IOV REGISTERED VALUERS FOUNDATION, New Delhi V. CIT(E), New Delhi

ITA 5787/DEL/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6800 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: misc
• Appeal Filed On: 03-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Set aside
• Section: 12AA; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C, NEW DELHI BEFORESHRI SUDHANSHU SRIVASTAVA, JUDICIALMEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO.5787/DEL/2019 ASSESSMENT YEAR: NA IOV REGISTERED VALUERS FOUNDATION, PLOT 3, II FLR, AGGARWAL, SQUARE, LSC JN OF 80 FT ROAD, PARWANA ROAD, PITAMPURA, DELHI VS. CIT (EXEMPTION), NEW DELHI PAN :AAECI7132G (APPELLANT) (RESPONDENT) ORDER PERO.P. KANT, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORD ER DATED 28/06/2019 PASSED BY THE COMMISSIONER OF INCOME-TAX (EXEMPTION), NEW DELHI [IN SHORT THE LD. CIT(E)] RE JECTING THE APPLICATION FOR REGISTRATION OF THE ASSESSEE IN TER MS OF SECTION 12AA OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT ) 2. THE GROUNDS RAISED BY THE ASSESSEE ARE REPRODUCE D AS UNDER: APPELLANT BY SHRI AMIT GOEL, ADV. RESPONDENT BY SHRI KANWALJIT SINGH, CIT(DR) DATE OF HEARING 26.08.2019 DATE OF PRONOUNCEMENT 18.10.2019 2 ITA NO.5787/DEL/2019 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE ORDER PASSED BY COMMISSIONER OF INCOME TAX (EXEMPTION) IS ERRONEOUS AND BAD IN LAW. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE COMMISSIONER OF INCOME TAX (EXEMPTION) ERRED IN REJ ECTING THE APPLICATION FOR REGISTRATION U/S 12 AA OF THE INCOM E TAX ACT, 1961 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE COMMISSIONER OF INCOME TAX (EXEMPTION) ERRED IN NOT ALLOWING THE REGISTRATION OF THE APPELLANT U/S 12 AA OF THE ACT. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE REASONS GIVEN BY COMMISSIONER OF INCOME TAX (EXEMPTION) FOR REJECTING THE APPLICATION OF THE APPELLANT FOR REGISTRATION U/S 1 2 AA OF THE ACT ARE ERRONEOUS AND NOT SUSTAINABLE. 5. THE APPELLANT CRAVES LEAVE TO ADD ONE OR MORE GR OUND OF APPEAL OR TO ALTER / MODIFY THE EXISTING GROUND BEFORE OR AT THE TIME OF HEARING OF APPEAL. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSE SSEE HAS BEEN INCORPORATED ON 19/12/2017 UNDER SECTION 8 OF THE COMPANY ACT, 2013 AS A NON-PROFIT ORGANIZATION. THE ASSESSEE HAS CLAIMED THAT IT IS RECOGNIZED AS REGISTERED VALUERSORGANIZATION IN TERMS OF RULE 13 OF THE COMP ANIES (REGISTERED VALUERS AND VALUATION) RULES, 2017 FOR VALUATION OF CLASS OF ASSETS CONSISTING OF LAND AND BUILDING, PL ANT AND MACHINERY AND SECURITIES OR FINANCIAL ASSETS. 2.1 THE ASSESSEE FILED APPLICATION BEFORE THE LD. CIT( E) SEEKING REGISTRATION IN TERMS OF SECTION 12AA OF THE ACT. T HE LEARNED CIT(E) EXAMINED THE OBJECTIVES AND ACTIVITIES OF TH E ASSESSEE FOR THE PURPOSE OF GRANTING REGISTRATION UNDER SECTION 12AA OF THE ACT. THE LD. CIT OBSERVED THAT: - ASSESSEE IS OPERATING ITS ACTIVITY FROM THE PREMISE S OWNED BY INSTITUTION OF VALUERS. - MAJOR PART OF THE EXPENSES INCLUDED PAYMENT MADE TO INSTRUCTOR OF THE INSTITUTION OF VALUER FOR TEACHIN G FEE AND RENT TO THE INSTITUTION OF VALUERS. 3 ITA NO.5787/DEL/2019 - THE ASSESSEE-COMPANY GENERATED INCOME MAINLY FROM RECEIVING FEES FROM THE INSOLVENCY AND BANKRUPTCY B OARD OF INDIA (IBBI) ASPIRANT STUDENTS. - NO FORMAL EDUCATION IS PROVIDED AND ONLY COACHING I S PROVIDED TO IBBI ASPIRANT STUDENTS AND THAT TOO ASA CONDUIT OF INSTITUTION OF VALUERS FOR CONDUCTING THE CLASSES BY THEIR FACULTIES. 2.2 IN VIEW OF THE OBSERVATIONS, THE LD. CIT CONCLUDED THAT THE COMPANY IS ENGAGED IN COMMERCIAL ACTIVITY. THE LEAR NED CIT HELD THAT THE CHARITABLE NATURE OF THE OBJECTIVES AND GE NUINENESS OF THE ACTIVITIES OF THE INSTITUTION COULD NOT BE ESTA BLISHED AND ACCORDINGLY, HE REJECTED THE REGISTRATION OF THE AS SESSEE COMPANY UNDER SECTION 12AA OF THE ACT. 3. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE FILEDA P APER-BOOK CONTAINING PAGES 1TO 123. THE LEARNED COUNSEL REFER RED TO COPY OF THE CERTIFICATE OF RECOGNITION BY THE INSOLVENCY AN D BANKRUPTCY BOARD OF INDIA (IBBI) AVAILABLE ON PAGE 81 OF THE P APER-BOOK AND ALSO REFERRED EDUCATION COURSES RECOGNIZED BY THE I BBI. THE LD. COUNSEL SUBMITTED THAT THE ASSESSEE IS ENGAGED IN I MPARTING EDUCATION WHICH IS CHARITABLE IN NATURE AS PER MAIN LIMB OF SECTION 2(15) OF THE ACT. THE LD. COUNSEL ALSO REFE RRED THAT THE ASSESSEE COMPANY HAS BEEN INCORPORATED UNDER SECTIO N 8 OF THE COMPANIESACT WHICH PRESCRIBE FORMATION OF THE COMPA NIES WITH CHARITABLE OBJECTS. HE ALSO REFERRED TO THE MEMORAN DUM OF ASSOCIATION OF THE COMPANY AND SUBMITTED THAT OBJEC T OF THE COMPANY IS FOR THE BENEFIT OF THE GENERAL PUBLIC AN D NOT FOR THE PROFIT MOTIVE. HE REFERRED TO CLAUSES 5(I), 5(II), 6, 10, AND 11 OF THE 4 ITA NO.5787/DEL/2019 MEMORANDUM OF ASSOCIATION TO STRESS THAT THE COMPAN Y EXISTS ONLY FOR CHARITABLE PURPOSES AND NOT FOR PROFIT MOT IVE. IN SUPPORT OF HIS CONTENTION, THE LD. COUNSEL RELIED ON FOLLOW ING DECISIONS: 1. ICAI ACCOUNTING RESEARCH FOUNDATION VS. DIRECTOR- GENERAL OF INCOME-TAX (EXEMPTION) (2009) 183 TAXMAN 462(DELHI). 2. DELHI ESCORTS SKILL DEVELOPMENT VERSUS CIT (EXEMPTION) 2019 (5) TMI 770-ITAT 3. ADDITIONAL COMMISSIONER OF INCOME-TAX , GUJRAT VS SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION (198 0) 121 ITR 1 (SC). 4. DECISIONS REFERRED IN PERAK 5.2, 5.3, 5.4 AND 5.6. 4. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDER OF THE LEARNED CIT(E) AND SUBMITTED THAT THE ASSESSEE IS O NLY CONDUCTING COACHING CLASSES FOR PREPARING THE STUDE NTS FOR APPEARING IN THE EXAMINATION CONDUCTED BY THE IBBI FOR VALUERS AND IT IS NOT ENGAGED IN PROVIDING ANY FORMAL SCHOO L EDUCATION. HE SUBMITTED THAT NO DEGREE OR ANY CERTIFICATE APPR OVED FROM ANY UNIVERSITY IS BEING ISSUED TO THE STUDENTS BY THE A SSESSEE. ACCORDING TO HIM, THE STUDENTS WHO ASPIRE TO BE VAL UERS ARE GIVEN COACHING BY THE FACULTY OF INSTITUTION OF VALUERS AT THE PREMISES OF INSTITUTION OF THE VALUERSTAKEN ON RENT BY THE ASSESSEE. HE SUBMITTED THAT NO WORTHWHILE ACTIVITY HAS BEEN CARR IED OUT BY THE ASSESSEE EXCEPT GETTING FEE FROM THE ASPIRING STUDE NTS AND TRANSFERRING THE SAME TO THE INSTITUTION OF THE VAL UERS AND THEIR FACULTIES. ACCORDINGLY, HE SUBMITTED THAT THE ASSES SEE DOES NOT DESERVE FOR REGISTRATION UNDER SECTION 12AA OF THE ACT. 5 ITA NO.5787/DEL/2019 5. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE RE LEVANT MATERIAL ON RECORD. AS FAR AS REGISTRATION UNDER SE CTION 12AA OF THE ACT IS CONCERNED, THE FOLLOWING CONDITIONS MUST BE SATISFIED: (A) THE OBJECTIVE OF THE ENTITY SHOULD BE OF CHARITABLE NATURE (B) THE ACTIVITIES OF THE ENTITY SHOULD BE GENUINE. 6. IN THE INSTANT CASE, THE LEARNED CIT(E) HAS HELD T HAT CHARITABLE NATURE OF THE OBJECTIVES AND GENUINENESS OF THE ACTIVITIES HAVE NOT BEEN ESTABLISHED. THEREFORE, TH E ISSUE BEFORE US IS WHETHER THE ASSESSEE FULFILLED BOTH THE CONDI TIONS FOR REGISTRATION UNDER SECTION 12AA OF THE ACT. 7. AS FAR AS THE FIRST CONDITION IS CONCERNED, THE OB JECTIVE OF THE ASSESSEE SHOULD BE OF CHARITABLE NATURE. THE CHARIT ABLE PURPOSE HAS BEEN DEFINED UNDER SECTION 2(15) OF THE ACT TO INCLUDE RELIEF TO POOR , EDUCATION, MEDICAL RELIEF AND ADVAN CEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. UNDER THE FOURTH LIMB OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY, ACTIVITIES WHICH ARE IN THE NATURE OF TRADE, COMMER CE AND BUSINESS OR ANY ACTIVITY OF RENDERING ANY SUCH SERV ICES IN RELATION TO TRADE, COMMERCE AND BUSINESS HAVE BEEN EXCLUDED FOR THE PURPOSE OF THE CHARITABLE PURPOSE BY WAY OF AMENDME NT 2008 AS UNDER: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT IN VOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BU SINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO AN Y TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERAT ION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY, UNLESS (I) SUCH ACTIVITY IS UNDERTAKEN IN THE COURSE OF A CTUAL CARRYING OUT OF SUCH ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUB LIC UTILITY; AND 6 ITA NO.5787/DEL/2019 (II) THE AGGREGATE RECEIPTS FROM SUCH ACTIVITY OR ACTIVITIES DURING THE PREVIOUS YEAR, DO NOT EXCEED TWENTY PER CENT OF THE TOTAL RECEIPTS, OF THE TRUST OR INSTITUTION UNDERTAKING SUCH ACTIVI TY OR ACTIVITIES, OF THAT PREVIOUS YEAR ; 8. BEFORE US, THE ASSESSEE HAS CLAIMED THAT IT EXISTED FOR THE OBJECTIVE OF IMPARTING EDUCATION, WHICH IS FALLING UNDER MAIN LIMB OF SECTION 2(15) OF THE ACT AND PROVISO IS NOT APPL ICABLE OVER THE SAID LIMB OF DEFINITION OF CHARITABLE PURPOSES, WHE REAS ACCORDING TO THE LEARNED CIT, THE ASSESSEE IS ENGAGED IN THE COMMERCIAL ACTIVITY, WHICH ARE OF THE NATURE OF TRADE, COMMERC E OR BUSINESS. WE NOT THAT THE HONBLE SUPREME COURT IN THE CASE O F SOLE TRUSTEES, LOKASHIKHANA TRUST VS CIT (1975) 101 234 (SC) HAS EXPLAINED THE WORD EDUCATION WITH REFERENCE S ECTION 2(15) OF THE ACT AS THE PROCESS OF TRAINING AND DEVELOPING T HE KNOWLEDGE, SKILL MIND, AND CHARACTER OFSTUDENTS BY FORMAL SCH OOLING. THE RELEVANT PARAGRAPH OF THE DECISION OF THE HONBLE S UPREME COURT TO REPRODUCED AS UNDER: THE SENSE IN WHICH THE WORD 'EDUCATION' HAS BEE NUSED IN SECTION 2(15) IS THE SYSTEMATIC INSTRUCTION,SCHOOLING, OR TRA INING GIVEN TO THE YOUNG IN PREPARATION FORTHE WORK OF L IFE. IT ALSO CONNOTES THE WHOLE COURSE OFSCHOLASTIC INSTRUCTI ON WHICH A PERSON HAS RECEIVED. THE WORD'EDUCATION' HAS, NOT BEEN U SED IN THAT WIDE AND EXTENDEDSENSE ACCORDING TO WHICH EVERY ACQ UISITION OF FURTHERKNOWLEDGE CONSTITUTES EDUCATION. ACCORDING TO THIS WIDE ANDEXTENDED SENSE, TRAVELLING IS EDUCATION, BECAUSE AS A RESULT OF TRAVELLING YOU ACQUIRE FRESH KNOWLEDGE. LIKEWISE, I F YOU READ NEWSPAPERS AND MAGAZINES, SEE PICTURES, VISIT ARTGALLERIES, MUSEUMS AND ZOOS, YOU THEREBY ADD TO YOURKNOWL EDGE. AGAIN, WHEN YOUR GROW UP AND HAVE DEALINGS WITHOTHER PEOPL E, SOME OF WHOM ARE NOT STRAIGHT, YOU LEARN BYEXPERIENCE AND THUS ADD TO YOUR KNOWLEDGE OF THE WAYS OF THEWORLD. IF YOU ARE NOT CAREFUL, YOUR WALLET IS LIABLE TO BESTOLEN OR YOU ARE LIABLE TO BE CHEATED BY SOME UNSCRUPULOUSIS LIABLE TO BE STOLEN OR YOU ARE LI ABLE TO BE CHEATED BYSOME UNSCRUPULOUS PERSON. THE THIEF WHO REMOVES YOUR WALLET AND THE SWINDLER WHO CHEATS YOU TEACH YOU A LESSON AND INTHE PROCESS MAKE YOU WISER THOUGH POORER. IF YOU VIS IT ANIGHT CLUB, YOU GET ACQUAINTED WIT AND ADD TO YOUR KNOWLEDGEABOUT S OME TO THE NOT MUCH REVEALED REALITIES AND MYSTERIESOF LIFE. ALL THIS IN A WAY IS 7 ITA NO.5787/DEL/2019 EDUCATION IN THE GREAT SCHOOLOF LIFE. BUT, THAT IS NOT THE SENSE IN WHICH THE WORD'EDUCATION' ISUSED IN CLAUSE (15) O F SECTION 2 . WHATEDUCATION CONNOTES IN THAT CLAUSE IS THE PROCES S OF TRAININGAND DEVELOPING THE KNOWLEDGE, SKILL MIND, AND CHARACTER OFSTUDENTS BY FORMAL SCHOOLING. [469C-F] 9. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE HAS SUB MITTED THAT IT IS AN ORGANIZATIONRECOGNIZED UNDER THE COMP ANIES (REGISTERED VALUE AND VALUATION) RULES, 2017 AND C ONDUCTING THE EDUCATION COURSES IN VALUATION IN ACCORDANCE WITH T HE SYLLABUS DETERMINED UNDER THE RULES FOR THE STUDENTS REGISTE RED AS MEMBER UNDER PRESCRIBED RULES AND SAME ALSO INCLUDE PRACTI CAL TRAINING. THE ASSESSEE HAS ALSO FILED A COPY OF RECOGNITION C ERTIFICATE, WHICH IS AVAILABLE ON PAGE 81 OF THE PAPER BOOK .THE LEAR NED CIT(E), HOWEVER, HAS TREATED THE ACTIVITY OF THE ASSESSEE A KIN TO COACHING CLASSES. IN OUR OPINION, THE LEARNED CIT HAS NOT EX AMINED THE OBJECTIVE OF THE ASSESSEE AS WELL AS THE ACTIVITIES IN THE LIGHT OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F SOLE TRUSTEE, LOKASHIKSHANA TRUST VS CIT (SUPRA) AND VERIFIED WHE THER THE EDUCATION IMPARTED BY THE ASSESSEE IS IN THE CHARAC TER OF FORMAL SCHOOLING. THE LEARNEDCIT(E) WAS REQUIRED TO VERIFY THE EXAMINATION CONDUCTED OR THE DEGREE OF THE CERTIFIC ATE AWARDED BY THE ASSESSEE. 10. AS THE SOLE ISSUE OF GRANTING REGISTRATION UNDER S ECTION 12AA OF THE ACT PRECIPITATE ON WHETHER THE ASSESSEE WAS ENGAGED IN IMPARTING EDUCATION, WHICH HAS NOT BEEN EXAMINED PROPERLY BY THE CIT, WE FEEL IT APPROPRIATE TO SET ASIDE THE OR DER OF THE LEARNEDCIT(E) AND REMIT THE MATTER BACK TO HIM FOR DECIDING THE ISSUE OF GRANTING REGISTRATION AFRESH IN ACCORDANCE WITH LAW. 8 ITA NO.5787/DEL/2019 ALTERNATIVELY, THE LD. CIT(E) MAY ALSO EXAMINE ELIG IBILITY OF THE ASSESSEE FOR REGISTRATION UNDER THE FOURTH LIMB OF CHARITABLE PURPOSE, I.E., ADVANCEMENT OF GENERAL PUBLIC UTILIT Y IN ACCORDANCE WITH LAW, IF RAISED SO BY THE ASSESSEE. IT IS NEEDL ESS TO MENTION THAT THE ASSESSEE SHALL BE AFFORDED ADEQUATE OPPORT UNITY OF BEING HEARD. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCOR DINGLY ALLOWED FOR THE STATISTICAL PURPOSES. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 18 TH OCTOBER, 2019. SD/- SD/- (SUDHANSHU SRIVASTAVA) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 18 TH OCTOBER, 2019. RK/-(D.T.D.) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI