M/s. National Informatics Centre Services Inc., New Delhi V. DIT (Exemptions), New Delhi

ITA 997/DEL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3484 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 05-04-2017
• Assessment Year: misc
• Appeal Filed On: 20-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H K CHAUDHARY
• Keywords: Charitable institution
• Section: 80G; 12A; 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI B.P. JAIN, ACCOUNTANT MEMBER ITA NO.997/DEL/2014 ASSESSMENT YEARS 2013-14 NATIONAL INFORMATICS CENTRE SERVICES INC. HALL NO.2 & 3, NBCC TOWER-15, BHIKAJI CAMA PLACE, NEW DELHI PAN: AAACN 2185J VS. DIT (EXEMPTION) ROOM NO.2602, 26 TH FLOOR, BLOCK E-2, PRATYAKSHKAR BHAWAN, CIVIC CENTRE, NEW DELHI (APPELLANT) (RESPONDENT) REVENUE BY : SHRI H.K. CHAUDHARY, CIT- D.R. ASSESSEE(S) BY : S/SHRI SALIL KAPOOR, SUMIT LAL CHANDANI AND ANANYA KAPOOR, ADVOCATE. / DATE OF HEARING : 11/04/2017 / DATE OF PRONOUNCEMENT: 17/04/2017 ORDER PER B.P. JAIN, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF DIT(E), NEW DELHI DATED 17.12.2013 PASSED U/S.12AA(1)(B) R.W.S. 12A OF THE INCOME TAX ACT, 1961. THE ASSESSEE HAS RAISED THE SOLE GROUND OF APPEAL AS UNDER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LE ARNED DIRECTOR OF INCOME TAX (EXEMPTION) HAS ERRED BOTH ON FACTS AND IN LAW IN R EJECTING THE APPLICATION OF THE ASSESSEE FOR REGISTRATION UNDER SECTION 12A OF THE INCOME TAX ACT, 1961. 2. THE BRIEF FACTS OF THE CASE AS ARE EMANATING FRO M THE ORDER OF LEARNED DIT(E) VIDE ORDER DATED 17.12.2013 WHICH IS REPRODU CED FOR THE SAKE OF CONVENIENCE AS UNDER: THE APPLICANT FILED AN APPLICATION ON 27.06.2013 I N FORM NO.10A SEEKING REGISTRATION U/S.12A OF THE INCOME TAX ACT, 1961. S UBSEQUENTLY, LETTER/NOTICE U/S.12A OF THE ACT, 1961 DATED 02.08.2013 WAS ISSUE D TO THE APPLICANT REQUIRING IT ITA NO.997/DEL/2014 2 TO SUBMIT CERTAIN REQUISITE DOCUMENTS/EXPLANATIONS ON 12.08.2013 IN SUPPORT OF ITS CLAIM FOR REGISTRATION U/S.12A OF THE IT ACT. 2. HOWEVER, ON GIVEN DATE I.E. ON 12.08.2013, NO ON E ATTENDED NOR ANY DETAIL WAS FILED IN THIS REGARD. SUBSEQUENTLY, A REMINDER- 1 IN THIS CASE WAS ISSUED ON 14.08.2013 AND CASE WAS FIXED FOR 27.08.2013. SUBSE QUENTLY, ON VARIOUS DATES SHRI GIRISH KUMAR, CS OF THE APPLICANT COMPANY ATTE NDED AND FILED DETAILS. ON 06.09.2013, AR OF THE APPLICANT WAS ASKED TO FILE T HE DETAILS REGARDING AMENDMENT IN AREA OF OPERATION DULY ENDORSED BY THE REGISTRAR OF THE COMPANIES (ROS) AND CASE WAS FIXED FOR 19.09.2013. SUBSEQUENT LY, ON 23.10.2013, AR OF THE APPLICANT ATTENDED AND HE WAS ASKED TO FILE THE DET AIL REGARDING AMENDMENT IN AREA OF OPERATION DULY ENDORSED BY THE ROS ON 31.10 .2013, MENTIONING THAT IN CASE OF NON-COMPLIANCE ON THE ABOVE MENTIONED DATE, CASE WILL BE DECIDED ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. ON 29.10.201 3, AR OF THE APPLICANT ATTENDED AND REQUESTED FOR ADJOURNMENT TO FILE THE REQUISITE DETAILS AND THE SAME, CASE WAS FIXED FOR 06.11.2013. SUBSEQUENTLY, ON 05. 01.2013 A LETTER DATED 05.11.2013, SUBMITTED BY THE APPLICANT REGARDING CL ARIFICATION IN RESPECT OF AREA OF OPERATION WITHIN OR OUTSIDE INDIA, WHICH IS REPR ODUCED AS UNDER: THIS IS TO BRING TO YOUR NOTICE THAT THE SECTION 12 A OR SECTION 11 DOES NOT RESTRICT THE REGISTRATION OF ORGANIZATION HAVING INTERNATION AL OPERATIONS. THIS IS BASED ON THE INFORMATION GIVEN IN THE TAX PAYERS BOOKLET ISS UED BY THE INCOME TAX DEPARTMENT ITSELF WHICH IS REPRODUCED BELOW: SECTION 11 PERMITS DEDUCTION OF EXPENDITURE FROM IN COME. THE EXPENDITURE INCURRED BY A TRUST OR INSTITUTION BY WAY OF APPLIC ANT OF INCOME IN INDIA TOWARDS RELIGIOUS OR CHARITABLE PURPOSES, AS PER IT S MEMORANDUM, IS DEDUCTIBLE FROM THE INCOME. THE ASSESSEE MAY ALSO S ET APART AND ACCUMULATE 15% OF INCOME FOR SUCH APPLICATION AND S UCH AMOUNT WILL ALSO BE TAKEN AS EXPENDITURE OF THE YEAR. THESE PROVISIO NS ARE APPLICABLE MUTATIS-MUTANDIS TO A PARTLY RELIGIOUS OR CHARITABL E TRUST. THIS SECTION ALSO PERMITS DEDUCTION OF EXPENDITURE INCURRED OUTSIDE I NDIA, PROVIDED THAT SUCH APPLICATION OF INCOME PROMOTES INTERNATIONAL W ELFARE IN WHICH INDIA IS INTERESTED. HOWEVER, FOR DEDUCTION OF SUCH EXPEN DITURE, PRIOR APPROVAL OF THE BOARD IS REQUIRED. IN CONFORMITY WITH SECTIO N 12, CORPUS DONATIONS CONSTITUTE DEDUCTIBLE EXPENDITURE UNDER SECTION 11( 1)(D). THE WORD APPLIED USED IN SECTION 11 SHOULD BE CONSTRUED WI DELY AND NOT IN NARROW SENSE. WE MAY HAVE REGARD TO SOME OF THE DECIDED CA SE. 3. I HAVE CAREFULLY CONSIDERED THE SUBMISSION MADE BY THE APPLICANT AND FIND NO MERIT IN IT. A REFERENCE IS MADE TO PROVISIONS O F SECTION 11 OF THE IT ACT, 1961, WHICH IS REPRODUCED AS UNDER: 11. (1) SUBJECT TO THE PROVISIONS OF SECTIONS 60 T O 63, THE FOLLOWING INCOME SHALL NOT BE INCLUDED IN THE TOTAL INCOME O F THE PREVIOUS YEAR OF THE PERSON IN RECEIPT OF THE INCOME. (A) INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLL Y FOR CHARITABLE OR RELIGIOUS PURPOSES, TO THE EXTENT TO WHICH SUCH INC OME IS APPLIED TO SUCH PURPOSES IN INDIA; AND WHERE ANY SUCH INCOME I S ACCUMULATED OR ITA NO.997/DEL/2014 3 SET APART FOR APPLICATION TO SUCH PURPOSES IN INDIA , TO THE EXTENT TO WHICH THE INCOME SO ACCUMULATED OR SET APART IS NOT IN EXCESS OF FIFTEEN PERCENT OF THE INCOME FROM SUCH PROPERTY. (B) INCOME DERIVED FROM PROPERTY HELD UNDER TRUST IN PA RT ONLY FOR SUCH PURPOSES, THE TRUST HAVING BEEN CREATED BEFORE THE COMMENCEMENT OF THIS ACT, TO THE EXTENT TO WHICH SUCH INCOME IS APP LIED TO SUCH PURPOSES IN INDIA; AND, WHERE ANY SUCH INCOME IS FINALLY SET APART. (C) FOR APPLICATION TO SUCH PURPOSE IN INDIA, TO THE EX TENT TO WHICH THE INCOME SO SET APART IS NOT IN EXCESS OF FIFTEEN PER CENT OF THE INCOME FROM SUCH PROPERTY. 3.1 A PERUSAL OF SECTION 11(1) CLEARLY INDICATE THAT I T APPLIES TO ONLY SUCH INCOME AS IS APPLIED FOR CHARITABLE PURPOSES IN IN DIA. SECTION 12A REGISTRATION IS FOR THE PURPOSE OF SECTION 11(1) EXEMPTION. THER EFORE SUCH INSTITUTIONS, WHICH APPLY ITS INCOME OUTSIDE INDIA/CARRIES OUT ACTIVITI ES OUTSIDE INDIA, DO NOT FALL UNDER THE PURVIEW OF SECTION 12A AND THUS ARE NOT E LIGIBLE FOR REGISTRATION U/S.12A OF THE IT ACT, 1961. 3.2 FURTHER, THE APPLICANT HAS REFERRED TO TAXPAYERS BO OKLET WHICH MENTIONS ABOUT EXEMPTION WITH REGARD TO APPLICATION OF INCOM E OUTSIDE INDIA. THE RELEVANT PROVISION IS AS PER SECTION 11(1)(C), WHICH READS A S UNDER: INCOME DERIVED FROM PROPERTY HELD UNDER TRUST- (I) CREATED ON OR AFTER THE 1 ST DAY OF APRIL, 1952, FOR A CHARITABLE PURPOSE WHICH TENDS TO PROMOTE INTERNATIONAL WELFAR E IN WHICH INDIA IS INTERESTED, TO THE EXTENT TO WHICH SUCH IN COME IS APPLIED TO SUCH PURPOSE OUTSIDE INDIA, AND (II) FOR CHARITABLE OR RELIGIOUS PURPOSES, CREATED BEFOR E THE 1 ST DAY OF APRIL, 1952, TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES OUTSIDE INDIA. PROVIDED THAT THE BOARD, BY GENERAL OR SPECIAL ORDE R, HAS DIRECTED IN EITHER CASE THAT IT SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PERSON IN RECEIPT OF SUCH INCOME. 3.3 IT IS EVIDENT FROM ABOVE THAT SECTION 11(1)(C) EXEMPTION IS AVAILABLE TO SUCH TRUST CREATED FOR A CHARITABLE PURPOSE WHICH TENDS TO PROMOTE INTERNATIONAL WELFARE WHICH INDIA IS INTERESTED. FURTHER, PRIOR APPROVAL OF THE BOARD IS NEEDED IN SUCH CASES. IN THE CASE UNDER CONSIDERATION, THE TRUST HAS NOT BEEN CREATED FOR ANY CHARITABLE PURPOSE, WHICH TENDS TO PROMOTE INTE RNATIONAL WELFARE IN WHICH INDIA IS INTERESTED. MOREOVER, THE COMPETENT AUTHOR ITY IN SUCH CASE IS CBDT AND AS SUCH CASE IS NOT COVERED EVEN U/S.11(1)(C) OF TH E IT ACT, 1961. 4. IN VIEW OF THE DETAILED DISCUSSION AS ABOVE, THE APPLICANTS REQUEST FOR REGISTRATION U/S.12A OF THE IT ACT, IS HEREBY REJEC TED. THE APPLICANT IS HOWEVER AT LIBERTY TO APPLY AGAIN AFTER SUITABLY AMENDING ITS PROVISIONS. ITA NO.997/DEL/2014 4 3. LEARNED COUNSEL FOR THE ASSESSEE, SHRI SALIL KAP OOR, ADVOCATE APPEARING ALONG WITH MS. ANANYA KAPOOR, ADVOCATE AR GUED THAT LEARNED DIT(E) PROBABLY HAS MISUNDERSTOOD THE FACTS OF THE CASE AS AVERTED HIMSELF REGARDING THE AMENDMENT OF THE REGISTRATION OF THE INSTITUTION. WHEREAS THERE WAS NO REQUIREMENT OF SUCH AMENDMENT AND NO MATERIA L HAS BEEN BROUGHT ON RECORD TO SHOW WHY SUCH AMENDMENT IS REQUIRED. IT W AS FURTHER ARGUED THAT THERE WAS NO REQUIREMENT FOR GOING INTO SECTION 11 WHICH HAS BEEN DISCUSSED BY THE LEARNED DIT(E) AT LENGTH. THERE IS NO DISPUTE TO THE FACT THAT THE OPERATIONS OUTSIDE INDIA ARE REFERRED INTO MAIN OBJECTS OF THE INSTITUTIONS BUT NO ACTIVITIES IN THIS REGARD IN ANY OF THE FORE IGN COUNTRY HAS BEEN CARRIED OUT TILL THE END OF THE IMPUGNED YEAR. THE ASSESSEE IS WELL AWARE OF THE PROVISIONS WHEN HE HAS TO CARRY OUT THE ACTIVITIES ABROAD, HE HAS TO TAKE THE PERMISSION OF THE BOARD. SINCE NO SUCH ACTIVITY HAS BEEN CARRIED OUT AND THEREFORE THERE IS NO REQUIREMENT OF THE APPROVAL O F THE BOARD. THE FINAL ACCOUNTS OF VARIOUS YEARS ALONG WITH COPY OF MEMORA NDUM OF ASSOCIATION AND ARTICLE OF ASSOCIATION ARE ON RECORD. NONE OF T HE EXPENDITURE HAS BEEN POINTED OUT BY THE LEARNED DIT(E) TO HAVE BEEN INCU RRED FOR ANY ACTIVITY CARRIED OUT OUTSIDE INDIA. THEREFORE IN THE CIRCUMS TANCES AND IN VIEW OF THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF M.K. NUMBYAR SAARF CHARITABLE TRUST VS. UNION OF INDIA, 269 ITR 556 (D EL), THE LD. DIT(E) IS NOT AUTHORIZED TO DENY THE REGISTRATION U/S.12A OF THE ACT. 4. LEARNED DR, ON THE OTHER HAND, RELIED UPON THE O RDER OF LEARNED DIT(E). 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE H AS PLACED ON RECORD THE FINAL ACCOUNTS WHICH HAVE BEEN PERUSED BY US. IT IS ALSO NOT IN DISPUTE THAT THE MAIN OBJECTS OF THE INSTITUTION INCLUDE THE CARRYIN G OUT OF THE ACTIVITIES ITA NO.997/DEL/2014 5 OUTSIDE INDIA. LEARNED DIT(E) AS WELL AS LEARNED DR ARGUING THE MATTER BEFORE US HAS NOT BROUGHT ON RECORD THE NECESSITY O F THE AMENDMENT OF THE MAIN OBJECTS AND THE NECESSITY APPLICATION OF SECTI ON 11(1) OF THE ACT. NONE OF THE EXPENDITURE HAS BEEN POINTED OUT EITHER BY T HE LEARNED DIT(E) OR BY THE LEARNED DR WHICH HAVE BEEN INCURRED BY THE ASSE SSEE FOR CARRYING OUT ANY ACTIVITY OUTSIDE INDIA. WHILE GRANTING THE REGI STRATION U/S.12AA(1), THE DIT(E) ON RECEIPT OF THE APPLICATION FOR REGISTRATI ON OF THE INSTITUTION HAS TO SATISFY HIMSELF ABOUT GENUINENESS OF THE ACTIVITIES OF THE TRUST AND MAKING SUCH INQUIRIES AS MAY DEEM NECESSARY IN THIS BEHALF AFTER SATISFYING HIMSELF ABOUT THE OBJECTS OF THE TRUST OR INSTITUTION ON TH E GENUINENESS OF HIS ACTIVITIES. IN THIS REGARD AS MENTIONED HEREINBEFOR E THE OBJECTS OF THE TRUST ARE THERE TO CARRY OUT THE ACTIVITIES OUTSIDE INDIA BUT NO ACTIVITY AS SUCH HAS BEEN CARRIED OUT, AND THEREFORE, NO APPROVAL OF THE BOARD IS REQUIRED TO BE TAKEN FROM THE BOARD. THERE IS NO NECESSITY TO MAKE THE AMENDMENT OF THE MAIN OBJECTS. ALSO NONE OF THE ACTIVITIES HAS BEEN BROUGHT TO OUR NOTICE BY THE LEARNED DR AND NO MATERIAL PLACED BEFORE US TO SHOW THAT ANY EXPENDITURE OUTSIDE INDIA HAS BEEN INCURRED BY THE ASSESSEE OR ANY ACTIVITY OUTSIDE INDIA HAS BEEN CARRIED OUT. IN SUCH CIRCUMS TANCES AND FACTS OF THE CASE, THE LEARNED DIT(E) IS NOT JUSTIFIED IN DENYIN G REGISTRATION U/S.12AA R.W.S. 12A OF THE ACT. THE RELIANCE IS PLACED UPON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF N.K. NUMBYAR SAARF LAW CHARITABLE TRUST (SUPRA). THE RELEVANT PARAGRAPH OF THE DECISION IS REPRODUCED HEREUNDER: 3. SO FAR AS THE BENEFIT OF SECTION 11(1)(A) IS CO NCERNED, IT CAN BE EXTENDED ONLY TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA. HOWEVER, IF THE INCOME IS APPLIED TO THE PURPOSES OUTSIDE INDIA, THEN CLAUSE (C) WILL BE APPLICABLE AND IF THE PERMISSION IS GRANTE D BY THE BOARD EITHER BY GENERAL OR SPECIAL ORDER THEN, BENEFIT CAN BE EXTENDED. SEC TION 12AA PRESCRIBES THE PROCEDURE FOR REGISTRATION. READING THE SECTION, IT BECOMES CLEAR THAT AFTER THE APPLICATION IS MADE, THE OFFICER HAS TO CALL FOR DO CUMENTS OR INFORMATION FROM THE TRUST TO SATISFY HIMSELF ABOUT THE GENUINENESS OF T HE ACTIVITIES OF THE TRUST. HE CAN MAKE FURTHER ENQUIRY AS HE MAY DEEM NECESSARY. IT I S ONLY AFTER SATISFYING HIMSELF ITA NO.997/DEL/2014 6 ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUS T. HE CAN MAKE FURTHER ENQUIRY AS HE MAY DEEM NECESSARY. IT IS ONLY AFTER SATISFYI NG HIMSELF ABOUT THE OBJECTS OF THE TRUST AND THE GENUINENESS OF ITS ACTIVITIES THA T HE HAS TO PASS AN ORDER IN WRITING REGISTERING THE TRUST OR INSTITUTION. AND I F HE IS NOT SATISFIED, HE CAN REJECT THE SAME. THIS SECTION DOES NOT REFER TO THE ACTIVI TIES IN INDIA OR OUTSIDE INDIA. IT REFERS TO APPLICATION OF INCOME FOR CHARITABLE OR R ELIGIOUS PURPOSES IN INDIA AS ALSO WITH DIRECTION OR ORDER OF THE BOARD FOR APPLI CATION OF INCOME AS AFORESAID OUTSIDE INDIA. READING THE ORDER DATED 24.02.2004, IT IS VERY CLEAR THAT THERE IS NON APPLICATION OF MIND. IT WAS NECESSARY FOR THE C OMMISSIONER TO EXAMINE THE PURPOSE FOR SATISFYING HIMSELF THAT THE ACTIVITIES ARE GENUINE. IT WAS OPEN FOR HIM TO MAKE NECESSARY ENQUIRIES IN THIS BEHALF AND TO P ASS AN ORDER AS PER THE PROCEDURE LAID DOWN UNDER SECTION 12AA OF THE SAID ACT. SO FAR AS INCOME WHICH IS APPLIED OUTSIDE INDIA IS CONCERNED, IS NOT A REL EVANT CRITERIA FOR REJECTING THE APPLICATION. IN ABSENCE OF ORDER UNDER SECTION 11(1 )(A)(C), ONE CANNOT SEEK BENEFIT FOR APPLICATION OF INCOME FOR CHARITABLE OR RELIGIOUS PURPOSES OUTSIDE INDIA. THEREFORE, THE ORDER DATED 24.2.2004 MADE BY THE DIRECTOR OF INCOME- TAX(E), ANNEXED AT PAGE 32 WHICH IS BASED ON IRRELE VANT CRITERIA IS QUASHED AND SET ASIDE WITH A DIRECTION TO CONSIDER THE APPLICAT ION STRICTLY IN ACCORDANCE WITH LAW. IT IS MADE THAT EVEN APPLICATION UNDER SECTION 80G IS REQUIRED TO BE CONSIDERED AFRESH. IT IS DIRECTED THAT THE APPLICAT ION SHALL BE DISPOSED OF WITHIN A PERIOD OF FOUR WEEKS BY THE COMMISSIONER. 6. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF HON 'BLE DELHI HIGH COURT, I DIRECT THE DIT(E) TO GRANT THE REGISTRATIO N AS APPLIED FOR BY THE ASSESSEE. 7. IN THE RESULT, THE SOLE GROUND OF THE ASSESSEE I S ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY 17 TH APRIL, 2017 SD/- SD/- (I.C. SUDHIR) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 17/04/2017 PRABHAT KUMAR KESARWANI, SR.P.S. COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(APPEALS) 5.DR: ITAT ASSTT. REGISTRAR, ITAT, NEW DELHI