TECHNOLOGY DISTRIBUTION ASSOCIATION OF INDIA, MUMBAI V. DIT (E), MUMBAI

ITA 6167/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100969 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2013-2014
• Appeal Filed On: 21-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJUNATHA R SWAMY
• Assessee Lawyers: R MURLIDHAR
• Keywords: Charitable institution; Competent authority
• Section: 12A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI N.K . BILLAIYA, ACCOUNTANT MEMBER AND RAM L AL NEGI, JUDICIAL MEMBER / I .T.A. NO. 6167/MUM/2013 TECHNOLOGY DISTRIBUTION ASSOCIATION OF INDIA, 105, UNIQUE INDUSTRIAL ESTATE, FIRST FLOOR, CARDINAL GRACIOUS ROAD, CHAKALA, ANDHERI EAST, MUMBAI0400 099 / VS. THE DIRECTOR OF INCOME TAX (EXEMPTION), PIRAMAL CHAMBERS, PAREL, MUMBAI - 400 012 ./ ./ PAN/GIR NO. : AAECT 5008J ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI R. MURLIDHAR / RESPONDENT BY: SHRI MANJUNATHA R. SWAMY / DATE OF HEARING : 0 3 .0 9 .2015 / DATE OF PRONOUNCEMENT : 09 .0 9 .2015 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST THE ORDER OF THE DIT (EXEMPTION) , MUMBAI D ATED 27 . 9 .201 3. 2. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE ASSESSEE IS THAT THE DIT ERRED IN REJECTING THE APPLICATION FOR REGISTRATION U/S. 12A(1)(AA) OF THE ACT. ITA. NO. 6167/M/2013 2 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY INCORPORATED U/S. 25 OF THE COMPANIES ACT AS A NON - PROFIT MAKING INSTITUTION. THE COMPANY FILED AN APPLICATION FOR REGISTRATION U/S. 12A OF THE ACT IN THE PRESCRIBED FORM NO. 10A ON 26.3.2013. 3.1. WHILE GOING THROUGH THE APPLICATION, THE DIT(EXEM.) OBSERVED THAT THE MAI N OBJECT OF THE COMPANY IS TO PROMOTE , DEVELOP AND PROTECT THE INTEREST OF THOSE IN THE BUSINESS OF DISTRIBUTION OF TECHNOLOGY PRODUCTS. THE DIT (EXEM.) WAS OF THE FIRM BELIEF THAT THIS OBJECT OF THE COMPANY IS NOT MEANT FOR THE BENEFIT OF THE PUBLIC BUT FOR THE BENEFIT OF ITS MEMBERS ONLY. THE DIT FURTHER OBSERVED THAT THE APPLICANT COMPANY HAS NON - CHARITABLE/COMMERCIAL OBJECTS. THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY IN VIEW OF ITS MIXED COMMERCIAL OBJECTS, ITS APPLICATION FOR REGISTRATION SHOU LD NOT BE REJECTED. THE ASSESSEE FILED A DETAILED REPLY VIDE LETTER DATED 20.9.2013 WHICH IS EXHIBITED AT PAGE - 2 OF THE ORDER OF THE DIT (EXEMPTION). 3.2. THE SUBMISSION OF THE ASSESSEE DID NOT FIND ANY FAVOUR WITH THE DIT WHO WAS OF THE STRONG BELIEF THAT THERE IS THE EXISTENCE OF NON - CHARITABLE/COMMERCIAL OBJECTS IN THE MEMORANDUM OF ASSOCIATION (MO A ) OF THE APPLICANT COMPANY. THE DIT REJECTED THE APPLICATION FOR GRANT OF REGISTRATION. 4. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. 5. THE LD. C OUNSEL FOR THE ASSESSEE ARGUED AT LENGTH STATING THAT THE DIT HAS NOT APPRECIATED THE OBJECTS OF THE COMPANY PROPERLY. IT IS THE SAY OF THE LD. COUNSEL THAT THE DIT HAS COMPLETELY IGNORED THE FACT THAT THE APPLICANT - COMPANY IS INCORPORATED U/S. 25 OF THE ITA. NO. 6167/M/2013 3 COMPANIES ACT WHEREIN ONLY THOSE COMPANIES GET RECOGNITION WHICH ARE NOT PROFIT MAKING INSTITUTION. THE LD. COUNSEL FURTHER STATED THAT BEFORE ISSUING THE CERTIFICATE OF INCORPORATION, THE REGISTRAR OF COMPANIES HAVE THOROUGHLY EXAMINED THE OBJECTS INCORP ORATED IN THE MO A OF THE APPLICANT - COMPANY. IN SUPPORT OF HIS CONTENTION, THE LD. COUNSEL RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS ANDHRA CHAMBER OF COMMERCE 55 ITR 722 , DIT VS BHARAT DIAMOND BOURSE 259 ITR 280 AND A CIT VS SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION 121 ITR 01. 6. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE DIT (EXEM.). 7. WE HAVE CAREFULLY PERUSED THE ORDER OF THE AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH THE D ECISIONS OF THE HONBLE SUPREME COURT REFERRED TO BY THE LD. COUNSEL. THE MAIN OBJECT OF THE COMPANY TO BE PURSUED BY THE COMPANY ON ITS INCORPORATION READ AS UNDER: TO PROMOTE, DEVELOP AND PROTECT THE INTEREST OF THOSE IN THE BUSINESS OF DISTRIBUTION OF TECHNOLOGY PRODUCTS INCLUDING BUT NOT RESTRICTED TO COMPUTERS, SOFTWARE, PERIPHERALS, NETWORKING PRODUCTS, MOBILITY PRODUCTS, COMPONENTS, CONSUMABLES, ACCESSORIES OR ANY OTHER TECHNOLOGY PRODUCTS AND RELATED SERVICES AND ALSO TO PROMOTE HONOURABLE PRACTICES IN THE TRADE AND TO DO ALL SUCH ACTIVITIES WHICH WILL GENERALLY HELP IN DEVELOPMENT OF BUSINESS OF DISTRIBUTION OF SUCH TECHNOLOGY PRODUCTS AND RELATED SERVICES. NO OBJECT OF THE COMPANY SHALL BE CARRIED OUT WITHOUT PERMISSION FROM COMPETENT AUTHORITY WHOMSOEVER AND NO OBJECT OF THE COMPANY SHALL BE CARRIED OUT ON COMMERCIAL BASIS. ITA. NO. 6167/M/2013 4 8. IT IS FURTHER PROVIDED IN THE ARTICLES OF ASSOCIATION AT CLAUSE 65 UNDER THE HE AD APPLICATION OF PROFIT THE PROPERTY, CAPITAL AND INCOME OF THE COMPANY HOWEVER DERIVED SHALL BE APPLIED SOLELY TOWARDS THE PROMOTION OF THE OBJECTS OF THE COMPANY AND NO PORTION THEREOF SHALL BE PAID BY WAY OF BONUS OR OTHERWISE TO THE MEMBERS. 9. COMING BACK TO THE OBJECTS OF THE COMPANY, IT SEEMS THAT THE LD. DIT(EXEM.) HAS BEEN CARRIED AWAY BY THE FACT THAT THE OBJECT RELATES TO THOSE IN THE BUSINESS OF DISTRIBUTION OF TECHNOLOGY PRODUCTS. THIS HAS BEEN UNDERSTOOD BY THE LD. DIT (EXEM.) , AS BEI NG RESTRICTED ONLY FOR THE BENEFIT OF ITS MEMBERS ONLY. THE HONBLE SUPREME COURT IN THE CASE OF ANDHRA CHAMBER OF COMMERCE (SUPRA) HAD THE OCCASION TO CONSIDER IDENTICAL FACTS WHICH READ AS UNDER: THE FOLLOWING ARE THE PRINCIPAL OBJECTS OF THE MEMORANDUM OF ASSOCIATION OF THE ASSESSEE: (A) TO PROMOTE AND PROTECT TRADE, COMMERCE AND INDUSTRIES OF INDIA, IN THE PROVINCE OF MADRAS AND IN PARTICULAR IN THE ANDHRA COUNTRY. (B) TO AID, STIMULATE AND PROMOTE THE DEVELOPMENT OF TRADE, COMMERCE AND INDUS TRIES IN INDIA OR ANY PART THEREOF WITH CAPITAL PRINCIPALLY PROVIDED BY INDIANS OR UNDER THE MANAGEMENT OF INDIANS. (C) TO WATCH OVER AND PROTECT THE GENERAL COMMERCIAL INTERESTS OF INDIA OR ANY PART THEREOF AND THE INTERESTS OF THE ANDHRAS IN PARTICULAR E NGAGED IN TRADE, COMMERCE OR MANUFACTURE IN INDIA AND IN PARTICULAR THE ANDHRA DESA. (D) TO DO ALL SUCH OTHER THINGS AS MAY BE CONDUCIVE TO THE PRESERVATION AND EXTENSION OF TRADE, COMMERCE, INDUSTRIES AND MANUFACTURES OR INCIDENTAL TO THE ATTAINMENT OF TH E ABOVE OBJECTS OR ANY OF THEM. CLAUSES (E) TO (X) ARE INCIDENTAL TO THE PRINCIPAL OBJECTS . ITA. NO. 6167/M/2013 5 9.1. ON THE AFOREMENTIONED OBJECTS, THE HONBLE SUPREME COURT OBSERVED AS UNDER: THE PRINCIPAL OBJECTS OF THE ASSESSEE ARE TO PROMOTE AND PROTECT TRADE, COMMERCE AND INDUSTRIES AND TO AID, STIMULATE AND PROMOTE THE DEVELOPMENT OF TRADE, COMMERCE AND INDUSTRIES IN INDIA OR ANY PART THEREOF. BY THE ACHIEVEMENT OF THESE OBJECTS, IT IS NOT INTENDED TO SERVE MERELY THE INTERESTS OF THE MEMBERS OF THE ASSESSEE. ADVANCEMENT OR PROMOTION OF TRADE, COMMERCE AND INDUSTRY LEADING TO ECONOMIC PROSPERITY ENURES FOR THE BENEFIT OF THE ENTIRE COMMUNITY. THAT PROSPERITY WOULD BE SHARED ALSO BY THOSE WHO ENGAGE IN TRADE, COMMERCE AND INDUSTRY BUT ON THAT ACCOUNT THE PURPOSE IS NOT RENDERED ANY THE LESS AN OBJECT OF GENERAL PUBLIC UTILITY. IT MAY BE REMEMBERED THAT PROMOTION AND PROTECTION OF TRADE, COMMERCE AND INDUSTRY CANNOT BE EQUATED WITH PROMOTION AND PROTECTION OF ACTIVITIES AND INTERESTS MERELY OF PERSONS ENGAGED IN T RADE, COMMERCE AND INDUSTRY . 9.2. A SIMILAR VIEW WAS TAKEN BY THE HONBLE SUPREME COURT IN THE CASE OF BHARAT DIAMOND BOURSE(SUPRA). THE DECISION OF THE TRIBUNAL, MUMBAI BENCH IN THE CASE OF CEO CLUBS INDIA VS DIT IN ITA NO. 3503/M/2011 25 TAXMANN.COM 217 IS WORTH MENTIONING. IN THAT C ASE ALSO THE ASSESSEE WAS INCORPORATED AS A PVT. LTD. COMPANY U/S. 25 OF THE COMPANIES ACT. IN THAT CASE ALSO THE ASSESSEE SUBMITTED THAT IT WAS A NON - PROFIT ASSOCIATION REGISTERED AS SUCH U/S. 25 OF THE COMPANIES ACT FOR A CHARITABLE PURPOSE. IN THAT CA SE ALSO THE DIT WAS NOT SATISFIED WITH THE CLAIM OF THE ASSESSEE HOLDING THAT THE OBJECTS AS SPELLED OUT WERE CLEARLY NOT FOR THE BENEFIT OF PUBLIC AS A WHOLE BUT RATHER ARE CONFINED TO SPECIFIC MEMBERS ONLY AND THE TRIBUNAL AT PARA - 9 OF ITS ORDER FOLLOWIN G THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION (SUPRA) HAS HELD THAT OBJECT WHICH SEEKS TO PROMOTE OR PROTECT THE INTEREST OF A PARTICULAR TRADE OR INDUSTRY ARE OBJECT OF PUBLIC UTILITY ITA. NO. 6167/M/2013 6 AND FINALLY HELD THAT THE OBJECTION OF THE DIT FOR DENYING REGISTRATION ON THIS GROUND IS THEREFORE FOUND TO BE WITHOUT ANY BASIS. CONSIDERING THE SIMILARITY IN THE FACTS OF THE CASE IN HAND WITH THE FACTS OF THE JUDICIAL DECISIONS REFERRED TO HEREINABOVE, WE ARE OF THE CONSIDERED OPINION THAT THE DIT (EXEM) HAVE GROSSLY ERRED IN REJECTING THE APPLICATION OF REGISTRATION. WE , THEREFORE , SET ASIDE THE ORDER OF THE DIT (EXEM.) AND DIRECT HIM TO GRANT REGISTRATION TO THE APPLICANT COMPANY. 10. IN THE RESULT, THE AP PEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH SEPTEMBER , 2015 SD/ - SD/ - ( RAM L AL NEGI ) (N.K. BILLAIYA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 9 TH SEPTEMBER , 2015 . . ./ RJ , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI