M/s. Kali Center for Legal Reform & Research Centre, New Delhi V. ITO, New Delhi

ITA 6501/DEL/2012

• Counselvise Citation: 650120114 RSA 2012
• Duration Of Justice: 2 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 29-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 31-12-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Charitable institution; Retrospective amendment
• Section: 143(3); 12A; 12; 154; 11

Judgement Text

INCOME TAX APPELLATE TRIBUNAL, DELHI D BENCH, NEW DELHI BEFORE : SHRI I. C. SUDHIR, JUDICIAL MEMBER A ND SHRI PRAMOD KUMAR, ACCOUNTA NT MEMBER ITA NO.6501/DEL./2012 ASSESSMENT YEAR : 2009-10 KALI CENTER FOR LEGAL REFORMS & VS. INCOME-TAX OFF ICER, RESEARCH CENTRE, 109, DELHI CHAMBER, TRUST WARD IV , NEW DELHI. DELHI GATE, DELHI 110 002. (PAN:AABTK 0406 D) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SANJAY JAIN, C.A. RESPONDENT BY : SHRI P. DAM KAUNAJMA, SR. DR DATE OF HEARING : 29.01.2015 DATE OF PRONOUNCEMENT : 27.03.2015 ORDER PER PRAMOD KUMAR, A.M.: 1. BY WAY OF THIS APPEAL, THE ASSESSEE HAS CHALLENG ED CORRECTNESS OF LEARNED CIT(A)S ORDER DATED 26 TH OCTOBER 2012 IN THE MATTER OF ASSESSMENT UNDER SEC TION 143(3) OF THE INCOME TAX ACT, 1961 FOR THE ASSESSME NT YEAR 2009-10. 2. THE GRIEVANCES RAISED BY THE ASSESSEE APPELLANT ARE AS FOLLOWS : 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. ASSESSING OFFICER HAS ERRED IN HOLDING THAT THE PROVISO TO SEC. 2(15) OF THE INCOME TAX ACT 1961 IS APPLICABLE TO THE ASSESSEE. 2. THAT THE LD. ASSESSING OFFICER HAS ERRED IN NOT ALLOWING EXEMPTION U/S. 11 AND 12 OF THE INCOME TAX ACT, 1961 EVEN THOUGH THE ASSESSEE IS A REGISTERED CHARITABLE TRUST U/S. 12A OF THE INCOME TAX ACT, 19 61. 2 ITA NO. 6501/DEL./2012 3. THAT THE LD. ASSESSING OFFICER HAS ERRED IN NOT ALLOWING THE BENEFIT OF ACCUMULATION OF INCOME U/S. 11(1)(A) OF THE INCOME TAX ACT, 1961. 4. THAT THE ACTIVITIES OF THE ASSESSEE BEING IN TH E NATURE OF EDUCATION, MEDICAL RELIEF AND RELIEF TO THE POOR ARE NOT COVER ED BY THE PROVISO TO SEC 2(15) OF I.T. ACT AND THUS THE ASSESSMENT AT A INCOME OF RS.8,56,660.00 (AS REDUCED VIDE ORDER U/S. 154 DATED 12.03.2012) MADE TO THE I NCOME OF THE ASSESSEE IS BAD AND OPPOSED TO FACTS AND LAW. 5. THAT THE ASSESSMENT AT AN INCOME OF RS.8,56,660 .00 (AS REDUCED VIDE ORDER U/S. 154 DATED 12.03.2012) THE INCOME OF THE ASSESSEE IS BAD. 3. THE SHORT ISSUE THAT WE ARE REQUIRED TO ADJUDICA TE IN THIS APPEAL, AS LEARNED REPRESENTATIVES AGREE, IS WHETHER INCOME EARNED BY THE ASSESSEE FROM RENDERING LEGAL CONSULTANCY IS TO BE TREATED AS EXEMPT UNDER SECTIO N 11 OR 12 OF THE ACT. 4. TO ADJUDICATE ON THIS ISSUE ONLY A FEW MATERIAL FACTS ARE REQUIRED TO BE TAKEN NOTE OF. THE ASSESSEE TRUST WAS CREATED TO ASSIST, AND PROVIDE DONATIONS AND CHARITY TO, VARIOUS KIND OF CHARITABLE ACTIVITIES. THERE IS NO DISPUTE THAT THE ASSESSEE HAS MADE CONTRIBUTIONS TO THESE NOBLE CAUSES. DURING THE COU RSE OF SCRUTINY ASSESSMENT PROCEEDINGS, HOWEVER, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE IS IN RECEIPT OF INCOME FROM LEGAL AND CONSULTANCY SERVICES PROVIDED TO DIFFERENT ENTITIES AND CLAIMED EXEMPTION IN RESPECT OF THE SAME. THE ASSESSING OFF ICER ALSO NOTED THAT THE ASSESSEE HAS RECEIVED SUCH LEGAL AND CONSULTANCY FEES AGGREG ATING TO RS.1,05,84,089, WHICH IS TERMED AS PROFESSIONAL FEES IN THE INCOME AND EXP ENDITURE ACCOUNT, AND IS ENGAGED IN A COMMERCIAL ACTIVITY. IT WAS ALSO NOTED THAT TH E ASSESSEE IS NOT ENGAGED IN ANY EDUCATIONAL ACTIVITY OR THE ACTIVITY OF PROVIDING M EDICAL RELIEF. IT WAS IN THIS BACKDROP 3 ITA NO. 6501/DEL./2012 THAT THE EXEMPTION UNDER SECTION 11/12 WAS DECLINED TO THE ASSESSEE, AND THE EXCESS OF INCOME OVER EXPENDITURE WAS BROUGHT TO TAX. AGGR IEVED BY THE STAND SO TAKEN BY THE ASSESSING OFFICER, ASSESSEE CARRIED THE MATTER IN APPEAL BUT WITHOUT ANY SUCCESS. WHILE DISMISSING THE GRIEVANCES OF THE ASSESSEE, LE ARNED CIT(A), INTER ALIA, OBSERVED AS FOLLOWS : IN THE INSTANT CASE ACTIVITY AS CLAIMED BY APPELLA NT IN THE NATURE OF RELIEF TO THE POOR, EDUCATION AND MEDICAL RELIEF HAS BEEN FOU ND TO BE TOTALLY MISLEADING THE FACTS, BECAUSE AO HAS CLEARLY DEMONSTRATED THAT APPELLANT IS NOT RUNNING ANY EDUCATIONAL INSTITUTION NOR IMPARTING ANY EDUCA TION, RATHER THE APPELLANT IS PROVIDING LEGAL AND TECHNICAL SERVICES TO DIFFERENT CORPORATE ENTITIES AND CHARGING FEE FROM THEM. SO, ACTIVITIES OF THE APPEL LANT ARE NOT IN THE NATURE OF EDUCATION. LIKE-WISE PROVIDING MEDICINES AND PAYING FEE FOR EYE OPERATION CANNOT BE TERMED AS ACTIVITIES IN THE NATURE OF MED ICAL RELIEF. IT IS ONLY A DONATION. SO, APPELLANTS CONTENTION THAT ITS ACTIV ITIES ARE UNDER FIRST THREE LIMBS OF SECTION 2(15) WHICH IS OBJECT OF GENERAL PUBLIC UTILITY AND HAS BEEN FOUND TO BE IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, AS APPELLANT IS PROVIDING LEGAL AND TECHNICAL SERVICES AND CHARGING FEE FROM THEM. IN VIEW OF THE ABOVE DISCUSSION AND AFTER PUTTING RELIANCE ON THE CBDT C IRCULAR, AS DISCUSSED ABOVE, ALL THE GROUNDS NO. 1 TO 7 ARE DISMISSED. IN THIS R EGARD IT IS ALSO HELD THAT Y AMENDMENT BROUGHT IN THE STATUTE BY FINANCE ACT, 20 12 WITH RETROSPECTIVE EFFECT, SECTION 13(8) HAS BEEN INSERTED WHICH IS EF FECTIVE FROM ASSESSMENT YEAR 2009-10 AS PER WHICH IF APPELLANT HAS BEEN FOUND TO BE HIT BY PROVISIONS OF FIRST PROVISO TO SECTION 2(15) THEN EXEMPTION U/S. 11 AND 12 OF THE ACT WILL NOT BE AVAILABLE. ACCORDINGLY ACTION OF THE AO DENYING EXE MPTION U/S. 11/12 OF THE IT ACT IS TOTALLY JUSTIFIED. ALL THE GROUNDS NO. 1 TO 7 OF APPEAL ARE DISMISSED. 5. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. 7. THE MAIN THRUST OF LEARNED COUNSELS SUBMISSIONS IS THAT THE ASSESSEE IS 4 ITA NO. 6501/DEL./2012 CARRYING OUT AN EDUCATIONAL ACTIVITY INASMUCH AS IN THE PROCESS OF GIVING THE LEGAL ADVICE TO, AND CARRYING OUT LEGAL WORK FOR, THE CLI ENTS, THE JUNIOR PROFESSIONALS ARE GETTING VERY USEFUL LEGAL EDUCATION AND HANDS ON EX PERIENCE. HOWEVER, IN MAKING THESE SUBMISSIONS, LEANED COUNSEL IS APPARENTLY UNM INDFUL OF THE OBSERVATIONS MADE BY HONBLE SUPREME COURT IN THE CASE OF SOLE TRUSTE E LOK SHIKSHAN TRUST VS. CIT (101 ITR 234), WHEREIN THEIR LORDSHIPS HAVE, INTER ALIA, OBSERVED AS FOLLOWS : THE SENSE IN WHICH THE WORD 'EDUCATION' HAS BEEN U SED IN SECTION 2(15) IS THE SYSTEMATIC INSTRUCTION, SCHOOLING OR TRAININ G GIVEN TO THE YOUNG IN PREPARATION FOR THE WORK OF LIFE. IT ALSO CONNOTES THE WHOLE COURSE OF SCHOLASTIC INSTRUCTION WHICH A PERSON HAS RECEIVED. THE WORD ' EDUCATION' HAS NOT BEEN USED IN THAT WIDE AND EXTENDED SENSE, ACCORDING TO WHICH EVERY ACQUISITION OF FURTHER KNOWLEDGE CONSTITUTES EDUCATION. ACCORDING TO THIS WIDE AND EXTENDED SENSE, TRAVELLING IS EDUCATION, BECAUSE AS A RESULT OF TRAVELLING YOU ACQUIRE FRESH KNOWLEDGE. LIKEWISE, IF YOU READ NEWSPAPERS AND MAG AZINES, SEE PICTURES, VISIT ART GALLERIES, MUSEUMS AND ZOOS, YOU THEREBY ADD TO YOUR KNOWLEDGE. AGAIN, WHEN YOU GROW UP AND HAVE DEALINGS WITH OTHER PEOPL E, SOME OF WHOM ARE NOT STRAIGHT, YOU LEARN BY EXPERIENCE AND THUS ADD TO Y OUR KNOWLEDGE OF THE WAYS OF THE WORLD. IF YOU ARE NOT CAREFUL, YOUR WALLET IS L IABLE TO BE STOLEN OR YOU ARE LIABLE TO BE CHEATED BY SOME UNSCRUPULOUS PERSON. T HE THIEF WHO REMOVES YOUR WALLET AND THE SWINDLER WHO CHEATS YOU TEACH YOU A LESSON AND IN THE PROCESS MAKE YOU WISER THOUGH POORER. IF YOU VISIT A NIGHT CLUB, YOU GET ACQUAINTED WITH AND ADD TO YOUR KNOWLEDGE ABOUT SOME OF THE NOT MUC H REVEALED REALITIES AND MYSTERIES OF LIFE. ALL THIS IN A WAY IS EDUCATION I N THE GREAT SCHOOL OF LIFE. BUT THAT IS NOT THE SENSE IN WHICH THE WORD 'EDUCATION' IS USED IN CLAUSE (15) OF SECTION 2. WHAT EDUCATION CONNOTES IN THAT CLAUSE I S THE PROCESS OF TRAINING AND DEVELOPING THE KNOWLEDGE, SKILL, MIND AND CHARACTER OF STUDENTS BY NORMAL SCHOOLING. 8. IN VIEW OF THE VIEWS SO EXPRESSED BY HONBLE SUP REME COURT, ON THE JOB TRAINING TO YOUNG PROFESSIONALS, EVEN IF THAT BE SO , IS NOT COVERED BY EDUCATION IN THE SENSE IN WHICH INCOME TAX LAW RECOGNIZES IT. IN ANY EVENT, THE ACTIVITY WHICH IS CARRIED OUT BY THE ASSESSEE IS A PURELY COMMERCIAL ACTIVITY, HOWSOEVER ALTRUISTIC BE THE MOTIVE, AND IT CANNOT BE TREATED AS AN EDUCATIO NAL OR CHARITABLE ACTIVITY. 5 ITA NO. 6501/DEL./2012 9. WE HAVE ALSO NOTED THAT THE CARRYING OUT OF THE AFORESAID BUSINESS ACTIVITY IS NOT INCIDENTAL TO ACHIEVEMENT OF THE MAIN OBJECTIVE S OF THE TRUST AND, THEREFORE, PROFITS AND GAINS OF THIS BUSINESS ACTIVITY CANNOT BE COVERED BY THE SCOPE OF SECTION 11(4A) EITHER. JUST BECAUSE THE PROFITS GENERATED B Y A BUSINESS ACTIVITY ARE USED ALSO FOR CHARITABLE ACTIVITIES DOES NOT, BY ITSELF, ENTI TLE THE BUSINESS PROFITS TO BE EXEMPTED FROM TAX UNDER SECTION 11(4A). 10. IN VIEW OF THE ABOVE DISCUSSIONS, AS ALSO BEARI NG IN MIND ENTIRETY OF THE CASE, WE APPROVE CONCLUSIONS ARRIVED AT BY THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. 11. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH MARCH, 2015. SD/- SD/- (I.C. SUDHIR) (PRAMOD K UMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 27 TH MARCH, 2015 COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED 4. CIT, CONCERNED 5. DR ITAT, DELHI BENCHES 6. GUARD FILE //TRUE COPY// BY O RDER, DY./ASSTT. REGISTRAR ITAT, DELHI BENCHES, NEW DELHI