Income Tax Appellate Tribunal - Delhi
Ito (E),, New Delhi vs Ghalib Institute, New Delhi on 30 November, 2018
ITA No.-2650/Del/2015.
M/s Ghalib Institute, New Delhi.
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH: C NEW DELHI)
BEFORE SHRI K.N. CHARY, JUDICIAL MEMBER
AND
SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER
ITA No:- 2650/Del/2015
(Assessment Year: 2011-12)
Income Tax Officer (E), M/s Ghalib Institute,
Ward-1 (2), Vs. Aiwan, -E, Ghalib Marg Mata
New Delhi. Sundri Lane,
New Delhi-110002.
PAN No: AAATG0399Q
APPELLANT RESPONDENT
Revenue by : Sh. Padam Singh, Sr. DR
Assessee by : Sh. Samir Jain, FCA
ORDER
PER: ANADEE NATH MISSHRA, AM This appeal by Revenue has been directed against the order of Learned Commissioner of Income Tax (Appeals)-XXI, New Delhi-110002 [for short hereinafter referred to as the "Ld. CIT(A)"] dated 27/02/2015 for Assessment Year 2011-12 on the following grounds of appeal: -
"i. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the benefit of section 11 & 12 of the Act ignoring that the activities of were not within the purview of section 2(15) of the I.T. Act, 1961 during the year.Page 1 of 17
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ii. The appellant craves leave to add, to alter or amend any ground of appeal raised above at the time the hearing."
(2) The Assessee is a Trust registered U/s 12A(a) of I.T. Act, 1961. The assessee is also registered U/s 80-G of I.T. Act. The Assessee filed Return on 29.09.2011, disclosing Nil income, claiming exemption U/s 11 of I.T. Act. The AO rejected the assessee's claim for exemption U/s 11 of I.T. Act by invoking proviso to Section 2(15) of I.T. Act and assessed the assessee's income at Rs. 75,19,980/- as per the following computation:
Rs.
Total Receipts as per I& E A/c. 2,58,71,660/-
Expenditure as the I& A/c (Excluding 1,83,51,680/-
Depreciation)
Total Taxable Income 75,19,980/-
Rounded Off 75,19,980/-
(2.1) The relevant portion of the Assessment Order is as under:
"1.0 APPLICABILITY OF PROVISO TO S- 21151 OF THE IT ACT. 1961;-
1,0 Facts of the case-t As also discussed in previous assessment year) The assessee is neither in the filed of education, nor in the field of medical relief of poor and it can 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.
On examination of assessee's I &E A/c, it is seen that main heads of incomes are as under:-
Income As on 31.03.11 (Rs.)
Rent Receipt 1,04,98,082/-
Hiring of Auditorium 1,21,67,700/-
Hiring of Furniture and 14,99,063/-
Fixture
Sponsorship Receipts ----------
Contribution Received 50,000/-
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towards Ghalib Awards
Profit on Sale of Publication 31,879/-
The I & E shows surplus of Rs.75,23,749/-. Thus, perusal of the I & E A/c shows that the incomes and expenditures are related to the property held by assessee at Aiwan-e- Ghalib Marg. The expenditure are nothing but administrative and establishment expenditure incurred in connection with earning of rental income from properties and auditorium hiring. There appears little expenditure in connection with any charitable activity undertaken by assessee during the year. As per Trust Deed, assessee's object is to | promote cultural activities, dance, drama etc. The above examination of a/cs of the trust showed that it has following as main source of income.
a) Hiring charge of auditorium and fixture & firniiture
b) Rental income & maintenance charges received from the tenants The hiring of auditorium, providing space for rent, and receipt of maintenance charge for providing services, are nothing but commercial activities. It is clear that these activities are principal activities of the assessee. The auditorium was given for hiring to various organizations. It is difficult to fathom, what sort of charitable activity can be performed, by the giving the auditorium on rent to the organizations, who were in the need of a venue to perform their activities.
1.1 The major tenants of the assessee at the Aiwan, e- Ghalib, are as under:
a)Atlas Cycle(Haryana) Ltd.,Aiwan-e-Ghalib, Mata Sundri Lane,N.Delhi
b) J.K.Cement Ltd. Kamla Tower, Kanpur, U.P.
c) Central Bank of India.
It is evident that all the three tenants are private limited companies registered under the Companies Act, 1956 and the assessee is providing them Services in relation to their businesses and only earning profits out of this activity and no charity can be seen from this activity.
2.0 Few persons who have taken Auditorium on hire from the assessee are:
a) Vinod Gupta.
b) Bright Professional Pvt. Ltd. Etc. It is noted that the assessee has total income of Rs. 1,21,67,700/- from hiring of auditorium of which major portion of income was from private parties. It is hiring the auditorium on day-to-day and on first-come-first-serve basis without any distinction between the customers, which is nothing but as outright commercial activity. Also, giving space on rent to Commercial company amounts Page 3 of 17 ITA No.-2650/Del/2015.
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to rendering services in relation to its business.
Section 2(15) of the I.T. Act. provides "Charitable purpose" includes relief of the poor, education, medical relief, [preservation of environment (including watersheds, forests and wildlife|) and preservation of monuments or places or objects of artistic or historic interest,] and the advancement of any other object of general public utility:
Provided that the advancement of any other object f general public utility shall not be a charitable purpose, if it involves the carrying on of any activity 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, irrespective of the nature of use or application, or retention, of the income from such activity:
[Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to there is (ten Lakh rupees) or less in the previous year.]"
In the instant case, the question is whether the activities carried out by assessee INOLVES carrying on any activity in nature of trade, business or commerce or RENDERING SERVICES in relations to the same, the words 'trade' 'business' and 'commerce' have been interpreted by Hon'ble courts in various decisions. Of these, the word 'business' is the broadest term that has been INCLUSIVELY defined in section 2(13) as.
"Business includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture." The legislature has consciously departed from restricting the import of the term 'businesses. Thus, the term also includes rendering services to other of a variegated character as held by Supreme Court in LAXMINARYAN RAM GOPAL AND SON LTD VS. GOVT.OF HYDERABAD 25 ITR 449.
Here the activity carried out by assessee by entering into contract with corporate and various other customers satisfies the following features of business;:-
i. NATURE OF ACTIVITY:- Business need not be confined to an active occupation continuously carried on; it may consist also of a quiescent activity (CIT vs. Sahara & Sons Ltd. 102 ITR 437). The undertaking and execution of contracts is WELL RECOGNISED as a business activity, (A, PILLAI & SONS VS CIT 41 ITR 636).
ii. PROFIT MOTIVE:- Profit motive here implies an activity not merely undertaken for sport an pleasure. It is NOT essential that the people who carry it on should desire or wish to do so for earning profit. So long as the methods observed are commercial, the motive with which business is carried out is IMMATERIAL {Religious Tract and Book Society of Scotland Vs. Forbes 3 TC 415 (1968)}. The basis of the Contract is the CONSIDERATION payable over the specified period. Thus, the profit motive is an ingrained competent of the transaction.Page 4 of 17
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iii. TRANSACTION BETWEEN THE TWO PERSONS:- Business cannot be a unilateral activity. Obviously, this requirement is evidently fulfilled in the instant case. As held recently by the Delhi High Court in Bharat Development (P) Ltd. Vs. CIT, the term business essentially means some real, substantive, systemic or organized course of activity or conduct capable of producing profit. As iv. Discussed in the above paragraphs, the activity undertaken by assessee satisfies these requirements for the purposes of proviso Section 2(15). v. FREQUENCY OF TRANSACTION:- Under the term business, it is not essential that there should e a series of transaction and even a single transaction may constitute business. In this case the assessee has entered into number of independent transactions with many customers showing that it has a pattern of business.
vi. TWIN ACTIVITY:- This basically requires a reciprocal activity between two parties. In other words two persons are needed to make a business transaction before it can result in a surplus or profit. Thus business essentially involves twin vii. Aspects. It is obvious in this case that here the transaction is between the customers and assessee for a specified consideration in lieu of hiring of auditorium. Thus, this requirement is also fully satisfied.
3.0 In view of the above it is seen that the assessee has receipts arising out of activity in the nature of business or commerce and accordingly the first proviso to section 1(15) is applicable in this case as the same is more than Rs. 10 Lakhs. Accordingly, it was given the show cause vide order sheet entry dated as to why the above provision be not applied in this case and exemption u/s 11 be not denied. In response, , the assessee has submitted his written submitted dated 04.02.2014 as follows:
"The assessee trust is registered under section 12A of the Income Tax Act, 1961 and carrying out charitable activities for last several years. Besides other activities, the trust also gives it auditorium on hire to various Parties. In the past for Assessment Year 1985-86 to 1988-89 the Assessing Officer has treated receipt from auditorium as business receipts and exemption u/s 12A was denied. However, this contention of the department was reverted back by Hon'ble ITAT vide its Order in IT A No. 8603 to 8605/DEL/1990 AND 8432/DEL/1991 DAED 28.02.1995. The department has also accepted the ITAT verdict by not appealing against the same. Now this order of ITAT is binding on the Income Tax Department and you cannot deviate form the same. Exemption has been given by the Department even in the following years. There is no change in the character of Receipts during this year which may prompt you to take a negative view. A detailed note on Nature of Auditorium Rent Receipts is attached herewith Further, without prejudice to our above argument we would like to emphasize that education is one of our main purposes/activity to which first Page 5 of 17 ITA No.-2650/Del/2015.
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proviso of section 2(15) does not apply. To support our above contention, we state as under:
Though, the assessee is not directly involved in teaching profession the nature of objects as per trust deed involves the promotion of some educational objects which is to promote the work of literature. In case of Shakespear Memorial Trust, In re (1923) 2 Ch 398 it was held that 'Education does not always involves teaching in sense of a teacher teaching in the class. In the case of find arts, such as painting, music, acting on the stage, classical dance and the like, the imparting of knowledge would be no doubt to the students, by lectures and teaching education.
In the case of Ecumenical Christian Centre Vs. CIT(1983) 139 ITR 226 (Kar), it was held that "Merely because an expression is used in a hyperbolic nature, its meaning need not to be restricted so as to exclude the notion of education. Where the object of the trust included promotion of search for truth and diffusion of useful knowledge, promotion of conference, publication of journals and books, bulletins etc. the trust was established for education purposes".
Courses in fine arts and literature is education.
In the case of CIT Vs. Sri Thyaga Brahmin Gana Sabh(OReg.)(1990) 52 Taxman 395 it was held that to provide education to artists through the medium of school etc. was a Charitable purpose covered under the head Education" and my incidental activities such as letting out of hall would not affect its charitable nature. Very crucial extracts from the case are as under:-
Education: Property held by a body corporate or unincorporated for the promotion of education, literature, science or the fine arts is technically held upon a charitable trust. This is so even if the education is not for the poor only but might extend to professional or commercial education as well as to higher education or technical education............ Raising the artistic taste of the country by public performances, dramatic, musical, etc would be an educational purpose. In Royal Choral Society Vs. IR (1944)12 ITR (Suppl.)13 the Court of Appeal held that cultivation and improvement of public taste in music and other fine arts is education and thus, falls within the category of charitable purposes. If the assessee is involved in education purposes then there should not be objection regarding its hiring activities. So, there will not be application of proviso to section 2(15) of Income Tax Act, 1961 as the assessee is engaged in promoting the literature to genteel public as per its objects such as:
To plan, organize, promote, execute and supervise cultural an literary programme, to organize and conduct international seminars and symposia in India and abroad, to compile and publish critical works of Ghalib, to Page 6 of 17 ITA No.-2650/Del/2015.
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collect books, manuscripts, Photostats, microfilms and handwritten copes of writings of Ghalib and other great poets and writers, to publish literature, books pamphlets and produce films and such visual material for propagator and popularizing the objects of the trust, to grant fellowships, scholarships and other monetary assistances to such persons as it may select for carrying on of any research or investigation on study on Ghalib, etc. Again be covered under the charitable purpose. In the case of CIT, Haldwani, Nanital vs. Jyoti Prabha Society (2009) 177 Taxman 429 (Uttrakhand), activities of letting out building to other society to run and educational institution cannot be treated as non- charitable in nature.
The assessee is hiring its auditorium mostly to educational institutions. So, apart from it cultural activities hiring activity will also be a charitable activity.
We again emphasize that most of our Total Auditorium Rental Income comes form the education of the students.
During the A.Y. 2010-11 the A.O. has treated sponsorship receipts as commercial in nature. However during the previous year relevant to the A.Y. 2011-12, there are no sponsorship receipts.
The benefit of section 11 of the I.T. Act, 1961 (the Act in short) has been allowed in all the preceding assessment years (with the exception of Assessment year 1985-86 to 1989-90) by the AO by retreating the assessee as an Institution engaged in charitable activities within the meaning of section 2(15) of the Act.
The submission at the outset is that viz a viz the facts of the assessee's case the issue is no longer reintegrate after the judgment of the Tribunal dated 28.02.1995 supra in the assessee's own case whereby the income from the letting out of the auditorium has been held a not attracting sub-section (4A) of section 11.
After having accepted the said judgment and allowing thereafter the benefit of section 11 to the assessee all these years the show cause to tax once again the same income as income from business, this time under the umbrella of the amended section 2(15) of the Act is in fact a review of a more or less settled position which is impermissible in law.
Comparison between sub-section (4A), secretion 11 the act and the amended section 2(15) of the Act.
Sub-section (4A) uses the term \profits and gains of business' whereas the proviso to section 2(15) refers to "activity in the nature of trade, commerce or business'. The term business is defined in section 2(13) of the Act and 'includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture'.
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It is apparent that the amended section 2(15) has to be tested on the same parameters as one would do while considering sub-section (4A) of section 11 or considering the definition of business in section 2(13) of the Act. In other words the decision of the Tribunal dated 28.02.1995 in the assessee's own case still holds good even post the amended section 2(15). The two essential requirements for an activity to be considered as business are:-
1) It must be a continuous course of activity and
2) It must carry on with a profit motive.
For an activity to be considered a business profit-making must be the end to which the activity concerned is directed. The predominant object of the activity must be the making of profit. Where the activity is not pervaded by profit motive but is carried on primarily for serving a charitable cause as in the case of he assessee then it would not be correct to describe it as an activity for profit. Just because some amount has been charged for letting out the auditorium it does not make the transaction as business. In order to bed business it must have indicia of trade. A reference may be made to the decision in the case of India chambers of Commerce vs. CIT(1975)101 ITR 796(SC). Summing up the arguments, the assessee is entitled to the benefit of section 11 of the Act consistent with the view taken by the department itself in the last 4 decades including the acceptance of order of the Tribunal supra. The amended section 2(15) does not impact the aforesaid fractural and legal position.
Without prejudice to our above mentioned arguments, we may bring to your kind notice that most of the total Rental Income comes from the education of the students. As such our main activity is for the promotion of education which itself is exempted u/s 2(15) The assessee organized several programmes form time to time in accordance with its objects. The intellectuals broadcast rights to these programs rest with the assessee. These rights are the property of the trust and therefore exploitation of these rights cannot be said to be a business. These activities are minor activities are minor activities which are incidental to the main objects."
4.1 The above submission of the assessee is not tenable due to following facts:-
a. Assessee is not pursuing any activity which can be remotely also termed as education during the year. It is rather a gimmick by the assessee to escape being hit by the proviso to S- 2(15). No expense in the I&E A/c nor any submission of the assessee has reflected any activity to be considered as education. The term education cannot be utilised as a garb to cover commercial activities of the assessee. The meaning of the word 'education' which connotes the process of systematic instruction, training and developing knowledge, skill, mind and character of the student as held in Sole Trust Lok Shiksha Trust v. CIT .Page 8 of 17
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Therefore, the claim of the assessee pursuing education by hiring out auditorium to private companies is definitely not education. b. The ITAT order in the case of assessee from being covered u/s- 11(4A) of the Income Tax Act for the A.Ys. 1985-86 to 1989-90 pertained again to the activity of the assessee hiring out its auditorium and pursing business activity. The assessee cannot be given the benefit of the ITAT order in its own case as the proviso of S-2(15) have been amended w.e.f A.Y. 2009-10 onwards. The section- 11(4A) is applicable only on the entities whose activities are in the nature of general public utility. The assessee has clearly stated that there has been no change in its activities from years in which it was hit by S- 11(4A) of the IT Act, 1961. Therefore, the assessee has itself accepted that it is a General Public Utility and not education. It is clearly evident from the above facts that assessee is covered under the last limb of charity u/s- 2(15) i.e. of being General Public Utility. The above submission of the assessee is not tenable as the nature of the receipt is purely commercial as is evident from the above discussion. The assessee claim that its activities have been accepted as charitable in the past by assessing officer and appellate authorities does not hold good after the amendment in Sec. 2(15). w.e.f. A.Y. 2009-10 onwards. More so, res-judicata is not applicable on revenue proceedings.
4.2 The assessee submission that Auditorium is made available for performance in the nature of dance drama, music, education etc. does not hold good as it has given auditorium on hire to all type of customers irrespective of their nature (details in para 2.0) and very long periods of time. Further, the argument that our Trust takes nominal charges for making the auditorium available for such activities only with a view to meet part of the running cost also does not hold as trust is having surpluses consistently over many years and moreover proviso to Sec. 2(15) states about any cess or fees for services rendered.
The activity is to maximize earning from hiring of auditorium, which was used for accumulation. The funds thus, generated from having surplus in the I&E every year is reflected in Schedule "C" of the balance sheet as Rs. 2,17,89,493/-, where it is transferred and kept. Thus, it is concluded that the predominant object of the activity was to earn profit from day-do-day hiring and letting of commercial space.
It is quite clear that the act of hiring and letting of property was for the purpose of earning of profit, which was not incidental to the main activity. Moreover, after being hit by amendment in Sec. 2(15), assessee's argument is not applicable as proviso to Sec. 2(15) states about not seeing the application i.e. 'irrespective of the nature of use or application, or retention, of the income from such activity'.
Therefore, following is concluded:
i) The hiring of auditorium and hiring of fixture and furniture by letting of Page 9 of 17 ITA No.-2650/Del/2015.
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property is the principal activity of the assessee, conducted with a clear profit motive and not an incidental activity. This is primary activity of the assessee which is being continuously pursued for years now. It has rented out its office space as well to three private entities during the year. Therefore, it has commercial receipts from various business activities during the year.
j) The surplus fund continues to be invested mainly in FDRs, without any attempt by utilized the same for addition to fixed assets for actively promoting objects as per Trust deed an i other societies with similar objects.
4.0 Thus, in view of the above, assessee's submission is rejected and assessee's claim of being a charitable institution cannot be accepted. In view of the above, it is section 2(15) of the Act. Since, the proviso is w.e.f. assessment year 2009-10, a (Exemptions) as the organization can no longer be regarded as a charitable organization within the provision of Section 2(15). Thus, in view of the discussion held above, assessee's submission of being charitable is rejected again u/s 13(8) of the IT Act, 1961 which is reproduced as below:
"(8) Nothing contained in section 11 or section 12 shall operate so as to exclude any income from the total income of the previous year of the person in receipt thereof if the provisions of the first proviso to clause (15) of section 2 become applicable in the case of such verson in the said previous year".
Hence, the income of the assessee in taxed as per rates applicable to an AOP, as its claim of exception for being a charitable institution is denied due to reasons already."
(2.2) The Assessee filed appeal before Ld. CIT(A), who vide order dated 27/02/2015 held that there was no proper justification for denying the exemption and further that proviso of Section 2(15) of I.T. Act was not attracted. The relevant portion of the order of Ld. CIT(A) is reproduced as under:-
"4. The facts emanating from the order of the AO and the submissions of the assessee is that the assessee is a charitable society registered under the Society Registration Act, 1860 dated 20/07/1971 and is also registered u/s 12AA(1) of the Income Tax Act, 1961 dated 28/09/1973 and also enjoys the benefit u/s 80G. The society was formed to promote the life and ideas of the great and lejendary Urdu poet Mirza Asadullah Baig Khan who is generally and popularly known as Mirza Ghalib who was born on 27/12/1797 and died on 15/02/1869. The Page 10 of 17 ITA No.-2650/Del/2015.
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society was formed to commemorate the first death centenary of the legendary Urdu poet in the year 1969 and the first chairman of the society was the then Prime Minister Smt. Indira Gandhi and the then President Shri Fakhhrudin Ali Ahmad was the first secretary of the society.
4.1 The assessee was granted a land by the government on lease on which the assessee has built a building with auditorium etc. which is utilised for the objects of the society and at the same time the building is rent out to earn income to fulfil the objects of the society. The assessee has been enjoying the benefit of exemption u/s 11(1) but the AO had earlier denied the exemption to the assessee during the A.Y 1985-86 to 1988-89 and the appeal of the assessee was dismissed but the same was allowed by the Hon'ble Tribunal vide the order dated 28/02/1995 in ITA No. 8432 and 8603 to 8605/Del/1991 and apparently the department did not go for appeal against this order. The AO had again denied the exemption during the A.Y 1989-90 but the same was allowed by the Hon'ble Tribunal vide the order dated 29/06/1999 in ITA No. 18/Del/1993. 4.2 The main source of the income of the assessee is from rent from the building, auditorium and sponsorship of the programmes etc. The AO had taken up the case for scrutiny for the current year and has invoked the mischief of the Proviso of section 2(15) and has denied the exemption u/s 11(1) mainly on the ground that the assessee is involved in trade, commerce or business vide the order of the AO.
4.3 The assessee is in appeal against the order of the AO and it is submitted that the AO is not justified to deny the exemption u/s 11(1). It is submitted that the assessee is involved in the charitable activity of promoting the life and ideas of the great and legendary Urdu poet Mirza Ghalib and to promote the language of Urdu which has been a language of the people of the country for centuries irrespective of the caste or creed or religion. The very meaning of the word Urdu is Laskar or soldier and the Urdu language is a combination of various languages like Hindi, Sanskrit, Awadhi and Brij Bhasha etc. It is submitted that the assessee is not involved in any type of trade or commerce as alleged by the AO in the order. It is submitted that the assessee is involved in the research work on Ghalib, popularization of work of Ghalib, organising Mushaira and running the museum and library etc. It is also submitted that there were similar issues during the earlier A.Y 2010-11 in which the appeal of the assessee has been allowed and the appeal of the assessee should be allowed in this year also on the principle of consistency and precedence. 4.4 The assessee is running a Ghalib Institute which is a research centre in its own premises at Aiwan-E-Galib Marg, Mata Sundari Lane, New Delhi-110002. The main income of the assessee is from rent etc. only and not from any activity of trade or commerce as alleged by the AO. It is submitted that the AO has treated the rental income as a business income which is not justified as the rental income cannot be called a business activity. 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. The assessee is a charitable society and is involved for the promotion of life and ideas of the great and legendary Urdu poet Mirza Ghalib and for this research, mushaira Page 11 of 17 ITA No.-2650/Del/2015.
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and various other activities are done by the assessee. The main source of the income is from the rent and some minor grants from the National Council for Promotion of Urdu Language (NCPUL) under the HRD Ministry. 4.6 The mere receipt of rental income from the building or auditorium etc. cannot be considered as a business activity and apparently the assessee is not involved in any trade or commerce. The very fact that the assessee is involved in promoting the Urdu language and the life and ideas of the great and legendary Urdu poet Mirza Ghalib is itself a charitable activity within the meaning of ^section 11(1).
4.7 The mere receipt of fees or charges does not tantamount that the assessee is involved in any trade, commerce or business as held in the following cases in favour of the various assessees:
I) ICAI Accounting Research Foundation vs. DGIT(E), 321ITR 73 (Delhi) 2010.
II) GS1 India vs. DGIT(Exemption), 360 ITR 138 (Delhi) 2013 III) Tamil Nadu Cricket Association vs. DIT(E), 265 CTR 277 (Mad) 2014.
IV) Indian Chamber of Commerce vs. ITO, ITAT Calcutta ITA No. 1491/Kol/2012 & 1284/Kol/2012 dated 02/12/2014.
V) Delhi & District Cricket Association vs. DIT, ITAT Delhi ITA No. 3095/Del/2012 dated 13/01/2015.
VI) India Trade Promotion Organization vs. DIT(E), Delhi HC W.P.(C) 1872/2013 order dated 22/01/2015 4.8 Recently the Hon'ble Delhi High Court in the case of India Trade Promotion Organisation vs. DGIT(E), 53 Taxmann.com 404 (Delhi) 2015 (order dated 22/01/2015) has upheld the constitution validity of the proviso of section 2(15) which was under challenge being discriminatory in view of the Article 14 [Equality before law) of the Constitution of India but the Hon'ble High Court has read down the strict and literal interpretation of the Proviso of section 2(15) and has held that mere receipt of fee or change cannot be said that the assessee is involved in any trade, commerce or business and has accordingly allowed the relief to the ITPO case vide Para 58 and 59 of the order.
4.9 After considering all the facts and circumstances of the case, I am of the view that there is no proper justification for denying the exemption and the Proviso of Section 2(15) is not attracted in this case and accordingly the AO is directed to allow the exemption U/s 11(1) with all the consequential benefits. "
(3) The Revenue is now in appeal in ITAT against the impugned order dated Page 12 of 17 ITA No.-2650/Del/2015.
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27/02/2015 of the Ld. CIT(A). In the course of appellate proceedings in ITAT, the Assessee filed a Paper Book consisting of 125 pages containing the following particulars:
1. Copy of Trust Deed
2. Copy of Registration U/s 12A
3. Audited Balance Sheet for F.Y. 2010-11
4. Return of Income for A.Y. 2011-12
5. Computation of Income for A.Y. 2011-12
6. Assessment Order U/s 143(3) for A.Y. 2011-12
7. Written submission submitted to Hon'ble CIT(A) dated 27th February, 2015;
8. Appeal Order passed by Hon'ble CIT(A) 40 for A.Y. 11-12;
9. Copy of Order passed by Hon'ble ITAT in assessee's own case for A.Y. 1985-86 to 1988-89;
10. Copy of order passed by Hon'ble ITAT in assessee's own case for A.Y. 1980-90;
11. Copy of order passed by Hon'ble CIT(A) 21 in assessee's case for A.Y. 2010-11;
12. Copy of Order passed by Hon'ble ITAT in assessee's case for A.Y. 2010-11;
13. Copy of Order passed by Hon'ble CIT(A) 40 in assessee's case for A.Y. 2012-13;
14. Copy of Order passed by Hon'ble ITAT in assessee's case for A.Y. 2012-13;
15. Copy of Order passed by Hon'ble CIT(A) 40 in assessee's case for A.Y. 2013-14;
16. Copy of order passed by Hon'ble CIT(A) 40 in assessee's case for A.Y. 2014-15.Page 13 of 17
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(3.1) At the time of hearing before us, at the outset, the Ld. AR of the Assessee submitted that the issue in dispute is covered by the order of ITAT in assessee's own case for A.Ys. 1985-86 to 1989-90 vide order dated 28.02.1995 in ITA Nos.-
8432/Del/1991 and 8603 to 8605/Del/1990 and order dated 29/06/1999 in ITA Nos.
18/Del/1993 of ITAT. The Ld. Counsel for assessee also placed strong reliance on the impugned order of the Ld. CIT(A). the Ld. DR, on the other hand contended that the aforesaid orders dated 28.02.1995 and 29/06/1999 of ITAT, do not advance the case of the assessee for this year, in view of Amendment Section 2(15) of I.T. Act, whereby a proviso was inserted to Section 2(15) of I.T. Act vide Finance Act, 2010, with retrospective effect from 01.04.2009 and by Finance Act, 2011 w.e.f. 01.04.2012. He contended that, in view of the Amendment to Section 2(15) of I.T. Act the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity 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, irrespective of the nature of use or application, or retention, of the income from such activity. Placing strong reliance on the Assessment Order dated 05.03.2014, he contended that the Assessee was carrying on business activity and was hit by proviso to Section 2(15) of I. T. Act. He strongly relied on the Assessment Order.
(4) We have heard both sides patiently and we have perused the materials available on record carefully. We have also considered the judicial precedents referred to in the Page 14 of 17 ITA No.-2650/Del/2015.
M/s Ghalib Institute, New Delhi.
Assessment Order, the impugned appellate order of the Ld. CIT(A) and the Paper Book filed by the Assessee. We are of the view that in view of Amendment to Section 2(15) of I.T. Act whereby a proviso was inserted; the precedents for earlier years in assessee's own case, reliance on which was placed by Ld. AR of the assessee, will not advance the case of the assessee in this year. We notice that the denial of Exemption U/s 11 of I.T. Act by invoking the proviso of Section 2(15) of I. T. Act, as per Assessment Order, is based mainly on the AO's case that the rental income of the assessee is commercial income from business activity. However, depending on specific facts and circumstances of each case, rental income may be considered under the head "Income from House Property", or under the head "Profits and Gains of Business or Profession" or under the head "Income from Other Sources". The AO has failed to explain why the rental income was treated by him as commercial income from business activity and not as "Income from House Property" or as "Income from Other Sources". The Ld. CIT(A) has also not examined the issue from this angle. Both the lower authorities, the AO as well as Ld. CIT(A) have also failed to consider whether the assessee's registration U/s 12A /12AA of I.T. Act continues to be in force for this year, or whether any steps were taken for revocation of registration U/s 12A /12AA of I. T. Act for this year or for any earlier or for any subsequent year.
(4.1) Thus, we are of the view that the lower authorities have not examined the issue properly and have not brought forth the relevant facts in their respective orders.
Therefore, we are of the view that the disputed issue requires fresh consideration and Page 15 of 17 ITA No.-2650/Del/2015.
M/s Ghalib Institute, New Delhi.
examination at the level of the AO. Accordingly, we set aside the order of the Ld. CIT(A) and restore the disputed issue to the file of the AO for denovo order in accordance with law.
(4.2) In the result, appeal of the Revenue is partly allowed for statistical purposes.
Order pronounced in the open court on 30/11/2018
Sd/- Sd/-
(K.N. CHARY) (ANADEE NATH MISSHRA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 30.11.2018
Pooja/-
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
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ITA No.-2650/Del/2015.
M/s Ghalib Institute, New Delhi.
Date of dictation
29.11.2018
Date on which the typed draft is placed before the
dictating Member 29 .11.2018
Date on which the typed draft is placed before the
Other Member
Date on which the approved draft comes to the Sr.
PS/PS
Date on which the fair order is placed before the
Dictating Member for pronouncement 29.11.2018
Date on which the fair order comes back to the Sr. 30 .11.2018
PS/PS
Date on which the final order is uploaded on the
website of ITAT
Date on which the file goes to the Bench Clerk
Date on which the file goes to the Head Clerk
The date on which the file goes to the Assistant
Registrar for signature on the order
Date of dispatch of the Order
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