Income Tax Appellate Tribunal - Delhi
Indian Youth Centre Trust Vishwa Yuvak ... vs Department Of Income Tax on 23 May, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'A' NEW DELHI
BEFORE SMT DIVA SINGH, JUDICIAL MEMBER
AND
SH.PRASHANT MAHARISHI, ACCOUNTANT MEMBER
I.T.A .No.-3635/Del/2015
(ASSESSMENT YEAR-2011-12)
ITO(Exemptions), vs Indian Youth Centre Trust,
Ward-12, Room No.2417, Vishwa Yuvak Kendra,
th
24 Floor, E-2-Block, Pratyaksh Kar Circular Road, Chanakya
Bhawan, Dr. Shyama Prasad Puri, New Delhi-110021.
Mukerjee Civic Centre, Jawahar Lal PAN-AAATI0141C
Nehru Marg, New Delhi-110002.
(APPELLANT) (RESPONDENT)
Assessee by Sh. K.K.Jaiswal, DR
Revenue by Sh.Ved Jain, Adv.
Date of Hearing 28.03.2016
Date of Pronouncement 23.05.2016
ORDER
PER DIVA SINGH, JM
The present appeal has been filed by the Revenue assailing the correctness of the order dated 12.03.2015 of CIT(A)-40, New Delhi pertaining to 2011-12 assessment year on the following grounds:-
1. "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in allowing the benefit of exemption u/s 11 & 12 of the income Tax Act, 1961, ignoring that the activities of the trust were not within the purview of section 2(150 of the I.T.Act, 1961 during the year.
2. "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in directing the AO to allow benefits of section 11 & 12 of the I.T.Act ignoring this fact that the assessee was involved in business activity during the year under consideration.
3. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in allowing the claim of depreciation to the assessee on the fixed assets which were claimed as application of income in earlier years.
I.T.A .No.-3635/Del/2015
4. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in allowing the claim of depreciation of Rs.33,34,307/- to the assessee ignoring the recent judgement of the jurisdictional High Court in the case of Charanjiv Charitable Trust vs DIT(E) in ITA No.321, 322 and 323/2013 dated 18.03.2014 wherein the Hon'ble Court has held that the Tribunal was not justified in directing the allowance of depreciation in respect of such assets.
5. The appellant craves leave to add, to alter or amend any ground of appeal raised above at the time of hearing."
2. Right at the outset, it was submitted by the ld.AR that the point at issue is fully covered in favour of the assessee as the CIT(A) has followed the order of the ITAT passed in the immediately preceding assessment year on identical facts and circumstances. The position was not disputed by the Revenue.
Accordingly the Ld.AR was required to show how it is claimed that the issues are same. The Ld.Sr.DR stated that he has no objection if the assessee demonstrates its claim first.
2.1. Accordingly referring to the grounds revised, Ld. AR submitted that Ground No.5 is general in nature. The issue addressed in Ground No.1 & 2 is fully addressed by the ITAT in its order dated 23.08.2013 in 2009-10 A.Y (copy filed). Referring to the assessment order passed in the year under consideration it was his submission that the assessee as in the earlier assessment year continues to be registered u/s 12A of the Income Tax Act, 1961 by Registration dated 15.05.1973. The trust it was submitted is also in receipt of order dated 02.12.2009 applicable for period commencing from A.Y.2010-11 to A.Y.2012-13 u/s 80G(5)(vi) vide DIT (Exemption) Delhi and the AO has taken cognizance of these facts. The objects as per the Memorandum of Association, it was submitted continue to remain the same. Its main object as in earlier years it was submitted continues to be to establish, maintain and conduct one or more Page 2 of 21 I.T.A .No.-3635/Del/2015 National or International Youth Centres at suitable centres in India, for the benefit of the foreign students and youth delegations as well as individuals visiting India. The assessee as in earlier years continue to sponsor programmes for interaction of youth leaders, young workers and students etc. 2.2. Addressing the background of the case it was submitted that the AO has following the past history proceeded to disallow the claim of the assessee for exemption u/s 11 of the income Tax Act, 1961 holding that the activities of the assessee fall within the scope of general utility u/s 2(15) of the Act. As in the past, the AO has held that benefit of section 11 & 12 would not be available to the assessee as according to him the trust is doing commercial activities. This finding has been reversed in appeal by the CIT(A) relying upon the order of the ITAT in assessee's own case for 2009-10 AY and on the very same facts, the detailed finding relied upon by the CIT(A) it was submitted is addressed at page 22 to 28 in para 6 to 6.1 of the order of the ITAT in ITA No.5502/Del/2012 dated 23.08.2013in 2009-10 AY in assessee's own case. It was heavily relied upon. Carrying us through the copy of the said order, it was his submission that since the claim of the Revenue remained identical. The CIT(A) was justified in holding that exemption claimed u/s 11 of the Act was to be allowed.
3. The Ld. Sr. DR, Sh. K.K.Jaiswal considering the order of the ITAT merely placed reliance on the assessment order. No distinguishing facts or circumstance was brought to the notice of the Bench in order to canvass a contrary view.
4. We have heard the rival submissions and perused the material available on record. It is seen that the AO in the year under consideration as in the Page 3 of 21 I.T.A .No.-3635/Del/2015 earlier year formed the view that the assessee fell in the scope of "general utility"
as per section 2(15) of the Income Tax Act, 1961. It is an admitted fact that the facts and circumstances in the year under consideration continue to remain the same as in the earlier years and that there is no change in the Memorandum of Association and the activities of the assessee as compared to the earlier years.
The AO took into consideration the fact that the assessee is registered u/s 12A of the Income Tax Act, 1961 vide registration dated 15.05.1971. The Trust also received order u/s 80G(5)(vi) vide DIT (Exemption) Delhi order dated 02.12.2009 applicable for period commencing from A.Y.2010-11 to A.Y.2012-13. The objects of the Society the AO noticed was claimed to be to maintain and conduct one or more National or International Youth Centres at & suitable centres in India, for the benefit of the foreign students and youth delegation as well as individuals visiting India. The society it was noted also sponsored programmes for interaction of youth leaders, young workers and students etc. Being of the view that the assessee is neither in the field of education, nor in the field of medical relief or relief of poor and he formed the view that it could be considered after seeing the activities carried out by assessee as falling within the scope of 'general public utility' as per Sec.2(15) of I.T.Act.
4.1. Further considering the annual accounts of the assessee, he was of the view that the assessee society's main source of receipts is from Hostel/Canteen activities and booking of Auditorium and Conference Hall which are of commercial nature. The expenses are correlating to these sources of income only. The assessee is providing its facilities on h ire on day-to-day basis to all type of customers by running Hostel/Canteen and giving Auditorium & Page 4 of 21 I.T.A .No.-3635/Del/2015 Conferences Hall on hire on Commercial lines which are open to everyone.
Thus, these activities attract amendment in Sec.2(15) of I.T. Act applicable w.e.f A.Y.2009-10 onwards.
4.2. The AO deputed an Inspector accompanied by "Senior T.A." (Tax Advisor) to visit the premises of the assessee where they after partaking snacks in the canteen enquired about the availability of rooms for a group of 30 people coming from North-East to Delhi. He noted that in response to this query, they were advised to book well in advance. He was of the view that since no inquiry regarding their identity card or membership was made, it was concluded that the facilities of the assessee were open to everyone and was not restricted to the members only. Accordingly, considering the past history of the assessee on the issue, the assessee was put to notice to explain why in terms of the proviso to section 2(15) not be applied for having commercial receipts and income from boarding and lodging and canteen income etc. Considering the fact that the centre was opened for all i.e. non-member the benefit of exemption should not be denied. Not accepting the reply offered by the assessee, the income of the assessee was taxed as per rates applicable to an AOP denying its claim for exemption for being a chargeable institution.
4.3. The issue travelled in appeal before the CIT(A) where relying upon the order of the ITAT for 2009-10 A.Y. and taking note of the fact that there was a similar denial in 2010-11 A.Y. also on identical fact which issue also stood concluded in favour of the assessee, the appeal of the assessee was allowed by the CIT(A) holding as under:-
4. "The facts emanating from the order of the AO and the submissions of the assessee is that the assessee is charitable Trust and is registered as per Page 5 of 21 I.T.A .No.-3635/Del/2015 Trust Deed dated 10.08.1961. The Trust is registered u/s 12AA(1) dated 15.05.11974 and also u/s 80G dated 02.12.2009. The Trust was founded with the object of charitable work of promoting the welfare with youth etc. The Trust was founded by the World Assembly of Youth, India and the following trustees were appointed:-
i) Shri Morari Desai (Chairman)
ii) Smt. Indira Gandhi
iii) Shri Naval H.tata
iv) Shri Ravindra Verma
v) Shri Viren J.Shah
vi) Shri Ram Krishna Bajaj (Managing Trustee)
4.5. "I have considered the order of the AO and the submissions of the assessee and I find considerable merit in the submissions of the assessee that the AO is not justified to deny the exemption u/s 11(1) as the assessee is involved in the charitable work of promoting the welfare and cause of the youth. After considering all the facts and circumstances of the case, I am of the view that the case of the assessee is covered by the order of the ld.CIT(A) and Hon'ble Tribunal for the A.Y. 2009-10 as referred above and accordingly the AO is directed to allow the exemption u/s 11(1) to the assessee with all the consequential benefits."
4.4. We have seen the material available on record and in the light of the submissions advanced by the parties and on consideration of the above finding, we find that the conclusion drawn by the CIT(A) relying upon the order of the ITAT cannot be faulted with. It is seen that in 2009-10 A.Y. more or less on identical facts, the AO had proceeded on an Inspector's report and therein also relying upon the information in Form 26AS as in the year under consideration he relying on the transactions made with non-member concluded that the trust was running as a commercial activity. This similarity of fact in the earlier year would be evident from para 2.6.3 of the order of the ITAT as is reproduced hereunder:-
2.6.3. "A further perusal of the same also showed that some of the transactions were with entities as was evident from Form No.-26AS, the same are reproduced for ready-reference from the assessment order:-
Form 26AS Entry Amount Paid (Rs.)
Amway India Enterprises Private Ltd. 33403
Engineers India Limited 143934
Page 6 of 21
I.T.A .No.-3635/Del/2015
Rural Electrification Corporation Limited 221106
The Energy and Resources Institute 257792
Care India 57400
Name of Customer Date of Amount
Transaction Paid
(Rs.)
C/o Vietnam Embassy 03.04.2008 3750
C/o Toshniwal Enterprises Controls Pvt. Ltd. 05.04.2008 29600
C/o World Expedition (India) Pvt. Ltd. 07.04.2008 21800
C/o Landmark Education India 26.04.2008 3650
C/o S I S India Ltd. 30.04.2008 14700
C/o IMT Faridabad 01.05.2008 3678
C/o electronic Media Pvt. Ltd. 11.05.2008 9750
C/o Trips Treks & Tours 27.06.2008 50100
C/o Project Concern International 08.07.2008 9100
C/o Proviti Consulting Private Limited 21.07.2008 14600
C/o Titan Energy Systems Ltd. 21.08.2008 3650
C/o Matrix Laboratories Limited 07.10.2008 3700
C/o SPC Management Services Pvt. Ltd. 05.11.2008 80850
C/o Microcosm Integrated Solutions (P) Ltd. 19.11.2008 273500
M/s Fair Trade Forum-India 24.11.2008 120690
C/o Asianet 13.03.2009 7300
4.5. In the facts of the present case also a similar inference has been drawn by the AO on the basis of the following entries in Form 26AS:-
Form 26AS Entry Amount Paid (Rs.)
Janvikas 329782
Centre for Science and Environment 382758
Indira Gandhi National Centre for the Arts 1146263
NASSCOM 880658
National School of Drama 3891667
4.6. The inference drawn on those facts for concluding that there was commercial activity was dispelled by the ITAT in the aforesaid order concurring with the following conclusion of the CIT(A):-
4.1. "The CIT(A) further elaborated the finding arrived at in para 6.2 by holding that the AO has not been able to appreciate the nature of the hostel and canteen activities and the AO had also not appreciated that the receipt on account of the auditorium and Conference Hall of Rs. 1.43 crore odd included the sum of Rs.1.02 crore odd on account of the rental and the balance amount represented the receipt on account of conferences organized in the auditorium. He held that all these activities were part of the Page 7 of 21 I.T.A .No.-3635/Del/2015 objects of the trust and for the cause of the youth only. Considering the finding of the AO that the assessee had received money from corporate houses, he held that the receipts were in the nature of sponsorship fees received for organizing conference in the Auditorium as such could not be considered to be a commercial activity. Examining the allegations of the AO as per Inspector's Report that the food by the canteen was provided to everyone and there was no control on an outsider having food, the CIT(A) was of the view that merely because somebody here and there obtained a service because of the lack of control will not mean that the trust has become commercial and as such lost its charitable character. The objects and the activities continued to be charitable despite the stray instance and cannot be the ground for holding that the trust is not charitable. Similarly, the instances of sponsorship for which tax had been deducted by various corporates as per Form No.-26AS, it was held will not make the trust non-charitable. The reliance placed upon the decisions by the AO which were assailed by the assessee and argued to be distinguishable after discussion were found to be rightly objected to by the assessee.
Addressing the advertisement in the newspaper objected to by the AO, the CIT(A) accepted the explanation of the assessee and held that there was nothing wrong in attracting more and more youths to become its members by way of advertisements."
(emphasis provided) 4.7. The aforesaid conclusion of the CIT(A) was vehemently contested by the Revenue. This fact would be evident from the following para which brings out the arguments advanced on behalf of the Revenue before the ITAT:-
5.1. "The Ld. Sr. DR, Ms. Shamuna Sen placed heavily reliance on the assessment order so as to contend that the activities of the trust are not in consonance with the requirements of the Act. It was her submission relying upon the Inspector's Report that canteen facilities were available to everyone and was being run as a commercial activity. It was her submission that the AO has considered after confronting it to the assessee which demonstrated that any and everyone could enter the premises and have the meal and pay for the same without any effort to check whether the customer was a resident of the hostel or not. It was submitted that there was no control to ensure that outsiders do not utlize the services of the canteen/cafeteria. Accordingly the general and vague answer of the assessee have rightly been rejected by the AO who has held that the hostel/canteen facility were utilized by the assessee and run on commercial lines. Inviting attention to Section 2(15) of the Income Tax Act, it was her submission that the activities which were in the nature of trade, commerce, business as per the proviso cannot termed to be coming under the umbrella of "other charitable activities" as envisaged by the statute and the claim of the assessee has rightly been rejected by the AO. The AO it was her submission has identified the features which distinguish an activity which is in the nature of trade and Page 8 of 21 I.T.A .No.-3635/Del/2015 business and all the requirements are fulfilled by the assessee. The judgements relied upon by the AO it was her submission have been distinguished on frivolous reasons by the assessee. Inviting attention to the list of sponsors as were available in the 26AS information available to the department vis-à-vis the list given by the assessee, it was her submission that there were a lot of discrepancies. It was also her submission that membership list given by the assessee pertaining to specific period i.e 01.04.2008 to 31.03.2009 and could not be said to be a membership list per se. The charges levied to different people for the so- called membership fee, it was her submission also varied and infact had odd figures. It was also her argument that the corporate entities who have made payments to the assessee for utilizing auditorium and conference hall cannot be said to be rendering any service to the youth and all these facts have been brought on record by the AO. Inviting attention to the manner in which the assessee's bills are raised, it was her argument no details are recorded. Specific attention was invited to page 78, it was her submission that it merely mentions the name as C/o NAWO and merely mentioning tariff therein does not prove anything. Inviting attention to page 443 which contains the Revenue summary, it was her submission that the same is merely a list and in the face of the Inspector's Report appearing on page 489 which was heavily relied upon by the Revenue. It was argued that it clearly brings out the fact that the facilities are open to the anyone and everyone and is running on commercial lines. For ready-reference, the said Report is reproduced hreunder :-
"I was sent by ADIT(E), TC-II, New Delhi, for enquiry in case of India Youth Centre Trust, Circular Road, Chanakya Puri, New Delhi on 02.12.2011.
After reaching Vishwa Yuvak Kendra (India Youth Centre Trust), We went to Dining Hall alongwith Sr. TA Sh. Omvir Singh and TA Sh. Arun Kumar, for taking Lunch. We were offered Buffet as well as Item-wise Lunch option and we opted for item-wise Lunch and took food items costing Rs. 957/- (approx.). Various other persons were also taking Lunch on payment basis and there was no check in the Centre for outsiders taking food at the Dining Hall.
After taking this Lunch we enquired about a get-together arrangement from the persons invoicing bills Mr. Rakesh Chopra and Mr. Vipin and told him that we want a Buffet arrangement of around 25 persons and asked him to give the costing details. He stated that Rs.300/- per plate cost will be there for Vegetarian food plate, Rs. 350/- for including Chicken in vegetarian food, Rs.400/- for including Mutton in vegetarian food and for Rs.500/- everything included. On enquiring about Hall charges, they stated that no charges will be there for Hall and it is included in food. They told that we should inform two days prior to them for making these arrangements personally or over phone.
After enquiry we left the place.
Sd/-
Sushma Rani Inspector Trust Circle-II, New Delhi Page 9 of 21 I.T.A .No.-3635/Del/2015 Witness
1. Omvir Singh, Sr. TA
2. Arun Kumar, TA
3. (emphasis provided) 4.8. The arguments of the Revenue were equally vehemently contested by the Ld.AR. For the sake of completeness these are reproduced hereunder:-
5.2. "Ld. AR on the other hand heavily relying upon the impugned order contended that the CIT(A) has met each and every argument/objections of the AO with cogent reasoning. It was his submission that the AO on the other hand has failed to appreciate that the activities of the trust were towards the aims and objects of the trust alone. It was also his contention that undue emphasis has been laid upon the Inspector's Report by the AO as apart from that this which has been explained there are only suspicious which it was submitted cannot take the place of evidence. It was argued where the inmates of the hostel necessarily utilize the facility for short duration the hostel inmates frequently change in such a scenario it is practically impossible for anyone to ensure control to the extent that no stray incident of "outsider" eating occurs. It was argued that the assessee cannot be penalized to do the impossible based on suspicious. The very fact that the hostel is not situated in a commercial hub and is situated in a diplomatic area ensures that stray outsiders do not come unless they are residing in the hostel or attending seminars or conferences held towards the aims of the trust. Addressing the background of the trust the facts leading the creators of the trust whose aims and objects have continuously been considered to be charitable in nature as they aim to address, harness, channel and focus the energies of the youth aiming and preparing the youth to perform productive, gainful and responsible roles in the environment has all along been accepted and it cannot be doubted to be a non-charitable merely because the canteen staff in good faith allowed the Inspector and her team of two tax advisors to have a meal. The queries answered in good faith by the canteen staff also do not make trust to be operating on commercial lines. It was his submission that auditorium and seminar halls are made routinely available to Government Education Bodies etc. and NGOs having the same aims and objects as the assessee and stringent documentations is maintained by the assessee trust which he would address which has been before the AO and the CIT(A). Accordingly mere oral queries casually answered by canteen staff who definitely were not making the booking does not lead to any conclusion against the assessee's trust. It was his submission that the assessee trust started with a very humble corpus of Rs. 1000/- towards its laudable aim. The hostel facilities it was submitted are utilized by various students either from different parts of the country or the world and provides a platform where the youth can be exposed to conferences and activities in the auditorium which co-incide with the aims and objects of the assessee trust. It was submitted that as and when the same are not required by the Page 10 of 21 I.T.A .No.-3635/Del/2015 assessee towards the same, they are available on rent to the corporate entities etc. and the receipts so generated are fully utilized only to meet the objects of the trust. The canteen/cafeteria facility is exclusively for the benefit of the students staying in the hostel facilities and considering the fact that the hostel cannot be in continuous use of more than 28 days the amounts vary. Looking at the sheer number of students who utilize the facilities it was submitted makes it impossible to monitor whether the person utilizing the facilities is actually a resident of the hostel or an outsider and if any stray person has utilized these facilities hoodwinking the serving staff than the assessee trust cannot penalized. Inviting attention to paper book page no-27 which contains the copy of the trust deed whose objects are enshrined at page 31, the said deed it was submitted underwent a change in regard to its name by way of a supplementary deed of trust copy placed at page 23-35 of the paper book.
Addressing the same it was submitted that the name of the assessee trust was changed from "World Assembly of youth India" to "India Youth Centre". The objects continued to remain the same. Inviting attention to page 30 it was submitted that the trust was having a corpus of Rs.1000/- as the trust's funds and inviting attention to page 619-814 it was submitted that this contains a copy of list of the Organizations/NGOs, Members and the documents which have been submitted or collected showing their eligibility of membership and before the hostel facility or seminar halls/auditorium is allowed to be used evidence demonstrating the organization/trust etc. who is utilizing the services are always taken and they have been shown to the AO all along who chose to talk only of Inspector's Report. A sample copy of membership and enrollment form with pre-prescribed eligibility criteria, it was submitted was made available to the AO, attention was invited to page 517-
590. Inviting attention to the paper book it was submitted copy of ledger of canteen sale and its break-up showing amount of sale made to members/member organizations and sales made to "others". The "others" included Directors and management staff, Auditors, Inspectors, Lawyers etc. The same is appearing at pages 607-618. All these documents it was submitted were filed before the AO vide letter dated 19.12.2011.
(emphasis provided) 5.2.1. As an illustration from the list of membership of NGO's etc, attention was invited to page 650 which would show that the "Membership Registration Form" has been filled by "Samvedna Foundation" giving its contact, address, telephone no, the source of its funds (herein Government) mentioning, the no. of staff visiting and the State from where they belong (herein Gujarat). The "aims and the objects" of the organizations are mentioned in the Column indicated therein for 'Samvedna Foundation' is as under :-
"To improve life standard of women at poor section through making them skillful and self reliant."
The information required to be mentioned under the "target group" is as under :-
"Women and child"
The Column requiring information on "thrust area" is given as under :-
"We are running vocational training, classes for poor section women in rural area"Page 11 of 21
I.T.A .No.-3635/Del/2015 5.2.2. It was submitted that the said information is accompanied by the copy of the Memorandum of Association, registration certificate, audited statement of the accounts of the said trust which are appearing in the following pages.
5.2.3. Similarly at page 667 it was submitted it will be seen that the name of the organization is given as "Shree Channappaswamy Vidyapeeth" and after recording of the relevant information of address, telephone no., no. of staff (here in being 217); source of funds herein donation, membership and State Government of Karnataka. In the information required under the heading "aims and objects" are described "as per the laws" copy Karnataka State. The target group is identified as under :-
"Targget Group (e.g. children/Women/Youth etc.)-Schools, colleges, Technical Colleges students, SHG Groups, Hostel etc."
The thrust area is "the State of Karnataka". The project undertaken is "State Government Grant Project, Aded School Grant, Watershed Grant, Zilla Panchayat Grant etc."
5.2.4. Herein also, it was submitted that the relevant documents are attached namely copy of Registration Certificate, copy of the trust deed, Annual Report, Audited statement of account, Memorandum of Association, etc. are attached along with this. Accordingly it was his submission that the suspicion raised by the Sr. DR by referring to the fact that there is no name recorded in the bill is incorrect and each and every bill will show that not only the name but even the Copy of the Trust Deed or Registration etc. of the organization required to be furnished and is available on record and an abbreviation of the NGO recorded does not mean that the documentation is wanting. It was his submission that the documents were available before the AO, he does not care to look at them and operates on suspicion and even today the paper book is available on record which has been considered by the CIT(A) and the Sr. DR does not assail at the same and merely relies on the AO's version based on the Inspector's Report without faulting the assessee in the stringent documentation maintained by the assessee trust. All these documents it was submitted are furnished and submitted before making its facilities to the N.G.Os etc who have the same aims and objects as the assessee trust. Inviting attention to page 9 of the assessment order para 5.5 it was his submission that some of these facts have been recorded by the AO himself in his order but for reasons best known to him, he chooses to rely on Inspector's Reports. For ready-reference arguments of the assessee as recorded by the AO and relied upon by the assessee are reproduced from the assessment order hereunder:-
"5.5 In addition to the above we would also like to submit here that the total receipts of Canteen is Rs. 82.95 laces which include Rs. 61.19 laces against the workshop / seminar in which buffet lunch was served to participants and Rs.13.14 laces for the personnel stayed in the Hostels. Balance Rs.8.62 laces from others that includes from Staff/Staffs' Guest/Trust Guest (viz. Auditors, Lowers, Architect, Contractors etc) and those who had come to attend some function or other.
Therefore, it would not be possible to ascertain the amount of canteen Page 12 of 21 I.T.A .No.-3635/Del/2015 collection from those persons who were not stayed in the hostel. In any case it is bound to be very negligible and within permissible limits of section 2(15) of the Income Tax Act. Further, it can be seen from the documents submitted that the trust serves buffet meals during the program / workshop conducted by Members Organizations and/or during own program and workshop but not for any other purposes. This can be reviewed form the related documents enclosed herewith for your kind perusal i.e. Bills of buffets served during workshop and seminars.
Further, we also like to submit that for the booking of the facilities (Buffet, Auditorium, Conference Hall etc.) of the Trust, officials of the trust designated for the said purposes (at the rank of Manager) are only authorized. Hence, as regard the remarks made by our Canteen staff they had merely given the information in regard to tariff rate both for vegetarian and non vegetarian buffets arrangement. There is nothing wrong in what has been stated by them and no where they had committed that it will be served also for the purposes other than the objectives of the activities for which it was intended. They had merely answered a query. Therefore, it would be inappropriate to conclude that what they had stated involve commercial activities."
...............................
4.9. Considering these arguments, it is seen that the order which has been followed by the CIT(A) proceeded to give a detailed finding on facts and rejecting the departmental grounds and upholding the impugned order. The same is reproduced hereunder for ready-reference:-
6. We have heard the rival submissions and perused the material available on record. The documents relied upon before us in the paper book and the case laws referred to and the orders of the authorities have been taken into consideration. The objects of the trust available at pages 31 & 32 read as under :-
"4.(a) To establish, maintain and conduct one or more National or international Youth Centre at suitable centres in India for practicing international understanding and cooperation and developing youth leadership;
(b) Each such Youth Centre may be multi-purpose in character functioning as a model youth centre for intellectual and recreational services to youth; a co-ordinating agency for youth organizations a centre for building up youth leadership through a variety of programmes; and a counseling bureau to advise on various problems confronting youth;
(c) For the benefit of foreign students and youth delegations ias well as individuals visiting India, the Youth Centre may provide hostel facilities, it may serve as an information centre, and provide them with opportunity for .........................................
(d) The hostel facilities at the Youth Centre shall be available to students or other persons on payment of such charges as the Trustee may decide from time to time.Page 13 of 21
I.T.A .No.-3635/Del/2015
(e) The centre for also sponsor programmes for bilateral ...........of youth leaders, young workers and students with a view to better National Integration and international understanding and co-operation.
(f) The Trustee may join, contribute to or .....financially or otherwise, any other institutions with similar objects to carry out or implement any of the objects of this Trust."
6.1. The Inspector's Report reproduced in the earlier part of this order in para 5.1 has also been taken into consideration. It is seen that the AO has been guided by the fact that the assessee is charging fees for hostel facilities and has also in its income shown receipts from canteen facilities over and above receipts from hiring of conference hall/auditorium etc. Apart from that he has also been guided by the fact that the Inspector accompanied by tax advisors was allowed to utilize the canteen facilities without any effort or the part of the serving personnel to ensure that only inmates of the hostel were being served. The explanation of the assessee that its hostel facilities are utilized by NGOs and Government schools, Education Departments etc. who stay/attend for a few days as students, professors, scholars etc attending seminars, conferences and then move on thereby making it difficult for canteen staff to ascertain whether the persons are staying in the hostel or not has not been accepted. The chances of stray incidents where unconnected person may avail of services has not been accepted as sufficient compliance. The argument that canteen staff may not be in a position to identify whether the person availing the services is staying in the hostel or is merely attending conference or is a rank outsider has not been accepted. On account of this lack of full control by the canteen staff on their facilities being used as is evidenced by Inspector's Report, the Revenue would want to argue that the assessee trust through its canteen facilities is functioning on commercial lines. Similarly the Revenue has also assailed the impugned order on the ground that information as per the 26 AS is that certain corporate entities have utilized the facilities thereby leading to the presumption that the hostel and canteen facilities are being used on commercial lines. On the other hand, on behalf of the assessee, the contention has been that the assessee maintains very strict checks for making available its hostel facilities. Various pages in the paper book referred to show that the assessee requires the filling of Membership Form which requires the specific and relevant information of the organization making a booking. If it is a Trust/NGO etc., the copy of the Deed of Registration, financial statements, sources of fund, the purpose of the stay, the aims and objects the thrust area, the target group etc. are required to be mentioned. It has also been stated that the facilities are available to outsiders only when they are not being utilized by the assessee trust or NGO's etc. having identical aim and then too the receipts thereof are utilized for the objects of the trust as in response to the Sr. DR's objections based on paper book page -78. Ld. AR has pointed out that Bill No-26949 has been issued for NAWO giving customer No-12306 dated 07.09.2008. The specific organization had booked 15 rooms for 17 persons belonging to NAWO and the period of Page 14 of 21 I.T.A .No.-3635/Del/2015 booking was 07.09.2008 to 10.09.2008. Details of this are available on the list at page 465 Sl. No-631 given again to the AO. Note mentioned at the bottom of the Bill has been pointed out showing that membership fee is valid only for 28 days and the Ld. AR has said that as per the Rules the hostel cannot be used for more than 28 days by the person/organization as evidently hostel inmates are not admitted for an academic year as is normally done in hostel of colleges etc. where students are studying for graduation and post- graduation courses. The hostel of the trust is only for students, scholars, professors attending seminars/conferences which aim to build leadership qualities in the youth; educate, inform, encourage and empower them by knowledge etc. by programmes/conference held by NGOs or by foreign visiting organizations whose aims are identical. Consequently at the time of admission it is seen that hostel facilities are made available only after the assessee trust is satisfied that the aims and objects of the charitable trust organizations are also for promotion of youth activities evidenced by relevant financial statement, certifications of registration narrating the purpose of visit etc and only then hostel facilities are made available for a maximum period of only 28 days which results at times where odd figures may be worked out depending on facilities used. We may reproduce for ready-reference from page 78 of paper book, the Note printed at the bottom of the Bill demonstrating the duration:-
NAWO "Note:-This membership fee is valid for the next 28 days from the date of checkin 07 Sep 2008 and upto date 04 Oct 2008 for rooms only. Please retain copy of this bill to avoid the repayment of membership fees. This membership fees is valid for Room(s) only and cannot be adjusted against the other services.
6.2. A perusal of pages 79, 80 & 81 also demonstrate that specific no for rooms have been book by specified organizations on specified dates namely M/s Positive Women Network; Socio Legal Information Centre; and Indo-
Global Social Service Society respectively and all these bills have a similar narration with regard to the membership fee that it is only for 28 days starting from the date of checkin which necessarily differs for each one of them. For ready-reference, we reproduce from pages 79-81 of the paper book as under :-
M/s Positive Women Network Note:-This membership fees is valid for the next 28 days from the date of checkin 01-Oct-2008 and Upto 28-Oct-2008 for rooms only. Please retain copy of this bill to avoid the repayment of membership fees. This membership fees is valid for Room(s0 only and cannot be adjusted against the other services.
Socio Legal Information Centre Note:-This membership fees is valid for the next 28 days from the date of checkin 26-Jun-2008 and Upto Date 23-Jul-2008 for rooms only. Please retain copy of this bill to avoid the repayment of membership Page 15 of 21 I.T.A .No.-3635/Del/2015 fees. This membership fees is valid for Room(s) only and cannot be adjusted against the other services.
Indo-Global Social Service Society Note:-This membership fees is valid for the next 28 days from the date of checkin 31-Jun-2008 and Upto Date 27-Aug-2008 for rooms only. Please retain copy of this bill to avoid the repayment of membership fees. This membership fees is valid for Room(s) only and cannot be adjusted against the other services."
6.3. It is also seen on a perusal of documents placed at pages 517 - 814 which are the documents made available to the AO alongwith accompanying letter dated 19.12.2011, copy of which is also placed at pages 510-516. It is seen that the assessee at the time of booking its hostel rooms is strictly adhering to maintaining, recording and keeping the documentation evidencing the aims and objects of the organization the purpose of visiting the target group and thrust area qua the visit or programme contemplated.
A perusal of the sample form of enrolment placed at page 517 and Membership Form at page 518 has been demonstrated to show that it is strictly adhered to in strict and specific compliance. Reference may also be made to page 63 of the paper book addressed to the ADIT(E) dated 08.08.2011 referring to the position for 2009-10 wherein column-8, it is said that the assessee trust has not given any donation and neither any donation has been received. Similarly in regard to the contribution to the corpus column-9 indicates that the assessee's trust has not received any contribution to corpus during the year. A perusal of page 815-816 addressed again to the ADIT(E) dated 29.12.2011 indicate that the accumulated Fund has been utilized in the time limit as prescribed in the Income Tax Act for the purpose of construction of the Annex Building of trust and renovation of old building. The details of this surplus for the five years and its utilization as per page 816 indicated as under :-
Asst. Years Total Accumulation u/s 11(1) up
Surplus/(Deficit) u/s 11(2) to 15%
2004-05 16,83,695 Not required 16,83,695
2005-06 (54,52,886) Not required 0
2006-07 (50,03,098) Not required 0
2007-08 86,88,124 80,00,000 6,88,124
2008-09 1,85,47,381 1,25,00,000 60,47,381
2009-10 Case is under Process
The above accumulation is started utilization from 2009-10 onwards for the construction of Building & renovation of old Building of the 2009-10 approx. Rs. 2.20 crores was utilized for said purposes. 6.4. We have also taken into consideration, the objections posed by the AO to the advertisement which was placed by the assessee in order to invite attention of the NGOs etc. to utilize the hostel facilities and auditorium and seminar facilities in order to promote leadership activities for the youth of the country and find ourselves in harmony with the findings of the CIT(A) as it does not lead to the conclusion that the activities are in the nature of Page 16 of 21 I.T.A .No.-3635/Del/2015 commercial activity. Merely advertising the fact that facility of hostel, seminar halls, auditorium etc. can be used by organizations interested in having leadership programs for the benefit of youth does not make the activity a commercial activity. We have also taken into consideration the arguments advanced by the assessee before us in support of the impugned order which are found supported by the explanation dtd. 19.12.2011 afforded by the assessee before the AO, copies placed at pages 510-516 of the paper book in response to show cause notice dated 19.12.2011 wherein apart from relying upon the letters dated 8.8.2011, 8.9.2011.13.10.2011, 20.11.2011, 28.11.2011, 5.12.2011 and 12.12.2011 the assessee as an illustration has made reference to a certificate course conducted by the trust for the duration 01st December to 23rd December 2011 which was held for unemployed youth and participants who were stated to be from different parts of India as well as from abroad including girl participants. It is found explained on behalf of the assessee that sometimes the guardians of the girl participants come to the centre to meet them and canteen staff had been instructed not to stop them from taking snacks and lunch if they so want, keeping in mind the fact that the location of the trust was not close to the commercial areas where the guardians of these girls visiting them could have gone. The mere affording of such a courtesy does not lead to the conclusion that the trust was operating on commercial lines. In the courtesy so afforded if the lady Inspector accompanied by two tax advisors were allowed to have lunch/snacks without requiring them to show any identification in no way detracts from the merits of the case. On a consideration of the facts. Evidences, material and arguments advanced by the parties before the Bench, we do not find any infirmity arrived at by the CIT(A) in the impugned order which warrants our interference. We have taken into consideration the decisions relied upon by the AO and find no fault in the conclusion of the CIT(A) who has held the judgement of Jalandhar Development Authority to be inapplicable on facts as the said authority was engaged in selling land after development could not prove its objects to be charitable. Similar was the position for Punjab Urban Planning & Development Authority who was found to be functioning on commercial lines. In the case of Indian Chamber of Commerce, the surplus was available for distribution which is not a fact in the present case. The judgement rendered in the case of MCD vs. Children Book Trust was also not applicable as it was rendered interpreting Municipal Corporation of Delhi Act for the purposes of house tax.
6.5. Accordingly on account of the arguments detailed reasoning on facts and law discussed at length in the earlier part of this order, we find no good reason to interfere with the finding arrived at in the impugned order. Being satisfied by the reasoning and finding of the CIT(A), Ground No-1 of the Revenue is rejected."
(emphasis provided) 4.10. Accordingly, on a careful reading of the above detailed order, it is seen that identical claim of the Revenue has been considered by the ITAT. No change Page 17 of 21 I.T.A .No.-3635/Del/2015 in fact or circumstance has either been referred to by the Ld. Sr. DR nor has been brought out in the assessment order. In the absence of any infirmity having been pointed out, we find no good reason to deviate from the view taken.
Holding the conclusion of the CIT(A) in relying thereon justified on facts and law the departmental ground is dismissed.
5. Addressing the issue raised in Ground No.3 & 4 by the Revenue, the Ld.AR again placed reliance on the afore-said order on the ITAT and invited specific attention to pages 29 to 31 para 7 to 7.1 of the same also submitted that the issue is covered in assessee's favour. Referring to the judgements cited by the Revenue in its ground namely DIT(E) vs Charaniv Charitable Trust in ITA No.322-323/2013 dated 18.03.2014, it was submitted that the said judgement has been over-ruled by the Delhi High Court in the DIT(E) vs Indraprastha Cancer Society []2015 229 Taxman 93 (Delhi). The Ld. Sr. DR did not offer any argument in rebuttal on considering the following finding arrived at by the ITAT:-
7. "We have heard the rival submissions and perused the material available on record. It is seen that no distinction on facts has been made on behalf of the Revenue nor any contrary decision in support of the claim either of the Jurisdictional High Court or the Hon'ble Apex Court has been referred to for our consideration. It is seen that the issue was decided by the CIT(A) in the following manner :-
"8.2. I have considered the submission made by the appellant and I have perused the record. On going through the same, I have noticed that the issue of depreciation is covered by the judgment of Delhi Tribunal in the case of ACIT vs. Tiny Tots Education Society ITA No. 3182/Del/2008 which has also been confirmed by the Punjab and Haryana High Court in the case of CIT vs. Tiny Tots Education Society 330 ITR 21. The contention of the Assessing Officer that depreciation on assets purchased in earlier years cannot be allowed because those assets have been claimed as application of income in earlier years is not correct. As per the provisions of section 11(1)(a) income of the charitable trust to the extent it is applied towards charitable purpose is considered to be exempt. Accordingly, for the purpose of computation of income, it is mandatory to compute the same applying the ordinary principle Page 18 of 21 I.T.A .No.-3635/Del/2015 of computation of income. This will include depreciation of the assets used in earning such income. After having determined such income, the application thereof has to be seen. The provision of section 11(1)(a) allows deduction of such income towards revenue as well as capital expenditure both. So if the income is used for purchasing of assets that is an application of income, not allowance of the depreciation. If in the subsequent years asset is used to generate income, the income has to be computed after allowing depreciation on the assets so used. The Assessing Officer is not justified in not allowing depreciation because these assets have been claimed as application of income in earlier years.
8.3 Application of income and depreciation are two different aspects. This view has been upheld by Hon'ble Delhi High Court in the case or DIT vs. Vishwa Jagriti Mission reported at 2012-TlOL-271-HC-DEL-IT, wherein, Hon 'ble Delhi High Court has observed as under:-
"There is no dispute that the assessee has been granted registration under Section 12AA vide order dated 11th September, 2009 and, therefore, it was entitled to exemption of its income under Section 11. The only question is whether the income of/he assessee should be computed on commercial principles and in doing so whether depreciation on fixed assets utilized for the charitable purposes should he allowed. On this issue. there seems to be a consensus of judicial thinking as is seen from the authorities relied upon by the CIT(Appeals) as well as the Tribunal. In ClT vs. The Society of the Sisters of St. Anme (Supra), an identical question arose before the Karnataka High Court. There the society was running a school in Bangalore and was allowed exemption under Section11. The question arose as to how the income available for application to charitable and religious purposes should be computed. Jagannatha Setty, J speaking for the Division Bench of' the Court held that income derived from property held under trust cannot be the "total income" as defined in Section 2(45) of the Act and that the word "income" is a wider term than the expression "profits and gains of business or profession".
Reference was made to the nature of depreciation and it was pointed out that depreciation was nothing but decrease in the value of property through wear, deterioration or obsolescence. It was observed that depreciation, if not allowed as a necessary deduction for computing the income of charitable institutions, then there is no way to preserve the corpus of the trust for deriving the income. The circularNo.5-P (LXX-6) of 1968, dated July 19,1968 was reproduced in the judgment in which the Board has taken the view that the income of the trust should be understood in its commercial sense. The circular is as under:-
"Where the trust derives income from house property, interest on securities. capital gains, or other sources, the word 'income' should be understood in its commercial sense, i.e., book income, after adding back any appropriations or applications thereof towards the purpose of the trust or otherwise, and also after adding back any debits made for capital expenditure incurred for the purposes of the trust or otherwise. It should be noted, in this connection, that the amounts so added back will become chargeable to tax u/s. 11(3) to the extent that they represent outgoings for purposes other than those of the trust. The amounts spent or applied for the purposes of the trust from out of Page 19 of 21 I.T.A .No.-3635/Del/2015 the income computed in the aforesaid manner, should be not less than 75 per cent. of the latter, if the trust is to get the full benefit of the exemption u/s. 11(1). "
12. A similar view was earlier expressed by the Andhra Pradesh High Court in Commissioner of Income-tax. v. Nizam's Suppl. Religious Endowment Trust (1981) 127 ITR 378 and by the Madras High Court in Commissioner of Income-Tax vs Rao Bahadur Calavala Cunnan Chetty Charities (1982) 135 ITR
485. The Madhya Pradesh High Court in CIT vs. Raipur Pallottine Society (supra) has held, following the judgement of the Karnataka High Court cited above, that in computing the income of a charitable institution/trust, depreciation of assets owned by the trust/institution is a necessary deduction on commercial principles. The Gujarat High Court, after referring to the judgements of the Karnataka, Maharashtra and Madhya Pradesh High Courts cited above, also came to the same conclusion and held that the amount of depreciation debited to the accounts of the charitable institution has to be deducted to arrive at the income available for application to charitable and religious purposes."
7.1. In the afore-mentioned facts where there is no infirmity pointed out by the Revenue nor any contrary decision has been referred to for our consideration we find no merit in the departmental ground. Being satisfied with the reasoning and finding of the CIT(A), the ground is dismissed.
6. We further find that the Hon'ble Delhi High Court in the case Indraprastha Cancer Society (cited supra) following the Vishwa Jagriti Missiion decided the issue as under:-
10. "The aforesaid paragraph refers to the decision in the case of Vishwa Jagriti Mission (supra) but ratio was distinguished on the ground that in the said case the Court was concerned with computation of income of a charitable trust/institution on commercial principles and if so whether depreciation on fixed assets used for charitable purposes should be allowed as a deduction.
The consensus of judicial opinion on the said aspect was referred to. It is noticeable that in Charanjiv Charitable Trust (supra) it stands observed that the Tribunal overlooked the fact that the cost of asset had been allowed as a "deduction" and thereafter deprecation was being claimed. The said case, therefore, appears to be a peculiar one wherein deduction as expenditures and deprecation was being claimed simultaneously, while computing the taxable income under the head "profits and gains from business". The said decision dated 18th March 2014 does not refer to the decision in Indian Trade Promotion Organization (supra) which was decided on 27th November 2013. The judgement in the case of Charanjiv Charitbale Trust (supra) is authored by the same judge, who has also authored the decision in the case of Vishwa Jagriti Mission (supra). It is obvious that in Charanjiv Charitable Trust (supra), the Division Bench could not have taken a different view on the legal ratio as interpreted in Vishwa Jagriti Mission (supra). Further, the decisions in the case of Vishwa Jagriti Mission and India trade Promotion Organization Page 20 of 21 I.T.A .No.-3635/Del/2015 (supra) being prior in point of time would act as binding precedents and could not have been overruled or dissented from by a coordinate Division Bench."
7. Accordingly, in view of the above, the issue raised by Ground Nos.3 & 4 of the Revenue is dismissed.
8. In the result, the appeal of the Revenue is dismissed.
The order is pronounced in the open court on 23rd of May, 2016.
Sd/- Sd/-
(PRASHANT MAHARISHI) (DIVA SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
*Amit Kumar*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
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