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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