PHD Chamber of Commerce & Industry, New Delhi V. DDIT (E), New Delhi

MA 133/DEL/2011

• Counselvise Citation: [2011] 123 COUNSELVISE.COM (IT) 7193 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 21 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 14-10-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2006-2007
• Appeal Filed On: 24-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K MONGA
• Assessee Lawyers: VINOD K BINDALC A; SWEETY KOTHARIC A
• Keywords: Business income; Charitable institution; Rule of consistency
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F (FRIDAY) BEFORE SHRI I.P. BANSAL AND SHRI K.G. BANSAL M.A. NO. 133(DEL)/2011 (ARISING OUT OF ITA NO. 1233(DEL)/2010) ASSESSMENT YEAR : 2006-07 PHD CHAMBER OF COMMERCE & DEPUTY DI RECTOR OF INCOME-TAX INDUSTRY, V S. (E), INV. CIRCLE-II, NEW DELHI. PHD HOUSE, OPP. ASIAN GAMES VILLAGE, NEW DELHI. PAN: AAACP 1438L (APPLICANT) (RESPONDENT) APPLICANT BY : SHRI VINOD K. BINDAL,C.A. & MS. SWEETY KOTHARI,C.A RESPONDENT BY : SHRI A.K. MONGA, SR. DR DATE OF HEARING : 07.10.2011 DATE OF PRONOUNCEMENT: 14.10.2011. ORDER PER K.G. BANSAL :AM BRIEFLY, THE FACTS OF THE CASE ARE THAT THE A SSESSEE FILED NIL RETURN ON 31.10.2006. THE AO COMPLETED ASSESSMENT ON 29.12.2008 AT TOTAL INCOME OF RS. 1,03,77,510/-. IN THE COURSE OF A SSESSMENT, IT WAS NOTED THAT THE ASSESSEE DECLARED RECEIPTS OF RS. 5,9 6,72,018/-. THE INCOME WAS CLASSIFIED UNDER SEVEN HEADS, VIZ., MEMBERSHIP SUBSCRIPTION, SPECIALIZED SERVICES, SERVICES AND FACILITIES, MEETING, SEMIN AR AND TRAINING PROGRAMS, LEGAL AND ARBITRATION FEES, SALE OF PUBLICATION A ND MISCELLANEOUS. SCHEDULE MA NO. 133(DEL)/2011 2 15 OF THE ANNUAL ACCOUNTS FURNISHED BIFURCATION OF SPECIALIZED SERVICES IN TERMS OF CERTIFICATION FEE AND SECRETARIAL AFFIL IATES. SIMILARLY, SCHEDULE 16 FURNISHED THE BREAK-UP OF SERVICES AND FACILIT IES IN TERMS OF COMMITTEE ROOM SERVICES, SERVICES AND FACILITIES, EMC PROJEC T AND SIB HELPLINE. IT WAS NOTED THAT SERVICES AND FACILITIES AND SPECIA LIZED SERVICES BY WAY OF SECRETARIAL AFFILIATES WERE PROVIDED TO 27 ASSOCI ATIONS OUT OF WHICH 7 ASSOCIATIONS ARE NOT THE MEMBERS OF THE ASSESSEE-C HAMBER. THE RECEIPTS UNDER THE HEAD EMC PROJECT WERE ALSO RECEIVED FR OM MEMBERS AS WELL AS NON-MEMBERS. THE AO CAME TO THE CONCLUSION THAT THE ASSESSEE IS CARRYING ON ACTIVITIES WHICH ARE IN THE NATURE OF BUSINESS. HOWEVER, IT HAS NOT MAINTAINED SEPARATE BOOKS OF ACCOUNT FOR SUC H BUSINESS ACTIVITIES AS PRESCRIBED U/S 11(4A) OF THE ACT. THEREFORE, HE P ROCEEDED TO COMPUTE THE INCOME BY REDUCING THE EXPENSES FROM THE TOTAL RECEIPTS. THE TOTAL RECEIPTS, AS MENTIONED EARLIER, AMOUNTED TO RS. 5,97,30,818/-. THE ASSESSEE HAD CLAIMED EXPENSES AMOUNTING TO RS. 4, 93,53,311/-. ACCORDINGLY, THE INCOME WAS COMPUTED AT RS. 1,03,7 7,510/-. 1.1 THE LD. CIT(APPEALS) RECORDED THE FINDING THA T THE ASSESSEE HAS CARRIED ON VARIOUS ACTIVITIES AS PER ITS OBJECTS . NONE OF THE ACTIVITIES WAS UNDERTAKEN TO EARN PROFIT. THESE ACTIVITIES WER E CARRIED ON TO ATTAIN THE MA NO. 133(DEL)/2011 3 OBJECTS. THUS, IT WAS HELD THAT NO BUSINESS AC TIVITY WAS CARRIED OUT BY THE ASSESSEE AND, THEREFORE, THERE WAS NO NEED TO MAINTAIN SEPARATE BOOKS OF ACCOUNT FOR SUCH ACTIVITY. IT WAS FURTHER H ELD THAT THE GENERATION OF INCOME IS NOT A TEST IN ITSELF FOR DETERMINING THE CHARITABLE NATURE OF ACTIVITIES AND EARNING OF SURPLUS IN WORKING OU T THE CHARITABLE PURPOSE IS NOT EXCLUDED FROM THE PROVISION OF SECTION 2(15) OF THE INCOME-TAX ACT, 1961. IT MAY BE THAT THE INCOME EARNED MAY BE ASSESSABLE UNDER THE BUSINESS HEAD, BUT THE TOTAL INCOME HAS TO BE COM PUTED AND THE DEDUCTION PERMISSIBLE U/S 11 HAS TO BE ALLOWED. 1.2 ON THE APPEAL OF THE REVENUE, THE TRIBUNAL RECO RDED A FINDING THAT FROM THE ORDERS OF THE LOWER AUTHORITIES, IT BEC OMES CLEAR THAT THE ADMITTED POSITION IS THAT THE ASSESSEE IS CARRYING ON CERT AIN ACTIVITIES, WHICH ARE IN THE NATURE OF CARRYING ON OF THE BUSINESS. THE AO HAD QUESTIONED THE ASSESSEE ABOUT MAINTENANCE OF SEPARATE BOOKS OF ACCOUNT FOR SUCH ACTIVITIES. HOWEVER, THE ASSESSEE EXPRESSED ITS INABILITY TO FILE THE DETAILS. THEREFORE, THE PROVISION CONTAINED IN SECTION 11( 4A) IS APPLICABLE. THIS PROVISION HAS ALSO BEEN DISCUSSED BY THE LD. CIT(A ) ON PAGE 22 OF THE IMPUGNED ORDER WHILE SUMMARIZING THE FINDINGS OF THE AO. HE HAS NOTED THE FINDING OF THE AO THAT THE ASSESSEE HAS NOT MAINTAINED SEPARATE BOOKS MA NO. 133(DEL)/2011 4 OF ACCOUNT. HOWEVER, THEREAFTER, HE DID NOT TAKE INTO ACCOUNT THE IMPORT OF THE AFORESAID PROVISION AND GRANTED DEDUCTIO N U/S 11 AS IF NO BUSINESS HAS BEEN CARRIED ON BY THE ASSESSEE IN THIS YEAR. IN THIS CONNECTION, HE HAS ALSO MENTIONED THAT THE POSITION IN THIS YEAR IS SIMILAR TO THE POSITION IN EARLIER YEAR. THUS, HE INDIRECTLY INVOKED THE R ULE OF CONSISTENCY WHILE COMING TO HIS CONCLUSION. IT IS FURTHER MENTION ED THAT THE PROVISION CONTAINED IN SECTION 11(4A) IS CLEAR THAT DEDUCTI ON U/S 11 WILL NOT BE ADMISSIBLE IN RELATION TO ANY INCOME BEING PROFI TS AND GAINS OF BUSINESS. HOWEVER, THIS DISABILITY IS REMOVED BY WAY OF C ONCESSION IF- (I) THE BUSINESS IS INCIDENTAL TO ATTAINMENT OF OBJECTS OF THE INSTITUTION, AND (II) SEPARATE BOOKS OF ACCOUNT ARE MAINTAINED IN RES PECT OF SUCH BUSINESS. THESE CONDITIONS ARE TO BE SATISFIED CUMULATIVEL Y. THE RULE OF CONSISTENCY CANNOT OVERRIDE THIS STATUTORY PROVISION. FINAL LY, IT HAS BEEN RECORDED THAT IT IS NOT CLEAR WHETHER SEPARATE BOOKS OF ACCOUNT HAVE BEEN MAINTAINED FOR THE BUSINESS OR THE BUSINESSES. T HE FINDING OF THE AO IS THAT THE ASSESSEE IS CARRYING ON THE BUSINESS ACTIVI TY BY RENDERING SERVICES TO MEMBERS AND NON-MEMBERS AND IT IS NOT CARRYING ON ANY CHARITABLE ACTIVITY. THE LATTER FINDING CANNOT BE UPHELD AS THE OBJECTS OF THE ASSESSEE ARE CHARITABLE IN NATURE AND IT HAS BEEN GRANTED REGISTRATION U/S 12A. THEREFORE, THE ONLY THING WHICH CAN BE DONE IS TO ASCERTAIN THE MA NO. 133(DEL)/2011 5 BUSINESS INCOME, WHETHER SUCH INCOME IS INCIDENTA L TO THE ATTAINMENT OF THE OBJECTS, AND WHETHER BOOKS ARE MAINTAINED FOR T HE BUSINESS AND QUANTUM THEREOF. IF THE CONDITION PRESCRIBED IN SECTI ON 11(4A) HAS BEEN SATISFIED, THE ASSESSEE WILL BE ENTITLED TO THE DEDUCTION U/S 11, OTHERWISE NOT. AS THE FACTS HAVE NOT BEEN ASCERTAINED, THE MATTER WAS RESTORED TO THE FILE OF THE AO TO HEAR THE ASSESSEE AND PASS A FRESH ORDER AS PER LAW. 1.3 THE ASSESSEE HAS FILED A MISCELLANEOUS APPLI CATION ON 11.07.2011 IN RESPECT OF THE AFORESAID ORDER. 2. IN THE COURSE OF HEARING, THE LD. COUNSEL FOR TH E ASSESSEE SUBMITTED THAT THERE ARE CERTAIN ERRORS, WHICH ARE REQUIRE D TO BE RECTIFIED WITHIN THE MEANING OF SECTION 254(2) OF THE ACT. THE FIRST ERROR IS IN PARAGRAPH NO. 5, WHERE IT HAS BEEN MENTIONED THAT FROM THE ORDE RS OF THE LOWER AUTHORITIES, IT BECOMES CLEAR THAT THE ADMITTED POSITION IS THAT THE ASSESSEE IS CARRYING ON CERTAIN ACTIVITIES, WHICH ARE I N THE NATURE OF BUSINESS. IT IS SUBMITTED THAT THE FINDING OF THE LD. CIT(A) IN PA RAGRAPH NO. 5.5 IS THAT SINCE THE ASSESSEE IS CARRYING ON ACTIVITIES AN D RENDERING SERVICES AS PER ITS OBJECTS, IT IS NOT AT ALL CARRYING ON ANY BU SINESS ACTIVITY AS STATED BY THE ASSESSING OFFICER. NONE OF THE ACTIVITIES WAS UNDERTAKEN TO EARN MA NO. 133(DEL)/2011 6 PROFIT BUT TO ATTAIN OBJECTS OF THE CHAMBER AND , THUS, NO BUSINESS WAS CARRIED OUT BY IT. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDER OF THE AO. 3. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. THE IMPORT OF THE REMARK MADE IN PARAG RAPH NO. 5 OF THE ORDER OF THE TRIBUNAL IS NOT WHAT IS UNDERSTOOD BY THE LD. COUNSEL. THE FINDING OF THE AO IS THAT THE ASSESSEE IS CARRYING ON CERTAIN ACTIVITIES WHICH ARE IN THE NATURE OF BUSINESS. HOWEVER, THE FINDING OF THE LD . CIT(A) IS THAT SINCE THE ACTIVITIES ARE CARRIED ON IN PURSUANCE OF THE OB JECTS, THE ACTIVITIES DO NOT CONSTITUTE BUSINESS. FURTHER, IT HAS ALSO BEEN HE LD THAT THE MODE OF EARNING IS NOT THE SINE QUA NON FOR GRANT OF DEDUCTION U/S 11(1) AND WHAT IS TO BE SEEN IS THAT THE INCOME HOWSOEVER EARNED SHOULD BE APPLIED TOWARDS THE OBJECTS OF THE INSTITUTION. THE DIFFERENCE IN THE FINDINGS IS ON ACCOUNT OF APPRECIATION OF LAW AND NOT ON ACCOUNT OF CONSIDE RATION OF THE ACTIVITIES PER SE. THE QUESTION WHETHER THE ASSESSEE HAS EARNE D PROFITS AND GAINS OF BUSINESS HAS TO BE DECIDED NOT WITH REFERENCE TO T HE PROVISION CONTAINED IN SECTION 2(15), BUT WITH REFERENCE TO THE PROVISI ON CONTAINED IN SECTION 2(13). WE HAVE ALREADY NARRATED VARIOUS HEADS UNDER WHICH RECEIPTS HAVE BEEN CLASSIFIED AND IT IS CLEAR THEREFROM THAT RECEIPTS UNDER CERTAIN MA NO. 133(DEL)/2011 7 HEADS HAVE BEEN EARNED BY REPETITIVE ACTIVITIES , WHICH COULD RIGHTLY BE TERMED AS BUSINESS. THEREFORE, WE DO NOT FIND AN Y ERROR IN THE ORDER WHEN IT IS HELD THAT THE ONLY THING WHICH CAN BE DONE IS TO ASCERTAIN THE BUSINESS INCOME, WHETHER SUCH INCOME IS INCIDENTAL TO THE O BJECTS, WHETHER BOOKS ARE MAINTAINED FOR SUCH BUSINESS AND QUANTUM THE REOF. THEREAFTER, THE AO HAS BEEN DIRECTED TO EXAMINE WHETHER CONDITION PR ESCRIBED IN SECTION 11(4A) HAS BEEN SATISFIED. SINCE THESE MATTERS COULD NOT BE ASCERTAINED BY THE AO DUE TO PAUCITY OF TIME, THE MATTER WAS RE STORED TO HIS FILE. THUS, AS SUCH THERE IS NO MISTAKE APPARENT FROM RECORD IN THE ORDER, WHICH CAN BE RECTIFIED U/S 254(2) OF THE ACT. 4. IN THE RESULT, THE APPLICATION IS DISMISSED. SD/- SD/- (I.P. BANSAL) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER SP SATIA COPY OF THE ORDER FORWARDED TO:- PHD CHAMBER OF COMMERCE & INDUSTRY, NEW DELHI. DY. DIRECTOR OF INCOME-TAX (E), INV. CIRCLE 11, NE W DELHI. CIT(A) CIT THE DR, ITAT, NEW DELHI. ASSISTANT REGISTRAR.