Institute of Development Banking Professional, New Delhi V. CIT(E), New Delhi

ITA 6285/DEL/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0780 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: misc
• Appeal Filed On: 27-11-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIJAY VERMA
• Assessee Lawyers: R K MEHRA
• Keywords: Charitable institution; Principle of natural justice
• Section: 80G; 12A; 12AA; 12

Judgement Text

1 ITA NOS. 6286 & 6287/DEL/2015 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D NEW DELHI BEFORE SHRI N. K. SAINI, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER ITA NO. 6286/DEL/201 5 ( A.Y BLOCK PERIOD) ITA NO. 6285/DEL/201 5 ( A.Y BLOCK PERIOD) INSTITUTE OF DEVELOPMENT BANKING PROFESSIONAL B-7/1A VASANT VIHAR NEW DELHI AAAA17650M (APPELLANT) VS CIT(E) PRATYAKSH KAR BHAWAN, 26 TH FLOOR, E-2 BLOCK, CIVIL CENTRE, J. L. N. MARG NEW DELHI (RESPONDENT) APPELLANT BY SH. R. K. MEHRA, CA RESPONDENT BY SH. VIJAY VERMA, CIT DR ORDER PER SUCHITRA KAMBLE, JM THESE TWO APPEALS ARE FILED BY THE ASSESSEE IN RESP ECT OF ORDER DATED 28/9/2015 PASSED BY COMMISSIONER OF INCOME TAX (EXE MPTIONS), NEW DELHI U/S 12AA (1)(B) READ WITH SECTION 12A OF THE INCOM E TAX ACT, 1961. 2. THE GROUNDS FOR APPEAL ARE AS UNDER:- ITA NO. 6286/DEL/2015 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE PETITIONERS CASE, THE LEARNED COMMISSIONER OF INCOME TAX (EXEMPTIONS) ERR ED IN LAW AND ON FACTS IN WRONGLY CONSIDERING THE SOCIETY AS MUTUAL SOCIETY KIND OF DATE OF HEARING 17.09.2018 DATE OF PRONOUNCEMENT 20.09.2018 2 ITA NOS. 6286 & 6287/DEL/2015 ORGANIZATION WORKING FOR THE MUTUAL BENEFIT OF MEMB ERS, WITHOUT SHOWING AS TO HOW THE MEMBERS ARE BENEFITED FROM THE SOCIET Y AND COMPLETELY IGNORING THAT NONE OF THE OBJECTS OF THE SOCIETY SU GGESTED ANY MUTUALITY OF INTEREST AS HELD BY THE COMMISSIONER OF INCOME TAX (EXEMPTIONS). 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE PETITIONERS CASE, THE LEARNED COMMISSIONER OF INCOME TAX (EXEMPTIONS) ERR ED IN LAW AND ON FACTS IN REFUSING TO GRANT REGISTRATION UNDER SECTI ON 12A OF THE INCOME TAX ACT, 1961 BY HOLDING THAT NONE OF THE OBJECTS OF OU R SOCIETY ARE COVERED WITHIN THE DEFINITION OF CHARITABLE PURPOSE IN TERM S OF SECTION 2(15) OF THE INCOME TAX ACT, 1961. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE PETITIONERS CASE, THE LEARNED COMMISSIONER OF INCOME TAX (EXEMPTIONS) ERR ED IN LAW AND ON FACTS IN REFUSING TO GRANT EXEMPTION UNDER SECTION 80G(5) OF THE INCOME TAX ACT, 1961 TO THE SOCIETY 4. THAT THE ORDER MADE IS BAD IN LAW. ITA NO. 6285/DEL/2015 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE PETITIONERS CASE, THE LEARNED COMMISSIONER OF INCOME TAX (EXEMPTIONS) ERRED IN LAW AND ON FACTS IN WRONGLY CONSIDERING THE SOCIETY AS MUTUAL SOCIETY KIND OF ORGANIZATION WORKING FOR THE MUTUAL BENEFIT OF MEMB ERS, WITHOUT SHOWING AS TO HOW THE MEMBERS ARE BENEFITED FROM THE SOCIET Y AND COMPLETELY IGNORING THAT NONE OF THE OBJECTS OF THE SOCIETY SU GGESTED ANY MUTUALITY OF INTEREST AS HELD BY THE COMMISSIONER OF INCOME TA X (EXEMPTIONS). 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE PETITIONERS CASE, THE LEARNED COMMISSIONER OF INCOME TAX (EXEMPTIONS) ERRED IN LAW AND ON 3 ITA NOS. 6286 & 6287/DEL/2015 FACTS IN REFUSING TO GRANT REGISTRATION UNDER SECTI ON 12A OF THE INCOME TAX ACT, 1961 BY HOLDING THAT NONE OF THE OBJECTS OF OU R SOCIETY ARE COVERED WITHIN THE DEFINITION OF CHARITABLE PURPOSE IN TERM S OF SECTION 2(15) OF THE INCOME TAX ACT, 1961 AND IGNORING THE FACT THAT THE PETITIONER SOCIETY HAPPENS TO BE AN EDUCATIONAL INSTITUTE WITHIN THE M EANING OF SECTION 10(23C) OF THE INCOME TAX ACT, 1961. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE PETITIONERS CASE, THE LD. COMMISSIONER OF INCOME TAX (EXEMPTIONS) ERRED I N LAW AND ON FACTS IN REFUSING TO GRANT EXEMPTION U/S 80G (5) OF THE INCO ME TAX ACT, 1961 TO THE SOCIETY. 4. THAT THE ORDER MADE IS BAD IN LAW. 3. THE ASSESSEE IS A SOCIETY REGISTERED UNDER SOCIE TIES REGISTRATION ACT, 1860 ON 10.02.2014. IT FILED APPLICATION(S) ON 24.0 3.2015 IN FORM NO. 10A SEEKING REGISTRATION U/S 12A AND IN FORM NO. 10G SE EKING EXEMPTION U/S 80G OF THE INCOME TAX ACT, 1961. THE ASSESSEE WAS I SSUED A LETTER/NOTICE DATED 24.03.2015 REQUESTING IT TO SUBMIT THE DOCUME NTS/EXPLANATIONS IN SUPPORT OF ITS CLAIM OF EXEMPTION FIXING THE CASE F OR 24.04.2015. ON SUBSEQUENT DATES, DETAILS WERE SUBMITTED BEFORE THE CIT(E). THE CIT (EXEMPTIONS) HELD THAT THE ASSESSEE IS NOT ELIGIBLE FOR GRANT OF REGISTRATION U/S 12A AS NONE OF ITS OBJECT ARE COVERED WITHIN TH E DEFINITION OF CHARITABLE PURPOSE AS GIVEN IN SECTION 2(15) OF INCOME TAX ACT , 1961. THEREFORE, THE ASSESSEES REQUEST FOR GRANT OF REGISTRATION U/S 12 A WAS REJECTED ALONG WITH GRANT OF EXEMPTION U/S 80G WAS ALSO REJECTED. 4. BEING AGGRIEVED BY THE ORDER PASSED BY THE CIT ( EXEMPTIONS), THE ASSESSEE FILED THESE TWO APPEALS BEFORE US. 5. THE LD. AR SUBMITTED THAT THE ASSESSEE FILED ALL THE DETAILS AS EXPLAINED U/S 12AA IN RESPECT OF APPLICATION FOR REGISTRATION & EXEMPTION U/S 80G OF 4 ITA NOS. 6286 & 6287/DEL/2015 THE ACT BEFORE THE CIT(E). THE LD. AR SUBMITTED TH AT THE OBJECT OF THE SOCIETY WAS TO SERVE THE GENERAL PUBLIC ONLY WHICH WAS OVER LOOKED BY THE CIT (EXEMPTIONS). 6. THE LD. DR SUBMITTED THAT AS PER 1922 ACT, BUSIN ESS WAS PERMITTED FOR RELIEF TO POOR, EDUCATION, MEDICAL RELIEF AND ANY O THER OBJECT OF GENERAL PUBLIC UTILITY SUBJECT TO THE PRIMARY PURPOSE THEORY UNLES S THE BUSINESS WAS DONE MAINLY BY THE BENEFICIARIES. THE RULE OF APPLICATIO N OF INCOME EXISTED. AS PER 1961 ACT THE CONCEPT OF PROFIT MOTIVE WAS INTRODUCE D WITH RESPECT TO ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. HERE CAME THE CON CEPT OF DOMINANT PURPOSE THEORY. THE DOMINANT PURPOSE THEORY MEANS THAT IF THAT DOMINANT PURPOSE IS NOT TO EARN PROFIT, BUT ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY TRUST WILL REMAIN CHARITABLE EVEN IF PROFIT IS EARNED. IT IS DIFFERENT FROM PRIMARY PURPOSE THEORY WHICH IS IN RELATION TO SECTION 11(4A1/13(1)BB. FROM A.Y. 1977-78, THE PRINCIPAL OF PRIMARY PURPOSE WAS INTRODUCED FOR BUS INESS IN RESPECT OF RELIEF TO POOR, EDUCATION AND MEDICAL RELIEF BY SECTION 13(L) BB. FOR ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY THE PRINCIPLE OF PROFIT MOTI VE CONTINUED AND SO THE DOMINANT PURPOSE THEORY. FROM A.Y. 1984-85, PRIMARY PURPOSE THEORY WAS INTRODUCED IN SECTION 11(4A) AS SECTION 13(L)(BB) W AS DELETED. IN A.Y. 1992-93 THE PRINCIPLE OF INCIDENTAL TO PRIMARY PURPOSE WAS INTRODUCED IN SECTION 11(4A). WITH EFFECT FROM A.Y. 1984-85, THE WORDS NOT INVOLV ING ANY ACTIVITIES FOR PROFIT WERE OMITTED FROM SECTION 2(15). FOR ANY OTHER OBJE CT OF GENERAL PUBLIC UTILITY I.E. FROM A.Y. 1984-85 TO 2008-09, THE CONCEPT OF P ROFIT MOTIVE DID NOT APPLY NOR WAS THERE A NEED FOR DOMINANT PURPOSE THEORY. RESTRICTIONS IN SECTION 11(4A), HOWEVER APPLIED IN CASE OF BUSINESS AND APPLY TILL DATE. IN A.Y. 2009- 10, A NEW CONCEPT WAS INTRODUCED WHICH SPECIFICALLY PROHIBITED CERTAIN ACTIVITIES AND USED THE WORDS IRRESPECTIVE OF APPL ICATION OF INCOME OF SUCH ACTIVITIES. MOREOVER, THE CONCEPT OF TRADE, COMMER CE AND BUSINESS WAS INTRODUCED RATHER THAN CONCEPT OF PROFIT AND SUCH A CTIVITIES WERE PROHIBITED. BUSINESS CONTINUED TO BE ALLOWED FOR RELIEF TO POOR ETC AND SO WAS THE APPLICATION OF PRIMARY PURPOSE THEORY AND INCIDENTA L TO PRIMARY PURPOSE THEORY 5 ITA NOS. 6286 & 6287/DEL/2015 IN RESPECT OF THE SAME. FOR ANY OTHER OBJECT OF GEN ERAL PUBLIC UTILITY, BAR ON PROFIT MOTIVE, WAS STILL NOT THERE. BUT ACTIVITIES OF BUSINESS/TRADE/COMMERCE WERE PROHIBITED I.E PROFIT FROM OTHER ACTIVITIES WA S PERMITTED UNDER THE CLAUSE. SO THE DOMINANT PURPOSE THEORY IS NOT RELEVANT NOW. THEREFORE, FROM A.Y. 2009-10, THE DECISIONS BASED ON THE CONCEPT OF PROF IT MOTIVE AND DOMINANT PURPOSE THEORY ARE NO LONGER RELEVANT AND DECISIONS FOR A.Y. 2009-10 ONWARDS PERMITTING PROHIBITED ACTIVITIES BY RELYING ON DECI SIONS RELATED TO THESE CONCEPTS AND ON SUCH PRINCIPLES ARE PER-INCURIAM/SU B-SILENTIO WITH RESPECT OF THESE ARGUMEN TS. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. SINCE, BEFORE THE CIT(EXEMPTIONS), THE AS SESSEE HAS NOT ELABORATED THE DOCUMENTARY EVIDENCES IN RESPECT OF AIMS AND OB JECTS OF THE ASSESSEE INSTITUTE REGARDING EDUCATION PROVIDED TO THE GENE RAL PUBLIC ORDER OF THE CIT(EXEMPTIONS) IS ALSO NOT ELABORATE AS TO HOW THE ASSESSEE FAIL TO CONDUCT THE OBJECT OF THE ASSESSEE INSTITUTE. THE CONTENTIONS TAKEN BY THE LD. DR ARE THE PRINCIPLES OF LAW BUT IT CAN BE FOLLOWED WHEN THE P ROPER ADJUDICATION OF THE MATTER IS DONE. IN THE PRESENT CASE CIT(EXEMPTION) HAS NOT TAKEN PROPER COGNIZANCE OF THE CORRECT STATE OF THE ASSESSEE SOC IETYS PURPOSE AND OBJECT. THUS, IT WILL BE APPROPRIATE TO REMAND BACK THESE I SSUES BEFORE THE CIT (EXEMPTIONS) FOR LOOKING INTO THE SAME AND THE ASSE SSEE ALSO SHOULD PROVIDE ALL THE REQUIRED EVIDENCES BEFORE THE CIT(EXEMPTIONS). NEEDLESS TO SAY, THE ASSESSEE BE GIVEN FULL OPPORTUNITY OF HEARING BY FO LLOWING PRINCIPALS OF NATURAL JUSTICE. AS REGARDS ISSUE OF REGISTRATION AFTER VE RIFYING ALL THE DOCUMENTS, THE CIT (EXEMPTIONS) SHOULD TAKE A PROPER DECISION WHET HER TO GRANT THE REGISTRATION U/S 12AA OF THE ACT OR NOT TO THE ASSE SSEE INSTITUTE. AS REGARDS, THE APPEAL RELATING TO 80G EXEMPTION, THE SAME IS C ONSEQUENTIAL TO A REGISTRATION U/S 12AA. HENCE, THIS ISSUE ALSO SHOUL D BE REMANDED BACK TO THE FILE OF THE CIT(EXEMPTIONS). THEREFORE, BOTH THE A PPEALS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE. 6 ITA NOS. 6286 & 6287/DEL/2015 8. IN RESULT, BOTH THE APPEALS FILED BY THE ASSESSE E ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH SEPTEMBER, 2018 . SD/- SD/- (N. K. SAINI) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 20/09/2018 *R. N COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 7 ITA NOS. 6286 & 6287/DEL/2015 DATE OF DICTATION 17.09.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 18.09.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 20.09.2018 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 20 .09.2018 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 20.09.2018 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER