MARITIME TRAINING & RESEARCH FOUNDATION, MUMBAI V. ADIT (E) 1(1), MUMBAI

ITA 7247/MUM/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3590 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 23-07-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 06-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G N MAKWANA
• Keywords: Charitable institution; Question of law; Capital expenditure
• Section: 143(3); 142(1); 12A; 11

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI SHAILENDRA KUMAR YADAV , JM AND SHRI RAJESH KUMAR, AM ./ I.T.A. NO. 7247 /MUM/ 201 2 ( / ASSESSMENT YEAR : 2009 - 10 ) MARITIME TRAINING AND RESEARCH FOUNDATION, MACKINNON MACKENZIE BUILDING, 1 ST FL, SHOORJI VALLABHADAS MARG, BALLARD ESTATE , MUMBAI - 400038 / VS. ASSTT. DIRECTOR OF INCOME TAX (EXEMPTION) 1(1), 5TH FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI - 400012 . ./ PAN : AAA TM5180H / ASSESSEE BY S HRI PRAKASH JOTWANI / REVENUE BY SHRI G N MAKWANA / DATE OF HEARING : 9 .8 . 2016 / DATE OF PRONOUNCEMENT : 22 .8. 2016 / O R D E R PER RAJESH KUMAR, A. M: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER PASSED BY THE LD.CIT(A) - 1 , MUMBAI DATED 29.10.2012 FOR THE ASSESSMENT YEAR S 2009 - 10 . 2. THE SOLE ISS UE RAISED IN THE VARIOUS GROUNDS OF APPEAL TAKEN BY THE ASSESSEE IS AGAINST THE UPHOLDING THE DENIAL OF EXEMPTION U/S 11 OF THE INCOME TAX ACT, 1961 ( HEREINAFTER TO REFERRED TO AS THE ACT) AS DONE BY THE AO ON THE GROUND THAT THE ASSESSEE IS ENGAGED IN T HE BUSINESS OF 2 7247 / MUM/201 2 ACTIVITIES NOT COVERED WITHIN THE MEANING CHARITABLE AS DEFINED IN SECTION 2(15) OF THE ACT AND THAT THE ACTIVIT Y OF TRAINING OF CADETS WAS NOT QUALIFIED TO BE EDUCATION AND ALSO THAT THE ASSESSEE HA S BEEN MAKING PROFIT ON CONTINUOUS BASI S AND WITHOUT ANY CHARITABLE OBJECT AS PROVIDED UNDER SECTION 2(15) OF THE ACT. 3 . FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 25.9.2009 DECLARING TOTAL INCOME OF RS.26,94,806/ - ALONG WITH THE INCOME AND EXPENDITURE ACCOUN T, BALANCE SHEET AND AUDIT REPORT IN FORM NO.10B. THE ASSESSEE TRUST IS REGISTERED AS A CHARITABLE TRUST WITH DIT(E), MUMBAI U/S 12A VIDE REGISTRATION NO.TR 29320/1992 AND ALSO WITH CHARITY COMMISSIONER, MUMBAI VIDE REGISTRATION NO.E - 13963/ - . THE AS SESSEE TRUST IS ENGAGED IN CHARITABLE ACTIVITIES IN THE FIELD OF TRAINING OF ALL CATEGORIES OF NAUTICAL AND OTHER OFFICERS AND RATINGS CONDUCTING TRAINING FOR EMPLOYEES OF MARINE COMPANIES AND CLAIMED I T S INCOME TO BE EXEMPT UNDER SECTION 11 OF THE ACT. T HEREAFTER, SCRUTINY PROCEEDINGS WERE INITIATED AGAINST THE ASSESSEE AND STATUTORY NOTICES UNDER SECTION 143(2) AND 142(1) WERE ISSUED AND SERVED UPON THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE ACTIVITIES OF THE ASSE SSEE WERE BEYOND THE SCOPE OF DEDUCTION AS PROVIDED UNDER SECTION 2(15) O F THE ACT AND THEREFORE CAME TO THE CONCLUSION THAT THE ASSESSEE WAS NOT ENTITLED TO CLAIM DEDUCTION UNDER SECTION 11 OF THE ACT. THE AO SPECIFICALLY REPRODUCED 3 7247 / MUM/201 2 THE OBJECT S OF ASSESS EE - TRUST IN PARA 3.1.1 OF THE ASSESSMENT ORDER WHICH ARE REPRODUCED BELOW FOR READY REFERENCE : 5. OBJECTS A ) THE OBJECTS OF THE TRUST ARE AS UNDER: I ) TO ESTABLISH, MAINTAIN, CONDUCT CONTROL AND FINANCIALLY ASSIST TRAINING ESTABLISHMENTS, IN PARTICULAR ES TABLISHMENTS FOR THE RAINING OF ALL CATEGORIES OF NAUTICAL AND OTHER OFFICES AND RATINGS FOR T HE MERCHANT MARINE IN INDIAN AND TO PROMOTE AND PROVIDE FOR THE TECHNICAL AND NAUTICAL EDUCATION TO ALL PERSONS OF INDIA, NATIONALITY WITH REGARD TO ALL ASPECTS O F THE SHIPPING INDUSTRY B ) AND GENERALLY TO DO AL SUCH LAWFUL ACTS AND THINGS AS ARE INCIDENTAL OR CONDUCIVE TO THE ATTAINMENT OF T HE AFORESAID OBJECT 4 . ACCORDINGLY, THE AO ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE DATED 14.10.2011 WHICH WAS REPLIED ON 21. 12.2011 AND THE DETAILED REPLY OF THE ASSESSEE IS REPRODUCED IN PARA 3 .12 OF THE ASSESSMENT YEAR . AFTER PERUSING THE REPLY OF THE ASSESSEE, THE AO HELD THAT THE ASSESSEE WAS ENGAGED IN THE ACTIVITIES OF TRAINING AND NOT EDUCATION AS CONTEMPLATED WITHIN T HE MEANING OF SECTION 2(15) OF THE ACT AND THUS THE TRUST WAS DOING THE ACTIVITIES OF COMMERCIAL NATURE AND CLEARLY BUSINESS ACTIVITIES AND ACCORDINGLY, THE AO COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT VIDE ASSESSMENT ORDER DATED 24.12.2011 AT A N INCOME OF RS.2,62,94,895/ - . AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE HAS PREFERRED APPEAL 4 7247 / MUM/201 2 BEFORE THE LD. CIT(A) WHO ALSO DISMISSED THE APPEAL OF THE ASSESSEE BY UPHOLDING THE ASSESSMENT ORDER AS UNDER : 4. I FIND THAT THE APPELLANT IS CERTAINLY ENGAGED IN THE ACTIVITIES OF TRAINING THE CADETS, WHICH BY ITSELF CANNOT BE QUALIFIED AS THE 'EDUCATION'. THERE IS NO MERIT IN THE ARGUMENT OF THE APPELLANT THAT ISSUANCE OF CERTIFICATE AFTER SHORT TERM COURSE AND TRAINING FOR THE SAME IS 'EDUCATION'. RES PECTFULLY FOLLOWING THE ORDER OF JURISDICTIONAL TRIBUNAL IN THE CASE OF GURSHIP EDUCATION TRUST, MUMBAI VS. ITO ITA NO. 4788 / MUM / 2009 I HOLD THAT THE ACTIVITIES OF THE APPELLANT ARE IN THE NATURE OF BUSINESS ACTIVITIES REGULARLY CARRIED ON AND THEREFORE OU TSIDE THE PURVIEW OF SECTION 2(15) OF THE ACT. IT IS FURTHER SEEN THAT THE APPELLANT IS CARRYING OUT THESE ACTIVITIES WITH HUGE PROFIT, ON CONTINUOUS BASIS AND WITHOUT ANY CHARITABLE OBJECT AS CONTEMPLATED U / S 2(15). I THEREFORE DO NOT FIND MERIT IN THE CO NTENTION OF THE APPELLANT AND CONFIRM THE ACTION OF THE AO IN TREATING INCOME OF THE APPELLANT UNDER THE HEAD INCOME FROM BUSINESS. CONSEQUENTLY EVEN THE CAPITAL EXPENDITURE CLAIMED AS EXEMPT UNDER SECTION 11 BY THE APPELLANT AMOUNTING TO RS.22,38, 508/ - IS ALSO RIGHTLY ADDED BY THE AO. GROUNDS 1 TO 3 OF APPEAL ARE DISMISSED. 5 . THE LD.AR VEHEMENTLY SUBMITTED THAT THE CASE OF THE ASSESSEE IS FULLY COVERED BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN IT APPEAL NO.465 OF 2012 IN DIRECTOR OF IN COME TAX V/S SAMUDRA INSTITUTE OF MARITIME STUDIES TRUST, ORDER DATED 7.8.2014 WHEREIN AN IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE AND PRAYED THAT FOLLOWING THE RATIO LAID DOWN IN THE SAID DECISION THE ORDER OF THE LD.CIT(A) BE SET ASIDE AND AO BE DIRECTED TO ALLOW THE DEDUCTION AS CLAIMED BY THE ASSESSEE UNDER SECTION 11 OF THE ACT. 6 . ON THE CONTRARY, THE LD.DR REITERATED THE FACTS OF THE CASE AS SUBMITTED BEFORE THE LD.CIT(A) AND HEAVILY RELIED ON THE ORDER OF LD.CIT(A). 5 7247 / MUM/201 2 7 . WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE PARTIES, PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE ORDERS OF AUTHORITIES BELOW AND CASE LAWS RELIED UPON BY THE PARTIES. WE FIND THAT THE ASSESSEE WAS DENIED EXEMPTION UNDER SECTION 11 OF THE ACT ON THE GROUND THAT THE ASSESSEE WAS ENGAGED IN IMPARTING TRAINING TO CADETS AND NOT EDUCATION WITHIN THE MEANING OF SECTION 2(15) OF THE ACT AND MOTIVE OF THE ASSESSEE WAS EARNING PROFIT FROM THE SAID ACTIVITIES. WE FIND THAT THE SIMILAR ISSUE HAS BEEN C ONSIDERED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SAMUDRA INSTITUTE OF MARITIME STUDIES TRUST,(SUPRA)/ THE OPERATIVE PART OF THE SAID JUDGMENT IS REPRODUCED BELOW : 3 . WE HAVE PERUSED THE ORDERS PASSED BY THE AUTHORITIES INCLUDING THE TR IBUNAL. WE HAVE ALSO PERUSED THE TWO DECISIONS, ONE OF THE HON'BLE SUPREME COURT AND RELIED UPON BY BOTH THE COUNSEL AND EQUALLY A SHORT JUDGMENT OF THE DIVISION BENCH OF THIS COURT IN THE CASE OF DIT (EXEMPTIONS) V . NATIONAL SAFETY COUNCIL [2008] 305 ITR 257 (BOM) . WE ARE OF THE OPINION THAT THE TRIBUNAL HAS APPLIED THE CORRECT TEST IN CONCLUDING THAT THE EXEMPTION UNDER SECTION 11 CAN BE AVAILED OF BY THE RESPONDENT - ASSESSEE. IN DOING SO, THE TRIBUNAL REFERRED TO THE OBJECTS AS SET OUT IN THE TRUST DEED OF THE RESPONDENT - ASSESSEE. THEY ARE TO SET UP, ADMINISTER AND MAINTAIN TECHNICAL TRAINING INSTITUTION AT VARIOUS PLACES IN INDIA FOR PRE - SEA AND POST - SEA TRAINING F OR THE SHIPS AND MARITIME INDUSTRY AS A PUBLIC CHARITABLE INSTITUTE FOR EDUCATION. THAT IS TO PROVIDE ON - BOARD AND OFFSHORE TRAINING AND CONTINUING TECHNICAL EDUCATION FOR OFFICERS, BOTH ON THE DECK AND ENGINE SIDE. ONE OF THE OBJECT WAS TO REGISTER WITH T HE DIRECTOR GENERAL OF SHIPPING AND OBTAIN OTHER NECESSARY APPROVALS AT THE STATE AND CENTRAL LEVELS. WE DO NOT FIND THAT THE RATIO OF THE JUDGMENT OF THE HON'BLE SUPREME COURT OR OF THIS COURT , WHICH MAY BE DEALING WITH SECTION 10(22), HAS BEEN APPLIED TO SUCH AN EXTENT AS COMPLAINED BY MR MALHOTRA. IN THE PRESENT CASE, THE TRIBUNAL IN PARAGRAPH 9.6 OF THE IMPUGNED ORDER CONCLUDES THAT THE ASSESSEE IS GIVING TRAINING IN THE ABOVE AREA TO SEAMEN. ALL THE 6 7247 / MUM/201 2 COURSES MAY NOT BE APPROVED BY THE DIRECTOR GENERAL O F SHIPPING BUT THAT BY ITSELF IS NO GROUND TO HOLD THAT THE PURPOSE IS NOT CHARITABLE. THE EXEMPTION UNDER SECTION 11 CAN BE CLAIMED AND BEARING IN MIND THE OBJECT OF THE TRUST . WE ARE OF THE OPINION THAT THE TRIBUNAL AND THE CIT (APPEALS) HAVE APPROACHED THE ISSUE CORRECTLY AND IN THE LIGHT OF THE DEFINITION SO ALSO THE TESTS LAID DOWN CAME TO A FACTUAL CONCLUSION THAT THE RESPONDENT IS ENTITLED TO EXEMPTION UNDER SECTION 11 OF THE ACT. THIS IS NOT A CASE WHERE THE PURPOSE CAN BE SAID TO RUN A COACHING CLA SS OR A CENTRE. THIS IS AN INSTITUTION WHICH IMPARTS EDUCATION IN THE AREA OF PRE - SEA AND POST - SEA TRAINING TO SEAMEN SO AS TO PREPARE THEM FOR ALL DUTIES. IN SUCH CIRCUMSTANCES, WE DO NOT FIND THAT THE CONCURRENT FINDINGS OF FACT ARE VITIATED BY ERROR OF LAW APPARENT ON THE FACE OF THE RECORD OR PERVERSITY ENABLING US TO ENTERTAIN THIS APPEAL. THERE IS NO SUBSTANTIAL QUESTION OF LAW. THE APPEAL IS THEREFORE DISMISSED WITH NO ORDER AS TO COSTS. 8 . ON PERUSAL OF THE ABOVE JUDGEMENT IT IS REVEALED THAT THE ASSESSEE TRUST WAS SET UP TO ADMINISTER AND MAINTAIN TECHNICAL TRAINING INSTITUTION AT VARIOUS PLACES IN INDIA FOR PRE - SEA AND POST - SEA TRAINING FOR THE SHIPS AND MARITIME INDUSTRY AND WAS ENGAGED TO P ROVIDE ON - BOARD AND OFFSHORE TRAINING AND ALSO SEEMS TO BE EDUCATION AND ACCORDINGLY, HELD THAT THERE IS NO SUBS TANTIAL QUESTION OF LAW AND DISMISSED THE APPEAL OF THE REVENUE . WE FIND THAT THE CASE OF ASSESSEE IS SQUARELY COVERED BY THE RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF SAMUDRA INSTITUTE OF MARITIME STUDIES TRUST,(SUPRA). RESPECTFULLY FOLLOWING THE ABOVE MENTIONED JUDGMENT OF HONBLE HIGH COURT WE SET ASIDE THE ORDER OF THE LD.CIT(A) AND DIRECT THE AO TO ALLOW THE BENEFIT AN ENUMERATED UNDER SECTION 11 OF THE ACT BY DELE TING THE ADDITION. 7 7247 / MUM/201 2 9 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 . 0 8 . 2016. SD/ - SD/ - ( SHAILENDRA KUMAR YADAV ) (RAJESH KUMAR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 22 . 8 .2016 SR.PS:SRL: / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / / TRUE COPY / / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI 8 7247 / MUM/201 2 DATE INITIAL S 1. DRAFT DICTATED ON 9 .8.2016 SPS 2. DRAFT PLACED BEFORE AUTHOR 18 .8.2016 SPS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM 5. APPROVED DRAFT COMES TO THE SR. PS SPS 6. KEPT FOR PRONO UNCEMENT ON SPS 7. FILE SENT TO THE BENCH CLERK SPS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO A.R. 10. DATE OF DISPATCH OF ORDER