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 ADIT (E), Inv. Circle (1), New Delhi. Vs. India Trade Promotion Organisation, Pragati Bhawan, Pragati Maidan, New Delhi – 110 001.
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ADIT (E), Inv. Circle (1), New Delhi. Vs. India Trade Promotion Organisation, Pragati Bhawan, Pragati Maidan, New Delhi 110 001.
September, 13th 2019

Referred Sections:
Section 2(15) of the Income Tax Act, 1961,
Section 25 of the Companies Act,
Section 12A of the Income-tax Act, 1961
Sections 11 & 12 of the Act
Section 10(23C)(iv) of the said Act.

Referred Cases / Judgments:
Income Tax vs. Market Committee, Pipli (2011) 330 ITR
Income Tax vs. Tiny Tots Education Society, (2011) 330 ITR 21
Commissioner of Income Tax vs. Manav Mangal Society, (2010) 328 ITR 421 (P&H),
Commissioner of Income Tax vs. Sheth Manilal Ranchhoddas Vishram Bhavan Trust, (1992) 198 ITR
Commissioner of Income Tax vs. Raipur Pallottine Society, (1989) 180 ITR 579 (M.P.),
Commissioner of Income Tax vs. Institute of Banking, (2003) 264 ITR 110 (Bom),
CIT vs. Shakuntala Tharal Charitable Foundation, (2013) 358 ITR 452 (MP).

     IN THE INCOME TAX APPELLATE TRIBUNAL
          (DELHI BENCH `D' : NEW DELHI)

   BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER
                       and
 SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER

                   ITA No.1919/Del./2016
               (ASSESSMENT YEAR : 2009-10)

                   ITA No.3359/Del./2016
               (ASSESSMENT YEAR : 2009-10)

                   ITA No.2508/Del./2016
               (ASSESSMENT YEAR : 2010-11)

ADIT (E), Inv. Circle (1), vs. India Trade Promotion Organisation,
New Delhi.                     Pragati Bhawan, Pragati Maidan,
                               New Delhi ­ 110 001.
                                     (PAN : AAATI2955C)

                   ITA No.3135/Del./2016
               (ASSESSMENT YEAR : 2011-12)

JDIT (E), Range 1,         vs.   India Trade Promotion Organisation,
New Delhi.                       Pragati Bhawan, Pragati Maidan,
                                 New Delhi ­ 110 001.
                                       (PAN : AAATI2955C)

      (APPELLANT)                            (RESPONDENT)

      ASSESSEE BY : Smt. Anju Goel, CA
      REVENUE BY : Smt. Aparna Karan, CIT DR

                     Date of Hearing :    27.08.2019
                     Date of Order :      13.09.2019

                             ORDER

PER KULDIP SINGH, JUDICIAL MEMBER :
                                     2    ITA Nos. 1919, 3359, 2508 &3135 /Del./2016



       Since common questions of facts and law have been raised

in the aforesaid appeals, the same are being disposed off by way of

consolidated order to avoid repetition of discussion.

ITA No.1919/Del./2016 (AY 2009-10)

ITA NO.2508/DEL/2016 (AY 2010-11)

ITA NO.3135/DEL/2016 (AY 2011-12)


2.     Appellant, ADIT (E), Inv. Circle (1), New Delhi and JDIT

(E), Range 1, New Delhi (hereinafter referred to as the `Revenue') by

filing the present appeals sought to set aside the impugned orders dated

09.03.2016, 15.02.2016 & 10.03.2016 passed by the Commissioner of

Income - tax ( Appeals ) - 40, New Delhi qua the assessment years

2009-10, 2010-11 & 2011-12 respectively on the identical grounds

except the difference in amount inter alia that :-

        "1. On the facts and in the circumstances of the case
       and in law, Ld. CIT(A) has erred in ignoring the fact
       that the activities of the assessee do not quality for
       charitable purpose in view of the provisions of Section 2
       (15) of the Income Tax Act, 1961, hence the income of
       the assessee does not qualify for exemption u/s 11/12 of
       the Income Tax Act, 1961.

       2.     On the facts and in the circumstance of the case
       and in law, 1d CIT(A) has erred in allowing the appeal
       of the assessee by ignoring the fact that when deduction
       is allowed in respect of capital expenditure, no
       depreciation is allowed on the same assets as this will
       lead to double.

       3.   On the facts and in the circumstances of the case
       and in law, Ld. CIT (A) has erred in allowing the
                                   3    ITA Nos. 1919, 3359, 2508 &3135 /Del./2016



      appeal of the assessee by ignoring the fact that assessee
      is following mercantile system of accounting and rental
      income has not accounted in the books. The income as
      per mercantile method of accounting has to be offered
      to tax on accrual basis. Such income which has accrued
      but not received is shown as receivable or under the
      head Sundry Debtor as the case may be in the Balance
      Sheet. Such income is entitled as and to be written of
      subsequently when it actually becomes bad, as per
      provisions of the Act."


3.    Briefly stated the facts necessary for adjudication of the issue at

hand are : India Trade Promotion Organisation (ITPO), the assessee is

an organisation incorporated under section 25 of the Companies Act,

1956 as not-for-profit organisation, registered under section 12A of the

Income-tax Act, 1961 (for short `the Act') to carry on the objects of

promoting the Indian Trade through medium of organizing trade fairs,

exhibitions etc. in India and abroad and has also exempted from Income-

tax u/s 10(23)(iv) of the Act from 1989-90 onwards. It is wholly owned

Apex Trade Promotion body of Government of India and Senior

Officers of Government are appointed as Directors and Members so as

to ensure that the Government Rules & Regulations are complied.

Assessing Officer (AO), following the earlier assessment orders,

proceeded to conclude that the assessee is covered by the proviso to

section 2 (15) of the Act inasmuch as its activities are in the nature of

business and thus held to be not charitable in nature and thereby denied

the benefit of sections 11 & 12 of the Act despite the fact that it is

registered organisation u/s 12AA and notified u/s 10(23C)(iv) of the
                                    4   ITA Nos. 1919, 3359, 2508 &3135 /Del./2016








Act as the assessee is having income from space rent, hoardings (display

site), site of publication, sale of tickets, etc. So, the AO proceeded to

hold that the assessee cannot be considered for exemption of its income

as even after amendment u/s 2(15) of the Act, its activities are not

charitable in nature.

4.     AO     disallowed     the   depreciation     of     Rs.2,11,52,612/-,

Rs.1,69,34,321/- & Rs.1,37,55,543 in AYs 2009-10, 2010-11 &

2011-12 respectively on the opening balance of fixed assets as on

01.04.2008 on the ground that the assessee has already claimed the

amount spent on purchase of fixed assets as application of funds as and

when the assets were purchased.           AO also made addition of

Rs.1,68,73,663/-, Rs.2,01,86,003/- & Rs.1,83,00,000/- in AYs 2009-10,

2010-11 &     2011-12 respectively to the income of the assessee on

account of space rent income on the basis of disclosure in Notes to

Accounts.

5.     Assessee carried the matter by way of appeals before the ld. CIT

(A) who has deleted the additions by partly allowing the appeals.

Feeling aggrieved, the Revenue has come up before the Tribunal by way

of filing the present appeals.

6.     We have heard the ld. Authorized Representatives of the parties

to the appeal, gone through the documents relied upon and orders passed

by the revenue authorities below in the light of the facts and

circumstances of the case.
                                        5    ITA Nos. 1919, 3359, 2508 &3135 /Del./2016




GROUND NO.1 OF
AYs 2009-10, 2010-11 & 2011-12


7.     AO by invoking the amended provisions of section 2 (15) of the

Act denied the benefit of exemption u/s 11 & 12 of the Act to the

assessee organisation on the ground that the assessee does not qualify

for charitable purposes. However, ld. CIT (A) by relying upon the

decision rendered by Hon'ble Delhi High Court in assessee's own case

rendered in WP (C) 1872 / 2013 proceeded to hold that the assessee is

entitled for benefit of exemption claimed u/s 10(23C)(iv) of the Act.

Operative part of the aforesaid decision rendered by Hon'ble Delhi High

Court in assessee's own case (supra) is extracted for ready perusal as

under :-

       "58. In conclusion, we may say that the expression "charitable
       purpose", as defined in Section 2(15) cannot be construed
       literally and in absolute terms. It has to take colour and be
       considered in the context of Section 10(23C)(iv) of the said Act. It
       is also clear that if the literal interpretation is given to the proviso
       to Section 2(15) of the said Act, then the proviso would be at risk
       of running fowl of the principle of equality enshrined in Article
       14 of the Constitution India. In order to save the Constitutional
       validity of the proviso, the same would have to be read down and
       interpreted in the context of Section 10(23C)(iv) because, in our
       view, the context requires such an interpretation. The correct
       interpretation of the proviso to Section 2(15) of the said Act
       would be that it carves out an exception from the charitable
       purpose of advancement of any other object of general public
       utility and that exception is limited to activities in the nature of
       trade, commerce or business or any activity of rendering any
       service in relation to any trade, commerce or business for a cess
       or fee or any other consideration. In both the activities, in the
       nature of trade, commerce or business or the activity of
       rendering any service in relation to any trade, commerce or
       business, the dominant and the prime objective has to be seen. If
       the dominant and prime objective of the institution, which claims
       to have been established for charitable purposes, is profit
                                      6    ITA Nos. 1919, 3359, 2508 &3135 /Del./2016



       making, whether its activities are directly in the nature of trade,
       commerce or business or indirectly in the rendering of any
       service in relation to any trade, commerce or business, then it
       would not be entitled to claim its object to be a 'charitable
       purpose'. On the flip side, where an institution is not driven
       primarily by a desire or motive to earn profits, but to do charity
       through the advancement of an object of general public utility, it
       cannot but be regarded as an institution established for
       charitable purposes.

       59.     Thus, while we uphold the Constitutional validity of the
       proviso to Section 2(15) of the said Act, it has to be read down in
       the manner indicated by us. As a consequence, the impugned
       order dated 23.01.2013 is set aside and a mandamus is issued to
       the respondent to grant approval to the petitioner under Section
       10(23C)(iv) of the said Act within six weeks from the date of this
       judgment. The writ petition stands allowed as above. The parties
       are left to bear their own costs."


8.     So, following the decision rendered by Hon'ble Delhi High Court

in assessee's own case (supra), the ld. CIT (A) has rightly decided the

issue in favour of the assessee holding that the assessee cannot be denied

the benefit of exemption u/s 10(23C)(iv) of the Act. So, ground no.1 in

AYs 2009-10, 2010-11 & 2011-12 is determined against the Revenue.


GROUND NO.2 IN
AYs 2009-10, 2010-11 & 2011-12

9.     AO made disallowance of Rs.2,11,52,612/-, Rs.1,69,34,321/- &

Rs.1,37,55,543 in AYs 2009-10, 2010-11 & 2011-12 respectively on

the ground that when deduction is allowed in respect of capital

expenditure, no depreciation is allowed on the same assets as it would

lead to double deduction.       However, the ld. CIT (A) allowed the

depreciation by relying upon the decision rendered by Hon'ble Delhi
                                     7    ITA Nos. 1919, 3359, 2508 &3135 /Del./2016



High Court in ITA No.7 / 2013 order dated 27.11.2013 rendered in

assessee's own case.

10.    Hon'ble Delhi High Court in the aforesaid decision in assessee's

own case (supra) vide order dated 06.09.2013 dismissed the appeal

preferred by the Revenue challenging the order of the Tribunal; the

operative part of the order is extracted for ready perusal as under :-

       "14. From the year 1984 onwards, there have been a number
       of decisions of various High Courts taking a similar and
       identical view, as that of Society of the Sisters of St. Anne
       (supra). These are as under:-

              Income Tax vs. Market Committee, Pipli (2011) 330 ITR
              16 (P&H), Income Tax vs. Tiny Tots Education Society,
              (2011) 330 ITR 21 (P&H), Commissioner of Income Tax
              vs. Manav Mangal Society, (2010) 328 ITR 421 (P&H),
              Commissioner of Income Tax vs. Sheth Manilal
              Ranchhoddas Vishram Bhavan Trust, (1992) 198 ITR
              598 (Guj.), Commissioner of Income Tax vs. Raipur
              Pallottine Society, (1989) 180 ITR 579 (M.P.),
              Commissioner of Income Tax vs. Institute of Banking,
              (2003) 264 ITR 110 (Bom), and CIT vs. Shakuntala
              Tharal Charitable Foundation, (2013) 358 ITR 452 (MP).


       15.    Kerala High Court was also conscious of the said
       decisions and the fact that Section 11(1)(a) had been interpreted
       in a different manner. It was in these circumstances that the
       Kerala High Court in the last portion of paragraph 6, as quoted
       above, has stated that the assessee would be entitled to write
       back depreciation and if done, the Assessing Officer would
       modify the assessment determining the higher income and allow
       recomputation of depreciation written back for the purpose of
       application of income for charitable purposes in future or
       subsequent years. This may lead to its own difficulties and
       problems as suddenly the entire depreciation written off would
       have to be added first and then in one year substantial
       application of income would be required. This may be
       impractical and would disturb the working of many a
       charitable institutions. The legal interpretation which has
       continued since 1984, if disturbed and implemented, would not
       appropriately resolved. Consistency and certainty is more
       appropriate.
                                     8      ITA Nos. 1919, 3359, 2508 &3135 /Del./2016









      16.     The equally plausible and consistent interpretation of
      clause (a) of Section 11(1) of the Act is that income derived from
      property must be calculated as per the principles of the Act. The
      said clause is not a computation provision and does not disturb
      the "income" earned or available but postulates that the
      "income" as computed in accordance with the provisions of the
      Act to the extent of 86% must be applied. Application of income
      may include purchase of a capital asset. The said purchase is
      valid and taken into consideration for the purpose of ensuring
      compliance, i.e., application of money or funds and is not
      a factor which determines and decides the quantum of income
      derived from property held under trust. Computation of income
      is separate and distinct and has to be made on commercial basis
      by applying provisions of the Act."


11.   So, following the decision rendered by Hon'ble Delhi High Court

in assessee's own case (supra), the ld. CIT (A) has rightly allowed the

depreciation in favour of the assessee and thereby deleted the

disallowance made by the AO. So, we find no illegality or perversity in

the impugned order on this issue. Consequently, ground no.2 in AYs

2009-10, 2010-11 & 2011-12 is determined against the Revenue.


GROUND NO.3 IN
AYs 2009-10, 2010-11 & 2011-12

12.   AO     made    addition   of       Rs.1,68,73,663,      Rs.2,01,86,003       &

Rs.1,83,00,000 in AYs 2009-10, 2010-11 & 2011-12 respectively on a/c of

space rent income on the basis of disclosure in Notes to Accounts of the

assessee. However, ld. CIT(A) deleted the addition on the ground that

since space rent account is disputed by two Government Departments viz.

National Science Centre and Crafts Museum by contesting the ownership

of land attracting rent by the assessee and claimed that they are
                                    9    ITA Nos. 1919, 3359, 2508 &3135 /Del./2016



in possession of the land and as such it is uncertain, no addition can be

made.

13.     Ld. CIT (A) has thrashed the facts in detail and by applying the

decision rendered by various Hon'ble High Courts and Hon'ble

Supreme Court, decided the issue in favour of the assessee on the

ground that since the dispute has not been resolved till date, the addition

is not sustainable.

14.     Assessee has brought on record documents and letter of

discussion to resolve the disputes between National Science Centre &

Crafts Museum and India Trade Promotion Organisation (ITPO) for

non-payment of rent, available at pages 93 to 130 of the paper book,

which have been duly examined by the ld. CIT(A). We are of the

considered view that when income on account of space rent has not been

accrued, as in the instant case due to dispute, there cannot be any rent

even though entry in the books of account have been made on account

of notional income.     So, when the income would be received its

taxability can be examined by the Revenue. Ld. DR for the Revenue

has not brought on record any document if the dispute between the

parties qua the space rent has been resolved. So, in these circumstances,

we are of the considered view that there is no illegality or perversity in

the findings returned by the ld. CIT (A), consequently ground no.3 in

AYs 2009-10, 2010-11 & 2011-12 is determined against the Revenue.
                                    10     ITA Nos. 1919, 3359, 2508 &3135 /Del./2016



ITA NO.3359/DEL/2016 (AY 2009-10)


15.    So far as appeal filed by the Revenue challenging the impugned

order dated 09.03.2016 passed by the ld. CIT (A) in which order passed

u/s 154 / 143 (3) of the Act was challenged, is concerned, since the issue

adjudicated and decided in assessment order dated 09.04.2012 passed

u/s 143 (3) and order dated 09.07.2012 passed u/s 154 of the Act have

been squarely covered in the grounds discussed in the preceding paras,

no separate findings are required to be returned, hence, the appeal filed

by the Revenue is hereby dismissed.

16.    Resultantly,    all    the   four       appeals        being            ITA

Nos.1919/Del./2016,          3359/Del./2016,          2508/Del./2016              &

3135/Del./2016 are hereby dismissed.

Order pronounced in open court on this 13th day of September, 2019.


         Sd/-                                           sd/-
  (PRASHANT MAHARISHI)                             (KULDIP SINGH)
   ACCOUNTANT MEMBER                              JUDICIAL MEMBER

Dated the 13th day of September, 2019
TS

Copy forwarded to:
     1.Appellant
     2.Respondent
     3.CIT
     4.CIT(A)-22, New Delhi.
     5.CIT(ITAT), New Delhi.                                     AR, ITAT
                                                                NEW DELHI.

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