ADIT (E), New Delhi V. M/s Apparel Export Promotion Council, New Delhi

ITA 645/DEL/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6233 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 28-01-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 01-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K JAISWAL
• Assessee Lawyers: BALDEV; KIDUS P URI
• Keywords: Depreciation; Charitable institution
• Section: 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : A NEW DELHI BEFORE SHRI H.S.SIDHU, J.M. AND SHRI J.SUDHAKAR REDDY, AM ITA NO: 6 45 /DEL/201 3 AY : 20 0 9 - 10 ADI T (E) VS. APPAREL EXPORT PROMOTION COUNCIL INV. CIRCLE 1 A 223, OKHLA INDUSTRIAL AREA NEW DELHI PHASE I NEW DELHI 110 020 PAN: AAACA 5150 G C.O. NO.55/DEL/13 (IN ITA NO: 645 /DEL/201 3) AY : 20 09 - 10 APPAREL EXPORT PROMOTION COUNCIL VS. ADIT(E), INV. CIRCLE 1 NEW DELHI NEW DELHI ITA NO: 549 /DEL/201 3 AY : 20 10 - 11 DCIT, CIRCLE 1(1) VS. APPAREL EXPORT PROMOTION COUNCIL NEW DELHI NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY : SH. KK JAISWAL, D.R. RESPONDENT BY : SH. KIDUS P URI , C.A. AND SHRI BALDEV, C.A. O R D E R PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER THESE TWO APPEALS ARE FILED BY THE REVENUE DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF I NCOME T AX (A PPEALS ) - XXI, N EW DELHI DATED 30 TH NOVEMBER, 2012 FOR THE A SSESSMENT YEAR (A.Y.) 2009 - 10 AND 2010 - 11. THE ITA NO. 645/DEL/13 A.Y. 2009 - 10 C.O. 55/DEL/13 (IN ITA 645/DEL/13) ITA 549/DEL/15 A.Y. 2010 - 11 APPAREL EXPORT PROMOTION COUNCIL, NEW DELHI 2 CROSS OBJECTION HAS BEEN FILED BY THE ASSESSEE IN ITA 645/DEL/13 FOR THE A.Y. 2009 - 1 0. 2. FACTS IN BRIEF : T HE ASSESSEE IS A COMPANY REGISTERED UNDER SECTION 25 OF THE C OMPANIES A CT 1956, AS A NON - PROFIT INSTITUTION WITH THE APPROVAL OF THE CENTRAL GOVERNMENT F OR THE PROMOTION OF EXPORT OF GARMENTS FROM INDIA . I T IS REGISTERED UNDER SECT ION 12 A (A) OF THE I NCOME T AX A CT, 1961 (THE ACT) W.E.F. 18 .05.1979. T HE ASSESSEE HAS BEEN CLAIMING EXEMPTION UNDER SECTION 11 OF THE A CT FROM THE A.Y. 1979 - 80 TO 199 - 91 AND EXEMPTION WAS GRANTED U/S 11 OF THE ACT. IT WAS ONLY DURING THE A.Y. 1991 - 92 THAT THE A.O. HELD THE THAT THE ASSESSEE IS NOT ENTITLED TO EXEMPTION UNDER SECTION11 OF THE ACT , AS IT WAS CARRYING ON BUSINESS. ON APPEAL THE I NCOME T AX A PPELLATE T RIBUNALS HELD THAT THE ASSESSEE IS ENTITLED TO EXEMPTION UNDER SECTION11 OF THE A CT. SU BSEQUENTLY AN AMENDMENT WAS BROUGHT TO S ECTION 11 (4A) OF THE A CT AND THE ASSESSEE WAS REQUIRED TO MAINTAIN SEPARATE BOOKS OF ACCOUNT. THE A.O. AGAIN DENIED EXEMPTION UNDER SECTION11 OF THE A CT . O N APPEAL THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE . THE HON BLE DELHI HIGH COURT UPHELD THE ORDER OF THE ITAT IN A JUDGEMENT WHICH IS REPORTED AT 244 ITR 736. THE SAME WAS THE CASE FOR THE ASSESSMENT YEAR 1993 94. FURTHER T HE ASSESSEE RECEIVED ENTRANCE FEE AND MEMBERSHIP FEE. IT HAS CLAIMED THAT THESE REC EIPTS ARE EXEMPT ON THE PRINCIPLE OF MUTUALITY. THIS ISSUE WAS ALSO RESOLVED IN FAVOUR OF THE ASSESSEE FROM THE A SSESSMENT Y EARS 1992 - 93 TO THE A SSESSMENT Y EAR 19 97 - 98 BY THE J URISDICTIONAL HIGH COURT. FOR THE A SSESSMENT Y EARS 19 98 - 99 TO THE A SSESSMENT Y EARS 2008 - 09 THE A SSESSING O FFICER ACCEPTED THE CLAIM OF THE ASSESSEE THAT THE INCOME IN QUESTION IS EXEMPT UNDER SECTION11 OF THE A CT. DURING THE IMPUGNED A SSESSMENT Y EAR 2009 10 , THE A SSESSING O FFICER HELD THAT THE ASSESSEE IS A CHARITABLE ORGANISATION WHICH FALLS UNDER THE CATEGORY ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AS DEFINED U/S 2 (15) READ WITH SECTION 11 OF THE A CT AND THAT THE NEWLY INSERTED PROVISO TO S ECTION 2(15) OF THE A CT IS ATTRACTED IN THIS CASE AND THE ASSESSEE WIL L NOT BE ELIGIBLE FOR EXEMPTION UNDER SECTION11 OF THE A CT AS IT IS CARRYING ON BUSINESS. HE HELD ITA NO. 645/DEL/13 A.Y. 2009 - 10 C.O. 55/DEL/13 (IN ITA 645/DEL/13) ITA 549/DEL/15 A.Y. 2010 - 11 APPAREL EXPORT PROMOTION COUNCIL, NEW DELHI 3 THAT THE ASSESSEE HAS BEEN RENDERING SERVICES IN RELATION TO TRADE, COMMERCE BUSINESS FOR THE CONSIDERATION, THE RECEIPTS OF WHICH EXCEEDS RS. 10 LACS . HE CONCLUDED THAT THE ASSESSEE S ACTIVITIES NEITHER QUALIFY AS CHARITABLE ACTIVITY NOR COVERED UNDER THE CONCEPT OF MUTUALITY . HE CONCLUDED THAT THIS INCOME IS THEREFORE, ASSESSED AS PER THE NORMAL PROVISIONS OF THE ACT . AGGRIEVED THE ASSESSEE CARRIE D THE MATTER IN APPEAL. 2.1. THE FIRST A PPELLATE A UTHORITY CALLED FOR THE REMAND REPORT FROM THE A SSESSING O FFICER AFTER RECEIVING WRITTEN SUBMISSIONS ALONG WITH AFFIDAVITS FROM THE ASSESSEE . T HEREAFTER HE CONCLUDED THAT THE ISSUE AS TO WHETHER THE ASSESSEE IS ENTITLED TO EXEMPTION U/S 11 OF THE ACT IS NO MORE RES INTEGRA, AS THE HON BLE DELHI HIGH COURT HAS RESOLVED THE ISSUE IN FAVOUR OF THE ASSESSEE . AS THERE IS NO CHANGE IN FACTS AND CIRCUMSTANCE OF THE CASE HE ALLOWED GROUND NO. 1. ON PRINC IPLE OF MUTUALITY THE LD. FIRST A PPELLATE A UTHORITY FOLLOWED THE BINDING DECISION OF THE T RIBUNAL IN THE ASSESSEE S OWN CASE FOR THE A SSESSMENT Y EARS 200 2 - 2003 , A ND 2003 04, AS WELL AS A.Y. E 2004 05, 2005 6, WHEREIN IT IS HELD THAT ENTRANCE FEE AND S UBSCRIPTION SHOULD NOT BE INCLUDED IN THE ASSESSEE S INCOME . ON GROUND NO. 5 WHICH IS AGAINST THE TREATMENT OF MISCELLANEOUS INCOME BY THE AO HE HELD THAT THE MAIN OBJECT OF THE ASSESSEE HAS ALREADY BEEN RESOLVED AS CHARITABLE IN NATURE AND HENCE EXEMPT ION UNDER SECTION11 HAS TO BE GRANTED . ON THE ISSUE OF DEPRECIATION HE APPLIED THE JUDGEMENT OF THE J URISDICTIONAL HIGH COURT IN THE CASE OF VISHWA JAGRITI MISSION, REPORTED AT 20112 - TIOL - 271 - HC - DEL - IT AND GRANTED RELIEF. ON THE ISSUE OF CONTRIBUTION OF RS . 1.50 COURSE TO APPAREL HR D EVELOPMENT SOCIETY THE LD.CIT DIRECTED THE A.O. TO ALLOW THE CLAIM AFTER PROPER VERIFICATION . 3. A GGRIEVED THE R EVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN ALLOWING DEPRECIATION OF RS.3,30,97,036/ - WHICH TANTAMOUNT TO DOUBLE DEDUCTION AND NOT APPRECIATING THE ASSESSMENT FRAMED BY THE A.O. ITA NO. 645/DEL/13 A.Y. 2009 - 10 C.O. 55/DEL/13 (IN ITA 645/DEL/13) ITA 549/DEL/15 A.Y. 2010 - 11 APPAREL EXPORT PROMOTION COUNCIL, NEW DELHI 4 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN ALLOWING RS.25,92,927/ - UNDER MISC. INCOME TREATED BY THE AO AS RECEIPTS FROM MEMBERS AS RENDERING SERVICES FOR CONSIDERATION WHICH WAS ON SOUND FOOTING AND APPRECIATING THE ACTION OF THE A.O. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DIRECTING THE AO TO ALLOW RS.1.50 CRORES AS PAYMENT TO THE APEC HR DEVELOPMENT SOCIETY, DISALLOWED BY THE AO AFTER PROPER VERIFICATION. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN ALLOWING THE ASSESSEE BENEFIT OF S.11 OF THE INCOME TAX ACT, 1961. 5. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER OR AMEND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING. 4 . WE HAVE HEARD SHRI KK JAISWAL, L D.DR ON BEHALF OF THE REVE NUE AND SHRI KIDUS PURI, LD.COUNSEL FOR THE ASSESSEE. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND A PERUSAL OF MATERIAL ON RECORD AND ORDERS OF AUTHORITIES BELOW , CASE LAWS CITED, WE HOLD AS FOLLOWS. 5. G ROUND NO. 1 IS ADMITTEDLY COVERED IN FAVOUR OF THE ASSESSEE BY THE J URISDICTIONAL HIGH COURT IN THE CASE OF VISHWA JAGRITI MISSION (SUPRA) . THE FIRST APPELLATE AUTHORITY HAS RIGHTLY APPLIED T HIS BINDING DECISION . WE FIND NO INFIRMITY IN THE SAME. IN TH E RESULT WE DISMISS GROUND NO. 1 OF THE R EVENUE . 6. GROUND NO. 2 IS WHETHER MISCELLANEOUS INCOME EARNED BY THE ASSESSEE CAN BE CONSIDERED AS RECEIPTS FROM RENDERING SERVICES , IN RELATION TO TRADE, COMMERCE O R BUSINESS , AS SPECIFIED IN THE PROVISO TO SECTION 2(15) OF THE A CT . T HE RECEIPTS IN QUESTION ARE LISTED OUT AT PAGE 3 OF THE ASSESSMENT ORDER . A PERUSAL OF THE SAME DOES NOT L EAD US TO THE CONCLUSION THAT THE ASSESSEE IS RENDERING SERVICES WHICH ARE I N THE NATURE OF TRADE, COMMERCE OR BUSI NESS , AS SPECIFIED IN THE PROVISO TO SECTION 2 (15 ) OF THE A CT. THE JURISDICTIONAL HIGH COURT IN THE ASSESSEE S OWN CASE HAS HELD THAT THE DOMINANT OBJECT S OF THE ASSESSEE IS CHARITABLE IN NATURE AND THAT THE ASSESSEE IS NOT CARRYING ON ANY TRADE, COMMERCE OR BUSINESS. THE DECISION OF THE ITAT FOR THE A SSESSMENT Y EAR 1991 92 WAS UPHELD BY THE HON BLE HIGH COURT . THE ITAT HELD AS FOLLOWS : ITA NO. 645/DEL/13 A.Y. 2009 - 10 C.O. 55/DEL/13 (IN ITA 645/DEL/13) ITA 549/DEL/15 A.Y. 2010 - 11 APPAREL EXPORT PROMOTION COUNCIL, NEW DELHI 5 IT IS CLEAR THAT IN TREATING COUNCI L AS A TRADING ENTITY, THE LD.REVENUE AUTHORITIES DID NOT KEEP IN MIND THE DISTINCTION THAT EXISTS BETWEEN DOMINANT OBJECT OF INSTITUTION AND ITS ACTIVITIES TO ACHIEVE THAT OBJECT. THEY ALSO DID NOT APPRECIATE THAT FASHION SHOWS, SEMINARS ETC. ARE REQUIRE D TO BE CARRIED ON EDUCATED PEOPLE ON EXPORT AND ECONOMICALLY IT HAS TO BE CARRIED ON BUSINESS PURPOSE LINES BY CHARGING FEE FROM THE PARTICIPANTS TO MEET ADMINISTRATIVE AND OTHER EXPENSES OF THE COUNCIL. IT DOES NOT MEAN THAT ANY ACTIVITY IN WHICH LOSS IS NOT SUFFERED IS BEING CARRIED ON FOR PROFIT. ACTIVITY CARRIED ON BUSINESS PRINCIPLES DOES NOT MEAN THAT THE ASSESSEE WAS CARRYING ON BUSINESS. IT IS CLEAR FROM MATERIAL ON RECORD THAT ALL ACTIVITIES OF THE ASSESSEE ARE DIRECTED TOWARDS ACHIEVING ITS MAI N OBJECT OF PROMOTING EXPORT ON READY MADE GARMENTS FROM INDIA. IT DID NOT CARRY ANY ACTIVITY FOR EARNING PROFIT AND, THEREFORE, IT HAS TO BE HELD THAT THE ASSESSEE DID NOT CARRY ON BUSINESS AS THE TERM IS UNDERSTOOD IN COMMON PARLANCE. THE ASSESSEE, T HEREFORE, IS A PUBLIC CHARITABLE INSTITUTE. FOR THE PURPOSE OF GRANTING EXEMPTION, THE DOMINANT OR MIN OBJECT IS TO BE SEEN EVEN IF IT IS FOUND THAT AT SOME POINT OF TIME THE PERSONS AT THE HELM OF AFFAIRS DID NOT OBSERVE RULES AND ACTED IN A MANNER NOT AUTHORIZED BY RULES THAT WOULD NOT MAKE ANY DIFFERENCE TO THE CLAIM OF THE ASSESSEE. A BREACH OF A DUTY BY PUBLIC OR PRIVATE HOLDER OF AN OFFICE CANNOT CHANGE THE CHARACTER OF OFFICE OR INSTITUTION. THUS EVEN IF IT IS PROVED THAT CERTAIN FAVOURS WERE DON E BY THE EXECUTIVE COMMITTEE IN ALLOTMENT OF QUOTA THAT WOULD NOT MAKE THE ASSESSEE A NON - CHARITABLE INSTITUTION. FOR ALL THE ABOVE REASONS, WE HOLD THAT ASSESSEE IS A CHARITABLE INSTITUTION TO WHICH PROVISIONS OF SECTION11 ARE APPLICABLE. THE PROVISIONS OF SECTION 28(III) OR OF S.11(4A) ARE NOT APPLICABLE TO THIS CASE AS THE ASSESSEE DID NOT CARRY ON ANY BUSINESS. THE CASE LAW CITED ON BEHALF OF THE REVENUE IS NOT APPLICABLE AS FACTUAL FOUNDATIONS TO APPLY THESE DECISIONS DO NOT EXIST IN THIS CASE. 6.1 . THERE IS NO CHANGE IN FACTS AND CIRCUMSTANCES OF THE CASE . T HE OBJECT S OF THE ASSESSEE ARE CHARIT ABLE IN NATURE AND THAT THE ASSESSEE DID NOT CARRY ON ANY ACTIVITY WITH AN OBJECT TO CARRY PROFIT. AS THERE IS NO PROFIT MOTIVE, THE QUESTION OF ATTRACTING THE PROVISO TO SECTION 2 (15) DOES NOT ARISE . HON BLE ITA NO. 645/DEL/13 A.Y. 2009 - 10 C.O. 55/DEL/13 (IN ITA 645/DEL/13) ITA 549/DEL/15 A.Y. 2010 - 11 APPAREL EXPORT PROMOTION COUNCIL, NEW DELHI 6 DELHI HIGH COURT HAS IN THE FOLLOWING CASES LAID DOWN THE POSITIONS OF LAW THAT GOVERNS THE PROVISO TO SECTION TO 2 (15) OF THE A CT . I. GIS VS. DCIT (DEL) 360 ITR 138 (DEL.) II. ICAI VS. D IT (DEL.) 35 TAXMANN.COM 140 III. INDIA TRADE PROMOTION VS. DGIT (E) 2015 (53 TAXMANN.COM 404 (DEL.) APPLYING THE PROPOSITIONS LAID DOWN IN ALL THESE CASES TO THE FACTS OF THIS CASE WE UPHOLD THE ORDER OF THE LD.CIT(A) ON THIS ISSUE. T HUS WE UPHOLD THE FINDINGS OF THE FIRST A PPELLATE A UTHORITY AND DISMISS THIS GROUND. 7. ON T HE GRIEVANCE OF THE REVENUE ON GROUND NO. 3 IS DEVOID OF MERIT, FOR THE REASON THAT THE FIRST A PPELLATE A UTHORITY HAS ASKED THE A.O. TO VERIFY THIS CLAIM OF T HE ASSESSEE AND DISPOSE OFF THE SAME IN ACCORDANCE WITH LAW. HENCE THIS GROUND IS DISMISSED 8. GROUND NO. 4 IS AGAINST THE ALLOWING OF BENEFIT UNDER SECTION11 OF THE ACT TO THE ASSESSEE. AS THIS ISSUE WAS ALREADY CONSIDERED AND RESOLVED IN FAVOUR OF THE ASSESSEE , IN ITS OWN CASE , FOR THE EARLIER A SSESSMENT Y EARS BY THE J URISDICTIONAL HIGH COURT , THIS GROUND IS DISMISSED . 9. I N THE RESULT THE BOTH APPEAL S OF THE R EVENUE ARE DISMISSED. 10. AS WE HAVE DISMISSED THE QUANTUM APPEAL BY THE REVENUE FOR THE A.Y. 2009 - 10, THE ASSESSEE S CROSS OBJECTION WHICH IS FILED IN SUPPORT OF THE ORDER OF THE LD.CIT(A) NEED NOT BE SEPARATELY DISPOSED OF. HENCE ASSESSEE S CROSS OBJECTION 55/DEL/13 (IN ITA 645/DEL/13) IS DISMISSED AS SUCH. ITA NO. 645/DEL/13 A.Y. 2009 - 10 C.O. 55/DEL/13 (IN ITA 645/DEL/13) ITA 549/DEL/15 A.Y. 2010 - 11 APPAREL EXPORT PROMOTION COUNCIL, NEW DELHI 7 11 . I N THE RESULT BOTH THE APPEALS BY THE REVENUE AS WELL AS THE ASSESSEE S C.O. ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH MARCH , 2016 . SD/ - SD/ - ( H.S. SIDHU ) (J.SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 30 TH MARCH, 2016 *MANGA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5.DR; 6.GUARD FILE BY ORDER ASST. REGISTRAR