NEIA TRUST, MUMBAI V. ASST CIT (E) II(2), MUMBAI

ITA 5818/MUM/2015

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0394 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 28-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K MADHUSUDAN LD
• Assessee Lawyers: AARTI VISSANJI LD
• Keywords: Charitable institution; Capital receipt; Set aside
• Section: 143(3); 56(2); 12AA; 13; 12; 11

Judgement Text

1 ITA NOS. 5818-19/MUM/2015 NEIA TRUST ASSESSMENT YEARS: 2011-12 & 2012-13 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM 1. . / I.T.A. 5818/MUM/2015 ( / ASSESSMENT YEAR:2011-12) & 2. . / I.T.A. NO.5819/MUM/2015 ( / ASSESSMENT YEAR:2012-13) NEIA TRUST NIRMAL, 5 TH FLOOR 241/242 BACKBAY RECLAMATION, NARIMAN POINT, MUMBAI-400 021. / VS. A DIT(E) - II(2) 5 TH FLOOR, PIRAMAL CHAMBERS PAREL, LALBAUG MUMBAI-400 012 !' ./ ./PAN/GIR NO. AAATN-9999-F ( '$ /APPELLANT ) : ( %&'$ / RESPONDENT ) '$ / APPELLANT BY : MS. AARTI VISSANJI - LD.AR %&'$ / RESPONDENT BY : SHRI K. MADHUSUDAN - LD. CIT DR / DATE OF HEARING : 03/10/2019 / DATE OF PRONOUNCEMENT : 24/12/2019 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER): - 1.1 AFORESAID APPEALS BY ASSESSEE FOR ASSESSMENT YE ARS [IN SHORT REFERRED TO AS AY] 2011-12 & 2012-13 CONTEST SEPA RATE ORDERS OF LEARNED 2 ITA NOS. 5818-19/MUM/2015 NEIA TRUST ASSESSMENT YEARS: 2011-12 & 2012-13 FIRST APPELLATE AUTHORITY. SINCE THE GRIEVANCE OF T HE ASSESSEE IS COMMON FOR BOTH THE YEARS, THE APPEALS WERE HEARD TOGETHER AND NOW BEING DISPOSED- OFF BY WAY OF THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE & BREVITY. FIRST, WE TAKE UP APPEAL FOR AY 2011-12 WHICH IS AG AINST THE ORDER OF LD. COMMISSIONS OF INCOME TAX (APPEALS)-1, MUMBAI, [IN SHORT REFERRED TO AS CIT(A)], APPEAL NO. CIT(A)-I/IT/E-II(50)/2014-15 DATED 06/10/2015. THE GROUNDS RAISED BY THE ASSESSEE READ AS UNDER: - 1. APPLICABILITY OF SECTION 11 OF THE INCOME TAX AC T, 1961 (THE ACT) : THE LD. C.1. T. (APPEALS) IN THE FACTS AND CIRCUMST ANCES OF THE CASE OF THE APPELLANT AND IN LAW OUGHT TO HAVE HELD THAT- (A) THE OBJECTS OF THE APPELLANT ARE 'CHARITABLE PU RPOSE' AS DEFINED IN SECTION 2(15) OF THE ACT KEEPING IN VIEW THE DEFINITION OF 'CHARITAB LE PURPOSE' IN SAID SUB-SECTION BEING 'INCLUSIVE' AND ACCORDINGLY THE PROVISIONS OF SECTI ON 11 OF THE ACT, HAVE TO BE APPLIED IN ASSESSMENT OF ITS INCOME. WITHOUT PREJUDICE TO THE ABOVE AND IN THE ALTERNATE (B) THOUGH THE OBJECTS OF THE APPELLANT FALL IN THE LAST LIMB OF 'ADVANCEMENT OF ANY OTHER OBJECTS OF GENERAL PUBLIC UTILITY', THE FIRST PROV ISO TO SECTION 2(15) OF THE ACT CANNOT BE APPLIED TO THE ACTIVITIES CARRIED ON BY THE APPELL ANT KEEPING IN VIEW THE OBJECTS OF THE TRUST AND ACCORDINGLY, THE OBJECTS OF THE APPELLANT HAVE TO BE CONSIDERED AS CHARITABLE PURPOSES AND THE PROVISIONS OF SECTION 11 OF THE A CT HAVE TO BE APPLIED IN ASSESSMENT OF ITS INCOME. 2. RE. RS. 150 CRORES RECEIVED DURING THE YEAR FROM THE CENTRAL GOVERNMENT OF INDIA ACCOUNTED INADVERTENTLY AS CORPUS CONTRIBUTION: THE LD. C.I.T. (APPEALS) IN THE FACTS AND CIRCUMSTA NCES OF THE CASE OF THE APPELLANT AND IN LAW OUGHT TO HAVE HELD THAT- (A) RS. 150 CRORES RECEIVED FROM THE GOVERNMENT OF INDIA AS PER THE TERMS STIPULATED VIDE LETTER DATED 18TH JUNE, 2010 BEARING NO.6/51/ 2009-E&MDA FOR RELEASE OF THE SAID AMOUNT DOES NOT REPRESENT CONTRIBUTION TOWARDS CORP US, BUT REPRESENTS GRANT-IN-AID REFUNDABLE TO THE EXTENT OF UNSPENT BALANCE FOR THE OBJECTS OF THE TRUST AND HENCE IS TO BE TREATED AS LIABILITY AND ACCORDINGLY OUGHT TO H AVE HELD THAT THE SAID AMOUNT CANNOT BE ASSESSED AS INCOME FOR THE YEAR UNDER ANY OF TH E APPLICABLE PROVISIONS OF THE INCOME TAX ACT, 1961. WITHOUT PREJUDICE TO THE ABOVE AND IN THE ALTERNATE (B) RS.150 CRORES RECEIVED FROM THE GOVERNMENT OF I NDIA CANNOT BE ASSESSED AS INCOME BY RESORTING TO THE DEFINITION OF 'INCOME' A S CONTAINED IN SECTION 2(24)(IIA) OF THE ACT IN THE EVENT THE OBJECTS OF THE TRUST ARE NOT ACCEPTED AS 'CHARITABLE PURPOSES' AS DEFINED U/S.2(15) OF THE ACT. 3 ITA NOS. 5818-19/MUM/2015 NEIA TRUST ASSESSMENT YEARS: 2011-12 & 2012-13 WITHOUT PREJUDICE TO THE ABOVE AND IN THE ALTERNATE (C) RECEIPT OF RS.150 CRORES, IN ANY VIEW OF THE MA TTER, CANNOT BE ASSESSED AS INCOME U/ S. 56(2) OF THE ACT. 3. IT IS HUMBLY PRAYED THAT THE RELIEFS AS PRAYED F OR HEREINABOVE AND/ OR SUCH OTHER RELIEFS AS MAY BE JUSTIFIED BY THE FACTS AND CIRCUM STANCES OF THE CASE AND AS MAY MEET THE ENDS OF JUSTICE SHOULD BE GRANTED. 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND, OR ADD A NEW GROUND WHICH MAY BE NECESSARY . 1.2 THE ASSESSEE HAS ALSO FILED AN ADDITIONAL GROUN D VIDE LETTER DATED 22/03/2019 AND PLEADED FOR ADMISSION OF THE SAME, INTER-ALIA, IN TERMS OF DECISION OF HONBLE SUPREME COURT RENDERED IN NATIONAL THERMAL POWER CO. LTD. V/S CIT (229 ITR 383). SINCE THE ADDITIONAL GROUND IS ONLY LEGAL GROUND IN NATURE AND AN INTER-CONNECTED GROUND WHIC H DO NOT REQUIRE APPRECIATION OF NEW FACTS, THE SAME WAS TAKEN ON RE CORD AS GROUND NO. 5. THE SAME READ AS UNDER: - THE LD. CIT(APPEALS) IN THE FACTS AND CIRCUMSTANCES OF THE CASE OF APPELLANT AND IN LAW OUGHT TO HAVE HELD THAT AS THE APPELLANT IS HOLDING CERTIFICATE OF REGISTRATION FROM THE CHIEF COMMISSIONER OF INCOME TAX U/S 12AA OF THE AC T, THE PROVISIONS OF SECTION 11 OF THE ACT HAVE TO BE APPLIED IN THE ASSESSMENT OF ITS INCOME. 1.3 THE LEARNED AUTHORIZED REPRESENTATIVE FOR ASSES SEE (AR), MADE SUBMISSIONS ASSAILING THE DENIAL OF EXEMPTION U/S 1 1 & 12 TO THE ASSESSEE. THE ATTENTION WAS DRAWN TO THE FACT THAT SIMILAR MA TTER OF GRANT OF EXEMPTION, IN ASSESSEES OWN CASE, CAME UP FOR CONS IDERATION BEFORE THIS TRIBUNAL FOR AY 2010-11 VIDE ITA NO. 544/MUM/2014 O RDER DATED 18/01/2019 WHEREIN THE ISSUE WAS DECIDED IN ASSESSE ES FAVOR. THE COPY OF THE ORDER HAS BEEN PLACED ON RECORD. AU CONTRAIRE, LD. CIT-DR SUPPORTED THE STAND TAKEN BY LOWER AUTHORITIES. 4 ITA NOS. 5818-19/MUM/2015 NEIA TRUST ASSESSMENT YEARS: 2011-12 & 2012-13 2.1 IN THE ABOVE BACKGROUND, WE FIND THAT THE ASSES SEE BEING PUBLIC TRUST SETTLED BY GOVERNMENT OF INDIA, IS REGISTERED WITH OFFICE OF CHARITY COMMISSIONER, MUMBAI REGION. THE ASSESSEE HOLD REGI STRATION U/S 12AA SINCE 29/10/2007. WITH A VIEW TO FACILITATING MEDIU M AND LONG TERM EXPORTS AND CONSIDERING THE LIMITATIONS OF EXPORT CREDIT GU ARANTEE CORPORATION (ECGC) IN PROVIDING ADEQUATE COVER ON ITS OWN AND N ON-AVAILABILITY OF RE- INSURANCE COVER TO SUCH EXPORTS, THE GOVERNMENT OF INDIA, MINISTRY OF COMMERCE AND INDUSTRY, DEPARTMENT OF COMMERCE VIDE RESOLUTION DATED 07/03/2008 ESTABLISHED NATIONAL EXPORT INSURANCE AC COUNT (NEIA) SCHEME, TO BE MAINTAINED AND OPERATED BY A PUBLIC TRUST. TH E ASSESSEE WAS THUS SET UP IN TERMS OF THIS GOVERNMENT RESOLUTION VIDE TRUST DEED DATED 21/03/2006 SETTLED BY PRESIDENT OF INDIA, ACTING TH ROUGH THE JOINT SECRETARY, DEPARTMENT OF COMMERCE, MINISTRY OF COMMERCE AND IN DUSTRY, GOVERNMENT OF INDIA. 2.2 THE PRIME OBJECTS OF THE TRUST ARE TO IMPLEMENT THE NEIA SCHEME THROUGH ECGC FOR THE BENEFIT OF MEDIUM AND LONG-TER M EXPORTS. THE ASSESSEE ENDEAVOR TO PROMOTE EXPORTS FROM INDIA AND TO PROTECT THE PAYMENT RISKS FOR TRANSACTIONS FOR WHICH ECGC IS UN ABLE TO PROVIDE COVER OWING TO LACK OF CAPACITY OR COMMERCIAL CONSIDERATI ON. IN OTHER WORDS, THE ASSESSEE IS TO PROVIDE INSURANCE COVER TO PROMOTE E XPORTS FROM INDIA AND TO PROTECT PAYMENTS RISKS. THE ASSESSEE ALSO AIM AT MEETING THE COST OF INSURANCE WHICH ECGC WOULD LEVY FOR PROJECT EXPORTS IN CERTAIN CIRCUMSTANCES. THE ASSESSEE IS REQUIRED TO IMPLEMEN T SUCH OTHER SCHEMES AND PROGRAMS AS THE GOVERNMENT OF INDIA MAY FRAME I N THIS REGARD AND 5 ITA NOS. 5818-19/MUM/2015 NEIA TRUST ASSESSMENT YEARS: 2011-12 & 2012-13 UNDERTAKE ITS ACTIVITIES AS PER THE DIRECTIONS OF G OVERNMENT OF INDIA. IT HAS BEEN SUBMITTED THAT SUCH ACTIVITIES WOULD NORMALLY BE NOT UNDERTAKEN BY COMMERCIAL ENTERPRISES FOR THE REASON THAT ULTIMATE LY THE CLAIMS DEVOLVING UPON THE ASSESSEE WOULD BE FAR IN EXCESS OF INSURAN CE PREMIUM, AS MAY BE CHARGED BY THE ASSESSEE. FURTHER THE INSURANCE C OVERAGE PROVIDED BY THE ASSESSEE WOULD BE AS PER THE DIRECTIONS OF CENT RAL GOVERNMENT, WHICH IS TO MEET WITH NATIONAL INTEREST OF THE GOVERNMENT OF INDIA AND ARE OF SUCH NATURE WHICH WOULD NORMALLY BE NOT PROVIDED BY ANY COMMERCIAL ENTERPRISES. 2.3 THE PERUSAL OF QUANTUM ASSESSMENT ORDER U/S 143 (3) DATED 25/03/2014 WOULD REVEAL THAT EXEMPTION U/S 11 HAS B EEN DENIED TO THE ASSESSEE SINCE THE ASSESSEE, IN THE OPINION OF LD. AO, WAS HIT BY FIRST PROVISO TO SECTION 2(15) OF THE ACT AS IT WAS CARRY ING OUT ACTIVITY IN THE NATURE OF TRADE, COMMERCE AND BUSINESS WHICH WOULD OUST THE ASSESSEE TO CLAIM ITS ACTIVITIES TO BE CHARITABLE IN NATURE IRR ESPECTIVE OF THE FACT THAT SUCH ACTIVITIES HAD PROFIT MOTIVE OR NOT. THE SAID OPINI ON WAS FORMED IN VIEW OF THE FACT THAT THE ASSESSEE HAD RECEIVED POLICY PREM IUM AGGREGATING TO RS.111.33 LACS FROM THREE ENTITIES AND PAID CLAIMS OF RS.349.24 LACS TO VARIOUS EXPORT PARTIES. HOWEVER, THE ASSESSEE WAS A LSO IN RECEIPT OF INTEREST INCOME FOR RS.78.23 CRORES AND HAD REFLECT ED SURPLUS OF RS.79.24 CRORES. OUT OF THIS SURPLUS, THE ASSESSEE CLAIMED 1 5% OF ITS RECEIPTS AS EXEMPT U/S 11(A) OF THE ACT WHEREAS THE BALANCE AMO UNT WAS SET ASIDE U/S 11(2) OF THE ACT FOR UTILIZATION IN SUBSEQUENT YEAR S. THE ASSESSEE HAD 6 ITA NOS. 5818-19/MUM/2015 NEIA TRUST ASSESSMENT YEARS: 2011-12 & 2012-13 ACCUMULATED AGGREGATE SURPLUS OF RS.206.73 CRORES A T THE END OF THIS FINANCIAL YEAR. 2.4 THE LD. AO, NOTICING THAT THE OBJECTS OF THE TR UST WOULD FALL UNDER THE LAST LIMB I.E. ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY, CONCLUDED THAT THE ASSESSEE WAS HIT BY FIRST PROVIS O TO SEC. 2(15) SINCE ITS ACTIVITIES INVOLVE CARRYING OUT OF AN ACTIVITY IN R ELATION TO ANY TRADE, COMMERCE OR BUSINESS AND ACCORDINGLY, PROCEEDED TO DENY THE EXEMPTION AS CLAIMED BY THE ASSESSEE. 2.5 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS ALSO NOTED THAT THE ASSESSEE WAS IN RECEIPT OF RS.150 CRORES AS CORPUS CONTRIBUTION DURING THE YEAR WHICH WAS CLAIMED TO BE EXEMPT U/S 11(1)(D) OF THE ACT. HOWEVER, AS PER LD.AO, THE ASSESSEE COULD CLAIM THI S EXEMPTION ONLY IF IT WAS ELIGIBLE FOR EXEMPTION U/S 11 OF THE ACT OTHERW ISE ALL CONTRIBUTIONS INCLUDING CORPUS CONTRIBUTIONS WOULD FORM PART OF T OTAL INCOME OF THE ASSESSEE AS PER SECTION 2(24)((IIA). 2.6 THE ASSESSEE DEFENDED ITS STAND BY DRAWING ATTE NTION TO ITS MAIN OBJECTIVES AND SUBMITTED THAT SINCE THE OBJECTS WER E CHARITABLE IN NATURE, THE ASSESSEE WAS ELIGIBLE TO CLAIM THE SAID EXEMPTI ON WHICH WAS FURTHER SUPPORTED BY THE FACT THAT THE ASSESSEE WAS HOLDING VALID CERTIFICATE OF REGISTRATION U/S 12AA OF THE ACT. 2.7 THE ASSESSEE ALSO CONTESTED THE STAND OF LD. AO IN INVOKING THE PROVISIONS OF SEC. 2(24)(IIA) WITH RESPECT TO CORPU S CONTRIBUTIONS. FOR THE SAME, THE ATTENTION WAS DRAWN TO TERMS OF SANCTION LETTER DATED 18/06/2010 BEARING NO. 6/51/2009-E&MDA TO SUBMIT THAT THE GRAN T OF RS.150 CRORES 7 ITA NOS. 5818-19/MUM/2015 NEIA TRUST ASSESSMENT YEARS: 2011-12 & 2012-13 WAS TO BE USED ONLY FOR SANCTIONED PURPOSES AND ANY UNSPENT AMOUNT WAS TO BE SURRENDERED TO THE GOVERNMENT. FURTHER, THE A SSESSEE WAS REQUIRED TO ABIDE BY OTHER TERMS AND CONDITIONS OF THE SANCTION ED LETTER. IN THE ABOVESAID BACKGROUND, THE ASSESSEE MADE OUT A CASE TO SUBMIT THAT THE GRANT OF RS.150 CRORES REPRESENT A LIABILITY THOUGH CREDITED TO CORPUS AS IT WAS REPAYABLE TO GOVERNMENT IN CASE IT WAS NOT UTIL IZED FOR THE STATED PURPOSES. 2.8 HOWEVER, THE ASSESSEES SUBMISSIONS COULD NOT C ONVINCE LD. AO, WHO ULTIMATELY CONCLUDED THAT THE ASSESSEE WAS HIT BY PROVISO TO SEC. 2(15) OF THE ACT AND THE FACT THAT IT HAD VALID REGISTRAT ION DURING THE YEAR, WOULD BE IMMATERIAL. FOR THE REASON THAT THE ASSESSEE WAS NO T ELIGIBLE FOR EXEMPTION U/S 11, THE CORPUS CONTRIBUTION WOULD BECOME TAXABL E AS PER SEC. 2(24)(IIA) OF THE ACT. ACCORDINGLY, THE EXEMPTION U/S 11 & 12 WAS DENIED TO THE ASSESSEE AGAINST SURPLUS OF RS.79.24 CRORES AND THE CORPUS CONTRIBUTION OF RS.150 CRORES WAS ALSO BROUGHT TO TAX, WHICH RESULT ED INTO DETERMINATION OF TOTAL INCOME AT RS.229.24 CRORES. 2.9 ALTHOUGH THE ASSESSEE REITERATED ITS STAND BEFO RE LEARNED FIRST APPELLATE AUTHORITY, HOWEVER, LD. CIT(A), RELYING U PON THE ORDER OF ITS PREDECESSOR FOR AY 2010-11, CHOSE TO CONFIRM THE ST AND OF LD. AO. AGGRIEVED, THE ASSESSEE IS UNDER FURTHER APPEAL BEF ORE US. 3. WE HAVE DULY CONSIDERED THE RIVAL SUBMISSIONS, P ERUSED RELEVANT MATERIAL ON RECORD INCLUDING DECISION RENDERED BY T HE TRIBUNAL IN ASSESSEES OWN CASE IN EARLIER YEAR. WE HAVE ALSO D ELIBERATED ON VARIOUS JUDICIAL PRONOUNCEMENTS AS CITED BEFORE US. UPON CA REFUL CONSIDERATION OF 8 ITA NOS. 5818-19/MUM/2015 NEIA TRUST ASSESSMENT YEARS: 2011-12 & 2012-13 FACTUAL MATRIX AS ENUMERATED IN PRECEDING PARAGRAPH S, IT IS QUITE EVIDENT THAT LEARNED FIRST APPELLATE AUTHORITY DISMISSED AS SESSEES CLAIM PRIMARILY BY RELYING UPON THE ORDER OF ITS PREDECESSOR FOR AY 20 10-11, SINCE FACTS WERE FOUND TO BE IDENTICAL. THE MATERIAL ON RECORD WOULD ESTABLISH THAT THE ASSESSEE ASSAILED THE DENIAL OF EXEMPTION FOR AY 20 10-11 BEFORE THIS TRIBUNAL VIDE ITA NO. 544/MUM/2014 ORDER DATED 18/0 1/2019 WHEREIN THE MATTER WAS CONCLUDED IN ASSESSEES FAVOR BY THE COO RDINATE BENCH WITH FOLLOWING FINDINGS / OBSERVATIONS: - ISSUE NO. 1 4. WE HAVE HEARD THE ARGUMENT ADVANCED BY THE LD. R EPRESENTATIVE OF THE PARTIES AND BY PERUSING THE RECORD. WE NOTICED THAT THE AO APPL IED THE FIRST PROVISO TO SECTION 2(15) OF THE ACT, 1961 AND DECLINED THE CLAIM OF THE ASSE SSEE U/S 11/12 OF THE ACT. THE OBJECT OF THE ASSESSEE HAS BEEN GIVEN IN PARA NO. 5 OF THE TRUST DEED AT PAGE NO. 11 WHICH IS HEREBY MENTIONED BELOW:- (I) TO IMPLEMENT THE NEIA SCHEME THROUGH ECGC (EXPORT CREDIT GUARANTEE CORPORATION OF INDIA) FOR THE BENE FIT OF MEDIUM AND LONG TERM EXPORTERS (B) TO IMPLEMENT SUCH OTHER SCHEMES AND P ROGRAMMES FOR THE BENEFIT OF MEDIUM AND LONG TERM EXPORTERS AS THE GOVERNMENT OF INDIA MAINFRAME FROM TIME TO TIME AND DIRECT THE TRUST IMPLEMENT. 5. THE ASSESSEE TRUST RECEIVED POLICY PREMIUM PAYME NTS FROM THE FOLLOWING PARTIES (I) APAR INDUSTRIES LTD. RS.1,86,12,015/- (II) ONGC VID ESH LTD RS.2,06,32,870/- (III) HINDUSTAN AERONAUTICS LTD. BANGALORE RS.17,34,159/- TOTAL TO THE TUNE OF RS.4,09,79,044/-. THE ASSESSEE ALSO PAID THE CLAIM OF VARIOUS EXPORTERS UNDER THE SCHEME IN SUM OF RS.32,12,724/- DURING THE YEAR. TH E CLAIM OF THE ASSESSEE WAS DECLINED IN VIEW OF THE EXCEPTION OF PROVISION U/S 2(15) OF THE ACT SPECIFICALLY ON THE GROUNDS OF THAT THE OBJECT OF THE ASSESSEE IS IN NA TURE OF BUSINESS, TRADE AND COMMERCE. NO DOUBT, THE SAID PROVISION WAS INTRODUC ED. THE ASSESSEE TRUST WAS FORMED WITH A VIEW TO FACILI TATE IMMEDIATE AND LONG-TERM EXPORTS AND TO CONSIDER THE LIMITATIONS OF EXPORT C REDIT GUARANTEE CORPORATION IN PROVIDING ADEQUATE COVER ON ITS OWN AND NON-AVAILAB ILITY OF REINSURANCE COVER TO SUCH EXPORTERS. THE GOVERNMENT OF INDIA MINISTRY OF COMM ERCE AND INDUSTRIES DEPARTMENT OF COMMERCE VIDE THE RESOLUTION DATED 7.03.2006 DECIDE D TO ESTABLISH THE NATIONAL EXPORTER INSURANCE ACCOUNT (NEIA) SCHEME TO BE MAIN TAINED AND OPERATED BY A PUBLIC TRUST. NEIA TRUST WAS, THUS, SET UP IN TERMS OF THI S GOVERNMENT RESOLUTION VIDE THE TRUST DEED DATED 21.3.2006, THE PRESIDENT OF INDIA, ACTING THROUGH THE JOINT SECRETARY, DEPARTMENT OF COMMERCE, MINISTRY OF COMMERCE & INDU STRY, GOVERNMENT OF INDIA BEING THE SETTLER OF THE TRUST. THE OBJECT OF THE ASSESSE E TRUST WAS THE SAME WHICH IS FOR THE BENEFIT OF MEDIUM- AND LONG-TERM EXPORTERS. THERE I S NO CHANGE IN THE OBJECT OF THE 9 ITA NOS. 5818-19/MUM/2015 NEIA TRUST ASSESSMENT YEARS: 2011-12 & 2012-13 TRUST. HERE IT IS IMPORTANT TO MENTION THAT THE ASS ESSEE TRUST WAS REGISTERED U/S 12AA OF THE ACT WHICH WAS NOT WITHDRAWN BY AUTHORITY WHO GR ANTED THE REGISTRATION. THE LD REPRESENTATIVE OF THE ASSESSEE HAS CONTENDED THAT A O HAS NO RIGHT TO WITHDRAW THE CLAIM OF EXEMPTION BY DISCUSSING THE PROVISIONS OF SECTION 2(15) OF THE ACT. SECTION 2(15) IS HEREBY REPRODUCED AS UNDER:- CHARITABLE PURPOSE INCLUDES RELIEF OF THE POOR, E DUCATION, MEDICAL RELIEF, PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF A RTISTIC OR HISTORIC INTEREST, AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBL IC UTILITY: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CARRYING ON OF ANY ACTI VITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR A NY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OF APPLICATION, O R RETENTION, OF THE INCOME FROM SUCH ACTIVITY 6. SUBSEQUENTLY, THE SAID AMENDMENT WAS EXPLAINED A ND INTERPRETED BY THE CBDT CIRCULAR NO.11/2018 DATED 19.12.2008 IN WHICH TRADE , COMMERCE AND BUSINESS IS REQUIRED TO BE DECIDED ON THE BASIS OF THE NATURE, SCOPE, EXTENT, FREQUENCY OF ACTIVITIES. ACCORDINGLY, THE NATURE OF THE TRUST IS HEREBY SPEC IFIED THAT THE TRUST IS TO PROVIDE CREDIT INSURANCE COVER TO INDIAN EXPORTERS KEEPING IN VIEW THE NATIONAL INTEREST. THE TRUST IS SPONSORED AND THE NATURE OF ACTIVITIES OF THE TRUST IS TO PROVIDE CREDIT INSURANCE COVER TO INDIAN EXPORTERS KEEPING IN VIEW OF THE NATIONAL IN TEREST. THE TRUST IS SPONSORED BY GOVT. OF INDIA WITH THE OBJECTIVE TO PROMOTE EXPORT S, IMPROVE COMPETITIVENESS OF INDIAN EXPORTS AND TO IMPLEMENT SCHEMES FORMULATED BY THE GOVT. OF INDIA FOR THE BENEFITS OF MEDIUM AND LONG TERM EXPORTERS IN NATIONAL INTEREST . CERTAINLY, NONE OF THE ABOVE OBJECTIVES ARE TAINTED WITH MOTIVE OF TRADE, COMMER CE OR BUSINESS AS GOVT. OF INDIA IS NOT INTO BUSINESS OF PROVIDING CREDIT INSURANCE. W HEREVER, IT HAS INTENDED TO DO SO, IT HAS BEEN DONE THROUGH CORPORATE STRUCTURE E.G. ECGC OF INDIA LTD. (EXPORT CREDIT GUARANTEE CORPORATION) WHICH DOES THE CREDIT INSURA NCE ACTIVITY ON COMMERCIAL BASIS WITH GOVT. OF INDIA AS THE SOLE SHAREHOLDER WITH A PREMIUM AND OTHER INCOME OF RS.1020 CRORES (APPX) AND A NET SURPLUS OF RS.171 (APPROX) FOR FY 2012-13. ON THE BASIS OF THE ABOVE, NEIAS ACTIVITY CANNOT AND SHOULD NOT BE CON SIDERED TO BE IN NATURE OF TRADE, COMMERCE OR BUSINESS. 7. THE TRUST SCOPE OF ACTIVITY IS PRIMARILY TO IMPL EMENT SCHEMES FORMULATED BY GOVT OF INDIA. MINISTRY OF COMMERCE, GOVT. OF INDIA, IS TH E SETTLER OF THE TRUST AND THE TRUST IS NOT EMPOWERED TO CARRY OUT ANY OTHER ACTIVITY. 8. FURTHER, EVEN THE PROJECT / EXPORTS WHICH REQUIR E CREDIT INSURANCE HAS TO MEET THE CRITERIA STIPULATED IN CLAUSE 12 OF THE TRUST DEED. CRITERIA NO.(IX) AND (XI) SPECIFICALLY REQUIRE THE PROJECT TO BE OF IMPORTANCE OF SUCH PR OJECT EXPORT FROM NATIONAL POINT OF VIEW AND OTHER FACTORS LIKE THE CURRENT ECONOMIC DEVELOPMENT IN THE PROJECT COUNTRY AND RELATED ISSUES. THEREFORE, THE TRUST DOES NOT EVEN EVALUATE THE PROJECT FROM THE PERSPECTIVE OF PREMIUM VIABILITY OR PROFITABILITY. ONCE THE PROJECT EXPORT FULFILLS THE CRITERIA MENTIONED IN CLAUSE 12, THE TRUST WILL PRO VIDE CREDIT COVER. IN VIEW OF THE ABOVE SAID ACTIVITIES WE NOTICED THAT THERE IS NO INTENSI ON OF THE ASSESSEE TO EARN THE PROFIT. 10 ITA NOS. 5818-19/MUM/2015 NEIA TRUST ASSESSMENT YEARS: 2011-12 & 2012-13 UNDOUBTEDLY THE DOMINANT AND PRIME OBJECT IS REQUIR ED TO BE SEEN. THE LEARNED REPRESENTATIVE OF THE ASSESSEE HAS RELIED UPON THE LAW SETTLED BY THE DELHI HIGH COURT IN CASE TITLED AS INDIA TRADE PROMOTION ORGAIZATION VS. DGIT(E), 2015 TAXMAN.COM 404 DELHI. IT IS SETTLED IN THE SAID LAW THAT THE DOMI NANT AND PRIME OBJECT IS REQUIRED TO BE SEEN TO OBSERVE THE NATURE OF TRADE, COMMERCE AND B USINESS. THE RELEVANT PARA IN CASE OF INDIA TRADE PROMOTION ORGAIZATION (SUPRA) I S 58 WHICH IS REPRODUCED AS UNDER 58. IN CONCLUSION, WE MAY SAY THAT THE EXPRESSION CHARITABLE PURPOSE, AS DEFINED IN SECTION 2(15) CANNOT BE CONSTRUED LITERA LLY AND IN ABSOLUTE TERMS. IT HAS TO TAKE COLOR AND BE CONSIDERED IN THE CONTEXT OF SECTION 10(23C)(IV) OF THE SAID ACT. IT IS ALSO CLEAR THAT IF THE LITERAL INT ERPRETATION IS GIVEN TO THE PROVISO TO SECTION 2(15) OF THE SAID ACT, THEN THE PROVISO WOU LD BE AT RISK OF RUNNING FOWL OF THE PRINCIPLE OF EQUALITY ENSHRINED IN ARTICLE 14 O F THE CONSTITUTION OF INDIA. IN ORDER TO SAVE THE CONSTITUTIONAL VALIDITY OF THE PR OVISO, THE SAME WOULD HAVE TO BE READ DOWN AND INTERPRETED IN THE CONTEXT OF SECTION 10(23C)(IV) BECAUSE, IN OUR VIEW, THE CONTEXT REQUIRES SUCH AN INTERPRETATION. THE CORRECTION INTERPRETATION OF THE PROVISO TO SECTION 2(15) OF THE SAID ACT WOULD BE THAT IT CARVES OUT AN EXCEPTION FROM THE CHARITABLE PURPOSE OF ADVANCEMEN T OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AND THAT EXCEPTION IS LIMITE D TO ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR THE ACTIVITY OF REND ERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, THE DOMINANT AND T HE PRIME OBJECTIVE HAS TO BE SEEN. IF THE DOMINANT AND PRIME OBJECTIVE OF TH E INSTITUTION, WHICH CLAIMS TO HAVE BEEN ESTABLISHED FOR CHARITABLE PURPOSE, IS PR OFIT MAKING, WHETHER ITS ACTIVITIES ARE DIRECTLY IN THE NATURE OF TRADE, COM MERCE OR BUSINESS OR INDIRECTLY IN THE RENDERING OF ANY SERVICE IN RELATION TO ANY TRA DE, COMMERCE OR BUSINESS, THEN IT WOULD NOT BE ENTITLED TO CLAIM ITS OBJECT TO BE A CHARITABLE PURPOSE. ON THE FLIP SIDE, WHERE AN INSTITUTION IS NOT DRIVEN PRIMARILY BY A DESIRE OR MOTIVE TO EARN PROFITS, BUT TO DO CHARITY THROUGH THE ADVANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTILITY, IT CANNOT BUT BE REGARDED AS AN INSTITUTIO N ESTABLISHED FOR CHARITABLE PURPOSES. 9. THE FACTS OF THE PRESENT CASE IS QUITE SIMILAR T O THE FACTS OF THE CASE TITLED AS INDIA TRADE PROMOTION ORGAIZATION (SUPRA). THEREFORE, FI NDING OF THE SAID CASES IS QUITE APPLICABLE TO THE FACTS OF THE PRESENT CASE. SINC E THE DOMINANT AND PRIME OBJECT OF THE ASSESSEE IS NOT TO EARN THE PROFIT IN RELATION TO T RADE, COMMERCE AND BUSINESS, THEREFORE, THE EXEMPTION U/S.11 & 12 IS NOT LIABLE TO BE DECLI NED. ACCORDINGLY, WE SET ASIDE THE FINDING OF THE CIT(A) IN THIS ISSUE AND ALLOWED THE CLAIM OF THE ASSESSEE. SINCE FACTS ARE FOUND TO BE IDENTICAL IN THIS YEAR, RESPECTFULLY FOLLOWING THE ABOVE ADJUDICATION, WE SET-ASIDE THE ORDER OF LD. C IT(A) AND DIRECT LD. AO TO GRANT EXEMPTION U/S 11 & 12, AS CLAIMED BY THE A SSESSEE. GROUND NO. 1 STAND ALLOWED. ACCORDINGLY, THE ADDITIONAL GROUND, TAKEN ON RECORD AS 11 ITA NOS. 5818-19/MUM/2015 NEIA TRUST ASSESSMENT YEARS: 2011-12 & 2012-13 GROUND NO. 5, BECOMES INFRUCTUOUS AND WOULD NOT REQ UIRE ANY SPECIFIC ADJUDICATION. THE FACT OF VALID REGISTRATION WOULD ONLY GO TO BOLSTER THE ASSESSEES CLAIM OF EXEMPTION U/S 11 & 12. 4. IN GROUND NO.2, THE ASSESSEE IS AGGRIEVED BY THE FACT THAT CORPUS CONTRIBUTION OF RS.150 CRORES RECEIVED BY THE ASSES SEE HAS BEEN BROUGHT TO TAX BY LD. AO. IN VIEW OF OUR ADJUDICATION THAT THE ASSESSEE WAS ELIGIBLE FOR EXEMPTION U/S 11 FOR THE YEAR UNDER CONSIDERATI ON, WE FIND THAT CORPUS CONTRIBUTIONS WOULD BE COVERED BY SEC. 11(1)(D) OF THE ACT AND ACCORDINGLY, THE ASSESSEE WAS ENTITLED TO CLAIM EXEMPTION AGAINS T THE SAME ALSO. HOWEVER, ANOTHER NOTEWORTHY FACT IS THAT THE SAID F UNDS HAS BEEN RECEIVED BY THE ASSESSEE FROM DEPARTMENT OF COMMERCE, MINIST RY OF COMMERCE & INDUSTRY, GOVERNMENT OF INDIA LETTER REF. NO. 6/51/ 2009-E&MDA DATED 18/06/2010, A COPY OF WHICH HAS BEEN PLACED ON RECO RD. UPON PERUSAL, WE FIND THAT THE RELEASE OF FUNDS WAS SUBJECT TO CERTA IN TERMS AND CONDITIONS AS ENUMERATED IN THE SAID LETTER AND THE FUNDS COULD B E UTILIZED ONLY FOR THE PURPOSE FOR WHICH IT WAS SANCTIONED. AS PER TERM (V I), ANY UNSPENT AMOUNT WAS TO BE SURRENDERED TO THE GOVERNMENT. THEREFORE, UPON PERUSAL OF STATED TERMS & CONDITIONS, IT COULD NOT BE SAID THA T THE FUNDS RECEIVED BY THE ASSESSEE WERE NOT IN THE NATURE OF VOLUNTARY CONTRI BUTIONS RATHER THEY WERE MORE IN THE NATURE OF SPECIFIC GRANTS ON CERTAIN TE RMS AND CONDITIONS AND LIABLE TO BE REFUNDED, IN CASE THE SAME WERE NOT UT ILIZED FOR SPECIFIC PURPOSES. IT IS TRITE LAW THAT ENTRIES IN THE BOOKS OF ACCOUNTS WOULD NOT BE DETERMINATIVE OF THE TRUE NATURE / CHARACTER OF THE TRANSACTIONS AND THE SAME COULD NOT BE HELD TO BE CONCLUSIVE. THEREFORE, THE MERE FACT THAT THE 12 ITA NOS. 5818-19/MUM/2015 NEIA TRUST ASSESSMENT YEARS: 2011-12 & 2012-13 ASSESSEE CREDITED THE RECEIPTS AS CORPUS CONTRIBUTI ON, IN OUR CONSIDERED OPINION, WOULD NOT MAKE MUCH DIFFERENCE AND WOULD N OT ALTER THE TRUE NATURE OF THE STATED RECEIPTS. THE SAID FUNDS / REC EIPTS, AS STATED EARLIER, WERE MORE IN THE NATURE OF SPECIFIC GRANTS AND REPR ESENT LIABILITY FOR THE ASSESSEE AND LIABLE TO BE REFUNDED IN CASE OF NON-U TILIZATION. THEREFORE, THE SAME BEING CAPITAL IN NATURE, COULD NOT BE EVEN OTH ERWISE BROUGHT TO TAX. FOR THE SAID PROPOSITION, STRENGTH COULD BE DRAWN F ROM THE DECISION OF HONBLE GUJARAT HIGH COURT RENDERED IN PR.CIT V/S STATE FISHERIES DEVELOPMENT CORPORATION LTD. (94 TAXMANN.COM 466) WHEREIN SIMILAR RECEIPTS WERE HELD TO BE CAPITAL IN NATURE. THIS DE CISION HAS ALREADY ATTAINED FINALITY BY WAY OF DISMISSAL OF REVENUES SPECIAL LEAVE PETITION (SLP) WHICH IS REPORTED AT 102 TAXMANN.COM 221. SIMILAR P ROPOSITION HAS BEEN LAID DOWN BY CHANDIGARH BENCH OF TRIBUNAL IN T HE CASE OF HARYANA RURAL DEVELOPMENT AUTHORITY V/S DCIT (162 TTJ 749 2 2/01/2014) WHEREIN IT HAS BEEN HELD THAT GRANTS-IN-AID RECEIVE D BY ASSESSEE FROM GOVERNMENT FOR PROMOTION OF GOVERNMENTS SCHEME COU LD NOT BE TERMED AS INCOME OF THE ASSESSEE. SIMILAR VIEW HAS BEEN EXPRE SSED BY HONBLE GUJARAT HIGH COURT IN DIT V/S GUJARAT STATE COUNCIL FOR BLOOD TRANSFUSION (41 TAXMANN.COM 449). THE OTHER DECISIONS PLACED ON RECORD BY THE ASSESSEE, ALSO SUPPORT THE VIEW THAT SUCH GR ANTS COULD NOT BE TERMED AS INCOME OF THE ASSESSEE AND WOULD PARTAKE THE CHARACTER OF CAPITAL RECEIPTS. CONCURRING WITH THE SAID VIEW, WE HOLD THAT THE SAID RECEIPTS WERE CAPITAL IN NATURE AND COULD NOT BE BR OUGHT TO TAX AS INCOME OF 13 ITA NOS. 5818-19/MUM/2015 NEIA TRUST ASSESSMENT YEARS: 2011-12 & 2012-13 THE ASSESSEE. GROUND NO. 2 STANDS ALLOWED. GROUND N OS. 3 & 4 ARE GENERAL IN NATURE. 5. THE APPEAL STANDS ALLOWED IN TERMS OF OUR ABOVE ORDER. ITA NO. 5819/MUM/2015, AY 2012-13 6. IN THIS AY, THE ASSESSMENT WAS FRAMED U/S 143(3) ON 21/02/2015 WHEREIN THE ASSESSEE WAS DENIED EXEMPTION U/S 11 & 12, IN SIMILAR MANNER AND SURPLUS OF RS.119.37 CRORES WAS BROUGHT TO TAX BY THE REVENUE. THE LEARNED CIT(A), RELYING UPON THE STAND OF ITS PREDE CESSOR FOR AY 2010-11, CONFIRMED THE ACTION OF LD. AO. AGGRIEVED, THE ASSE SSEE IS UNDER FURTHER APPEAL BEFORE US WITH SIMILAR GROUNDS OF APPEAL. TH E ONLY ISSUE UNDER APPEAL IS ASSESSEES CLAIM OF EXEMPTION U/S 11 & 12 WHICH IS SIMILAR TO GROUND NOS. 1 & 5 OF AY 2011-12. FACTS BEING PARI-M ATERIA THE SAME, TAKING THE SAME VIEW, WE DIRECT LD. AO TO ALLOW THE EXEMPTION U/S 11 & 12 AS CLAIMED BY THE ASSESSEE. ACCORDINGLY, THE APPEAL STANDS ALLOWED. CONCLUSION 7. BOTH THE APPEALS STAND ALLOWED IN TERMS OF OUR A BOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH DECEMBER, 2019. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 24/12/2019 SR.PS:-JAISY VARGHESE 14 ITA NOS. 5818-19/MUM/2015 NEIA TRUST ASSESSMENT YEARS: 2011-12 & 2012-13 ,- .- / COPY OF THE ORDER FORWARDED TO : 1. '$ / THE APPELLANT 2. %&'$ / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. F G% H , H , / DR, ITAT, MUMBAI 6. G IJK / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.