Madras Chamber of Commerce and Industry, CHENNAI V. ADIT, CHENNAI

ITA 880/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8136 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 13-01-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 20-04-2015
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: V S MANOJ
• Keywords: Business income; Charitable institution
• Section: 12AA; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI . . . , . ! , ' # $ [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NOS. 879 & 880/MDS/2015 / ASSESSMENT YEARS : 2009-10 & 2010-11 M/S MADRAS CHAMBE R OF COMMERCE AND INDUSTRY KARUMUTHU CENTRE, 1 ST FLOOR NO.634 (OLD NO.498) ANNA SALAI NANDANAM, CHENNAI 600 035 VS. THE ASST. DIRECTOR OF INCOME - TAX (EXEMPTIONS)-III CHENNAI [PAN AAAAT 0095 R ] ( %& / APPELLANT) ( '(%& /RESPONDENT) / APPELLANT BY : SMT. PU SHYA S EETHA RAMAN, SR. COUNS EL & SHRI V.S MANOJ, ADVOCATE /RESPONDENT BY : S H RI A.V.SREEKANTH, JCIT / DATE OF HEARING : 13 - 01 - 2016 ! / DATE OF PRONOUNCEMENT : 05 - 02 - 2016 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THESE APPEALS OF THE ASSESSEE ARE DIRECTED AGAIN ST THE COMMON ORDER OF THE COMMISSIONER OF INCOME-TAX (APP EALS)-VII, CHENNAI, DATED 31.12.2014, FOR ASSESSMENT YEARS 200 9-10 AND 2010- 11. SINCE COMMON ISSUE ARISES FOR CONSIDERATION IN BOTH THE APPEALS, WE HEARD THEM TOGETHER AND DISPOSING OF THE SAME B Y THIS COMMON ORDER. ITA NO. 879 & 880/15 :- 2 -: 2. SMT. PUSHYA SEETHARAMAN, LD. SR. COUNCIL FOR THE A SSESSEE SUBMITTED THAT THE ASSESSEE IS A CHARITABLE INSTIT UTION REGISTERED U/S 12AA OF THE ACT. THE ASSESSEE CLAIMED EXEMPTION U/S 11 OF THE ACT IN RESPECT OF THE FEES FOR CERTIFICATE OF ORIGIN, S UBSCRIPTION FEE, ENTRANCE FEE AND SEMINAR INCOME ETC. HOWEVER, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE-SOCIETY FALLS WITHIN THE FOURTH LIMB OF SE C. 2(15) OF THE ACT BEING ITS OBJECTS OF GENERAL PUBLIC UTILITY. SINCE THE RECEIPTS EXCEEDS ` 10 LAKHS, THE ASSESSEE IS NOT ENTITLED FOR EXEMPTI ON U/S 11 OF THE ACT IN VIEW OF SECOND PROVISO TO SEC. 2(15) OF THE ACT. ON APPEAL BY THE ASSESSEE, THE CIT(A) FOUND THAT THE ACTIVITIES OF THE ASSESSEE ARE OF GENERAL PUBLIC UTILITY. WHEN THE ASSESSEE IS C HARGING FEES FOR THE SERVICES, THE ESSENTIAL CHARACTERISTIC OF VOLUNTARY NATURE WAS LOST. THE FEES RECEIVED FOR CERTIFICATION OF ORIGIN ARE THERE FORE, IN THE NATURE OF BUSINESS RECEIPT ONLY. ACCORDINGLY, THE CIT(A) CON FIRMED THE ORDER OF THE ASSESSING OFFICER. 3. LD. SR. COUNCIL FOR THE ASSESSEE, PLACING HER RELI ANCE ON THE INTERNATIONAL CONVENTION RELATING TO THE SIMPLIFICA TION OF CUSTOMS FORMALITIES AND PROTOCOL OF SIGNATURE, SUBMITTED TH AT THE ASSESSEE WAS AUTHORIZED TO ISSUE CERTIFICATE OF ORIGIN FOR E XPORT OF GOODS FROM INDIA. REFERRING TO THE JUDGMENT OF THE MADRAS HI GH COURT IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 1967-68 TO 1969-70, THE LD. ITA NO. 879 & 880/15 :- 3 -: SR. COUNCIL FOR THE ASSESSEE SUBMITTED THAT THE VE RY SAME ISSUE WAS CONSIDERED BY THE MADRAS HIGH COURT AND FOUND THAT THE INCOME RECEIVED BY THE ASSESSEE FROM ARBITRATION AND FEES FOR ISSUING CERTIFICATES ARE INCIDENTAL TO THE MAIN ACTIVITY. T HE HIGH COURT FURTHER FOUND THAT THE DOMINANT PURPOSE OF THE ASSESSEE IS ONLY TO PURSUE AN OBJECT OF GENERAL PUBLIC UTILITY. THE SERVICES REN DERED IN CONNECTION WITH ARBITRATION OR ISSUE OF CERTIFICATE ARE ONLY I NCIDENTAL. SINCE THE MADRAS HIGH COURT SPECIFICALLY FOUND IN ASSESSEES OWN CASE THAT FEES RECEIVED FOR ISSUE OF CERTIFICATE OF ORIGIN ARE IN CIDENTAL TO THE MAIN ACTIVITY, ACCORDING TO THE LD. SR. COUNCIL, THE CIT (A) IS NOT JUSTIFIED IN SAYING THAT ISSUE OF CERTIFICATE OF ORIGIN IS COMME RCIAL IN NATURE. 4. ON THE CONTRARY, SHRI A.V SREEKANTH, LD. DEPARTMENT AL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE IS ISSU ING CERTIFICATE OF ORIGIN AND COLLECTING FEES. THE ACTIVITY OF CHARGI NG FEE AND ISSUING CERTIFICATE OF ORIGIN WAS CARRIED ON FOR A PROFIT M OTIVE, THEREFORE, THE ACTIVITY OF ISSUE OF CERTIFICATE OF ORIGIN IS IN TH E NATURE OF TRADE, COMMERCE OR BUSINESS. REFERRING TO FIRST PROVISO T O SEC. 2(15) OF THE ACT, THE LD. DR SUBMITTED THAT WHEN THE RECEIPTS OF THE ASSESSEE EXCEEDED ` 10 LAKHS, THE ASSESSEE LOSES THE CLAIM OF EXEMPTI ON U/S 11 OF THE ACT. THE LD. DR FURTHER SUBMITTED THAT E VEN THOUGH REGISTRATION U/S 12AA WAS GRANTED, THE ASSESSING O FFICER HAS TO EXAMINE THE ISSUE INDEPENDENTLY BEFORE ALLOWING THE CLAIM U/S 11 OF ITA NO. 879 & 880/15 :- 4 -: THE ACT. THEREFORE, THE CIT(A) HAS RIGHTLY CONFIRM ED THE ORDER OF THE ASSESSING OFFICER. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. AD MITTEDLY, THE ASSESSEE WAS REGISTERED AS A CHARITABLE INSTITUTION U/S 12AA OF THE ACT AND REGISTRATION CONTINUES EVEN FOR THE YEARS UNDER CONSIDERATION. IT IS AN ADMITTED FACT THAT THE OBJECT OF THE ASSESSEE I S OF GENERAL PUBLIC UTILITY. IN THE COURSE OF ITS ACTIVITY, THE ASSES SEE WAS ISSUING CERTIFICATE OF ORIGIN AND RECEIVING FEES. THE MAIN CONTENTION OF THE REVENUE BEFORE THIS TRIBUNAL IS THAT WHEN THE ASSE SSEE IS CHARGING FEES FOR ISSUING CERTIFICATE OF ORIGIN, IT AMOUNTS TO COMMERCIAL ACTIVITY, THEREFORE, NO ELEMENT OF CHARITY REMAINS IN THE OBJ ECT OF THE ASSESSEE. THIS FACT WAS EXAMINED BY THE MADRAS HIGH COURT IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 1967-68 TO 1969-70 IN TAX CASE NOS. 186 TO 188 OF 1976. THE LD. SR. COUNCIL FOR THE ASSESSEE HAS FILED THE COPY OF UNREPORTED JUDGMENT OF THE MADRAS HIGH COURT AT PAG E 36 OF THE PAPER BOOK. AFTER REFERRING TO THE RELEVANT FACTS OF THE CASE, THE HIGH COURT FOUND THAT FEES RECEIVED BY THE ASSESSEE FOR ARBITRATION AND ISSUE OF CERTIFICATE ARE ONLY INCIDENTAL TO THE MAI N OBJECT. THIS JUDGMENT OF THE MADRAS HIGH COURT WAS NOT TAKEN NOT E OF BY BOTH THE AUTHORITIES BELOW. THIS TRIBUNAL IS OF THE CONSID ERED OPINION THAT THIS JUDGMENT OF THE MADRAS HIGH COURT IN ASSESSEES OW N CASE IS BINDING ITA NO. 879 & 880/15 :- 5 -: ON THE AUTHORITIES BELOW. ONCE THE HIGH COURT FOUN D THAT THE FEES RECEIVED BY THE ASSESSEE FOR ARBITRATION AND ISSUA NCE OF CERTIFICATE ARE INCIDENTAL TO THE MAIN ACTIVITY, THE REVENUE CANNOT CONTEND NOW THAT THE ACTIVITY OF ISSUING CERTIFICATE OF ORIGIN AMOUN TS TO TRADE OR COMMERCE. THEREFORE, THIS TRIBUNAL IS OF THE CONS IDERED OPINION THAT EVEN THOUGH THE ASSESSEE IS RECEIVING FEES FOR ISS UING CERTIFICATE OF ORIGIN, THAT DOES NOT AMOUNT TO A COMMERCIAL ACTIVI TY. AS FOUND BY THE MADRAS HIGH COURT, THE ACTIVITY OF RECEIVING FEE AN D ISSUING CERTIFICATE OF ORIGIN IS ONLY INCIDENTAL TO THE MAIN ACTIVITY. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASS ESSEE IS ELIGIBLE FOR EXEMPTION UNS11 OF THE ACT. ACCORDINGLY, THE ORDER S OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO ALLOW EXEMPTION U/S 11 OF THE ACT TO THE ASSESSEE PROVI DED THE INCOME IS APPLIED FOR CHARITABLE ACTIVITY IN FURTHERANCE TO I TS OBJECTS. 6. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE AR E ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH FEBRUARY, 2016, AT CHENNAI. SD/- SD/- ( . ! ) (A. MOHAN ALANKAMONY) ' / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 5 TH FEBRUARY, 2016 RD ITA NO. 879 & 880/15 :- 6 -: &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF