Artificial Limbs Manufacturing Corporation of India, Kanpur V. DCIT (E), Ghaziabad

ITA 7874/DEL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0825 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 29-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Earning of tax free income
• Section: 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A : NEW DELHI) BEFORE HONBLE PRESIDENT, SHRI G.D. AGRAWAL AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.7874/DEL./2017 (ASSESSMENT YEAR : 2013-14) ITA NO.7875/DEL./2017 (ASSESSMENT YEAR : 2014-15) ARTIFICIAL LIMBS MANUFACTURING CORPORATION VS. JCIT (EXEMPTION) OF INDIA, GHAZIABAD. VILLAGE NARAMAU, G.T. ROAD, KANPUR 208 016. (PAN : AABCA8899F) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SANJAY KUMAR, CA SHRI AKASH GARG, ADVOCATE REVENUE BY : NONE DATE OF HEARING : 06.09.2018 DATE OF ORDER : 14.09.2018 O R D E R PER BENCH : SINCE COMMON QUESTIONS OF FACTS AND LAW HAVE BEEN R AISED IN BOTH THE AFORESAID APPEALS, THE SAME ARE BEING D ISPOSED OFF BY WAY OF CONSOLIDATED ORDER TO AVOID REPETITION OF DI SCUSSION. 2. THE APPELLANT, ARTIFICIAL LIMBS MANUFACTURING CO RPORATION OF INDIA (HEREINAFTER REFERRED TO AS THE ASSESSEE ) BY FILING THE ITA NOS.7874/DEL./2017 ITA NOS.7875/DEL./2017 2 PRESENT APPEALS, SOUGHT TO SET ASIDE THE IMPUGNED O RDER DATED 11.10.2017 PASSED BY LD. CIT (APPEALS)-II, KANPUR QUA THE ASSESSMENT YEARS 2013-14 & 2014-15 ON THE GROUNDS I NTER ALIA THAT:- 1. BECAUSE THE 'CIT(A)' HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT A) ACTIVITIES CARRIED ON BY THE APPELLANT INVOLVED 'CARRYING ON OF ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR ANY OTHER ACTIVITIES RENDERING SERVICE IN RELATION TO ANY TRADE, COMMERC E OR BUSINESS FOR A CESS OR FEE OR ANY OTHER CONSIDERATION' AS HIT BY PROVISO TO SUB-SECTION (15 ) OF SECTION (2) OF THE ACT; AND B) IN-CONCURRING WITH THE FINDING/ DECISION GIVEN B Y THE LD. FIRST APPELLATE AUTHORITY VIDE APPELLATE ORDERS DATED 08.12.2015 AND 30.06.2016 PASSED FOR THE ASSESSMENT YEAR 2011-12 AND 2012-13 (PRECEDING YEARS) RESPECTIVELY. SO AS TO UPHOLD DENIAL OF APPELLANT'S CLAIM FOR EXE MPTION UNDER SECTION 11 READ WITH SECTION 12 OF THE ACT. 2. BECAUSE ON A DUE APPRECIATION AND CONSIDERATION OF VERY COMPREHENSIVE SUBMISSION MADE DURING THE YE AR UNDER APPEAL HERE, IT DESERVES TO BE HELD THAT IN P URSUANCE OF ITS OBJECT CLAUSES, THE ACTIVITIES CARRIED ON BY THE APPELLANT AIMED AT; A) PROVIDING 'RELIEF TO THE POOR'; B) PROVIDING 'MEDICAL RELIEF' BY REHABILITATING THE PATIENTS TO LEAD A NORMAL LIFE AT WORK AND LEISURE; AND C) SETTING UP CENTRES EQUIPPED WITH TRAINING FACILI TIES AND TECHNICAL KNOW-HOW FOR FABRICATION OF 'DEVICE' AND 'FITMENT', FALLING IN THE REALM OF' EDUCATION' AND ACCORDINGLY THE PROVISO TO SECTION 2(15) WAS NO T ATTRACTED IN ITS CASE AND VIEW TO THE CONTRARY IS W HOLLY ITA NOS.7874/DEL./2017 ITA NOS.7875/DEL./2017 3 ERRONEOUS BEING INCONSISTENT WITH THE FACTS OF THE CASE AND LAW APPLICABLE THERETO. 3. BECAUSE APPLICABILITY OF PROVISO TO SECTION 2(1 5) OF THE ACT STOOD SPECIFICALLY EXCLUDED IN THE INSTANT CASE BY VIRTUE OF CIRCULAR NO.11 OF 2008 DATED 19.12.2008 I SSUED BY CBDT WHICH WAS BINDING ON THE AUTHORITIES BELOW SIT UATED UNDER THE OVERALL CONTROL OF THE SAID APEX BODY IN THE DIRECT TAXES ADMINISTRATION. 4. BECAUSE THE SURPLUS ARISING OUT OF ACTIVITIES CARRIED ON BY THE APPELLANT WAS LIABLE TO BE PLOUGH ED BACK FOR THE OBJECTIVES OF (I) PROVIDING RELIEF TO THE P OOR, (II) MEDICAL RELIEF AND (III) EDUCATION AND ACCORDINGLY THE PROVISO TO SECTION 2(15) IS OUSTED FROM ITS APPLICA BILITY IN THE INSTANT CASE. 5. BECAUSE IN ANY CASE IT IS PLEADED THAT LOOKING TO THE UNDISPUTED FACTS THAT A) THE APPELLANT IS A COMPANY WHOLLY OWNED BY THE CENTRAL GOVERNMENT, THROUGH PRESIDENT OF INDIA; B) IT HAD BEEN APPROVED BY GOVERNMENT OF INDIA UNDE R SECTION 25 OF THE COMPANIES ACT 1956;AND C) BY VIRTUE OF PROHIBITION ON DISTRIBUTION OF' DIV IDEND' AS IS CONTAINED IN THE APPROVAL ITSELF IT COULD NOT BE SAID OR HELD THAT ACTIVITIES CARRIE D ON BY IT (THE APPELLANT) WERE MOTIVATED BY 'CONSIDERATION' ( AS ENVISAGED IN THE PROVISO TO SECTION 2(15) OF THE AC T, AND ACCORDING THE DISQUALIFICATION CONTAINED THEREIN SE CTION 2(15) WAS NOT APPLICABLE IN THE INSTANT CASE. 6. BECAUSE THE PLEADING AS AFORESAID STOOD FULLY SUPPORTED BY LARGE NUMBER OF JUDICIAL PRONOUNCEMENT S, SOME OF WHICH HAD BEEN REFERRED TO ALSO IN THE SUBM ISSIONS MADE DURING THE COURSE OF APPELLATE PROCEEDINGS AND ON A CORRECT AND DUE APPRECIATION OF THE SAME, THE APPEL LANT DESERVED TO BE HELD TO BE ELIGIBLE FOR EXEMPTION UN DER SECTION 11 OF THE ACT, BY VIRTUE OF ITS BEING ALREA DY REGISTERED UNDER SECTION 12AA OF THE ACT. 7. BECAUSE THE ORDER APPEALED AGAINST IS CONTRARY TO THE FACTS, LAW AND PRINCIPLE OF NATURAL JUSTICE. ITA NOS.7874/DEL./2017 ITA NOS.7875/DEL./2017 4 3. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICA TION OF THE CONTROVERSY AT HAND ARE : ASSESSEE CORPORATION IS A GOVERNMENT OF UNDERTAKING ENGAGED IN THE BUSINESS OF MANUFACTURIN G OF ARTIFICIAL LIMBS, COMPONENTS AND REHABILITATION AIDS AND RELAT ED SERVICES. ASSESSEE CLAIMED EXEMPT INCOME UNDER SECTION 11 OF THE INCOME- TAX ACT, 1961 (FOR SHORT THE ACT) ON THE BASIS OF REGISTRATION GRANTED U/S 12AA OF THE ACT. HOWEVER, AO DENIED TH E BENEFIT OF SECTION 11 OF THE ACT TO THE ASSESSEE ON THE GROUND THAT SINCE MANUFACTURE AND SALE OF ARTIFICIAL LIMBS ETC. IS TH E MAIN BUSINESS OF THE ASSESSEE, IT IS NOT INCIDENTAL TO THE AIMS AND OBJECTS OF THE ASSESSEE CORPORATION AND AS SUCH, THE INCOME DERIVE D FROM MANUFACTURE AND SALE OF ARTIFICIAL LIMBS IS NOT ELI GIBLE FOR EXEMPTION U/S 11 OF THE ACT AND THEREBY ASSESSED TH E TOTAL INCOME OF THE ASSESSEE CORPORATION AT RS.18,30,93,780/- AN D RS.35,12,41,340/- FOR AYS 2013-14 & 2014-15 RESPECT IVELY. 4. ASSESSEE CARRIED THE MATTER BY WAY OF APPEAL BEF ORE THE LD. CIT (A) WHO HAS DISMISSED THE APPEALS. FEELING AGGR IEVED, THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEALS. 5. THE REVENUE DEPARTMENT HAS NOT PREFERRED TO PUT IN APPEARANCE AND CONSEQUENTLY, WE PROCEEDED TO DECIDE THE PRESENT ITA NOS.7874/DEL./2017 ITA NOS.7875/DEL./2017 5 APPEAL WITH THE ASSISTANCE OF THE LD. AR FOR THE AS SESSEE AS WELL AS ON THE BASIS OF DOCUMENTS AVAILABLE ON THE FILE. 6. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE TO THE APPEAL, GONE THROUGH THE DOCUMENTS RELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 7. AT THE VERY OUTSET, IT IS BROUGHT TO OUR NOTICE THAT PRIMARILY THE BENEFIT OF SECTION 11 HAS BEEN DENIED BY THE AO AS WELL AS LD. CIT (A) ON THE GROUND THAT THE ISSUE AS TO THE GRAN T OF REGISTRATION U/S 12AA IS PENDING DECISION BEFORE THE HONBLE ALL AHABAD HIGH COURT AND AS SUCH, STATUS OF THE ASSESSEE CORPORATI ON WAS HELD AS COMPANY. RELEVANT SUB-PARA OF PARA 5 AT PAGE 7 O F THE ASSESSMENT ORDER IS EXTRACTED AS UNDER FOR READY PE RUSAL :- THEREFORE, KEEPING IN VIEW THE FACTS AS DISCUSSED ABOVE, THE STATUS OF THE ASSESSEE IS TAKEN AS COMPA NY AND TOTAL INCOME IS COMPUTED IN ACCORDANCE WITH NORMAL PROVISIONS OF THE INCOME TAX ACT, 1961 APPLICABLE IN THE CASES OF DOMESTIC COMPANIES. FURT HER LD. COMMISSIONER OF INCOME-TAX-IL, KANPUR VIDE HIS ORDER DATED 8.12.2008 GRANTED CERTIFICATE U/S. 12AA OF THE ACT IN ACCORDANCE WITH THE DIRECTIONS ISSUED BY HON'BLE IT A T GRANTED REGISTRATION TO THE INSTITUT ION W.E.F. 30.11.1972, SUBJECT TO PROVISIONS CONTAINED U/S. 12AA (3) OF THE INCOME TAX ACT, 1961. THE ISSUE OF GRANT OF REGISTRATION U/S. 12AA IS SUB-JUDICE BEFOR E HON'BLE ALLAHABAD HIGH COURT, THEREFORE, THE STATUS OF THE ASSESSEE AS DISCUSSED IN ABOVE PARAS IS TAKEN A S 'COMPANY'. THE ASSESSEES CLAIM OF EXEMPTION U/S 11 IS DENIED IN VIEW OF DISCUSSION IN ABOVE PARAS. AS THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF ITA NOS.7874/DEL./2017 ITA NOS.7875/DEL./2017 6 INCOME AS PER RETURN, PENALTY PROCEEDINGS U/S 271(1 )(C) IS ALSO CONSIDERED SEPARATELY. 8. HONBLE ALLAHABAD HIGH COURT VIDE ORDER DATED 17 .07.2017, AVAILABLE AT PAGES 16 & 17 OF THE PAPER BOOK, HAS A FFIRMED THE ORDER PASSED BY THE TRIBUNAL AFFIRMING THE REGISTRA TION ACCORDED TO THE ASSESSEE COMPANY BY THE COMMISSIONER. SO, SINC E THE ISSUE AS TO THE REGISTRATION GRANTED TO THE ASSESSEE COMPANY U/S 12AA HAS BEEN DECIDED, WE DEEM IT NECESSARY TO SET ASIDE THE SE CASES TO THE FILE OF THE AO TO DECIDE AFRESH IN THE LIGHT OF THE FACT THAT THE ASSESSEE IS REGISTERED UNDER NON-PROFIT MAKING ENT ITY UNDER SECTION 25 OF THE COMPANIES ACT AND HAS BEEN PROVID ING ARTIFICIAL LIMBS TO THE NEEDY PERSONS WITHOUT EARNING ANY PROF IT. NEEDLESS TO SAY THAT THE AO SHALL PROVIDE AN OPPORTUNITY OF BEI NG HEARD TO THE ASSESSEE BEFORE DECIDING THE ISSUE. 9. RESULTANTLY, BOTH THE APPEALS FILED BY THE ASSES SEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 14 TH DAY OF SEPTEMBER, 2018. SD/- SD/- (G.D. AGRAWAL) (KULDIP SINGH) PRESIDENT JUDICIAL MEMBER DATED THE 14 TH DAY OF SEPTEMBER, 2018 TS ITA NOS.7874/DEL./2017 ITA NOS.7875/DEL./2017 7 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-II, KANPUR. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.