ITO (E), New Delhi V. Consumer Electronics & Appliances Manufactures Association, Noida

ITA 6588/DEL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4333 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 11-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ATIQ AHMAD SENIOR
• Assessee Lawyers: ASHISH CHADHA S
• Keywords: Charitable institution; Benefit of exemption
• Section: 12A; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F : NEW DELHI) BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.6588/DEL./2015 (ASSESSMENT YEAR : 2011-12) ITO (E), WARD 1 (3), VS. M/S. CONSUMER ELECTRONICS & NEW DELHI. APPLIANCES MANUFACTURERS ASSOCIATIO N, WAVE 1, F 4/23, 4 TH FLOOR, PLOT NO.D 6, SECTOR 18, NOIDA 201 301. (PAN : AAATC0558R) (APPELLANT) (RESPONDENT) ASSESSEE BY : SMT. RANO JAIN & SHRI ASHISH CHADHA, ADVOCATES REVENUE BY : SHRI ATIQ AHMAD, SENIOR DR DATE OF HEARING : 21.09.2017 DATE OF ORDER : 03.10.2017 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, INCOME-TAX OFFICER (E), WARD 1 (3), NEW DELHI (HEREINAFTER REFERRED TO AS THE REVENUE), B Y FILING THE PRESENT APPEAL, SOUGHT TO SET ASIDE THE IMPUGNED OR DER DATED 14.09.2015 PASSED BY THE COMMISSIONER OF INCOME-TAX -40, NEW DELHI QUA THE ASSESSMENT YEAR 2011-12 ON THE GROUND S INTER ALIA THAT :- ITA NO.6588/DEL./2015 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. C!T(A) HAS ERRED IN ALLOWING THE BENEFITS OF SECTION 11 & 12 OF THE INCOME TAX ACT IGNORING THE FACT THAT THE ASSESSEE ACTIVITIES INVOLVE RENDERING OF SERVICES I N RELATION TO CARRYING ON OF A COMMERCE OR BUSINESS AND HENCE, PROVISO TO SECTION 2(15) OF THE I.T. ACT, IS CLEARLY APPLICABLE IN CASE OF THE ASSESSEE. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICATION OF THE CONTROVERSY AT HAND ARE : THE ASSESSEE IS A SOCIETY REGISTERED UNDER SOCIETIES REGISTRATION ACT, 1860 AND HAS BEEN ACCOR DED REGISTRATION UNDER SECTION 12A(A) OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) VIDE ORDER DATED 15.01.1996. ASSE SSEE COMPANY WAS CONSTITUTED ON 17.08.1992 WITH MAIN OBJECT TO P ROMOTE THE DEVELOPMENT OF THE CONSUMER ELECTRONICS & APPLIANCE S INDUSTRY LIKE TELEVISION, VIDEO, AUDIO, GAMES, TOYS, ELECTRO NIC CLOCKS AND WATCHES, MICROWAVE OVENS ETC. AND COMPONENTS US ED IN THESE PRODUCTS, THROUGH THE DEVELOPMENT OF A HEALTHY AND PROGRESSIVE ACTIVITY IN RESEARCH AND DEVELOPMENT, MANUFACTURE, TRADE, COMMERCE, SALE AND USE OF THESE ITEMS; TO PROMOTE A FEELING OF FRATERNITY AND UNANIMITY AMONG ITS MEMBERS ON ALL S UBJECTS CONNECTED WITH THEIR COMMON GOOD; AND TO PROMOTE FA IR COMPLETION AND HEALTHY PRACTICES AMONG MANUFACTURER S, DEALERS AND USERS OF CONSUMER ELECTRONIC ITEMS. ITA NO.6588/DEL./2015 3 3. DURING THE ASSESSMENT PROCEEDINGS, AO NOTICED TH AT THE ASSESSEE IS NEITHER IN THE FIELD OF EDUCATION NOR I N THE FIELD OF MEDICAL RELIEF OR RELIEF FOR POOR AND INVOKED THE P ROVISIONS CONTAINED UNDER PROVISIONS OF SECTION 2(15) OF THE ACT. BEING DIS- SATISFIED WITH THE SUBMISSIONS MADE BY THE ASSESSEE , AO CAME TO THE CONCLUSION THAT THE ACTIVITIES CARRIED OUT BY T HE ASSESSEE SOCIETY IS IN THE NATURE OF TRADE, COMMERCE OR BUSINESS AND THUS FAILED TO FULFILL THE REQUIREMENTS OF SECTIONS 11, 12A (B) AN D 13 OF THE ACT. 4. ASSESSEE CARRIED THE MATTER BY WAY OF FILING APP EAL BEFORE THE LD. CIT (A) WHO HAS ALLOWED THE APPEAL BY ALLO WING THE BENEFIT OF EXEMPTION U/S 11 (1) OF THE ACT TO THE A SSESSEE SOCIETY AS A CHARITABLE INSTITUTION WITH CONSEQUENTIAL BENEFIT S. FEELING AGGRIEVED, THE REVENUE HAS COME UP BEFORE THE TRIBU NAL BY WAY OF CHALLENGING THE IMPUGNED ORDER PASSED BY LD. CIT (A ) . 5. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. BEFORE PROCEEDING FURTHER, WE WOULD LIKE TO EXTR ACT THE PROVISIONS CONTAINED U/S 2(15) OF THE ACT, PROVISO, FOR READY REFERENCE :- ITA NO.6588/DEL./2015 4 2. IN THIS ACT, UNLESS THE CONTEXT OTHERWISE REQUI RES, .. (15) 'CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR, EDUCATION, [YOGA,] MEDICAL RELIEF, [PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILD LIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTORIC INTEREST,] AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY: [PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PU RPOSE, IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NAT URE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF REN DERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR B USINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRES PECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY, UNLESS (I) SUCH ACTIVITY IS UNDERTAKEN IN THE COURSE OF AC TUAL CARRYING OUT OF SUCH ADVANCEMENT OF ANY OTHER OBJEC T OF GENERAL PUBLIC UTILITY; AND (II) THE AGGREGATE RECEIPTS FROM SUCH ACTIVITY OR ACTIVITIES DURING THE PREVIOUS YEAR, DO NOT EXCEED TWENTY PER CENT OF THE TOTAL RECEIPTS, OF THE TRUST OR INSTITUTION UND ERTAKING SUCH ACTIVITY OR ACTIVITIES, OF THAT PREVIOUS YEAR;]] 7. UNDISPUTEDLY, THE ASSESSEE SOCIETY IS REGISTERED U/S 12A(A) OF THE ACT. PERUSAL OF THE MEMORANDUM OF ASSOCIATION OF CONSUMER ELECTRONICS AND APPLIANCES MANUFACTURERS ASSOCIATIO N, THE ASSESSEE SOCIETY, APPARENTLY SHOWS THAT THE SAME WA S SET UP AS A CHARITABLE INSTITUTION TO WORK FOR DEVELOPMENT OF C ONSUMER ELECTRONICS AND APPLIANCES INDUSTRIES LIKE TELEVISI ON, VIDEO, AUDIO ETC. AND THE ACTIVITY IN RESEARCH AND DEVELOPMENT, MANUFACTURES, TRADE, COMMERCE, SALE, ETC. AND TO PROMOTE A FEELIN G OF FRATERNITY ITA NO.6588/DEL./2015 5 AND UNANIMITY AMONG ITS MEMBERS OF ALL SUBJECTS CON NECTED WITH THEIR COMMON GOOD. 8. NOW, IN THE BACKDROP OF THE OBJECTS OF THE ASSES SEE SOCIETY ENSHRINED IN MEMORANDUM OF ASSOCIATION, WHICH HAVE UNDISPUTEDLY NOT BEEN CHANGED, THE SOLE QUESTION AR ISES FOR DETERMINATION IN THIS CASE IS :- AS TO WHETHER BY VIRTUE OF ITS ACTIVITIES THE ASSE SSEE SOCIETY FALLS WITHIN THE MISCHIEF OF PROVISIONS OF SECTION 2(15) OF THE ACT. 9. AO PROCEEDED TO INVOKE PROVISO TO SECTION 2(15) OF THE ACT ON THE SOLE GROUND THAT SINCE THE ASSESSEE HAS RECE IVED PAYMENTS ON ACCOUNT OF SUBSCRIPTION RECEIVED, ADMISSION FEE REC EIVED, MEETING & CONFERENCE CONTRIBUTION, INTEREST, MISC. INCOME, CEAMA NEWS RECEIPTS, CONTRIBUTION FOR MARKET STUDY AND CONTRIB UTION FOR ANTI DUMPING CASE FROM DIFFERENT PARTIES, THESE ACTIVITI ES ARE IN THE NATURE OF TRADE, COMMERCE AND RENDERING SERVICES IN RELATION TO THE TRADE, COMMERCE AND BUSINESS. THE AO HAS ALSO NOT BROUGHT ON RECORD ANY MATERIAL IF THE ASSESSEE SOCIETY IS CARR YING OUT ACTIVITIES WHICH ARE NOT ENSHRINED IN THE MEMORANDUM OF ASSOCI ATION, A PRIMARY DOCUMENT, TO CONTROL THE ACTIVITIES OF THE ASSESSEE SOCIETY. 10. HONBLE DELHI HIGH COURT IN CASE OF INDIA TRADE PROMOTION ORGANIZATION VS. DIRECTOR GENERAL OF INCOME-TAX (EX EMPTIONS) ITA NO.6588/DEL./2015 6 (2015) 371 ITR 333 (DEL.) WHILE DECIDING THE IDENTICAL ISSUE HELD AS UNDER :- SECTION 2(15), READ WITH SECTION 10(23C) OF THE IN COME-TAX ACT, 1961 - CHARITABLE PURPOSE OBJECT OF GENERAL PUBLI C UTILITY (PROVISO) - WHETHER IN DECIDING WHETHER ANY ACTIVIT Y IS IN NATURE OF TRADE, COMMERCE OR BUSINESS OR IS ONE FOR RENDER ING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSIN ESS IT HAS TO BE EXAMINED WHETHER THERE IS AN ELEMENT OF PROFIT MAKI NG OR NOT - HELD, YES - WHETHER EXPRESSION 'CHARITABLE PURPOSE' , AS DEFINED IN SECTION 2 (15) CANNOT BE CONSTRUED LITERALLY AND IN ABSOLUTE TERMS AND IT HAS TO TAKE COLOUR AND BE CONSIDERED IN CONT EXT OF SECTION 10(23C)(IV) - HELD, YES - WHETHER CORRECT INTERPRET ATION OF PROVISO TO SECTION 2(15) WOULD BE THAT IT CARVES OU T AN EXCEPTION FROM CHARITABLE PURPOSE OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AND THAT EXCEPTION IS LIMITE D TO ACTIVITIES IN NATURE OF TRADE, COMMERCE OR BUSINESS OR ANY ACTIVI TY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COM MERCE OR BUSINESS FOR A CESS OR FEE OR ANY OTHER CONSIDERATI ON - HELD, YES - WHETHER THUS IF DOMINANT AND PRIME OBJECTIVE OF INS TITUTION, WHICH CLAIMS TO HAVE BEEN ESTABLISHED FOR CHARITABL E PURPOSES, IS PROFIT MAKING, WHETHER ITS ACTIVITIES ARE DIRECTLY IN NATURE OF TRADE, COMMERCE OR BUSINESS OR INDIRECTLY IN RENDER ING OF ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSIN ESS, THEN IT WOULD NOT BE ENTITLED TO CLAIM ITS OBJECT TO BE A ' CHARITABLE PURPOSE' - HELD, YES - WHETHER WHERE DRIVING FORCE IS NOT DESIRE TO EARN PROFITS, BUT OBJECT OF PROMOTING TRADE AND COMMERCE NOT FOR ITSELF, BUT FOR NATION, IT IS CLEARLY A CHARITA BLE PURPOSE - HELD, YES - WHETHER CONSTITUTIONAL VALIDITY OF PROVISO TO SECTION 2(15) INTRODUCED BY FINANCE ACT 2008 IS TO BE UPHELD, HOW EVER, IT IS TO BE READ DOWN IN MANNER AS INDICATED ABOVE HELD, Y ES WHETHER OBJECTS OF INDIA TRADE PROMOTION ORGANIZATI ON NAMELY ARE CHARITABLE IN NATURE - HELD, YES [PARAS 43,46,4 7,58 & 59] [IN FAVOUR OF ASSESSEE] 11. WHEN WE EXAMINE THE DOMINANT AND PRIMARY OBJECT OF THE ASSESSEE SOCIETY IN THE LIGHT OF THE DECISION RENDE RED BY HONBLE DELHI HIGH COURT IN CASE CITED AS INDIA TRADE PROMOTION ORGANIZATION (SUPRA), THE ACTIVITIES OF THE ASSESSEE SOCIETY ARE NOT ITA NO.6588/DEL./2015 7 IN THE NATURE OF TRADE, COMMERCE OR BUSINESS NOR RE NDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSIN ESS. 12. WHEN WE FURTHER EXAMINE NATURE OF ACTIVITIES BE ING CARRIED OUT BY THE ASSESSEE SOCIETY DULY EXTRACTED BY LD. A O IN ASSESSMENT ORDER, THE SAME ARE NOT IN THE NATURE OF TRADE AND COMMERCE BY ANY STRETCH OF IMAGINATION. FOR READY REFERENCE, NATUR E OF ACTIVITIES CARRIED OUT BY THE ASSESSEE SOCIETY ARE REPRODUCED AS UNDER :- SL.NO. HEADS AMOUNT (IN RS.) 1 SUBSCRIPTION RECEIVED 34,49,307 2 ADMISSION FEE RECEIVED 15,000 3 MEETING & CONFERENCE CONTRIBUTION 28,56,479 4 CEAMA NEWS RECEIPTS 16,44,36 2 5 INTEREST 7,56,480 6 CONTRIBUTION FOR MARKET STUDY 4,00,000 7 CONTRIBUTION FOR ANTI DUMPING CASE 5,00,000 8 MISC. INCOME 60,470 13. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE AR E OF THE CONSIDERED VIEW THAT THERE IS NO ILLEGALITY OR PERV ERSITY IN THE IMPUGNED ORDER PASSED BY THE LD. CIT (A), HENCE PRE SENT APPEAL FILED BY THE REVENUE IS HEREBY DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 3 RD DAY OF OCTOBER, 2017. SD/- SD/- (N.K. SAINI) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 3 RD DAY OF OCTOBER, 2017 TS ITA NO.6588/DEL./2015 8 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT (A)-40, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.