Income Tax Appellate Tribunal - Delhi
Dcit(E), New Delhi vs M/S. Apparel Exports Promotion ... on 31 August, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'G', NEW DELHI
BEFORE SH. I.C. SUDHIR, JUDICIAL MEMBER
AND
SH. O.P. KANT, ACCOUNTANT MEMBER
ITA No. 4901/Del/2015
Assessment Year : 2011-12
DCIT(E), Circle-1(1), New Delhi Vs. M/s. Apparel Exports Promotion
Council, A-223, Okhla Industrial
Area, Phase-I, New Delhi
PAN : AAACA5150G
(Appellant) (Respondent)
Appellant by Sh. S.S. Rana, CIT(DR)
Respondent by Sh. Vidur Puri, Adv.
Date of hearing 16.08.2017
Date of pronouncement 31.08.2017
ORDER
PER O.P. KANT, A.M.:
This appeal by the Revenue is directed against order dated 28/05/2015 of the Commissioner of Income-tax (Appeals) - 40 (Exemption), New Delhi [in short "the CIT-(A)"] for assessment year 2011-12, raising following grounds:
"1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding the assessee society is a charitable organization despite the fact that the assessee society was doing business within the meaning of amended provisions of section 2(15) of the Income-Tax Act, 1961.
2. 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.4,34,43,775/- to the assessee ignoring the fact that the assessee 2 ITA No. 4901/Del/2015 had claimed the amount incurred on purchase of assets in earlier years as application of income, on which depreciation is claimed now and further allowance of depreciation will be tantamount to double deduction.
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 of Rs.4,34,43,775/- to the assessee in view of the recent decision of the Hon'ble Delhi High Court in the case of DIT(E) Vs. Charanjiv Charitable Trust dated 18.03.2014.
4. The appellant craves leave to add, to alter or amend any ground of appeal raised above at the time of hearing."
2. The facts in brief of the case are that the assessee, a company registered under section 25 of the Companies Act, 1956 on 22/02/1978, is a non-profit organization constituted with the approval of the Central Government for Promotion of Exports of Garments from India. It was also registered under section 12AA(1) of the Income-tax Act, 1961 (in short "the Act") on 18/05/1979. The assessee is engaged in the activity of promotion of the export of all kind of ready-made garments excluding woollen knitwear, and garments made of leather, jute and hemp. 2.1 The assessee has been claiming exemption under section 11 of the Act from assessment year 1979-80 to 1990-91. During the assessment year 1991-92, the Assessing Officer denied the exemption under section 11 of the Act on the ground that it was engaged in carrying of business. The order of the Assessing Officer was confirmed by the Ld. CIT-(A), however the Income-tax Appellate Tribunal (ITAT), held that the assessee is entitled to exemptions under section 11 of the Act. 2.2 Subsequently, an amendment was brought to section 11(4A) of the Act and the assessee was required to maintain separate books of accounts. In assessment year 1992-93, the Assessing Officer again denied exemption under section 11 of the Act. On appeal, the issue was 3 ITA No. 4901/Del/2015 decided in favour of the assessee by the ITAT. The Hon'ble Delhi High Court upheld the order of the ITAT in a judgment, which is reported at 244 ITR 736.
2.3 Further the assessee received entrance fee and membership fee and it was claimed that the receipts are exempt on the principle of mutuality. This issue was also resolved in favour of the assessee from the assessment year 1992-93 to assessment year 1997-98 by the jurisdictional High Court.
2.4 From the assessment year 1998-99 to the assessment year 2008- 09, the Assessing Officer accepted the claim of the assessee that income in question is exempt under section 11 of the Act. 2.5 During assessment year 2009-10 and 2010-11, the Assessing Officer again denied exemption under section 11 of the Act on the ground that the assessee is a charitable organization which falls under the category of "advancement of any other object of general public utility"
as defined under section 2(15) of the Act read with section 11 of the Act and thus, the newly inserted provisio to section 2(15) of the Act is attracted in the case and the assessee would not be eligible for exemption under section 11 of the Act as it is carrying on the business. The Assessing Officer held that the assessee has been rendering services in relation to trade, commerce business for consideration and the receipt of which exceeds Rs. 10 lacs, accordingly, he assessed the income as per the normal provisions of the Act. On appeal, the Ld. CIT- (A) allowed the appeal following the decision of the Hon'ble Delhi High Court in the case of the assessee and there being no changes in the facts and circumstances of the case. On further appeal by the Revenue, the ITAT observed that that the assessee did not carry any activity with an object of profit, the question of attracting the proviso does not arise and accordingly, upheld the finding of the first appellate authority.4 ITA No. 4901/Del/2015
2.6 In the year under consideration, the assessee filed return of income declaring income of Rs.6,18,332/- on 20/09/2011. The case was selected for scrutiny and notice under section 143(2) of the Act was issued and complied with. The Assessing Officer noted that members of the company are exporters of the ready-made garments. The executive committee of the assessee company consisted of elected members out of the garment exporters and three officers as government nominee and the co-opted members who could make useful contribution to the deliberations of the executive committee. The Assessing Officer further noted that in the year under consideration that the assessee received income under the head 'membership fee' of Rs.3,84,35,015/-, council fee of Rs.2,28,45,897/-, rent of Rs.9,10,38,024/-, interest of Rs.7,06,30,985/- and miscellaneous income of Rs.99,36,890/-. The Assessing Officer also noted expenses incurred by the assessee towards salary and staff benefit of Rs.5,99,96,290/-, administrative expenses of Rs.6,27,06,493/-, export promotion expenses of Rs.5,19,89,665/- and depreciation amounting to Rs.4,34,43,775/-.
2.7 The Assessing Officer further noted that activity of the assessee of promoting export of ready-made garments was not the charitable under the main definition of relief to poor, education, medical relief, preservation of environment (including watersheds, forest and wildlife) and preservation of monuments or objects of artistic or historic interest. Then the Assessing Officer noted that the "concept of mutuality" was also not applicable in the case of the assessee. According to the Assessing Officer, "the essence of mutuality" lies in the return of what has been contributed to into a common fund and unless there is a complete identity between the contributors and the participators in a common fund, the principle of mutuality would not be attracted. The Assessing Officer observed that the persons who are paying rent to the assessee for using 5 ITA No. 4901/Del/2015 its building/offices etc. cannot fit into the category of the common contributor to the common fund. Thus, he held that this very fact takes the assessee out of the ambit of "concept of mutuality" and thus the leasing out of properties to the outside parties for rent was essential in the nature of business venture.
2.8 Then, he noted that the activities of the assessee were not even towards the advancement of object of general public utility. He further invoked proviso to section 2(15) of the Act and noted that even if the activity of the assessee were for advancement of any other object of general public utility, same was not charitable purpose as assessee was engaged in the activity of nature of the trade, commerce or business. Accordingly, the Assessing Officer assessed the income of the assessee under normal provisions of the Act.
2.9 The Assessing Officer also disallowed the claim of the assessee of depreciation to the extent of Rs.4,34,43,775/- made in the income and expenditure account as it would amount to double deduction to the assessee.
2.10 On further appeal, the Ld. CIT-(A) following the decision of the Hon'ble Delhi High Court in the case of India Trade Promotion Organization Vs. DGIT(E), 53 taxmann.com 404 (Delhi) 2015, directed the Assessing Officer to allow the exemption to the assessee under section 11(1) of the Act with all consequential benefits. 2.11 Aggrieved, the Revenue is in appeal before the Tribunal raising the grounds as reproduced above.
3. Before us, the Ld. CIT(DR) submitted that in view of the proviso to section 2(15) of the Act, the activity of the assessee was in the nature of business and therefore, in view of the amended provisions, the assessee was not entitled to the benefit of a charitable organization.
6 ITA No. 4901/Del/20155. The Ld. counsel, on the other hand, submitted that all the grounds raised by the Revenue have been adjudicated by the Tribunal in assessment years 2009-10 and 2010-11 in the favour of the assessee and the appeal filed by the Revenue before the Hon'ble High Court, has also been dismissed. Accordingly, he submitted that issues in dispute are covered in favour of the assessee.
6. We have heard the rival submission and perused the relevant material on record.
7. The ground No. 1 raised by the Revenue is covered by the decision of the Tribunal in the case of the assessee itself for assessment year 2009-10 and 2010-11 in ITA No. 645/Del/2013 and ITA No. 549/Del/2015 respectively. The relevant finding of the Tribunal is reproduced as under:
"6.1 There is no change in facts and circumstances of the case, the objects of the assessee are charitable in nature and that the assessee did not carry on any activity with an object to carry profit. As there is no profit motive, the question of attracting the proviso to section 2(15) does not arise. Hon'ble Delhi High Court has in the following cases laid down the positions of law that governs the proviso to section 2(15) of the Act.
i. GIS vs. DCIT(Del) 360 ITR 138(Del.) ii. ICAI vs. DIT (Del.) 35 Taxmann.com 140 iii. India Trade Promotion vs. DGIT (E), (2015) 53 taxmann.com 404 (Del) Applying the propositions laid down in all these cases to the facts of this case we uphold the order of the learned CIT(A) on this issue.
Thus we uphold the findings of the First Appellant Authority and dismiss this ground."
7 ITA No. 4901/Del/20157.1 On further appeal by the Revenue in assessment year 2009-10 and 2010-11, the Hon'ble Delhi High Court held that no substantial question of law arises and dismissed the appeal. The relevant finding of the Hon'ble High Court is reproduced as under:
"2. We notice that the Income Tax Appellate Tribunal (ITAT) has relied upon the rulings of this Court in India Trade Promotion Organisation vs. Director General of Income Tax (2015) 371 ITR 333 and judgment dated 04.07.2013 in WP(C) 3147/2012, titled: the Institute of Chartered Accountants of India and Anr. Vs Director General of India Tax (Exemptions), Delhi & Ors. No question of law, therefore, arises."
7.2 As the issue has already been considered and resolved in favour of the assessee by the jurisdictional High Court, the ground of the appeal is dismissed.
8. In grounds No. 2 and 3, the Revenue has raised the issue of claim of the depreciation of Rs.4,34,43,775/- allowed to the assessee by the Ld. CIT-(A).
8.1 Before us, the Ld. CIT(DR) submitted that once the purchase of assets has been allowed as application of income, allowing the depreciation on those very assets will amount to double deduction to the assessee and accordingly, prayed that order of the Ld. CIT-(A) on the issue in dispute might be reversed.
8.3 Learned counsel of the assessee, on the other hand, submitted that issue in dispute is covered in favour of the assessee by the order of the Tribunal in assessment years 2009-10 and 2010-11 and which has been further upheld by the Jurisdictional High Court. 8.4 We have heard the rival submission and perused the relevant material on record. We find that in ITA No. 645/Del/2013 and ITA No. 549/Del/2015 in the case of the assessee itself for assessment year 2009-10 and assessment year 2010-11, the following ground was raised:
8 ITA No. 4901/Del/2015"1. On the facts and in the circumstanstances of the case and in law, the learned CIT(A) has erred in allowing depreciation of Rs.3,30,97,036/- which tantamount to double deduction and not appreciating the assessment framed by the AO"
8.5 The Tribunal adjudicated the ground No. 1 of that appeal as under:
"5. Ground no. 1 is admittedly covered in favour of the assessee by the Jurisdictional High court in the case of Vishwa Jagriti Mission (supra). The First Appellate Authority has rightly applied this binding decision. We find no infirmity in the same. In the result we dismiss ground No. 1 of the Revenue."
8.6 The Revenue raised the issue of claim of depreciation before the Hon'ble High Court. The Hon'ble High Court allowed the issue in favour of the assessee with following finding:
"3. As far as second question urged with respect to permissibility of depreciation, here the Revenue urges that the grant of depreciation would result in a double benefit given that the assessee is a charitable organization and, therefore, beneficiary of all exemptions. In the judgment rendered by the Court in Director of Income Tax Vs. Vishwa Jagriti Mission (2013) 262 CTR 558 it was held that grant of depreciation does not result in a double or undue benefit."
8.7 In view of the fact that issue in dispute is squarely covered in favour of the assessee by the decision of the Hon'ble Delhi High Court in the case of assessee is itself, we do not find any infirmity in the order of 9 ITA No. 4901/Del/2015 the Ld. CIT-(A), and accordingly uphold the same and dismiss grounds No. 2 and 3 of the appeal of the Revenue.
9. In the result, appeal of the Revenue is dismissed The decision is pronounced in the open court on 31st August, 2017.
` Sd/- Sd/-
(I.C. SUDHIR) (O.P. KANT)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 31st August, 2017.
RK/-(D.T.D)
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
Asst. Registrar, ITAT, New Delhi