE ASSESSEE WAS REGISTERED U/S 12A(A) OF THE ITA NO. 5659(DEL)/2010 2 ACT ON 09.02.1977. IT HAS ALSO BEEN APPROVED U/S 80G OF THE ACT. THE MAIN OBJECT OF THE SOCIETY IS TO PROMOTE ARTIST IC AND CULTURAL EXPRESSION THROUGH DRAMAS, MUSIC, EDUCATION ETC. IT OWNED AN AUDITORIUM SITUATED AT 4, SAFDAR HASHMI MARG, NEW DELHI. THE AUDITORIU M IS CLAIMED TO HAVE BEEN USED FOR PROMOTING THE OBJECTS OF THE TRUST. THE MAIN INCOME OF THE ASSESSEE CONSISTS OF HIRING CHARGES OF THE AUDITORI UM AND RENTAL INCOME AND MAINTENANCE CHARGES RECEIVED FROM TWO TENANTS, B ENET COLEMAN & CO. LTD. (BENET & COLEMAN FOR SHORT) AND SHRIRAM CENT RE FOR INDUSTRIAL RELATION & HUMAN RSOURCES (SHRIRAM FOR SHORT). THE ASSESSEE RECEIVED RENT OF RS. 43,33,200/- AND MAINTENANCE CHARGES OF RS. 27,96,000/- FROM BENET & COLEMAN. FURTHER, IT RECEIVED RENT OF RS. 6.00 LAKH AND MAINTENANCE CHARGES OF RS. 12.00 LAKH FROM SHRIRAM. IT ALSO RECEIVED HIRING CHARGES FROM SUNDRY PARTIES IN RESPECT OF AUDITORIUM AMOUNTING TO RS. 39.35 LAKH. APART FROM THAT, THE ASSESSEE D ERIVED INCOME BY WAY OF INTEREST AND GAIN ON TRANSFER OF UNITS. THE EXPEND ITURE INCURRED WAS PRIMARILY FOR REPAIRS AND MAINTENANCE OF THE PROP ERTY, INCLUDING DEPRECIATION AND DONATION OF RS. 18.10 LAKH. THE AO CAME TO THE CONCLUSION THAT THE ACTIVITIES OF THE ASSESSEE A RE IN THE NATURE OF BUSINESS. IT HAS NOT MAINTAINED SEPARATE BOOKS OF ACCOUNT F OR THE BUSINESS AS REQUIRED U/S 11(4A). THEREFORE, DEDUCTION HAS NO T BEEN ALLOWED U/S 11 OF ITA NO. 5659(DEL)/2010 3 THE ACT. THE CLAIM OF DEPRECIATION HAS BEEN DENIED ON THE GROUND THAT THE COST OF THE ASSET HAS BEEN CLAIMED AS APPLICA TION OF INCOME. THE DONATION HAS ALSO BEEN DISALLOWED. THUS, THE INCOM E HAS BEEN CALCULATED AT RS. 77,74,610/- AS UNDER:- RS. RS. NET PROFIT AS PER I&E ACCOUNT 52,16,186/- ADD: DONATION, WHICH IS NOTHING BUT APPLICATION OF INCOME 18,10,000/- DEPRECIATION AS THE ASSESSEE CLAIMED EXPENDITURE FOR PURCHASE OF FIXED ASSETS 7,48,000/- 25,58,420/- TOTAL TAXABLE INCOME 77,74,606/- ROUNDED OFF 77,74,610/- 2.1 THE LD. CIT(A) ALLOWED THE APPEAL OF THE ASS ESSEE BY RELYING ON THE DECISION OF THE TRIBUNAL IN THE CASE OF THE ASSES SEE IN ITA NO. 7892(DEL)/91 FOR ASSESSMENT YEAR 2006-07, ITA N O. 7893(DEL)/91 FOR ASSESSMENT YEAR 1988-89 AND ITA NO. 1589(DEL)/92 FOR ASSESSMENT YEAR 2007-08 (THERE SEEMS TO BE SOME THING WRONG IN THI S PART OF THE ORDER). THE ORDER OF THE TRIBUNAL IN TURN RELIED ON THE DECISION IN THE CASE OF GALIB INSTITUTE VS. ACIT, (1995) 53 ITD 350. AGGRIEVED BY THIS ORDER, THE REVENUE IS IN APPEAL BEFORE US. ITA NO. 5659(DEL)/2010 4 3. THE SUBMISSIONS OF THE LD. DR BEFORE US ARE TO THE EFFECT THAT EARNING OF RENTAL INCOME BY HIRING THE PREMISES AND CHARGING MAINTENANCE CHARGES IS A COMMERCIAL ACTIVITY, THER EFORE, THE ASSESSEE SHOULD HAVE MAINTAINED SEPARATE BOOKS OF ACCOUN T FOR THIS ACTIVITY. THERE IS NOTHING ON RECORD TO SHOW ANY CHARITABLE A CTIVITY IN PURSUANCE OF THE OBJECTS OF THE SOCIETY. THEREFORE, IT IS AGITAT ED THAT THE PROVISION CONTAINED IN SECTION 11(4A) IS APPLICABLE. 3.1 AS AGAINST THE AFORESAID, THE SUBMISSION OF THE LD. COUNSEL IS THAT THE ASSESSEE HAS BEEN ASSESSED AS A CHARITABLE SOCIETY OVER A LONG PERIOD OF TIME. THERE HAS BEEN NO CHANGE IN FACTS IN THIS YEAR. THE ISSUE RAISED BY THE REVENUE STANDS COVERED BY THE DECISION OF THE TRIBUNAL DATED 22.04.1999 FOR ASSESSMENT YEARS 1986-87 TO 1988 -89, A COPY OF WHICH HAS BEEN PLACED BEFORE US. THIS DECISION HAS NOT BEE N CHALLENGED BY THE REVENUE BEFORE THE HIGH COURT. 4. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. THE OPERATIVE PORTION OF THE ORDER OF T HE TRIBUNAL IS CONTAINED IN PARAGRAPH NO. 6, WHICH READS AS UNDER:- 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. CIT(A) IN THE IMPUGNED ORDER HIMSEL F ADMITTED ITA NO. 5659(DEL)/2010 5 THAT FACTS IN THE CASE WERE IDENTICAL TO THE F ACTS IN THE CASE OF GALIB INSTITUTE AND ADMITTEDLY, ITAT DELHI BENCH HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE. THE LD. DR WAS NOT ABLE TO POINT OUT ANY DIFFERENCE EITHER OF FACT O R OF LAW AND RESPECTFULLY FOLLOWING THE SAID ANALOGY, THE APP EALS OF THE ASSESSEE ARE TO BE ALLOWED. 4.1 THE FACTS IN THE CASE OF GALIB INSTITUTE (S UPRA) ARE THAT THE ASSESSEE DERIVED INCOME FROM RENT INCLUDING RENT FROM HIRI NG OF AUDITORIUM AND FURNITURE AND FIXTURE. THE AO TREATED THE INCOME AS BUSINESS INCOME AND INVOKED THE PROVISION CONTAINED IN SECTION 11(4 A). SINCE SEPARATE BOOKS OF ACCOUNT WERE NOT MAINTAINED, HE DENIED DED UCTION U/S 11. THE OPERATIVE PORTION OF THE DECISION READS AS UNDER: - IN ALL THE ABOVE CASES, THEIR LORDSHIPS WERE C ONSIDERING THE WORDS THE ADVANCEMENT OF ANY OTHER OBJECT OF G ENERAL PUBLIC UTILITY NOT INVOLVING THE CARRYING ON OF ANY ACT IVITY FOR PROFIT. THEIR LORDSHIPS HAVE COME TO THE CONCLUS ION THAT WHEN THE PREDOMINANT OBJECT WAS NOT TO EARN THE PROFIT BUT TO CARRY OUT OBJECTS OF GENERAL PUBLIC UTILITY, T HE PROFIT EARNED IS RENT WOULD NOT AMOUNT TO CARRYING ON OF ANY ACTIVITY FOR PROFIT. HERE, IN THIS CASE ALSO, THE PREDOMINANT OBJECT OF THE LETTING OUT OF THE AUDITORIUM AND FURNITURE AND FI XTURE IS FOR CARRYING OUT OF THE OBJECT OF THE TRUST AND, THEREFORE, IN VIEW OF THE ABOVE DECISIONS, IT IS NOT AN ACTIVITY CA RRIED ON FOR PROFIT. THEREFORE, IT CANNOT BE SAID TO BE PRO FITS AND GAINS OF THE BUSINESS. ACCORDINGLY, S. 11(4A) WILL HAVE NO APPLICATION. THEREFORE, WE HOLD THE ASSESSEE-TRUST BE ALLOWED EXEMPTION UNDER S. 11 EVEN IN RESPECT OF THE INCOME FROM RENT FROM LETTING OUT OF THE AUDITORIUM AND FURNITURE AND FIXTURES. ACCORDINGLY, GROUND NO. 1 OF THE ASSESSEES APPE AL FOR ALL THE YEARS IS ALLOWED. ITA NO. 5659(DEL)/2010 6 4.2 THE DECISION IN THE CASE OF THE ASSESSEE AN D IN THE CASE OF GALIB INSTITUTE WILL SHOW THAT THE HIRING OF THE AUDI TORIUM TO VARIOUS PERSONS WAS IN FURTHERANCE OF ITS OBJECTS. THIS DECISION IN THE CASE OF THE ASSESSEE HAS NOT BEEN CHALLENGED. THIS ISSUE IS FUNDAMENT AL ISSUE PERMEATING ALL THE ASSESSMENT OF THE ASSESSEE. THEREFORE, IN A BSENCE OF ANY CHALLENGE TO THE EARLIER ORDER, THE REVENUE CANNOT BE ALLOWED TO CHANGE ITS STAND IN THIS YEAR. 5. IN THE RESULT, THE APPEAL IS DISMISSED. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 5 AUGUST, 2011. SD/- SD/- (I.P. BANSAL) (K.G. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 05.08.2011. SP SATIA COPY OF THE ORDER FORWARDED TO:- INDIAN NATIONAL THEATRE TRUST, NEW DELHI. ADIT(E), TRUST CIRCLE-II, LAXMI NAGAR, DELHI. CIT CIT(APPEALS) THE DR, ITAT, NEW DELHI. ASSISTANT REGISTRAR.