Income Tax Appellate Tribunal - Agra
Rajkiya Audyogik Kriishi Pradarshani ... vs Department Of Income Tax on 26 July, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
AGRA BENCH, AGRA
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND
SHRI A.L. GEHLOT, ACCOUNTANT MEMBER
ITA Nos.72 & 73/Agr/2011
Assessment Years: 2005-06 & 2006-07 respectively
Addl. Commissioner of Income Tax vs. Rajkiya Audyogik Krishi Pradarshani
Range-1, Aligarh. Avam Govt. Industrial Exhibition,
G.T. Road, Aligarh.
(PAN: Not mentioned).
(Appellant) (Respondent)
Appellant by : Shri Waseem Arshad, Sr. D.R.
Respondent by : Shri Avan Kumar Singh, F.C.A.
Date of Hearing : 26.07.2012
Date of Pronouncement of order : 31.08.2012
ORDER
PER A.L. GEHLOT, ACCOUNTANT MEMBER:
These are two appeals filed by the Revenue. ITA No.72/Agr/2011 is filed against the order dated 27.12.2010 passed by the ld. CIT(A), Ghaziabad for the A.Y. 2005-06 and ITA No.73/Agr/2011 is filed against the order dated 22.11.2010 passed by the ld. CIT(A), Muzaffarnagar for the A.Y. 2006-07. 2 ITA Nos.72 & 73/Agr/2011
A.Ys. 2005-06 & 2006-07.
2. Common grounds have been raised by the Revenue in both the appeals except for difference of amount involved. For the purpose of ready reference, grounds of appeal in ITA No.72/Agr/2011 for A.Y. 2005-06 are reproduced as under:-
"1. Whether Under the facts and circumstances of the case Ld. CIT(A) was correct in deleting the addition of Rs.79,12,400/-, relying on the fact that it was registered U/s 12A, ignoring that the expenditure incurred by the assessee was not related to general public utility and does not entitled for exemption u/s 11 of the IT Act, 1961,
2. Whether under facts and circumstances of the case Ld. CIT(A) was correct in deleting the addition of Rs.1,05,550/- on account Holi Milan and Roza Iftar celebration, relying on the fact that it was registered U/s 12A, ignoring that the expenditure incurred by the assessee was not related to general public utility and does not entitled for exemption u/s 11 of the IT Act, 1961.
3. Whether under facts and circumstances of the case Ld. CIT(A) was correct in deleting the addition of Rs.5,99,690/- on account of expenditure incurred on NEDA project, relying on the fact that it was registered U/s 12A, ignoring that the expenditure incurred by the assessee was not related to general public utility and does not entitled for exemption u/s 11 of the IT Act,1961.
4. Whether under facts and circumstances of the case Ld. CIT(A) was correct in deleting the addition of Rs.8,69,085/- on account of Atithi Grah Sajja & Repair, relying on the fact that it was registered U/s 12A, ignoring that the expenditure incurred by the assessee was not related to general public utility and does not entitled for exemption u/s 11 of the IT Act,1961.
5. Whether under facts and circumstances of the case Ld. CIT(A) was correct in deleting the addition of Rs.2,00,000/-- on account of Police Kalyan Nidhi relying on the fact that it was registered u/s 12A, ignoring that the expenditure incurred by the assessee was not related 3 ITA Nos.72 & 73/Agr/2011 A.Ys. 2005-06 & 2006-07.
to general public utility and does not entitled for exemption u/s 11 of the IT Act,1961.
6. Whether under facts and circumstances of the case Ld. CIT(A) was, correct in deleting the addition of Rs.1,73,293/- on account of Atithi Satkar/Hotel relying on the fact that it was registered U/s 12A, ignoring that the expenditure incurred by the assessee was not related to general public utility and does not entitled for exemption u/s 11 of the IT Act,1961.
7. Whether under facts and circumstances of the case Ld. CIT(A) was correct in deleting the addition of Rs.6,47,034/- on account of general repair and maintenance, relying on the fact that it was registered U /s 12A, ignoring that the expenditure incurred by the assessee was not related to general public utility and does not entitled for exemption u/s 11 of the IT Act,1961.
8. Whether under facts and circumstances of the case Ld. CIT(A) was correct in deleting the addition of Rs.17,75,194/- on account of expenditure claimed under light & sound System, Musical Nights Kavi Sammelan, Geet and Cultural & other· programmes, relying on the fact that it was registered U/s 12A, ignoring that the expenditure incurred by the assessee was not related to general public utility and does not entitled for exemption u/s 11 of the IT Act,1961.
9 Whether under facts and circumstances of the case Ld. CIT(A) was correct in deleting the addition of Rs.2l,45,l50/- on account of Disallowance out of other expenses, relying on the fact that it was registered U/s 12A, ignoring that the expenditure incurred by the assessee was not related to general public utility and does not entitled for exemption u/s 11 of the IT Act, 1961.
10. Whether under facts and circumstances of the case Ld. CIT(A) was correct in deleting the addition of Rs.3,91,729/- on account of TDS claimed as expenditure."
3. The brief facts of the case are that the assessee is a government floated Society registered under Society Registration Act, 1860. It was set up for the 4 ITA Nos.72 & 73/Agr/2011 A.Ys. 2005-06 & 2006-07.
purpose of holding exhibition of various industrial and agricultural equipments, for the purpose of development of Aligarh District as whole, especially to boost the inventions/progress made by small scale industries and agricultural implementation and also to show case the growth in the medical science, horticulture, games and sports and other fields of the District. During the assessment proceedings, the A.O. noticed that the assessee has shown parking trucks of balu & badarpur contract receipt of Rs.79,11,000/-. The A.O. was of the view that this income is income from business. The income through rent on shops and land for the period other than exhibition period was also taken as income from business by the A.O. The A.O. was also of the view that the title of the society over the land was not clearly evidenced and hence the income from such property was not the income derived from property held in trust and hence was not eligible for exemption under section 11 & 12 of the Act. The A.O. has also noticed that following expenses were not found incurred for charitable purposes:-
"(a) Holi Milan and Roza Iftar celebration expenses Rs.1,05,550/-
(b) 50% of (Rs.11,99,380/-) the expenditure incurred on NEDA project Rs.5,99,690/-.
(c) Atithi Grah Sajja & Repair Rs.8,69,085/-
(d) Police Kalyan Nidhi Rs.2,00,000/-
(e) 50% of (Rs.3,46,586/-) Atithi Satkar/Hotel Rs.1,73,293/-
(f) ¼ th of (Rs.25,91,734/-) out of general repair and maintenance Rs.6,47,034/-
(g) TDS claimed as expenditure Rs.3,91,729/-5 ITA Nos.72 & 73/Agr/2011
A.Ys. 2005-06 & 2006-07.
(h) 50% of expenditure claimed under light & sound System (Rs.10,94,488/-), Musical Nights Kavi Sammelan, Geet (Rs.16,55,600/-) and Cultural & other programmes (Rs.8,00,300/-) Rs.17,75,194/-
(i) Disallowance out of other expenses Rs.21,45,150/-"
CIT(A) page 3"
4. The CIT(A) allowed the appeal of the assessee as under :-
"5.1. Grounds of appeal No.1, 2, 3 & 4 are against disallowance of claim of exemption u/s 11 & 12 and thereby making an addition of Rs.79,11,000/- and treating the same as business income. 5.1(a) On this issue, the view taken by CIT(A), Muzaffarnagar, who has already adjudicated appellant's case for Assessment year 2006- 07, vide order in appeal No.51/2008-09/Alg dated 22.11.2010, is reproduced hereunder:
"The facts of the case as well as submissions made by the appellant and remand report of the A. O. have been carefully considered. It is noticed that the appellant has furnished copy of registration granted u/s 12A of the Act by the Commissioner of Income-tax, Agra vide letter F.No,CIT(Tech)1120(G-360/12- A/99-2000/Agra dated 09-10-2000 by virtue of which the appellant was entitled for claim of exemption u/s 11 & 12 of the I.T. Act, 1961 with effect from 01-04-1999. The A. O. cannot simply override the order of the Commissioner of Income-tax, Agra by pointing out certain defects in the constitution of the society and proceed to disallow the claim of exemption u/s 11 & 12 of the Act. It is pertinent to mention here that though the power to cancel registration flows from the power to register, but the same having not been provided for specifically in the provisions, it lead to unnecessary litigation. Sub-section (3) has been inserted by the Finance (No.2) Act, 2004, with effect from 1 October, 2004 to provide for such a situation, it is provided that if the Commissioner of Income-tax is satisfied that the activities of any trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or 6 ITA Nos.72 & 73/Agr/2011 A.Ys. 2005-06 & 2006-07.
institution, he shall, after giving reasonable opportunity of being heard to the concerned trust or institution, pass an order in writing cancelling the registration granted under the said section. Thus what least the A. O. could do was to refer the matter to the Commissioner of Income-tax, Agra in view of discrepancies as pointed out in the assessment order in respect of constitution of the society etc. But it was for the Commissioner of Income-tax, Agra to review the matter with reference to discrepancies pointed by the A. O. Thus, the A.O. was acting beyond his jurisdiction in suo moto denying the claim of exemption u/s 11 & 12 of the Act particularly in light of the fact that the appellant was entitled for the same in view of registration granted u/s 12A of the Act by the competent authority. The view is supported with the judicial pronouncement in the case of Madhya Pradesh Madhyam vs. CIT (2002) 256 ITR 277 (MP.) as relied upon by the appellant.
Further, it remains undisputed that main objective of the society remains charitable activity which falls under the fourth limb of section 2(15) of the I.T. Act as advancement of any other objective of general public utility. The exhibition is being conducted since last more than 100 years which clearly establishes its utility and credibility for general public at large. Although, it seems the formal registration u/s 12AA done on 09- 10-2000; the appellant society's cases were scrutinized for A.Ys. 1989-90, 1990-91 and 1995-96 and it is observed that the appellant society's income was held as exempt.
Regarding various expenses incurred by the society, the A. O. has not pointed out any violation of section 13 of the I.T. Act so as to render its registration u/s 12A liable for cancellation or deny exemption of income u/s 11 of the I.T. Act. On the other hand, the A. O. disallowed the expenses only on the ground that in his opinion were not for charitable purposes. However, the various activities of the society and the expenses incurred therein are incidental to the main objectives of the society which is clearly as charitable. The view is supported by the rulings of the Hon'ble Apex Court in the case of Dharmadeepti vs. CIT, Kerala (1978) 114 ITR 454 (SC), as relied upon by the appellant amongst other judicial pronouncements.7 ITA Nos.72 & 73/Agr/2011
A.Ys. 2005-06 & 2006-07.
Thus it is held that the A. O. was not justified in not allowing claim of exemption u/s.11 & 12 of the Act and hold the application of funds as not been applied for charitable purposes. In view of the above, the benefit of registration granted u/s 12A is allowed and accordingly, exemption u/s 11 & 12 is allowed subject to fulfillment of the relevant provisions of these sections of the Act."
5.1(b) On independent consideration, I agree with the reasoning given by CIT(Appeals), Muzaffarnagar and the same reasoning is followed and applied to the issue for this assessment year as well.
5.l(c) Apart from above, I feel like adding some further discussion here. From the facts on record, I am fully satisfied that the Society's objectives are charitable, as its aims are to promote small scale industries, agriculturists, artisans etc., of not only the entire district but also of the entire nation by trying to show case the developments and programmes of the region as well as the country as a whole in various fields, especially touching the Villages and suburban areas and common man in general.
5.l(d) The exhibition is having a long illustrious precedence and its good reputation must be reckoned and recognized.
5.1(e) The society was set up for this illustrious Pradarshani/Exhibition with Government's funds and machinery, which further adds to its status and non-commercial status.
5.l(f) Further, I do not find any defect in the clauses of Memorandum & Article of Association. Special mention must be made that income or funds are not divisible amongst the members of the trust and no benefits are to go to any individual; the entire funds of any surplus generated are dovetailed "into the avowed of charitable activities of the trust.
5.1(g) I have personally verified and find that AO is wrong in asserting that ledger is not maintained. I have seen and perused the ledger which is certainly not fabricated. The ledger entries tallies with the various accounts and account folders and cash book being maintained by the society. This ledger has been produced before 8 ITA Nos.72 & 73/Agr/2011 A.Ys. 2005-06 & 2006-07.
CIT(A), Muzaffarnagar as well and before the AO during remand proceedings for A.Y. 2006-07. Further, I agree with the appellant's contention that even assuming that ledger is not being maintained; the other account books and registers/folders being maintained, did not lead to any conclusion that there are any inherent defects in the books or system of accounting. The AO has not pointed out any specific
5.l(h) In the above back drop, the activity of allowing the land for parking of trucks carrying sand and badarpur during non-exhibition period and earning rental income there from is, at the most, an incidental or supplementary activity, supplementing to the cause of the society simply because the entire rental income generated is being ploughed back for the purposes of the society. Various case laws cited by the appellant support the case of the appellant. Special reliance is placed on following judgements:
(i) Surat Art Silk Cloth Manufacturers Association - 121 ITR 1 (SC)
(ii) Trustees of Visha Nima Charity Trust - 138 ITR 564 (Bombay)
(iii) Thanthi Trust - 247 ITR 785 (SC) 5.1(i) In view of above discussion, the AO's view of treating Rs.79,22,000/- as taxable business income is over ruled.
5.2. Ground No.6 pertains to various disallowances made by the AO. All the disallowances made by the AO out of various expenses, as mentioned in ground No.6, are deleted because of discussion above and also because the reasoning given by the AO for such disallowances is not found tenable. It would suffice to say that all these expenses are directly towards achieving the objects of the charitable activities i.e. for maintaining and utilizing the property of the trust for the annual exhibition. Most of the disallowances are on adhoc basis which is also not correct.
Once the expenses are accepted to be made for the charitable purposes and when no specific defect in the books and bills and vouchers has been found; all these expenses are to be held allowable being utilization of the funds/ income towards charitable purposes. 9 ITA Nos.72 & 73/Agr/2011
A.Ys. 2005-06 & 2006-07.
5.2(a) Just to clarify further; I am satisfied with the explanation given by the appellant in respect of nature and purpose of these expenses. The AO's conclusion that assessee is engaged in business activity is negated. Further, AO's view that the assessee has applied income for the purpose of entertainment and for non-charitable activities is also negated.
5.3 Regarding ground of appeal No.5, the AO is directed to verify whether there was any determined loss for assessment year 2004-05 and if so, give effect to the same, as per law."
5. Ld. Departmental Representative relied upon the order of A.O. and submitted that the assessee society was not owner of the property. Therefore, the income from stock, parking of trucks etc. were not the income derived from property held under the trust. Ld. Departmental Representative further submitted that the CIT(A) without appreciating the facts decided the issue. The ld. Departmental Representative submitted that the finding of the CIT(A) has misplaced. It was also submission of the ld. Departmental Representative that various expenses like Holi Milam, Roza Iftar, Atithi Grah Sajja repair, Police Kalyan Nidhi and others which has been noted by the A.O. are not related to Exhibition. Therefore, the expenses incurred were not for the charitable purpose. Ld. Departmental Representative submitted that the assessee did not incur expenditure for the purpose of charitable purposes. Ld. Departmental Representative while concluding his submission submitted that the CIT(A) did not give his finding in respect of Society property and in respect of expenditure which 10 ITA Nos.72 & 73/Agr/2011 A.Ys. 2005-06 & 2006-07.
was disallowed by the A.O. whether these were incurred for the purpose of the object of the Society i.e. charitable purpose.
6. The ld. Authorised Representative, on the other hand, relied upon the order of CIT(A) and submitted that the A.O. has wrongly came to the conclusion that the property held by the Society means only the immovable property. The ld. Authorised Representative further submitted that the entire expenses incurred were for charitable purposes in accordance with the object of the Society. The Society is registered society under Society Registration Act, 1860. The object of the society is to conduct exhibition of various industrial and agricultural equipments. The institution headed by the District Magistrate, Aligarh. The constitution of the Society has been written on the first day of April, 1998. Ld. Authorised Representative further submitted that the President of the committee is District Magistrate and the Officer Incharge is additional District Magistrate, Aligarh. General Secretary of the committee is Tehsildar. The assessee society is registered under section 12A of the Income Tax Act, 1961. Ld. Authorised Representative further submitted that the A.O. has failed to differentiate between the Private Society and Government/Public Society. The Aligarh exhibition is wholly owned, carried & controlled by State Government and the Supervisor is District Magistrate and no public interference is involved therein. It is also submission of the ld. 11 ITA Nos.72 & 73/Agr/2011
A.Ys. 2005-06 & 2006-07.
Authorised Representative are that case of the assessee in earlier year has also been completed under section 143(3) of the Act and existing assessee's claim as it is. Ld. Authorised Representative submitted that when the assessee has been granted registration under section 12A of the Act, the A.O. has no power to withdraw it. Ld. Authorised Representative submitted that Society has complied with all the conditions as laid down under section 11 of the Act.
7. We have heard the ld. Representatives of the parties and records perused. We notice that the assessee has granted registration under section 12A/12AA of the Act dated 09.10.2000 w.e.f. 01.04.99. This registration has not been found cancelled. The objects of the Society are charitable as its aims and activities are to promote small scale industries, agriculturists, artists etc. The CIT(A) noted that the clauses of Memorandum & Article of Association mentions that income or funds are not divisible amongst the members of the trust and no benefits are to go to any individual, the entire funds or any surplus generated are dovetailed into the avowed of charitable activities of the Society. The CIT(A) has also noted the fact that the entire rental income generated is being ploughed back for the purposes of the Society. The CIT(A) has followed his predecessor's order for A.Y. 2006-07 in assessee's own case wherein it was stated that the A.O. cannot simply override the order of CIT, Agra by pointing out certain defects in constitution of the Society 12 ITA Nos.72 & 73/Agr/2011 A.Ys. 2005-06 & 2006-07.
and proceed to disallow the claim of exemption u/s 11 & 12 of the Act. Action of the A.O. was beyond jurisdiction. It has also been noticed in that order that the society was allowed registration under section 12A/12AA of the Act dated 9th October, 2000 and the assessee's cases were scrutinized for the A.Ys. 1989-90, 1990-91 & 1995-96 wherein it was held that income of the society was exempt. As regards the contention of the ld. Authorised Representative regarding Society's property, we agree with the contention of the ld. Authorised Representative that 'property' word used in section 11 is a term of widest import, and subject to any limitation or qualification which the context might require, it signifies every possible interest which a person can acquire, hold and enjoy. 'Business' would undoubtedly be 'property', unless there is something to the contrary in the enactment. There is nothing in the language of section 11 which restricts in any manner the normal and accepted meaning of the word 'property'. In this regard, we may refer the judgment of Apex Court in the case of J.K. Trust vs. CIT, 32 ITR 535 (SC). Hon'ble Bombay High Court in the case of A.J. Patel vs. CIT, 97 ITR 683 (Bom) held that the right to exploit space on either side of an overbridge for advertisements is a 'property'. In the light of the above discussion, we do not find any substance in the submissions of the ld. Departmental Representative, therefore, the same is dismissed.
13 ITA Nos.72 & 73/Agr/2011
A.Ys. 2005-06 & 2006-07.
8. As regards the objection of the ld. Departmental Representative in respect of disallowance of expenditure, we notice that the CIT(A) has rightly held that the A.O. himself accepted those expenses incurred for the purposes of the object of the Society as he made adhoc disallowance in part. The CIT(A) after verifying the facts satisfied that expenses were incurred for charitable purposes in accordance with the object of the Society.
9. In the light of the above discussion, we do not find any infirmity in the order of the CIT(A). The order of the CIT(A) is, therefore, confirmed.
10. As stated above that since the facts of the case for A.Y. 2006-07 are identical to the case for A.Y. 2005-06 of which detailed discussion has been made above, in the light of the same, order of the CIT(A) for A.Y. 2006-07 is also confirmed.
11. In the result, both the appeals of the Revenue are dismissed.
(Order pronounced in the open Court)
Sd/- Sd/-
(BHAVNESH SAINI) (A.L. GEHLOT)
Judicial Member Accountant Member
PBN/*
14 ITA Nos.72 & 73/Agr/2011
A.Ys. 2005-06 & 2006-07.
Copy of the order forwarded to:
1. Appellant
2. Respondent
3. CIT (Appeals) concerned
4. CIT concerned
5. D.R., ITAT, Agra Bench, Agra
6. Guard File.
By Order
Sr. Private Secretary
Income-tax Appellate Tribunal, Agra
True Copy